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Oppenheimer New Jersey Municipal Fund
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6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.525.7048

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.  You can obtain the
Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free number shown
above or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents                                                                  Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks.........
     The Fund's Investment Policies...........................................
     Other Investment Techniques and Strategies...............................
     Other 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
Independent Registered Public Accounting Firm's Report........................
Financial Statements .........................................................

Appendix A: Municipal Bond Ratings.........................................A-1
Appendix B: Industry Classifications.......................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers..................C-1
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ABOUT THE FUND
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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"), can 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 and strategies
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
because that would be inconsistent with its goal of seeking tax-exempt income.  However,
the values of the securities held by the Fund may be affected by changes in general
interest rates and other factors prior to their maturity.  Because the current value of
debt securities vary inversely with changes in prevailing interest rates, if interest rates
increased after a security is purchased, that security will normally decline in value.
Conversely, should interest rates decrease after a security is purchased, normally its
value will 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 the security's maturity.  A
debt security held to maturity is redeemable by its issuer at full principal value plus
accrued interest.  The Fund may dispose of securities prior to their maturity 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 Invest in?" and "About the Fund's
Investments."  As a fundamental policy, the Fund invests at least 80% of its net assets
(plus borrowings for investment purposes) in New Jersey municipal securities. This includes
securities that generate income subject to the alternative minimum tax. 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 municipal securities having a maturity
(when the security is issued) of more than one (1) year 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 five (5) to ten
(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 power, if any, for the
repayment of principal and the payment of interest.  Issuers of general obligation bonds
include states, counties, cities, towns, and school 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.

                  |_| Private Activity Bonds. Interest on certain Qualified Private
Activity Bonds 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 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.

      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 (and excludable from gross
income).  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 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. There are no limits on the amount of assets
the Fund may invest in private activity bonds.

      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 private activity bond 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 (1) 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.

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

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,
19.9% of the Fund's assets were invested in tobacco revenue settlement bonds.
      Tobacco settlement revenue bonds are secured by an issuing state's proportionate
share in the Master Settlement Agreement ("MSA"). The MSA is an agreement, reached out of
court in November 1998 between 46 states and nearly all of the U.S. tobacco manufacturers
(approximately 99% of the current combined market share of tobacco manufacturers). The MSA
provides for payments annually by the manufacturers to the states and jurisdictions in
perpetuity, in exchange for releasing all claims against the manufacturers and a pledge of
no further litigation. Tobacco manufacturers pay into a master escrow trust based on their
market share, and each state receives a fixed percentage of the payment as set forth in the
MSA.

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

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

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

      |X| 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.

      After the Funds buys, a municipal security, it may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund.  Neither event requires
the Fund to sell the security, but the Manager will consider such events in determining
whether the Fund should continue to hold the security.  To the extent that ratings given by
Moody's, S&P or Fitch 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.

      The rating definitions of Moody's, S&P and Fitch for municipal securities are
contained in Appendix A to this Statement of Additional Information.  The Fund can 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 assign a rating
category to a security that is comparable to what the Manager believes a rating agency
would assign to that security.  However, the Manager's rating does not constitute a
guarantee of the quality of a particular issue.

Special Risks of Investing Primarily in New Jersey Municipal Securities.  Because the Fund
focuses its investments primarily on New Jersey municipal securities, the value of its
portfolio investments will be highly sensitive to events affecting the fiscal stability of
the State of New Jersey and its municipalities, authorities and other instrumentalities
that issue securities in which the Fund invests, including political developments, economic
problems and legislation as well as adverse events affecting borrower entities and credit
enhancement providers. It is not possible to predict the future impact of political
developments, economic, regulatory or tax problems and legislation on the long-term ability
of the State of New Jersey or New Jersey municipal issuers, borrower entities or credit
enhancement providers to pay interest or repay principal on their obligations.

      The information below is only a brief summary of general information regarding the
state and the types of obligations issued by it and its political subdivisions, based upon
information the Fund has drawn from sources that it believes are reliable, including
official statements relating to securities offerings of New Jersey issuers.  The
information below is general in nature and does not provide information about the financial
condition of the state or specific issuers in whose securities the Fund may invest, or the
risks of those specific investments. 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
State since the date hereof.

New Jersey Economic Information and Trends -- New Jersey's economic base is diversified,
consisting of a variety of manufacturing, construction and service industries, supplemented
by rural areas with selective commercial agriculture.

The New Jersey economy had a breakout year in 2004 after struggling for three years in the
context of a weak national economy. New Jersey's economy was one of the best performing in
the nation. Employment increased by 75,900 jobs, or by 1.9%, from December 2003 through
December 2004. With almost all of the state's employment sectors showing gains in the last
year, New Jersey has strong economic momentum going into 2005. The outlook for 2005 is for
continued, but moderating, growth. The state unemployment rate was 4.2% as of December
2004, and remains well below the 5.2% rate for the nation during the same period. New
Jersey's personal income grew by 4.2% in 2004. Economic forecasts project personal income
growth of 4.7% in 2005.

New Jersey's economy and the nation's economy are both expected to have momentum heading
into 2006. New Jersey's economy is expected to follow the national trend in 2006. The State
and the nation may experience further near-term slow growth and the expected recovery may
stall if consumers, investors, and businesses remain more cautious than currently assumed.
However,
the fundamentals of the State's economic health remain stable and the long run prospects
for economic growth of the State in 2006 and beyond are favorable.

New Jersey's Budget And Appropriation System -- Current Operating Expenses

The General Fund -- New Jersey operates on a fiscal year ending on June 30. The General
Fund is the fund into which all New Jersey revenues, not otherwise restricted by statute,
are deposited and from which appropriations are made. The largest part of the total
financial operations of New Jersey is accounted for in the General Fund. The Appropriations
Act enacted by the New Jersey Legislature and approved by the Governor provides the basic
framework for the operation of
the General Fund. The undesignated General Fund balance at year end for fiscal year 2001
was $388.7 million, for fiscal year 2002 was 292.3 million, for fiscal year 2003 was $373.0
million and for fiscal year 2004 was 376.5 million. For fiscal year 2005 and 2006, the
balance in the undesignated General Fund is estimated to be $111.6 million each year. The
fund balances are available for appropriation in succeeding fiscal years.

Tax And Revenue Anticipation Notes -- In fiscal year 1992, New Jersey initiated a program
pursuant to which it issues tax and revenue anticipation notes to aid in providing
effective cash flow management to fund imbalances which occur in the collection and
disbursement of General Fund revenues and Property Tax Relief Fund revenues. It is
anticipated that New Jersey will
continue this program for fiscal year 2006. Such tax and revenue anticipation notes do not
constitute a general obligation of New Jersey or a debt or liability within the meaning of
the New Jersey Constitution. Such notes constitute special obligations of New Jersey
payable solely from monies on deposit in the General Fund and Property Tax Relief Fund that
are legally
available for such payment.

NEW JERSEY CAPITAL PROJECT FINANCINGS

General Obligation Bonds -- New Jersey finances certain capital projects through the sale
of its general obligation bonds. These bonds are backed by the full faith and credit of New
Jersey. Certain state tax revenues and certain other fees are pledged to meet the principal
payments, interest payments and redemption premium payments, if any, required to fully pay
the bonds. The aggregate outstanding general obligation bonded indebtedness of New Jersey
as of June 30, 2004 was $3,236,100,000. The appropriation for the debt service obligation
on outstanding projected indebtedness is $185.4 million for fiscal year 2006.

Pay-As-You-Go -- In addition to payment from bond proceeds, capital projects can also be
funded by appropriation of current revenues on a pay-as-you-go basis. In fiscal year 2006,
the amount appropriated for this purpose is $1,089.4 million.

OTHER LONG TERM DEBT OBLIGATIONS OF NEW JERSEY

Bonds Guaranteed By New Jersey -- The New Jersey Sports and Exposition Authority ("NJSEA")
has issued State-guaranteed bonds of which $20,050,000 were outstanding as of June 30,
2004. To date, the NJSEA has not had a revenue deficiency requiring New Jersey to make debt
service payments pursuant to its guarantee. It is anticipated that the NJSEA's revenues
will continue to be sufficient to pay debt service on these bonds without recourse to New
Jersey's
guarantee.

"Moral Obligation" Bonds -- The authorizing legislation for certain New Jersey entities
provides for specific budgetary procedures with respect to certain of the obligations
issued by such entities. Pursuant to such legislation, a designated official is required to
certify any deficiency in a debt service reserve fund maintained to meet payments of
principal of and
interest on the obligations and a New Jersey appropriation in the amount of the deficiency
is to be made. However, the New Jersey Legislature is not legally bound to make such an
appropriation. Bonds issued pursuant to authorizing legislation of this type are sometimes
referred to as "moral obligation" bonds. Below is a discussion of those New Jersey
authorities and instrumentalities that issue bonds that constitute a "moral obligation" of
New Jersey.

New Jersey Housing And Mortgage Finance Agency -- Neither the New Jersey Housing and
Mortgage Finance Agency nor its predecessor agencies (the New Jersey Housing Finance Agency
and the New Jersey Mortgage Finance Agency) have had a deficiency in a debt service reserve
fund which required New Jersey to appropriate funds to meet its "moral obligation." It is
anticipated that this agency's revenues will continue to be sufficient to pay debt service
on its
bonds.

South Jersey Port Corporation -- New Jersey has periodically provided the South Jersey Port
Corporation (the "SJPC") with funds to cover debt service and property tax requirements,
when earned revenues are anticipated to be insufficient to cover these obligations. For
calendar years 2000 through 2004, New Jersey has made appropriations totaling
$20,371,846.00 which covered
deficiencies in revenues of the SJPC for debt service.

New Jersey Higher Education Student Assistance Authority -- The New Jersey Higher Education
Student Assistance Authority ("NJHESAA") (successor to the Higher Education Assistance
Authority) has not had a revenue deficiency that required New Jersey to appropriate funds
to meet its "moral obligation". It currently is anticipated that the NJHESAA's revenues
will continue to be sufficient to cover debt service on its bonds.

There is no statutory limitation on the amount of "moral obligation" bonds which may be
issued by eligible New Jersey entities. As of June 30, 2004, outstanding "moral obligation"
bonded indebtedness issued by New Jersey entities totaled $1,167,907,668, and fiscal year
2004 debt service subject to "moral obligation" is $53,999,749.

Obligations Supported By New Jersey Revenue Subject To Annual Appropriation -- New Jersey
has entered into a number of leases and contracts described below (collectively, the
"Agreements" and each an "Agreement") with several governmental authorities to secure the
financing of various New Jersey projects. Under the terms of the Agreements, New Jersey has
agreed to make payments equal to the debt service on, and other costs related to, the
obligations sold to finance the projects, including payments on swap agreements defined
below. New Jersey's obligations to make payments with respect to certain financings
includes payments related to interest rate exchange agreements described below ("swap
agreements") entered into with respect to such financings. Under such swap agreements, the
issuer is required to pay a fixed rate to the swap counter party and any swap termination
payment. If the payments to an issuer under a swap agreement are not sufficient to pay the
interest on the issuer's related
obligation, the issuer must pay such deficiency. New Jersey's obligation to make payments
under the Agreements is subject to and dependent upon annual appropriations being made by
the New Jersey Legislature for such purposes. The New Jersey Legislature has no legal
obligation to enact such appropriations, but has done so to date for all such obligations.
Below is a discussion of those financings pursuant to which State authorities and
instrumentalities have entered into Agreements with New Jersey to secure the financing of
various State projects.

New Jersey Economic Development Authority -- The New Jersey Economic Development Authority
("NJEDA") issues bonds secured by Agreements pursuant to the following legislative
programs: (i) Economic Recovery Bonds issued to finance various economic development
purposes (with payments made by New Jersey pursuant to an Agreement being equivalent to
payments due to New Jersey under an agreement with the Port Authority of New York and New
Jersey); (ii) Pension Bonds issued for the purpose of financing the unfunded accrued
pension liability for New Jersey's retirement system; (iii) Market Transition Facility
Bonds issued to pay current and anticipated liabilities and expenses of the Market
Transition Facility, which issued private passenger automobile insurance policies for
drivers who could not be insured by private insurance companies on a voluntary basis; (iv)
the Community Mental Health Loan Program, pursuant to which revenue bonds are issued on
behalf of non-profit community mental health
service providers and debt service is paid by New Jersey pursuant to Agreements between the
New Jersey Department of Human Services and the service providers; (v) the School Facility
Construction Bonds (the principal amount of bonds authorized to be issued is $6 billion for
the "Abbott" districts, $2.5 billion for all other districts and $100 million for county
vocational school district projects), pursuant to which the NJEDA issues bonds to finance
New Jersey's
share of costs for school facility construction projects and debt service on the bonds is
paid pursuant to a contract between the NJEDA and the New Jersey Treasurer; (vi) pursuant
to the Motor Vehicle Security and Customer Service Act, the NJEDA is authorized to issue
bonds to pay the costs of capital improvements for the New Jersey Moter Vehicle Commission
facilities (authorized in an amount not exceeding $160 million); (vii) the lease financing
program through which certain real property, office buildings and equipment are financed
with NJEDA bonds (secured by Agreements between the New Jersey Treasurer and NJEDA); (viii)
the NJEDA is authorized to issue bonds to fund business employment incentive grants that
the NJEDA is contractually obligated to pay annually pursuant to the Business Employment
Incentive Program Act; (ix) the Motor Vehicle Surcharges Securitization Act authorized the
issuance of bonds, the proceeds of which will be held by the NJEDA and deposited into the
General Fund or the Motor Vehicle Surcharges Fund at the request of the New Jersey
Treasurer; (x) pursuant to the Cigarette Tax Securitization Act, the NJEDA may issue bonds
secured by $0.0325 per cigarette of the cigarette tax (debt service will be paid pursuant
to a contract between the NJEDA and the New Jersey Treasurer), with the proceeds to be
deposited into the General Fund or the Cigarette Tax Securitization Fund; and (xi) the
Municipal Rehabilitation and Economic Recovery Act authorized bonds issued for the purpose
of providing loans and grants to sustain economic
activity in qualified municipalities.

Swap Agreements -- The NJEDA has entered into a number of swap agreements with certain bond
issuers. In connection with the $375,000,000 State Pension Variable Rate Refunding Bonds,
Series 2003, the NJEDA has entered into swap agreements for the purpose of converting the
NJEDA's variable rate exposure to a fixed rate. The outstanding aggregate principal amount
of the bonds is equal to the aggregate notional amount of the swap agreements related
thereto. In
connection with School Facilities Construction Bonds, the NJEDA has entered into six
separate tranches of swap agreements in an aggregate notional amount of $3 billion. These
forward-starting swap agreements effectively hedge against rising interest rates a portion
of the NJEDA's future borrowings expense associated with bonds anticipated to be issued
under the Educational Facilities Construction and Financing Act, enacted July 18, 2000,
P.L. 2000, c.72. In 2004, the NJEDA entered into three additional swap agreements in the
aggregate notional amount of $750 million for the same purpose. The NJEDA also entered in
swap agreements in the aggregate notional amount of $214,795,000 to hedge against rising
interest rates for a portion of the NJEDA's future borrowing expense associated with bonds
anticipated to be issued under the Business Employment Incentive Program in Fiscal Years
2005, 2006, and 2007.

New Jersey Educational Facilities Authority -- The New Jersey Educational Facilities
Authority issues bonds secured by Agreements pursuant to seven separate legislative
programs to finance (i) the purchase of equipment to be leased to institutions of higher
learning; (ii) grants to New Jersey's public and private institutions of higher education
for the development, construction and improvement of instructional, laboratory,
communication and research
facilities; (iii) grants to public and private institutions of higher education to develop
a technology infrastructure within and among New Jersey's institutions of higher education;
(iv) capital projects at county colleges; (v) grants to public and private institutions of
higher education to finance and refinance eligible educational facilities; (vi) grants to
public libraries to
finance the acquisition, expansion and rehabilitation of buildings to be used as public
library facilities; and (vii) loans to public and private institutions of higher education
and public and private secondary schools, military schools and boarding schools located
within New Jersey to install automatic fire suppression systems.

New Jersey Transportation Trust Fund Authority -- In July 1984, New Jersey created the New
Jersey Transportation Trust Fund Authority (the "NJTTFA") for the purpose of funding a
portion of New Jersey's share of the cost of improvements to its transportation system. The
principal amount of the NJTTFA's bonds, notes or other obligations which may be issued in
any fiscal year generally may not exceed $650 million plus amounts carried over from prior
fiscal years. The obligations issued by the NJTTFA are special obligations of the NJTTFA
payable from a contract among the NJTTFA, the New Jersey Treasurer and the Commissioner of
Transportation.

New Jersey Building Authority -- The New Jersey Building Authority ("NJBA") issues bonds
for the acquisition, construction, renovation and rehabilitation of various New Jersey
office buildings, historic buildings, and correctional facilities. Pursuant to a lease
agreement, New Jersey makes rental payments to NJBA in amounts sufficient to pay debt
service on the NJBA bonds.

New Jersey Sports And Exposition Authority -- Legislation enacted in 1992 authorizes the
New Jersey Sports and Exposition Authority (the "NJSEA") to issue bonds for various
purposes payable from a contract between the NJSEA and the New Jersey Treasurer. Pursuant
to such contract, the NJSEA undertakes certain projects and the New Jersey Treasurer
credits to the NJSEA amounts from the General Fund sufficient to pay debt service and other
costs related to the bonds.

Garden State Preservation Trust -- In July 1999, New Jersey established the Garden State
Preservation Trust ("GSPT") for the purpose of preserving, as open space, farmland and
historic properties. Pursuant to the enabling act of the GSPT, the principal amount of
bonds, notes or other obligations which may be issued prior to July 1, 2009, other than
refunding bonds, cannot exceed $1 billion. After July 1, 2009, only refunding bonds can be
issued. The obligations
to be issued by the GSPT will be special obligations of the GSPT payable from amounts paid
to it under a contract between GSPT and the New Jersey Treasurer.

New Jersey Certificates Of Participation -- Beginning in April 1984, New Jersey, acting
through the Director of the Division of Purchase and Property, has entered into a series of
lease purchase agreements which provide for the acquisition of equipment, services and real
property to be used by various departments and agencies of New Jersey. Certificates of
Participation in
such lease purchase agreements have been issued. A Certificate of Participation represents
a proportionate interest of the owner thereof in the lease payments to be made by New
Jersey under the terms of the lease purchase agreement.

New Jersey Supported School And County College Bonds - Legislation provides for future
appropriations for New Jersey aid to local school districts equal to a portion of the debt
service on bonds issued by such local school districts for construction and renovation of
school facilities (P.L. 1968, c. 177; P.L. 1971, c. 10; and P.L. 1978, c. 74) and for New
Jersey aid to counties equal to a portion of the debt service on bonds issued by or on
behalf of counties for construction of county college facilities (P.L. 1971, c. 12, as
amended). The New Jersey Legislature has no legal obligation to make such appropriations,
but has done so to date for all obligations issued under these laws.

Conduit Indebtedness Of New Jersey Authorities And Instrumentalities -- Certain State
authorities and instrumentalities are authorized to issue debt on behalf of various private
and governmental entities on a conduit basis. Under such circumstances, neither the New
Jersey authority or instrumentality acting as a conduit issuer nor the State of New Jersey
is responsible for the repayment of such debt. The payment obligations with respect to such
debt are solely that
of the entity on whose behalf the debt was issued. Those State authorities and
instrumentalities that issue debt on behalf of private and governmental entities on a
conduit basis include: (i) the New Jersey Economic Development Authority; (ii) the New
Jersey Health Care Facilities Financing Authority; (iii) the New Jersey Education
Facilities Authority; (iv) the New Jersey Housing and Mortgage Finance Agency; (v) the New
Jersey Environmental Infrastructure Trust;
and (vi) the New Jersey Redevelopment Agency.

COUNTIES AND MUNICIPALITIES

Regulation Of County And Municipal Finance -- New Jersey's county and municipal finance
system is regulated by various statutes designed to assure that all county and municipal
governments and their issuing authorities remain on a sound financial basis. Regulatory and
remedial statutes are enforced by the Division of Local Government Services (the
"Division") in the New Jersey Department of Community Affairs.

The Local Budget Law (N.J.S.A. 40A:4-1 ET SEQ.) (the "Local Budget Law") imposes specific
budgetary procedures upon counties and municipalities ("local units"). Every local unit
must adopt an operating budget which is balanced on a cash basis, and items of revenue and
appropriation must be examined by the Director of the Division (the "Director"). The
accounts of each local unit must be independently audited by a registered municipal
accountant. New Jersey law provides that budgets must be submitted in a form promulgated by
the Division.
The Division reviews all local unit annual budgets prior to adoption for compliance with
the Local Budget Law. The Director is empowered (i) to require changes for compliance with
law as a condition of approval; (ii) to disapprove budgets not in accordance with law; and
(iii) to prepare the budget of a local unit, within the limits of the adopted budget of the
previous year with suitable adjustments for legal compliance, if the local unit fails to
adopt a budget in
accordance with law. This process insures that every local unit annually adopts a budget
balanced on a cash basis, within limitations on appropriations or tax levies, respectively,
and making adequate provision for (i) principal of and interest on indebtedness falling due
in the fiscal year, (ii) deferred charges, and (iii) other statutory expenditure
requirements. The Director also oversees changes to local budgets after adoption as
permitted by law, and enforces
regulations pertaining to execution of adopted budgets and financial administration. In
addition to the exercise of regulatory and oversight functions, the Division offers expert
technical assistance to local units in all aspects of financial administration, including
revenue collection and cash management procedures, contracting procedures, debt management
and administrative analysis.

The Local Government Cap Law (N.J.S.A. 40A:4-45.1 ET SEQ.) (the "Cap Law") limits the
year-to-year increase of the total appropriations of any local unit to either 5 percent or
an index rate determined annually by the Director, whichever is less. However, where the
index percentage rate exceeds 5 percent, the Cap Law permits the governing body of any
local unit to approve the use of a higher percentage rate up to the index rate. Further,
where the index percentage rate is less than 5 percent, the Cap Law also permits the
governing body of any
local unit to approve the use of a higher percentage rate up to 5 percent. Regardless of
the rate utilized, certain exceptions exist to the Cap Law's limitation on increases in
appropriations. The principal exceptions to these limitations are: (i) municipal and county
appropriations to pay debt service requirements; (ii) requirements to comply with certain
other New Jersey or federal mandates; (iii) appropriations of private and public dedicated
funds; (iv) amounts approved by referendum; and (v) in the case of municipalities only, to
fund the preceding year's cash deficit or to reserve for shortfalls in tax collections, and
amounts required pursuant to contractual obligations for specified services. The Cap Law
was re-enacted in 1990 with amendments and made a permanent part of the municipal finance
system.

Regulation Of The Issuance Of Bonds By Counties And Municipalities -- New Jersey law also
regulates the issuance of debt by local units. The Local Budget Law limits the amount of
tax anticipation notes that may be issued by local units and requires the repayment of such
notes within 120 days of the end of the fiscal year (six months in the case of the
counties) in which issued. The Local Bond Law (N.J.S.A. 40A:2-1 ET SEQ.) governs the
issuance of bonds and
notes by the local units. No local unit is permitted to issue bonds for the payment of
current expenses (other than fiscal year adjustment bonds). Local units may not issue bonds
to pay outstanding bonds, except for refunding purposes, and then only with the approval of
the Local Finance Board. Local units may issue bond anticipation notes for temporary
periods not exceeding in the aggregate approximately ten years from the date of issue. The
debt that any
local unit may authorize is limited to a percentage of its equalized valuation basis. In
the calculation of debt capacity, the Local Bond Law and certain other statutes permit the
deduction of certain classes of debt ("statutory deduction") from all authorized debt of
the local unit in computing whether a local unit has exceeded its statutory debt limit. The
Local Bond Law permits the issuance of certain obligations, including obligations issued
for certain emergency or self liquidating purposes, notwithstanding the statutory debt
limitation described above, but, with certain exceptions, it is then necessary to obtain
the approval of the Local Finance Board.

SCHOOL DISTRICTS

Regulation of School District Finance -- All New Jersey school districts are coterminous
with the boundaries of one or more municipalities. They are characterized by the manner in
which the board of education, the governing body of the school districts, takes office.
Type I school districts, most commonly found in cities, have a board of education,
appointed by the mayor or the chief executive officer of the municipality, constituting the
school district. In a Type II school district, the board of education is elected by the
voters of the district.

Nearly all regional and consolidated school districts are Type II school districts. The New
Jersey Department of Education has been empowered with authority to abolish an existing
school board and create a State-operated school district where the existing school board
has failed or is unable to take the corrective actions necessary to provide a thorough and
efficient system of education in that school district pursuant to N.J.S.A. 18A:7A-15 ET
SEQ. (the "School Intervention Act"). The State-operated school district, under the
direction of a New Jersey appointed superintendent, has all of the powers and authority of
the local board of education and of the local district
superintendent. Pursuant to the authority granted under the School Intervention Act, the
New Jersey Department of Education has ordered the creation of a State-operated school
district in the City of Jersey City, the City of Paterson and the City of Newark.

New Jersey's school districts operate under the same comprehensive review and regulation as
do its counties and municipalities. Certain exceptions and differences are provided, but
New Jersey's supervision of school finance closely parallels that of local governments.

Regulation Of The Issuance Of Bonds By School Districts -- School district bonds and
temporary notes are issued in conformity with N.J.S.A. 18A:24-1 ET SEQ. (the "School Bond
Law"), which closely parallels the Local Bond Law (for further information relating to the
Local Bond Law, see "Counties and Municipalities -- Regulation of the Issuance of Bonds by
Counties and Municipalities" herein). Although school districts are exempted from the 5
percent down payment provision generally applied to bonds issued by local units, they are
subject to debt limits (which vary depending on the type of school system) and to New
Jersey regulation of their borrowing.

School bonds are authorized by (i) an ordinance adopted by the governing body of a
municipality within a Type I school district; (ii) adoption of a proposal by resolution by
the board of education of a Type II school district having a board of school estimate;
(iii) adoption of a proposal by resolution by the board of education and approval of the
proposal by the legal voters of any other Type II school district; or (iv) adoption of a
proposal by resolution by a capital project control board for projects in a State-operated
school district.

If school bonds of a Type II school district will exceed the school district borrowing
capacity, a school district (other than a regional school district) may use the balance of
the municipal borrowing capacity. If the total amount of debt exceeds the school district's
borrowing capacity, the Commissioner and the Local Finance Board must approve the proposed
authorization before it is submitted to the voters. All authorizations of debt in a Type II
school district without a board of school estimate require an approving referendum, except
where, after hearing, the Commissioner and the New Jersey Department of Education determine
that the issuance of such debt is necessary to meet the constitutional obligation to
provide a thorough and efficient system of public schools. When such obligations are
issued, they are issued by, and in the name of, the school district.

In Type I and II school districts with a board of school estimate, that board examines the
capital proposal of the board of education and certifies the amount of bonds to be
authorized. When it is necessary to exceed the borrowing capacity of the municipality, the
approval of a majority of the legally qualified voters of the municipality is required,
together with the approval of the Commissioner and the Local Finance Board. When such bonds
are issued by a Type I school district, they are issued by the municipality and identified
as school bonds. When bonds are issued by a Type II school district having a board of
school estimate, they are issued by, and in the name of, the school district.

School District Lease Purchase Financings -- School districts are permitted to enter into
lease purchase agreements for the acquisition of equipment or for the acquisition of land
and school buildings in order to undertake the construction or the improvement of the
school buildings. Lease purchase agreements for equipment cannot exceed five years. Lease
purchase agreements for school facilities must be approved by the Commissioner, the voters
or the board of school estimate, as applicable. The payment of rent on an equipment lease
and on a five year and under facilities lease purchase agreement is treated as a current
expense and is within the cap on the school district's budget. Under the Comprehensive
Education Improvement and Financing Act, lease purchase payments on leases in excess of
five years will be treated as debt service payments and therefore receive debt service aid
if the school district is entitled and will
be outside the school district's spending limitation of the General Fund.

New Jersey School Bond Reserve Act -- The New Jersey School Bond Reserve Act (N.J.S.A.
18A:56-17 ET SEQ.) establishes a school bond reserve within the constitutionally dedicated
Fund for the support of free public schools. Under this law, the reserve is maintained at
an amount equal to 1.5 percent of the aggregate outstanding bonded indebtedness of
counties, municipalities or school districts for school purposes (exclusive of bonds whose
debt service is provided by New Jersey appropriations), but not in excess of monies
available in such Fund. If a municipality, county or school district is unable to meet
payment of the principal of or interest on any of its school bonds, the trustee of the
school bond reserve will purchase such bonds at the face amount thereof or pay the holders
thereof the interest due or to become due. There has never been an occasion to call upon
this Fund.

LOCAL FINANCING AUTHORITIES

Regulation Of Local Financing Authorities -- The Local Authorities Fiscal Control Law
(N.J.S.A. 40A:5A-1 ET SEQ.) provides for State supervision of the fiscal operations and
debt issuance practices of independent local authorities and special taxing districts by
the New Jersey Department of Community Affairs. The Local Authorities Fiscal Control Law
applies to all autonomous public bodies, created by local units, which are empowered (i) to
issue bonds, (ii) to
impose facility or service charges, or (iii) to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal utilities, parking,
pollution control, improvement, etc.) and special taxing
districts (fire, water, etc.). Authorities which are subject to differing New Jersey or
federal financial restrictions are exempted, but only to the extent of that difference.

Financial control responsibilities over local authorities and special districts are
assigned to the Local Finance Board and the Director. The Local Finance Board exercises
approval over creation of new authorities and special districts as well as their
dissolution. The Local Finance Board prescribes minimum audit requirements to be followed
by authorities and special districts in the conduct of their annual audits. The Director
reviews and approves annual budgets of authorities and special districts.

Regulation Of The Issuance Of Bonds By Local Financing Authorities -- Certain local
authorities are authorized to issue debt on behalf of various entities on a conduit basis.
Under such circumstances, neither the local authority acting as a conduit issuer, the local
unit creating such local authority nor the State of New Jersey is responsible for the
repayment of such debt. The payment obligations with respect to such debt is solely that of
the entity on whose behalf the debt was issued. The Local Finance Board reviews, conducts
public hearings, and issues findings and recommendations on any proposed project financing
of an authority or district, and on any proposed financing agreement between a local unit
and an authority or special district.

Pollution Control Bonds -- In the 1970's, the New Jersey Legislature initiated a
comprehensive statutory mechanism for the management of solid waste disposal within New
Jersey that required each county to develop a plan for county-wide controlled flow of solid
waste to a franchised location. The controlled flow of solid waste to a franchised location
enabled the imposition
of above-market-rate disposal fees. Most counties created independent local authorities or
utilized existing local authorities in order to finance, with the proceeds of bonds, the
technically complex and expensive infrastructure required to implement this statutory
mechanism. Typically, the primary security for the amortization of the bonds was the
above-market-rate disposal fees, although some bonds were further secured by a guaranty of
the respective county. On May 1,
1997, in ATLANTIC COAST DEMOLITION & RECYCLING, INC. V. BOARD OF CHOSEN FREEHOLDERS OF
ATLANTIC COUNTY, 112 F.3d 652 (3d Cir. 1997), the United States Court of Appeals for the
Third Circuit held that New Jersey's system of controlled flow of solid waste to franchised
locations unconstitutionally discriminated against out-of-State operators of waste disposal
facilities and, therefore, violated the Commerce Clause of the United States Constitution.
Subsequently, the United States Supreme Court denied a petition for writ of
certiorari. This decision has terminated controlled flow of solid waste to franchised
locations within New Jersey. In the absence of controlled flow, franchisees facing
competition from other operators of waste disposal facilities are unable to charge
above-market-rate disposal fees. The reduction of such fees to competitive levels has
reduced correspondingly the primary source of security for the outstanding bonds of the
local authorities. The facts relevant to each local authority within New Jersey remain
unique. Some local authorities have successfully implemented refunding and work-out
financings. Other local authorities have eliminated revenue shortfalls through the
imposition of special waste disposal taxes. In other cases, revenue shortfalls continue,
but bond payment defaults by such local authorities have been avoided as a result of a New
Jersey program by which New Jersey to date has voluntarily provided financial assistance to
qualifying local authorities to satisfy bond payment obligations on a given bond payment
date. However, no assurance can be given that such New Jersey subsidies will be made
available to such local authorities in the future (or that sufficient funds will be made
available to New Jersey for such purpose), particularly given recent New Jersey budget
reductions.

Qualified Bonds -- In 1976, legislation was enacted (P.L. 1976, c. 38 and c. 39) which
provides for the issuance by municipalities and school districts of "qualified bonds."
Whenever a local board of education or the governing body of a municipality determines to
issue bonds, it may file an application with the Local Finance Board, and, in the case of a
local board of education, the
Commissioner, to qualify bonds pursuant to P.L. 1976 c. 38 or c. 39. Upon approval of such
an application, the New Jersey Treasurer shall withhold from certain New Jersey revenues or
other New Jersey aid payable to the municipalities, or from New Jersey school aid payable
to the school district, as appropriate, an amount sufficient to pay debt service on such
bonds. These
"qualified bonds" are not direct, guaranteed or moral obligations of New Jersey, and debt
service on such bonds will be provided by New Jersey only if the above mentioned
appropriations are made by New Jersey. As of June 30, 2004, the aggregate amount of school
district and municipal qualified bonds outstanding was $251,901,700 and $1,104,790,953,
respectively.

LITIGATION OF THE STATE OF NEW JERSEY

General -- At any given time, there are various numbers of claims and cases pending against
the State of New Jersey, State agencies and State employees, seeking recovery of monetary
damages that are primarily paid out of the fund created pursuant to the New Jersey Tort
Claims Act (N.J.S.A. 59:1-1 ET SEQ.). New Jersey does not formally estimate its reserve
representing potential exposure for these claims and cases. New Jersey is unable to
estimate its exposure for these claims and cases.

New Jersey routinely receives notices of claim seeking substantial sums of money. The
majority of these claims have historically proven to be of substantially less value than
the amount originally claimed. Under the New Jersey Tort Claims Act, any tort litigation
against New Jersey must be preceded by a notice of claim, which affords New Jersey the
opportunity for a six-month
investigation prior to the filing of any suit against it. In addition, at any given time,
there are various numbers of contract and other claims against New Jersey and New Jersey
agencies, including environmental claims asserted against New Jersey, among other parties,
arising from the alleged disposal of hazardous waste. Claimants in such matters seek
recovery of monetary damages or other relief which, if granted, would require the
expenditure of funds. New Jersey is
unable to estimate its exposure for these claims. At any given time, there are various
numbers of claims and cases pending against the University of Medicine and Dentistry of New
Jersey and its employees, seeking recovery of monetary damages that are primarily paid out
of the Self Insurance Reserve Fund created pursuant to the New Jersey Tort Claims Act.

An independent study estimated an aggregate potential exposure of $88,860,618 for tort and
medical malpractice claims pending as of December 31, 2003. In addition, at any given time,
there are various numbers of contract and other claims against the University of Medicine
and Dentistry of New Jersey, seeking recovery of monetary damages or other relief which, if
granted, would require the expenditure of funds. New Jersey is unable to estimate its
exposure for these claims.

Lawsuits currently pending or threatened in which New Jersey has the potential for either a
significant loss of revenue or a significant unanticipated expenditure are described in
official statements relating to securities offerings of New Jersey municipal obligations
available as of the
date of this Statement of Additional Information.

Other Investment Techniques and Strategies.  In seeking its objective, the Fund may from
time to time employ the types of investment strategies and investments described below.  It
is not required to use all of these strategies at all times, and at times may not use them.

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

      The interest rate on a floating rate demand note is based on a stated prevailing
market rate, such as a bank's prime rate, the ninety-one (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 no less than one (1) year.
Generally, the changes in the interest rate on such securities reduce the fluctuation in
their market value.  As interest rates decrease or increase, the potential for capital
appreciation or depreciation is less than that for fixed-rate obligations of the same
maturity.

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

      Floating rate and variable rate demand notes that have a stated maturity in excess of
one (1) year may have features that permit the holder to recover the principal amount of
the underlying security at specified intervals not exceeding one (1) year and upon not more
than thirty (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.

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

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

      Inverse floaters may offer relatively high current income, reflecting the spread
between 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" (or "forward commitment") basis.  "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market exists, but which
are not available for immediate delivery.

      When such transactions are negotiated the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made.  Delivery and payment for the
securities take place at a later date.  Normally the settlement date is within six (6)
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 (6) months and
possibly as long as two (2) 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 of any type 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| 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.  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 (1) to five (5) days of the purchase.  Repurchase
agreements having a maturity beyond seven (7) 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 (7) days or less.

      Repurchase agreements, considered "loans" under the Investment Company Act of 1940
("Investment Company Act"), are collateralized by the underlying security.  The Fund's
repurchase agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price to fully
collateralize the repayment obligation.

      The Manager will monitor the vendor's creditworthiness to confirm that the vendor is
financially sound and will continuously monitor the collateral's value.  However, if the
vendor fails to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay in its ability
to do so.

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

      |X| Illiquid and Restricted Securities.  The Fund has percentage limitations that
apply to purchases of illiquid and restricted securities, as stated in the Prospectus. The
Manager monitors holdings of illiquid and restricted securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.

      |X|  Borrowing and Leverage.  The Fund has the ability to invest borrowed funds in
portfolio securities. This speculative investment technique is known as "leverage". Under
its fundamental policies, the Fund may not borrow, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or any exemption therefrom that
is applicable to the Fund, as such statutes, rules or regulations may be amended or
interpreted from time to time.  Currently, under the Investment Company Act, a mutual fund
may borrow only from banks and the maximum amount it may borrow is up to one-third of its
total assets (including the amount borrowed) less its liabilities, other than borrowings,
except that a fund may borrow up to 5% of its total assets for temporary purposes from any
person. Under the Investment Company Act, there is a rebuttable presumption that a loan is
temporary if it is repaid within 60 days and not extended or renewed. The Fund may borrow
for temporary or emergency purposes only to the extent necessary in emergency situations to
meet redemption requests after using all cash held by the Fund to meet such redemption
requests, other than cash necessary to pay Fund fees and expenses. If the value of a Fund's
assets fails to meet the 300% asset coverage requirement, the Fund is required, within
three days to reduce its bank debt to the extent necessary to meet such requirement and may
have to sell a portion of its investments at a time when independent investment judgment
would not dictate such sale.


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

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

      |X| 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, custodian and administrative or other
fees in connection with these loans.  The terms of the Fund's loans must meet applicable
tests under the Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five (5) days' notice or in time to vote on any important matter.

|X|   Other Derivative Investments.  The Fund can invest in other municipal derivative
securities that pay interest that depends on the change in value of an underlying asset,
interest rate or index.  Examples are interest rate swaps, municipal bond indices or swap
indices.  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| Puts and Standby Commitments.   The Fund can acquire "stand-by commitments" or "puts"
with respect to municipal securities to enhance portfolio liquidity and to try to reduce
the average effective portfolio maturity. These arrangements give the Fund the right to
sell the securities at a set price on demand to the issuing broker-dealer or bank. However,
securities having this feature may have a relatively lower interest rate.  When the Fund
buys a municipal security subject to a standby commitment to repurchase the security, the
Fund is entitled to same-day settlement from the purchaser.  The Fund receives an exercise
price equal to the amortized cost of the underlying security plus any accrued interest at
the time of exercise.  A put purchased in conjunction with a municipal security enables the
Fund to sell the underlying security within a specified period of time at a fixed exercise
price.

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

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

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


      |X| 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 could:

      |_| 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.

      The Fund can also write covered calls 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
would normally seek to purchase the securities, and then terminate that hedging position.
For this type of hedging, the Fund could:

      |_| 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,
are approved by its Board, 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.

      No money is paid by or received by the fund on the purchase or sale of a futures
contract. 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 (for example, the duration of municipal bonds relative to U.S.
Treasury Bonds might have been greater than anticipated).

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

      |X| Writing Covered Call Options.  The Fund can 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.

      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 (9) 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.

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

      The Fund's custodian, or a securities depository acting for the custodian, will act
as the Fund's escrow agent through the facilities of the Options Clearing Corporation
("OCC"), as to the investments on which the Fund has written calls traded on exchanges, or
as to other acceptable escrow securities. In that way, no margin will be required for such
transactions. OCC will release the securities on the expiration of the 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 Securities and Exchange Commission 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 in all appropriate cases 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.

            |X| Purchasing Calls and Puts.  The Fund may buy calls only on securities,
broadly-based municipal bond indices, municipal bond index futures and interest rate
futures.  It can 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 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).

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

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

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

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

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

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

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

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

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

     |_| 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 can enter into swaps only on securities it owns. The Fund cannot 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 can 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
can 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."

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

|X|   Portfolio Turnover.  A change in the securities held by the Fund from buying and
selling investments is known as "portfolio turnover."  Active and frequent 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 capital gains, because they
would not be tax-exempt income.  To a limited degree, the Fund may engage in active and
frequent 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 Manager believes such disposition is advisable or the Fund needs to generate cash to
satisfy requests to redeem Fund shares.  In those cases, the Fund may realize a capital
gain or loss on its investments.  The Fund's annual portfolio turnover rate normally is not
expected to exceed 100%. The Financial Highlights table at the end of the Prospectus shows
the Fund's portfolio turnover rates during the past five fiscal years.

      |X| Temporary Defensive and Interim Investments. The securities the Fund can 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 type of securities pending the investment of proceeds for
the sale of portfolio securities or to meet anticipated redemptions of Fund shares. The
income from some of these temporary defensive investments may not be tax-exempt. Therefore
when making those investments, the Fund might not achieve its objective.

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

Other Investment Restrictions

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

      |_| 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 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 New Jersey municipal securities.

      |_| The Fund cannot invest in real estate, physical commodities or commodity
contracts, except to the extent permitted under the 1940 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 cannot underwrite securities of other companies.  A permitted exception
is in case it is deemed to be an underwriter under the Securities Act of 1933 when
reselling any securities held in its own portfolio.

      |_| The Fund cannot make loans, except to the extent permitted under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom that is applicable to the
Fund, as such statute, rules or regulations may be amended or interpreted from time to time.

      |_| The Fund may not borrow money, except to the extent permitted under the 1940 Act,
the rules or regulations thereunder or any exemption therefrom that is applicable to the
Fund, as such statute, rules or regulations may be amended or interpreted from time to time.

      |_|  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.


|_|   The Fund invests at least 80% of its net assets (plus borrowings for investment
purposes) in New Jersey municipal securities. This includes securities that generate income
subject to the alternative minimum tax.

      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.

      The Fund cannot invest in other investment companies except to the extent permitted
by the Act. The Fund would be permitted under this policy to invest its assets in the
securities of one or more open-end management investment company for which the Manager, one
of its affiliates or a successor is the investment advisor or sub-advisor. That fund or
funds must have substantially the same fundamental investment objective, policies and
limitations as the Fund. The Fund's policy not to concentrate its investments, as described
above, also would permit the Fund to adopt a "master-feeder" structure. Under that
structure, the Fund would be a "feeder" fund and would invest all of its assets in a single
pooled "master fund" in which other feeder funds could also invest. This could enable the
Fund to take advantage of potential operational and cost efficiencies in the master-feeder
structure. The Fund has no present intention of adopting the master-feeder structure. If it
did so, the Prospectus and this Statement of Additional Information would be revised
accordingly.

      The Fund's policy on senior securities does not prohibit certain activities that are
permitted by the Fund's other policies, including borrowing money for emergency purposes as
permitted by its other investment policies and applicable regulations, entering into
delayed-delivery and when-issued arrangements for portfolio securities transactions, and
entering into contracts to buy or sell derivatives, hedging instruments, options, futures
and the related margin, collateral or escrow arrangements permitted under its other
investment policies.

      |X| Does the Fund Have Other Restrictions that are Not Fundamental Policies?

      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 or other investments other than municipal
securities, the temporary investments described in its Prospectus, repurchase agreements,
covered calls, private activity municipal securities and hedging instruments described in
"About the Fund" in the Prospectus or this Statement of Additional Information.

      |_| The Fund cannot purchase securities other than hedging instruments on margin.
However, the Fund may obtain short-term credits that may be necessary for the clearance of
purchases and sales of securities.

      |_| The Fund cannot sell securities short.

      |_| The Fund cannot buy or sell futures contracts other than interest rate futures
and municipal bond index futures.

      |_| The Fund will not invest more than 10% of its net assets in securities which are
restricted as to disposition under the federal securities laws, except that the Fund may
purchase without regard to this limitation restricted securities which are eligible for
resale pursuant to Rule 144A under the Securities Act of 1933.


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. The Manager has no present intention of
investing 25% or more of the Fund's total assets in securities paying interest from
revenues of similar type projects or in industrial development bonds. This is not a
fundamental policy and therefore could be changed without shareholder approval. However, if
that change were made, the Prospectus or this Statement of Additional Information would be
supplemented to reflect the change.

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

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

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

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

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

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

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

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

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

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

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

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

    Portfolio holdings information (which may include information on the Fund's entire
    portfolio or individual securities therein) may be provided by senior officers of the
    Manager or attorneys on the legal staff of the Manager, Distributor, or Transfer Agent,
    in the following circumstances:

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

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

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

    The Chief Compliance Officer 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 LLC Nomura Securities
         ------------------------------------------------------------
         ------------------------------------------------------------
         Credit Agricole Cheuvreux N.A. Pacific Crest
         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 Wasserstein Plexus
         ------------------------------------------------------------
         ------------------------------------------------------------
         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 a series of Oppenheimer Multi-State Municipal Trust
(referred to as the "Trust), is an open-end, non-diversified management investment company
with an unlimited number of authorized shares of beneficial interest.  The Trust was
organized as a single-series Massachusetts business trust in 1989.  In 1993 it was
reorganized to be a multi-series business trust (now called Oppenheimer Multi-State
Municipal Trust).  The Fund was added as a separate series of that Trust in 1994. Each of
the three (3) series of the Trust is a separate fund that issues its own shares, has its
own investment portfolio, and has its own assets and liabilities.

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

      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
Independent 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 Committee's Charter.

      The Governance Committee's functions also include selecting and nominating, to the
full Board, nominees for election as Trustees, and selecting and nominating 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 Committee may, upon Board
approval, retain an executive search firm to assist in screening potential candidates.
Upon Board approval, the 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, NY 10281-1008, to the attention of the Board of
Trustees of Oppenheimer New Jersey 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 the
proxy voting of portfolio securities held by the Fund and monitors proxy voting by the Fund.

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

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

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

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

      Messrs. Fielding, Cottier, Loughran, 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 any class of shares of the Fund.  The foregoing statement does not reflect ownership of
shares held of record by an employee benefit plan for employees of the Manager, other than
the shares beneficially owned under that plan by the officers of the Fund listed above.  In
addition, none of the Independent Trustees (nor any of their immediate family members),
owns securities of either the Manager or the Distributor of the Board I Funds or of any
entity directly or indirectly controlling, controlled by or under common control with the
Manager or the Distributor.

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

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

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





------------------------------------------------------------------------------------
                               Independent Trustees
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Name,               Principal Occupation(s) During Past 5    Dollar     Aggregate
                                                                        Dollar
                                                                        Range Of
                    Years;                                   Range of   Shares
Position(s) Held    Other Trusteeships/Directorships Held    Shares     Beneficially
with Fund,          by 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
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K.          Director of American Commercial Lines    None       Over
Yeutter, Chairman   (barge company) (since January 2005);               $100,000
of the Board of     Attorney at Hogan & Hartson (law firm)
Trustees since      (since June 1993); Director of Covanta
2003;               Holding Corp. (waste-to-energy company)
Trustee since 1994  (since 2002); Director of Weyerhaeuser
Age: 74             Corp. (1999-April 2004); Director of
                    Caterpillar, Inc. (1993-December 2002);
                    Director of ConAgra Foods (1993-2001);
                    Director of Texas Instruments
                    (1993-2001); Director of FMC
                    Corporation (1993-2001). Oversees 38
                    portfolios in the OppenheimerFunds
                    complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Matthew P. Fink     Trustee of the Committee for Economic    None       None
Trustee since 2005  Development (policy research foundation)
Age: 64             (since 2005); Director of ICI Education
                    Foundation (education foundation) (since
                    October 1991); President of the
                    Investment Company Institute (trade
                    association) (1991-2004); Director of
                    ICI Mutual Insurance Company (insurance
                    company) (1991-2004). Oversees 38
                    portfolios in the OppenheimerFunds
                    complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Robert G. Galli,    A trustee or director of other           None       Over
Trustee since 1994  Oppenheimer funds. Oversees 48                      $100,000
Age: 72             portfolios in the OppenheimerFunds
                    complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip A.          Director of GSI Lumonics Inc.            None       Over
Griffiths,          (precision medical equipment supplier)              $100,000
Trustee, 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 1989  (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 1994  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 1992)
August 2005         and Cathco (since 1996); Director of
Age: 64             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 production             $100,000
September 2005      company) (since 1994); Vice President,
Age: 57             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, New York 10281-1008. Mr. Murphy serves as a Trustee and an officer for an
indefinite term, or until his resignation, retirement, death or removal. Mr. Murphy is an
"Interested Trustee" because he is affiliated with the Manager by virtue of his positions
as an officer and director of the Manager, and as a shareholder of its parent company.

-------------------------------------------------------------------------------------
                           INTERESTED TRUSTEE AND OFFICER
-------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Name, Position(s)  Principal Occupation(s) During the Past 5      Dollar      Aggregate
                                                                            Dollar Range
                                                                 Range of     Of Shares
                                                                  Shares    Beneficially
Held with Fund,    Years; Other Trusteeships/Directorships      Beneficially  Owned in
Length of          Held; Number of Portfolios in the Fund        Owned in    Supervised
Service, Age       Complex Currently Overseen                    the Fund       Funds
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
                                                                 As of December 31, 2004
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
John V. Murphy,    Chairman, Chief Executive Officer and        None        Over $100,000
President and      Director (since June 2001) and President
Trustee since 2001 (since September 2000) of the Manager;
Age: 56            President and a director or trustee of
                   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 and 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, New York, New York 10281-1008, for Messrs. Petersen, Vandehey,
Vottiero, and Wixted and Ms. Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924.
Each officer serves for an indefinite term or until his or her resignation, retirement,
death or removal.

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


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



------------------------------------------------------------------------------------
Name and Other Fund       Aggregate      Retirement     Estimated        Total
                                          Benefits        Annual      Compensation
                         Compensation    Accrued as      Benefits    From the Fund
Position(s)                From the     Part of Fund       Upon         and Fund
(as applicable)           Fund((1))       Expenses    Retirement((2))   Complex
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K. Yeutter         $854(3)          $213         $86,171        $173,700
Chairman of the Board
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Matthew P. Fink(4)           None           None          $2,641          None
Proxy Committee Member
and Regulatory &
Oversight Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Robert G. Galli
Regulatory & Oversight       $635           None       $100,824(5)    $237,312(6)
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip A. Griffiths
Governance Committee
Chairman and               $737(7)         $1,937        $34,972        $142,092
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee Member
and Proxy Committee          $341           None          $7,128         $8,532
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joel W. Motley
Audit Committee
Chairman and               $741(9)          $296         $23,945        $150,760
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Kenneth A. Randall           $659         None(10)       $85,944        $134,080
Audit Committee Member
and Governance
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Edward V. Regan((11))        $542           None         $70,977        $118,788

------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Russell S. Reynolds,         $526           None         $66,602        $106,792
Jr.
Proxy Committee
Chairman and
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Donald Spiro ((12))          $51            None           None         $64,080

------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joseph M. Wikler             None           None            --          $23,000
Audit Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Peter I. Wold(13)
Governance Committee         None           None            --          $20,500
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Brian F. Wruble((1)(4))
Regulatory & Oversight       None           None      $22,238(1(5))  $111,000(1(6))
Committee Member
------------------------------------------------------------------------------------
1....."Aggregate  Compensation  From the Fund" includes fees and deferred  compensation,  if
   any.
2.    "Estimated  Annual  Retirement  Benefits Upon  Retirement" is based on a straight life
   payment plan  election  with the  assumption  that a Trustee will retire at the age of 75
   and is eligible  (after 7 years of  service) to receive  retirement  plan  benefits  with
   respect to certain Board I Funds as described below under "Retirement Plan for Trustees."
3.    Includes $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 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 a Board member of 13 of the Board I Funds effective
   August13, 2004 and of 9 of the Board I Funds effective October 26, 2004. She was elected
   as a Board member of all of the Board I Funds during 2005.
9.    Includes $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 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. Wikler and Mr. Wold were elected as Board members of 23 of the Board I Funds as
   of August 17, 2005. They had served as Board members of the other 11 Board I Funds prior
   to that date.
14.   Mr. Wruble was appointed as Trustee of the Board I Funds effective October 10, 2005.
15.   Estimated benefits to be paid to Mr. Wruble for serving as a director or trustee of
   10 other Oppenheimer funds that are not Board I Funds. Mr. Wruble's service as a
   director or trustee of such funds will not be counted towards the fulfillment of his
   eligibility requirements for payments under the Board I retirement plan, described below.
16.   For serving as a director or trustee of 10 other Oppenheimer funds (at December 31,
   2004) that are not Board I Funds.

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

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

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

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

      MLPF&S for the sole benefit of its customers, Attn. Fund ADMN/#, 4800 Deer Lake Drive
East Floor 3, Jacksonville, FL 32246-6484, which owned 1,041,612.898 Class A shares (5.09%
of the Class A shares then outstanding) for the benefit of its customers.

      Citigroup Global Mkts Inc. Attn. Cindy Tempesta, 7th Floor 333 West 34th Street, New
York, New York 10001-2483, which owned 1,180,096.745 Class A shares (5.77% of the Class A
shares then outstanding) for the benefit of its customers.

      Citigroup Global Mkts Inc., Attn. Cindy Tempesta, 7th Floor 333 West 34th Street, New
York, New York 10001-2483, which owned 452,421.611 Class B shares (8.35% of the Class B
shares then outstanding) for the benefit of its customers.

      MLPF&S for the sole benefit of its customers, Attn. Fund ADMN/#, 4800 Deer Lake Drive
East Floor 3, Jacksonville, FL 32246-6484, which owned 1,225,451.630 Class C shares (16.79%
of the Class C shares then outstanding) for the benefit of its customers.

      Citigroup Global Mkts Inc., Attn. Cindy Tempesta, 7th Floor 333 West 34th Street, New
York, New York 10001-2483, which owned 522,762.707 Class C shares (7.16% of the Class C
shares then outstanding) for the benefit of its customers.

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

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

      The Code of Ethics is an exhibit to the Fund's registration statement filed with the
SEC and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C.
You can obtain information about the hours of operation of the Public Reference Room by
calling the SEC at 1-202-942-8090.  The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet website at
www.sec.gov.  Copies may be obtained, after paying a duplicating fee, by electronic request
at the following E-mail address: publicinfo@sec.gov, or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.

|X| Portfolio Proxy Voting.   The Fund has adopted Portfolio Proxy Voting Policies and
Procedures under which the Fund votes proxies relating to securities ("portfolio proxies")
held by the Fund.   The Fund's primary consideration in voting portfolio proxies is the
financial interests of the Fund and its shareholders. The Fund has retained an unaffiliated
third-party as its agent to vote portfolio proxies in accordance with the Fund's Portfolio
Proxy Voting Guidelines and to maintain records of such portfolio proxy voting.  The
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 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.

-----------------------------------------------------------------------------
                                                  Management Fee Paid to
    Fiscal Year           Management Fee                the Manager
    Ended 7/31      (Without Voluntary Waiver)        (after waiver)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
       2003                  $700,465                    $466,975
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
       2004                  $901,530                    $600,745
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
       2005                 $1,363,857                   $902,968
-----------------------------------------------------------------------------

      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 team of investment
professionals including Daniel G. Loughran, Ronald H. Fielding, Scott Cottier, 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. Loughran, Fielding, 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.
Loughran, Fielding, 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                     $19,636.80
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Daniel G.           10                  None      $0          10     $0.466
    Loughran                     $19,636.80
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Scott Cottier       10                  None      $0           7     $0.240
                                 $19,636.80
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Troy Willis         10                  None      $0           2     $0.104
                                 $19,636.80
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Mark DeMitry        10                  None      $0           6     $0.122
                                 $19,636.80
   -------------------------------------------------------------------------------
   -------------------------------------------------------------------------------
    Marcus Franz        10                  None      $0          10     $0.170
                                 $19,636.80
       *  In millions.

     As indicated above, each of the Portfolio Managers also manages 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 he may need to execute transactions for another fund or account that could
have a negative impact on the value of securities held by the Fund. Not all funds and
accounts advised by the Manager have the same management fee. If the management fee
structure of another fund or account is more advantageous to the Manager than the fee
structure of the Fund, the Manager could have an incentive to favor the other fund or
account. However, the Manager's compliance procedures and Code of Ethics recognize the
Manager's fiduciary obligations to treat all of its clients, including the Fund, fairly and
equitably, and are designed to preclude the Portfolio Managers from favoring one client
over another. It is possible, of course, that those compliance procedures and the Code of
Ethics may not always be adequate to do so. At 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 - New Jersey 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 September 30, 2005, the Portfolio Manager
beneficially owned shares of the Fund as follows:

            ----------------------------------------------------------
                                                Range of Shares
            ------------------------------        Beneficially
                  Portfolio Manager            Owned in the Fund
            ----------------------------------------------------------
            ----------------------------------------------------------
            Daniel G. Loughran                      770.160
            ----------------------------------------------------------

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

Brokerage Policies of the Fund

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

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

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

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

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

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

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

      The investment advisory agreement permits the Manager to allocate brokerage for
research services.  The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its affiliates.  Investment
research received by the Manager for the commissions paid by those other accounts may be
useful both to the Fund and one or more of the Manager's other accounts.  Investment
research services may be supplied to the Manager by a third party at the instance of a
broker through which trades are placed.
       Investment research services include information and analyses on particular
companies and industries as well as market or economic trends and portfolio strategy,
market quotations for portfolio evaluations, analytical software and similar products and
services.  If a research service also assists the Manager in a non-research capacity (such
as bookkeeping or other administrative functions), then only the percentage or component
that provides assistance to the Manager in the investment decision-making process may be
paid in commission dollars.

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

      The 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.

In the fiscal years ended July 31, 2003, 2004 and 2005, there were no transactions directed
to brokers for research services, and the amount of the commissions paid to broker-dealers
for those services was $0. As explained above, in the fiscal years ended July 31, 2003,
2004 and 2005 respectively, the Fund did not pay any brokerage commissions.


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.

 ------------------------------------------------------------------------------
          Aggregate     Class A                     Concessions  Concessions
 Fiscal   Front-End     Front-End    Concessions    on Class B   on Class C
 Year     Sales         Sales        on Class A     Shares       Shares
 Ended    Charges on    Charges      Shares         Advanced by  Advanced by
 7/31:    Class A       Retained by  Advanced by    Distributor(2Distributor(2)
          Shares        Distributor(1Distributor(2)
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2003     $432,635      $62,816       $37,785       $443,729      $76,829
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2004     $761,563      $118,554      $31,075       $531,567      $95,807
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2005    $1,979,397     $321,354      $74,595       $623,968     $402,303
 ------------------------------------------------------------------------------
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.


 ------------------------------------------------------------------------------
             Class A Contingent   Class B Contingent    Class C Contingent
 Fiscal      Deferred Sales       Deferred Sales        Deferred Sales
 Year Ended  Charges Retained by  Charges Retained by   Charges Retained by
 7/31:       Distributor          Distributor           Distributor
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2003              $0                $140,792                $6,649
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2004              $0                 $97,081                $3,962
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2005             $250               $133,731               $40,746
 ------------------------------------------------------------------------------


Distribution and Service Plans.  The Fund has adopted a Service Plan for its Class A shares
and Distribution and Service Plans for its Class B and Class C shares under Rule 12b-1 of
the Investment Company Act.  Under those plans, the Fund makes payments to 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 Fund's 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 or replacement 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.

      |_|  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 0.15% of
average annual net assets of Class A shares. The Board has set the rate at the 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 0.15% of the average annual net
assets of Class A shares held in accounts of the service providers or their customers.

      For the fiscal year ended July 31, 2005, payments under the Class A plan totaled
$194,249, all of which was paid by the Distributor to recipients and included $2,471 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.

|_|   Class B and Class C Distribution and Service Plans.  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 plans during the period for which the fee is paid.  The types of services that
recipients provide are similar to the services provided under 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 an 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 fees 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:
|_|   pays sales concessions to authorized brokers and dealers at the time of sale and pays
      service fees as described above,
|_|   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,
|_|   employs personnel to support distribution of Class B and Class C shares,
|_|   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,
|_|   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,
|_|   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,
|_|   may use the payments under the plan to include the Fund in various third-party
      distribution programs that may increase sales of Fund shares,
|_|   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
|_|   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 in the Fiscal Year
                                 Ended 7/31/05
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:       Total Payments      Amount       Distributor's    Distributor's
                                                 Aggregate       Unreimbursed
                                                Unreimbursed    Expenses as %
                                Retained by    Expenses Under   of Net Assets
                Under Plan      Distributor         Plan           of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B         $509,751       $441,267(1)      $2,170,424         3.48%
 Plan
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C         $365,028       $188,257(2)       $925,040          1.32%
 Plan
 -------------------------------------------------------------------------------
1.    Includes $492 paid to an affiliate of the Distributor's parent company.
2.    Includes $1,077 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  Statement of Additional Information. They may also receive reallowance of commissions
from the Distributor, derived from sales charges paid by the clients of the financial
intermediary, also as described in this Statement of Additional Information. Additionally,
the Manager and/or the Distributor (including their affiliates) may make payments to
financial intermediaries in connection with their offering and selling shares of the Fund
and other Oppenheimer funds, providing marketing or promotional support, transaction
processing and/or administrative services. Among the financial intermediaries that may
receive these payments are brokers and dealers who sell and/or hold shares of the Fund,
banks (including bank trust departments), registered investment advisers, insurance
companies, retirement plan and qualified tuition program administrators, third party
administrators, and other institutions that have selling, servicing or similar arrangements
with the Manager or Distributor. The payments to intermediaries vary by the types of
product sold, the features of the Fund share class and the role played by the intermediary.

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Performance of the Fund

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

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

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

      |_| 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.
      |_|  The Fund's performance returns may not reflect the effect of taxes on dividends
      and capital gains distributions.
      |_| An investment in the Fund is not insured by the FDIC or any other government
      agency.
      |_| 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.
      |_| When an investor's shares are redeemed, they may be worth more or less than their
      original cost.
      |_| 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.

      |_| 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:
                              6
                      [( a-b )   ]
Standardized Yield = 2[(--- +1)-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 thirty-day period.

      |_| 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.

      |_| 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 Federal 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 7/31/05
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                           Tax-Equivalent Yield
                 Dividend Yield      Standardized Yield      (40.83% Combined
                                                            Federal/New Jersey
Class of                                                       Tax Bracket)
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
             Without       After    Without    After        Without   After
             Sales         Sales    Sales      Sales         Sales    Sales
               Charge     Charge      Charge     Charge     Charge      Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A        5.19%       4.94%      4.36%      4.15%       7.36%      7.01%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B        4.26%        N/A        356%       N/A        6.01%       N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C        4.27%        N/A       3.55%       N/A        6.01%       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% contingent deferred
sales charge is deducted for returns for the one-year period.

      |_| 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:

     1/n
(ERV)
(---)-1 = Average Annual Total Return
( P )



            |_| 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:


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


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



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

      |_| 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
      |_| Total Returns at Net Asset Value.  From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without deducting sales
charges) for Class A, Class B or Class C 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
---------------------------------------------------------------------------------
          -----------------------------------------------------------------------
          Cumulative Total              Average Annual Total Returns
             Returns (10
          years or life of
               class)
Class of
 Shares
---------------------------------------------------------------------------------
          -----------------------------------------------------------------------
                                                                    10-Years
                                 1-Year            5-Years        (or life of
                                                                     class)
---------------------------------------------------------------------------------
          -----------------------------------------------------------------------
          After    Without  After    Without  After    Without  After   Without
          Sales    Sales    Sales    Sales    Sales    Sales    Sales   Sales
           Charge   Charge   Charge   Charge   Charge   Charge  Charge   Charge
---------------------------------------------------------------------------------
          -----------------------------------------------------------------------
Class A   78.03%(1)86.90%(1) 12.83%   18.46%   7.70%    8.75%   5.94%(1)6.45%(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B   79.08%(2)79.08%(2) 12.53%   17.53%   7.65%    7.95%   6.00%(2)6.00%(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C   73.17%(3)73.17%(3) 16.54%   17.54%   7.95%    7.95%   5.69%(3)5.69%(3)
---------------------------------------------------------------------------------
(1)         Inception of Class A shares:  3/1/94
(2)         Inception of Class B shares:  3/1/94
(3)         Inception of Class C shares:  8/29/95


---------------------------------------------------------------------------------
         Average Annual Total Returns for Class A Shares (After Taxes)
                         For the Periods Ended 7/31/05
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                      1-Year        5-Years         10-Years
                                                                  (or life of
                                                                     class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Taxes on Distributions          12.83%         7.70%           5.91%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Taxes on Distributions and      10.46%         7.38%           5.82%
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.

      |_| 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.

      |_|  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 Single State 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.

      |_|  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 nor 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 Government Fund
Oppenheimer AMT-Free New York Municipals  Oppenheimer Limited Term Municipal Fund
Oppenheimer Balanced Fund                 Oppenheimer Main Street Fund
Oppenheimer Core Bond Fund                Oppenheimer Main Street Opportunity Fund
Oppenheimer California Municipal Fund     Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer MidCap Fund
Oppenheimer Capital 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 Developing Markets Fund       Street Fund II
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Disciplined Allocation Fund   Street Fund III
Oppenheimer Discovery Fund                Oppenheimer Quest Balanced Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Dividend Growth Fund          Inc.
                                          Oppenheimer  Quest  International  Value
Oppenheimer Emerging Growth Fund          Fund, Inc.
Oppenheimer Emerging Technologies Fund    Oppenheimer Quest Opportunity Value Fund
Oppenheimer Enterprise Fund               Oppenheimer Quest Value Fund, Inc.
Oppenheimer Equity Fund, Inc.             Oppenheimer Real Asset Fund
Oppenheimer Global Fund                   Oppenheimer Real Estate Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Global Opportunities Fund     Municipals
Oppenheimer Gold & Special Minerals Fund  Oppenheimer Select Value Fund
Oppenheimer Growth Fund                   Oppenheimer Senior Floating Rate Fund
Oppenheimer High Yield Fund               Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer International Bond Fund       Oppenheimer Strategic Income Fund
Oppenheimer International Growth Fund     Oppenheimer Total Return Bond Fund
Oppenheimer  International  Small Company
Fund                                      Oppenheimer U.S. Government Trust
Oppenheimer International Value Fund      Oppenheimer Value Fund
Oppenheimer   Limited   Term   California
Municipal Fund                            Limited-Term New York Municipal Fund
                                          Rochester Fund Municipals
                                          Oppenheimer Portfolio Series:
                                             Active Allocation Fund
                                             Aggressive Investor Fund
                                             Conservative Investor Fund
And the following money market funds:         Moderate Investor Fund

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 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 reduced
sales charge rate that applies to your Class A shares purchases during that period. You can
choose to include purchases 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 of Intent is an investor's statement in writing to the Distributor of his or
her intention to purchase a specific 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 in 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 of Intent period, the escrowed shares will be promptly released to the
investor.

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

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

      5. The shares eligible for purchase under the Letter (or the holding of which may be
counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class A contingent
      deferred sales charge,
(b)   Class B 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 of
exchange of classes 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.

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

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

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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


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

      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          Oppenheimer New Jersey Municipal Fund
      Municipals
      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     Oppenheimer Quest International Value
      Fund                                   Fund, Inc.
      Oppenheimer Disciplined Allocation     Oppenheimer Rochester National
      Fund                                   Municipals
      Oppenheimer Dividend Growth Fund
      Oppenheimer Gold & Special Minerals    Oppenheimer Total Return Bond Fund
      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 (3/3/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be exchanged at
      net asset value for shares of any of the Oppenheimer funds. However, shareholders are
      not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
      Principal Protected Main Street Fund III until after the expiration of the warranty
      period (12/16/2011).


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

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

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

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

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

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

o     Except with respect to 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.

      To the extent that distributions paid by the Fund are derived from interest on New
Jersey municipal securities and obligations of the U.S. Treasury, those distributions will
also be exempt from New Jersey individual income tax. Distributions from the Fund
attributable to income from sources other than those will generally be subject to New
Jersey individual income tax as ordinary income.

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

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

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

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

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

      In general, any gain or loss arising from the redemption of shares of the Fund will
be considered capital gain or loss, if the shares were held as a capital asset. It will be
long-term capital gain or loss if the shares were held for more than one year.  However,
any capital loss arising from the redemption of shares held for six months or less will be
treated as a long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal Revenue Code
apply in this case to determine the holding period of shares and there are limits on the
deductibility of capital losses in any year.

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent Registered Public Accounting Firm. KPMG LLP served as the Independent
Registered Public Accounting Firm for the Fund.  KPMG LLP audits the Fund's financial
statements and perform other related audit services.  KPMG LLP also acts 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 MULTI-STATE MUNICIPAL
TRUST:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer New Jersey Municipal Fund (one of the portfolios constituting the
Oppenheimer Multi-State Municipal Trust), 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 New Jersey 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


                   44 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND








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

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--103.0%
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY--87.3%
$     275,000    Audubon Devel. Corp. (Audubon Park)                        7.750%    08/01/2024    $     289,597
-----------------------------------------------------------------------------------------------------------------
    2,015,000    Camden County Improvement Authority
                 (Cooper Health System)                                     6.000     02/15/2027        2,087,056
-----------------------------------------------------------------------------------------------------------------
      120,000    Camden County PCFA
                 (Camden County Energy Recovery Associates)                 7.500     12/01/2009          120,630
-----------------------------------------------------------------------------------------------------------------
       15,000    Collingswood GO                                            5.875     07/15/2018           15,256
-----------------------------------------------------------------------------------------------------------------
    1,000,000    Delaware River Port Authority PA/NJ                        5.400     01/01/2016        1,029,980
-----------------------------------------------------------------------------------------------------------------
    5,540,000    Delaware River Port Authority PA/NJ 1                      5.500     01/01/2026        5,710,798
-----------------------------------------------------------------------------------------------------------------
       15,000    Essex County Improvement Authority
                 (County Jail & Youth House)                                5.350     12/01/2024           15,719
-----------------------------------------------------------------------------------------------------------------
    2,000,000    Garden State Preservation Trust
                 (Open Space & Farmland Preservation) 2                     5.800     11/01/2023        2,288,240
-----------------------------------------------------------------------------------------------------------------
       20,000    Gloucester County Improvement Authority
                 (Governmental Leasing Program)                             5.900     04/01/2007           20,053
-----------------------------------------------------------------------------------------------------------------
        5,000    Gloucester County Utilities Authority                      5.125     01/01/2013            5,010
-----------------------------------------------------------------------------------------------------------------
       25,000    Haledon School District                                    5.625     02/01/2009           25,186
-----------------------------------------------------------------------------------------------------------------
      685,000    Higher Education Student Assistance Authority
                 (Student Loan)                                             6.000     06/01/2015          701,502
-----------------------------------------------------------------------------------------------------------------
    3,755,000    Hudson County Improvement Authority (Koppers Site)         6.125     01/01/2029        3,739,492
-----------------------------------------------------------------------------------------------------------------
    1,000,000    Hudson County Solid Waste Improvement Authority            6.000     01/01/2029        1,001,440
-----------------------------------------------------------------------------------------------------------------
       75,000    Mercer County Improvement Authority                        5.000     11/15/2016           78,216
-----------------------------------------------------------------------------------------------------------------
    6,290,000    Mercer County Improvement Authority                        5.000     08/01/2040        6,610,476
-----------------------------------------------------------------------------------------------------------------
      875,000    Middlesex County Improvement Authority
                 (Heldrich Center Hotel) 1                                  5.000     01/01/2015          890,426
-----------------------------------------------------------------------------------------------------------------
      500,000    Middlesex County Improvement Authority
                 (Heldrich Center Hotel) 1                                  5.000     01/01/2020          498,200
-----------------------------------------------------------------------------------------------------------------
    1,535,000    Middlesex County Improvement Authority
                 (Heldrich Center Hotel) 1                                  5.000     01/01/2032        1,537,794
-----------------------------------------------------------------------------------------------------------------
    1,100,000    Middlesex County Improvement Authority
                 (Heldrich Center Hotel) 1                                  5.125     01/01/2037        1,106,083
-----------------------------------------------------------------------------------------------------------------
      975,000    Middlesex County Improvement Authority
                 (Skyline Tower Urban Renewal Associates)                   5.350     07/01/2034        1,025,856
-----------------------------------------------------------------------------------------------------------------
    2,500,000    Middlesex County Pollution Control Authority
                 (Amerada Hess Corp.) 1                                     6.050     09/15/2034        2,694,125
-----------------------------------------------------------------------------------------------------------------
       35,000    New Brunswick Hsg. & Urban Devel. Authority                5.500     08/01/2011           35,082
-----------------------------------------------------------------------------------------------------------------
       65,000    New Brunswick Hsg. & Urban Devel. Authority                5.750     07/01/2024           65,484
-----------------------------------------------------------------------------------------------------------------
      170,000    Newark Hsg. Finance Corp. (Spruce Park Apartments)        10.800     05/01/2025          184,734
-----------------------------------------------------------------------------------------------------------------
      135,000    NJ EDA (American Airlines)                                 7.100     11/01/2031          114,930
-----------------------------------------------------------------------------------------------------------------
      255,000    NJ EDA (Anheuser-Busch Companies) 1                        5.850     12/01/2030          262,245
-----------------------------------------------------------------------------------------------------------------
      100,000    NJ EDA (Cadbury at Cherry Hill)                            5.500     07/01/2018          104,143
-----------------------------------------------------------------------------------------------------------------
       25,000    NJ EDA (Cadbury at Cherry Hill)                            5.500     07/01/2028           25,692


                   20 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$      25,000    NJ EDA (Cascade Corp.)                                     8.250%    02/01/2026    $      24,995
-----------------------------------------------------------------------------------------------------------------
    3,000,000    NJ EDA (Cigarette Tax)                                     5.500     06/15/2031        3,149,070
-----------------------------------------------------------------------------------------------------------------
    1,500,000    NJ EDA (Cigarette Tax)                                     5.750     06/15/2029        1,609,215
-----------------------------------------------------------------------------------------------------------------
   10,000,000    NJ EDA (Cigarette Tax)                                     5.750     06/15/2034       10,668,400
-----------------------------------------------------------------------------------------------------------------
      200,000    NJ EDA (Continental Airlines)                              5.500     04/01/2028          150,128
-----------------------------------------------------------------------------------------------------------------
    6,040,000    NJ EDA (Continental Airlines)                              6.250     09/15/2019        5,645,769
-----------------------------------------------------------------------------------------------------------------
       85,000    NJ EDA (Continental Airlines)                              6.250     09/15/2029           77,846
-----------------------------------------------------------------------------------------------------------------
    2,120,000    NJ EDA (Continental Airlines) 1                            6.400     09/15/2023        1,995,450
-----------------------------------------------------------------------------------------------------------------
    2,500,000    NJ EDA (Continental Airlines)                              6.625     09/15/2012        2,434,200
-----------------------------------------------------------------------------------------------------------------
      425,000    NJ EDA (Continental Airlines)                              7.000     11/15/2030          420,125
-----------------------------------------------------------------------------------------------------------------
    3,500,000    NJ EDA (Continental Airlines) 1                            9.000     06/01/2033        3,879,715
-----------------------------------------------------------------------------------------------------------------
      100,000    NJ EDA (Courthouse Convalescent Center)                    8.700     02/01/2014          100,135
-----------------------------------------------------------------------------------------------------------------
    3,100,000    NJ EDA (Cranes Mill) 1                                     5.100     06/01/2027        3,027,956
-----------------------------------------------------------------------------------------------------------------
       60,000    NJ EDA (Dept. of Human Services)                           5.000     07/01/2022           62,581
-----------------------------------------------------------------------------------------------------------------
      135,000    NJ EDA (Dept. of Human Services)                           6.250     07/01/2024          149,993
-----------------------------------------------------------------------------------------------------------------
      100,000    NJ EDA (Devereux Foundation)                               5.450     05/01/2027          104,549
-----------------------------------------------------------------------------------------------------------------
       25,000    NJ EDA (Eastern Shore)                                     8.000     02/01/2011           24,996
-----------------------------------------------------------------------------------------------------------------
      465,000    NJ EDA (Elizabethtown Water Company)                       5.600     12/01/2025          476,490
-----------------------------------------------------------------------------------------------------------------
    4,000,000    NJ EDA (Empowerment Zone-Cumberland)                       7.750     08/01/2021        4,046,160
-----------------------------------------------------------------------------------------------------------------
       20,000    NJ EDA (Fellowship Village)                                5.500     01/01/2018           20,417
-----------------------------------------------------------------------------------------------------------------
      320,000    NJ EDA (Hackensack Water Company)                          5.800     03/01/2024          323,968
-----------------------------------------------------------------------------------------------------------------
       25,000    NJ EDA (Hackensack Water Company)                          5.900     03/01/2024           25,276
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ EDA (Jersey Central Power & Light)                      7.100     07/01/2015        2,065,600
-----------------------------------------------------------------------------------------------------------------
    5,500,000    NJ EDA (JVG Properties) 1                                  5.375     03/01/2019        5,608,075
-----------------------------------------------------------------------------------------------------------------
    2,500,000    NJ EDA (Kapkowski Road Landfill)                           6.500     04/01/2031        2,900,125
-----------------------------------------------------------------------------------------------------------------
      125,000    NJ EDA (Kullman Associates)                                6.750     07/01/2019          119,568
-----------------------------------------------------------------------------------------------------------------
    1,020,000    NJ EDA (Liberty Street Park) 2                             5.000     03/01/2020        1,097,591
-----------------------------------------------------------------------------------------------------------------
    2,545,000    NJ EDA (Liberty Street Park) 2                             5.000     03/01/2021        2,730,225
-----------------------------------------------------------------------------------------------------------------
    8,690,000    NJ EDA (Liberty Street Park)                               5.000     03/01/2027        9,258,500
-----------------------------------------------------------------------------------------------------------------
    3,435,000    NJ EDA (Liberty Street Park) 2                             5.000     03/01/2027        3,648,554
-----------------------------------------------------------------------------------------------------------------
      710,000    NJ EDA (Lions Gate)                                        5.750     01/01/2025          722,361
-----------------------------------------------------------------------------------------------------------------
    1,230,000    NJ EDA (Lions Gate)                                        5.875     01/01/2037        1,252,817
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ EDA (Marcus L. Ward Home)                               5.750     11/01/2024        1,057,600
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ EDA (Marcus L. Ward Home)                               5.800     11/01/2031        1,049,620
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ EDA (Masonic Charity Foundation of NJ)                  5.500     06/01/2031        1,075,250
-----------------------------------------------------------------------------------------------------------------
      750,000    NJ EDA (Masonic Charity Foundation of NJ)                  6.000     06/01/2025          838,238
-----------------------------------------------------------------------------------------------------------------
       50,000    NJ EDA (Middlesex Water Company)                           5.200     10/01/2022           50,167
-----------------------------------------------------------------------------------------------------------------
       95,000    NJ EDA (Middlesex Water Company)                           5.250     10/01/2023           95,157
-----------------------------------------------------------------------------------------------------------------
      165,000    NJ EDA (Middlesex Water Company)                           5.350     02/01/2038          171,760
-----------------------------------------------------------------------------------------------------------------
      150,000    NJ EDA (New Jersey American Water Company)                 5.250     07/01/2038          157,373


                   21 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$      30,000    NJ EDA (New Jersey Transit)                                5.750%    12/15/2017    $      30,670
-----------------------------------------------------------------------------------------------------------------
       70,000    NJ EDA (NJ American Water Company)                         5.350     06/01/2023           70,132
-----------------------------------------------------------------------------------------------------------------
      240,000    NJ EDA (NJ American Water Company)                         5.350     06/01/2023          240,451
-----------------------------------------------------------------------------------------------------------------
      160,000    NJ EDA (NJ American Water Company)                         5.375     05/01/2032          168,648
-----------------------------------------------------------------------------------------------------------------
      115,000    NJ EDA (NJ American Water Company)                         5.500     06/01/2023          115,128
-----------------------------------------------------------------------------------------------------------------
      655,000    NJ EDA (NJ American Water Company)                         5.950     11/01/2029          672,593
-----------------------------------------------------------------------------------------------------------------
      205,000    NJ EDA (NJ American Water Company)                         6.000     05/01/2036          213,208
-----------------------------------------------------------------------------------------------------------------
    6,520,000    NJ EDA (NJ American Water Company)                         6.875     11/01/2034        6,671,916
-----------------------------------------------------------------------------------------------------------------
       15,000    NJ EDA (NJ Natural Gas Company)                            5.375     08/01/2023           15,015
-----------------------------------------------------------------------------------------------------------------
        5,000    NJ EDA (NJ Natural Gas Company)                            5.375     08/01/2023            5,010
-----------------------------------------------------------------------------------------------------------------
      495,000    NJ EDA (Nui Corp.) 1                                       5.250     11/01/2033          497,846
-----------------------------------------------------------------------------------------------------------------
    1,955,000    NJ EDA (Nui Corp.) 1                                       5.250     11/01/2033        1,982,605
-----------------------------------------------------------------------------------------------------------------
      195,000    NJ EDA (Nui Corp.)                                         5.700     06/01/2032          203,980
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ EDA (Public Schools Small Project
                 Loan Program) 3                                           10.916 4   09/01/2024        2,763,200
-----------------------------------------------------------------------------------------------------------------
    4,640,000    NJ EDA (Public Service Electric & Gas)                     6.400     05/01/2032        4,735,862
-----------------------------------------------------------------------------------------------------------------
      130,000    NJ EDA (St. Barnabas Medical Center)                       5.375     07/01/2027          137,497
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ EDA (St. Francis Life Care Corp.)                       5.750     10/01/2023        2,025,920
-----------------------------------------------------------------------------------------------------------------
      480,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2019          494,443
-----------------------------------------------------------------------------------------------------------------
      510,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2020          525,101
-----------------------------------------------------------------------------------------------------------------
      545,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2021          561,524
-----------------------------------------------------------------------------------------------------------------
      575,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2022          591,342
-----------------------------------------------------------------------------------------------------------------
      610,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2023          626,470
-----------------------------------------------------------------------------------------------------------------
      650,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2024          667,108
-----------------------------------------------------------------------------------------------------------------
      690,000    NJ EDA (The Gill/St. Bernards School)                      6.000     02/01/2025          708,140
-----------------------------------------------------------------------------------------------------------------
    3,770,000    NJ EDA (Trigen-Trenton District Energy Company)            6.200     12/01/2010        3,774,034
-----------------------------------------------------------------------------------------------------------------
       15,000    NJ EDA (United Methodist Homes of NJ)                      5.125     07/01/2018           14,929
-----------------------------------------------------------------------------------------------------------------
    2,370,000    NJ EDA (United Methodist Homes of NJ)                      5.125     07/01/2025        2,359,643
-----------------------------------------------------------------------------------------------------------------
      240,000    NJ EDA (United Water New Jersey)                           5.000     11/01/2028          247,301
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ EDA Retirement Community (Cedar Crest Village)          7.250     11/15/2021        2,195,620
-----------------------------------------------------------------------------------------------------------------
    2,100,000    NJ EDA Retirement Community (Seabrook Village)             8.000     11/15/2015        2,375,793
-----------------------------------------------------------------------------------------------------------------
       90,000    NJ Educational Facilities Authority
                 (Beth Medrash Govoha America)                              6.375     07/01/2030           95,356
-----------------------------------------------------------------------------------------------------------------
    1,420,000    NJ Educational Facilities Authority
                 (Bloomfield College)                                       6.850     07/01/2030        1,449,536
-----------------------------------------------------------------------------------------------------------------
   15,000,000    NJ Educational Facilities Authority
                 (Fairleigh Dickinson University), Series D                 6.000     07/01/2025       16,128,000
-----------------------------------------------------------------------------------------------------------------
    1,265,000    NJ Educational Facilities Authority
                 (Fairleigh Dickinson University), Series G                 5.700     07/01/2028        1,300,142
-----------------------------------------------------------------------------------------------------------------
    3,540,000    NJ Educational Facilities Authority
                 (Georgian Court College) 1                                 6.500     07/01/2033        4,011,068
-----------------------------------------------------------------------------------------------------------------
       60,000    NJ Educational Facilities Authority
                 (Monmouth University)                                      5.625     07/01/2013           60,070


                   22 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$   2,000,000    NJ Educational Facilities Authority
                 (Monmouth University)                                      5.800%    07/01/2022    $   2,089,560
-----------------------------------------------------------------------------------------------------------------
       25,000    NJ Educational Facilities Authority
                 (Richard Stockton College)                                 5.400     07/01/2021           25,761
-----------------------------------------------------------------------------------------------------------------
      250,000    NJ Educational Facilities Authority
                 (St. Peter's College)                                      5.500     07/01/2027          246,078
-----------------------------------------------------------------------------------------------------------------
    1,250,000    NJ Educational Facilities Authority
                 (Stevens Institute of Technology) 1                        5.250     07/01/2032        1,304,650
-----------------------------------------------------------------------------------------------------------------
       20,000    NJ Educational Facilities Authority
                 (University of Medicine & Dentistry)                       5.250     12/01/2015           20,349
-----------------------------------------------------------------------------------------------------------------
       75,000    NJ Educational Facilities Authority
                 (University of Medicine & Dentistry)                       5.250     12/01/2021           76,281
-----------------------------------------------------------------------------------------------------------------
      100,000    NJ Educational Facilities Authority
                 (University of Medicine & Dentistry)                       5.250     12/01/2025          101,692
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ Health Care Facilities Financing Authority
                 (Allegany Health System Obligated Group)                   5.200     07/01/2018           10,526
-----------------------------------------------------------------------------------------------------------------
       65,000    NJ Health Care Facilities Financing Authority
                 (Atlantic Health Systems Hospital Corp.)                   5.375     07/01/2019           68,812
-----------------------------------------------------------------------------------------------------------------
      475,000    NJ Health Care Facilities Financing Authority
                 (Avalon at Hillsborough)                                   6.150     07/01/2020          479,513
-----------------------------------------------------------------------------------------------------------------
      750,000    NJ Health Care Facilities Financing Authority
                 (Avalon at Hillsborough)                                   6.375     07/01/2025          754,718
-----------------------------------------------------------------------------------------------------------------
      500,000    NJ Health Care Facilities Financing Authority
                 (Avalon at Hillsborough)                                   6.625     07/01/2035          504,585
-----------------------------------------------------------------------------------------------------------------
       85,000    NJ Health Care Facilities Financing Authority
                 (Bayonne Hospital)                                         6.250     07/01/2012           85,277
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ Health Care Facilities Financing Authority
                 (Burdette Tomlin Memorial Hospital)                        6.500     07/01/2012           10,373
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ Health Care Facilities Financing Authority
                 (Englewood Hospital & Medical Center) RITES 3             11.988 4   08/01/2025        2,630,040
-----------------------------------------------------------------------------------------------------------------
       15,000    NJ Health Care Facilities Financing Authority
                 (Holy Name Hospital)                                       6.000     07/01/2025           15,645
-----------------------------------------------------------------------------------------------------------------
       25,000    NJ Health Care Facilities Financing Authority
                 (ONP/MHC Obligated Group)                                  5.375     07/01/2024           26,794
-----------------------------------------------------------------------------------------------------------------
       55,000    NJ Health Care Facilities Financing Authority
                 (Palisades Medical Center)                                 5.250     07/01/2028           55,927
-----------------------------------------------------------------------------------------------------------------
    2,000,000    NJ Health Care Facilities Financing Authority
                 (Raritan Bay Medical Center)                               7.250     07/01/2014        2,112,100
-----------------------------------------------------------------------------------------------------------------
    8,000,000    NJ Health Care Facilities Financing Authority
                 (RWJ University Hospital)                                  5.000     07/01/2035        8,336,560
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ Health Care Facilities Financing Authority
                 (RWJ University Hospital)                                  5.750     07/01/2025        1,080,000
-----------------------------------------------------------------------------------------------------------------
       20,000    NJ Health Care Facilities Financing Authority
                 (Society of the Valley Hospital)                           5.500     07/01/2020           21,587


                   23 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$      20,000    NJ Health Care Facilities Financing Authority
                 (South Jersey Hospital System)                             6.000%    07/01/2032    $      21,453
-----------------------------------------------------------------------------------------------------------------
      200,000    NJ Health Care Facilities Financing Authority
                 (St. Joseph's Hospital & Medical Center)                   5.750     07/01/2016          208,486
-----------------------------------------------------------------------------------------------------------------
      750,000    NJ Health Care Facilities Financing Authority
                 (St. Joseph's Hospital & Medical Center)                   6.000     07/01/2026          784,890
-----------------------------------------------------------------------------------------------------------------
       95,000    NJ Health Care Facilities Financing Authority
                 (St. Peter's Hospital)                                     5.000     07/01/2021           95,636
-----------------------------------------------------------------------------------------------------------------
       45,000    NJ HFA                                                     5.375     11/01/2008           45,065
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ HFA                                                     5.700     11/01/2005           10,019
-----------------------------------------------------------------------------------------------------------------
       50,000    NJ Higher Education Assistance Authority
                 (Student Loan Program)                                     5.800     06/01/2016           51,508
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ Higher Education Assistance Authority
                 (Student Loan Program)                                     6.125     07/01/2015           10,129
-----------------------------------------------------------------------------------------------------------------
       80,000    NJ Hsg. & Mortgage Finance Agency (Multifamily)            5.400     11/01/2028           83,212
-----------------------------------------------------------------------------------------------------------------
      200,000    NJ Hsg. & Mortgage Finance Agency, Series A                5.550     05/01/2027          211,200
-----------------------------------------------------------------------------------------------------------------
       45,000    NJ Hsg. & Mortgage Finance Agency, Series A                5.650     05/01/2040           47,606
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ Hsg. & Mortgage Finance Agency, Series A                6.250     05/01/2028        1,030,180
-----------------------------------------------------------------------------------------------------------------
       30,000    NJ Hsg. & Mortgage Finance Agency, Series B                5.850     11/01/2012           32,074
-----------------------------------------------------------------------------------------------------------------
      100,000    NJ Hsg. & Mortgage Finance Agency, Series E1               5.750     05/01/2025          105,226
-----------------------------------------------------------------------------------------------------------------
    5,230,000    NJ Hsg. & Mortgage Finance Agency, Series M                4.875     10/01/2026        5,375,917
-----------------------------------------------------------------------------------------------------------------
    1,000,000    NJ Hsg. & Mortgage Finance Agency, Series M                5.000     10/01/2036        1,022,260
-----------------------------------------------------------------------------------------------------------------
       35,000    NJ Hsg. & Mortgage Finance Agency, Series N                5.900     10/01/2012           35,672
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ Hsg. & Mortgage Finance Agency, Series S                5.950     10/01/2017           10,332
-----------------------------------------------------------------------------------------------------------------
       75,000    NJ Hsg. & Mortgage Finance Agency, Series T                5.600     04/01/2017           78,261
-----------------------------------------------------------------------------------------------------------------
    1,135,000    NJ Hsg. & Mortgage Finance Agency, Series U                5.750     04/01/2018        1,176,677
-----------------------------------------------------------------------------------------------------------------
       10,000    NJ Hsg. & Mortgage Finance Agency, Series V                5.250     04/01/2026           10,314
-----------------------------------------------------------------------------------------------------------------
      175,000    NJ Sports & Exposition Authority, Series A                 5.200     01/01/2020          175,306
-----------------------------------------------------------------------------------------------------------------
      480,000    NJ Sports & Exposition Authority, Series A                 5.200     01/01/2024          480,840
-----------------------------------------------------------------------------------------------------------------
      300,000    NJ Tobacco Settlement Financing Corp. (TASC)               5.375     06/01/2018          311,085
-----------------------------------------------------------------------------------------------------------------
   12,635,000    NJ Tobacco Settlement Financing Corp. (TASC)               5.750     06/01/2032       13,338,138
-----------------------------------------------------------------------------------------------------------------
    7,965,000    NJ Tobacco Settlement Financing Corp. (TASC)               6.000     06/01/2037        8,586,748
-----------------------------------------------------------------------------------------------------------------
   14,700,000    NJ Tobacco Settlement Financing Corp. (TASC)               6.125     06/01/2042       15,894,081
-----------------------------------------------------------------------------------------------------------------
    3,860,000    NJ Tobacco Settlement Financing Corp. (TASC)               6.250     06/01/2043        4,463,125
-----------------------------------------------------------------------------------------------------------------
    1,005,000    NJ Tobacco Settlement Financing Corp. (TASC)               6.375     06/01/2032        1,170,433
-----------------------------------------------------------------------------------------------------------------
   10,180,000    NJ Tobacco Settlement Financing Corp. (TASC)               6.750     06/01/2039       12,031,335
-----------------------------------------------------------------------------------------------------------------
      295,000    NJ Tobacco Settlement Financing Corp. (TASC)               7.000     06/01/2041          357,012
-----------------------------------------------------------------------------------------------------------------
      800,000    NJ Tobacco Settlement Financing Corp. Fixed Receipts       6.125     06/01/2042          864,984
-----------------------------------------------------------------------------------------------------------------
    9,600,000    NJ Tobacco Settlement Financing Corp. RITES 1,3            8.602 4   06/01/2042       11,159,616
-----------------------------------------------------------------------------------------------------------------
    2,500,000    NJ Transit Corp. ROLs, Series 15 3                         9.800 4   09/15/2014        3,053,325
-----------------------------------------------------------------------------------------------------------------
    4,000,000    NJ University of Medicine & Dentistry 1                    5.000     06/15/2036        4,192,000


                   24 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$   4,935,000    North Hudson Sewage Authority 1                            5.125%    08/01/2022    $   5,078,806
-----------------------------------------------------------------------------------------------------------------
    2,500,000    Port Authority NY/NJ (KIAC)                                6.750     10/01/2011        2,640,700
-----------------------------------------------------------------------------------------------------------------
    1,710,000    Port Authority NY/NJ (KIAC)                                6.750     10/01/2019        1,802,733
-----------------------------------------------------------------------------------------------------------------
      370,000    Port Authority NY/NJ, 106th Series                         6.000     07/01/2016          383,834
-----------------------------------------------------------------------------------------------------------------
       25,000    Port Authority NY/NJ, 119th Series                         5.500     09/15/2017           25,861
-----------------------------------------------------------------------------------------------------------------
    1,000,000    Port Authority NY/NJ, 135th Series                         5.000     03/15/2039        1,052,750
-----------------------------------------------------------------------------------------------------------------
    2,635,000    Port Authority NY/NJ, 140th Series 1                       5.000     12/01/2034        2,799,977
-----------------------------------------------------------------------------------------------------------------
    2,305,000    Port Authority NY/NJ, 238th Series ROLs 3                 13.419 4   12/15/2032        2,859,583
-----------------------------------------------------------------------------------------------------------------
       75,000    Readington-Lebanon Sewage Authority                        5.250     01/01/2013           75,533
-----------------------------------------------------------------------------------------------------------------
       20,000    Riverside Township GO                                      5.450     12/01/2010           20,028
-----------------------------------------------------------------------------------------------------------------
      115,000    Salem County Industrial Pollution Control Financing
                 Authority (Atlantic City Electric Company)                 5.600     11/01/2025          115,428
-----------------------------------------------------------------------------------------------------------------
      555,000    Salem County Industrial Pollution Control Financing
                 Authority (E.I. Dupont De Nemours)                         6.125     07/15/2022          561,704
-----------------------------------------------------------------------------------------------------------------
      505,000    Salem County Industrial Pollution Control Financing
                 Authority (E.I. Dupont De Nemours) 1                       6.500     11/15/2021          516,570
-----------------------------------------------------------------------------------------------------------------
      420,000    Salem County Industrial Pollution Control Financing
                 Authority (Public Service Electric & Gas)                  5.200     03/01/2025          420,315
-----------------------------------------------------------------------------------------------------------------
    1,260,000    Salem County Industrial Pollution Control Financing
                 Authority (Public Service Electric & Gas)                  5.450     02/01/2032        1,267,497
-----------------------------------------------------------------------------------------------------------------
    1,120,000    Salem County Industrial Pollution Control Financing
                 Authority (Public Service Electric & Gas)                  5.750     04/01/2031        1,192,632
-----------------------------------------------------------------------------------------------------------------
      120,000    South Jersey Transit Authority
                 (The Raytheon Company)                                     6.150     01/01/2022          123,742
-----------------------------------------------------------------------------------------------------------------
       35,000    Union County Utilities Authority
                 (Ogden Martin Systems of Union)                            5.000     06/01/2023           35,857
-----------------------------------------------------------------------------------------------------------------
       70,000    Union County Utilities Authority
                 (Ogden Martin Systems of Union)                            5.375     06/01/2018           73,498
-----------------------------------------------------------------------------------------------------------------
      100,000    Union County Utilities Authority
                 (Ogden Martin Systems of Union)                            5.375     06/01/2019          104,997
-----------------------------------------------------------------------------------------------------------------
       60,000    Union County Utilities Authority
                 (Ogden Martin Systems of Union)                            5.375     06/01/2020           62,998
-----------------------------------------------------------------------------------------------------------------
       10,000    Washington Township Municipal Utilities Authority          5.625     12/15/2014           10,206
-----------------------------------------------------------------------------------------------------------------
       45,000    Washington Township Municipal Utilities Authority          5.625     12/15/2019           45,912
                                                                                                    -------------
                                                                                                      291,186,895
-----------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--15.7%
    1,420,000    Northern Mariana Islands, Series A                         6.250     03/15/2028        1,481,955
-----------------------------------------------------------------------------------------------------------------
    5,000,000    Northern Mariana Islands, Series A                         6.750     10/01/2033        5,477,100
-----------------------------------------------------------------------------------------------------------------
      350,000    Puerto Rico Commonwealth GO                                5.000     07/01/2025          367,455
-----------------------------------------------------------------------------------------------------------------
       15,000    Puerto Rico Commonwealth GO                                5.000     07/01/2027           15,647
-----------------------------------------------------------------------------------------------------------------
      170,000    Puerto Rico Commonwealth GO                                5.125     07/01/2031          177,077
-----------------------------------------------------------------------------------------------------------------
    2,000,000    Puerto Rico Electric Power Authority, Series NN            5.125     07/01/2029        2,118,120


                   25 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

    PRINCIPAL                                                                                               VALUE
       AMOUNT                                                              COUPON       MATURITY       SEE NOTE 1
------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS Continued
$   9,750,000    Puerto Rico Infrastructure                                 5.000%    07/01/2041    $  10,181,633
------------------------------------------------------------------------------------------------------------------
      100,000    Puerto Rico ITEMECF (Ana G. Mendez University)             5.375     02/01/2019          103,368
------------------------------------------------------------------------------------------------------------------
      500,000    Puerto Rico ITEMECF (Ana G. Mendez University)             5.375     02/01/2029          514,710
------------------------------------------------------------------------------------------------------------------
    1,710,000    Puerto Rico ITEMECF (Cogeneration Facilities)              6.625     06/01/2026        1,855,624
------------------------------------------------------------------------------------------------------------------
      250,000    Puerto Rico ITEMECF
                 (SEAM/Hospital Espanol Auxillio Obligated Group)           6.250     07/01/2024          255,198
------------------------------------------------------------------------------------------------------------------
    1,000,000    Puerto Rico Municipal Finance Agency RITES 3               8.554 4   08/01/2015        1,226,740
------------------------------------------------------------------------------------------------------------------
    6,155,000    Puerto Rico Port Authority (American Airlines),
                 Series A                                                   6.250     06/01/2026        4,874,945
------------------------------------------------------------------------------------------------------------------
    1,790,000    Puerto Rico Port Authority (American Airlines),
                 Series A                                                   6.300     06/01/2023        1,448,880
------------------------------------------------------------------------------------------------------------------
       35,000    Puerto Rico Port Authority, Series D                       6.000     07/01/2021           35,045
------------------------------------------------------------------------------------------------------------------
    6,000,000    Puerto Rico Public Buildings Authority                     5.250     07/01/2029        6,446,100
------------------------------------------------------------------------------------------------------------------
    1,000,000    Puerto Rico Public Buildings Authority, Series D           5.125     07/01/2024        1,050,130
------------------------------------------------------------------------------------------------------------------
      935,000    Puerto Rico Public Buildings Authority, Series D           5.250     07/01/2036          990,707
------------------------------------------------------------------------------------------------------------------
      675,000    University of Puerto Rico, Series O                        5.375     06/01/2030          682,965
------------------------------------------------------------------------------------------------------------------
      150,000    University of V.I. , Series A                              5.250     12/01/2023          156,342
------------------------------------------------------------------------------------------------------------------
      210,000    University of V.I. , Series A                              5.375     06/01/2034          222,245
------------------------------------------------------------------------------------------------------------------
    1,000,000    University of V.I. , Series A                              6.000     12/01/2024        1,081,340
------------------------------------------------------------------------------------------------------------------
       40,000    University of V.I. , Series A                              6.250     12/01/2029           43,728
------------------------------------------------------------------------------------------------------------------
       60,000    V.I. Hsg. Finance Authority, Series A                      6.500     03/01/2025           61,139
------------------------------------------------------------------------------------------------------------------
    5,000,000    V.I. Public Finance Authority (Hovensa Coker) 1            6.500     07/01/2021        5,700,950
------------------------------------------------------------------------------------------------------------------
      525,000    V.I. Public Finance Authority, Series A                    6.125     10/01/2029          586,115
------------------------------------------------------------------------------------------------------------------
    1,515,000    V.I. Public Finance Authority, Series A                    6.375     10/01/2019        1,717,010
------------------------------------------------------------------------------------------------------------------
      300,000    V.I. Public Finance Authority, Series E                    5.875     10/01/2018          315,879
------------------------------------------------------------------------------------------------------------------
    2,500,000    V.I. Public Finance Authority, Series E                    6.000     10/01/2022        2,612,750
------------------------------------------------------------------------------------------------------------------
      290,000    V.I. Water & Power Authority                               5.300     07/01/2018          297,060
------------------------------------------------------------------------------------------------------------------
      175,000    V.I. Water & Power Authority                               5.300     07/01/2021          177,175
                                                                                                    --------------
                                                                                                       52,275,132

------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $321,944,991)--103.0%                                               343,462,027
------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(3.0)                                                          (10,103,783)
                                                                                                    --------------
NET ASSETS--100.0%                                                                                  $ 333,358,244
                                                                                                    ==============

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 $23,692,504, which represents 7.11% 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.


                   26 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

EDA         Economic Development Authority

GO          General Obligation

HFA         Housing Finance Agency/Authority

ITEMECF     Industrial, Tourist, Educational, Medical and
            Environmental Community Facilities

MHC         Meridian Hospitals Corporation

NY/NJ       New York/New Jersey

ONP         Ocean Nursing Pavillion, Inc.

PCFA        Pollution Control Finance Authority

RITES       Residual Interest Tax Exempt Security

ROLs        Residual Option Longs

RWJ         Robert Wood Johnson

SEAM        Sociedad Espanola de Auxilio Mutuo

TASC        Tobacco Settlement Asset-Backed Bonds

V.I.        United States Virgin Islands

--------------------------------------------------------------------------------
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                                                       VALUE   PERCENT
-------------------------------------------------------------------------------
Tobacco Settlement Payments                             $ 68,176,557      19.8%
Higher Education                                          29,764,749       8.7
Municipal Leases                                          23,385,201       6.8
Sales Tax Revenue                                         22,946,679       6.7
Airlines                                                  21,041,988       6.1
Adult Living Facilities                                   19,855,115       5.8
Hospital/Health Care                                      18,453,230       5.4
Marine/Aviation Facilities                                15,379,783       4.5
Electric Utilities                                        14,731,046       4.3
Pollution Control                                         13,994,388       4.1
General Obligation                                        13,909,779       4.0
Hotels, Restaurants & Leisure                             13,291,003       3.9
Special Tax                                               13,081,758       3.8
Water Utilities                                            9,755,686       2.8
Single Family Housing                                      7,770,572       2.3
Education                                                  6,962,514       2.0
Manufacturing, Non-Durable Goods                           6,386,890       1.9
Gas Utilities                                              5,398,581       1.6
Sewer Utilities                                            5,159,349       1.5
Resource Recovery                                          5,138,912       1.5
Manufacturing, Durable Goods                               4,314,465       1.2
Multifamily Housing                                        3,165,335       0.9
Student Loans                                                711,631       0.2
Sports Facility Revenue                                      656,146       0.2
Highways/Railways                                             30,670       0.0
                                                        -----------------------
Total                                                   $343,462,027     100.0%
                                                        =======================


                   27 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

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

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

RATINGS                                                                PERCENT
-------------------------------------------------------------------------------
AAA                                                                       22.2%
AA                                                                         7.8
A                                                                          8.4
BBB                                                                       47.4
BB                                                                         2.4
B                                                                          4.2
CCC                                                                        1.9
Not Rated                                                                  5.7
                                                                         ------
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.


                   28 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

-------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------
Investments, at value (cost $321,944,991)--see accompanying
statement of investments                                                          $  343,462,027
-------------------------------------------------------------------------------------------------
Cash                                                                                     497,650
-------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold                                                     4,815,295
Interest                                                                               4,156,504
Investments sold                                                                       2,573,134
Other                                                                                      7,149
                                                                                  ---------------
Total assets                                                                         355,511,759

-------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------
Payables and other liabilities:
Payable on borrowings (See Note 6)                                                    11,600,000
Investments purchased (including $9,514,815 purchased
on a when-issued basis or forward commitment)                                          9,622,611
Shares of beneficial interest redeemed                                                   537,258
Dividends                                                                                239,155
Distribution and service plan fees                                                        39,877
Trustees' compensation                                                                    23,760
Shareholder communications                                                                21,109
Interest expense                                                                          20,029
Transfer and shareholder servicing agent fees                                             12,709
Other                                                                                     37,007
                                                                                  ---------------
Total liabilities                                                                     22,153,515

-------------------------------------------------------------------------------------------------
NET ASSETS                                                                        $  333,358,244
                                                                                  ===============

-------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-------------------------------------------------------------------------------------------------
Paid-in capital                                                                   $  315,562,806
-------------------------------------------------------------------------------------------------
Accumulated net investment income                                                        511,303
-------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                          (4,232,901)
-------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                            21,517,036
                                                                                  ---------------
NET ASSETS                                                                        $  333,358,244
                                                                                  ===============


                   29 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

STATEMENT OF ASSETS AND LIABILITIES  Continued
--------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$200,831,374 and 16,688,424 shares of beneficial interest outstanding)                  $  12.03
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price)                                                                         $  12.63
------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $62,399,331
and 5,178,990 shares of beneficial interest outstanding)                                $  12.05
------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $70,127,539
and 5,823,259 shares of beneficial interest outstanding)                                $  12.04

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   30 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

-------------------------------------------------------------------------------------------------
INVESTMENT INCOME
-------------------------------------------------------------------------------------------------
Interest                                                                          $   14,159,128

-------------------------------------------------------------------------------------------------
EXPENSES
-------------------------------------------------------------------------------------------------
Management fees                                                                        1,363,857
-------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                  194,249
Class B                                                                                  509,751
Class C                                                                                  365,028
-------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                                   63,055
Class B                                                                                   31,670
Class C                                                                                   20,754
-------------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                                    5,194
Class B                                                                                    6,271
Class C                                                                                    5,284
-------------------------------------------------------------------------------------------------
Interest expense                                                                         189,885
-------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                               11,612
-------------------------------------------------------------------------------------------------
Trustees' compensation                                                                     8,368
-------------------------------------------------------------------------------------------------
Other                                                                                     72,096
                                                                                  ---------------
Total expenses                                                                         2,847,074
Less reduction to custodian expenses                                                      (4,395)
Less waivers and reimbursements of expenses                                             (460,889)
                                                                                  ---------------
Net expenses                                                                           2,381,790

-------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                 11,777,338

-------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
-------------------------------------------------------------------------------------------------
Net realized gain on investments                                                         359,429
-------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                                  25,172,214

-------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                              $   37,308,981
                                                                                  ===============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   31 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

YEAR ENDED JULY 31,                                                                    2005             2004
-------------------------------------------------------------------------------------------------------------
OPERATIONS
-------------------------------------------------------------------------------------------------------------
Net investment income                                                         $  11,777,338    $   8,903,069
-------------------------------------------------------------------------------------------------------------
Net realized gain (loss)                                                            359,429         (115,750)
-------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)                             25,172,214        1,690,070
                                                                              -------------------------------
Net increase in net assets resulting from operations                             37,308,981       10,477,389

-------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                          (7,660,240)      (4,669,052)
Class B                                                                          (2,857,475)      (2,635,363)
Class C                                                                          (1,998,017)      (1,060,217)

-------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                          92,338,986       31,512,135
Class B                                                                           4,822,489        3,381,161
Class C                                                                          42,066,514        5,810,614

-------------------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------------------
Total increase                                                                  164,021,238       42,816,667
-------------------------------------------------------------------------------------------------------------
Beginning of period                                                             169,337,006      126,520,339
                                                                              -------------------------------
End of period (including accumulated net investment income
of $511,303 and $1,249,697, respectively)                                     $ 333,358,244    $ 169,337,006
                                                                              ===============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   32 | OPPENHEIMER NEW JERSEY 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                 $    10.76     $   10.51     $   10.99    $     10.89     $    10.36
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .62 1         .67           .67            .53            .55
Net realized and unrealized gain (loss)                    1.32           .23          (.52)           .08            .51
                                                     -----------------------------------------------------------------------
Total from investment operations                           1.94           .90           .15            .61           1.06
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.67)         (.65)         (.63)          (.51)          (.53)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                       $    12.03     $   10.76     $   10.51    $     10.99     $    10.89
                                                     =======================================================================

----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        18.46%         8.63%         1.21%          5.79%         10.42%
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)             $  200,831     $  94,214     $  61,825    $    47,305     $   39,185
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                    $  133,634     $  78,828     $  54,811    $    42,809     $   35,710
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      5.41%         6.28%         6.24%          4.88%          5.08%
Total expenses                                             0.91%         0.98%         1.02%          0.84%          0.87%
Expenses after payments and waivers and
reduction to custodian expenses                            0.71%         0.78%         0.82%          0.63% 4        0.67% 4
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       8%           25%           93%            26%            27%

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 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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   33 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

CLASS B     YEAR ENDED JULY 31,                            2005          2004          2003           2002           2001
----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                 $    10.78     $   10.52     $   11.00    $     10.90     $    10.37
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .54 1         .60           .59            .45            .47
Net realized and unrealized gain (loss)                    1.31           .23          (.53)           .08            .51
                                                     -----------------------------------------------------------------------
Total from investment operations                           1.85           .83           .06            .53            .98
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.58)         (.57)         (.54)          (.43)          (.45)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                       $    12.05     $   10.78     $   10.52    $     11.00     $    10.90
                                                     =======================================================================

----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        17.53%         7.92%         0.46%          4.99%          9.58%
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)             $   62,399     $  51,329     $  46,912    $    43,888     $   39,164
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                    $   56,755     $  50,920     $  45,226    $    41,532     $   36,447
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.74%         5.54%         5.46%          4.12%          4.34%
Total expenses                                             1.68%         1.73%         1.78%          1.60%          1.62%
Expenses after payments and waivers and
reduction to custodian expenses                            1.48%         1.53%         1.58%          1.39% 4        1.42% 4
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       8%           25%           93%            26%            27%

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 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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   34 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

CLASS C     YEAR ENDED JULY 31,                            2005          2004          2003           2002           2001
----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                 $    10.77     $   10.51     $   10.99    $     10.89     $    10.36
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .53 1         .59           .59            .44            .47
Net realized and unrealized gain (loss)                    1.32           .24          (.53)           .09            .51
                                                     -----------------------------------------------------------------------
Total from investment operations                           1.85           .83           .06            .53            .98
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.58)         (.57)         (.54)          (.43)          (.45)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                       $    12.04     $   10.77     $   10.51    $     10.99     $    10.89
                                                     =======================================================================

----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                        17.54%         7.91%         0.45%          4.99%          9.59%
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)             $   70,128     $  23,795     $  17,784    $    12,664     $    8,622
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                    $   40,717     $  20,470     $  16,770    $     9,831     $    7,301
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.57%         5.53%         5.49%          4.10%          4.33%
Total expenses                                             1.67%         1.73%         1.78%          1.60%          1.62%
Expenses after payments and waivers and
reduction to custodian expenses                            1.47%         1.53%         1.58%          1.39% 4        1.42% 4
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       8%           25%           93%            26%            27%

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 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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   35 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

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

Oppenheimer New Jersey Municipal Fund (the Fund) is a separate series of
Oppenheimer Multi-State Municipal Trust, a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek as high a level of current
interest income exempt from federal and New Jersey 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 domestic securities whose


                   36 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of July 31, 2005, the Fund had purchased $9,514,815 of
securities issued on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
INVERSE FLOATING RATE SECURITIES. The Fund invests in inverse floating rate
securities that pay interest at a rate that varies inversely with short-term
interest rates. Certain of these securities may be leveraged, whereby the
interest rate varies inversely at a multiple of the change in short-term rates.
As interest rates rise, inverse floaters produce less current income. The price
of such securities is more volatile than comparable fixed rate securities. The
Fund will invest no more than 20% of its total assets in inverse floaters.
Inverse floaters amount to $23,692,504 as of July 31, 2005, which represents
6.66% of the Fund's total assets.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. 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.

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


                   37 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

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

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
        -----------------------------------------------------------------------------
        $ 773,927                 $ --          $   4,232,904         $    21,517,036

1. As of July 31, 2005, the Fund had $4,232,904 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 carryforwards were as follows:

                              EXPIRING
                              ----------------------
                              2009      $  2,565,622
                              2010         1,551,532
                              2012           115,750
                                        ------------
                              Total     $  4,232,904
                                        ============

2. During the fiscal year ended July 31, 2005, the Fund utilized $359,429 of
capital loss carryforward to offset capital gains realized in that fiscal year.

3. During the fiscal year ended July 31, 2004, the Fund did not utilize any
capital loss carryforward.

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

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     $12,515,732      $8,364,632

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


                   38 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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         $ 321,944,991
                                                 ==============
          Gross unrealized appreciation          $  21,750,748
          Gross unrealized depreciation               (233,712)
                                                 --------------
          Net unrealized appreciation            $  21,517,036
                                                 ==============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended July 31,
2005, the Fund's projected benefit obligations were increased by $3,442 and
payments of $1,383 were made to retired trustees, resulting in an accumulated
liability of $18,322 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.

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


                   39 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

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

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 no 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                           9,080,461    $ 105,520,260        4,157,479    $  45,439,740
Dividends and/or
distributions reinvested         376,131        4,339,946          237,670        2,588,895
Redeemed                      (1,520,910)     (17,521,220)      (1,526,995)     (16,516,500)
                              --------------------------------------------------------------
Net increase                   7,935,682    $  92,338,986        2,868,154    $  31,512,135
                              ==============================================================

--------------------------------------------------------------------------------------------
CLASS B
Sold                           1,585,776    $  18,264,106        1,428,513    $  15,622,837
Dividends and/or
distributions reinvested         142,260        1,635,223          142,239        1,552,924
Redeemed                      (1,312,398)     (15,076,840)      (1,267,677)     (13,794,600)
                              --------------------------------------------------------------
Net increase                     415,638    $   4,822,489          303,075    $   3,381,161
                              ==============================================================

--------------------------------------------------------------------------------------------
CLASS C
Sold                           3,958,354    $  46,014,401        1,043,074    $  11,511,732
Dividends and/or
distributions reinvested          90,223        1,044,143           54,414          593,732
Redeemed                        (434,529)      (4,992,030)        (579,840)      (6,294,850)
                              --------------------------------------------------------------
Net increase                   3,614,048    $  42,066,514          517,648    $   5,810,614
                              ==============================================================

--------------------------------------------------------------------------------
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     $138,913,934  $15,836,894


                   40 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

--------------------------------------------------------------------------------
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 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
in excess of $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 $110,665
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 0.15% 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 0.15% 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 shares were $2,170,424 and $925,040,
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


                   41 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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

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

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         $321,354            $250        $133,731          $40,746

-------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has voluntarily agreed to
waive a portion of its management fee so the management fees will not exceed
0.40% of average annual net assets for each class of shares. During the year
ended July 31, 2005, the Manager waived $460,889 of its management fees. This
voluntary undertaking is expected to remain in effect indefinitely, however it
may be amended or withdrawn by the Manager at anytime without notice to
shareholders.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class. 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 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


                   42 | OPPENHEIMER NEW JERSEY MUNICIPAL FUND

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
$6,950,411 at an average daily interest rate of 2.738%. The Fund had borrowings
outstanding of $11,600,000 at July 31, 2005 at an interest rate of 3.3439%. The
Fund had gross borrowings and gross loan repayments of $105,200,000 and
$111,900,000, 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 $19,400,000. The Fund paid $13,546 in fees and $172,012 in interest
during the year ended July 31, 2005.

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

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

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







                                            A-7
                                         Appendix A

                             MUNICIPAL BOND RATINGS DEFINITIONS

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

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

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

MUNICIPAL LONG-TERM RATING DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

BB, B, CCC, CC, and C

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

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

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

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

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

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

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

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

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

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

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

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

N.R. Not rated.

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

Bond Investment Quality Standards

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

Speculative Grade:

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

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

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

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

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

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

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.







                                            B-1
                                         Appendix B

                          MUNICIPAL BOND INDUSTRY CLASSIFICATIONS

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








C-12

                                         Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A shares(2)
of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A,
Class B or Class C shares may be waived.(3)  That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as
the "Distributor"), or by dealers or other financial institutions that offer those shares
to certain classes of investors. Not all waivers apply to all funds.

For the purposes of some of the waivers described below and in the Prospectus and Statement
of Additional Information of the applicable Oppenheimer funds, the term "Retirement Plan"
refers to the following types of plans:
         1) plans 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 Value 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.

1.    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.

2.    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.

3.    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.

4.    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.

5.    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.

6.    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.

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

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

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

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

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

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

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








Oppenheimer New Jersey 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
PX395.001.rev1205

--------
(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 or the Trust 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.

------------------------------------------------------------------------------
Oppenheimer Pennsylvania Municipal Fund
------------------------------------------------------------------------------

6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.525.7048


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.  You can obtain the Prospectus by writing to
the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above or by downloading it from the OppenheimerFunds Internet
website at www.oppenheimerfunds.com.

Contents                                                                Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.........
     The Fund's Investment Policies...........................................
     Municipal Securities.....................................................
     Other Investment Techniques and Strategies...............................
     Other 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
Independent Registered Public Accounting Firm's Report........................
Financial Statements .........................................................
Appendix A: Municipal Bond Ratings.........................................A-1
Appendix B: Industry Classifications.......................................B-1
Appendix C: Special Sales Charge Arrangements and Waivers..................C-1





93

------------------------------------------------------------------------------
ABOUT THE FUND
------------------------------------------------------------------------------

Additional Information About the Fund's Investment Policies and Risks

      The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus.  This Statement of
Additional Information contains supplemental information about those policies
and the types of securities that the Fund's investment manager,
OppenheimerFunds, Inc. (the "Manager"), can select for the Fund.  Additional
information is 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 Fund's Manager may use in selecting
portfolio securities will vary over time.  The Fund is not required to use
all of the investment techniques and strategies described below 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 because that would generally be inconsistent with its goal of
seeking tax-exempt income.  However, the values of the securities held by the
Fund may be affected by changes in general interest rates and other factors
prior to their maturity.  Because the current value of debt securities vary
inversely with changes in prevailing interest rates, if interest rates
increased after a security is purchased, that security will normally decline
in value.  Conversely, should interest rates decrease after a security is
purchased, normally its value will 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 the security's 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 Invest
In?" and "About the Fund's Investments."  As a fundamental policy, the Fund
invests at least 80% of its net assets (plus borrowings for investment
purposes) in Pennsylvania municipal securities.  This includes securities
that generate income subject to the alternative minimum tax. 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 have classified municipal securities
having a maturity (when the security is issued) of more than one (1) year 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 five (5) to ten (10) years from the issuance date.  When
interest rates decline, if the call provision 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 have a
lower rate of return.

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

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

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

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

            |X| Private Activity Bonds.  Interest on certain Qualified
Private Activity bonds 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 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.

      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. There are no limits on the
amount of assets the Fund may invest in private activity securities.

      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 (1) 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.

      |X| 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.

      |X| 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.

      |X| 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.

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

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

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

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

      |_| 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.

      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. The Commonwealth
of Pennsylvania is not required by law to appropriate or otherwise provide
moneys from which the lease payments are to be made.

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

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, 24.1% of the Fund's assets were invested in tobacco
revenue settlement bonds.
      Tobacco settlement revenue bonds are secured by an issuing state's
proportionate share in the Master Settlement Agreement ("MSA"). The MSA is an
agreement, reached out of court in November 1998 between 46 states and nearly
all of the U.S. tobacco manufacturers (approximately 99% of the current
combined market share of tobacco manufacturers). The MSA provides for
payments annually by the manufacturers to the states and jurisdictions in
perpetuity, in exchange for releasing all claims against the manufacturers
and a pledge of no further litigation. Tobacco manufacturers pay into a
master escrow trust based on their market share, and each state receives a
fixed percentage of the payment as set forth in the MSA.

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

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

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



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

      After the Fund buys a municipal security, it may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
Fund.  Neither event requires the Fund to sell the security, but the Manager
will consider such events in determining whether the Fund should continue to
hold the security.  To the extent that ratings given by Moody's, S&P, or
Fitch 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.

      The rating definitions of Moody's, S&P and Fitch for municipal
securities are contained in Appendix A to this Statement of Additional
Information.  The Fund can 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 assign a rating
category to a security that is comparable to what the Manager believes a
rating agency would assign to that security.  However, the Manager's rating
does not constitute a guarantee of the quality of a particular issue.

Special Risks of Investing Primarily in Pennsylvania Municipal Securities.
Because the Fund focuses its investments primarily on Pennsylvania municipal
securities, the value of its portfolio investments will be highly sensitive
to events affecting the fiscal stability of the Commonwealth of Pennsylvania
and its municipalities, authorities and other instrumentalities that issue
securities in which the Fund invests, including political developments,
economic problems and legislation.  Many different social, environmental and
economic factors may affect the financial condition of Pennsylvania and its
political subdivisions.  From time to time Pennsylvania and certain of its
political subdivisions have encountered financial difficulties that have
adversely affected their respective credit standings.  Other factors that may
negatively affect economic conditions in Pennsylvania include adverse changes
in employment rates, federal revenue sharing or laws with respect to
tax-exempt financing.  In addition, the recent national economic recession
and the continuing economic uncertainty has had, and may continue to have, a
negative impact on the Pennsylvania economy. It is not possible to predict
the future impact of the political developments, economic problems and
legislation on the long-term ability of the Commonwealth of Pennsylvania or
Pennsylvania municipal issuers to pay interest or repay principal on their
obligations.

      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, including official statements relating to securities offerings of
Pennsylvania issuers.  The information below is general in nature and does
not provide information about financial condition of the state or specific
issuers in whose securities the Fund may invest, or the risks of those
specific investments. 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.

      |X|  The Effect of General Economic Conditions in the State.  The
Commonwealth of Pennsylvania is one of the most populous states, ranking
sixth behind California, Texas, New York, Florida and Illinois.  Pennsylvania
is an established state with a diversified economy.  It is the headquarters
for many major corporations.  Pennsylvania had historically been identified
as a heavy industry state.  That reputation has changed over the last thirty
years as the coal, steel and railroad industries declined and the
Commonwealth's business environment readjusted with a more diversified
economic base.  This economic readjustment was a direct result of a long-term
shift in jobs, investment and workers away from the northeast part of the
nation.  Currently, the major sources of growth in Pennsylvania are in the
service sector, including trade, medical and the health services, education
and financial institutions.  Pennsylvania's estimated 5.7 million-person work
force ranks as the sixth largest labor pool in the nation.

      The Commonwealth uses the fund method of accounting. The General Fund,
the Commonwealth's largest fund, receives all tax revenues, non-tax revenues
and federal grants and entitlements that are not specified by law to be
deposited elsewhere.  The majority of the Commonwealth's operating and
administrative expenses are payable from the General Fund.  Debt service and
all bonded indebtedness of the Commonwealth, except that issued for highway
purposes or for the benefit of other special revenue funds, is payable from
the General Fund.

      The Comprehensive Annual Financial Report ("CAFR") for the fiscal year
ended June 30, 2004 was issued on March 31, 2005.  The CAFR, beginning with
the one issued for the fiscal year ended June 30, 2002, incorporated several
new accounting and reporting standards that affect the comparability of
financial information for that fiscal year and subsequent fiscal years to
GAAP basis financial information reported for fiscal years prior to the
adoption of the new standards.  Also beginning with the fiscal year ended
June 30, 2002, the CAFR provided a new presentation of government-wide
financial statements that were intended to provide an all-encompassing view
of a government's financial condition and activities.

Financial Results for Recent Fiscal Years (GAAP Basis).

      During the five-year period from fiscal year 2000 through fiscal year
2004, total revenues and other sources increased by an average of 4.6 percent
annually. Tax revenues during this same period increased by an annual average
of 2.7 percent.  During the past several fiscal years slow economic growth
and the resulting slow growth for tax revenues have caused fees and license
income and other financing sources such as transfers from other funds to
become a larger portion of income to the General Fund. Expenditures and other
uses during the fiscal years 2000 through 2004 rose at an average annual rate
of 5.4 percent.  Comparison of expenditures by individual category in fiscal
years 2002 through 2004 to prior fiscal years is not reliable due to a change
to the definitions for these expenditure categories in fiscal year 2002.

      The fund balance at June 30, 2004 totaled $3,006.5 million, an increase
of $648.8 million from the balance at June 30, 2003.  The fiscal year 2004
year-end unreserved-undesignated portion of the fund balance was $1,633.3
million, $318.8 million above the amount recorded for fiscal year 2003 at
years end.


Fiscal 2003 Results.

Continued slow growth in the national economy since the recession of 2001
impacted the Commonwealth tax and revenue collections in fiscal year 2003.
Actual fiscal year Commonwealth revenues were below estimate by 2.3 percent
or $497.6 million.  Total fiscal year 2003 Commonwealth revenues net of
reserves for tax refunds and including intergovernmental transfers and
additional resources were $21,808.5 million.  Actual expenditures from fiscal
year 2003 appropriations were 1.4 percent or $295.7 million below the
original enacted amounts for fiscal year 2003.  Total expenditures net of
appropriation lapses and including intergovernmental transfers and
expenditures from additional resources totaled $21,671.9 million.  As result
of financial operations during fiscal year 2003, efforts to reduce
expenditures and the General Assembly's repeal of the transfer of $300
million from the General Fund to the Budget Stabilization Reserve Fund, the
unappropriated surplus balance increased by $136.6 million prior to the
statutorily required 25 percent transfer to the Budget Stabilization Reserve
Fund.  As result, the fiscal year 2003 final unappropriated surplus balance
was $209.3 million as of June 30, 2003.

      Revenues available to the Commonwealth, including intergovernmental
transfers and additional resources, and prior to reserves for refunds
increased 11.0 percent from fiscal year 2002 levels.  Fiscal year 2003
revenues totaled $21,808.5 million, an increase of $2.2 billion over fiscal
year 2002 revenues.  Commonwealth taxes and revenues, prior to reserves for
refunds, increased by $1.3 billion to $21,314.5 million in fiscal year 2003,
a 6.3 percent increase.  This increase in tax revenues was primarily due to
increases for certain Commonwealth taxes enacted with the fiscal 2003
budget.  While Commonwealth revenues increased year over year, revenues were
below the estimate enacted with the fiscal 2003 budget.  Commonwealth taxes
and revenues (prior to reserves for tax refunds) totaled $21,314.5 million,
$497.6 million (2.3 percent) below the estimate made at the time the fiscal
year 2003 budget was enacted.  Most major Commonwealth tax categories
performed below the estimated amount for fiscal year 2003.

      Commonwealth expenditures of appropriations, including supplemental
appropriations, intergovernmental transfers and additional resources, and net
of appropriation lapses, totaled $21,671.9 million, representing an increase
of $797.5 million or 3.8 percent from fiscal year 2002 levels.  A total of
$466.9 million in appropriations were lapsed in fiscal year 2003 as part of a
comprehensive effort by the executive branch to limit expenditures in
response to revenue collections below the estimate enacted with the 2003
budget.  The fiscal year 2003 budget relied on intergovernmental transfers
for a larger portion of medical assistance costs than in fiscal 2002.

      For GAAP purposes, the General Fund reported a fund balance of $2,357.7
million, a decrease of $665 million from the reported $3,022.8 million fund
balance at June 30, 2002.  On a net basis, total assets increased by $388
million to $8,525 million. Liabilities increased by $1,053 million to $6,167
million largely because of a $383 million increase in accounts payable.  A
large part of the $665 million net decrease in General Fund balance was
because the General Fund transferred $903 million to other Funds and provided
$1,037 million to component units.  Without these items, the General Fund
would have increased by $1,275 million.  Total General Fund expenditures
increased by 8.2 percent during the fiscal year ended June 30, 2003, on a
reported basis, largely because of a sharp increase in expenditures for
medical and other assistance (reported as part of health and human services)
and a change in classification for component unit subsidies.  The overall
decrease in fund balance ($665 million) during the fiscal year was an
improvement of $957 million over the prior year fiscal year decrease in fund
balance ($1,622 million).  On an overall basis, during periods of declining
or slow economic growth, it is common for the fund balance of the General
Fund to decline.


Fiscal 2004 Results.

      A rebounding national economy that exceeded preliminary estimates for
growth resulted in actual fiscal year 2004 Commonwealth General Fund revenues
exceeding the budget estimate by 2.9 percent, or $636.7 million.  Total
fiscal year 2004 revenues net of reserves for tax refunds and including
intergovernmental transfers and additional resources totaled $23,159.7
million.  Total expenditures net of appropriation lapses and including
intergovernmental transfers and expenditures from additional resources was
$23,089.2 million.  As result of Commonwealth financial operations during the
fiscal year the preliminary unappropriated surplus balance, prior to the
statutorily required 25 percent transfer to the Budget Stabilization Reserve
Fund, was scheduled to increase $57.5 million to $266.8 million from the
fiscal year 2003 ending balance.  Following the statutorily required 25
percent transfer to the Budget Stabilization Reserve Fund ($66.7 million), a
supplemental transfer of $123.3 million also made to the Budget Stabilization
Reserve Fund.  As result, the fiscal year 2004 final unappropriated surplus
balance was $76.7 million as of June 30, 2004.

      Revenues available to the Commonwealth, including intergovernmental
transfers and additional resources increased 6.2 percent from fiscal year
2003 levels.  Fiscal year 2004 revenues totaled $23,159.7 million, an
increase of $1,351.2 million over fiscal year 2003 revenues. Commonwealth
taxes and revenues, prior to reserves for refunds, increased by $1,513.6
million to $22,828.1 million in fiscal year 2004, a 7.1 percent increase from
fiscal year 2003 actual receipts.  This increase in tax revenues was
primarily due to increases for certain Commonwealth taxes enacted with the
fiscal year 2004 budget.  Tax revenues to the Commonwealth for fiscal year
2004 exceeded the budget estimate, as re-certified in December 2003, by
$636.7 million or 2.9 percent.  Nearly all Commonwealth major tax and revenue
categories experienced revenue collections above the budget estimate.
Non-tax revenue collections were $158.9 million (25.5 percent) greater than
projected, principally due to increased earnings on investments and the
enhancement of Commonwealth's escheat program.  In addition, as part of the
fiscal year 2004 budget certain tax, fee and other revenue enhancement items
totaling $794 million were enacted.

      Reserves for tax refunds in fiscal year 2004 were $1,014.7 million, an
increase of 9.2 percent over fiscal year 2003 reserves.  Tax rate and tax
base changes contributed to the growth rate in refunds in fiscal year 2004.
Actual tax refunds have stabilized after several recent years of increases.
At the end of fiscal year 2004, approximately $91.7 million of reserves were
available for making tax refunds in the following fiscal year.

      Expenditures for the fiscal year, including supplemental
appropriations, intergovernmental transfers and additional resources, and net
of appropriation lapses, totaled $23,089.2million, representing an increase
of $1,417.3 million or 6.5 percent from the fiscal year 2003 level.  A total
of $182.9 million in appropriations were lapsed in fiscal year 2004.  The
fiscal year 2004 budget continued to utilize an enhanced level of
intergovernmental transfers for a portion of medical assistance costs, albeit
at a reduced rate from fiscal year 2003.

      For GAAP purposes, the General Fund reported a fund balance of $3,006.5
million at June 30, 2004, an increase of $648.8 million from the reported
$2,357.7 million fund balance at June 30, 2003.  On a net basis, total assets
increased by $1,939 million to $10,464 million. Liabilities increased by
$1,290 million to $7,457 million largely because of a $764 million increase
in accounts payable. General Fund tax revenues increased by 8.4 percent due
to economic growth and specific statutory increases in certain tax bases and
rates enacted in December 2003.  Intergovernmental revenues increased by 14.3
percent, due primarily to increases in federally-funded programs,
particularly medical and other assistance, where expenditures increased over
the prior year.  Total General Fund revenues increased by 10.3 percent during
the fiscal year.

      The overall increase in the fund balance, $648.8 million, during the
fiscal year was an improvement of $1,314 million over the prior fiscal year
decrease in fund balance of $665 million.  On an overall basis, during
periods of declining or slow economic growth, it is common for the fund
balance of the General Fund to decline and, conversely, to increase during
periods of economic growth.  During periods of economic growth, General Fund
revenues increase while certain significant expenditures, such as medical
assistance, also increase, but at a slower rate.  Total General Fund
expenditures increased by 6.0 percent during the fiscal year ended June 30,
2004, on a GAAP-reported basis, largely because of the increase in
expenditures for medical and other assistance (reported as part of health and
human services). Expenditures for direction and supportive services increased
due to significantly higher employer costs for both active and retired
employee healthcare benefits.  Year-over-year expenditures for the health and
human services function increased by 6.5 percent; all other expenditures, on
a combined basis, increased by 5.5 percent, largely as a result of higher
amounts appropriated throughout most of the General Fund.

      As part of his fiscal year 2004 budget proposal, the Governor proposed
two major program expansions that were enacted by the General Assembly.  In
education, the Governor proposed to shift a substantial portion of local
public school costs from local property taxes levied by school districts to
an increased subsidy payment to school districts by the Commonwealth.  The
program as enacted would increase, over time, the Commonwealth's subsidy of
local public school costs to 50 percent of total costs in the aggregate.
Funds for education at the local level totaling nearly $1.0 billion are
expected to be funded from taxes realized from the legalization of slot
machines at racetracks in the state.  The increased level of education
funding from the Commonwealth would be used to reduce local property taxes by
an equal amount.  The Governor also proposed an economic stimulus plan for
the Commonwealth to provide additional funding to be combined with private
investments to invest in economic development projects within the state.
Investments are to be directed to blighted rural, urban and suburban sites to
be re-developed to spur the location of new job-creating businesses.  The
funding for the economic stimulus program is to come from $2,025 million of
debt issued over more than four fiscal years.

      Major portions of the Governor's economic stimulus proposal were
enacted with the passage of Acts 10, 12, 22, 23 and 67 of 2004.

      Fiscal 2005 Budget.

      The adopted budget for fiscal year 2005, enacted on July 4, 2004, was
based initially on an estimated 4.5 percent increase for Commonwealth General
Fund revenues prior to accounting for any changes in tax and revenue
provisions enacted in the second half of fiscal year 2004.  After adjustments
for various tax rate and tax base changes enacted for the fiscal year 2004
budget, total Commonwealth General Fund revenues were projected to increase
3.8 percent over fiscal year 2004 actual receipts and total $23,866.5 million
prior to reserves for tax refunds.  The tax revenue component of Commonwealth
receipts, including the effects of the tax rate and tax base changes enacted
in fiscal year 2004, was expected to rise $1,342.1 million or 6.1 percent
over fiscal year 2004 actual receipts.  Approximately two-thirds of the
increase in tax revenues is associated with the various tax rate and tax base
changes.

      The fiscal year 2005 estimate for Commonwealth revenues, as estimated
in June 2004, was based upon an economic forecast for national real gross
domestic product to grow at a 4.1 percent rate from the second quarter 2004
to the second quarter 2005.  The forecast anticipated that economic growth
would continue to recover from a period of softness in the second quarter of
2004 and that employment levels would continue to improve moderately.  Trends
in the Pennsylvania economy were expected to maintain their close association
with national economic trends.  Personal income growth in Pennsylvania was
projected to remain slightly below that of the U.S., while the Pennsylvania
unemployment rate was anticipated to be close to the national rate.

      Estimates for fiscal year 2005 General Fund revenues were increased by
$290.9 million in February 2005 as part of the Governor's proposed fiscal
year 2006 budget. Actual fiscal year 2005 collections totaled $24.3 billion,
which was $439.8 million or 1.8 percent above estimate.

      The enacted fiscal year 2005 budget provided $22,876.1 million of
appropriations from Commonwealth revenues, an increase of 4.5 percent from
fiscal year 2004 appropriations, and represents a planned draw down of $71.8
million of the unappropriated surplus balance available at the end of fiscal
year 2004.  In addition, approximately $377.6 million of remaining federal
fiscal relief is appropriated in fiscal year 2005 to fund expenditures
normally funded from Commonwealth revenues.  The budget also included $673.8
million in funding for medical assistance expenditures through
intergovernmental transfer proceeds.

      The fiscal 2005-06 General Fund operating budget for the Commonwealth
that was adopted on July 7, 2005 totals $24.3 billion.  It provided for an
8.7 percent increase in funding for the Department of Public Welfare, and
additional investment in public education reflected in a 3.7 percent increase
for the Department of Education that follows an 8.1 percent increase in
education funding in the prior budget.  It also included $91 million in
funding for the Job Ready Pennsylvania initiative intended to improve
Pennsylvania workforce programs. Most of the tax reform initiatives proposed
by the Governor in February were not adopted.

      The achievement of the budgeted results may be adversely affected by a
number of trends or events, including developments in the national and state
economy.

      According to the Pennsylvania Department of Revenue news release dated
September 30, 2005, the state collected $2.2 billion in General Fund revenues
in September 2005 - $20.3 million, or .9 percent above the official
estimate.  Fiscal year-to-date General Fund collections total $5.5 billion,
which is $30.1 million, or 0.5 percent, above the official estimate.

Commonwealth Debt.

Fiscal Year 2006  The 2006 budget was enacted in July 2005 and is scheduled
to be $846 million, or 3.6 percent, higher than the enacted 2004-05 operating
budget, taking into account the $378 million in 2004-05 expenditures that
were supported by a one-time federal "fiscal relief" grant from 2004-05 that
has been discontinued.  The highlights of the 2006 budget included an
increase in funding for the Department of Public Welfare and additional
investment in public education reflected in a 3.7 percent increase for the
Department of Education bringing the total 2005-06 enacted General Fund
operating budget to $24.3 billion.

In addition, the budget included $625 million in bond funding under the
Growing Greener initiative which would be spread out over six years to allow
the Commonwealth to address some of the Commonwealth's environmental problems
and help the state compete for new development and job creation without
increasing fees or imposing new taxes.

According to the Department of Revenue's "Monthly Revenue Report" for August
2005, General Fund collections of $1,566.4 million for the month of August
2005 were $1.2 million, or 0.1%, below the official estimate. Fiscal year
2005-06 collections of $3,302.6 million exceed the official estimate by $9.7
million, or 0.3%.

Commonwealth Debt.

      The current constitutional provisions relating to Commonwealth debt
permit the issuance of the following types of debt: (i) debt to suppress
insurrection or rehabilitate areas affected by disaster, (ii) electorate
approved debt, (iii) debt for capital projects subject to an aggregate debt
limit of 1.75 times the annual average tax revenue of the preceding five (5)
fiscal years, and (iv) tax anticipation notes payable in the fiscal year of
issuance.  All debt except tax anticipation notes must be amortized in
substantial and regular amounts.  Outstanding general obligation debt totaled
$6,893 million at June 30, 2004.

      Other state-related obligations include "moral obligations."  Moral
obligation indebtedness may be issued by the Pennsylvania Housing Financing
Agency, a state-created agency which provides financing for housing for lower
and moderate income families, and the Hospitals and Higher Education
Facilities Authority of Philadelphia, a municipal authority organized by the
City of Philadelphia to, among other things, acquire and prepare various
sites for use as intermediate care facilities for the mentally retarded.

      The Commonwealth, through several of its departments and agencies,
leases various real property and equipment. Some leases and their respective
lease payments are, with the Commonwealth's approval, pledged as security for
debt obligations issued by certain public authorities or other entities
within the state.  All lease payments payable by Commonwealth departments and
agencies are subject to and dependent upon an annual spending authorization
approved through the Commonwealth's annual budget process.  The Commonwealth
is not required by law to appropriate or otherwise provide moneys from which
the lease payments are to be paid. The obligations to be paid from such lease
payments are not bonded debt of the Commonwealth.

      In addition, certain Commonwealth-created organizations have statutory
authorization to issue debt for which Commonwealth appropriations to pay debt
service thereon are not required.  The debt of these organizations is funded
by the assets of, or revenues derived from, the various projects financed and
is not a statutory or moral obligation of the Commonwealth.  Some of these
agencies, however, are indirectly dependent on Commonwealth operating
appropriations.  The Commonwealth also maintains pension plans covering state
employees, public school employees and employees of certain state-related
organizations.

            |X|  Local Tax Considerations.  Pennsylvania municipalities and
school districts are, with certain limitations, authorized to impose a
variety of taxes.  The real estate tax is the only tax authorized by law to
be levied by all classes of local government in the state.  Thus, property
owners generally pay real estate taxes to three independent authorities - the
county, the municipality and the school district.

      The Local Tax Enabling Act, applicable to almost all political
subdivisions in Pennsylvania, gives local governments (other than counties)
and school districts in Pennsylvania a broad range of non-real estate tax
sources.  The taxes commonly in use include the earned income or wage tax,
per capita taxes, occupation taxes, occupational privilege taxes, real estate
transfer taxes, amusement and admission taxes and business gross receipts
taxes.  Counties are also permitted to impose intangible personal property
taxes.

      In addition, the City and School District of Philadelphia have separate
taxing authority to impose a variety of business taxes, wage taxes, income
and other various taxes.

      There is various litigation pending against the Commonwealth, its
officers and employees. An adverse decision in one or more of these cases
could materially affect the Commonwealth's governmental operations.

      Other Investment Techniques and Strategies.  In seeking its objective,
the Fund may from time to time employ the types of investment strategies and
investments described below.  It is not required to use all of these
strategies at all times, and at times may not use them.

      |X|  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 to its maturity.  The tender may be
at par value plus accrued interest, according to the terms of the obligation.

      The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the ninety-one (91) day
U.S. Treasury Bill rate, or some other standard, and is adjusted
automatically each time such rate is adjusted.  The interest rate on a
variable rate demand note is also based on a stated prevailing market rate
but is adjusted automatically at specified intervals of not less than one
year.  Generally, the changes in the interest rate on such securities reduce
the fluctuation in their market value.  As interest rates decrease or
increase, the potential for capital appreciation or depreciation is less than
that for fixed-rate obligations of the same maturity.

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

      Floating rate and variable rate demand notes that have a stated
maturity in excess of one year may have features that permit the holder to
recover the principal amount of the underlying security at specified
intervals not exceeding one (1) year and upon no more than thirty (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.

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

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

      Inverse floaters may offer relatively high current income, reflecting
the spread between 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" (or "forward commitment") basis.
"When-issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery.

      When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date.  Normally
the settlement date is within six (6) 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 (6) months and
possibly as long as two (2) 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 of any
type 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| 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 as primary dealers in government securities.  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 (1) to five (5) days of
the purchase.  Repurchase agreements having a maturity beyond seven (7) 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 (7) days or less.

      Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 ("Investment Company Act"), are collateralized by the underlying
security.  The Fund's repurchase agreements require that at all times while
the repurchase agreement is in effect, the collateral's value must equal or
exceed the repurchase price to fully collateralize the repayment obligation.

      The Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the
collateral's value.  However, if the vendor fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.

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

      |X| Illiquid and Restricted Securities.  The Fund has percentage
limitations that apply to purchases of illiquid and restricted securities, as
stated in the Prospectus.  The Manager monitors holdings of illiquid and
restricted securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.


      |X| Borrowing and Leverage.  The Fund has the ability to invest
borrowed funds in portfolio securities. This speculative investment technique
is known as "leverage". Under its fundamental policies, the Fund may not
borrow, except to the extent permitted under the Investment Company Act, the
rules or regulations thereunder or any exemption therefrom that is applicable
to the Fund, as such statutes, rules or regulations may be amended or
interpreted from time to time.  Currently, under the Investment Company Act,
a mutual fund may borrow only from banks and the maximum amount it may borrow
is up to one-third of its total assets (including the amount borrowed) less
its liabilities, other than borrowings, except that a fund may borrow up to
5% of its total assets for temporary purposes from any person. Under the
Investment Company Act, there is a rebuttable presumption that a loan is
temporary if it is repaid within 60 days and not extended or renewed. The
Fund may borrow for temporary or emergency purposes only to the extent
necessary in emergency situations to meet redemption requests after using all
cash held by the Fund to meet such redemption requests, other than cash
necessary to pay Fund fees and expenses. If the value of a Fund's assets
fails to meet the 300% asset coverage requirement, the Fund is required,
within three days to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a time
when independent investment judgment would not dictate such sale.


      |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, custodian and administrative or other fees
in connection with these loans.  The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five (5) days' notice or in time to vote on
any important matter.

Other Derivative Investments.  The Fund can invest in other municipal
derivative securities that pay interest that depends on the change in value
of an underlying asset, interest rate or index.  Examples are interest rate
swaps, municipal bond indices or swap indices.  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| Puts and Standby Commitments.   The Fund can acquire "stand-by
commitments" or "puts" with respect to municipal securities to enhance
portfolio liquidity and to try to reduce the average effective portfolio
maturity. These arrangements give the Fund the right to sell the securities
at a set price on demand to the issuing broker-dealer or bank. However,
securities having this feature may have a relatively lower interest rate.
When the Fund buys a municipal security subject to a standby commitment to
repurchase the security, the Fund is entitled to same-day settlement from the
purchaser.  The Fund receives an exercise price equal to the amortized cost
of the underlying security plus any accrued interest at the time of
exercise.  A put purchased in conjunction with a municipal security enables
the Fund to sell the underlying security within a specified period of time at
a fixed exercise price.

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

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

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

      |X| 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 could:

      |_| 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.

      The Fund can also write covered calls 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 could:

      |_| 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.

      No money is paid by or received by the Fund on the purchase or sale of
a futures contract. 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 (for example, 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.

      |X| 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.

      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.

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

      The Fund's custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities.  In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the 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
Securities and Exchange Commission 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 in all appropriate cases 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 Calls and Puts.  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).

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


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

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

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

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

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

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

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

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

      |_| 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 cannot 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 can 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."

       |_|  Regulatory Aspects of Hedging Instruments. The Commodities
Futures Trading Commission (the "CFTC") recently eliminated limitations on
futures trading by certain regulated entities including registered investment
companies and consequently registered investment companies may engage in
unlimited futures transactions and options thereon provided that the Fund
claims an exclusion from regulation as a commodity pool operator. The Fund
has claimed such an exclusion from registration as a commodity pool operator
under the Commodity Exchange Act ("CEA"). The Fund may use futures and
options for hedging and non-hedging purposes to the extent consistent with
its investment objective, internal risk management guidelines adopted by the
Fund's investment advisor (as they may be amended from time to time), and as
otherwise set forth in the Fund's prospectus or this 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 Securities and Exchange
Commission regarding applicable provisions of the Investment Company Act,
when the Fund purchases an interest rate future or municipal bond index
future, it must segregate cash or readily marketable short-term debt
instruments in an amount equal to the purchase price of the future, less the
margin deposit applicable to it.  The account must be a segregated account or
accounts held by its custodian bank.


|X|   Portfolio Turnover.  A change in the securities held by the Fund from
buying and selling investments is known as "portfolio turnover."  Active and
frequent 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 capital gains,
because they would not be tax-exempt income.  To a limited degree, the Fund
may engage in active and frequent 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 Manager believes such disposition is advisable or the Fund needs to
generate cash to satisfy requests to redeem Fund shares.  In those cases, the
Fund may realize a capital gain or loss on its investments.  The Fund's
annual portfolio turnover rate normally is not expected to exceed 100%. The
Financial Highlights table at the end of the Prospectus shows the Fund's
portfolio turnover rates during the past five fiscal years.

      |X| Temporary Defensive and Interim Investments.  The securities the
Fund may invest in for temporary defensive purposes include the following:

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

      |X| Taxable Investments. While the Fund can invest up to 20% of its net
assets (plus borrowings for investment purposes) in investments that generate
income subject to income taxes, it does not anticipate investing substantial
amounts of its assets in taxable investments under normal market conditions
or as part of its normal trading strategies and policies.  To the extent it
invests in taxable securities, the Fund would not be able to 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 it would buy for temporary defensive
purposes.

Other Investment Restrictions

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

      |_| 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 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 Pennsylvania 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 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 underwrite securities of other companies.  A
permitted exception is in case it is deemed to be an underwriter under the
Securities Act of 1933 when reselling any 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.


      |_| The Fund invests at least 80% of its net assets (plus borrowings
for investment purposes) in Pennsylvania municipal securities.  This includes
securities that generate income subject to the alternative minimum tax.

      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.

      |X| Does The Fund Have Other Restrictions That Are Not Fundamental
Policies?


      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 or other investments other
than municipal securities, the temporary investments described in its
Prospectus, repurchase agreements, covered calls, private activity municipal
securities and hedging instruments described in "About the Fund" in the
Prospectus or this Statement of Additional Information.

      |_| The Fund can pledge,  mortgage or  otherwise  encumber,  transfer or
assign its assets to secure  borrowings  by or  indebtedness  of the Fund.  In
addition,  the use of escrow or other  collateral  arrangements  in connection
with borrowings and hedging instruments is permitted.

      |_| The Fund cannot purchase securities other than hedging instruments
on margin. However, the Fund may obtain short-term credits that may be
necessary for the clearance of purchases and sales of securities.

      |_| The Fund cannot sell securities short.

      |_| The Fund cannot buy or sell futures contracts other than interest
rate futures and municipal bond index futures.

      |_| The Fund will not invest more than 10% of its net assets in
securities which are restricted as to disposition under the federal
securities laws, except that the Fund may purchase without regard to this
limitation restricted securities which are eligible for resale pursuant to
Rule 144A under the Securities Act of 1933.

      |_| The Fund cannot invest in the securities of other registered
investment companies or registered unit investment trusts in reliance on
sub-paragraph (F) or (G) of section 12(d)(1) of the Investment Company Act of
1940.

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. The Manager has no present intention of
investing more than 25% of the Fund's total assets in securities paying
interest from revenues of similar type projects or in industrial development
bonds. This is not a fundamental policy and therefore could be changed
without shareholder approval. However, if that change were made, the
Prospectus or this Statement of Additional Information would be supplemented
to reflect the change.

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

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

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

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

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

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

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

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

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

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

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

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

    Portfolio holdings information (which may include information on the
    Fund's entire portfolio or individual securities therein) may be provided
    by senior officers of the Manager or attorneys on the legal staff of the
    Manager, Distributor, or Transfer Agent, in the following circumstances:

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

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

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

    The Chief Compliance Officer 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, a series of Oppenheimer Multi-State
Municipal Trust (referred to as the "Trust), 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 1989.  Each of the three (3) series of the Trust is a separate fund
that issues its own shares, has its own investment portfolio, and has its own
assets and liabilities.

      |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 of shares 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,
      will generally have a different net asset value,
      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"
of the Fund under certain circumstances. However, the risk that a Fund
shareholder will incur financial loss from being held liable as a "partner"
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 Independent 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), Russell S. Reynolds, Jr. Peter I. Wold and Kenneth A. Randall.
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 Committee's
Charter.

      The Governance Committee's functions also include selecting and
nominating, to the full Board nominees for election as Trustees, and
selecting and nominating 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 Committee may, upon
Board approval, retain an executive search firm to assist in screening
potential candidates. Upon Board approval, the Committee may also use
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 office of OppenheimerFunds, Inc., Two World Financial
Center, 225 Liberty Street, 11th Floor, New York, NY 10281-1008, to the
attention of the Board of Trustees of Oppenheimer Pennsylvania 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; (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 not 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 and "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.

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


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


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


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


      Messrs. Fielding, Cottier, Loughran, Willis, Gillespie, Murphy,
Petersen, Vandehey, Vottiero, Wixted, Zack and Mss. Bloomberg, and Ives, who
are officers of the Fund, hold the same offices with one or more of the other
Board I Funds.  As of October 31, 2005, the Trustees and officers of the
Fund, as a group, owned of record or beneficially less than 1% of any class
of shares of the Fund.  The foregoing statement does not reflect ownership of
shares held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under that plan by the
officers of the Fund listed above. In addition, none of the Independent
Trustees (nor any of their immediate family members), owns securities of
either the Manager or Distributor of the Board I Funds or of 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 years ended December 31, 2003 and 2004 and does not
expect to provide any such services in the calendar year ending December 31,
2005.

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

Biographical Information. The Trustees and officers, their positions with the
Fund, length of service in such position(s) and principal occupations and
business affiliations during at least the past five years are listed in the
charts below. The charts also include information about each Trustee's
beneficial share ownership in the Fund and in all of the registered
investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). Ms. Miller was elected to certain Board I Funds
during 2004 and did not hold shares of Board I Funds during the calendar year
ended December 31, 2004. Mr. Fink was elected to the Board I Funds in 2005
and did not hold shares of Board I Funds during the calendar year ended
December 31, 2004. The address of each Trustee in the chart below is 6803 S.
Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an
indefinite term or until his or her resignation, retirement, death or
removal.
------------------------------------------------------------------------------------
                               Independent Trustees
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5    Dollar     Aggregate
                                                                       Dollar
                                                                       Range Of
                   Years;                                   Range of   Shares
Position(s) Held   Other Trusteeships/Directorships Held    Shares     Beneficially
with Fund,         by 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
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K.         Director of American Commercial Lines    None      Over $100,000
Yeutter, Chairman  (barge company) (since January 2005);
of the Board of    Attorney at Hogan & Hartson (law firm)
Trustees since     (since June 1993); Director of Covanta
2003;              Holding Corp. (waste-to-energy company)
Trustee since 1991 (since 2002); Director of Weyerhaeuser
Age: 74            Corp. (1999-April 2004); Director of
                   Caterpillar, Inc. (1993-December 2002);
                   Director of ConAgra Foods (1993-2001);
                   Director of Texas Instruments
                   (1993-2001); Director of FMC
                   Corporation (1993-2001). Oversees 38
                   portfolios in the OppenheimerFunds
                   complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Matthew P. Fink    Trustee of the Committee for Economic    None      None
Trustee since 2005 Development (policy research
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 $100,000
Trustee since 1994 Oppenheimer funds. Oversees 48
Age: 72            portfolios in the OppenheimerFunds

                   complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip A.         Director of GSI Lumonics Inc.            None      Over $100,000
Griffiths,         (precision medical equipment supplier)
Trustee, since     (since 2001); Trustee of Woodward
1999               Academy (since 1983); Senior Advisor of
Age: 67            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 $100,000
Trustee since 2002 Corp. (privately-held financial
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.         Director of Dominion Resources, Inc.     None      Over $100,000
Randall, Trustee   (electric utility holding company)
since 1989         (since February 1972); Former Director
Age: 78            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 $100,000
Reynolds, Jr.,     Group, Inc. (corporate governance
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-

Trustee since      device companies: Medintec (since 1992)            $100,000
August 2005        and Cathco (since 1996); Director of
Age: 64            Lakes Environmental Association (since
                   1996); Member of the Investment
                   Committee of the Associated Jewish
                   Charities of Baltimore (since 1994);
                   Director of Fortis/Hartford mutual
                   funds (1994-December 2001). Oversees 39
                   portfolios in the OppenheimerFunds
                   complex.
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Peter I. Wold      President of Wold Oil Properties, Inc.   None      Over $100,000
Trustee since      (oil and gas exploration and production
September 2005     company) (since 1994); Vice President,
Age: 57            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 $100,000
Trustee since 2005 L.P. (hedge fund) (since September
Age: 62            1995); Director of Special Value
o                  Opportunities Fund, LLC (registered
                   investment company) (since September
                   2004); Director of Zurich Financial
                   Investment Advisory Board (affiliate of
                   the Manager's parent company) (since
                   October 2004); Board of Governing
                   Trustees of The Jackson Laboratory
                   (non-profit) (since August 1990);
                   Trustee of the Institute for Advanced
                   Study (non-profit educational
                   institute) (since May 1992); Special
                   Limited Partner of Odyssey Investment
                   Partners, LLC (private equity
                   investment) (January 1999-September
                   2004); Trustee of Research Foundation
                   of AIMR (2000-2002) (investment
                   research, non-profit); Governor, Jerome
                   Levy Economics Institute of Bard
                   College (August 1990-September 2001)
                   (economics research); Director of Ray &
                   Berendtson, Inc. (May 2000-April 2002)
                   (executive search firm). Oversees 48
                   portfolios in the OppenheimerFunds
                   complex.
------------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------
                           Interested Trustee and Officer
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,               Principal Occupation(s) During Past 5     Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                    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     (since September 2000) of the Manager;
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 and 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, New York, New York
10281-1008, for Messrs. Petersen, Vandehey, Vottiero,  and Wixted and Ms.
Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924.  Each officer
serves for an indefinite term or until his or her resignation, retirement,
death or removal.



-------------------------------------------------------------------------------------
                             Other Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,                   Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund, Length of
Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Ronald H. Fielding,     Senior Vice President (since January 1996) of the Manager;
Vice President and      Chairman of the Rochester Division of the Manager (since
Portfolio Manager       January 1996); an officer of 9 portfolios in the
since 1999              OppenheimerFunds complex.
Age: 56
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Daniel G. Loughran,     Vice President of the Manager since April 2001; an officer
Vice President since    of 8 portfolios in the OppenheimerFunds complex.
2005
Age: 42
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Scott Cottier, Vice     Vice President of the Manager since 2002; portfolio manager
President since 2005    and trader at Victory Capital Management (1999-2002); an
Age: 34                 officer of 8 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Troy Willis, Vice       Assistant Vice President of the Manager since July 2005;
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 the
Vice President and      Manager (since March 2004); Vice President of
Chief Compliance        OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004      Management Corporation and Shareholder Services, Inc.
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 (since
Treasurer since 1999    March 1999); Treasurer of the following: HarbourView Asset
Age: 46                 Management Corporation, Shareholder Financial Services,
                        Inc., Shareholder Services, Inc., Oppenheimer Real Asset
                        Management Corporation, and Oppenheimer Partnership
                        Holdings, Inc. (since March 1999), OFI Private Investments,
                        Inc. (since March 2000), OppenheimerFunds International
                        Ltd. (since May 2000), OppenheimerFunds plc (since May
                        2000), OFI Institutional Asset Management, Inc. (since
                        November 2000), and OppenheimerFunds Legacy Program
                        (charitable trust program established by the Manager)
                        (since June 2003); Treasurer and Chief Financial Officer of
                        OFI Trust Company (trust company subsidiary of the Manager)
                        (since May 2000); Assistant Treasurer of the following: OAC
                        (since March 1999),Centennial Asset Management Corporation
                        (March 1999-October 2003) and OppenheimerFunds Legacy
                        Program (April 2000-June 2003); Principal and Chief
                        Operating Officer of Bankers Trust Company-Mutual Fund
                        Services Division (March 1995-March 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen,         Assistant Vice President of the Manager (since August
Assistant Treasurer     2002); Manager/Financial Product Accounting of the Manager
since 2004              (November 1998-July 2002). An officer of 87 portfolios in
Age: 35                 the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero,        Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer     2002); Vice President/Corporate Accounting of the Manager
since 2002              (July 1999-March 2002); Chief Financial Officer of Sovlink
Age: 42                 Corporation (April 1996-June 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Executive Vice President (since January 2004) and General
Secretary since 2001    Counsel (since March 2002) of the Manager; General Counsel
Age: 57                 and Director of the Distributor (since December 2001);
                        General Counsel of Centennial Asset Management Corporation
                        (since December 2001); Senior Vice President and General
                        Counsel of HarbourView Asset Management Corporation (since
                        December 2001); Secretary and General Counsel of OAC (since
                        November 2001); Assistant Secretary (since September 1997)
                        and Director (since November 2001) of OppenheimerFunds
                        International Ltd. and OppenheimerFunds plc; Vice President
                        and Director of Oppenheimer Partnership Holdings, Inc.
                        (since December 2002); Director of Oppenheimer Real Asset
                        Management, Inc. (since November 2001); Senior Vice
                        President, General Counsel and Director of Shareholder
                        Financial Services, Inc. and Shareholder Services, Inc.
                        (since December 2001); Senior Vice President, General
                        Counsel and Director of OFI Private Investments, Inc. and
                        OFI Trust Company (since November 2001); Vice President of
                        OppenheimerFunds Legacy Program (since June 2003); Senior
                        Vice President and General Counsel of OFI Institutional
                        Asset Management, Inc. (since November 2001); Director of
                        OppenheimerFunds (Asia) Limited (since December 2003);
                        Senior Vice President (May 1985-December 2003), Acting
                        General Counsel (November 2001-February 2002) and Associate
                        General Counsel (May 1981-October 2001) of the Manager;
                        Assistant Secretary of the following: Shareholder Services,
                        Inc. (May 1985-November 2001), Shareholder Financial
                        Services, Inc. (November 1989-November 2001), and
                        OppenheimerFunds International Ltd. (September
                        1997-November 2001). An officer of 87 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice President (since June 1998) and Senior Counsel and
Assistant Secretary     Assistant Secretary (since October 2003) of the Manager;
since 2001              Vice President (since 1999) and Assistant Secretary (since
Age: 40                 October 2003) of the Distributor; Assistant Secretary of
                        Centennial Asset Management Corporation (since October
                        2003); Vice President and Assistant Secretary of
                        Shareholder Services, Inc. (since 1999); Assistant
                        Secretary of OppenheimerFunds Legacy Program and
                        Shareholder Financial Services, Inc. (since December 2001);
                        Assistant Counsel of the Manager (August 1994-October
                        2003). An officer of 87 portfolios in the OppenheimerFunds
                        complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg,      Vice  President and Associate  Counsel of the Manager (since
Assistant Secretary     May 2004);  First Vice President  (April  2001-April  2004),
since 2004              Associate  General  Counsel   (December   2000-April  2004),
Age:  37                Corporate   Vice  President   (May   1999-April   2001)  and
                        Assistant  General Counsel (May  1999-December  2000) of UBS
                        Financial    Services    Inc.     (formerly,     PaineWebber
                        Incorporated).   An   officer  of  87   portfolios   in  the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie,   Senior  Vice  President  and Deputy  General  Counsel of the
Assistant Secretary     Manager  (since  September  2004);  Mr.  Gillespie  held the
since 2004              following positions at Merrill Lynch Investment  Management:
Age: 41                 First  Vice  President   (2001-September   2004);   Director
                        (2000-September  2004) and Vice  President  (1998-2000).  An
                        officer of 87 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------


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



------------------------------------------------------------------------------------
 Name and Other Fund      Aggregate      Retirement     Estimated        Total
                                          Benefits        Annual      Compensation
                         Compensation    Accrued as      Benefits    From the Fund
Position(s)                From the     Part of Fund       Upon         and Fund
(as applicable)           Fund((1))       Expenses    Retirement((2))   Complex
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K. Yeutter       $2,244((3))        $561         $86,171        $173,700
Chairman of the Board
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Matthew P. Fink((4))         None           None          $2,641          None
Proxy Committee Member
and Regulatory &
Oversight Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Robert G. Galli
Regulatory & Oversight      $1,670          None      $100,824((5))  $237,312((6))
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip A. Griffiths
Governance Committee
Chairman and             $1,937((7))       $6,188        $34,972        $142,092
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee Member
and Proxy Committee          $880           None          $7,128         $8,532
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joel W. Motley
Audit Committee
Chairman and             $1,947((9))       $2,487        $23,945        $150,760
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Kenneth A. Randall          $1,732       None((10))      $85,944        $134,080
Audit Committee Member
and Governance
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Edward V. Regan((11))       $1,423          None         $70,977        $118,788

------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Russell S. Reynolds,        $1,382          None         $66,602        $106,792
Jr.
Proxy Committee
Chairman and
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Donald Spiro((12))           $203           None           None         $64,080

------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joseph M. Wikler(13)         None           None            --          $23,000
Audit Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Peter I. Wold (13)
Governance Committee         None           None            --          $20,500
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Brian F. Wruble (1(4))
Regulatory & Oversight       None           None      $22,238(1(5))   $111,000(16)
Committee Member
------------------------------------------------------------------------------------
1....."Aggregate  Compensation  From the  Fund"  includes  fees  and  deferred
   compensation, if any.

2.    "Estimated  Annual  Retirement  Benefits Upon  Retirement" is based on a
   straight  life payment plan  election  with the  assumption  that a Trustee
   will retire at the age of 75 and is eligible  (after 7 years of service) to
   receive  retirement  plan benefits with respect to certain Board I Funds as
   described below under "Retirement Plan for Trustees."

3.    Includes  $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  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 a Board member of 13 of the Board I Funds
   effective August13, 2004 and of 9 of the Board I Funds effective
   October 26, 2004. She was elected as a Board member of all of the 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 Trustee of the Board I funds effective June 30,
   2005.
12.   Mr. Spiro retiredas Trustee of the Board I funds effective October 31,
   2004.
13.   Mr. Wikler and Mr. Wold were elected as Board members of 23 of the
   Board I Funds as of August 17, 2005. They had served as Board members of
   the other 11 Board I Funds prior to that date.
14.   Mr. Wruble was appointed as Trustee of the Board I Funds effective
   October 10, 2005.
15.   Estimated benefits to be paid to Mr. Wruble for serving as a director
   or trustee of 10 other Oppenheimer funds that are not Board I Funds. Mr.
   Wruble's service as a director or trustee of such funds will not be
   counted towards the fulfillment of his eligibility requirements for
   payments under the Board I retirement plan, described below.
16.   For serving as a director or trustee of 10 other Oppenheimer funds (at
   December 31, 2004) that are not Board I Funds.


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

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

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


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

      MLPF&S for the sole  benefit of its  customers,  Attn.  Fund  ADMN/#XXX,
4800 Deer Lake Drive East Floor 3,  Jacksonville,  FL 32246-6484,  which owned
1,172,024.562  Class C shares  (9.73% of the Class C shares then  outstanding)
for the benefit of its customers.

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 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.

--------------------------------------------------------------------------------
                                                     Management Fee Paid to
   Fiscal Year             Management Fee                  the Manager
    Ended 7/31       (Without Voluntary Waiver)          (after waiver)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       2003                  $2,046,970                        N/A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       2004                  $2,465,343                        N/A
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
       2005                  $3,034,961                        N/A
--------------------------------------------------------------------------------

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

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

Portfolio Managers. The Fund's portfolio is managed by Ronald H. Fielding and
a team of investment professionals including Ronald H. Fielding, Daniel G.
Loughran, Scott Cottier, 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     Registered  Total     Other      Total      Other   Total
                             Assets               Assets in
                             in                   Other
                             RegisteredPooled     Pooled               Assets
                 Investment  InvestmentInvestment Investment         in Other
                 Companies   Companies Vehicles   Vehicles   AccountsAccounts
   Manager        Managed    Managed*   Managed    Managed*  Managed  Managed*
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Ronald H.        10     $19,636.80     None        $0      None      None
   Fielding
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Daniel G.        10     $19,636.80     None        $0      None      None
   Loughran
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Scott Cottier    10     $19,636.80     None        $0      None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Troy Willis      10     $19,636.80     None        $0      None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Marcus Franz     10     $19,636.80     None        $0      None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Mark DeMitry     10     $19,636.80     None        $0      None      None

   *  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 - Pennsylvania Municipal Debt Funds.  Other
factors include management quality (such as style consistency, risk
management, sector coverage, team leadership and coaching) and organizational
development. The Portfolio Managers' compensation is not based on the total
value of the Fund's portfolio assets, although the Fund's investment
performance may increase those assets. The compensation structure is also
intended to be internally equitable and serve to reduce potential conflicts
of interest between the Fund and other funds managed by the Portfolio
Managers.  The compensation structure of the other funds managed by the
Portfolio Managers is the same as the compensation structure of the Fund,
described above.

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

Brokerage Policies of the Fund

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

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

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

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

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

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

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

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

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

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

In the  fiscal  years  ended  July 31,  2003,  2004 and  2005,  there  were no
transactions directed to brokers for research services,  and the amount of the
commissions  paid to  broker-dealers  for those  services was $0. As explained
above, in the fiscal years ended July 31, 2003,  2004 and 2005,  respectively,
the Fund did not pay any brokerage commissions.

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:

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

                        Class A
 Fiscal   Aggregate     Front-End    Concessions    Concessions  Concessions
 Year     Front-End     Sales        on Class A     on Class B   on Class C
 Ended    Sales         Charges      Shares         Shares       Shares
 7/31:    Charges on    Retained by  Advanced by    Advanced by  Advanced by
          Class A       Distributor(1Distributor(2) Distributor(2Distributor(2)
          Shares
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2003    $1,351,585     $238,281      $25,800      $2,138,403    $297,755
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2004    $1,552,600     $285,333      $56,886      $1,054,726    $195,943
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2005    $3,260,915     $538,933      $93,658      $1,109,526    $479,669
 ------------------------------------------------------------------------------
   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.

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

             Class A Contingent   Class B Contingent    Class C Contingent
 Fiscal      Deferred Sales       Deferred Sales        Deferred Sales
 Year  Ended Charges Retained by  Charges Retained by   Charges Retained by
 7/31:       Distributor          Distributor           Distributor
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2003            $ 553               $252,776               $15,290
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2004            $2,555              $425,206               $18,275
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2005            $4,305              $276,297               $16,742
 ------------------------------------------------------------------------------

      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.

      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 $418,901, all of which all was paid by the Distributor to recipients,
and included $16,961 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.

      Class B and Class C Distribution and Service Plan Fees. Under each
plan, distribution and service plan 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 in the Fiscal Year
                                 Ended 7/31/05
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:      Total Payments  Amount Retained  Distributor's    Distributor's
                                              Aggregate        Unreimbursed
                                              Unreimbursed     Expenses as %
                                              Expenses Under   of Net Assets
             Under Plan      by Distributor   Plan             of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B       $1,559,825     $1,337,641(1)      $5,240,040         1.07%
 Plan
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C        $865,970       $267,839(2)       $1,639,689         1.23%
 Plan
 -------------------------------------------------------------------------------
1.    Includes $3,375 paid to an affiliate of the Distributor's parent
      company.
2.    Includes $29,287 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 Statement of Additional Information. They
may also receive reallowance of commissions from the Distributor, derived
from sales charges paid by the clients of the financial intermediary, also as
described in this Statement of Additional Information. Additionally, the
Manager and/or the Distributor (including their affiliates) may make payments
to financial intermediaries in connection with their offering and selling
shares of the Fund and other Oppenheimer funds, providing marketing or
promotional support, transaction processing and/or administrative services.
Among the financial intermediaries that may receive these payments are
brokers and dealers who sell and/or hold shares of the Fund, banks (including
bank trust departments), registered investment advisers, insurance companies,
retirement plan and qualified tuition program administrators, third party
administrators, and other institutions that have selling, servicing or
similar arrangements with the Manager or Distributor. The payments to
intermediaries vary by the types of product sold, the features of the Fund
share class and the role played by the intermediary.

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

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

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

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

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

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

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

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

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

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

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


  ===============================================================================

  ADVEST INC.                             AEGON

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

  A.G. Edwards & Sons, Inc.               AIG Network

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

  Allianz Life Insurance Company          Allstate Life Insurance Company

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

  Ameritas Life Insurance Corporation     American Centurian Life Insurance

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

  American Enterprise Life Insurance      American Express Financial Advisors
                                          Inc.

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

  American Portfolios                     Annuity Investors Life

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

  AXA Advisors                            Banc One Securities Corporation

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

  Bank of New York                        Cadaret Grant & Co. Inc.

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

  Charter One Securities Inc.             Chase Investment Services

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

  Citigroup Financial Network             CitiStreet

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

  Citizens Bank of Rhode Island           CJM Planning Corp.

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

  Columbus Life Insurance Company         Commonwealth Financial Network

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

  CUNA Brokerage Services Inc.            CUSO Financial Services, L.P.

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

  Federal Kemper                          First Allied Securities Inc

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

  First Global Capital                    GE Financial Assurance

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

  GlenBrook Life and Annuity Co.          Great West Life & Annuity Co., Inc.

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

  HD Vest                                 Hewitt Associates

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

  HSBC Brokerage (USA) Inc.               ING Network

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

  Jefferson Pilot Securities Corporation  John Hancock Variable Life Insurance
                                          Company

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

  Kemper Life Assurance Company           Legend Equities Corporation

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

  Legg Mason Wood Walker, Incorporated    Lincoln National Life Insurance
                                          Company

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

  Lincoln Financial Advisors Corporation  Lincoln Investment Planning

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

  Linsco/Private Ledger Corp.             MassMutual Financial Group and
                                          affiliates

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

  McDonald Investments, Inc.              Merrill Lynch & Co., Inc. and
                                          affiliates

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

  Metlife and affiliates                  Minnesota Life Insurance Company

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

  Morgan Stanley DW Inc.                  NPH Network

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

  Nationwide and affiliates               New York Life Securities, LLC

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

  PacLife Network                         Park Avenue Securities LLC

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

  Planmember Securities Corporation       Prime Capital Services, Inc.

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

  Princor Financial Services Corporation  Protective Life Insurance Co.

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

  Provident Mutual Insurance Company      Prudential Investment Management
                                          Services LLC

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

  Raymond James Financial Services, Inc.  Raymond James & Associates, Inc.

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

  RBC Dain Rauscher Inc.                  Securities America, Inc.

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

  Security Benefit Life Insurance Company Signator Investments

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

  Sun Life Insurance Company              Suntrust Investment Services, Inc.

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

  Tower Square Securities, Inc            Travelers Life & Annuity Co., Inc.

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

  UBS Financial Services Inc.             Union Central Life Insurance Company

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

  Wachovia Securities LLC                 Wells Fargo Investments, LLC

  ===============================================================================


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


  ===============================================================================

  ABN AMRO                                ADP

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

  Alliance Benefit Group                  AMVESCAP Retirement Plans

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

  American Stock & Transfer               Baden Retirement

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

  BCG                                     Benefit Administration Co., LLC

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

  Benefit Administration, Inc.            Benefit Plans Administrative Services

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

  Benetech, Inc.                          BISYS Retirement Services

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

  Boston Financial Data Services          Ceridian

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

  Circle Trust Company                    Citigroup

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

  CitiStreet                              CPI

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

  Daily Access.Com, Inc.                  Digital Retirement Solutions

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

  Dyatech                                 ERISA Administrative Services, Inc.

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

  ExpertPlan.com                          FAScore

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

  FBD Consulting                          Federated Investors

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

  Fidelity Institutional                  First National Bank of Omaha

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

  First Trust Corp.                       Franklin Templeton

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

  Geller Group                            Gold K

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

  Great West Financial Services           Hartford Life Insurance Co.
  Equities, Inc.

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

  ICMA - RC Services                      In West Pension Mgmt

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

  Independent Plan Coordinators           Ingham Group

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

  Interactive Retirement Systems, Ltd.    Invesmart, Inc.

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

  Kaufman & Goble                         Leggette & Co., Inc.

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

  Manulife                                MassMutual Financial Group and
                                          affiliates

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

  Matrix Settlement & Clearance Services  Mellon HR Solutions

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

  Merrill Lynch & Co., Inc.               Metavante

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

  Metlife Securities Inc.                 MFS Investment Management

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

  Mid Atlantic Capital Corp.              Milliman USA

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

  Morgan Stanley DW Inc.                  National City Bank

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

  National Financial Services Corp.       National Investors Services Corp.

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

  Nationwide Investment Service Corp.     New York Life Investment Management,
                                          Inc.

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

  Northwest Plan Services                 Pension Administration and Consulting

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

  PFPC, Inc.                              PSMI Group

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

  Putnam Fiduciary Trust Company          Quads Trust Company

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

  RSM McGladrey                           SAFECO

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

  Charles Schwab & Co., Inc.              Security Trust Company

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

  Sentinel / National Life                Standard Insurance Co

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

  Stanley, Hunt, Dupree & Rhine           State Street Bank & Trust Company

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

  Suntrust Investment Services, Inc.      Swerdlin & Co.

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

  T. Rowe Price Brokerage Services, L.P.  Taylor, Perky & Parker, LLC

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

  The 401k Company                        The Investment Center, Inc.

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

  Trusource                               Union Bank and Trust Co.

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

  USI Consulting Group                    Vanguard Group

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

  Web401K.com                             Wilmington Trust Company

  ===============================================================================


Performance of the Fund

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

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

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

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

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

      |_| Standardized Yield.  The "standardized yield" (sometimes referred
to just as "yield") is shown for a class of shares for a stated thirty day
period.  It is not based on actual distributions paid by the Fund to
shareholders in the thirty 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:

------------------------------------------------------------------------------
                               [OBJECT OMITTED]
------------------------------------------------------------------------------
      The symbols above represent the following factors:
      a =  dividends and interest earned during the thirty (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 thirty (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.

      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.

      |_| 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 Federal 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 7/31/05
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                           Tax-Equivalent Yield
               Standardized Yield      Dividend Yield        (37.00% Combined
                                                           Federal/Pennsylvania
                                                               Tax Bracket)
Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
             Without    After       Without    After      Without     After
             Sales      Sales       Sales      Sales      Sales       Sales
             Charge     Charge      Charge     Charge     Charge      Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A           4.58%       4.36%      4.86%      4.63%       7.26%      6.92%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B           3.80%         N/A      3.96%        N/A       6.02%        N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C           3.79%         N/A      3.96%        N/A       6.02%        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.

      |_| 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:

------------------------------------------------------------------------------
                               [OBJECT OMITTED]
------------------------------------------------------------------------------
|_|   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:

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

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

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


      |_| 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


      |_| 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
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          Cumulative Total              Average Annual Total Returns
             Returns (10
          years or life of
               class)
Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                                    10-Years
                                  1-Year           5-Years        (or life of
                                                                     class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without   After    Without After   Without
          Sales    Sales    Sales    Sales     Sales    Sales   Sales   Sales
           Charge   Charge   Charge   Charge    Charge  Charge  Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A   80.43%(1)89.43%(1) 9.95%    15.43%    7.85%    8.90%   6.08%   6.60%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B   81.05%(2)81.05%(2) 9.56%    14.56%    7.81%    8.10%  6.12%(2)6.12%(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C   75.28%(3)75.28%(3) 13.48%   14.48%    8.07%    8.07%  5.82%(3)5.82%(3)
---------------------------------------------------------------------------------
(1)   Inception of Class A:   9/18/89
(2)   Inception of Class B:   5/3/93
(3)   Inception of Class C:   8/29/95

 -------------------------------------------------------------------------------
         Average Annual Total Returns for Class A Shares (After Taxes)
                         For the Periods Ended 7/31/05
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------

                                   1-Year           5-Year         10 Years
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 After Taxes on Distributions       9.95%           7.85%            6.08%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 After Taxes on Distributions
 and Redemption of Fund Shares      8.45%           7.58%            6.00%
 -------------------------------------------------------------------------------



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.

      |_| 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 single state 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.

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

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


      There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this 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 rage that applies to your purchase of Class A shares if you
purchases 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
the 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 classes of shares.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

      The following funds do not offer Class N shares:
   Oppenheimer AMT-Free Municipals           Oppenheimer Pennsylvania Municipal
                                             Fund
   Oppenheimer AMT-Free New York             Oppenheimer Rochester National
   Municipals                                Municipals
   Oppenheimer California Municipal Fund     Limited Term New York Municipal Fund
   Oppenheimer Limited Term Municipal        Oppenheimer Senior Floating Rate Fund
   Fund
   Oppenheimer New Jersey Municipal Fund     Rochester Fund Municipals
   Oppenheimer Principal Protected Main      Oppenheimer Limited Term California
   Street Fund II                            Municipal Fund
   Oppenheimer International Value Fund      Oppenheimer International Value Fund
   Oppenheimer Money Market Fund, Inc.       Oppenheimer New Jersey Municipal 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          Oppenheimer New Jersey Municipal Fund
   Municipals
   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     Oppenheimer Quest International Value
   Fund                                   Fund, Inc.
   Oppenheimer Disciplined Allocation     Oppenheimer Rochester National Municipals
   Fund
   Oppenheimer Dividend Growth Fund
   Oppenheimer Gold & Special Minerals    Oppenheimer Total Return Bond Fund
   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 except
      Class A share 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
      (3/3/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund III until after the expiration of the warranty period
      (12/16/2011).

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

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

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

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

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

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

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

            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.

To the extent that distributions paid by the Fund are derived from interest
on Pennsylvania municipal securities, qualifying obligations of the U.S.
government and certain qualifying obligations of governments of U.S.
territories, agencies and instrumentalities, those distributions will also be
exempt from Pennsylvania personal income tax, and in the case of residents of
Philadelphia, exempt from the investment income tax of the School District of
Philadelphia. Distributions from the Fund attributable to income from sources
other than those will generally be subject to Pennsylvania personal income
tax.

Corporations that are subject to the Pennsylvania corporate net income tax
will not be subject to tax on distributions received from the Fund provided
that such distributions are not included in federal taxable income determined
before net operating loss deductions and special deductions.  As a result of
a pronouncement by the Pennsylvania Department of Revenue, an investment in
the Fund by a corporate shareholder will apparently qualify as an exempt
asset for purposes of the single asset apportionment fraction available in
computing the Pennsylvania capital stock/foreign franchise tax to the extent
that the Fund's portfolio securities comprise investments in Pennsylvania
and/or U.S. government securities that would be exempt assets if owned
directly by the corporation.

      Shares of the Fund will be exempt from Pennsylvania county personal
property taxes to the extent that on the annual assessment date the Fund's
portfolio securities consist of:
o     Pennsylvania municipal securities,
o     obligations of the U.S. government (and certain qualifying obligations
         of  governments of U.S. territories, agencies and
         instrumentalities), and
o     certain other obligations that are not subject to such personal
         property taxes.



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

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

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

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

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

      In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year.  However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent Registered Public Accounting Firm. KPMG LLP served as an
Independent Registered Public Accounting Firm for the Fund.  KPMG LLP audits
the Fund's financial statements and perform other related audit services.
KPMG LLP also acts 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 MULTI-STATE MUNICIPAL TRUST:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Pennsylvania Municipal Fund (one of the portfolios constituting the
Oppenheimer Multi-State Municipal Trust), 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 assess- ing 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 Pennsylvania 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--102.5%
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--71.1%
$     20,000    Allegheny County Airport
                (Pittsburgh International Airport)                            5.250%    01/01/2016    $      20,836
-------------------------------------------------------------------------------------------------------------------
     130,000    Allegheny County HDA (Catholic Health East)                   5.375     11/15/2022          135,478
-------------------------------------------------------------------------------------------------------------------
   5,000,000    Allegheny County HDA (Jefferson Health Services)              5.875     05/01/2026        5,208,750
-------------------------------------------------------------------------------------------------------------------
   3,150,000    Allegheny County HDA (Ohio Valley General Hospital)           5.125     04/01/2035        3,209,220
-------------------------------------------------------------------------------------------------------------------
      35,000    Allegheny County HDA
                (Pittsburgh Mercy Health System)                              5.625     08/15/2026           36,382
-------------------------------------------------------------------------------------------------------------------
     165,000    Allegheny County HDA
                (Presbyterian University Health System)                       5.375     12/01/2025          169,302
-------------------------------------------------------------------------------------------------------------------
      30,000    Allegheny County HDA (Presbyterian University Hospital)       5.625     04/01/2027           31,637
-------------------------------------------------------------------------------------------------------------------
   1,500,000    Allegheny County HDA (The Covenant at South Hills)            8.625     02/01/2021          984,465
-------------------------------------------------------------------------------------------------------------------
     180,000    Allegheny County HDA (The Covenant at South Hills)            8.750     02/01/2031          117,652
-------------------------------------------------------------------------------------------------------------------
     100,000    Allegheny County HDA
                (University of Pittsburgh Medical Center)                     5.350     12/01/2017          102,711
-------------------------------------------------------------------------------------------------------------------
     420,000    Allegheny County HDA
                (West Penn Allegheny Health System)                           9.250     11/15/2015          507,478
-------------------------------------------------------------------------------------------------------------------
   1,625,000    Allegheny County HDA
                (West Penn Allegheny Health System)                           9.250     11/15/2022        1,960,660
-------------------------------------------------------------------------------------------------------------------
  12,640,000    Allegheny County HDA
                (West Penn Allegheny Health System)                           9.250     11/15/2030       15,192,648
-------------------------------------------------------------------------------------------------------------------
     350,000    Allegheny County HDA RITES 1                                 17.024 2   11/15/2030          561,708
-------------------------------------------------------------------------------------------------------------------
   1,900,000    Allegheny County HDA RITES 1                                 17.024 2   11/15/2030        3,049,272
-------------------------------------------------------------------------------------------------------------------
     300,000    Allegheny County HEBA (Carnegie Mellon University)            5.450     03/01/2027          300,558
-------------------------------------------------------------------------------------------------------------------
   2,020,000    Allegheny County HEBA (Chatham College) 3                     5.750     11/15/2028        2,140,594
-------------------------------------------------------------------------------------------------------------------
   7,965,000    Allegheny County HEBA (Chatham College)                       5.750     11/15/2035        8,415,421
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Allegheny County HEBA (Chatham College) 3                     5.850     03/01/2022        1,049,740
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Allegheny County HEBA (Chatham College) 3                     5.950     03/01/2032        1,040,490
-------------------------------------------------------------------------------------------------------------------
      20,000    Allegheny County HEBA (Robert Morris College)                 6.200     02/15/2010           20,623
-------------------------------------------------------------------------------------------------------------------
   2,310,000    Allegheny County HEBA (Robert Morris College)                 6.250     02/15/2026        2,387,270
-------------------------------------------------------------------------------------------------------------------
      60,000    Allegheny County HEBA (Thiel College)                         5.375     11/15/2029           61,479
-------------------------------------------------------------------------------------------------------------------
   1,775,000    Allegheny County IDA
                (Airport Special Facilities/U S Airways) 1,3,4,5              8.875     03/01/2021           35,323
-------------------------------------------------------------------------------------------------------------------
      10,000    Allegheny County IDA (Coltec Industries)                      7.250     06/01/2008            9,889
-------------------------------------------------------------------------------------------------------------------
   1,145,000    Allegheny County IDA (Residential Resources)                  5.700     09/01/2012        1,181,422
-------------------------------------------------------------------------------------------------------------------
   4,845,000    Allegheny County IDA (Residential Resources)                  6.600     09/01/2031        5,147,134
-------------------------------------------------------------------------------------------------------------------
      40,000    Allegheny County IDA (The Bradley Center)                     6.400     05/01/2010           40,061
-------------------------------------------------------------------------------------------------------------------
      10,000    Allegheny County IDA (USX Corp.)                              5.500     12/01/2029           10,390
-------------------------------------------------------------------------------------------------------------------
     235,000    Allegheny County IDA (USX Corp.)                              5.600     09/01/2030          245,599
-------------------------------------------------------------------------------------------------------------------
     105,000    Allegheny County IDA (USX Corp.)                              6.100     01/15/2018          110,603
-------------------------------------------------------------------------------------------------------------------
      10,000    Allegheny County IDA (USX Corp.)                              6.100     07/15/2020           10,534


                  20 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$  3,520,000    Allegheny County IDA (USX Corp.) 3                            6.700%    12/01/2020    $   3,580,720
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Allegheny County Redevel. Authority (Pittsburgh Mills)        5.100     07/01/2014        1,037,250
-------------------------------------------------------------------------------------------------------------------
   4,000,000    Allegheny County Redevel. Authority (Pittsburgh Mills)        5.600     07/01/2023        4,173,560
-------------------------------------------------------------------------------------------------------------------
      65,000    Allegheny County Redevel. Authority (Robinson Mall) 3         6.875     11/01/2017           68,772
-------------------------------------------------------------------------------------------------------------------
       5,000    Allegheny County Residential Finance Authority                5.625     11/01/2023            5,012
-------------------------------------------------------------------------------------------------------------------
      35,000    Allegheny County Residential Finance Authority                5.950     11/01/2024           36,994
-------------------------------------------------------------------------------------------------------------------
      10,000    Allegheny County Residential Finance Authority                6.250     11/01/2016           10,344
-------------------------------------------------------------------------------------------------------------------
   8,000,000    Allegheny County Residential Finance Authority                7.000     11/01/2017        8,588,960
-------------------------------------------------------------------------------------------------------------------
      65,000    Allegheny County Residential Finance Authority                7.100     05/01/2024           65,098
-------------------------------------------------------------------------------------------------------------------
     485,000    Allegheny County Residential Finance Authority
                (Single Family)                                               5.150     11/01/2016          502,441
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Allegheny County Sanitation Authority                         5.000     12/01/2030        1,061,740
-------------------------------------------------------------------------------------------------------------------
   2,775,000    Allentown Area Hospital Authority
                (Sacred Heart Healthcare System)                              6.750     11/15/2014        2,883,780
-------------------------------------------------------------------------------------------------------------------
   3,290,000    Allentown Area Hospital Authority
                (Sacred Heart Healthcare System)                              6.750     11/15/2015        3,418,968
-------------------------------------------------------------------------------------------------------------------
     740,000    Beaver County IDA
                (Cleveland Electric Illuminating Company)                     7.750     07/15/2025          755,029
-------------------------------------------------------------------------------------------------------------------
     380,000    Beaver County IDA (J. Ray McDermott & Company)                6.800     02/01/2009          379,958
-------------------------------------------------------------------------------------------------------------------
     100,000    Beaver County IDA (Ohio Edison Company)                       5.450     09/15/2033          100,244
-------------------------------------------------------------------------------------------------------------------
     125,000    Beaver County IDA
                (Pennsylvania Power & Light Company) 3                        5.375     06/01/2028          131,069
-------------------------------------------------------------------------------------------------------------------
      65,000    Beaver County IDA
                (Pennsylvania Power & Light Company)                          5.450     09/15/2028           65,159
-------------------------------------------------------------------------------------------------------------------
      50,000    Beaver County IDA
                (Pennsylvania Power & Light Company)                          6.000     09/01/2028           51,124
-------------------------------------------------------------------------------------------------------------------
      85,000    Beaver County IDA (St. Joe Minerals Corp.)                    6.000     05/01/2007           87,542
-------------------------------------------------------------------------------------------------------------------
   2,180,000    Beaver County IDA (Toledo Edison Company)                     7.750     05/01/2020        2,253,728
-------------------------------------------------------------------------------------------------------------------
      35,000    Beaver County IDA (Toledo Edison Company)                     7.750     05/01/2020           36,184
-------------------------------------------------------------------------------------------------------------------
      50,000    Bedford County IDA (Brown Group)                              7.125     02/01/2009           50,003
-------------------------------------------------------------------------------------------------------------------
     375,000    Blair County IDA
                (The Village at Penn State Retirement Community)              6.050     01/01/2034          376,039
-------------------------------------------------------------------------------------------------------------------
   3,785,000    Blair County IDA
                (The Village at Penn State Retirement Community)              6.900     01/01/2022        4,025,310
-------------------------------------------------------------------------------------------------------------------
   6,835,000    Blair County IDA
                (The Village at Penn State Retirement Community)              7.000     01/01/2034        7,241,136
-------------------------------------------------------------------------------------------------------------------
      50,000    Blair County IDA
                (The Village at Penn State Retirement Community) 4,5         10.000     01/01/2012           25,100
-------------------------------------------------------------------------------------------------------------------
     140,000    Bradford County IDA (International Paper Company) 3           5.900     12/01/2019          143,125
-------------------------------------------------------------------------------------------------------------------
     500,000    Brighton Township Municipal Authority                         5.100     07/15/2022          501,050
-------------------------------------------------------------------------------------------------------------------
     800,000    Bucks County IDA (Chandler Hall Health Care Facility)         6.300     05/01/2029          820,232
-------------------------------------------------------------------------------------------------------------------
     240,000    Bucks County IDA (PA Suburban Water Company)                  5.550     09/01/2032          256,178


                  21 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$     15,000    Bucks County IDA (Pennswood Village)                          5.800%    10/01/2020    $      15,936
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Bucks County IDA (Pennswood Village) 3                        6.000     10/01/2027        1,071,270
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Bucks County IDA RITES 1                                     13.109 2   09/01/2032        2,539,320
-------------------------------------------------------------------------------------------------------------------
      20,000    Butler County Hospital Authority
                (Butler Memorial Hospital)                                    5.250     07/01/2016           20,035
-------------------------------------------------------------------------------------------------------------------
     480,000    Butler County IDA (Greenview Gardens Apartments)              6.000     07/01/2023          488,405
-------------------------------------------------------------------------------------------------------------------
     880,000    Butler County IDA (Greenview Gardens Apartments)              6.250     07/01/2033          903,162
-------------------------------------------------------------------------------------------------------------------
      10,000    Cambria County IDA (PA Electric Company)                      6.050     11/01/2025           10,271
-------------------------------------------------------------------------------------------------------------------
      25,000    Central Greene School District                                5.250     02/15/2024           25,289
-------------------------------------------------------------------------------------------------------------------
   7,870,000    Chester County H&EFA (Chester County Hospital)                5.875     07/01/2016        8,142,932
-------------------------------------------------------------------------------------------------------------------
      95,000    Chester County H&EFA (Devereaux Foundation)                   6.000     11/01/2019          101,230
-------------------------------------------------------------------------------------------------------------------
      25,000    Chester County H&EFA (Immaculata College)                     5.300     10/15/2011           25,007
-------------------------------------------------------------------------------------------------------------------
   7,500,000    Chester County H&EFA (Jenners Pond) 3                         7.625     07/01/2034        8,330,400
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Chester County IDA (Collegium Charter School) 3               5.500     04/15/2031        2,127,220
-------------------------------------------------------------------------------------------------------------------
   3,730,000    Columbia County Hospital Authority
                (Bloomsburg Hospital Obligated Group)                         5.800     06/01/2019        3,505,976
-------------------------------------------------------------------------------------------------------------------
      35,000    Conrad Weiser Area School District                            5.200     12/15/2010           35,712
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Conrad Weiser Area School District, Series AA                 5.250     12/15/2011        1,020,770
-------------------------------------------------------------------------------------------------------------------
     750,000    Crawford County Hospital Authority
                (Wesbury United Methodist Community)                          6.125     08/15/2019          779,723
-------------------------------------------------------------------------------------------------------------------
     145,000    Cumberland County Municipal Authority
                (Presbyterian Homes)                                          6.000     12/01/2017          147,456
-------------------------------------------------------------------------------------------------------------------
     370,000    Cumberland County Municipal Authority
                (Presbyterian Homes)                                          6.000     12/01/2026          376,986
-------------------------------------------------------------------------------------------------------------------
     215,000    Cumberland County Municipal Authority
                (Presbyterian Homes)                                          6.000     12/01/2026          220,764
-------------------------------------------------------------------------------------------------------------------
   6,000,000    Cumberland County Municipal Authority
                (Wesley Affiliated Services)                                  7.250     01/01/2035        6,587,220
-------------------------------------------------------------------------------------------------------------------
     175,000    Delaware County Authority
                (Crozer-Chester Medical Center)                               5.300     12/15/2020          176,304
-------------------------------------------------------------------------------------------------------------------
     120,000    Delaware County Authority
                (MHSSPA/MAS/MHH/MHP/MCMCSPA Obligated Group)                  5.375     11/15/2023          127,655
-------------------------------------------------------------------------------------------------------------------
   2,500,000    Delaware County Authority (Neumann College) 3                 6.000     10/01/2031        2,629,275
-------------------------------------------------------------------------------------------------------------------
      20,000    Delaware County Authority (Riddle Village)                    7.000     06/01/2021           20,637
-------------------------------------------------------------------------------------------------------------------
     750,000    Delaware County Authority (White Horse Village)               7.625     07/01/2030          811,493
-------------------------------------------------------------------------------------------------------------------
      15,000    Delaware County Hospital Authority
                (CCMC/CKHS/DCMH Obligated Group)                              5.375     12/01/2018           15,537
-------------------------------------------------------------------------------------------------------------------
      10,000    Delaware County IDA (American Ref-Fuel Company)               6.100     07/01/2013           10,551
-------------------------------------------------------------------------------------------------------------------
      20,000    Delaware County IDA (American Ref-Fuel Company)               6.200     07/01/2019           20,839
-------------------------------------------------------------------------------------------------------------------
     100,000    Delaware County IDA
                (Philadelphia Suburban Water Company)                         6.350     08/15/2025          102,158


                  22 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$ 10,000,000    Delaware County IDA Water Facilities
                (Aqua Pennsylvania)                                           5.000%    11/01/2037    $  10,369,800
-------------------------------------------------------------------------------------------------------------------
   9,900,000    Delaware County IDA Water Facilities
                (Aqua Pennsylvania)                                           5.000     11/01/2038       10,265,310
-------------------------------------------------------------------------------------------------------------------
   2,250,000    Delaware County IDA Water Facilities
                (Aqua Pennsylvania) RITES 1                                  11.048 2   11/01/2038        2,582,100
-------------------------------------------------------------------------------------------------------------------
     175,000    Delaware River Port Authority PA/NJ                           5.400     01/01/2015          180,247
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Delaware River Port Authority PA/NJ 3                         5.400     01/01/2016        2,059,960
-------------------------------------------------------------------------------------------------------------------
   6,095,000    Delaware River Port Authority PA/NJ 3                         5.500     01/01/2026        6,282,909
-------------------------------------------------------------------------------------------------------------------
     245,000    Eastern York County Sewer Authority                           6.000     09/15/2016          249,131
-------------------------------------------------------------------------------------------------------------------
     270,000    Eastern York County Sewer Authority                           6.000     09/15/2019          273,839
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Erie County Convention Center Authority 3                     5.000     01/15/2036        1,051,860
-------------------------------------------------------------------------------------------------------------------
     170,000    Erie County Hospital Authority (St. Mary's Home of Erie)      6.000     08/15/2029          184,659
-------------------------------------------------------------------------------------------------------------------
      50,000    Erie-Western PA Port Authority                                6.875     06/15/2016           52,198
-------------------------------------------------------------------------------------------------------------------
       5,000    Exeter Township Sewer Authority                               6.500     04/01/2008            5,023
-------------------------------------------------------------------------------------------------------------------
      80,000    Falls Township Hospital Authority
                (Delaware Valley Medical Center)                              7.000     08/01/2022           81,862
-------------------------------------------------------------------------------------------------------------------
      45,000    Ferndale Area School District GO                              6.750     07/15/2009           45,147
-------------------------------------------------------------------------------------------------------------------
      50,000    Horizon Hospital System Authority
                (Horizon Hospital Systems)                                    6.350     05/15/2026           51,772
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Horsham Industrial & Commercial Devel. Authority
                (GF/Pennsylvania Property)                                    8.375     09/01/2024          957,970
-------------------------------------------------------------------------------------------------------------------
      30,000    Indiana County IDA Pollution Control
                (PSEG Power LLC)                                              5.850     06/01/2027           31,627
-------------------------------------------------------------------------------------------------------------------
     250,000    Jeannette Health Services Authority
                (Jeannette District Memorial Hospital)                        6.000     11/01/2018          247,723
-------------------------------------------------------------------------------------------------------------------
      25,000    Lancaster County Hospital Authority
                (Saint Anne's Home for the Aged)                              6.500     04/01/2015           25,002
-------------------------------------------------------------------------------------------------------------------
      15,000    Lancaster County IDA (Garden Spot Village)                    7.600     05/01/2022           16,575
-------------------------------------------------------------------------------------------------------------------
   2,300,000    Lancaster County IDA (Garden Spot Village)                    7.625     05/01/2031        2,525,538
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Langhorne Manor Boro Higher Education Authority
                (Lower Bucks Hospital)                                        7.350     07/01/2022        1,000,120
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Langhorne Manor Boro Higher Education Authority
                (Philadelphia Biblical University)                            5.200     04/01/2020          992,930
-------------------------------------------------------------------------------------------------------------------
     575,000    Langhorne Manor Boro Higher Education Authority
                (Philadelphia Biblical University)                            5.500     04/01/2025          576,018
-------------------------------------------------------------------------------------------------------------------
      35,000    Lawrence County IDA (Pennsylvania Power & Light)              5.400     09/15/2017           35,315
-------------------------------------------------------------------------------------------------------------------
     105,000    Lawrence County IDA (Shenango Presbyterian Center)            7.000     11/15/2016          105,569
-------------------------------------------------------------------------------------------------------------------
   5,085,000    Lawrence County IDA (Shenango Presbyterian Center)            7.500     11/15/2031        5,230,889
-------------------------------------------------------------------------------------------------------------------
     450,000    Lebanon County Health Facilities Authority
                (Pleasant View Retirement Community)                          6.625     12/15/2029          467,843
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Lehigh County GPA (Bible Fellowship Church Home)              6.000     12/15/2023        1,005,260


                  23 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$  1,060,000    Lehigh County GPA (Bible Fellowship Church Home)              7.625%    11/01/2021    $   1,176,685
-------------------------------------------------------------------------------------------------------------------
     750,000    Lehigh County GPA (Bible Fellowship Church Home)              7.750     11/01/2033          825,893
-------------------------------------------------------------------------------------------------------------------
     115,000    Lehigh County GPA (Cedar Crest College)                       6.600     04/01/2010          117,072
-------------------------------------------------------------------------------------------------------------------
     100,000    Lehigh County GPA (Cedar Crest College)                       6.650     04/01/2017          103,209
-------------------------------------------------------------------------------------------------------------------
      60,000    Lehigh County GPA (Cedar Crest College)                       6.700     04/01/2026           62,147
-------------------------------------------------------------------------------------------------------------------
   1,485,000    Lehigh County GPA (Kidspeace Obligated Group)                 5.800     11/01/2012        1,454,780
-------------------------------------------------------------------------------------------------------------------
   1,265,000    Lehigh County GPA (Kidspeace Obligated Group) 3               5.800     11/01/2012        1,360,773
-------------------------------------------------------------------------------------------------------------------
   8,155,000    Lehigh County GPA (Kidspeace Obligated Group)                 6.000     11/01/2018        7,972,165
-------------------------------------------------------------------------------------------------------------------
   1,100,000    Lehigh County GPA (Kidspeace Obligated Group)                 6.000     11/01/2023        1,058,607
-------------------------------------------------------------------------------------------------------------------
     145,000    Lehigh County GPA (Kidspeace Obligated Group)                 6.000     11/01/2023          154,084
-------------------------------------------------------------------------------------------------------------------
     200,000    Lehigh County IDA (Lifepath)                                  5.850     06/01/2008          198,394
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Lehigh County IDA
                (PA Power & Light Company) RITES 1,3                         13.702 2   02/15/2027        1,136,260
-------------------------------------------------------------------------------------------------------------------
   4,335,000    Lehigh County IDA Pollution Control RITES 1,3                10.117 2   02/15/2027        4,728,791
-------------------------------------------------------------------------------------------------------------------
     650,000    Lehigh Northampton Airport Authority
                (Lehigh Valley International Airport)                         5.000     01/01/2021          678,009
-------------------------------------------------------------------------------------------------------------------
     750,000    Lehigh Northampton Airport Authority
                (Lehigh Valley International Airport)                         5.000     01/01/2023          779,393
-------------------------------------------------------------------------------------------------------------------
   3,160,000    Luzerne County IDA ROLs 1                                    12.335 2   09/01/2034        3,684,370
-------------------------------------------------------------------------------------------------------------------
      10,000    Lycoming County Authority (Muncy Valley Hospital)             5.500     11/15/2022           10,266
-------------------------------------------------------------------------------------------------------------------
      20,000    Lycoming County Hospital Authority
                (WH/NCPHS Obligated Group)                                    5.250     11/15/2015           20,501
-------------------------------------------------------------------------------------------------------------------
     975,000    Lycoming County Recreation Authority 3                        5.000     12/15/2027          996,226
-------------------------------------------------------------------------------------------------------------------
      55,000    McKean County Hospital Authority (Bradford Hospital)          6.100     10/01/2020           55,900
-------------------------------------------------------------------------------------------------------------------
     100,000    Mifflin County Hospital Authority (Lewiston Hospital)         6.200     07/01/2030          111,045
-------------------------------------------------------------------------------------------------------------------
      25,000    Montgomery County HEHA (Foulkeways at Gwynedd)                6.100     11/15/2008           25,121
-------------------------------------------------------------------------------------------------------------------
     700,000    Montgomery County HEHA
                (Philadelphia Geriatric Center)                               7.375     12/01/2030          747,628
-------------------------------------------------------------------------------------------------------------------
      20,000    Montgomery County HEHA (Waverly Heights)                      6.000     01/01/2008           20,031
-------------------------------------------------------------------------------------------------------------------
   1,345,000    Montgomery County IDA
                (ACTS/BPE Obligated Group) 3                                  5.875     11/15/2022        1,393,030
-------------------------------------------------------------------------------------------------------------------
   1,750,000    Montgomery County IDA (Meadowood Corp.)                       6.250     12/01/2017        1,821,663
-------------------------------------------------------------------------------------------------------------------
      20,000    Montgomery County IDA (Meadowood Corp.)                       7.400     12/01/2020           20,685
-------------------------------------------------------------------------------------------------------------------
   2,500,000    Montgomery County IDA
                (Whitemarsh Continued Care)                                   6.250     02/01/2035        2,681,350
-------------------------------------------------------------------------------------------------------------------
   3,840,000    Montgomery County IDA (Wordsworth Academy)                    8.000     09/01/2024        3,845,875
-------------------------------------------------------------------------------------------------------------------
     145,000    Montgomery County Redevel. Authority                          5.600     01/15/2024          148,321
-------------------------------------------------------------------------------------------------------------------
      15,000    Montgomery County Redevel. Authority (Pheasant Run)           5.600     01/15/2024           15,344
-------------------------------------------------------------------------------------------------------------------
      50,000    Moon IDA (Ellis School)                                       5.650     03/01/2020           52,808
-------------------------------------------------------------------------------------------------------------------
      65,000    Moon Township Municipal Authority                             5.500     12/01/2019           65,554
-------------------------------------------------------------------------------------------------------------------
     220,000    Muncy Boro Municipal Utility Authority                        5.000     07/01/2020          223,766


                  24 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$    600,000    Myerstown Water Authority                                     5.000%    11/15/2018    $     600,966
-------------------------------------------------------------------------------------------------------------------
      65,000    New Castle GO, Series B                                       5.000     11/01/2018           65,308
-------------------------------------------------------------------------------------------------------------------
   2,860,000    New Morgan IDA (Browning-Ferris Industries)                   6.500     04/01/2019        2,860,715
-------------------------------------------------------------------------------------------------------------------
      40,000    New Wilmington Municipal Authority
                (Westminster College)                                         5.300     03/01/2018           40,760
-------------------------------------------------------------------------------------------------------------------
     810,000    North Penn HHEA (Maple Village)                               7.800     10/01/2024          826,621
-------------------------------------------------------------------------------------------------------------------
   1,205,000    North Penn HHEA (Maple Village)                               8.000     10/01/2032        1,211,278
-------------------------------------------------------------------------------------------------------------------
     155,000    North Wales Water Authority                                   5.250     11/01/2009          155,972
-------------------------------------------------------------------------------------------------------------------
     190,000    Northampton County IDA
                (Metropolitan Edison Company)                                 6.100     07/15/2021          194,273
-------------------------------------------------------------------------------------------------------------------
     170,000    Northampton County IDA (Moravian Hall Square)                 5.350     07/01/2010          172,562
-------------------------------------------------------------------------------------------------------------------
      40,000    Northampton County IDA (Moravian Hall Square)                 5.700     07/01/2020           40,847
-------------------------------------------------------------------------------------------------------------------
     465,000    Northeastern PA Hospital &
                Education Authority (Wilkes University)                       5.625     10/01/2018          475,132
-------------------------------------------------------------------------------------------------------------------
      20,000    Northern Lebanon School District                              5.450     04/01/2018           20,088
-------------------------------------------------------------------------------------------------------------------
     830,000    Northumberland County IDA (Aqua Pennsylvania)                 5.050     10/01/2039          861,606
-------------------------------------------------------------------------------------------------------------------
     445,000    Northumberland County IDA (NHS Youth Services)                5.500     02/15/2033          466,534
-------------------------------------------------------------------------------------------------------------------
   1,620,000    Northumberland County IDA (NHS Youth Services)                7.500     02/15/2029        1,677,559
-------------------------------------------------------------------------------------------------------------------
   3,955,000    Northumberland County IDA (NHS Youth Services)                7.750     02/15/2029        4,150,377
-------------------------------------------------------------------------------------------------------------------
      35,000    PA Convention Center Authority, Series A                      6.750     09/01/2019           35,791
-------------------------------------------------------------------------------------------------------------------
   1,400,000    PA Convention Center Authority, Series A 3                    6.750     09/01/2019        1,453,508
-------------------------------------------------------------------------------------------------------------------
   2,450,000    PA Convention Center Authority, Series A 3                    6.750     09/01/2019        2,543,639
-------------------------------------------------------------------------------------------------------------------
   9,000,000    PA EDFA (30th St. Garage)                                     5.875     06/01/2033        9,642,690
-------------------------------------------------------------------------------------------------------------------
     315,000    PA EDFA (Amtrak)                                              6.000     11/01/2005          316,065
-------------------------------------------------------------------------------------------------------------------
     250,000    PA EDFA (Amtrak)                                              6.125     11/01/2021          268,108
-------------------------------------------------------------------------------------------------------------------
   5,005,000    PA EDFA (Amtrak) 3                                            6.250     11/01/2031        5,411,706
-------------------------------------------------------------------------------------------------------------------
     880,000    PA EDFA (Amtrak)                                              6.375     11/01/2041          954,448
-------------------------------------------------------------------------------------------------------------------
   5,000,000    PA EDFA (Colver)                                              5.000     12/01/2014        5,380,950
-------------------------------------------------------------------------------------------------------------------
   3,700,000    PA EDFA (Colver)                                              5.000     12/01/2015        3,977,167
-------------------------------------------------------------------------------------------------------------------
   2,000,000    PA EDFA (Colver)                                              7.050     12/01/2010        2,043,040
-------------------------------------------------------------------------------------------------------------------
   1,500,000    PA EDFA (Colver)                                              7.125     12/01/2015        1,532,325
-------------------------------------------------------------------------------------------------------------------
   9,900,000    PA EDFA (Colver)                                              7.150     12/01/2018       10,113,444
-------------------------------------------------------------------------------------------------------------------
  14,700,000    PA EDFA (National Gypsum Company) 3                           6.125     11/02/2027       15,675,639
-------------------------------------------------------------------------------------------------------------------
   5,000,000    PA EDFA (National Gypsum Company) 3                           6.250     11/01/2027        5,380,350
-------------------------------------------------------------------------------------------------------------------
   7,000,000    PA EDFA (Northampton Generating)                              6.400     01/01/2009        7,058,100
-------------------------------------------------------------------------------------------------------------------
   4,950,000    PA EDFA (Northampton Generating)                              6.500     01/01/2013        5,025,240
-------------------------------------------------------------------------------------------------------------------
   6,000,000    PA EDFA (Northampton Generating) 3                            6.600     01/01/2019        6,088,140
-------------------------------------------------------------------------------------------------------------------
   4,310,000    PA EDFA (Northwestern Human Services)                         5.250     06/01/2014        4,249,832
-------------------------------------------------------------------------------------------------------------------
   3,000,000    PA EDFA (Northwestern Human Services)                         5.250     06/01/2028        2,582,130
-------------------------------------------------------------------------------------------------------------------
   6,500,000    PA EDFA (Reliant Energy)                                      6.750     12/01/2036        6,995,300


                  25 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$  3,000,000    PA EDFA (Reliant Energy)                                      6.750%    12/01/2036    $   3,228,840
-------------------------------------------------------------------------------------------------------------------
   5,000,000    PA EDFA (Reliant Energy) RITES 1,3                           10.163 2   12/01/2036        5,762,050
-------------------------------------------------------------------------------------------------------------------
   2,500,000    PA EDFA ROLs 1                                               10.897 2   12/01/2018        2,696,450
-------------------------------------------------------------------------------------------------------------------
      65,000    PA HEFA (Allegheny Delaware Valley Obligated Group)           5.875     11/15/2021           68,533
-------------------------------------------------------------------------------------------------------------------
     155,000    PA HEFA (Allegheny General Hospital) 1                        7.125     09/01/2007          155,243
-------------------------------------------------------------------------------------------------------------------
      40,000    PA HEFA (Allegheny General Hospital) 1                        7.250     09/01/2017           40,068
-------------------------------------------------------------------------------------------------------------------
   1,500,000    PA HEFA (CA University of PA Student Association)             6.750     09/01/2020        1,610,100
-------------------------------------------------------------------------------------------------------------------
     110,000    PA HEFA (CA University of PA Student Association)             6.750     09/01/2032          115,702
-------------------------------------------------------------------------------------------------------------------
      30,000    PA HEFA (CA University of PA Student Association)             6.800     09/01/2025           31,784
-------------------------------------------------------------------------------------------------------------------
   1,450,000    PA HEFA (College of Science & Agriculture)                    5.350     04/15/2028        1,453,611
-------------------------------------------------------------------------------------------------------------------
   1,460,000    PA HEFA (Delaware Valley College of Science & Agriculture)    5.650     04/15/2025        1,504,092
-------------------------------------------------------------------------------------------------------------------
     815,000    PA HEFA (Delaware Valley College of Science & Agriculture)    5.750     04/15/2029          839,287
-------------------------------------------------------------------------------------------------------------------
     170,000    PA HEFA (Delaware Valley College of Science & Agriculture)    5.750     04/15/2034          174,692
-------------------------------------------------------------------------------------------------------------------
   3,210,000    PA HEFA (Delaware Valley College of Science & Agriculture)    5.800     04/15/2030        3,317,150
-------------------------------------------------------------------------------------------------------------------
   3,385,000    PA HEFA (Delaware Valley College of Science & Agriculture)    5.800     04/15/2033        3,486,076
-------------------------------------------------------------------------------------------------------------------
   1,820,000    PA HEFA (Geneva College) 3                                    5.375     04/01/2023        1,890,197
-------------------------------------------------------------------------------------------------------------------
     860,000    PA HEFA (Geneva College)                                      5.450     04/01/2018          901,994
-------------------------------------------------------------------------------------------------------------------
   1,000,000    PA HEFA (Geneva College) 3                                    6.125     04/01/2022        1,069,800
-------------------------------------------------------------------------------------------------------------------
     735,000    PA HEFA (Lycoming College)                                    5.250     11/01/2027          780,879
-------------------------------------------------------------------------------------------------------------------
   3,000,000    PA HEFA (MCP/HUHS/AUS Obligated Group)                        5.875     11/15/2021        3,166,980
-------------------------------------------------------------------------------------------------------------------
       5,000    PA HEFA (Medical College of
                Pennsylvania/Allegheny United Hospitals)                      5.875     11/15/2016            5,272
-------------------------------------------------------------------------------------------------------------------
   2,200,000    PA HEFA (Philadelphia University) 3                           5.250     06/01/2032        2,216,082
-------------------------------------------------------------------------------------------------------------------
     250,000    PA HEFA (Philadelphia University)                             6.000     06/01/2029          273,453
-------------------------------------------------------------------------------------------------------------------
      50,000    PA HEFA (Philadelphia University)                             6.100     06/01/2030           54,909
-------------------------------------------------------------------------------------------------------------------
     100,000    PA HEFA (Saint Francis University)                            5.750     11/01/2023          104,224
-------------------------------------------------------------------------------------------------------------------
   2,300,000    PA HEFA (Slippery Rock University Foundation)                 5.000     07/01/2023        2,441,266
-------------------------------------------------------------------------------------------------------------------
   3,000,000    PA HEFA (Slippery Rock University Foundation)                 5.000     07/01/2037        3,142,140
-------------------------------------------------------------------------------------------------------------------
   3,925,000    PA HEFA (St. Francis University) 3                            6.250     11/01/2018        4,268,398
-------------------------------------------------------------------------------------------------------------------
      40,000    PA HEFA (St. Joseph University)                               5.875     07/15/2025           40,894
-------------------------------------------------------------------------------------------------------------------
      35,000    PA HEFA (St. Joseph University)                               5.875     07/15/2025           35,782
-------------------------------------------------------------------------------------------------------------------
       5,000    PA HEFA (Temple University)                                   7.400     10/01/2010            5,019
-------------------------------------------------------------------------------------------------------------------
      10,000    PA HEFA (University of PA Presbyterian Medical Center)        5.875     01/01/2015           10,215
-------------------------------------------------------------------------------------------------------------------
      25,000    PA HEFA (University of the Arts)                              5.750     03/15/2030           26,912
-------------------------------------------------------------------------------------------------------------------
     750,000    PA HEFA (Widener University)                                  5.000     07/15/2026          775,260
-------------------------------------------------------------------------------------------------------------------
      65,000    PA HFA (Multifamily FHA Mtg.)                                 8.200     07/01/2024           66,136


                  26 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$  2,500,000    PA HFA (Single Family Mtg.) RITES 1                          11.319% 2  10/01/2020    $   2,861,850
-------------------------------------------------------------------------------------------------------------------
   2,500,000    PA HFA (Single Family Mtg.) RITES 1                          11.519 2   10/01/2022        2,846,550
-------------------------------------------------------------------------------------------------------------------
   2,000,000    PA HFA (Single Family Mtg.) RITES 1                          12.013 2   04/01/2021        2,260,560
-------------------------------------------------------------------------------------------------------------------
   2,850,000    PA HFA (Single Family Mtg.) RITES 1                          12.319 2   10/01/2022        3,335,868
-------------------------------------------------------------------------------------------------------------------
      35,000    PA HFA (Single Family Mtg.), Series 47                        5.700     10/01/2016           35,756
-------------------------------------------------------------------------------------------------------------------
   1,230,000    PA HFA (Single Family Mtg.), Series 47 3                      5.700     10/01/2026        1,260,258
-------------------------------------------------------------------------------------------------------------------
   2,640,000    PA HFA (Single Family Mtg.), Series 59A 3                     5.750     10/01/2023        2,731,925
-------------------------------------------------------------------------------------------------------------------
   2,450,000    PA HFA (Single Family Mtg.), Series 59A                       5.800     10/01/2029        2,531,953
-------------------------------------------------------------------------------------------------------------------
      55,000    PA HFA (Single Family Mtg.), Series 60A                       5.850     10/01/2027           56,637
-------------------------------------------------------------------------------------------------------------------
   9,180,000    PA HFA (Single Family Mtg.), Series 61A                       5.450     10/01/2021        9,518,375
-------------------------------------------------------------------------------------------------------------------
      85,000    PA HFA (Single Family Mtg.), Series 61A                       5.500     04/01/2029           87,951
-------------------------------------------------------------------------------------------------------------------
     195,000    PA HFA (Single Family Mtg.), Series 63A                       0.000 6   04/01/2030           51,400
-------------------------------------------------------------------------------------------------------------------
      50,000    PA HFA (Single Family Mtg.), Series 66A                       5.650     04/01/2029           52,043
-------------------------------------------------------------------------------------------------------------------
      85,000    PA HFA (Single Family Mtg.), Series 67A                       5.900     10/01/2030           88,618
-------------------------------------------------------------------------------------------------------------------
   4,740,000    PA HFA (Single Family Mtg.), Series 70A                       5.800     04/01/2027        4,959,083
-------------------------------------------------------------------------------------------------------------------
      75,000    PA HFA (Single Family Mtg.)                                   5.450     10/01/2032           77,844
-------------------------------------------------------------------------------------------------------------------
   2,365,000    PA Infrastructure Investment Authority                        5.625     09/01/2014        2,480,814
-------------------------------------------------------------------------------------------------------------------
      35,000    Patterson Township Municipal Authority                        5.250     04/15/2007           35,051
-------------------------------------------------------------------------------------------------------------------
      10,000    Patterson Township Municipal Authority                        5.500     04/15/2011           10,013
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Philadelphia Airport Authority for Industrial
                Devel. RITES 1                                               12.312 2   07/01/2022        2,595,320
-------------------------------------------------------------------------------------------------------------------
      20,000    Philadelphia Airport System, Series B                         5.400     06/15/2027           20,724
-------------------------------------------------------------------------------------------------------------------
   1,470,000    Philadelphia Authority for Industrial Devel.
                (Aero Philadelphia)                                           5.500     01/01/2024        1,465,208
-------------------------------------------------------------------------------------------------------------------
     135,000    Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                        5.125     07/01/2028          138,706
-------------------------------------------------------------------------------------------------------------------
      40,000    Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                        5.300     07/01/2017           41,928
-------------------------------------------------------------------------------------------------------------------
   3,000,000    Philadelphia Authority for Industrial Devel.
                (Presbyterian Homes Germantown)                               5.625     07/01/2035        2,989,500
-------------------------------------------------------------------------------------------------------------------
   1,400,000    Philadelphia Authority for Industrial Devel.
                Senior Living (Arbor House)                                   6.100     07/01/2033        1,425,354
-------------------------------------------------------------------------------------------------------------------
   1,240,000    Philadelphia Authority for Industrial Devel.
                Senior Living (Miriam and Robert M. Rieder House)             6.100     07/01/2033        1,262,456
-------------------------------------------------------------------------------------------------------------------
   1,160,000    Philadelphia Authority for Industrial Devel.
                Senior Living (Robert Saligman House)                         6.100     07/01/2033        1,181,008
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Philadelphia Gas Works                                        5.250     08/01/2021        1,083,910
-------------------------------------------------------------------------------------------------------------------
      15,000    Philadelphia Gas Works                                        5.250     08/01/2024           15,177
-------------------------------------------------------------------------------------------------------------------
   1,780,000    Philadelphia Gas Works RITES 1                               11.478 2   08/01/2031        2,087,976
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Philadelphia Gas Works RITES 1                               11.840 2   08/01/2021        2,622,120
-------------------------------------------------------------------------------------------------------------------
     205,000    Philadelphia GO                                               5.000     03/15/2028          211,693


                  27 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$  1,210,000    Philadelphia H&HEFA
                (Centralized Comprehensive Human Services)                    7.250%    01/01/2021    $   1,299,383
-------------------------------------------------------------------------------------------------------------------
   1,785,000    Philadelphia H&HEFA (Jeanes Health System) 3                  6.600     07/01/2010        1,961,251
-------------------------------------------------------------------------------------------------------------------
   2,380,000    Philadelphia H&HEFA (Philadelphia Protestant Home)            6.500     07/01/2027        2,406,727
-------------------------------------------------------------------------------------------------------------------
      10,000    Philadelphia H&HEFA (Temple University Hospital)              5.500     11/15/2027           10,531
-------------------------------------------------------------------------------------------------------------------
      25,000    Philadelphia H&HEFA (Temple University Hospital)              5.500     11/15/2027           25,136
-------------------------------------------------------------------------------------------------------------------
      35,000    Philadelphia H&HEFA (Temple University Hospital)              5.875     11/15/2023           35,519
-------------------------------------------------------------------------------------------------------------------
      10,000    Philadelphia H&HEFA (Temple University Hospital)              6.500     11/15/2008           10,554
-------------------------------------------------------------------------------------------------------------------
   3,675,000    Philadelphia H&HEFA (Temple University Hospital)              6.625     11/15/2023        3,726,818
-------------------------------------------------------------------------------------------------------------------
   3,870,000    Philadelphia IDA (Air Cargo)                                  7.500     01/01/2025        4,045,698
-------------------------------------------------------------------------------------------------------------------
      90,000    Philadelphia IDA (Baker's Bay Nursing Home Associates)        5.750     08/01/2023           90,639
-------------------------------------------------------------------------------------------------------------------
   1,150,000    Philadelphia IDA (Baptist Home of Philadelphia)               5.500     11/15/2018        1,152,300
-------------------------------------------------------------------------------------------------------------------
     326,000    Philadelphia IDA (Baptist Home of Philadelphia)               5.600     11/15/2028          321,586
-------------------------------------------------------------------------------------------------------------------
     450,000    Philadelphia IDA (Cathedral Village)                          6.750     04/01/2023          491,882
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Philadelphia IDA (Cathedral Village)                          6.875     04/01/2034        1,084,430
-------------------------------------------------------------------------------------------------------------------
   2,750,000    Philadelphia IDA (First Mtg.-CPAP)                            6.125     04/01/2019        2,155,038
-------------------------------------------------------------------------------------------------------------------
   1,330,000    Philadelphia IDA
                (International Educational & Community Project) 3             5.875     06/01/2022        1,441,853
-------------------------------------------------------------------------------------------------------------------
      25,000    Philadelphia IDA (The Franklin Institute)                     5.200     06/15/2018           25,305
-------------------------------------------------------------------------------------------------------------------
   3,425,000    Philadelphia IDA RITES 1                                     11.488 2   10/01/2026        4,310,431
-------------------------------------------------------------------------------------------------------------------
     195,000    Philadelphia Redevel. Authority (Multifamily Hsg.)            5.450     02/01/2023          199,844
-------------------------------------------------------------------------------------------------------------------
   2,580,000    Philadelphia Redevel. Authority (Pavilion Apartments) 3       6.000     10/01/2023        2,593,803
-------------------------------------------------------------------------------------------------------------------
   4,100,000    Philadelphia Redevel. Authority (Pavilion Apartments) 3       6.250     10/01/2032        4,140,016
-------------------------------------------------------------------------------------------------------------------
   2,250,000    Philadelphia Redevel. Authority ROLs 1                       12.538 2   04/15/2028        2,748,960
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Philadelphia School District GO RITES 1                      13.492 2   08/01/2022        3,033,240
-------------------------------------------------------------------------------------------------------------------
   3,000,000    Philadelphia Water & Wastewater                               5.000     07/01/2035        3,166,830
-------------------------------------------------------------------------------------------------------------------
      60,000    Pittsburgh Urban Redevel. Authority                           5.600     04/01/2020           61,763
-------------------------------------------------------------------------------------------------------------------
      30,000    Pittsburgh Urban Redevel. Authority
                (Home Improvement Loans), Series A                            5.650     08/01/2015           30,092
-------------------------------------------------------------------------------------------------------------------
      20,000    Pittsburgh Urban Redevel. Authority (Oliver Garage)           5.450     06/01/2028           21,332
-------------------------------------------------------------------------------------------------------------------
      25,000    Pittsburgh Urban Redevel. Authority Mtg., Series A            5.650     10/01/2024           25,414
-------------------------------------------------------------------------------------------------------------------
      25,000    Pittsburgh Urban Redevel. Authority Mtg., Series A            5.650     10/01/2024           25,519
-------------------------------------------------------------------------------------------------------------------
     140,000    Pittsburgh Urban Redevel. Authority Mtg., Series A            6.050     10/01/2026          143,861
-------------------------------------------------------------------------------------------------------------------
      40,000    Pittsburgh Urban Redevel. Authority Mtg., Series A            7.250     02/01/2024           40,054
-------------------------------------------------------------------------------------------------------------------
      10,000    Pittsburgh Urban Redevel. Authority Mtg., Series C            5.700     04/01/2030           10,268
-------------------------------------------------------------------------------------------------------------------
     535,000    Pittsburgh Urban Redevel. Authority Mtg., Series C            5.950     10/01/2029          556,106
-------------------------------------------------------------------------------------------------------------------
      25,000    Pittsburgh Urban Redevel. Authority Mtg., Series C            7.125     08/01/2013           25,032
-------------------------------------------------------------------------------------------------------------------
   4,250,000    Pittsburgh Water & Sewer Authority                            5.000     09/01/2029        4,493,058
-------------------------------------------------------------------------------------------------------------------
   2,250,000    Pittsburgh Water & Sewer Authority                            5.000     09/01/2033        2,371,140


                  28 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
-------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA Continued
$    100,000    Potter County Hospital Authority
                (Charles Cole Memorial Hospital)                              6.050%    08/01/2024    $     104,677
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Pottsville Hospital Authority
                (Pottsville Hospital & Warne Clinic)                          5.500     07/01/2018          999,950
-------------------------------------------------------------------------------------------------------------------
   4,170,000    Pottsville Hospital Authority
                (Pottsville Hospital & Warne Clinic)                          5.625     07/01/2024        4,119,626
-------------------------------------------------------------------------------------------------------------------
   2,000,000    Sayre Health Care Facilities (Guthrie Healthcare System)      7.125     12/01/2031        2,378,740
-------------------------------------------------------------------------------------------------------------------
      10,000    Scranton Parking Authority                                    7.000     09/15/2009           10,034
-------------------------------------------------------------------------------------------------------------------
      35,000    Snyder County Higher Education Authority
                (Susquehanna University)                                      5.000     01/01/2028           35,049
-------------------------------------------------------------------------------------------------------------------
      30,000    Somerset County Hospital Authority
                (Somerset Community Hospital)                                 5.375     03/01/2017           31,059
-------------------------------------------------------------------------------------------------------------------
   3,250,000    St. Mary Hospital Authority (Catholic Health East)            5.375     11/15/2034        3,412,923
-------------------------------------------------------------------------------------------------------------------
      95,000    St. Mary Hospital Authority (Catholic Health Initiatives)     5.000     12/01/2028           99,971
-------------------------------------------------------------------------------------------------------------------
      50,000    St. Mary Hospital Authority (Franciscan Health)               7.000     06/15/2015           51,608
-------------------------------------------------------------------------------------------------------------------
   1,000,000    Susquehanna Area Regional Airport Authority
                (Aero Harrisburg)                                             5.500     01/01/2024          925,670
-------------------------------------------------------------------------------------------------------------------
     145,000    Warren County Hospital Authority
                (Warren General Hospital)                                     6.900     04/01/2011          146,781
-------------------------------------------------------------------------------------------------------------------
   2,200,000    Warren County Hospital Authority
                (Warren General Hospital) 3                                   7.000     04/01/2019        2,227,148
-------------------------------------------------------------------------------------------------------------------
   5,200,000    Washington County Authority
                (Capital Projects & Equipment Program) 3                      6.150     12/01/2029        5,574,920
-------------------------------------------------------------------------------------------------------------------
     750,000    Washington Township Municipal Authority                       5.875     12/15/2023          778,965
-------------------------------------------------------------------------------------------------------------------
   2,500,000    Washington Township Municipal Authority                       6.000     12/15/2033        2,590,075
-------------------------------------------------------------------------------------------------------------------
   1,000,000    West Cornwall Township Municipal Authority
                (Elizabethtown College) 3                                     6.000     12/15/2022        1,073,420
-------------------------------------------------------------------------------------------------------------------
      25,000    West Cornwall Township Municipal Authority
                (Elizabethtown College)                                       6.000     12/15/2027           26,623
-------------------------------------------------------------------------------------------------------------------
     300,000    West Shore Area Hospital Authority (Holy Spirit Hospital)     6.250     01/01/2032          325,593
-------------------------------------------------------------------------------------------------------------------
      25,000    Westmoreland County IDA (Redstone Health Care Facilities)     5.850     11/15/2029           24,997
-------------------------------------------------------------------------------------------------------------------
      10,000    Westmoreland County IDA (Redstone Health Care Facilities)     5.900     11/15/2021           10,000
-------------------------------------------------------------------------------------------------------------------
     500,000    Westmoreland County IDA (Redstone Health Care Facilities)     8.000     11/15/2023          551,960
-------------------------------------------------------------------------------------------------------------------
       5,000    Westmoreland County IDA (Redstone Health Care Facilities)     8.125     11/15/2030            5,524
-------------------------------------------------------------------------------------------------------------------
      25,000    York County Hospital Authority (York Hospital)                5.500     07/01/2008           25,055
-------------------------------------------------------------------------------------------------------------------
      10,000    York County IDA (PSEG Power)                                  5.500     09/01/2020           10,598
-------------------------------------------------------------------------------------------------------------------
      30,000    York Hsg. Corp. Mtg., Series A                                6.875     11/01/2009           30,046
                                                                                                      -------------
                                                                                                        503,900,407


                  29 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

   PRINCIPAL                                                                                                  VALUE
      AMOUNT                                                                 COUPON       MATURITY       SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--31.4%
$  1,485,000    Guam EDA (TASC) 3                                             5.400%    05/15/2031    $   1,527,605
--------------------------------------------------------------------------------------------------------------------
   3,350,000    Guam EDA (TASC) 3                                             5.500     05/15/2041        3,452,611
--------------------------------------------------------------------------------------------------------------------
     710,000    Guam Power Authority, Series A 3                              5.250     10/01/2023          711,470
--------------------------------------------------------------------------------------------------------------------
      60,000    Northern Mariana Islands, Series A                            6.000     06/01/2014           64,158
--------------------------------------------------------------------------------------------------------------------
   1,410,000    Northern Mariana Islands, Series A                            6.600     03/15/2028        1,569,133
--------------------------------------------------------------------------------------------------------------------
  10,100,000    Northern Mariana Islands, Series A                            6.750     10/01/2033       11,063,742
--------------------------------------------------------------------------------------------------------------------
 199,000,000    Puerto Rico Children's Trust Fund (TASC) 7                    0.000 6   05/15/2050       12,624,560
--------------------------------------------------------------------------------------------------------------------
  39,865,000    Puerto Rico Children's Trust Fund (TASC)                      5.375     05/15/2033       41,212,437
--------------------------------------------------------------------------------------------------------------------
  67,005,000    Puerto Rico Children's Trust Fund (TASC)                      5.500     05/15/2039       69,888,895
--------------------------------------------------------------------------------------------------------------------
  39,440,000    Puerto Rico Children's Trust Fund (TASC)                      5.625     05/15/2043       41,456,173
--------------------------------------------------------------------------------------------------------------------
   2,250,000    Puerto Rico Infrastructure                                    5.000     07/01/2041        2,349,608
--------------------------------------------------------------------------------------------------------------------
      25,000    Puerto Rico ITEMECF (Ana G. Mendez University)                5.375     02/01/2019           25,842
-------------------------------------------------------------------------------------------------------------------
     500,000    Puerto Rico ITEMECF (Ana G. Mendez University)                5.375     02/01/2029          514,710
--------------------------------------------------------------------------------------------------------------------
  14,480,000    Puerto Rico Port Authority (American Airlines), Series A 3    6.250     06/01/2026       11,468,594
--------------------------------------------------------------------------------------------------------------------
     115,000    Puerto Rico Port Authority, Series D                          7.000     07/01/2014          116,804
--------------------------------------------------------------------------------------------------------------------
     100,000    University of Puerto Rico                                     5.400     06/01/2009          101,727
--------------------------------------------------------------------------------------------------------------------
   6,645,000    V.I. Government Refinery Facilities (Hovensa Coker)           6.500     07/01/2021        7,576,545
--------------------------------------------------------------------------------------------------------------------
   4,000,000    V.I. Public Finance Authority (Hovensa Coker)                 6.500     07/01/2021        4,560,760
--------------------------------------------------------------------------------------------------------------------
   5,000,000    V.I. Public Finance Authority (Hovensa Refinery) 3            6.125     07/01/2022        5,518,050
--------------------------------------------------------------------------------------------------------------------
   3,250,000    V.I. Public Finance Authority ROLs 1,3                       12.403 2   10/01/2024        4,003,740
--------------------------------------------------------------------------------------------------------------------
      45,000    V.I. Tobacco Settlement Financing Corp. (TASC) 3              5.000     05/15/2021           45,595
--------------------------------------------------------------------------------------------------------------------
   2,235,000    V.I. Tobacco Settlement Financing Corp. (TASC) 3              5.000     05/15/2031        2,254,400
                                                                                                      --------------
                                                                                                        222,107,159

--------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $670,751,709)--102.5%                                                 726,007,566
--------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(2.5)                                                            (17,932,218)
                                                                                                      --------------
NET ASSETS--100.0%                                                                                    $ 708,075,348
                                                                                                      ==============

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Illiquid security. The aggregate value of illiquid securities as of July 31,
2005 was $59,677,570, which represents 8.43% of the Fund's net assets. See Note
5 of Notes to Financial Statements.

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

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

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

5. Non-income producing security.

6. Represents a zero coupon bond.

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


                  30 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

ACTS        Adult Communities Total Services

AUS         Allegheny United Hospitals

BPE         Brittany Pointe Estates

CCMC        Crozer-Chester Medical Center

CKHS        Crozer-Keystone Health System

CPAP        Crime Prevention Association of Philadelphia

DCMH        Delaware County Memorial Hospital

EDA         Economic Development Authority

EDFA        Economic Development Finance Authority

FHA         Federal Housing Agency

GO          General Obligation

GPA         General Purpose Authority

H&EFA       Health and Educational Facilities Authority

H&HEFA      Hospitals and Higher Education Facilities Authority

HDA         Hospital Development Authority

HEBA        Higher Education Building Authority

HEFA        Higher Education Facilities Authority

HEHA        Higher Education and Health Authority

HFA         Housing Finance Agency/Authority

HHEA        Health, Hospital and Education Authority

HUHS        Hahnemann University Hospital System

IDA         Industrial Development Agency

ITEMECF     Industrial, Tourist, Educational, Medical and
            Environmental Community Facilities

MAS         Mercy Adult Services

MCMCSPA     Mercy Catholic Medical Center of Southeastern Pennsylvania

MCP         Medical College of Pennsylvania

MHH         Mercy Haverford Hospital

MHP         Mercy Health Plan

MHSSPA      Mercy Health System of Southeastern PA

NCPHS       North Central Pennsylvania Health System

PSEG        Public Service Enterprise Group

RITES       Residual Interest Tax Exempt Security

ROLs        Residual Option Longs

TASC        Tobacco Settlement Asset-Backed Bonds

V.I.        United States Virgin Islands

WH          Williamsport Hospital


                  31 | OPPENHEIMER PENNSYLVANIA 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                                         VALUE        PERCENTAGE
-------------------------------------------------------------------------
Tobacco Settlement Payments             $  172,462,276              23.8%
Hospital/Health Care                        74,958,468              10.3
Adult Living Facilities                     61,927,868               8.5
Higher Education                            52,814,867               7.3
Resource Recovery                           46,806,961               6.5
Water Utilities                             41,553,162               5.7
Not-for-Profit Organization                 39,080,622               5.4
Single Family Housing                       34,088,782               4.7
Electric Utilities                          26,000,834               3.6
Manufacturing, Durable Goods                24,177,189               3.3
Pollution Control                           21,937,241               3.0
General Obligation                          21,119,039               2.9
Marine/Aviation Facilities                  20,792,496               2.9
Special Tax                                 13,687,528               1.9
Airlines                                    11,503,917               1.6
Parking Fee Revenue                          9,674,056               1.3
Multifamily Housing                          8,790,964               1.2
Sewer Utilities                              8,170,667               1.1
Sales Tax Revenue                            8,036,678               1.1
Highways/Railways                            7,130,574               1.0
Gas Utilities                                5,809,183               0.8
Special Assessment                           5,210,810               0.7
Municipal Leases                             4,310,431               0.6
Education                                    3,702,970               0.5
Hotels, Restaurants & Leisure                1,120,632               0.2
Sports Facility Revenue                        996,226               0.1
Paper, Containers & Packaging                  143,125               0.0
                                        ---------------------------------
Total                                   $  726,007,566             100.0%
                                        =================================


                  32 | OPPENHEIMER PENNSYLVANIA 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:

RATINGS                                                                 PERCENT
--------------------------------------------------------------------------------
AAA                                                                        18.9%
AA                                                                          5.5
A                                                                           4.2
BBB                                                                        49.1
BB                                                                          5.5
B                                                                           4.1
CCC                                                                         1.6
Not Rated                                                                  11.1
                                                                          ------
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 out- standing 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 PENNSYLVANIA MUNICIPAL FUND

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

------------------------------------------------------------------------------------------------------------------
ASSETS
------------------------------------------------------------------------------------------------------------------
Investments, at value (cost $670,751,709)--see accompanying statement of investments              $   726,007,566
------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                                       13,870,895
Interest                                                                                               10,052,031
Shares of beneficial interest sold                                                                      4,895,651
Other                                                                                                      14,812
                                                                                                  ----------------
Total assets                                                                                          754,840,955

------------------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------------------
Bank overdraft                                                                                          2,162,884
------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Payable on borrowings (See Note 6)                                                                     31,500,000
Investments purchased (including $11,981,790 purchased on a when-issued basis
or forward commitment)                                                                                 12,058,639
Dividends                                                                                                 473,923
Shares of beneficial interest redeemed                                                                    242,328
Distribution and service plan fees                                                                         85,946
Interest expense                                                                                           70,754
Trustees' compensation                                                                                     52,623
Shareholder communications                                                                                 34,695
Transfer and shareholder servicing agent fees                                                              28,058
Other                                                                                                      55,757
                                                                                                  ----------------
Total liabilities                                                                                      46,765,607

------------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                        $   708,075,348
                                                                                                  ================

------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
------------------------------------------------------------------------------------------------------------------
Paid-in capital                                                                                   $   655,959,326
------------------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                         108,639
------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                                           (3,248,474)
------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                             55,255,857
                                                                                                  ----------------
NET ASSETS                                                                                        $   708,075,348
                                                                                                  ================


                  34 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
-----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $384,863,080 and
29,952,829 shares of beneficial interest outstanding)                                             $         12.85
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)   $         13.49
-----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $189,643,273 and 14,763,720 shares
of beneficial interest outstanding)                                                               $         12.85
-----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $133,568,995 and 10,407,808 shares
of beneficial interest outstanding)                                                               $         12.83

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  35 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
------------------------------------------------------------------------------------------------------------------
Interest                                                                                          $    34,881,979

------------------------------------------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------------------------------------------
Management fees                                                                                         3,034,961
------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                                   418,901
Class B                                                                                                 1,559,825
Class C                                                                                                   865,970
------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                                                   127,852
Class B                                                                                                    96,734
Class C                                                                                                    55,613
------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                                                    16,041
Class B                                                                                                    16,739
Class C                                                                                                    10,370
------------------------------------------------------------------------------------------------------------------
Interest expense                                                                                          323,131
------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                                                27,645
------------------------------------------------------------------------------------------------------------------
Trustees' compensation                                                                                     23,230
------------------------------------------------------------------------------------------------------------------
Other                                                                                                     113,671
                                                                                                  ----------------
Total expenses                                                                                          6,690,683
Less reduction to custodian expenses                                                                       (6,144)
                                                                                                  ----------------
Net expenses                                                                                            6,684,539

------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                                  28,197,440

------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------
Net realized loss on investments                                                                         (396,855)
------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                                                   49,249,528

------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                              $    77,050,113
                                                                                                  ================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  36 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

YEAR ENDED JULY 31,                                                                       2005               2004
------------------------------------------------------------------------------------------------------------------
OPERATIONS
------------------------------------------------------------------------------------------------------------------
Net investment income                                                           $   28,197,440    $    24,870,361
------------------------------------------------------------------------------------------------------------------
Net realized loss                                                                     (396,855)          (530,650)
------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                               49,249,528          7,584,109
                                                                                ----------------------------------
Net increase in net assets resulting from operations                                77,050,113         31,923,820

------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                            (16,117,132)       (12,179,580)
Class B                                                                             (8,235,507)        (7,846,660)
Class C                                                                             (4,521,666)        (3,754,519)

------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                            130,474,143         41,101,968
Class B                                                                             17,198,067          7,719,115
Class C                                                                             48,949,671          5,391,284

------------------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------------------
Total increase                                                                     244,797,689         62,355,428
------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                463,277,659        400,922,231
                                                                                ----------------------------------
End of period (including accumulated net investment income
of $108,639 and $785,504, respectively)                                         $  708,075,348    $   463,277,659
                                                                                ==================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  37 | OPPENHEIMER PENNSYLVANIA 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             $    11.76     $    11.48      $    11.57    $    11.46     $    11.28
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .67 1          .73             .75           .70            .67
Net realized and unrealized gain (loss)                1.10            .25            (.11)          .11            .21
                                                 -------------------------------------------------------------------------
Total from investment operations                       1.77            .98             .64           .81            .88
--------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.68)          (.70)           (.73)         (.70)          (.70)
--------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    12.85     $    11.76      $    11.48    $    11.57     $    11.46
                                                 =========================================================================

--------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    15.43%          8.53%           5.36%         7.36%          8.10%
--------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  384,863     $  229,450      $  184,638    $  144,592     $  100,222
--------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  295,002     $  211,061      $  172,228    $  120,251     $   77,048
--------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  5.35%          6.01%           6.11%         6.03%          5.84%
Total expenses                                         0.81%          0.86%           0.86%         0.85%          0.94%
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 4          N/A 4,5         N/A 4        0.82% 6        0.87% 6
--------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  30%            37%             33%           39%            58%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  38 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

CLASS B      YEAR ENDED JULY 31,                       2005           2004            2003          2002           2001
--------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    11.76     $    11.48      $    11.57    $    11.46     $    11.27
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .57 1          .63             .65           .62            .59
Net realized and unrealized gain (loss)                1.11            .25            (.11)          .11            .22
                                                 -------------------------------------------------------------------------
Total from investment operations                       1.68            .88             .54           .73            .81
--------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.59)          (.60)           (.63)         (.62)          (.62)
--------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    12.85     $    11.76      $    11.48    $    11.57     $    11.46
                                                 =========================================================================

--------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    14.56%          7.71%           4.56%         6.55%          7.40%
--------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  189,643     $  157,338      $  146,369    $  101,126     $   52,926
--------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  173,663     $  156,689      $  127,280    $   75,772     $   32,037
--------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  4.62%          5.26%           5.34%         5.26%          5.03%
Total expenses                                         1.59%          1.62%           1.63%         1.61%          1.68%
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 4          N/A 4,5         N/A 4        1.58% 6        1.62% 6
--------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  30%            37%             33%           39%            58%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  39 | OPPENHEIMER PENNSYLVANIA 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             $    11.75     $    11.47      $    11.56    $    11.45     $    11.27
--------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .57 1          .63             .65           .61            .57
Net realized and unrealized gain (loss)                1.10            .25            (.11)          .12            .23
                                                 -------------------------------------------------------------------------
Total from investment operations                       1.67            .88             .54           .73            .80
--------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.59)          (.60)           (.63)         (.62)          (.62)
--------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $    12.83     $    11.75      $    11.47    $    11.56     $    11.45
                                                 =========================================================================

--------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    14.48%          7.71%           4.57%         6.55%          7.30%
--------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  133,569     $   76,489      $   69,916    $   47,163     $   19,494
--------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $   96,508     $   74,956      $   60,202    $   33,327     $   10,913
--------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  4.56%          5.25%           5.34%         5.26%          5.01%
Total expenses                                         1.59%          1.63%           1.63%         1.61%          1.68%
Expenses after payments and waivers and
reduction to custodian expenses                         N/A 4          N/A 4,5         N/A 4        1.58% 6        1.62% 6
--------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  30%            37%             33%           39%            58%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                  40 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

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

Oppenheimer Pennsylvania Municipal Fund (the Fund) is a separate series of
Oppenheimer Multi-State Municipal Trust, a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek as high a level of current
interest income exempt from federal and Pennsylvania personal income taxes as is
available from municipal securities, 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


                  41 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

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

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

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of July 31, 2005, the Fund had purchased $11,981,790
of securities issued on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
INVERSE FLOATING RATE SECURITIES. The Fund invests in inverse floating rate
securities that pay interest at a rate that varies inversely with short-term
interest rates. Certain of these securities may be leveraged, whereby the
interest rate varies inversely at a multiple of the change in short-term rates.
As interest rates rise, inverse floaters produce less current income. The price
of such securities is more volatile than comparable fixed rate securities. The
Fund will invest no more than 20% of its total assets in inverse floaters.
Inverse floaters amount to $59,446,936 as of July 31, 2005, which represents
7.88% of the Fund's total assets.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of July 31, 2005, securities with an aggregate
market value of $60,423, representing 0.01% 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 PENNSYLVANIA 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
         ----------------------------------------------------------------------------
         $634,602                     $--            $3,220,867           $55,228,247

1. As of July 31, 2005, the Fund had $3,220,867 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 carryforwards were as follows:

                           EXPIRING
                           ----------------------------
                           2009            $    195,858
                           2010               1,365,649
                           2013               1,659,360
                                           ------------
                           Total           $  3,220,867
                                           ============

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

3. During the fiscal year ended July 31, 2004, the Fund utilized $759,465 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 PENNSYLVANIA 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          $28,874,305      $23,780,759

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   $ 670,779,319
                                          ==============
         Gross unrealized appreciation    $  58,460,272
         Gross unrealized depreciation       (3,232,025)
                                          --------------
         Net unrealized appreciation      $  55,228,247
                                          ==============

--------------------------------------------------------------------------------
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 $10,276 and
payments of $2,510 were made to retired trustees, resulting in an accumulated
liability of $39,829 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.


                  44 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption 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 no 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                         12,116,018    $  151,196,257        6,348,845    $  75,835,815
Dividends and/or
distributions reinvested        695,852         8,652,502          552,950        6,600,738
Redeemed                     (2,365,369)      (29,374,616)      (3,477,589)     (41,334,585)
                             ---------------------------------------------------------------
Net increase                 10,446,501    $  130,474,143        3,424,206      $41,101,968
                             ===============================================================

--------------------------------------------------------------------------------------------
CLASS B
Sold                          2,375,112    $   29,515,607        2,430,805    $  29,026,035
Dividends and/or
distributions reinvested        314,290         3,897,091          315,813        3,768,477
Redeemed                     (1,305,293)      (16,214,631)      (2,119,775)     (25,075,397)
                             ---------------------------------------------------------------
Net increase                  1,384,109    $   17,198,067          626,843    $   7,719,115
                             ===============================================================


                  45 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

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

                                 YEAR ENDED JULY 31, 2005          YEAR ENDED JULY 31, 2004
                                 SHARES            AMOUNT           SHARES           AMOUNT
--------------------------------------------------------------------------------------------
CLASS C
Sold                          4,460,811    $   55,895,068        2,039,798    $  24,542,492
Dividends and/or
distributions reinvested        221,073         2,744,414          199,041        2,373,352
Redeemed                       (784,051)       (9,689,811)      (1,825,116)     (21,524,560)
                             ---------------------------------------------------------------
Net increase                  3,897,833    $   48,949,671          413,723    $   5,391,284
                             ===============================================================

--------------------------------------------------------------------------------
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        $300,902,353      $145,841,963

--------------------------------------------------------------------------------
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 in excess of $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 $273,166
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 0.15% 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


                  46 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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 0.15% 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 shares were $5,240,040 and $1,639,689, 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                $538,933             $4,305          $276,297            $16,742
---------------------------------------------------------------------------------------------

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

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

As of July 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 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


                  47 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

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

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

agreement which enabled it to participate with certain other Oppenheimer funds
in a committed, unsecured line of credit with a bank, which permitted borrowings
up to $540 million, collectively. Interest was charged to each fund, based on
its borrowings, at a rate equal to the Federal Funds Rate plus 0.75%. The Fund
also paid a commitment fee equal to its pro rata share of the average unutilized
amount of the credit facility at a rate of 0.09% per annum.

      Effective January 21, 2005 the Fund entered into a Revolving Credit and
Security Agreement (the "Agreement") with a conduit lender and a bank which
enables it to 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
$11,147,397 at an average daily interest rate of 2.752%. The Fund had borrowings
outstanding of $31,500,000 at July 31, 2005 at an interest rate of 3.3439%. The
Fund had gross borrowings and gross loan repayments of $241,100,000 and
$224,200,000, 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 $31,500,000. The Fund paid $32,649 in fees and $254,097 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


                  48 | OPPENHEIMER PENNSYLVANIA MUNICIPAL FUND

at common law. The complaint seeks unspecified compensatory and punitive
damages, rescission of the funds' investment advisory agreements, an accounting
of all fees paid, and an award of attorneys' fees and litigation expenses.

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


                  49 | OPPENHEIMER PENNSYLVANIA 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(1) of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.(2)  That
is because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors. Not all waivers apply to all funds.


For 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(3)
         4) Group Retirement Plans(4)
         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.


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

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

      There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."(5) This waiver provision applies to:
|X|   Purchases of Class A shares aggregating $1 million or more.
|X|   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.
|X|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
      Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and  (b)  funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").

         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $5 million or more of its assets (excluding assets
            invested in money market funds) invested in Applicable
            Investments.

         3) The record keeping for a Retirement Plan is handled under a
            service agreement with Merrill Lynch and on the date the plan
            sponsor signs that agreement, the Plan has 500 or more eligible
            employees (as determined by the Merrill Lynch plan conversion
            manager).









          II. Waivers of Class A Sales Charges of Oppenheimer Funds

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

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

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

      Effective October 1, 2005, taxable accounts established with the
         proceeds of Required Minimum Distributions from Retirement Plans.



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


1. Class A shares issued or purchased in the following transactions are not
   subject to sales charges (and no concessions are paid by the Distributor
   on such purchases):

      Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
      Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (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.


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


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

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


 III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
      Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
      Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.

      The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability (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(8) from Retirement Plans or other employee benefit plans
         for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account.
         3) To return contributions made due to a mistake of fact.
         4) To make hardship withdrawals, as defined in the plan.(9)
         5) To make distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.(10)
         9) On account of the participant's separation from service.(11)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
      Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.

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

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



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

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

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

   Oppenheimer Quest Value Fund, Inc.           Oppenheimer Small- & Mid- Cap
   Value Fund
   Oppenheimer Quest Balanced Value 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.

      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.

      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.

      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.

      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.

      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.

      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.

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

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

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

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

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


     VI. Special Reduced Sales Charge for Former Shareholders of Advance
                                America Funds, Inc.

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

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


   VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer

                            Convertible Securities Fund
------------------------------------------------------------------------------

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







Oppenheimer Pennsylvania 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
PX740.rev1205


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

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Oppenheimer Rochester National Municipals
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6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.525.7048

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.  You can obtain the Prospectus by writing to
the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above or by downloading it from the OppenheimerFunds Internet
website at www.oppenheimerfunds.com.

Contents                                                                  Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks.........
     The Fund's Investment Policies...........................................
     Other Investment Techniques and Strategies...............................
     Other 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
Independent Auditors' Report..................................................
Financial Statements .........................................................

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







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ABOUT THE FUND
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Additional Information About the Fund's Investment Policies and Risks

      The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus.  This Statement of
Additional Information contains supplemental information about those policies
and the types of securities that the Fund's investment manager,
OppenheimerFunds, Inc. (the "Manager"), can 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 and strategies 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 because since that would be inconsistent with its goal of
seeking tax-exempt income.  However, the values of the securities held by the
Fund may be affected by changes in general interest rates and other factors,
prior to their maturity.  Because the current value of debt securities vary
inversely with changes in prevailing interest rates, if interest rates
increased after a security is purchased, that security will normally decline
in value.  Conversely, should interest rates decrease after a security is
purchased, normally its value will 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 the security's 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 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 municipal securities
having a maturity (when the security is issued) of more than one (1) year 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 five (5) to ten (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 power, if any, for the repayment of principal and the payment of
interest.  Issuers of general obligation bonds include states, counties,
cities, towns, and regional districts.  The proceeds of these obligations are
used to fund a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.  The
rate of taxes that can be levied for the payment of debt service on these
bonds may be limited or unlimited.  Additionally, there may be limits as to
the rate or amount of special assessments that can be levied to meet these
obligations.

            |_| 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.

            |_| Private Activity Municipal Securities. 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.  There are no limits on the
amount of assets the Fund may invest in private activity securities.

      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 (1) 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.

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

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, 23.5% of the Fund's assets were invested in tobacco
revenue settlement bonds.
            Tobacco settlement revenue bonds are secured by an issuing
state's proportionate share in the Master Settlement Agreement ("MSA"). The
MSA is an agreement, reached out of court in November 1998 between 46 states
and nearly all of the U.S. tobacco manufacturers (approximately 99% of the
current combined market share of tobacco manufacturers). The MSA provides for
payments annually by the manufacturers to the states and jurisdictions in
perpetuity, in exchange for releasing all claims against the manufacturers
and a pledge of no further litigation. Tobacco manufacturers pay into a
master escrow trust based on their market share, and each state receives a
fixed percentage of the payment as set forth in the MSA.

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

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

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



      |X| 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 (often referred to as "junk bonds") may have a
higher yield than securities rated in the higher rating categories.  In
addition to having a greater risk of default than higher-grade securities,
there may be less of a market for these securities.  As a result they may be
harder to sell at an acceptable price.  The additional risks mean that the
Fund may not receive the anticipated level of income from these securities,
and the Fund's net asset value may be affected by declines in the value of
lower-grade securities. While securities rated "Baa" by Moody's or "BBB" by
S&P are investment grade, they may be subject to special risks and have some
speculative characteristics.

      After the Fund buys a municipal security it may cease to be rated or
its rating may be reduced.  Neither event requires the Fund to sell the
security, but the Manager will consider such events in determining whether
the Fund should continue to hold the security.  To the extent that ratings
given by Moody's, S&P, or Fitch 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.

      The rating definitions of Moody's, S&P and Fitch for municipal
securities are contained in Appendix A to this Statement of Additional
Information.  The Fund can 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 assign 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.

      |X|  Municipal Debt Securities. The Fund can invest in a variety of
municipal debt securities to seek its objective. Municipal debt securities
are subject to different types of risk, including credit risk and interest
rate risk.

         |_|  Credit Risk.  Credit risk relates to the ability of the issuer
to meet interest or principal payments or both as they become due.  In
general, lower-grade, higher-yield municipal bonds are subject to credit risk
to a greater extent than lower-yield, higher-quality civic bonds.

      The Fund's debt investments mainly include high yield,
non-investment-grade municipal bonds (commonly referred to as "junk bonds").
Investment-grade municipal bonds are bonds rated at least "Baa" by Moody's,
at least "BBB" by S&P or Fitch or that have comparable ratings by another
nationally-recognized rating organization.

      In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research
to evaluate a security's credit-worthiness.  If securities the Fund buys are
unrated, they are assigned a rating by the Manager of comparable quality to
bonds having similar yield and risk characteristics within a rating category
of a rating organization. In evaluating the credit quality of a particular
security, whether it is rated or unrated, the Manager will normally take into
consideration a number of factors. Among them are the financial resources of
the issuer, or the underlying source of funds for debt service on a security,
the issuer's sensitivity to economic conditions and trends, any operating
history of the facility financed by the obligation and the degree of
community support for it, the capabilities of the issuer's management and
regulatory factors affecting the issuer and the particular facility.

      The Fund does not have investment policies establishing specific
maturity ranges for the Fund's investments, and they may be within any
maturity range (short, medium or long) depending on the Manager's evaluation
of investment opportunities available within the debt securities markets.
Generally, however, it is expected that the Fund's average portfolio maturity
will be of a longer average maturity.  The Fund may shift its investment
focus to securities of longer maturity as interest rates decline and to
securities of shorter maturity as interest rates rise.

            |_|  Interest Rate Risk.  Interest rate risk refers to the
fluctuations in value of debt securities resulting from the inverse
relationship between price and yield.  For example, an increase in general
interest rates will tend to reduce the market value of already-issued debt
investments, and a decline in general interest rates will tend to increase
their value.  In addition, debt securities with longer maturities, which tend
to have higher yields, are subject to potentially greater fluctuations in
value from changes in interest rates than obligations with shorter
maturities.

      While the changes in value of the Fund's portfolio securities after
they are purchased will be reflected in the net asset value of the Fund's
shares, those changes normally do not affect the interest income paid by
those securities (unless the security's interest is paid at a variable rate
pegged to particular interest rate changes).  However, those price
fluctuations will be reflected in the valuations of the securities, and
therefore the Fund's net asset values will be affected by those fluctuations.

            |_|  Special Risks of Lower-Grade Municipal Securities.  The Fund
can invest without limit in lower-grade debt securities. Although under
normal market conditions the Fund intends to invest approximately 50% to 70%
of its total assets in these securities, there are no specific maximum or
minimum limits on the amount of the Fund's assets that can be invested in
these types of securities to seek the Fund's main objective.  Lower-grade
securities (often referred to as "junk bonds") tend to offer higher yields
than investment grade securities, but also are subject to greater risks of
default by the issuer in its obligations to pay interest and/or repay
principal on the maturity of the security.

      "Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by S&P or Fitch, or similar ratings by other rating organizations.  If
they are unrated, and are determined by the Manager to be of comparable
quality to debt securities rated below investment grade, they are considered
part of the Fund's portfolio of lower-grade securities.  The Fund can invest
in securities rated as low as "C" or "D" or which may be in default at the
time the Fund buys them.

      Some of the special credit risks of lower-grade securities are
discussed below.  There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of
investment grade securities.  The issuer's low creditworthiness may increase
the potential for its insolvency.  An overall decline in values in the high
yield bond market is also more likely during a period of a general economic
downturn.  An economic downturn or an increase in interest rates could
severely disrupt the market for high yield bonds, adversely affecting the
values of outstanding bonds as well as the ability of issuers to pay interest
or repay principal.

      While securities rated "Baa" by Moody's or "BBB" by S&P or Fitch are
investment grade and are not regarded as junk bonds, those securities may be
subject to special risks, and have some speculative characteristics.
Definitions of the debt security ratings categories of the principal rating
organizations are included in Appendix A to this Statement of Additional
Information.

Other Investment Techniques and Strategies.  In seeking its objective, the
Fund may from time to time employ the types of investment strategies and
investments described below.  It is not required to use all of these
strategies at all times, and at times may not use them.

      |X| 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 to its maturity.  The tender may be
at par value plus accrued interest, according to the terms of the obligation.

      The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the ninety-one (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 (1)
year.  Generally, the changes in the interest rate on such securities reduce
the fluctuation in their market value.  As interest rates decrease or
increase, the potential for capital appreciation or depreciation is less than
that for fixed-rate obligations of the same maturity.

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

      Floating rate and variable rate demand notes that have a stated
maturity in excess of one (1) year may have features that permit the holder
to recover the principal amount of the underlying security at specified
intervals not exceeding one (1) year and upon no more than thirty (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.

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

To provide investment leverage, a municipal issuer might decide to issue two
variable rate obligations instead of a single long-term, fixed-rate bond. For
example, the interest rate on one obligation reflects short-term interest
rates. The interest rate on the other instrument, the inverse floater,
reflects the approximate rate the issuer would have paid on a fixed-rate
bond, multiplied by a factor of two, minus the rate paid on the short-term
instrument. The two portions may be recombined to create a fixed-rate bond.
The Manager might acquire both portions of that type of offering, to reduce
the effect of the volatility of the individual securities. This provides the
Manager with a flexible portfolio management tool to vary the degree of
investment leverage efficiently under different market conditions. The Fund
can invest up to 35% 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" (or "forward commitment") basis.
"When-issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery.

      When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date.  Normally
the settlement date is within six (6) 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 (6) months and
possibly as long as two (2) 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 of any
type at least equal to the value of purchase commitments until the Fund pays
for the investment.

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

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

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

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

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

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

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

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

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

      |X| Repurchase Agreements.  The Fund may acquire securities subject to
repurchase agreements.  It may do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities.

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

      The majority of these transactions run from day to day. Delivery
pursuant to resale typically will occur within one (1) to five (5) days of
the purchase.  Repurchase agreements having a maturity beyond seven (7) 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 (7) days or less.

      Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 ("Investment Company Act"), are collateralized by the underlying
security.  The Fund's repurchase agreements require that at all times while
the repurchase agreement is in effect, the collateral's value must equal or
exceed the repurchase price to fully collateralize the repayment obligation.

      The Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the
collateral's value.  However, if the vendor fails to pay the resale price on
the delivery date, the Fund may incur costs in disposing of the collateral
and may experience losses if there is any delay in its ability to do so.

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


      |X| Illiquid and Restricted Securities.  The Fund has percentage
limitations that apply to purchases of illiquid and restricted securities, as
stated in the Prospectus.  The Manager monitors holdings of illiquid and
restricted securities on an ongoing basis to determine whether to sell any
holdings to maintain adequate liquidity.

      |X| Borrowing and Leverage.  The Fund has the ability to invest
borrowed funds in portfolio securities. This speculative investment technique
is known as "leverage". Under its fundamental policies, the Fund may not
borrow, except to the extent permitted under the Investment Company Act, the
rules or regulations thereunder or any exemption therefrom that is applicable
to the Fund, as such statutes, rules or regulations may be amended or
interpreted from time to time.  Currently, under the Investment Company Act,
a mutual fund may borrow only from banks and the maximum amount it may borrow
is up to one-third of its total assets (including the amount borrowed) less
its liabilities, other than borrowings, except that a fund may borrow up to
5% of its total assets for temporary purposes from any person. Under the
Investment Company Act, there is a rebuttable presumption that a loan is
temporary if it is repaid within 60 days and not extended or renewed. The
Fund may borrow for temporary or emergency purposes only to the extent
necessary in emergency situations to meet redemption requests after using all
cash held by the Fund to meet such redemption requests, other than cash
necessary to pay Fund fees and expenses. If the value of a Fund's assets
fails to meet the 300% asset coverage requirement, the Fund is required,
within three days to reduce its bank debt to the extent necessary to meet
such requirement and may have to sell a portion of its investments at a time
when independent investment judgment would not dictate such sale.

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

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

       |X| 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. Income from securities loans does not constitute
exempt-interest income for the purpose of paying tax-exempt dividends.

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

      When it lends securities, the Fund receives amounts equal to the
dividends or interest on the loaned securities.  It also receives one or more
of (a) negotiated loan fees, (b) interest on securities used as collateral,
and (c) interest on short-term debt securities purchased with the loan
collateral.  Either type of interest may be shared with the borrower.  The
Fund may pay reasonable finder's, custodian and administrative or other fees
in connection with these loans.  The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five (5) days' notice or in time to vote on
any important matter.

Other Derivative Investments. The Fund can invest in other municipal
derivative securities that pay interest that depends on the change in value
of an underlying asset, interest rate or index.  Examples are interest rate
swaps, municipal bond indices or swap indices.  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 could:

      |_| 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.

      The Fund can also write covered calls 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 would normally seek to purchase the
securities, and then terminate that hedging position.  For this type of
hedging, the Fund could:

      |_| 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, are approved by its Board, and are permissible under
applicable regulations governing the Fund.

      |_| 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.

      No money is paid or received by the Fund on the purchase or sale of a
futures contract.  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 (3) 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 (for example, the duration of
municipal bonds relative to U.S. Treasury Bonds might have been greater than
anticipated).

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

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

      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 (9) 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.

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

      The Fund's custodian, or a securities depository acting for the
custodian, will act as the Fund's escrow agent through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges, or as to other acceptable escrow
securities.  In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the 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
Securities and Exchange Commission 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 in all appropriate cases 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 Calls and Puts.  The Fund may buy calls only on
securities that relate to securities the Fund owns, broadly-based municipal
bond indices, municipal bond index futures and interest rate futures.  It can
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).

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

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

      The Fund could pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put.  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 might
decline.  If that occurred, the Fund would lose money on the hedging
instruments and also experience a decline in value of its debt securities.
However, while this could occur over a brief period or to a very small
degree, over time the value of a diversified portfolio of debt securities
will tend to move in the same direction as the indices upon which the hedging
instruments are based.

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

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

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

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

      |_| 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 can enter 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 can 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 can 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."

      |_| 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 Securities and Exchange
Commission regarding applicable provisions of the Investment Company Act,
when the Fund purchases an interest rate future or municipal bond index
future, it must segregate cash or readily marketable short-term debt
instruments in an amount equal to the purchase price of the future, less the
margin deposit applicable to it. The account must be a segregated account or
accounts held by its custodian bank.
      |X| Portfolio Turnover.  A change in the securities held by the Fund
from buying and selling investments is known as "portfolio turnover."  Active
and frequent 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 capital gains,
because they would not be tax-exempt income.  To a limited degree, the Fund
may engage in active and frequent 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 Manager believes such disposition is advisable or the Fund needs to
generate cash to satisfy requests to redeem Fund shares.  In those cases, the
Fund may realize a capital gain or loss on its investments.  The Fund's
annual portfolio turnover rate normally is not expected to exceed 100%. The
Financial Highlights table at the end of the Prospectus shows the Fund's
portfolio turnover rates during the past five fiscal years.

      |X| Temporary Defensive and Interim Investments. The securities the
Fund can 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.

      |X| Taxable Investments. While the Fund can invest up to 20% of its net
assets (plus borrowings for investment purposes) in investments that generate
income subject to income taxes, it does not anticipate investing substantial
amounts of its assets in taxable investments under normal market conditions
or as part of its normal trading strategies and policies.  To the extent it
invests in taxable securities, the Fund would not be able to 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 it would buy for temporary defensive
purposes.

Other Investment Restrictions

      |X| What Are "Fundamental Policies?"  Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities.  Under the Investment Company Act, such a "majority" vote is
defined as the vote of the holders of the lesser of:
      |_| 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 invest 25% or more of its total assets in any one
industry.  That limit does not apply to municipal securities in general, to
securities issued or guaranteed by the U.S. Government or its agencies and
instrumentalities or to securities issued by investment companies.

      |_| The Fund cannot buy securities or other instruments issued or
guaranteed by any one issuer if more than 5% of its total assets would be
invested in securities or other instruments of that issuer or if it would
then own more than 10% of that issuer's voting securities.  This limitation
applies to 75% of the Fund's total assets.  The limit does not apply to
securities issued or guaranteed by the U.S. government or any of its agencies
or instrumentalities or securities of other investment companies.
      |_| 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 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 1940 Act, the rules or regulations thereunder or any exemption therefrom
that is applicable to the fund, as such statute, rules or regulations may be
amended or interpreted from time to time.

      |_| The Fund cannot underwrite securities of other companies.  A
permitted exception is in case it is deemed to be an underwriter under the
Securities Act of 1933 when reselling any 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.

      |X| Does the Fund Have Other Restrictions that are Not Fundamental
Policies?

      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 or other investments other
than municipal securities, the temporary investments described in its
Prospectus, repurchase agreements, covered calls, private activity municipal
securities and hedging instruments described in "About the Fund" in the
Prospectus or this Statement of Additional Information.

      |_| The Fund will not invest more than 10% of its net assets in
securities which are restricted as to disposition under the federal
securities laws, except that the Fund may purchase without regard to this
limitation restricted securities which are eligible for resale pursuant to
Rule 144A under the Securities Act of 1933.

      |_| The Fund cannot buy or sell futures contracts other than interest
rate futures and municipal bond index futures.

      |_| The Fund cannot purchase securities other than hedging instruments
on margin. However, the Fund may obtain short-term credits that may be
necessary for the clearance of purchases and sales of securities.

      |_| The Fund cannot sell securities short.

      |_|  The Fund cannot invest in other investment companies except to the
extent permitted by the Act. The Fund would be permitted under this policy to
invest its assets in the securities of one or more open-end management
investment company for which the Manager, one of its affiliates or a
successor is the investment advisor or sub-advisor. That fund or funds must
have substantially the same fundamental investment objective, policies and
limitations as the Fund. The Fund's policy not to concentrate its
investments, as described above, also would permit the Fund to adopt a
"master-feeder" structure. Under that structure, the Fund would be a "feeder"
fund and would invest all of its assets in a single pooled "master fund" in
which other feeder funds could also invest. This could enable the Fund to
take advantage of potential operational and cost efficiencies in the
master-feeder structure. The Fund has no present intention of adopting the
master-feeder structure. If it did so, the Prospectus and this Statement of
Additional Information would be revised accordingly.

Diversification.   The Fund intends to be "diversified" as defined in the
Investment Company Act and to satisfy the restrictions against investing too
much of its assets in any "issuer" as set forth in the restrictions above.

      The Fund limits 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 assets, the Fund has adopted the industry classifications
set forth in Appendix B to this Statement of Additional Information.  Those
industry classifications are not a fundamental policy.

      In implementing the Fund's policy not to concentrate its investments,
the Manager will consider a non-governmental user of facilities financed by
industrial development bonds as being in a particular industry.  That is done
even though the bonds are municipal securities, as to which the Fund has no
concentration limitation.  Although this application of the concentration
restriction is not a fundamental policy of the Fund, it will not be changed
without shareholder approval. The Manager has no present intention of
investing more than 25% of the Fund's total assets in securities paying
interest from revenues of similar type projects or in industrial development
bonds. This is not a fundamental policy and therefore could be changed
without shareholder approval.  However, if that change were made, the
Prospectus or this Statement of Additional Information would be supplemented
to reflect the change.

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

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

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

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

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

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

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

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

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

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

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

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

    Portfolio holdings information (which may include information on the
    Fund's entire portfolio or individual securities therein) may be provided
    by senior officers of the Manager or attorneys on the legal staff of the
    Manager, Distributor, or Transfer Agent, in the following circumstances:

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

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

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

    The Chief Compliance Officer 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 a series Oppenheimer Multi-State
Municipal Trust (referred to as the "Trust), and is an open-end, diversified
management investment company with an unlimited number of authorized shares
of beneficial interest.  The Fund was organized as a Massachusetts business
trust in 1989.  In 1993, the Trust was reorganized as a multi-series business
trust (now called Oppenheimer Multi-State Municipal Trust). The Fund
(formerly known as Oppenheimer Florida Municipal Fund) was added as a
separated series of the Trust in 1993. In September 2001, the Fund was
renamed "Oppenheimer Rochester National Municipals". Each of the three series
of the Trust is a separate fund that issues its own shares, has its own
investment portfolio, and has its own assets and liabilities.

      |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 or preemptive 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 Independent 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 selecting and nominating,
to the full Board nominees for election as Trustees, and selecting and
nominating 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 Committee may, upon
Board approval, retain an executive search firm to assist in screening
potential candidates. Upon Board approval, the Committee may also use
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 office of OppenheimerFunds, Inc., Two World Financial
Center, 225 Liberty Street, 11th Floor, New York, NY 10281-1008, to the
attention of the Board of Trustees of Oppenheimer Rochester National
Municipals, c/o the Secretary of the Fund.

      Submissions should, at a minimum, be accompanied by the following: (1)
the name, address, and business, educational, and/or other pertinent
background of the person being recommended; (2) a statement concerning
whether the person is an "interested person" as defined in the Investment
Company Act; (3) any other information that the Fund would be required to
include in a proxy statement concerning the person if he or she was
nominated; (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 not 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 and "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 directors or
trustees of the following Oppenheimer funds (referred to as "Board I
Funds"):

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

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

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

      Messrs. Fielding, Cottier, Loughran, 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 any
class of shares.  The foregoing statement does not reflect ownership of
shares held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under that plan by the
officers of the Fund listed above. In addition, none of the Independent
Trustees (nor any of their immediate family members) own securities of either
the Manager or Distributor of the Board I Funds or of any entity directly or
indirectly controlling, controlled by or under common control with the
Manager or the Distributor.

|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 years ended December 31, 2003 and 2004 and does not
expect to provide any such services in the calendar year ended 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' status as an Independent Trustee. Nonetheless, to assure certainty
as to determinations of the Board and the Independent Trustees as to matters
upon which the Investment Company Act or the rules thereunder require
approval by a majority of Independent Trustees, Mr. Reynolds will not be
counted for purposes of determining whether a quorum of Independent Trustees
was present or whether a majority of Independent Trustees approved the matter.

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

-----------------------------------------------------------------------------------
                               Independent Trustees
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5    Dollar     Aggregate
                                                                       Dollar
                                                                       Range Of
                   Years;                                   Range of   Shares
Position(s) Held   Other Trusteeships/Directorships Held    Shares     Beneficially
with Fund,         by 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
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Clayton K.         Director of American Commercial Lines    None       Over
Yeutter, Chairman  (barge company) (since January 2005);               $100,000
of the Board of    Attorney at Hogan & Hartson (law firm)
Trustees since     (since June 1993); Director of Covanta
2003;              Holding Corp. (waste-to-energy company)
Trustee since 1991 (since 2002); Director of Weyerhaeuser
Age: 74            Corp. (1999-April 2004); Director of
                   Caterpillar, Inc. (1993-December 2002);
                   Director of ConAgra Foods (1993-2001);
                   Director of Texas Instruments
                   (1993-2001); Director of FMC
                   Corporation (1993-2001). Oversees 38
                   portfolios in the OppenheimerFunds
                   complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Matthew P. Fink    Trustee of the Committee for Economic    None       None
Trustee since 2005 Development (policy research
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 1994 Oppenheimer funds. Oversees 48                      $100,000
Age: 72            portfolios in the OppenheimerFunds
                   complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Phillip A.         Director of GSI Lumonics Inc.            None       Over
Griffiths,         (precision medical equipment supplier)              $100,000
Trustee, since     (since 2001); Trustee of Woodward
1999               Academy (since 1983); Senior Advisor of
Age: 67            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.         Director of Dominion Resources, Inc.     None       Over
Randall, Trustee   (electric utility holding company)                  $100,000
since 1989         (since February 1972); Former Director
Age: 78            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 1992)
August 2005        and Cathco (since 1996); Director of
Age: 64            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 production             $100,000
September 2005     company) (since 1994); Vice President,
Age: 57            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, New York 10281-1008.  Mr. Murphy serves as a
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 Past 5     Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                    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     (since September 2000) of the Manager;
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 and an additional
                    10 portfolios as an officer.
-------------------------------------------------------------------------------------

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



-------------------------------------------------------------------------------------
                             Other Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,                   Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund, Length of
Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Ronald H. Fielding,     Senior Vice  President  (since January 1996) of the Manager;
Vice President and      Chairman of the  Rochester  Division  of the Manager  (since
Portfolio Manager       January   1996);   an  officer  of  9   portfolios   in  the
since 1999              OppenheimerFunds complex.
Age: 56
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Scott Cottier, Vice     Vice President of the Manager since 2002;  portfolio manager
President since 2005    and trader at Victory  Capital  Management  (1999-2002);  an
Age: 34                 officer of 8 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Daniel G. Loughran,     Vice  President of the Manager  since April 2001; an officer
Vice President since    of 8 portfolios in the OppenheimerFunds complex.
2005
Age: 42
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Troy Willis, Vice       Assistant  Vice  President  of the Manager  since July 2005;
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 the
Vice President and      Manager    (since   March   2004);    Vice    President   of
Chief Compliance        OppenheimerFunds   Distributor,   Inc.,   Centennial   Asset
Officer since 2004      Management   Corporation  and  Shareholder  Services,   Inc.
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 (since
Treasurer since 1999    March 1999); Treasurer of the following: HarbourView Asset
Age: 46                 Management Corporation, Shareholder Financial Services,
                        Inc., Shareholder Services, Inc., Oppenheimer Real Asset
                        Management Corporation, and Oppenheimer Partnership
                        Holdings, Inc. (since March 1999), OFI Private Investments,
                        Inc. (since March 2000), OppenheimerFunds International
                        Ltd. (since May 2000), OppenheimerFunds plc (since May
                        2000), OFI Institutional Asset Management, Inc. (since
                        November 2000), and OppenheimerFunds Legacy Program
                        (charitable trust program established by the Manager)
                        (since June 2003); Treasurer and Chief Financial Officer of
                        OFI Trust Company (trust company subsidiary of the Manager)
                        (since May 2000); Assistant Treasurer of the following: OAC
                        (since March 1999),Centennial Asset Management Corporation
                        (March 1999-October 2003) and OppenheimerFunds Legacy
                        Program (April 2000-June 2003); Principal and Chief
                        Operating Officer of Bankers Trust Company-Mutual Fund
                        Services Division (March 1995-March 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen,         Assistant Vice President of the Manager (since August
Assistant Treasurer     2002); Manager/Financial Product Accounting of the Manager
since 2004              (November 1998-July 2002). An officer of 87 portfolios in
Age: 35                 the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero,        Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer     2002); Vice President/Corporate Accounting of the Manager
since 2002              (July 1999-March 2002); Chief Financial Officer of Sovlink
Age: 42                 Corporation (April 1996-June 1999). An officer of 87
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Executive Vice President (since January 2004) and General
Secretary since 2001    Counsel (since March 2002) of the Manager; General Counsel
Age: 57                 and Director of the Distributor (since December 2001);
                        General Counsel of Centennial Asset Management Corporation
                        (since December 2001); Senior Vice President and General
                        Counsel of HarbourView Asset Management Corporation (since
                        December 2001); Secretary and General Counsel of OAC (since
                        November 2001); Assistant Secretary (since September 1997)
                        and Director (since November 2001) of OppenheimerFunds
                        International Ltd. and OppenheimerFunds plc; Vice President
                        and Director of Oppenheimer Partnership Holdings, Inc.
                        (since December 2002); Director of Oppenheimer Real Asset
                        Management, Inc. (since November 2001); Senior Vice
                        President, General Counsel and Director of Shareholder
                        Financial Services, Inc. and Shareholder Services, Inc.
                        (since December 2001); Senior Vice President, General
                        Counsel and Director of OFI Private Investments, Inc. and
                        OFI Trust Company (since November 2001); Vice President of
                        OppenheimerFunds Legacy Program (since June 2003); Senior
                        Vice President and General Counsel of OFI Institutional
                        Asset Management, Inc. (since November 2001); Director of
                        OppenheimerFunds (Asia) Limited (since December 2003);
                        Senior Vice President (May 1985-December 2003), Acting
                        General Counsel (November 2001-February 2002) and Associate
                        General Counsel (May 1981-October 2001) of the Manager;
                        Assistant Secretary of the following: Shareholder Services,
                        Inc. (May 1985-November 2001), Shareholder Financial
                        Services, Inc. (November 1989-November 2001), and
                        OppenheimerFunds International Ltd. (September
                        1997-November 2001). An officer of 87 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice President (since June 1998) and Senior Counsel and
Assistant Secretary     Assistant Secretary (since October 2003) of the Manager;
since 2001              Vice President (since 1999) and Assistant Secretary (since
Age: 40                 October 2003) of the Distributor; Assistant Secretary of
                        Centennial Asset Management Corporation (since October
                        2003); Vice President and Assistant Secretary of
                        Shareholder Services, Inc. (since 1999); Assistant
                        Secretary of OppenheimerFunds Legacy Program and
                        Shareholder Financial Services, Inc. (since December 2001);
                        Assistant Counsel of the Manager (August 1994-October
                        2003). An officer of 87 portfolios in the OppenheimerFunds
                        complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg,      Vice President and Associate Counsel of the Manager (since
Assistant Secretary     May 2004); First Vice President (April 2001-April 2004),
since 2004              Associate General Counsel (December 2000-April 2004),
Age:  37                Corporate Vice President (May 1999-April 2001) and
                        Assistant General Counsel (May 1999-December 2000) of UBS
                        Financial Services Inc. (formerly, PaineWebber
                        Incorporated). An officer of 87 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie,   Senior Vice President and Deputy General Counsel of the
Assistant Secretary     Manager (since September 2004); Mr. Gillespie held the
since 2004              following positions at Merrill Lynch Investment Management:
Age: 41                 First Vice President (2001-September 2004); Director
                        (2000-September 2004) and Vice President (1998-2000). An
                        officer of 87 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------
Name and Other Fund        Aggregate      Retirement     Estimated        Total
                                           Benefits        Annual      Compensation
                          Compensation    Accrued as      Benefits    From the Fund
Position(s)                 From the     Part of Fund       Upon         and Fund
(as applicable)             Fund(1)        Expenses    Retirement(2)     Complex
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Clayton K. Yeutter        $7,164((3))       $1,791        $86,171        $173,700
Chairman of the Board
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Matthew P. Fink((4))          None           None          $2,641          None
Proxy Committee Member
and Regulatory &
Oversight Committee
Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli
Regulatory & Oversight       $5,333          None      $100,824((5))  $237,312((6))
Committee Chairman
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip A. Griffiths
Governance Committee
Chairman and Regulatory   $6,188((7))       $6,188        $34,972        $142,092
& Oversight Committee
Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee Member
and Proxy Committee          $2,964          None          $7,128         $8,532
Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Joel W. Motley
Audit Committee
Chairman and Regulatory   $6,218((9))       $2,487        $23,945        $150,760
& Oversight Committee
Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kenneth A. Randall           $5,530       None((10))      $85,944        $134,080
Audit Committee Member
and Governance
Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward V. Regan((11))        $4,542          None         $70,977        $118,788

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Russell S. Reynolds, Jr.     $4,414          None         $66,602        $106,792
Proxy Committee
Chairman and Governance
Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Donald Spiro ((12))           $594           None           None         $64,080

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Joseph M. Wikler(13)          None           None            --          $23,000
Audit Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Peter I. Wold (13)
Governance Committee          None           None            --          $20,500
Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian F. Wruble(1(4))
Regulatory & Oversight
Committee Member              None           None      $22,238(1(5))  $111,000(1(6))
-------------------------------------------------------------------------------------
1....."Aggregate  Compensation  From the  Fund"  includes  fees  and  deferred
   compensation, if any.
2.    "Estimated  Annual  Retirement  Benefits Upon  Retirement" is based on a
   straight  life payment plan  election  with the  assumption  that a Trustee
   will retire at the age of 75 and is eligible  (after 7 years of service) to
   receive  retirement  plan benefits with respect to certain Board I Funds as
   described below under "Retirement Plan for Trustees."
3.    Includes  $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 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 a Board member of 13 of the Board I Funds
   effective August13, 2004 and of 9 of the Board I Funds effective
   October 26, 2004. She was elected as a Board member of all of the 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 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. Wikler and Mr. Wold were elected as Board members of 23 of the
   Board I Funds as of August 17, 2005. They had served as Board members of
   the other 11 Board I Funds prior to that date.
14.   Mr. Wruble was appointed as Trustee of the Board I Funds effective
   October 10, 2005.
15.   Estimated benefits to be paid to Mr. Wruble for serving as a director
   or trustee of 10 other Oppenheimer funds that are not Board I Funds. Mr.
   Wruble's service as a director or trustee of such funds will not be
   counted towards the fulfillment of his eligibility requirements for
   payments under the Board I retirement plan, described below.
16.   For serving as a director or trustee of 10 other Oppenheimer funds (at
   December 31, 2004) that are not Board I Funds.

|X|   Retirement Plan for Trustees. Certain Board I Funds have adopted a
retirement plan that provides for payments to retired Independent Trustees.
Payments are up to 80% of the average compensation paid during a Trustee's
five years of service in which the highest compensation was received. A
Trustee must serve as director or trustee for any of the Board I Funds for at
least seven years 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 compensations and the length of
his or her service on the Board.

|X|   Deferred Compensation Plan. The Board of the 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 certain Board I Funds. Under the plan, the compensation
deferred by a Trustee is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected by the
Trustee. The amount paid to the Trustee under the plan is determined based
upon the amount of compensation deferred and the performance of the selected
funds.

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

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

      Citigroup Global Mkts Inc. 109801250, Attn. Cindy Tempesta, 7th Floor
333 West 34th Street, New York, New York 10001-2483, which owned
11,480,837.656 Class A shares (5.81% of the Class A shares then outstanding)
for the benefit of its customers.

      Charles Schwab & Co Inc. Special Custody acct for the exclusive benefit
of customers, Attn. Mutual Funds, 101 Montgomery St. San Francisco CA
94104-4122, which owned 16,276,263.428 Class A shares (8.24% of the Class A
shares then outstanding) for the benefit of its customers.

      MLPF&S for the sole benefit of its customers, Attn. Fund ADMN/#XXXX,
4800 Deer Lake Drive East Floor 3, Jacksonville, FL 32246-6484, which owned
10,543,885.786 Class A shares (5.34% of the Class A shares then outstanding)
for the benefit of its customers.

      Citigroup Global Mkts Inc. 109801250, Attn. Cindy Tempesta, 7th Floor
333 West 34th Street, New York, New York 10001-2483, which owned
4,259,118.274 Class B shares (10.00% of the Class B shares then outstanding)
for the benefit of its customers.

      MLPF&S for the sole benefit of its customers, Attn. Fund ADMN, 4800
Deer Lake Drive East Floor 3, Jacksonville, FL 32246-6484, which owned
3,515,205.312 Class B shares (8.25% of the Class B shares then outstanding)
for the benefit of its customers.

      MLPF&S for the sole benefit of its customers, Attn. Fund ADMN, 4800
Deer Lake Drive East Floor 3, Jacksonville, FL 32246-6484, which owned
17,072,316.592 Class C shares (22.07% of the Class C shares then outstanding)
for the benefit of its customers.

      Citigroup Global Mkts Inc. 109801250, Attn. Cindy Tempesta, 7th Floor
333 West 34th Street, New York, New York 10001-2483, which owned
8,307,975.118 Class C shares (10.74% of the Class C shares then outstanding)
for the benefit of its customers.


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.

|X| Portfolio Proxy Voting.  The Fund has adopted Portfolio Proxy Voting
Policies and Procedures under which the Fund votes proxies relating to
securities held by the Fund ("portfolio proxies").  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 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               Management Fee        Management Fee Paid to
        Ended 7/31          (Without Voluntary Waiver)        the Manager
                                                            (after waiver)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2003                     $2,636,346                    N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2004                     $4,646,275                    N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2005                     $9,270,643                    N/A
---------------------------------------------------------------------------------

      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 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 adviser to the Fund, the Manager can withdraw its permission to
the Fund 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 Ronald H. Fielding, Scott Cottier, 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, Cottier, Loughran, 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, Cottier, Loughran, Willis, DeMitry and
      Franz as of July 31, 2005.  No account has a performance-based advisory
      fee:

 Portfolio       Registered    Total    Other     Total      Other      Total
                                                  Assets in
                              Assets in           Other
                             Registered Pooled    Pooled                Assets
                 Investment  Investment InvestmentInvestment           in Other
                 Companies    Companies Vehicles  Vehicles   Accounts  Accounts
 Manager          Managed     Managed*   Managed   Managed*  Managed   Managed*
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Ronald H.           10      $19,636.8    None        $0      None       None
 Fielding
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Daniel G.           10      $19,636.8    None        $0      None       None
 Loughran
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Scott Cottier       10      $19,636.8    None        $0      None       None
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Troy Willis         10      $19,636.8    None        $0      None       None
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Marcus Franz        10     $19,636.80    None        $0      None       None
 ---------------------------------------------------------------------------------
 ---------------------------------------------------------------------------------
 Mark DeMitry        10     $19,636.80    None        $0      None       None
   *  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 accounts 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 - High Yield 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 September 30, 2005, the
      Portfolio Manager beneficially owned shares of the Fund as follows:

            ----------------------------------------------------------
                                                Range of Shares
            ------------------------------        Beneficially
                  Portfolio Manager            Owned in the Fund
            ----------------------------------------------------------
            ----------------------------------------------------------
            Daniel G. Loughran                     $10,001-$50,000
            ----------------------------------------------------------
            Troy Willis                            $10,001-$50,000
            ----------------------------------------------------------

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


Brokerage Policies of the Fund

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

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

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

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

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

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

In the  fiscal  years  ended  July 31,  2003,  2004 and  2005,  there  were no
transactions directed to brokers for research services,  and the amount of the
commissions  paid to  broker-dealers  for those  services was $0. As explained
above, in the fiscal years ended July 31, 2003,  2004 and 2005,  respectively,
the Fund did not pay any brokerage commissions.

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.

 ------------------------------------------------------------------------------
          Aggregate     Class A                     Concessions  Concessions
 Fiscal   Front-End     Front-End    Concessions    on Class B   on Class C
 Year     Sales         Sales        on Class A     Shares       Shares
 Ended    Charges on    Charges      Shares         Advanced by  Advanced by
 7/31:    Class A       Retained by  Advanced by    Distributor(2Distributor(2)
          Shares        Distributor(1Distributor(2)
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2003      $4,232,170   $742,361      $322,613     $4,840,008    $782,185
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2004    $9,301,500    $1,470,397    $1,042,717    $5,141,582   $1,680,449
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2005    $27,469,020   $4,232,112    $3,771,254    $7,183,977   $4,926,868
 ------------------------------------------------------------------------------
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.


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

             Class A Contingent   Class B Contingent    Class C Contingent
 Fiscal      Deferred Sales       Deferred Sales        Deferred Sales
 Year  Ended Charges Retained by  Charges Retained by   Charges Retained by
 7/31:       Distributor          Distributor           Distributor
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2003           $16,995              $606,720               $109,266
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2004           $60,920              $641,845               $108,492
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2005           $76,961             $1,058,377              $176,463
 ------------------------------------------------------------------------------


Distribution and Service Plans.  The Fund has adopted a Service Plan for its
Class A shares and Distribution and Service Plans for its Class B and Class C
shares under Rule 12b-1 of the Investment Company Act.  Under those plans,
the Fund makes payments to 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 of the Fund, 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 Fund's 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.

      |_|  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 $2,023,635, all of which was paid by the Distributor to
recipients and included $54,322 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.

|_|   Class B and Class C Distribution and Service Plans. 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 for the service fee are similar to the
services provided under 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 dealer 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 fees 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:

      |_|         pays sales concessions to authorized brokers and dealers at
      the time of sale and pays service fees as described in the Prospectus,
      |_|         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,
      |_|         employs personnel to support distribution of Class B and
Class C shares,
      |_|         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,
|_|   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,
|_|   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,
|_|   may use the payments under the plan to include the Fund in various
      third-party distribution programs that may increase sales of Fund
      shares,
|_|   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
|_|   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 in the Fiscal Year
                                 Ended 7/31/05
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:      Total Payments  Amount          Distributor's      Distributor's
                                             Aggregate          Unreimbursed
                                             Unreimbursed       Expenses as %
                             Retained by     Expenses Under     of Net Assets
             Under Plan      Distributor     Plan               of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B
 Plan          $3,680,913     $3,253,770(1)     $17,018,319          3.22%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C
 Plan          $4,378,928     $2,531,873(2)     $10,097,129          1.16%
 -------------------------------------------------------------------------------
1.    Includes $3,218 paid to an affiliate of the Distributor's parent
      company.
2.    Includes $23,733 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 Statement of Additional Information. They
may also receive reallowance of commissions from the Distributor, derived
from sales charges paid by the clients of the financial intermediary, also as
described in this Statement of Additional Information. Additionally, the
Manager and/or the Distributor (including their affiliates) may make payments
to financial intermediaries in connection with their offering and selling
shares of the Fund and other Oppenheimer funds, providing marketing or
promotional support, transaction processing and/or administrative services.
Among the financial intermediaries that may receive these payments are
brokers and dealers who sell and/or hold shares of the Fund, banks (including
bank trust departments), registered investment advisers, insurance companies,
retirement plan and qualified tuition program administrators, third party
administrators, and other institutions that have selling, servicing or
similar arrangements with the Manager or Distributor. The payments to
intermediaries vary by the types of product sold, the features of the Fund
share class and the role played by the intermediary.

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

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

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

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

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

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

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

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

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

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

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

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

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

  ===============================================================================
  ABN AMRO                                ADP
  -------------------------------------------------------------------------------
  -------------------------------------------------------------------------------
  Alliance Benefit Group                  AMVESCAP Retirement Plans
  -------------------------------------------------------------------------------
  -------------------------------------------------------------------------------
  American Stock & Transfer               Baden Retirement
  -------------------------------------------------------------------------------
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  BCG                                     Benefit Administration Co., LLC
  -------------------------------------------------------------------------------
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  Benefit Administration, Inc.            Benefit Plans Administrative Services
  -------------------------------------------------------------------------------
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  Benetech, Inc.                          BISYS Retirement Services
  -------------------------------------------------------------------------------
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  Boston Financial Data Services          Ceridian
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  Circle Trust Company                    Citigroup
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  CitiStreet                              CPI
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  Daily Access.Com, Inc.                  Digital Retirement Solutions
  -------------------------------------------------------------------------------
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  Dyatech                                 ERISA Administrative Services, Inc.
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  ExpertPlan.com                          FAScore
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  FBD Consulting                          Federated Investors
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  Fidelity Institutional                  First National Bank of Omaha
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  First Trust Corp.                       Franklin Templeton
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  Geller Group                            Gold K
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  Great West Financial Services           Hartford Life Insurance Co.
  Equities, Inc.
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  ICMA - RC Services                      In West Pension Mgmt
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  Independent Plan Coordinators           Ingham Group
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  Interactive Retirement Systems, Ltd.    Invesmart, Inc.
  -------------------------------------------------------------------------------
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  Kaufman & Goble                         Leggette & Co., Inc.
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  Manulife                                MassMutual Financial Group and
                                          affiliates
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  Matrix Settlement & Clearance Services  Mellon HR Solutions
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  Merrill Lynch & Co., Inc.               Metavante
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  Metlife Securities Inc.                 MFS Investment Management
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  Mid Atlantic Capital Corp.              Milliman USA
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  Morgan Stanley DW Inc.                  National City Bank
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  National Financial Services Corp.       National Investors Services Corp.
  -------------------------------------------------------------------------------
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  Nationwide Investment Service Corp.     New York Life Investment Management,
                                          Inc.
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  Northwest Plan Services                 Pension Administration and Consulting
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  PFPC, Inc.                              PSMI Group
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  Putnam Fiduciary Trust Company          Quads Trust Company
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  RSM McGladrey                           SAFECO
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  Charles Schwab & Co., Inc.              Security Trust Company
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  Sentinel / National Life                Standard Insurance Co
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  Stanley, Hunt, Dupree & Rhine           State Street Bank & Trust Company
  -------------------------------------------------------------------------------
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  Suntrust Investment Services, Inc.      Swerdlin & Co.
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  T. Rowe Price Brokerage Services, L.P.  Taylor, Perky & Parker, LLC
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  The 401k Company                        The Investment Center, Inc.
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  Trusource                               Union Bank and Trust Co.
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  USI Consulting Group                    Vanguard Group
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  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 its most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at
1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

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

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

      |_| 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.
      |_|  The Fund's performance returns may not reflect the effect of taxes
         on dividends and capital gains distributions.
      |_| An investment in the Fund is not insured by the FDIC or any other
government agency.
      |_| 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.
      |_| When an investor's shares are redeemed, they may be worth more or
less than their original cost.
      |_|  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.

      |_| 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:

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

      |_| 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.

      |_| 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 Federal 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 income tax after deductions
and exemptions).


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

             The Fund's Yields for the 30-Day Periods Ended 7/31/05
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                           Tax-Equivalent Yield
                Dividend Yield       Standardized Yield      (35.00% Fed. Tax
                                                                 Bracket)
Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

           Without     After Sales  Without    After      Without     After
           Sales       Charge       Sales      Sales      Sales       Sales
           Charge                   Charge     Charge     Charge      Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A       5.68%       5.41%       5.37%      5.12%       8.27%      7.87%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B       4.77%        N/A        4.59%       N/A        7.06%       N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C       4.80%        N/A        4.59%       N/A        7.06%       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% contingent
deferred sales charge is deducted for returns for the one-year period.

      |_| 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 below) to achieve an
Ending Redeemable Value ("ERV" in the formula) of that investment, according
to the following formula:

     1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )

|_|   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:

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

|_|   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
ATVDR     1/n  Distributions and Redemptions)
  P

      |_| 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

      |_| Total Returns at Net Asset Value.  From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset
value" (without deducting sales charges) for Class A, Class B or Class C
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
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          Cumulative Total              Average Annual Total Returns
             Returns (10
          years or life of
               class)
Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                                    10-Years
                                 1-Year            5-Years        (or life of
                                                                     class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without  After    Without  After   Without
          Sales    Sales    Sales    Sales    Sales    Sales    Sales   Sales
           Charge   Charge   Charge   Charge   Charge   Charge  Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A   101.07%(1111.10%(1)16.18%   21.97%   9.54%    10.61%  7.23%(1)7.76%(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B   101.83%(2101.83%(2)16.09%   21.09%   9.49%    9.77%   7.28%(2)7.28%(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C   95.10%(3)95.10%(3) 20.08%   21.08%   9.77%    9.77%   6.97%(3)6.97%(3)
---------------------------------------------------------------------------------
(1)   Inception of Class A:   10/1/93
(2)   Inception of Class B:   10/1/93
(3)   Inception of Class C:   8/29/95






----------------------------------------------------------------------------------
          Average Annual Total Returns for Class A Shares (After Taxes)
                          For the Periods Ended 7/31/05
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
                                 1-Year           5-Years            10-Years

----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
After Taxes on Distributions
                                 16.18%            9.54%              7.23%
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
After Taxes on Distributions
and Redemption of Fund Shares    13.02%            9.16%              7.05%
----------------------------------------------------------------------------------

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.

      |_| 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.

      |_|   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 rated among
the municipal national 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.

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

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

      There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this 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 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
the 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 of
Intent period will be deducted.  It is the responsibility of the dealer of
record and/or the investor to advise the Distributor about the Letter in
placing any purchase orders for the investor during the Letter of Intent
period. All of such purchases must be made through the Distributor.

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

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

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

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

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

         5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class
               A contingent deferred sales charge,
(b)   Class B 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 classes of shares.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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


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

      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           Oppenheimer New Jersey Municipal Fund
   Municipals
   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 Gold & Special Minerals     Oppenheimer Total Return Bond Fund
   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
      (3/3/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund III until after the expiration of the warranty period
      (12/16/2011).

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

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

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

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

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

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

o     Except with respect to 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 Limited-Term Government Fund, Limited
Term Municipal Fund, Limited Term New York Municipal Fund and Oppenheimer
Senior Floating Rate Fund, the Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange 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 the 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.

      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 (including short-term and long-term) and the proceeds of the
redemption of shares, paid to any shareholder (1) who has failed to provide a
correct taxpayer identification number or to properly certify that number
when required, (2) who is subject to backup withholding for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to backup withholding
or is an "exempt recipient" (such as a corporation). Any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and all income and any tax
withheld is identified in reports mailed to shareholders in January of each
year with a copy sent to the IRS.

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


      In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year.  However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.

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

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

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

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

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



Additional Information About the Fund

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

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

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

Independent Registered Public Accounting Firm. KPMG LLP served as the
Independent Registered Public Accounting Firm for the Fund.  KPMG LLP audits
the Fund's financial statements and performs other related audit services.
KPMG LLP also acts as 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 MULTI-STATE MUNICIPAL TRUST:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Rochester National Municipals (one of the portfolios constituting
the Oppenheimer Multi-State Municipal Trust), 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 Rochester National Municipals as of July 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.


KPMG LLP

Denver, Colorado
September 13, 2005







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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--103.7%
-----------------------------------------------------------------------------------------------------------------------
ALABAMA--1.3%
$ 30,000,000     AL Hsg. Finance Authority (Single Family)                    5.450%         10/01/2032   $  30,838,200
-----------------------------------------------------------------------------------------------------------------------
     190,000     AL IDA Solid Waste Disposal (Pine City Fiber Company)        6.450          12/01/2023         198,712
-----------------------------------------------------------------------------------------------------------------------
      55,000     AL IDA Solid Waste Disposal (Pine City Fiber Company)        6.450          12/01/2023          57,999
-----------------------------------------------------------------------------------------------------------------------
  11,000,000     AL Space Science Exhibit Finance Authority                   6.000          10/01/2025      10,930,260
-----------------------------------------------------------------------------------------------------------------------
   5,845,000     Courtland, AL Industrial Devel. Board
                 (Champion International Corp.), Series A                     6.375          03/01/2029       5,894,683
-----------------------------------------------------------------------------------------------------------------------
   2,200,000     Rainbow City, AL Special Health Care Facilities
                 Financing Authority (Regency Pointe)                         8.250          01/01/2031         887,524
-----------------------------------------------------------------------------------------------------------------------
      10,000     Selma, AL Industrial Devel. Board
                 (International Paper Company)                                6.000          05/01/2025          10,558
-----------------------------------------------------------------------------------------------------------------------
      30,000     South Marengo County, AL Water
                 & Fire Protection Authority                                  7.700          05/01/2008          30,299
                                                                                                          -------------
                                                                                                             48,848,235
-----------------------------------------------------------------------------------------------------------------------
 ALASKA--0.2%
     260,000     AK Northern Tobacco Securitization Corp. (TASC)              5.375          06/01/2021         267,717
-----------------------------------------------------------------------------------------------------------------------
     330,000     AK Northern Tobacco Securitization Corp. (TASC)              5.500          06/01/2029         341,025
-----------------------------------------------------------------------------------------------------------------------
   5,170,000     AK Northern Tobacco Securitization Corp. (TASC)              6.500          06/01/2031       5,502,638
                                                                                                          -------------
                                                                                                              6,111,380
-----------------------------------------------------------------------------------------------------------------------
 ARIZONA--0.6%
     200,000     Apache County, AZ IDA
                 (Tucson Electric Power Company)                              5.875          03/01/2033         200,058
-----------------------------------------------------------------------------------------------------------------------
   7,000,000     AZ Health Facilities Authority (American Baptist
                 Estates)                                                     7.750          11/15/2033       7,311,640
-----------------------------------------------------------------------------------------------------------------------
     520,000     Coconino County, AZ Pollution Control
                 (Nevada Power Company)                                       6.375          10/01/2036         534,279
-----------------------------------------------------------------------------------------------------------------------
   3,360,000     Gila County, AZ IDA (Asarco, Inc.) 1,2                       5.550          01/01/2027       2,966,309
-----------------------------------------------------------------------------------------------------------------------
     310,000     Maricopa County, AZ IDA (Sun King Apartments)                6.750          11/01/2018         280,863
-----------------------------------------------------------------------------------------------------------------------
     490,000     Maricopa County, AZ IDA (Sun King Apartments)                6.750          05/01/2031         418,583
-----------------------------------------------------------------------------------------------------------------------
   4,375,000     Maricopa County, AZ Pollution Control ROLs 3,4              12.447 5        08/01/2033       4,460,925
-----------------------------------------------------------------------------------------------------------------------
      50,000     Navajo County, AZ IDA (Stone Container Corp.)                7.400          04/01/2026          51,645
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Phoenix, AZ IDA (America West Airlines)                      6.250          06/01/2019       1,640,420
-----------------------------------------------------------------------------------------------------------------------
   1,750,000     Phoenix, AZ IDA (Royal Paper Converting)                     7.000          03/01/2014       1,702,365
-----------------------------------------------------------------------------------------------------------------------
     170,000     Pima County, AZ Devel. Authority
                 (Tucson Electric Power Company)                              6.100          09/01/2025         170,019
-----------------------------------------------------------------------------------------------------------------------
   1,385,000     Pima County, AZ IDA (Basis School)                           7.375          07/01/2034       1,413,863
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Pima County, AZ IDA (Desert Tech Schools)                    7.000          02/01/2024       1,005,710
-----------------------------------------------------------------------------------------------------------------------
     210,000     Tucson & Pima Counties, AZ IDA (Single Family Mtg.)          6.200          01/01/2034         212,516
                                                                                                          -------------
                                                                                                             22,369,195


                 21 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

    PRINCIPAL                                                                                                      VALUE
       AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------
ARKANSAS--0.1%
$     520,000     Little River County, AR (Georgia-Pacific Corp.) 4           5.600%         10/01/2026   $      525,845
------------------------------------------------------------------------------------------------------------------------
    2,160,000     North Little Rock, AR Residential Hsg. Facilities
                  Board RITES 3                                              13.355 5        02/20/2017         2,531,34
                                                                                                          --------------
                                                                                                               3,057,192
------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--14.4%
    2,500,000     CA County Tobacco Securitization Agency (TASC)              5.500          06/01/2033        2,595,650
------------------------------------------------------------------------------------------------------------------------
      680,000     CA County Tobacco Securitization Agency (TASC)              5.750          06/01/2029          715,816
------------------------------------------------------------------------------------------------------------------------
    2,610,000     CA County Tobacco Securitization Agency (TASC)              5.875          06/01/2035        2,742,249
------------------------------------------------------------------------------------------------------------------------
    7,285,000     CA County Tobacco Securitization Agency (TASC)              5.875          06/01/2043        7,716,855
------------------------------------------------------------------------------------------------------------------------
    2,375,000     CA County Tobacco Securitization Agency (TASC)              5.875          06/01/2043        2,496,054
------------------------------------------------------------------------------------------------------------------------
    5,105,000     CA County Tobacco Securitization Agency (TASC)              5.875          06/01/2043        5,365,202
------------------------------------------------------------------------------------------------------------------------
    1,605,000     CA County Tobacco Securitization Agency (TASC)              6.000          06/01/2038        1,697,833
------------------------------------------------------------------------------------------------------------------------
    2,930,000     CA County Tobacco Securitization Agency (TASC)              6.000          06/01/2042        3,099,471
------------------------------------------------------------------------------------------------------------------------
      155,000     CA County Tobacco Securitization Agency (TASC)              6.000          06/01/2043          163,965
------------------------------------------------------------------------------------------------------------------------
    5,000,000     CA County Tobacco Securitization Agency (TASC)              6.125          06/01/2038        5,325,000
------------------------------------------------------------------------------------------------------------------------
    2,720,000     CA Golden State Tobacco Securitization Corp.                5.500          06/01/2043        3,054,723
------------------------------------------------------------------------------------------------------------------------
    3,655,000     CA Golden State Tobacco Securitization Corp.                6.250          06/01/2033        4,077,153
------------------------------------------------------------------------------------------------------------------------
   13,180,000     CA Golden State Tobacco Securitization Corp.                6.625          06/01/2040       15,070,803
------------------------------------------------------------------------------------------------------------------------
   23,855,000     CA Golden State Tobacco Securitization Corp.                6.750          06/01/2039       27,476,189
------------------------------------------------------------------------------------------------------------------------
  160,000,000     CA Golden State Tobacco Securitization Corp.
                  (TASC) 4                                                    5.000          06/01/2045      164,422,400
------------------------------------------------------------------------------------------------------------------------
    1,510,000     CA Golden State Tobacco Securitization Corp. (TASC)         7.875          06/01/2042        1,883,559
------------------------------------------------------------------------------------------------------------------------
    7,320,000     CA Golden State Tobacco Securitization Corp. RITES 3       11.954 5        06/01/2043       10,923,050
------------------------------------------------------------------------------------------------------------------------
    6,800,000     CA Golden State Tobacco Securitization Corp. RITES 3       12.988 5        06/01/2043       10,147,096
------------------------------------------------------------------------------------------------------------------------
    3,790,000     CA Pollution Control Financing Authority
                  (Browning-Ferris Industries)                                6.875          11/01/2027        3,847,608
------------------------------------------------------------------------------------------------------------------------
    4,880,000     CA Statewide CDA (Aspire Public Schools)                    7.250          08/01/2031        4,970,329
------------------------------------------------------------------------------------------------------------------------
    5,000,000     CA Statewide CDA (Daughters of Charity)                     5.250          07/01/2035        5,252,750
------------------------------------------------------------------------------------------------------------------------
    9,000,000     CA Statewide CDA (East Valley Tourist)                      9.250          10/01/2020        9,934,110
------------------------------------------------------------------------------------------------------------------------
   19,000,000     CA Statewide CDA (East Valley Tourist)                     11.000          10/01/2020       19,561,070
------------------------------------------------------------------------------------------------------------------------
    3,000,000     CA Statewide CDA (Elder Care Alliance)                      8.250          11/15/2032        3,111,570
------------------------------------------------------------------------------------------------------------------------
   14,400,000     CA Statewide CDA (Fairfield Apartments)                     7.250          01/01/2035       14,686,992
------------------------------------------------------------------------------------------------------------------------
   47,039,000     CA Statewide CDA (United Airlines) 1,2                      5.700          10/01/2033       30,659,079
------------------------------------------------------------------------------------------------------------------------
    4,500,000     CA Statewide Financing Authority Tobacco
                  Settlement (TASC)                                           6.000          05/01/2037        4,757,535
------------------------------------------------------------------------------------------------------------------------
    1,405,000     CA Statewide Financing Authority Tobacco
                  Settlement (TASC)                                           6.000          05/01/2043        1,485,408
------------------------------------------------------------------------------------------------------------------------
      100,000     CA Statewide Financing Authority Tobacco
                  Settlement (TASC)                                           6.000          05/01/2043          105,723
------------------------------------------------------------------------------------------------------------------------
    3,995,000     CA Valley Health System COP                                 6.875          05/15/2023        4,000,953
------------------------------------------------------------------------------------------------------------------------
    9,010,000     CA Veterans GO                                              4.750          12/01/2018        9,169,027


                 22 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
CALIFORNIA Continued
$ 21,000,000     CA Veterans GO                                              4.900%         12/01/2025   $   21,290,220
-----------------------------------------------------------------------------------------------------------------------
  57,500,000     CA Veterans GO 6                                            5.050          12/01/2036       59,190,500
-----------------------------------------------------------------------------------------------------------------------
   1,535,000     Lathrop, CA Special Tax Community Facilities
                 District No. 03-2                                           7.000          09/01/2033        1,607,790
-----------------------------------------------------------------------------------------------------------------------
   3,250,000     Long Beach, CA Harbor DRIVERS 3                            12.918 5        05/15/2027        4,041,765
-----------------------------------------------------------------------------------------------------------------------
   5,700,000     Los Angeles, CA Regional Airports Improvement
                 Corp. (Air Canada)                                          8.750          10/01/2014        5,639,637
-----------------------------------------------------------------------------------------------------------------------
  10,000,000     Los Angeles, CA Regional Airports Improvement
                 Corp. (American Airlines)                                   7.500          12/01/2024       10,705,100
-----------------------------------------------------------------------------------------------------------------------
   1,135,000     Los Angeles, CA Regional Airports Improvement
                 Corp. (Delta Airlines)                                      6.350          11/01/2025          934,241
-----------------------------------------------------------------------------------------------------------------------
   8,485,000     Los Angeles, CA Regional Airports Improvement
                 Corp. (Delta-Continental Airlines)                          9.250          08/01/2024        8,591,911
-----------------------------------------------------------------------------------------------------------------------
   9,800,000     Northern CA Tobacco Securitization Authority (TASC)         5.375          06/01/2041       10,039,708
-----------------------------------------------------------------------------------------------------------------------
   1,565,000     Northern CA Tobacco Securitization Authority (TASC),
                 Series A                                                    5.250          06/01/2031        1,588,444
-----------------------------------------------------------------------------------------------------------------------
   2,200,000     San Diego County, CA COP                                    5.700          02/01/2028        2,143,702
-----------------------------------------------------------------------------------------------------------------------
   5,025,000     Southern CA Tobacco Securitization Authority (TASC)         5.500          06/01/2036        5,183,338
-----------------------------------------------------------------------------------------------------------------------
   8,550,000     Southern CA Tobacco Securitization Authority (TASC)         5.625          06/01/2043        8,888,324
-----------------------------------------------------------------------------------------------------------------------
   8,335,000     Southern CA Tobacco Securitization Authority (TASC)         6.000          06/01/2043        8,814,596
-----------------------------------------------------------------------------------------------------------------------
   2,680,000     Val Verde, CA Unified School District Special Tax           5.450          09/01/2036        2,707,068
                                                                                                         --------------
                                                                                                            531,881,566
-----------------------------------------------------------------------------------------------------------------------
COLORADO--2.0%
   1,620,000     Beacon Point, CO Metropolitan District                      6.125          12/01/2025        1,612,386
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Beacon Point, CO Metropolitan District                      6.250          12/01/2035        1,983,660
-----------------------------------------------------------------------------------------------------------------------
   6,000,000     Central Marksheffel, CO Metropolitan District               7.250          12/01/2029        6,338,520
-----------------------------------------------------------------------------------------------------------------------
  24,295,000     CO Educational & Cultural Facilities Authority              6.000          07/01/2042       24,268,518
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     CO Educational & Cultural Facilities Authority
                 (Colorado Lutheran High School Assoc.)                      7.625          06/01/2034        2,124,380
-----------------------------------------------------------------------------------------------------------------------
     830,000     CO Hsg. & Finance Authority                                 6.400          11/01/2024          854,278
-----------------------------------------------------------------------------------------------------------------------
   1,170,000     CO Hsg. & Finance Authority                                 6.450          04/01/2030        1,235,485
-----------------------------------------------------------------------------------------------------------------------
     240,000     CO Hsg. & Finance Authority                                 7.050          04/01/2031          248,114
-----------------------------------------------------------------------------------------------------------------------
     695,000     CO Hsg. & Finance Authority                                 8.400          10/01/2021          756,042
-----------------------------------------------------------------------------------------------------------------------
     600,000     CO Hsg. & Finance Authority (Single Family), Series C-2     6.600          08/01/2032          627,048
-----------------------------------------------------------------------------------------------------------------------
   4,535,000     Colorado Springs, CO Utilities ROLs 3,4                    13.258 5        11/15/2043        5,238,651
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Denver, CO City & County Airport Special Facilities
                 (United Air Lines) 1,2                                      6.875          10/01/2032        1,825,340
-----------------------------------------------------------------------------------------------------------------------
   3,625,000     High Plains, CO Metropolitan District                       6.125          12/01/2025        3,674,518
-----------------------------------------------------------------------------------------------------------------------
   5,625,000     High Plains, CO Metropolitan District                       6.250          12/01/2035        5,704,819
-----------------------------------------------------------------------------------------------------------------------
   3,725,000     Highline Business Improvement District (Littleton, CO)      5.250          12/15/2019        2,523,688


                 23 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
COLORADO Continued
$ 11,000,000     Lincoln Park, CO Metropolitan District                       7.750%         12/01/2026   $  11,767,360
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Southlands, CO Medical District                              7.000          12/01/2024       1,099,490
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Southlands, CO Medical District                              7.125          12/01/2034       2,195,760
                                                                                                          -------------
                                                                                                             74,078,057
-----------------------------------------------------------------------------------------------------------------------
CONNECTICUT--0.1%
   1,500,000     CT Devel. Authority Airport Facility (Learjet)               7.950          04/01/2026       1,808,925
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     CT Resource Recovery Authority
                 (Browning-Ferris Industries)                                 6.450          11/15/2022       1,528,650
                                                                                                          -------------
                                                                                                              3,337,575
-----------------------------------------------------------------------------------------------------------------------
DELAWARE--0.0%
     200,000     DE Hsg. (Multifamily)                                        7.000          05/01/2025         200,952
-----------------------------------------------------------------------------------------------------------------------
DISTRICT OF COLUMBIA--1.4%
      85,000     District of Columbia HFA (Benning Road Apartments)           6.300          01/01/2012          85,638
-----------------------------------------------------------------------------------------------------------------------
     100,000     District of Columbia Tobacco Settlement Financing Corp.      6.250          05/15/2024         107,826
-----------------------------------------------------------------------------------------------------------------------
   3,295,000     District of Columbia Tobacco Settlement Financing Corp.      6.500          05/15/2033       3,916,832
-----------------------------------------------------------------------------------------------------------------------
  26,885,000     District of Columbia Tobacco Settlement Financing Corp.      6.750          05/15/2040      30,007,424
-----------------------------------------------------------------------------------------------------------------------
   2,055,000     Metropolitan Washington, D.C. Airport Authority
                 DRIVERS 3,4                                                 12.997 5        10/01/2011       2,422,023
-----------------------------------------------------------------------------------------------------------------------
   5,575,000     Metropolitan Washington, D.C. Airport Authority ROLs 3      13.402 5        10/01/2032       6,630,905
-----------------------------------------------------------------------------------------------------------------------
   6,580,000     Metropolitan Washington, D.C. Airport Authority,
                 Series A ROLs 3                                             13.402 5        10/01/2020       7,256,161
                                                                                                          -------------
                                                                                                             50,426,809
-----------------------------------------------------------------------------------------------------------------------
FLORIDA--7.1%
   2,200,000     Beacon, FL Tradeport Community Devel. District               7.250          05/01/2033       2,382,930
-----------------------------------------------------------------------------------------------------------------------
   2,750,000     Beacon, FL Tradeport Community Devel. District RITES 3      13.419 5        05/01/2032       3,718,220
-----------------------------------------------------------------------------------------------------------------------
   7,625,000     Bonnet Creek, FL Resort Community Devel.
                 District Special Assessment                                  7.500          05/01/2034       8,225,698
-----------------------------------------------------------------------------------------------------------------------
   1,900,000     Dade County, FL IDA (Miami Cerebral Palsy Residence)         8.000          06/01/2022       1,941,629
-----------------------------------------------------------------------------------------------------------------------
      50,000     FL Capital Projects Finance Authority CCRC
                 (Glenridge on Palmer Ranch)                                  7.625          06/01/2032          52,465
-----------------------------------------------------------------------------------------------------------------------
   8,485,000     FL Capital Projects Finance Authority CCRC
                 (Glenridge on Palmer Ranch)                                  8.000          06/01/2032       9,436,508
-----------------------------------------------------------------------------------------------------------------------
     710,000     FL Capital Trust Agency (American Opportunity)               8.250          12/01/2038         660,627
-----------------------------------------------------------------------------------------------------------------------
  24,400,000     FL Capital Trust Agency (Seminole Tribe                      8.950          10/01/2033      26,674,080
                 Convention) 6
-----------------------------------------------------------------------------------------------------------------------
  72,110,000     FL Capital Trust Agency (Seminole Tribe Convention)         10.000          10/01/2033      79,367,872
-----------------------------------------------------------------------------------------------------------------------
  28,230,000     FL Capital Trust Agency Multifamily Affordable Hsg.,
                 Series C                                                     8.125          10/01/2038      28,096,190
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     FL City Center Community Devel. District                     6.125          05/01/2036       2,007,580
-----------------------------------------------------------------------------------------------------------------------
     260,000     FL HFA (Multifamily Hsg.), Series I                          6.625          07/01/2028         249,072
-----------------------------------------------------------------------------------------------------------------------
     570,000     FL HFA (Multifamily Hsg.), Series I-1                        6.100          01/01/2009         571,248


                 24 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
FLORIDA Continued
$  1,660,000     FL HFC (Tallahassee Augustine Club Apartments)               8.250%         10/01/2030   $   1,541,825
-----------------------------------------------------------------------------------------------------------------------
   5,220,000     FL HFC (Westchase Apartments)                                6.610          07/01/2038       4,540,147
-----------------------------------------------------------------------------------------------------------------------
     665,000     Grand Haven, FL Community Devel. District
                 Special Assessment, Series B                                 6.900          05/01/2019         670,227
-----------------------------------------------------------------------------------------------------------------------
   2,255,000     Hillsborough County, FL Hsg. & Finance Authority
                 (Gardens at South Bay Apartments) ROLs 3                    11.374 5        07/01/2022       2,240,207
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Hillsborough County, FL IDA
                 (National Gypsum Company)                                    7.125          04/01/2030       2,245,420
-----------------------------------------------------------------------------------------------------------------------
   9,250,000     Hillsborough County, FL IDA (Senior Care Group)              6.700          07/01/2021       9,476,163
-----------------------------------------------------------------------------------------------------------------------
   3,500,000     Hillsborough County, FL IDA (Senior Care Group)              6.750          07/01/2029       3,566,255
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     Jacksonville, FL Economic Devel. Corp.
                 (Met Packaging Solutions)                                    5.500          10/01/2030       1,581,765
-----------------------------------------------------------------------------------------------------------------------
   4,500,000     Jacksonville, FL Health Facilities Authority ROLs 3         13.522 5        11/15/2032       5,426,010
-----------------------------------------------------------------------------------------------------------------------
   1,225,000     Keys Cove, FL Community Devel. District                      5.875          05/01/2035       1,275,433
-----------------------------------------------------------------------------------------------------------------------
   1,800,000     Madison County, FL Mtg. (Twin Oaks)                          6.000          07/01/2025       1,788,732
-----------------------------------------------------------------------------------------------------------------------
  14,090,000     Martin County, FL IDA (Indiantown Cogeneration)              7.875          12/15/2025      14,325,303
-----------------------------------------------------------------------------------------------------------------------
     670,000     Martin County, FL IDA (Indiantown Cogeneration)              8.050          12/15/2025         681,196
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Miami Beach, FL Health Facilities Authority
                 (Mt. Sinai Medical Center)                                   6.700          11/15/2019       1,092,520
-----------------------------------------------------------------------------------------------------------------------
     500,000     Miami Beach, FL Health Facilities Authority
                 (Mt. Sinai Medical Center)                                   6.800          11/15/2031         547,400
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Miami, FL Health Facilities Authority
                 (Mercy Hospital) IRS                                         7.770 5        08/15/2015       2,045,920
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     Orange County, FL Health Facilities Authority
                 (Orlando Lutheran Towers)                                    8.750          07/01/2026       1,619,130
-----------------------------------------------------------------------------------------------------------------------
     685,000     Palm Beach County, FL Multifamily
                 (Boynton Apartments) 1,2                                     8.000          01/01/2014         377,483
-----------------------------------------------------------------------------------------------------------------------
      15,000     Pinellas County, FL Educational Facilities Authority
                 (Eckerd College)                                             7.750          07/01/2014          15,025
-----------------------------------------------------------------------------------------------------------------------
   1,750,000     Reunion East, FL Community Devel. District                   5.800          05/01/2036       1,804,810
-----------------------------------------------------------------------------------------------------------------------
  10,000,000     Reunion East, FL Community Devel. District, Series A         7.375          05/01/2033      11,213,300
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Reunion West, FL Community Devel. District
                 Special Assessment                                           6.250          05/01/2036       2,113,480
-----------------------------------------------------------------------------------------------------------------------
   3,965,000     Sanford, FL Airport Facilities Authority
                 (Central Florida Terminals)                                  7.500          05/01/2010       3,950,924
-----------------------------------------------------------------------------------------------------------------------
   5,880,000     Sanford, FL Airport Facilities Authority
                 (Central Florida Terminals)                                  7.500          05/01/2015       5,823,493
-----------------------------------------------------------------------------------------------------------------------
   1,145,000     Sanford, FL Airport Facilities Authority
                 (Central Florida Terminals)                                  7.500          05/01/2021       1,125,844
-----------------------------------------------------------------------------------------------------------------------
  10,395,000     Sanford, FL Airport Facilities Authority
                 (Central Florida Terminals)                                  7.750          05/01/2021      10,416,518
-----------------------------------------------------------------------------------------------------------------------
   4,475,000     Seminole County, FL IDA (Progressive Health)                 7.500          03/01/2035       4,522,838


                 25 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

    PRINCIPAL                                                                                                     VALUE
       AMOUNT                                                               COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
FLORIDA Continued
$   3,000,000     Town Center, FL at Palm Coast Community
                  Devel. District                                            6.000%         05/01/2036   $    3,055,260
                                                                                                         --------------
                                                                                                            262,466,747
-----------------------------------------------------------------------------------------------------------------------
GEORGIA--1.3%
    3,000,000     Atlanta, GA Devel. Authority Student Hsg.
                  (ADA/CAU Partners)                                         6.250          07/01/2036        3,333,780
-----------------------------------------------------------------------------------------------------------------------
      140,000     Atlanta, GA Urban Residential Finance Authority
                  (Spring Branch Apartments)                                 8.500          04/01/2026          138,296
-----------------------------------------------------------------------------------------------------------------------
      580,000     Brunswick & Glynn County, GA Devel. Authority
                  (Coastal Community Retirement Corp.)                       7.125          01/01/2025          617,132
-----------------------------------------------------------------------------------------------------------------------
    7,695,000     Brunswick & Glynn County, GA Devel. Authority
                  (Coastal Community Retirement Corp.)                       7.250          01/01/2035        8,269,124
-----------------------------------------------------------------------------------------------------------------------
    6,700,000     Burke County, GA Devel. Authority RITES 3                  9.582 5        05/01/2034        6,766,330
-----------------------------------------------------------------------------------------------------------------------
       75,000     Charlton County, GA Solid Waste Management
                  Authority (Chesser Island Road Landfill)                   7.375          04/01/2018           75,446
-----------------------------------------------------------------------------------------------------------------------
       35,000     Effingham County, GA Devel. Authority
                  (Fort James Corp.)                                         5.625          07/01/2018           34,992
-----------------------------------------------------------------------------------------------------------------------
    8,270,000     GA Hsg. & Finance Authority 4                              4.850          12/01/2037        8,315,816
-----------------------------------------------------------------------------------------------------------------------
      100,000     McDuffie County, GA County Devel. Authority
                  (Temple-Inland)                                            6.950          12/01/2023          113,737
-----------------------------------------------------------------------------------------------------------------------
    3,475,000     Rockdale County, GA Devel. Authority (Visy Paper)          7.400          01/01/2016        3,527,855
-----------------------------------------------------------------------------------------------------------------------
   14,500,000     Rockdale County, GA Devel. Authority (Visy Paper) 6        7.500          01/01/2026       14,720,545
-----------------------------------------------------------------------------------------------------------------------
      425,000     Savannah, GA EDA (Skidway Health & Living Services)        7.400          01/01/2024          446,050
-----------------------------------------------------------------------------------------------------------------------
    2,450,000     Savannah, GA EDA (Skidway Health & Living Services)        7.400          01/01/2034        2,569,291
                                                                                                         --------------
                                                                                                             48,928,394
-----------------------------------------------------------------------------------------------------------------------
HAWAII--0.7%
    2,500,000     HI Department of Budget & Finance RITES 3                 10.820 5        12/01/2022        2,876,600
-----------------------------------------------------------------------------------------------------------------------
    2,125,000     HI Department of Budget & Finance RITES 3                 11.216 5        09/01/2032        2,449,573
-----------------------------------------------------------------------------------------------------------------------
   10,600,000     HI Department of Budget & Finance Special Purpose
                  (Kahala Nui)                                               8.000          11/15/2033       12,195,724
-----------------------------------------------------------------------------------------------------------------------
    2,600,000     HI Department of Budget & Finance Special Purpose
                  (Kahala Senior Living Community)                           7.875          11/15/2023        2,999,308
-----------------------------------------------------------------------------------------------------------------------
    3,920,000     HI Department of Transportation (Continental
                  Airlines)                                                  7.000          06/01/2020        3,803,615
                                                                                                         --------------
                                                                                                             24,324,820
-----------------------------------------------------------------------------------------------------------------------
IDAHO--0.1%
    3,000,000     ID Health Facilities Authority (Valley Vista Care Corp.)   7.875          11/15/2022        3,021,720
-----------------------------------------------------------------------------------------------------------------------
ILLINOIS--2.8%
    4,262,500     Bolingbrook, IL Will & Du Page Counties Wastewater
                  Facilities (Crossroads Treatment)                          6.600          01/01/2035        4,311,945
-----------------------------------------------------------------------------------------------------------------------
    8,000,000     Caseyville, IL Tax (Forest Lakes)                          7.000          12/30/2022        8,037,600
-----------------------------------------------------------------------------------------------------------------------
    8,000,000     Centerpoint, IL Intermodal Center Program                  8.000          06/15/2023        7,834,000


                 26 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


    PRINCIPAL                                                                                                     VALUE
       AMOUNT                                                               COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
ILLINOIS Continued
$  13,645,000     Chicago, IL O'Hare International Airport
                  (American Airlines)                                        8.200%         12/01/2024   $   13,472,254
-----------------------------------------------------------------------------------------------------------------------
    8,050,000     Chicago, IL O'Hare International Airport RITES 3          14.806 5        01/01/2029       12,161,296
-----------------------------------------------------------------------------------------------------------------------
    2,000,000     Chicago, IL O'Hare International Airport ROLs 3           12.388 5        01/01/2034        2,235,160
-----------------------------------------------------------------------------------------------------------------------
    1,375,000     Godfrey, IL (United Methodist Village)                     5.875          11/15/2029          966,158
-----------------------------------------------------------------------------------------------------------------------
      170,000     IL Devel. Finance Authority                                8.250          08/01/2012          172,655
-----------------------------------------------------------------------------------------------------------------------
   23,540,000     IL Devel. Finance Authority (Citgo Petroleum Corp.) 6      8.000          06/01/2032       26,998,497
-----------------------------------------------------------------------------------------------------------------------
    2,000,000     IL Finance Authority (Friendship Village Schaumburg)       5.375          02/15/2025        2,020,020
-----------------------------------------------------------------------------------------------------------------------
    2,000,000     IL Finance Authority (Friendship Village Schaumburg)       5.625          02/15/2037        2,027,200
-----------------------------------------------------------------------------------------------------------------------
    1,500,000     IL Health Facilities Authority                             6.900          11/15/2033        1,586,280
-----------------------------------------------------------------------------------------------------------------------
    2,125,000     IL Health Facilities Authority RITES 3                    11.478 5        02/15/2025        2,516,255
-----------------------------------------------------------------------------------------------------------------------
       10,000     IL Hsg. Devel. Authority (Multifamily Hsg.),
                  Series A                                                   7.100          07/01/2026           10,015
-----------------------------------------------------------------------------------------------------------------------
      500,000     Peoria, IL Hsg. (Peoria Oak Woods Apartments)              7.750          10/15/2033          494,545
-----------------------------------------------------------------------------------------------------------------------
   19,026,158     Robbins, IL Res Rec (Robbins Res Rec Partners)             7.250          10/15/2024       19,442,641
                                                                                                         --------------
                                                                                                            104,286,521
-----------------------------------------------------------------------------------------------------------------------
INDIANA--1.3%
    2,175,000     East Chicago, IN Pollution Control
                  (Ispat Inland Steel Company)                               6.800          06/01/2013        2,174,696
-----------------------------------------------------------------------------------------------------------------------
   13,925,000     IN Devel. Finance Authority (Inland Steel)                 7.250          11/01/2011       14,662,607
-----------------------------------------------------------------------------------------------------------------------
    1,690,000     IN Health Facility Financing Authority RITES 3            12.939 5        11/01/2031        2,067,614
-----------------------------------------------------------------------------------------------------------------------
    2,500,000     IN Health Facility Financing Authority RITES 3            12.954 5        11/01/2031        3,058,600
-----------------------------------------------------------------------------------------------------------------------
   17,500,000     North Manchester, IN
                  (Estelle Peabody Memorial Home)                            7.250          07/01/2033       18,255,300
-----------------------------------------------------------------------------------------------------------------------
    7,120,000     Vincennes, IN Economic Devel.
                  (Southwest Indiana Regional Youth Village)                 6.250          01/01/2024        7,161,438
-----------------------------------------------------------------------------------------------------------------------
       30,000     Wabash, IN Solid Waste Disposal
                  (Jefferson Smurfit Corp.)                                  7.500          06/01/2026           31,270
                                                                                                         --------------
                                                                                                             47,411,525
-----------------------------------------------------------------------------------------------------------------------
IOWA--2.4%
      900,000     IA Finance Authority Retirement Community
                  (Friendship Haven)                                         6.125          11/15/2032          917,550
-----------------------------------------------------------------------------------------------------------------------
   22,245,000     IA Tobacco Settlement Authority (TASC)                     5.300          06/01/2025       22,813,805
-----------------------------------------------------------------------------------------------------------------------
   62,965,000     IA Tobacco Settlement Authority (TASC)                     5.600          06/01/2035       64,971,695
                                                                                                         --------------
                                                                                                             88,703,050
-----------------------------------------------------------------------------------------------------------------------
KANSAS--0.1%
    1,300,000     Lenexa, KS Multifamily Hsg. (Meadows Apartments)           7.750          10/15/2035        1,248,936
-----------------------------------------------------------------------------------------------------------------------
    1,745,000     Sedgwick & Shawnee Counties, KS Hsg. (Single Family)       6.875          12/01/2026        1,822,827
-----------------------------------------------------------------------------------------------------------------------
      445,000     Sedgwick & Shawnee Counties, KS Hsg. (Single Family)       7.600          12/01/2031          470,579
-----------------------------------------------------------------------------------------------------------------------
    1,110,000     Sedgwick & Shawnee Counties, KS Hsg. (Single Family)       7.600          12/01/2031        1,173,803
                                                                                                         --------------
                                                                                                              4,716,145


                 27 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
KENTUCKY--3.5%
$  3,360,000      Boone County, KY Pollution Control
                  (Dayton Power & Light Company)                             6.500%         11/15/2022   $    3,427,570
-----------------------------------------------------------------------------------------------------------------------
      25,000      Boone County, KY Pollution Control
                  (Dayton Power & Light Company)                             6.500          11/15/2022           25,078
-----------------------------------------------------------------------------------------------------------------------
  20,760,000      Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                           6.125          02/01/2022       16,709,309
-----------------------------------------------------------------------------------------------------------------------
  42,760,000      Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                           7.125          02/01/2021       38,353,154
-----------------------------------------------------------------------------------------------------------------------
     100,000      Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                           7.250          02/01/2022           90,488
-----------------------------------------------------------------------------------------------------------------------
  27,795,000      Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                           7.500          02/01/2012       26,600,371
-----------------------------------------------------------------------------------------------------------------------
  29,185,000      Kenton County, KY Airport Special Facilities
                  (Delta Airlines)                                           7.500          02/01/2020       27,189,913
-----------------------------------------------------------------------------------------------------------------------
   2,165,000      Kenton County, KY Airport Special Facilities
                  (Mesaba Aviation)                                          6.625          07/01/2019        1,889,504
-----------------------------------------------------------------------------------------------------------------------
   3,000,000      Kenton County, KY Airport Special Facilities
                  (Mesaba Aviation)                                          6.700          07/01/2029        2,492,010
-----------------------------------------------------------------------------------------------------------------------
   2,735,000      Kuttawa, KY (1st Mortgage-GF/Kentucky)                     6.750          03/01/2029        2,636,540
-----------------------------------------------------------------------------------------------------------------------
   2,900,000      Morgantown, KY Solid Waste Disposal (Imco Recycling)       6.000          05/01/2023        2,817,727
-----------------------------------------------------------------------------------------------------------------------
   1,200,000      Morgantown, KY Solid Waste Disposal (Imco Recycling)       7.450          05/01/2022        1,198,092
-----------------------------------------------------------------------------------------------------------------------
   5,740,000      Morgantown, KY Solid Waste Disposal (Imco Recycling)       7.650          05/01/2016        5,765,026
-----------------------------------------------------------------------------------------------------------------------
   2,000,000      Perry County, KY Solid Waste Disposal
                  (Weyerhaeuser Company)                                     6.550          04/15/2027        2,113,340
                                                                                                         --------------
                                                                                                            131,308,122
-----------------------------------------------------------------------------------------------------------------------
LOUISIANA--5.3%
   5,555,000      Calcasieu Parish, LA Industrial Devel. Board Pollution
                  Control (Gulf States Utilities Company)                    6.750          10/01/2012        5,610,272
-----------------------------------------------------------------------------------------------------------------------
   1,375,000      Epps, LA COP 3                                             8.000          06/01/2018        1,418,643
-----------------------------------------------------------------------------------------------------------------------
   3,800,000      LA CDA (Eunice Student Hsg. Foundation)                    7.375          09/01/2033        2,659,620
-----------------------------------------------------------------------------------------------------------------------
     695,000      LA Local Government EF&CD (Oakleigh Apartments)            8.500          06/01/2038          702,930
-----------------------------------------------------------------------------------------------------------------------
   1,170,000      LA Local Government EF&CD Authority
                  (Cypress Apartments)                                       8.000          04/20/2028        1,148,776
-----------------------------------------------------------------------------------------------------------------------
     525,000      LA Local Government EF&CD Authority
                  (Sharlo Apartments)                                        8.000          06/20/2028          506,048
-----------------------------------------------------------------------------------------------------------------------
   8,000,000      LA Local Government EF&CD Authority (St. James Place)      7.000          11/01/2029        8,030,880
-----------------------------------------------------------------------------------------------------------------------
   6,000,000      LA Public Facilities Authority
                  (Lake Charles Memorial Hospital)                           8.625          12/01/2030        6,409,080
-----------------------------------------------------------------------------------------------------------------------
   5,350,000      LA Public Facilities Authority (Progressive Healthcare)    6.375          10/01/2028        5,009,259
-----------------------------------------------------------------------------------------------------------------------
   1,875,000      LA Public Facilities Authority ROLs 3                     12.508 5        05/15/2022        2,236,838
-----------------------------------------------------------------------------------------------------------------------
 118,530,000      LA Tobacco Settlement Financing Corp. (TASC)               5.875          05/15/2039      125,565,941
-----------------------------------------------------------------------------------------------------------------------
   9,580,000      LA Tobacco Settlement Financing Corp. (TASC), Series B     5.500          05/15/2030       10,000,849


                 28 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS



   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
LOUISIANA Continued
$     50,000     Lake Charles, LA Non-Profit HDC Section 8 (Chateau)         7.875%         02/15/2025   $       52,125
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Port New Orleans, LA Industrial Devel.
                 (Continental Grain Company)                                 7.500          07/01/2013        1,033,600
-----------------------------------------------------------------------------------------------------------------------
  19,650,000     St. Charles Parish, LA
                 (Louisiana Power & Light Company)                           7.500          06/01/2021       19,753,556
-----------------------------------------------------------------------------------------------------------------------
   4,250,000     St. Charles Parish, LA
                 (Louisiana Power & Light Company)                           7.500          06/01/2021        4,361,988
                                                                                                         --------------
                                                                                                            194,500,405
-----------------------------------------------------------------------------------------------------------------------
MAINE--0.3%
   7,595,000     ME Finance Authority Solid Waste Recycling Facilities
                 (Great Northern Paper)                                      7.750          10/01/2022        7,635,937
-----------------------------------------------------------------------------------------------------------------------
   1,495,000     ME State Hsg. Authority Mtg. ROLs 3                        12.996 5        11/15/2022        1,682,114
                                                                                                         --------------
                                                                                                              9,318,051
-----------------------------------------------------------------------------------------------------------------------
 MARYLAND--0.0%
     320,000     MD Industrial Devel. Financing Authority
                 (Our Lady of Good Counsel)                                  5.500          05/01/2020          323,946
-----------------------------------------------------------------------------------------------------------------------
     850,000     MD Industrial Devel. Financing Authority
                 (Our Lady of Good Counsel)                                  6.000          05/01/2035          874,429
-----------------------------------------------------------------------------------------------------------------------
      15,000     Montgomery County, MD Hsg. Opportunities
                 Commission (Multifamily Mtg.), Series C                     7.150          07/01/2023           15,020
                                                                                                         --------------
                                                                                                              1,213,395
-----------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--2.2%
     800,000     MA Devel. Finance Agency (Eastern Nazarene College)         5.625          04/01/2019          810,576
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     MA Devel. Finance Agency (Eastern Nazarene College)         5.625          04/01/2029        1,000,390
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     MA GO ROLs 3                                               12.538 5        08/01/2027        2,720,120
-----------------------------------------------------------------------------------------------------------------------
  22,575,000     MA HFA                                                      5.000          07/01/2022       22,990,380
-----------------------------------------------------------------------------------------------------------------------
  52,085,000     MA HFA 6                                                    5.250          07/01/2025       53,907,454
                                                                                                         --------------
                                                                                                             81,428,920
-----------------------------------------------------------------------------------------------------------------------
MICHIGAN--2.3%
     310,000     Detroit, MI Hsg. Finance Corp.
                 (Across The Park Section 8 Elderly Hsg.)                    7.875          06/01/2010          313,457
-----------------------------------------------------------------------------------------------------------------------
      95,000     Detroit, MI Local Devel. Finance Authority                  5.500          05/01/2021           89,272
-----------------------------------------------------------------------------------------------------------------------
   2,625,000     Kent, MI Hospital Finance Authority                         6.250          07/01/2040        2,903,119
-----------------------------------------------------------------------------------------------------------------------
   2,475,000     MI Higher Education Student Loan Authority RITES 3         12.616 5        09/01/2026        2,940,894
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     MI Strategic Fund Limited Obligation
                 (Detroit Edison) ROLs 3                                    14.416 5        06/01/2030        2,628,480
-----------------------------------------------------------------------------------------------------------------------
     485,000     MI Strategic Fund Limited Obligation
                 (Ford Motor Company), Series A                              6.550          10/01/2022          485,058
-----------------------------------------------------------------------------------------------------------------------
   3,710,000     MI Strategic Fund Pollution Control
                 (General Motors Corporation)                                6.200          09/01/2020        3,732,705


                 29 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
MICHIGAN Continued
$  2,640,000     Wayne Charter County, MI Airport Facilities
                 (Northwest Airlines)                                         6.000%         12/01/2029   $   2,101,546
-----------------------------------------------------------------------------------------------------------------------
   5,375,000     Wayne Charter County, MI Airport Facilities
                 (Northwest Airlines)                                         6.750          12/01/2015       4,220,396
-----------------------------------------------------------------------------------------------------------------------
  15,190,000     Wayne County, MI Airport Authority                           4.750          12/01/2018      15,633,396
-----------------------------------------------------------------------------------------------------------------------
  15,925,000     Wayne County, MI Airport Authority                           4.750          12/01/2019      16,309,907
-----------------------------------------------------------------------------------------------------------------------
  31,195,000     Wayne County, MI Airport Authority 6                         5.000          12/01/2029      32,537,009
-----------------------------------------------------------------------------------------------------------------------
   2,900,000     Wenonah Park Properties, MI (Bay City Hotel)                 7.500          04/01/2033       2,779,302
                                                                                                          -------------
                                                                                                             86,674,541
-----------------------------------------------------------------------------------------------------------------------
MINNESOTA--1.7%
   1,430,000     Burnsville, MN Commercial Devel. (Holiday Inn)               5.900          04/01/2008       1,423,150
-----------------------------------------------------------------------------------------------------------------------
   1,235,000     Mahtomedi, MN Multifamily (Briarcliff)                       7.350          06/01/2036       1,270,926
-----------------------------------------------------------------------------------------------------------------------
  27,300,000     Minneapolis & St. Paul, MN Metropolitan Airports
                 Commission (Northwest Airlines)                              7.000          04/01/2025      25,053,483
-----------------------------------------------------------------------------------------------------------------------
  12,400,000     Minneapolis & St. Paul, MN Metropolitan Airports
                 Commission (Northwest Airlines)                              7.375          04/01/2025      11,842,496
-----------------------------------------------------------------------------------------------------------------------
   8,150,000     Rochester, MN Hsg. (Wedum Shorewood Campus)                  6.600          06/01/2036       8,473,555
-----------------------------------------------------------------------------------------------------------------------
     690,000     Rochester, MN Multifamily Hsg. (Eastridge Estates)           7.750          12/15/2034         689,903
-----------------------------------------------------------------------------------------------------------------------
   1,700,000     St. Paul, MN Hsg. & Redevel. Authority
                 (Brigecreek Senior Place)                                    7.000          09/15/2037       1,700,153
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     St. Paul, MN Hsg. & Redevel. Authority
                 (Community of Peace Building Company)                        7.875          12/01/2030       2,090,080
-----------------------------------------------------------------------------------------------------------------------
   3,000,000     St. Paul, MN Hsg. & Redevel. Authority
                 (Great Northern Lofts)                                       6.250          03/01/2029       3,025,080
-----------------------------------------------------------------------------------------------------------------------
   2,130,000     St. Paul, MN Hsg. & Redevel. Authority (Upper Landing)       7.000          03/01/2029       2,135,112
-----------------------------------------------------------------------------------------------------------------------
   3,400,000     St. Paul, MN Port Authority (Healtheast Midway Campus)       6.000          05/01/2030       3,454,808
                                                                                                          -------------
                                                                                                             61,158,746
-----------------------------------------------------------------------------------------------------------------------
MISSISSIPPI--0.1%
     100,000     Claiborne County, MS Pollution Control
                 (System Energy Resources)                                    6.200          02/01/2026         100,037
-----------------------------------------------------------------------------------------------------------------------
     320,000     Hinds County, MS Urban Renewal
                 (The Lodge Associates, Ltd.) 1,2                             8.000          10/15/2022         179,504
-----------------------------------------------------------------------------------------------------------------------
   4,375,000     MS Hospital Equipment & Facilities Authority RITES 3        11.062 5        09/01/2024       4,922,313
                                                                                                          -------------
                                                                                                              5,201,854
-----------------------------------------------------------------------------------------------------------------------
MISSOURI--1.1%
  13,000,000     Branson, MO IDA (Branson Hills)                              7.050          05/01/2027      13,103,740
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Kansas City, MO IDA (Plaza Library)                          5.900          03/01/2024       1,000,340
-----------------------------------------------------------------------------------------------------------------------
   1,400,000     Kansas City, MO IDA (West Paseo)                             6.750          07/01/2036       1,410,416
-----------------------------------------------------------------------------------------------------------------------
   2,500,000     St. Joseph, MO IDA (Living Community of St. Joseph)          7.000          08/15/2032       2,676,050
-----------------------------------------------------------------------------------------------------------------------
     750,000     St. Joseph, MO IDA (Shoppes at North Village)                5.375          11/01/2024         745,043
-----------------------------------------------------------------------------------------------------------------------
   2,500,000     St. Joseph, MO IDA (Shoppes at North Village)                5.500          11/01/2027       2,498,175


                 30 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON             MATURITY     SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
MISSOURI Continued
$  2,335,000     St. Louis, MO IDA (Kiel Center Multipurpose Arena)           7.750%          12/01/2013  $   2,377,731
-----------------------------------------------------------------------------------------------------------------------
  15,400,000     St. Louis, MO IDA (Kiel Center Multipurpose Arena) 6         7.875           12/01/2024     15,697,220
                                                                                                          -------------
                                                                                                             39,508,715
-----------------------------------------------------------------------------------------------------------------------
MONTANA--1.2%
  18,245,000     Lewis & Clark County, MT Environmental (Asarco) 1,2          5.600           01/01/2027     16,066,912
-----------------------------------------------------------------------------------------------------------------------
  23,195,000     Lewis & Clark County, MT Environmental (Asarco) 1,2          5.850           10/01/2033     20,857,408
-----------------------------------------------------------------------------------------------------------------------
   6,800,000     MT Board of Investment Exempt Facilities
                 (Stillwater Mining Company)                                  8.000           07/01/2020      7,126,944
-----------------------------------------------------------------------------------------------------------------------
   1,905,000     MT Health Facilities Authority
                 (Community Medical Center)                                   6.375           06/01/2018      1,962,664
                                                                                                          -------------
                                                                                                             46,013,928
-----------------------------------------------------------------------------------------------------------------------
MULTI STATES--0.5%
   7,000,000     GMAC Municipal Mortgage Trust                                5.500           10/31/2040      7,050,120
-----------------------------------------------------------------------------------------------------------------------
  13,000,000     GMAC Municipal Mortgage Trust                                5.700           10/31/2040     13,121,550
                                                                                                          -------------
                                                                                                             20,171,670
-----------------------------------------------------------------------------------------------------------------------
NEVADA--1.7%
  27,210,000     Clark County, NV Industrial Devel.
                 (Nevada Power Company)                                       5.900           10/01/2030     27,212,993
-----------------------------------------------------------------------------------------------------------------------
   6,990,000     Clark County, NV Industrial Devel.
                 (Nevada Power Company), Series A                             5.900           11/01/2032      6,990,769
-----------------------------------------------------------------------------------------------------------------------
  16,150,000     Clark County, NV Industrial Devel.
                 (Southwest Gas Corp.), Series B 6                            5.000           12/01/2033     16,665,993
-----------------------------------------------------------------------------------------------------------------------
   2,065,000     Clark County, NV Industrial Devel. RITES 3                  13.016 5         12/01/2038      2,643,365
-----------------------------------------------------------------------------------------------------------------------
  10,000,000     Director of the State of NV Dept. of Business
                 & Industry (Las Ventanas Retirement)                         7.000           11/15/2034     10,579,200
-----------------------------------------------------------------------------------------------------------------------
     150,000     NV Hsg. Division (Single Family Mtg.), Series A              8.625           04/01/2016        157,418
                                                                                                          -------------
                                                                                                             64,249,738
-----------------------------------------------------------------------------------------------------------------------
NEW HAMPSHIRE--0.3%
   2,265,000     NH Business Finance Authority (Air Cargo at Pease)           6.750           04/01/2024      2,214,264
-----------------------------------------------------------------------------------------------------------------------
   4,000,000     NH H&EFA (Franklin Pierce College)                           6.050           10/01/2034      4,355,400
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     NH H&EFA (Southern New Hampshire University)                 5.000           01/01/2030      1,536,750
-----------------------------------------------------------------------------------------------------------------------
   3,000,000     NH H&EFA (Southern New Hampshire University)                 5.000           01/01/2036      3,063,180
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     NH HE&H Facilities Authority (New England College)           5.750           03/01/2009        973,930
                                                                                                          -------------
                                                                                                             12,143,524
-----------------------------------------------------------------------------------------------------------------------
NEW JERSEY--11.2%
     435,000     NJ EDA (American Airlines)                                   7.100           11/01/2031        370,329
-----------------------------------------------------------------------------------------------------------------------
     100,000     NJ EDA (Cascade Corp.)                                       8.250           02/01/2026        100,071
-----------------------------------------------------------------------------------------------------------------------
  24,000,000     NJ EDA (Cigarette Tax) 6                                     5.500           06/15/2024     25,397,520
-----------------------------------------------------------------------------------------------------------------------
   5,205,000     NJ EDA (Cigarette Tax)                                       5.500           06/15/2031      5,463,636
-----------------------------------------------------------------------------------------------------------------------
  19,205,000     NJ EDA (Cigarette Tax)                                       5.750           06/15/2029     20,603,316


                 31 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
NEW JERSEY Continued
$  3,000,000     NJ EDA (Cigarette Tax)                                      5.750%         06/15/2034   $    3,200,520
-----------------------------------------------------------------------------------------------------------------------
     965,000     NJ EDA (Continental Airlines)                               5.500          04/01/2028          724,368
-----------------------------------------------------------------------------------------------------------------------
  12,030,000     NJ EDA (Continental Airlines)                               6.250          09/15/2019       11,244,802
-----------------------------------------------------------------------------------------------------------------------
  27,800,000     NJ EDA (Continental Airlines)                               6.250          09/15/2029       25,460,074
-----------------------------------------------------------------------------------------------------------------------
  10,755,000     NJ EDA (Continental Airlines)                               6.400          09/15/2023       10,123,144
-----------------------------------------------------------------------------------------------------------------------
     760,000     NJ EDA (Continental Airlines)                               6.625          09/15/2012          739,997
-----------------------------------------------------------------------------------------------------------------------
  12,820,000     NJ EDA (Continental Airlines)                               7.000          11/15/2030       12,672,955
-----------------------------------------------------------------------------------------------------------------------
  16,910,000     NJ EDA (Continental Airlines)                               7.200          11/15/2030       16,970,876
-----------------------------------------------------------------------------------------------------------------------
     100,000     NJ EDA (Continental Airlines)                               9.000          06/01/2033          110,849
-----------------------------------------------------------------------------------------------------------------------
   1,600,000     NJ EDA (Empowerment Zone-Cumberland)                        7.750          08/01/2021        1,618,464
-----------------------------------------------------------------------------------------------------------------------
   3,250,000     NJ EDA Retirement Community (Cedar Crest Village)           7.250          11/15/2031        3,537,170
-----------------------------------------------------------------------------------------------------------------------
   7,395,000     NJ EDA ROLs 3                                              13.546 5        12/15/2015       10,954,805
-----------------------------------------------------------------------------------------------------------------------
   5,000,000     NJ Health Care Facilities Financing Authority
                 (Raritan Bay Medical Center)                                7.250          07/01/2027        5,212,500
-----------------------------------------------------------------------------------------------------------------------
   1,125,000     NJ Tobacco Settlement Financing Corp. (TASC)                5.750          06/01/2032        1,187,606
-----------------------------------------------------------------------------------------------------------------------
  64,620,000     NJ Tobacco Settlement Financing Corp. (TASC)                6.000          06/01/2037       69,664,237
-----------------------------------------------------------------------------------------------------------------------
  88,750,000     NJ Tobacco Settlement Financing Corp. (TASC)                6.125          06/01/2042       95,959,163
-----------------------------------------------------------------------------------------------------------------------
  46,215,000     NJ Tobacco Settlement Financing Corp. (TASC)                6.250          06/01/2043       53,436,094
-----------------------------------------------------------------------------------------------------------------------
  16,165,000     NJ Tobacco Settlement Financing Corp. (TASC)                6.375          06/01/2032       18,825,921
-----------------------------------------------------------------------------------------------------------------------
  12,590,000     NJ Tobacco Settlement Financing Corp. (TASC)                6.750          06/01/2039       14,879,617
-----------------------------------------------------------------------------------------------------------------------
   4,055,000     NJ Tobacco Settlement Financing Corp. (TASC)                7.000          06/01/2041        4,907,402
                                                                                                         --------------
                                                                                                            413,365,436
-----------------------------------------------------------------------------------------------------------------------
NEW MEXICO--0.5%
   5,800,000     El Dorado, NM Area Water & Sanitation District              6.000          02/01/2025        5,770,304
-----------------------------------------------------------------------------------------------------------------------
  10,800,000     Sandoval County, NM (Santa Ana Pueblo)                      7.750          07/01/2015       11,275,848
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Ventana West, NM Public Improvement District
                 Special Levy                                                6.875          08/01/2033        1,022,520
                                                                                                         --------------
                                                                                                             18,068,672
-----------------------------------------------------------------------------------------------------------------------
 NEW YORK--0.7%
   3,000,000     Albany, NY IDA (New Covenant Charter School)                7.000          05/01/2035        2,880,330
-----------------------------------------------------------------------------------------------------------------------
   2,825,000     NYC IDA (American Airlines)                                 5.400          07/01/2019        2,122,536
-----------------------------------------------------------------------------------------------------------------------
   3,815,000     NYC IDA (American Airlines)                                 5.400          07/01/2020        2,831,646
-----------------------------------------------------------------------------------------------------------------------
   6,905,000     NYC IDA (American Airlines)                                 6.900          08/01/2024        5,886,651
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     NYC IDA (Liberty-7 World Trade Center) 3                    6.500          03/01/2035        2,127,120
-----------------------------------------------------------------------------------------------------------------------
     500,000     NYC IDA Special Facilities (JFK International Airport)      8.000          08/01/2012          491,500
-----------------------------------------------------------------------------------------------------------------------
   5,000,000     NYS DA
                 (MSH/NYU Hospital Center/HJDOI Obligated Group)             6.625          07/01/2019        5,349,000
-----------------------------------------------------------------------------------------------------------------------
   1,350,000     Otsego County, NY IDA (Hartwick College)                    6.000          07/01/2013        1,365,525
-----------------------------------------------------------------------------------------------------------------------
   1,435,000     Otsego County, NY IDA (Hartwick College)                    6.000          07/01/2014        1,443,380
-----------------------------------------------------------------------------------------------------------------------
   1,520,000     Otsego County, NY IDA (Hartwick College)                    6.000          07/01/2015        1,520,334


                 32 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


    PRINCIPAL                                                                                                     VALUE
       AMOUNT                                                                COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
NEW YORK Continued
$   1,610,000     Otsego County, NY IDA (Hartwick College)                    6.000%         07/01/2016   $   1,597,828
                                                                                                          -------------
                                                                                                             27,615,850
-----------------------------------------------------------------------------------------------------------------------
NORTH CAROLINA--0.2%
      600,000     Charlotte, NC Douglas International Airport
                  Special Facilities (US Airways)(1,2,3)                      7.750          02/01/2028         432,612
-----------------------------------------------------------------------------------------------------------------------
   10,420,000     Charlotte, NC Special Facilities
                  (Charlotte/Douglas International Airport)(1,2,3)            5.600          07/01/2027       6,816,243
                                                                                                          -------------
                                                                                                              7,248,855
-----------------------------------------------------------------------------------------------------------------------
NORTH DAKOTA--0.1%
    2,635,000     Richland County, ND Hsg. (Birchwood Properties)             6.750          05/01/2029       2,582,748
-----------------------------------------------------------------------------------------------------------------------
OHIO--2.0%
    1,520,000     Butler County, OH Hsg. (Anthony Wayne Apartments)           6.500          09/01/2030       1,368,836
-----------------------------------------------------------------------------------------------------------------------
   11,685,000     Cleveland, OH Airport (Continental Airlines)                5.375          09/15/2027       9,254,637
-----------------------------------------------------------------------------------------------------------------------
   12,710,000     Cleveland, OH Airport (Continental Airlines)                5.700          12/01/2019      10,990,337
-----------------------------------------------------------------------------------------------------------------------
    3,680,000     Dublin, OH Industrial Devel. (Dublin Health Care Corp.)     7.500          12/01/2016       3,785,726
-----------------------------------------------------------------------------------------------------------------------
   18,480,000     Hamilton, OH Electric                                       4.600          10/15/2020      19,010,191
-----------------------------------------------------------------------------------------------------------------------
    1,500,000     Moraine, OH Solid Waste Disposal
                  (General Motors Corp.)                                      5.650          07/01/2024       1,409,550
-----------------------------------------------------------------------------------------------------------------------
   12,190,000     OH Solid Waste (General Motors Corp.)                       6.300          12/01/2032      12,488,533
-----------------------------------------------------------------------------------------------------------------------
   16,320,000     Port Authority of Columbiana, OH Solid Waste
                  (Apex Environmental)                                        7.250          08/01/2034      16,603,152
                                                                                                          -------------
                                                                                                             74,910,962
-----------------------------------------------------------------------------------------------------------------------
OKLAHOMA--1.0%
    2,635,000     Cleveland County, OK IDA (Vaughn Foods)                     6.750          12/01/2012       2,672,048
-----------------------------------------------------------------------------------------------------------------------
    2,365,000     Cleveland County, OK IDA (Vaughn Foods)                     7.100          12/01/2024       2,429,328
-----------------------------------------------------------------------------------------------------------------------
    2,015,000     Ellis County, OK Industrial Authority
                  (W.B. Johnston Grain of Shattuck)                           7.100          08/01/2023       2,129,089
-----------------------------------------------------------------------------------------------------------------------
    2,760,000     Ellis County, OK Industrial Authority
                  (W.B. Johnston Grain of Shattuck)                           7.500          08/01/2023       2,965,454
-----------------------------------------------------------------------------------------------------------------------
    3,825,000     Jackson County, OK Memorial Hospital Authority
                  (Jackson County Memorial)                                   7.300          08/01/2015       3,887,233
-----------------------------------------------------------------------------------------------------------------------
    9,000,000     OK Devel. Finance Authority (Doane Products Company)        6.250          07/15/2023       8,439,390
-----------------------------------------------------------------------------------------------------------------------
    1,500,000     Oklahoma City, OK Industrial & Cultural Facilities
                  (Aero Obligated Group)                                      6.750          01/01/2023       1,506,420
-----------------------------------------------------------------------------------------------------------------------
    3,000,000     Ottawa, OK Finance Authority
                  (Doane Products Company)                                    7.250          06/01/2017       2,868,390
-----------------------------------------------------------------------------------------------------------------------
       50,000     Tulsa, OK Municipal Airport Trust (American Airlines)       7.350          12/01/2011          50,003
-----------------------------------------------------------------------------------------------------------------------
   10,500,000     Tulsa, OK Municipal Airport Trust (American Airlines)       7.750          06/01/2035      11,053,875
                                                                                                          -------------
                                                                                                             38,001,230


                 33 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
OREGON--0.0%
$     90,000     OR Economic Devel. (Georgia-Pacific Corp.)                  6.350%         08/01/2025   $       90,221
-----------------------------------------------------------------------------------------------------------------------
   3,000,000     Port of Portland, OR Special Obligation (Delta Air Lines)   6.200          09/01/2022        1,021,770
                                                                                                         --------------
                                                                                                              1,111,991
-----------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--5.4%
   1,250,000     Allegheny County, PA HDA
                 (The Covenant at South Hills)                               8.750          02/01/2031          817,025
-----------------------------------------------------------------------------------------------------------------------
   4,370,000     Allegheny County, PA HDA
                 (West Penn Allegheny Health System)                         9.250          11/15/2015        5,280,184
-----------------------------------------------------------------------------------------------------------------------
   6,000,000     Allegheny County, PA HDA
                 (West Penn Allegheny Health System)                         9.250          11/15/2022        7,239,360
-----------------------------------------------------------------------------------------------------------------------
  36,010,000     Allegheny County, PA HDA
                 (West Penn Allegheny Health System) 6                       9.250          11/15/2030       43,282,220
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Chester County, PA H&EFA (Jenners Pond)                     7.750          07/01/2034        1,042,060
-----------------------------------------------------------------------------------------------------------------------
     440,000     Horsham, PA Industrial & Commercial Devel. Authority
                 (GF/Pennsylvania Property)                                  7.375          09/01/2008          434,720
-----------------------------------------------------------------------------------------------------------------------
   5,040,000     Horsham, PA Industrial & Commercial Devel. Authority
                 (GF/Pennsylvania Property)                                  8.375          09/01/2024        4,828,169
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Lawrence County, PA IDA
                 (Shenango Presbyterian Center)                              7.500          11/15/2031        1,028,690
-----------------------------------------------------------------------------------------------------------------------
     475,000     New Morgan, PA IDA (Browning-Ferris Industries)             6.500          04/01/2019          475,119
-----------------------------------------------------------------------------------------------------------------------
   3,000,000     PA EDFA (Colver)                                            7.150          12/01/2018        3,064,680
-----------------------------------------------------------------------------------------------------------------------
   5,000,000     PA EDFA (National Gypsum Company)                           6.250          11/01/2027        5,380,350
-----------------------------------------------------------------------------------------------------------------------
  70,875,000     PA EDFA (Reliant Energy)                                    6.750          12/01/2036       76,275,675
-----------------------------------------------------------------------------------------------------------------------
  10,500,000     PA EDFA (Reliant Energy)                                    6.750          12/01/2036       11,300,100
-----------------------------------------------------------------------------------------------------------------------
  23,275,000     PA EDFA (Reliant Energy)                                    6.750          12/01/2036       25,050,417
-----------------------------------------------------------------------------------------------------------------------
   8,000,000     PA EDFA (Reliant Energy)                                    6.750          12/01/2036        8,609,600
-----------------------------------------------------------------------------------------------------------------------
   1,310,000     Philadelphia, PA Airport, Series A 4                        5.000          06/15/2023        1,371,819
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Philadelphia, PA Airport, Series A 4                        5.000          06/15/2024        2,091,120
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Philadelphia, PA Airport, Series A 4                        5.000          06/15/2025        2,089,500
                                                                                                         --------------
                                                                                                            199,660,808
-----------------------------------------------------------------------------------------------------------------------
RHODE ISLAND--3.0%
  45,000,000     Central Falls, RI Detention Facility                        7.250          07/15/2035       46,283,400
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     RI Hsg. & Mtg. Finance Corp. RITES 3                       11.485 5        10/01/2022        2,208,360
-----------------------------------------------------------------------------------------------------------------------
  41,515,000     RI Tobacco Settlement Financing Corp. (TASC)                6.250          06/01/2042       44,860,279
-----------------------------------------------------------------------------------------------------------------------
  17,925,000     RI Tobacco Settlement Financing Corp. (TASC), Series A      6.125          06/01/2032       19,148,919
                                                                                                         --------------
                                                                                                            112,500,958
-----------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA--1.6%
   1,510,000     Florence County, SC Industrial Devel.
                 (Stone Container Corp.)                                     7.375          02/01/2007        1,516,025
-----------------------------------------------------------------------------------------------------------------------
   7,810,000     Greenville County, SC School District ROLs 3               10.957 5        12/01/2020        9,011,334


                 34 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                  COUPON           MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
SOUTH CAROLINA Continued
$  6,250,000     SC Connector 2000 Association Toll Road, Series B             0.000%7       01/01/2020   $   2,837,313
-----------------------------------------------------------------------------------------------------------------------
   8,500,000     SC Connector 2000 Association Toll Road, Series B             0.000 7       01/01/2024       3,050,735
-----------------------------------------------------------------------------------------------------------------------
   7,315,000     SC GO ROLs 3                                                  9.988 5       08/01/2019       8,450,434
-----------------------------------------------------------------------------------------------------------------------
   1,785,000     SC Hsg. Finance & Devel. Authority RITES 3                   10.231 5       01/01/2023       1,908,843
-----------------------------------------------------------------------------------------------------------------------
   2,800,000     SC Hsg. Finance & Devel. Authority ROLs 3                    13.199 5       07/01/2034       3,143,784
-----------------------------------------------------------------------------------------------------------------------
       5,000     SC Resource Authority Local Government Program                7.250         06/01/2020           5,019
-----------------------------------------------------------------------------------------------------------------------
  18,840,000     SC Tobacco Settlement Management Authority, Series B 6        6.375         05/15/2028      20,264,116
-----------------------------------------------------------------------------------------------------------------------
   6,485,000     SC Tobacco Settlement Management Authority, Series B          6.375         05/15/2030       7,601,847
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     Spartanburg County, SC Solid Waste Disposal Facilities
                 (BMW US Capital Corp.)                                        7.550         11/01/2024       2,079,540
-----------------------------------------------------------------------------------------------------------------------
     110,000     York County, SC (Hoechst Celanese Corp.)                      5.700         01/01/2024         108,514
-----------------------------------------------------------------------------------------------------------------------
     255,000     York County, SC Pollution Control (Bowater)                   7.400         01/01/2010         255,474
                                                                                                          -------------
                                                                                                             60,232,978
-----------------------------------------------------------------------------------------------------------------------
SOUTH DAKOTA--1.3%
   1,000,000     Lower Brule, SD Sioux Tribe, Series B                         5.500         05/01/2019         996,090
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Lower Brule, SD Sioux Tribe, Series B                         5.600         05/01/2020         999,110
-----------------------------------------------------------------------------------------------------------------------
  36,920,000     SD Educational Enhancement Funding Corp.
                 Tobacco Settlement                                            6.500         06/01/2032      40,388,265
-----------------------------------------------------------------------------------------------------------------------
   6,444,756     Sioux Falls, SD Economic Devel. (City Centre Hotel)           7.000 8       11/01/2016       6,404,992
                                                                                                          -------------
                                                                                                             48,788,457
-----------------------------------------------------------------------------------------------------------------------
TENNESSEE--0.9%
   1,000,000     Chattanooga, TN Health Educational & Hsg. Board
                 (Campus Devel. Foundation Phase I)                            5.500         10/01/2020         996,350
-----------------------------------------------------------------------------------------------------------------------
   1,800,000     Chattanooga, TN Health Educational & Hsg. Board
                 (Campus Devel. Foundation Phase I)                            6.000         10/01/2035       1,825,542
-----------------------------------------------------------------------------------------------------------------------
     400,000     Hamilton County, TN Industrial Devel. Board (Park at 58)      6.700         03/01/2021         346,464
-----------------------------------------------------------------------------------------------------------------------
  14,745,000     Maury County, TN Industrial Devel. Board
                 (General Motors Company) 6                                    6.500         09/01/2024      14,790,562
-----------------------------------------------------------------------------------------------------------------------
   4,335,000     McMinn County, TN Industrial Devel. Board Pollution
                 Control (Calhoun Newsprint)                                   7.625         03/01/2016       4,343,757
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     McMinn County, TN Industrial Devel. Board Solid Waste
                 (Calhoun Newsprint)                                           7.400         12/01/2022       1,508,130
-----------------------------------------------------------------------------------------------------------------------
   7,500,000     Metropolitan Knoxville, TN Airport Authority
                 (Northwest Airlines)                                          8.000         04/01/2032       7,661,475
-----------------------------------------------------------------------------------------------------------------------
     800,000     Shelby County, TN HE&HF
                 (Cornerstone-Cameron & Stonegate)                             5.900         07/01/2018         618,568
-----------------------------------------------------------------------------------------------------------------------
     655,000     Shelby County, TN HE&HF
                 (Cornerstone-Cameron & Stonegate)                             6.000         07/01/2028         466,360
                                                                                                          -------------
                                                                                                             32,557,208


                 35 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON             MATURITY     SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
TEXAS--10.2%
$ 28,615,000     Alliance Airport Authority, TX (American Airlines)           7.500%          12/01/2029  $  25,727,747
-----------------------------------------------------------------------------------------------------------------------
   5,015,000     Alliance Airport Authority, TX (Federal Express Corp.)       6.375           04/01/2021      5,227,435
-----------------------------------------------------------------------------------------------------------------------
     520,000     Austin, TX Convention Enterprises (Convention Center)        6.700           01/01/2028        561,226
-----------------------------------------------------------------------------------------------------------------------
     540,000     Bexar County, TX HFC (American Opportunity Hsg.)             7.500           01/01/2013        549,299
-----------------------------------------------------------------------------------------------------------------------
     800,000     Bexar County, TX HFC (American Opportunity Hsg.)             8.000           01/01/2031        803,680
-----------------------------------------------------------------------------------------------------------------------
   1,195,000     Bexar County, TX HFC (American Opportunity Hsg.)             8.250           12/01/2037      1,062,032
-----------------------------------------------------------------------------------------------------------------------
     975,000     Bexar County, TX HFC (American Opportunity Hsg.)             9.250           12/01/2037        855,368
-----------------------------------------------------------------------------------------------------------------------
     220,000     Bexar County, TX HFC (Honey Creek LLC)                       8.000           04/01/2030        220,579
-----------------------------------------------------------------------------------------------------------------------
   1,460,000     Bexar County, TX HFC (Perrin Square)                         9.750           11/20/2031      1,451,109
-----------------------------------------------------------------------------------------------------------------------
  18,720,000     Brazos River Authority, TX (Centerpoint Energy)              4.250           03/01/2017     18,903,269
-----------------------------------------------------------------------------------------------------------------------
   3,150,000     Brazos River Authority, TX (TXU Energy Company)              6.750           10/01/2038      3,521,133
-----------------------------------------------------------------------------------------------------------------------
   8,000,000     Brazos River Authority, TX (TXU Energy Company)              7.700           04/01/2033      9,499,120
-----------------------------------------------------------------------------------------------------------------------
  17,500,000     Cambridge, TX Student Hsg.
                 (Cambridge Student Hsg. Devel.)                              7.000           11/01/2039     17,705,450
-----------------------------------------------------------------------------------------------------------------------
     885,000     Dallas-Fort Worth, TX International Airport
                 (American Airlines)                                          6.150           05/01/2029        853,273
-----------------------------------------------------------------------------------------------------------------------
   3,630,000     Dallas-Fort Worth, TX International Airport
                 (American Airlines)                                          6.375           05/01/2035      2,803,195
-----------------------------------------------------------------------------------------------------------------------
  19,065,000     Dallas-Fort Worth, TX International Airport
                 (American Airlines)                                          7.250           11/01/2030     16,573,776
-----------------------------------------------------------------------------------------------------------------------
      40,000     Dallas-Fort Worth, TX International Airport
                 (American Airlines)                                          8.250           11/01/2036         38,924
-----------------------------------------------------------------------------------------------------------------------
     235,000     Dallas-Fort Worth, TX International Airport
                 (Delta Air Lines)                                            7.625           11/01/2021         63,521
-----------------------------------------------------------------------------------------------------------------------
  22,000,000     Dallas-Fort Worth, TX International Airport Facility
                 Improvement Corp.                                            9.000           05/01/2029     22,869,660
-----------------------------------------------------------------------------------------------------------------------
  45,945,000     Dallas-Fort Worth, TX International Airport Facility
                 Improvement Corp. 6                                          9.125           05/01/2029     47,978,526
-----------------------------------------------------------------------------------------------------------------------
   6,000,000     Dallas-Fort Worth, TX International Airport RITES 3         10.944 5         11/01/2027      6,425,880
-----------------------------------------------------------------------------------------------------------------------
   8,125,000     Dallas-Fort Worth, TX International Airport ROLs 3          14.416 5         11/01/2033     10,540,075
-----------------------------------------------------------------------------------------------------------------------
   7,240,000     El Paso, TX Health Facilities Devel. Corp.
                 (Bienvivir Senior Health Services)                           7.750           08/15/2031      7,937,574
-----------------------------------------------------------------------------------------------------------------------
      25,000     Galveston County, TX HFC                                     6.200           10/01/2021         25,060
-----------------------------------------------------------------------------------------------------------------------
      10,000     Galveston, TX Special Contract
                 (Farmers Export Company)                                     6.750           05/01/2007         10,039
-----------------------------------------------------------------------------------------------------------------------
   1,000,000     Grapevine, TX IDC (Air Cargo)                                6.500           01/01/2024      1,048,430
-----------------------------------------------------------------------------------------------------------------------
   4,660,000     Gulf Coast, TX IDA (Citgo Petroleum Corp.)                   7.500           05/01/2025      5,355,458
-----------------------------------------------------------------------------------------------------------------------
      80,000     Gulf Coast, TX Waste Disposal Authority (FMC Corp.)          7.050           10/01/2009         81,688
-----------------------------------------------------------------------------------------------------------------------
   5,950,000     Harris County, TX Industrial Devel. Corp.
                 (Continental Airlines)                                       5.375           07/01/2019      4,879,774
-----------------------------------------------------------------------------------------------------------------------
   2,000,000     HFDC of Central TX
                 (Lutheran Social Services of the South)                      6.875           02/15/2032      2,100,600


                 36 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                      VALUE
      AMOUNT                                                                 COUPON            MATURITY      SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
TEXAS Continued
$  4,000,000     HFDC of Central TX (Villa De San Antonio)                    6.250%         05/15/2036   $   4,057,240
-----------------------------------------------------------------------------------------------------------------------
   6,070,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       5.700          07/15/2029       4,876,759
-----------------------------------------------------------------------------------------------------------------------
   2,385,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       5.700          07/15/2029       1,916,157
-----------------------------------------------------------------------------------------------------------------------
   8,285,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       6.125          07/15/2017       7,467,933
-----------------------------------------------------------------------------------------------------------------------
   6,405,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       6.125          07/15/2027       5,540,453
-----------------------------------------------------------------------------------------------------------------------
   4,520,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       6.125          07/15/2027       3,909,890
-----------------------------------------------------------------------------------------------------------------------
  17,750,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       6.750          07/01/2021      17,301,813
-----------------------------------------------------------------------------------------------------------------------
  22,015,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       6.750          07/01/2029      21,316,684
-----------------------------------------------------------------------------------------------------------------------
     100,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       7.000          07/01/2029          99,819
-----------------------------------------------------------------------------------------------------------------------
   1,230,000     Houston, TX Airport Special Facilities
                 (Continental Airlines)                                       7.375          07/01/2022       1,253,850
-----------------------------------------------------------------------------------------------------------------------
   1,500,000     Houston, TX HFDC
                 (Buckinham Senior Living Community)                          7.000          02/15/2026       1,653,600
-----------------------------------------------------------------------------------------------------------------------
   5,000,000     Houston, TX HFDC
                 (Buckinham Senior Living Community)                          7.125          02/15/2034       5,501,700
-----------------------------------------------------------------------------------------------------------------------
     135,000     Houston, TX IDC (Air Cargo)                                  6.375          01/01/2023         140,528
-----------------------------------------------------------------------------------------------------------------------
   2,200,000     IAH TX Public Facility Corp.                                 7.750          05/01/2026       2,150,852
-----------------------------------------------------------------------------------------------------------------------
   2,500,000     Lancaster, TX Independent School District GO RITES 3        13.955 5        02/15/2034       3,759,650
-----------------------------------------------------------------------------------------------------------------------
   9,000,000     Lewisville, TX GO                                            6.125          09/01/2029       9,848,790
-----------------------------------------------------------------------------------------------------------------------
   1,790,000     Lubbock, TX HFC (Las Colinas Quail Creek Apartments)         6.000          07/01/2032       1,818,837
-----------------------------------------------------------------------------------------------------------------------
     140,000     Matagorda County, TX Navigation District
                 (Reliant Energy)                                             5.950          05/01/2030         142,471
-----------------------------------------------------------------------------------------------------------------------
   1,350,000     Newton County, TX Public Facility Corp. 3                    8.000          03/01/2019       1,385,343
-----------------------------------------------------------------------------------------------------------------------
   2,250,000     North Central, TX HFDC (Northwest Senior Hsg. Corp.)         7.500          11/15/2029       2,433,848
-----------------------------------------------------------------------------------------------------------------------
   1,860,000     Nueces County, TX HFC (Dolphins Landing Apartments)          6.875          07/01/2030       1,878,265
-----------------------------------------------------------------------------------------------------------------------
   1,310,000     Nueces, TX River Authority (Asarco) 1,2                      5.600          04/01/2018       1,193,829
-----------------------------------------------------------------------------------------------------------------------
   3,570,000     Nueces, TX River Authority (Asarco) 1,2                      5.600          01/01/2027       3,139,422
-----------------------------------------------------------------------------------------------------------------------
      75,000     Port Corpus Christi, TX Industrial Devel. Corp.
                 (Citgo Petroleum Corp.)                                      8.250          11/01/2031          80,215
-----------------------------------------------------------------------------------------------------------------------
   5,905,000     Port of Bay City, TX (Hoechst Celanese Corp.)                6.500          05/01/2026       6,064,376
-----------------------------------------------------------------------------------------------------------------------
  15,000,000     Port of Corpus Christi, TX Authority (CNA Holdings) 6        6.700          11/01/2030      16,152,300
-----------------------------------------------------------------------------------------------------------------------
      15,000     San Antonio, TX Convention Center Hotel Finance
                 Corp. (Empowerment Zone) 4                                   5.000          07/15/2039          15,477
-----------------------------------------------------------------------------------------------------------------------
   8,065,000     San Antonio, TX Convention Center Hotel Finance Corp.
                 ROLs 3,4                                                    12.388 5        07/15/2039       9,091,513


                 37 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

    PRINCIPAL                                                                                                     VALUE
       AMOUNT                                                               COUPON            MATURITY       SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
TEXAS Continued
$      45,000     Southeast TX HFC (Forest View Apartments)                  8.750%         11/01/2023   $       30,883
-----------------------------------------------------------------------------------------------------------------------
    2,125,000     Tomball, TX Hospital Authority
                  (Tomball Regional Hospital)                                6.125          07/01/2023        2,155,388
-----------------------------------------------------------------------------------------------------------------------
    2,965,000     TX Affordable Hsg. Corp.
                  (Ashton Place & Woodstock Apartments)                      6.300          08/01/2033        2,108,767
-----------------------------------------------------------------------------------------------------------------------
   10,000,000     TX Department of Hsg. & Community Affairs RITES 3         10.944 5        07/01/2034       10,780,800
-----------------------------------------------------------------------------------------------------------------------
    2,500,000     TX GO RITES 3                                             15.416 5        12/01/2028        3,036,800
-----------------------------------------------------------------------------------------------------------------------
    3,000,000     TX Research Division RITES 3                              13.816 5        06/01/2029        3,508,560
-----------------------------------------------------------------------------------------------------------------------
    2,320,000     TX State Affordable Hsg. Corp.
                  (American Hsg. Foundation)                                 8.000          03/01/2032          696,719
-----------------------------------------------------------------------------------------------------------------------
       50,000     TX Student Hsg. Corp. (University of North Texas)          6.000          07/01/2011           48,321
-----------------------------------------------------------------------------------------------------------------------
       40,000     TX Student Hsg. Corp. (University of North Texas)          6.750          07/01/2021           37,641
-----------------------------------------------------------------------------------------------------------------------
      200,000     TX Student Hsg. Corp. (University of North Texas)          6.850          07/01/2031          184,686
-----------------------------------------------------------------------------------------------------------------------
    4,000,000     TX Turnpike Authority ROLs 3                              12.508 5        08/15/2042        4,482,960
                                                                                                         --------------
                                                                                                            376,936,039
-----------------------------------------------------------------------------------------------------------------------
 U.S. POSSESSIONS--2.2%
    1,155,000     Guam EDA (Royal Socio Apartments) 1,2                      9.500          11/01/2018          579,394
-----------------------------------------------------------------------------------------------------------------------
    9,500,000     Northern Mariana Islands, Series A                         6.750          10/01/2033       10,406,490
-----------------------------------------------------------------------------------------------------------------------
  405,000,000     Puerto Rico Children's Trust Fund (TASC) 4                 0.000 7        05/15/1955       13,693,050
-----------------------------------------------------------------------------------------------------------------------
  548,500,000     Puerto Rico Children's Trust Fund (TASC) 4                 0.000 7        05/15/2050       34,796,840
-----------------------------------------------------------------------------------------------------------------------
      850,000     Puerto Rico IMEPCF (American Airlines)                     6.450          12/01/2025          685,712
-----------------------------------------------------------------------------------------------------------------------
       75,000     Puerto Rico ITEMECF (Mennonite General Hospital)           6.500          07/01/2012           75,588
-----------------------------------------------------------------------------------------------------------------------
   22,430,000     Puerto Rico Port Authority (American Airlines), Series A   6.250          06/01/2026       17,765,233
-----------------------------------------------------------------------------------------------------------------------
    4,950,000     Puerto Rico Port Authority (American Airlines), Series A   6.300          06/01/2023        4,006,679
                                                                                                         --------------
                                                                                                             82,008,986
-----------------------------------------------------------------------------------------------------------------------
UTAH--0.1%
      650,000     Carbon County, UT Solid Waste Disposal
                  (Allied Waste Industries)                                  7.450          07/01/2017          678,373
-----------------------------------------------------------------------------------------------------------------------
    1,385,000     Carbon County, UT Solid Waste Disposal
                  (Allied Waste Industries)                                  7.500          02/01/2010        1,419,764
-----------------------------------------------------------------------------------------------------------------------
    1,975,000     UT HFA (RHA Community Service of Utah)                     6.875          07/01/2027        1,998,029
                                                                                                         --------------
                                                                                                              4,096,166
-----------------------------------------------------------------------------------------------------------------------
VIRGINIA--2.8%
    2,275,000     Bedford County, VA IDA (Georgia-Pacific Corp.)             6.550          12/01/2025        2,386,543
-----------------------------------------------------------------------------------------------------------------------
       90,000     Giles County, VA IDA (Hoechst Celanese Corp.)              5.950          12/01/2025           90,831
-----------------------------------------------------------------------------------------------------------------------
   10,000,000     Giles County, VA IDA (Hoechst Celanese Corp.)              6.450          05/01/2026       10,271,000
-----------------------------------------------------------------------------------------------------------------------
    7,915,000     Giles County, VA IDA (Hoechst Celanese Corp.)              6.625          12/01/2022        7,946,660
-----------------------------------------------------------------------------------------------------------------------
    1,750,000     Halifax County, VA IDA RITES 3                            13.350 5        06/01/2028        2,463,965
-----------------------------------------------------------------------------------------------------------------------
    1,100,000     Norfolk, VA Redevel. & Hsg. Authority
                  (First Mtg.-Retirement Community)                          6.125          01/01/2035        1,127,170

                 38 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


   PRINCIPAL                                                                                                       VALUE
      AMOUNT                                                                COUPON            MATURITY        SEE NOTE 1
------------------------------------------------------------------------------------------------------------------------
VIRGINIA Continued
$ 10,500,000      Pittsylvania County, VA IDA (Multitrade of Pittsylvania)    7.500%         01/01/2014   $   10,926,195
------------------------------------------------------------------------------------------------------------------------
   7,350,000      Pittsylvania County, VA IDA (Multitrade of Pittsylvania)    7.550          01/01/2019        7,652,012
------------------------------------------------------------------------------------------------------------------------
   2,250,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2007        1,980,450
------------------------------------------------------------------------------------------------------------------------
   4,050,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2012        2,811,429
------------------------------------------------------------------------------------------------------------------------
     100,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2015           58,276
------------------------------------------------------------------------------------------------------------------------
     865,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2016          475,153
------------------------------------------------------------------------------------------------------------------------
   1,125,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2018          450,518
------------------------------------------------------------------------------------------------------------------------
   1,845,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2019          679,514
------------------------------------------------------------------------------------------------------------------------
     125,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2019           57,276
------------------------------------------------------------------------------------------------------------------------
   1,000,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2023          362,250
------------------------------------------------------------------------------------------------------------------------
  26,500,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2024        9,030,670
------------------------------------------------------------------------------------------------------------------------
  10,000,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2025        3,216,100
------------------------------------------------------------------------------------------------------------------------
     825,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2030          197,670
------------------------------------------------------------------------------------------------------------------------
  48,400,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             0.000 7        08/15/2034        9,083,712
------------------------------------------------------------------------------------------------------------------------
   3,000,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             5.250          08/15/2008        3,107,310
------------------------------------------------------------------------------------------------------------------------
   5,510,000      Pocahontas Parkway Association, VA
                  (Route 895 Connector Toll Road)                             5.500          08/15/2028        5,741,916
------------------------------------------------------------------------------------------------------------------------
  20,000,000      VA Tobacco Settlement Authority (TASC)                      5.625          06/01/2037       21,115,000
------------------------------------------------------------------------------------------------------------------------
   2,500,000      West Point, VA IDA (Chesapeake Corp.)                       6.375          03/01/2019        2,545,575
                                                                                                          --------------
                                                                                                             103,777,195
------------------------------------------------------------------------------------------------------------------------
WASHINGTON--1.7%
   3,000,000      Chelan County, WA Public Utility District RITES 3          13.219 5        01/01/2036        4,020,600
------------------------------------------------------------------------------------------------------------------------
   3,500,000      Grant County, WA Public Utility District RITES 3           10.988 5        01/01/2022        3,827,600
------------------------------------------------------------------------------------------------------------------------
     100,000      Port Camas, WA Public Industrial Corp.
                  (James River Corp. of VA)                                   6.700          04/01/2023          100,099
------------------------------------------------------------------------------------------------------------------------
   1,600,000      Port Seattle, WA Special Facility (Northwest Airlines)      7.125          04/01/2020        1,517,424
------------------------------------------------------------------------------------------------------------------------
  24,900,000      Port Seattle, WA Special Facility (Northwest Airlines)      7.250          04/01/2030       23,470,740
------------------------------------------------------------------------------------------------------------------------
   1,500,000      WA Health Care Facilities Authority
                  (Overlake Hospital Medical Center)                          5.000          07/01/2030        1,538,295


                 39 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

   PRINCIPAL                                                                                                   VALUE
      AMOUNT                                                            COUPON          MATURITY          SEE NOTE 1
---------------------------------------------------------------------------------------------------------------------
WASHINGTON Continued
$  8,000,000     WA Health Care Facilities Authority
                 (Overlake Hospital Medical Center)                      5.000%       07/01/2038      $    8,166,000
---------------------------------------------------------------------------------------------------------------------
   4,710,000     WA Tobacco Settlement Authority (TASC)                  6.500        06/01/2026           5,216,231
---------------------------------------------------------------------------------------------------------------------
  13,955,000     WA Tobacco Settlement Authority (TASC)                  6.625        06/01/2032          15,519,495
                                                                                                      ---------------
                                                                                                          63,376,484
---------------------------------------------------------------------------------------------------------------------
WEST VIRGINIA--0.2%
   6,365,000     WV Hsg. Devel. Fund RITES 3                            12.332 5      11/01/2032           6,992,971
---------------------------------------------------------------------------------------------------------------------
WISCONSIN--2.5%
      15,000     Badger, WI Tobacco Asset Securitization Corp.           6.125        06/01/2027              16,159
---------------------------------------------------------------------------------------------------------------------
  34,870,000     Badger, WI Tobacco Asset Securitization Corp.           6.375        06/01/2032          38,174,979
---------------------------------------------------------------------------------------------------------------------
     600,000     Milwaukee, WI (Aero Milwaukee)                          6.500        01/01/2025             635,568
---------------------------------------------------------------------------------------------------------------------
   1,420,000     Milwaukee, WI (Air Cargo)                               7.500        01/01/2025           1,463,338
---------------------------------------------------------------------------------------------------------------------
     165,000     New Berlin, WI Hsg. Authority (Pinewood Creek)          6.800        11/01/2012             170,899
---------------------------------------------------------------------------------------------------------------------
     160,000     New Berlin, WI Hsg. Authority (Pinewood Creek)          6.850        05/01/2013             165,720
---------------------------------------------------------------------------------------------------------------------
   1,595,000     New Berlin, WI Hsg. Authority (Pinewood Creek)          7.125        05/01/2024           1,648,034
---------------------------------------------------------------------------------------------------------------------
   1,000,000     WI H&EFA (Eastcastle Place)                             6.125        12/01/2034           1,011,130
---------------------------------------------------------------------------------------------------------------------
   4,400,000     WI H&EFA (Hess Memorial Hospital Association)           7.750        11/01/2015           4,541,372
---------------------------------------------------------------------------------------------------------------------
   2,600,000     WI H&EFA (National Regency of New Berlin)               7.750        08/15/2015           2,716,948
---------------------------------------------------------------------------------------------------------------------
   6,200,000     WI H&EFA (National Regency of New Berlin)               8.000        08/15/2025           6,485,076
---------------------------------------------------------------------------------------------------------------------
   2,000,000     WI H&EFA RITES 3                                       11.954 5      02/15/2032           2,474,000
---------------------------------------------------------------------------------------------------------------------
   5,000,000     WI Hsg. & Economic Devel. Authority                     4.950        03/01/2025           5,131,200
---------------------------------------------------------------------------------------------------------------------
   2,500,000     WI Hsg. & Economic Devel. Authority ROLs 3             11.881 5      03/01/2036           2,621,950
---------------------------------------------------------------------------------------------------------------------
   5,600,000     WI Hsg. & Economic Devel. Authority ROLs 3             12.185 5      03/01/2024           5,859,360
---------------------------------------------------------------------------------------------------------------------
  19,500,000     WI Hsg. & Economic Devel. Authority, Series C           4.875        03/01/2036          19,737,737
---------------------------------------------------------------------------------------------------------------------
     250,000     WI Lac Courte Oreilles Band of Lake Superior
                 Chippewa Indians                                        8.000        12/01/2018             251,111
                                                                                                       --------------
                                                                                                          93,104,581
---------------------------------------------------------------------------------------------------------------------
WYOMING--0.0%
      25,000     Sweetwater County, WY Solid Waste Disposal
                 (FMC Corp.)                                             6.900        09/01/2024              25,349
---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $3,570,287,846)--103.7%                                              3,844,025,416
---------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(3.7)                                                            (137,869,435)
                                                                                                      ---------------
NET ASSETS--100.0%                                                                                    $3,706,155,981
                                                                                                      ===============


                 40 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


FOOTNOTES TO STATEMENT OF INVESTMENTS

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

2. Non-income producing security.

3. Illiquid security. The aggregate value of illiquid securities as of July 31,
2005 was $246,686,115, which represents 6.66% of the Fund's net assets. See Note
5 of Notes to Financial Statements.

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

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

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

7. Represents a zero coupon bond.

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

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

ADA      Atlanta Development Authority
CAU      Clark Atlanta University
CCRC     Continuing Care Retirement Community
CDA      Communities Development Authority
COP      Certificates of Participation
DA       Dormitory Authority
DRIVERS  Derivative Inverse Tax Exempt Receipts
EDA      Economic Development Authority
EDFA     Economic Development Finance
         Authority
EF&CD    Environmental Facilities and Community
         Development
GO       General Obligation
H&EFA    Health and Educational Facilities
         Authority
HDA      Hospital Development Authority
HDC      Housing Development Corp.
HE&H     Higher Educational and Health
HE&HF    Higher Educational and Housing Facilities
HFA      Housing Finance Agency/Authority
HFC      Housing Finance Corp.
HFDC     Health Facilities Development Corp.
HJDOI    Hospital for Joint Diseases Orthopedic
         Institute
IDA      Industrial Development Agency
IDC      Industrial Development Corporation
IMEPCF   Industrial, Medical and Environmental
         Pollution Control Facilities
IRS      Inverse Rate Security
ITEMECF  Industrial, Tourist, Educational, Medical
         and Environmental Community Facilities
JFK      John Fitzgerald Kennedy
MSH/NYU  Mount Sinai Hospital/New York
         University
NYC      New York City
NYS      New York State
Res Rec  Resource Recovery Facility
RITES    Residual Interest Tax Exempt Security
ROLs     Residual Option Longs
TASC     Tobacco Settlement Asset-Backed Bonds


                 41 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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                                         VALUE         PERCENT
-----------------------------------------------------------------------
Tobacco Settlement Payments             $  904,439,847            23.5%
Airlines                                   603,762,488            15.7
Electric Utilities                         297,841,929             7.8
Special Assessment                         255,648,569             6.7
Multifamily Housing                        215,199,471             5.6
Hospital/Health Care                       191,589,126             5.0
Hotels, Restaurants & Leisure              180,265,211             4.7
Marine/Aviation Facilities                 155,308,817             4.0
General Obligation                         127,072,069             3.3
Adult Living Facilities                    118,850,071             3.1
Single Family Housing                      109,020,541             2.8
Resource Recovery                           64,470,289             1.7
Manufacturing, Non-Durable Goods            63,170,980             1.6
Manufacturing, Durable Goods                60,796,870             1.6
Not-for-Profit Organization                 59,565,647             1.6
Pollution Control                           57,234,942             1.5
Sales Tax Revenue                           54,670,011             1.4
Higher Education                            53,929,349             1.4
Gas Utilities                               51,743,528             1.4
Special Tax                                 50,071,579             1.3
Highways/Railways                           47,623,252             1.2
Paper, Containers & Packaging               44,049,200             1.1
Education                                   35,649,206             0.9
Sports Facility Revenue                     18,074,951             0.5
Water Utilities                             11,008,955             0.3
Municipal Leases                             7,074,808             0.2
Sewer Utilities                              4,311,945             0.1
Parking Fee Revenue                          1,581,765             0.0
                                        -------------------------------
Total                                   $3,844,025,416           100.0%
                                        ===============================


                 42 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

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

RATING                                                                PERCENT
-------------------------------------------------------------------------------
AAA                                                                      11.0%
AA                                                                        4.5
A                                                                         6.5
BBB                                                                      31.0
BB                                                                        6.7
B                                                                         9.0
CCC                                                                       5.5
CC                                                                        2.9
Not Rated                                                                22.9
                                                                        ------
Total                                                                   100.0%
                                                                        ======

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 43 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

---------------------------------------------------------------------------------------------------------
ASSETS
---------------------------------------------------------------------------------------------------------
Investments, at value (cost $3,570,287,846)--see accompanying statement of investments   $ 3,844,025,416
---------------------------------------------------------------------------------------------------------
Cash                                                                                           2,438,783
---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold                                                            60,429,764
Interest                                                                                      55,590,581
Investments sold                                                                              44,642,356
Other                                                                                             31,291
                                                                                         ----------------
Total assets                                                                               4,007,158,191

---------------------------------------------------------------------------------------------------------
LIABILITIES
---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $263,401,362 purchased on a when-issued basis
or forward commitment)                                                                       272,901,085
Payable on borrowings (See Note 6)                                                            17,100,000
Shares of beneficial interest redeemed                                                         6,841,244
Dividends                                                                                      2,931,791
Distribution and service plan fees                                                               448,352
Interest expense                                                                                 155,358
Transfer and shareholder servicing agent fees                                                    127,201
Trustees' compensation                                                                            91,449
Shareholder communications                                                                        89,190
Other                                                                                            316,540
                                                                                         ----------------
Total liabilities                                                                            301,002,210

---------------------------------------------------------------------------------------------------------
NET ASSETS                                                                               $ 3,706,155,981
                                                                                         ================

---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
---------------------------------------------------------------------------------------------------------
Paid-in capital                                                                          $ 3,436,055,576
---------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                133,374
---------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                                  (3,770,539)
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                   273,737,570
                                                                                         ----------------
NET ASSETS                                                                               $ 3,706,155,981
                                                                                         ================


           44 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
---------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $2,309,856,096 and
182,000,546 shares of beneficial interest outstanding)                                             $12.69
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)    $13.32
----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $528,192,261 and 41,521,913 shares
of beneficial interest outstanding)                                                                $12.72
----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $868,107,624 and 68,507,949 shares
of beneficial interest outstanding)                                                                $12.67

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 45 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS

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

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                          $ 162,287,477

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       9,270,643
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               2,023,635
Class B                                                               3,680,913
Class C                                                               4,378,928
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                 515,730
Class B                                                                 251,937
Class C                                                                 256,036
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                  62,760
Class B                                                                  30,868
Class C                                                                  35,803
--------------------------------------------------------------------------------
Interest expense                                                      1,320,120
--------------------------------------------------------------------------------
Custodian fees and expenses                                             170,237
--------------------------------------------------------------------------------
Trustees' compensation                                                   83,551
--------------------------------------------------------------------------------
Other                                                                   526,213
                                                                  --------------
Total expenses                                                       22,607,374
Less reduction to custodian expenses                                   (120,585)
                                                                  --------------
Net expenses                                                         22,486,789

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                               139,800,688

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
--------------------------------------------------------------------------------
Net realized gain on investments                                     16,330,226
--------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                270,282,535

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS              $ 426,413,449
                                                                  ==============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 46 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

YEAR ENDED JULY 31,                                                                      2005               2004
-----------------------------------------------------------------------------------------------------------------
OPERATIONS
-----------------------------------------------------------------------------------------------------------------
Net investment income                                                         $   139,800,688    $    68,719,462
-----------------------------------------------------------------------------------------------------------------
Net realized gain                                                                  16,330,226          8,187,916
-----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                             270,282,535            191,836
                                                                              -----------------------------------
Net increase in net assets resulting from operations                              426,413,449         77,099,214

-----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                           (89,316,259)       (37,786,294)
Class B                                                                           (24,198,317)       (17,197,773)
Class C                                                                           (28,160,685)       (12,989,258)

-----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                         1,407,359,926        421,943,144
Class B                                                                           166,634,889        114,357,949
Class C                                                                           541,739,166        153,043,901

-----------------------------------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------------------------------
Total increase                                                                  2,400,472,169        698,470,883
-----------------------------------------------------------------------------------------------------------------
Beginning of period                                                             1,305,683,812        607,212,929
                                                                              -----------------------------------
End of period (including accumulated net investment income
of $133,374 and $2,007,947, respectively)
                                                                              $ 3,706,155,981    $ 1,305,683,812
                                                                              ===================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 47 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

CLASS A     YEAR ENDED JULY 31,                         2005           2004          2003         2002            2001
-------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $    11.13       $  10.64      $  11.28     $  11.25        $  10.76
-------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .78 1          .85           .92          .71             .58
Net realized and unrealized gain (loss)                 1.59            .50          (.67)         .03             .48
                                                  -----------------------------------------------------------------------
Total from investment operations                        2.37           1.35           .25          .74            1.06
-------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.81)          (.86)         (.89)        (.71)           (.57)
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $    12.69       $  11.13      $  10.64     $  11.28        $  11.25
                                                  =======================================================================

-------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     21.97%         12.78%         2.36%        6.89%          10.03%
-------------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $2,309,856       $731,565      $306,857     $193,452        $ 38,827
-------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $1,366,113       $506,440      $252,496     $ 73,877        $ 36,900
-------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   6.46%          7.54%         8.44%        6.61%           5.21%
Total expenses                                          0.69%          0.80%         1.04%        1.06%           0.87%
Expenses after payments and waivers and
reduction to custodian expenses                          N/A 4          N/A 4,5       N/A 4       0.89% 6         0.78% 6
-------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                   22%            44%           57%         127%             37%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 48 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


CLASS B          YEAR ENDED JULY 31,                  2005           2004         2003         2002            2001
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $  11.15        $ 10.66      $ 11.30      $ 11.27         $ 10.78
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                  .70 1          .77          .83          .63             .49
Net realized and unrealized gain (loss)               1.59            .49         (.66)         .02             .48
                                                  --------------------------------------------------------------------
Total from investment operations                      2.29           1.26          .17          .65             .97
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                  (.72)          (.77)        (.81)        (.62)           (.48)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $  12.72        $ 11.15      $ 10.66      $ 11.30         $ 11.27
                                                  ====================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                   21.09%         11.89%        1.57%        6.07%           9.19%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $528,192       $308,778     $188,645      $90,547         $20,279
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $410,031       $256,425     $141,819      $36,100         $18,445
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                 5.80%          6.80%        7.67%        5.85%           4.45%
Total expenses                                        1.48%          1.56%        1.81%        1.80%           1.62%
Expenses after payments and waivers and
reduction to custodian expenses                        N/A 4          N/A 4,5      N/A 4       1.63% 6         1.53% 6
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 22%            44%          57%         127%             37%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 49 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

CLASS C     YEAR ENDED JULY 31,                       2005           2004         2003         2002            2001
----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $  11.11        $ 10.63      $ 11.27      $ 11.24         $ 10.75
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                  .68 1          .76          .83          .61             .50
Net realized and unrealized gain (loss)               1.60            .49         (.66)         .04             .48
                                                   -------------------------------------------------------------------
Total from investment operations                      2.28           1.25          .17          .65             .98
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                  (.72)          (.77)        (.81)        (.62)           (.49)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $  12.67        $ 11.11      $ 10.63      $ 11.27         $ 11.24
                                                  ====================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                   21.08%         11.83%        1.59%        6.09%           9.22%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $868,108       $265,340     $111,710      $49,248         $ 3,410
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $488,562       $193,845     $ 85,483      $13,453         $ 2,552
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                 5.68%          6.76%        7.68%        5.88%           4.45%
Total expenses                                        1.46%          1.56%        1.80%        1.80%           1.62%
Expenses after payments and waivers and
reduction to custodian expenses                        N/A 4          N/A 4,5      N/A 4       1.63% 6         1.53% 6
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 22%            44%          57%         127%             37%

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. Reduction to custodian expenses less than 0.01%.

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

6. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                 50 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

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

Oppenheimer Rochester National Municipals (the Fund) is a separate series of
Oppenheimer Multi-State Municipal Trust, an open-end management investment
company registered under the Investment Company Act of 1940, as amended. The
Fund's investment objective is to seek a high level of current income exempt
from federal income taxes for individual investors by investing in a diversified
portfolio of high-yield municipal securities. 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


                 51 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS



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

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

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

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of July 31, 2005, the Fund had purchased $263,401,362
of securities issued on a when-issued basis or forward commitment.

--------------------------------------------------------------------------------
INVERSE FLOATING RATE SECURITIES. The Fund invests in inverse floating rate
securities that pay interest at a rate that varies inversely with short-term
interest rates. Certain of these securities may be leveraged, whereby the
interest rate varies inversely at a multiple of the change in short-term rates.
As interest rates rise, inverse floaters produce less current income. The price
of such securities is more volatile than comparable fixed rate securities. The
Fund will invest no more than 35% of its total assets in inverse floaters.
Inverse floaters amount to $236,552,076 as of July 31, 2005, which represents
5.90% of the Fund's total assets.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of July 31, 2005, securities with an aggregate
market value of $85,093,535, representing 2.30% of the Fund's net assets, were
in default.

--------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to


                 52 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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
       ------------------------------------------------------------------------------------
       $3,269,849                  $--                  $3,586,519             $273,553,548

1. As of July 31, 2005, the Fund had $3,586,519 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
                ---------------------------------
                2012                   $3,586,519

2. During the fiscal year ended July 31, 2005, the Fund utilized $16,514,248 of
capital loss carryforward to offset capital gains realized in that fiscal year.

3. During the fiscal year ended July 31, 2004, the Fund did not utilize any
capital loss carryforward.

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

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                  $141,675,261              $67,973,325


                 53 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

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

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    $ 3,570,471,869
                                                 ===============
               Gross unrealized appreciation     $   288,790,208
               Gross unrealized depreciation         (15,236,660)
                                                 ---------------
               Net unrealized appreciation       $   273,553,548
                                                 ===============

--------------------------------------------------------------------------------
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 $43,130 and
payments of $704 were made to retired trustees, resulting in an accumulated
liability of $67,605 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.

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


                 54 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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 no 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                         133,239,665     $ 1,612,797,528      45,587,726     $ 519,590,084
Dividends and/or
distributions reinvested       3,545,591          42,823,965       1,579,654        17,826,296
Redeemed                     (20,526,179)       (248,261,567)    (10,258,031)     (115,473,236)
                            -------------------------------------------------------------------
Net increase                 116,259,077     $ 1,407,359,926      36,909,349     $ 421,943,144
                            ===================================================================

-----------------------------------------------------------------------------------------------
CLASS B
Sold                          17,084,575     $   205,710,784      12,764,933     $ 145,432,112
Dividends and/or
distributions reinvested         820,743           9,875,104         620,409         7,015,793
Redeemed                      (4,071,776)        (48,950,999)     (3,387,398)      (38,089,956)
                            -------------------------------------------------------------------
Net increase                  13,833,542     $   166,634,889       9,997,944     $ 114,357,949
                            ===================================================================

-----------------------------------------------------------------------------------------------
CLASS C
Sold                          47,841,160     $   580,425,334      17,536,942     $ 199,701,778
Dividends and/or
distributions reinvested       1,061,481          12,801,896         568,003         6,410,221
Redeemed                      (4,272,766)        (51,488,064)     (4,736,781)      (53,068,098)
                            -------------------------------------------------------------------
Net increase                  44,629,875     $   541,739,166      13,368,164     $ 153,043,901
                            ===================================================================

--------------------------------------------------------------------------------
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      $2,298,924,374       $410,767,698


                 55 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

--------------------------------------------------------------------------------
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 in excess of $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 $953,268
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 0.15% 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 0.15% 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 shares were $17,018,319 and
$10,097,129, 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


                 56 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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           $4,232,112                $76,961              $1,058,377           $176,463

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

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

As of July 31, 2005, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 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 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 (3.344% 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.


                 57 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS


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

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

      For the year ended July 31, 2005, the average daily loan balance was
$45,398,904 at an average daily interest rate of 2.811%. The Fund had borrowings
outstanding of $17,100,000 at July 31, 2005 at an interest rate of 3.344%. The
Fund had gross borrowings and gross loan repayments of $910,100,000 and
$968,400,000, 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 $165,800,000. The Fund paid $140,390 in fees and $1,173,643 in interest
during the year ended July 31, 2005.

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

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

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


                 58 | OPPENHEIMER ROCHESTER NATIONAL MUNICIPALS







                                     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. Not all waivers apply to all funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
         1) plans 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.








 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).








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

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

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

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

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

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

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

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

   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.

   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.

      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.

      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.

      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.

      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.

      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.

 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.

      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.






      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.

   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%.

      Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
                            Convertible Securities Fund
------------------------------------------------------------------------------

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










Oppenheimer Rochester National Municipals

Internet Website
     www.oppenheimerfunds.com

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

Distributor
     OppenheimerFunds Distributor, Inc.
     Two World Financial Center,
     225 Liberty Street, 11th Floor,
     New York, New York 10281-1008
Transfer Agent
     OppenheimerFunds Services
     P.O. Box 5270
     Denver, Colorado 80217
     1.800.CALL OPP(225.5677)

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

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

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



1234
PX795.001.rev1205


--------
(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 the Trust 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.