Oppenheimer Pennsylvania Municipal Fund


Revised Prospectus dated March 5, 2007



                                          Oppenheimer Pennsylvania Municipal
                                          Fund is a mutual fund that seeks
                                          current income exempt from federal
                                          and Pennsylvania personal income
                                          taxes while attempting to preserve
                                          capital. It invests mainly in
                                          municipal securities.
                                             This prospectus contains
                                          important information about the
                                          Fund's objective, its investment
                                          policies, strategies and risks.  It
                                          also contains important information
                                          about how to buy and sell shares of
                                          the Fund and other account
                                          features.  Please read this
                                          prospectus carefully before you
As with all mutual funds, the             invest and keep it for future
Securities and Exchange Commission        reference about your account.
has not approved or disapproved the
Fund's securities nor has it
determined that this prospectus is
accurate or complete.  It is a
criminal offense to represent
otherwise.

                                            (OppenheimerFunds logo)





Contents
            About The Fund
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            The Fund's Investment Objective and Principal Investment Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance

            Fees and Expenses of the Fund

            About the Fund's Investments

            How the Fund is Managed


            About Your Account
_______________________________________________________________________________

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

            Special Investor Services
            AccountLink
            PhoneLink
            OppenheimerFunds Internet Website

            How to Sell Shares
            Checkwriting
            By Mail
            By Telephone

            How to Exchange Shares

            Shareholder Account Rules and Policies

            Dividends, Capital Gains and Taxes

            Financial Highlights


About the Fund
------------------------------------------------------------------------------

The Fund's Investment Objective and Principal Investment Strategies
------------------------------------------------------------------------------
     What Is A Municipal Security? A municipal security is essentially a loan by
the buyer to the issuer of the  security.  The issuer  promises  to pay back the
principal  amount of the loan and  normally  pays  interest  exempt from federal
personal income taxes.
-------------------------------------------------------------------------------

     What is The Fund's Investment Objective?  The Fund seeks 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.

     What  Does  the  Fund  Mainly  Invest  In?  The  Fund  invests   mainly  in
Pennsylvania  municipal  securities  that pay interest  that,  in the opinion of
counsel to the issuer of each security,  is exempt from federal and Pennsylvania
personal income taxes, and from the investment income tax of the school district
of Philadelphia.  These securities  primarily include municipal bonds (which are
debt obligations having a maturity of more than one year when issued), municipal
notes (short-term obligations),  and interests in municipal leases. Pennsylvania
Municipal  securities  also may include debt  obligations of the  governments of
certain possessions, territories and commonwealths of the United States or their
respective  agencies,  instrumentalities  or  authorities if the interest is not
subject to Pennsylvania  personal income tax or federal  personal income tax (in
the opinion of bond  counsel to the issuer at the time the  security is issued).
Most of the  securities  the Fund buys must be  "investment  grade"  (securities
rated  in  one  of  the  four  highest  rating  categories  of  national  rating
organizations,  such as Moody's Investors  Services  ("Moody's")),  although the
Fund  also can hold up to 25% of its  total  assets  in  lower-grade  securities
(sometimes  called "junk  bonds").  Under  normal  market  conditions,  the Fund
attempts  to  invest  100%  of its  assets  in  municipal  securities,  and as a
fundamental  policy 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.

     The Fund does not limit  its  investments  to  securities  of a  particular
maturity range, and may hold both short- and long- term securities.  However, it
currently  focuses  on  longer-term  securities  to seek  higher  yields.  These
investments are more fully explained in "About the Fund's Investments," below.

     |X| How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting  securities  for the Fund,  the portfolio  managers look primarily for
Pennsylvania  municipal  securities  using a variety of factors  that may change
over time and may vary in particular  cases.  The portfolio  managers  currently
look for:

     |_| Securities that provide high current income

     |_| A wide range of securities of different  issuers  within the state (and
certain  possessions,  territories  and  commonwealths  of the  United  States),
including different agencies and municipalities, to spread risk

     |_| Securities having favorable credit characteristics

     |_| Special situations that provide opportunities for value

     |_| Unrated bonds that might provide high income

     |_|  Securities  of  smaller  issuers  that  might be  overlooked  by other
investors and funds

     |_| Special situations of higher rated bonds that provide opportunities for
above average income with limited volatility.

     |_|  Securities  across a wide  range of  municipal  sectors,  coupons  and
revenue sources.

     The  portfolio  managers  may  consider  selling a security if any of these
factors no longer applies to a security purchased for the Fund.

     Who Is the Fund Designed For? The Fund is designed for individual investors
who are seeking  income  exempt from federal and  Pennsylvania  personal  income
taxes.  The Fund does not seek  capital  gains or growth.  Because it invests in
tax-exempt securities,  the Fund is not appropriate for retirement plan accounts
or for investors seeking capital growth.  The Fund is not a complete  investment
program.

Main Risks of Investing in the Fund

     All  investments  have risks to some  degree.  The Fund's  investments  are
subject to changes in their  value from a number of  factors,  described  below.
There is also the risk that poor  security  selection  by the Fund's  investment
manager,  OppenheimerFunds,  Inc.  (the  "Manager"),  will  cause  the  Fund  to
underperform other funds having a similar objective. The Fund's share prices and
yields may change daily.

     Credit Risk.  Municipal  securities are subject to credit risk. Credit risk
is the risk that the issuer of a municipal  security might not make interest and
principal  payments on the  security as they become due. If the issuer  fails to
pay interest,  the Fund's income may be reduced and if the issuer fails to repay
principal,  the value of that  security and of the Fund's shares may be reduced.
Because  the Fund can  invest  as much as 25% of its total  assets in  municipal
securities below investment grade to seek higher income, the Fund's credit risks
are  greater  than  those of  funds  that buy  only  investment-grade  bonds.  A
downgrade in an issuer's credit rating or other adverse news about an issuer can
reduce the market value of that issuer's securities.

     Special Credit Risks of Lower-Grade  Securities.  Municipal securities that
are rated below  investment  grade (these are  sometimes  called  "junk  bonds")
usually offer higher yields than investment-grade  securities but are subject to
greater  price  fluctuations  and risks of loss of  income  and  principal  than
investment-grade municipal securities. Securities that are (or that have fallen)
below investment grade have a greater risk that the issuers might not meet their
debt obligations.  They also may not have an active trading market,  which means
that they would be less liquid than investment grade  securities  making it more
difficult for the Fund to sell them at an acceptable price.

     Interest  Rate Risk.  Municipal  securities  are debt  securities  that are
subject  to  changes  in value  when  prevailing  interest  rates  change.  When
prevailing   interest  rates  fall,  the  values  of  already-issued   municipal
securities  generally  rise. When interest rates fall, the income the Fund earns
on its investments,  and the Fund's distributions to shareholders,  may decline.
When  prevailing  interest  rates rise, the values of  already-issued  municipal
securities  generally fall, and the securities may sell at a discount from their
face amount.

     The  magnitude of these price  changes is generally  greater for bonds with
longer maturities.  When the average maturity of the Fund's portfolio is longer,
its share price may fluctuate more if interest rates change.  Callable bonds the
Fund buys are more likely to be called when  interest  rates fall,  and the Fund
might then have to reinvest  the proceeds of the  callable  instrument  in other
securities  that have lower  yields,  reducing  its income.  The Fund  currently
focuses on longer-term  securities to seek higher income.  Therefore,  its share
prices may fluctuate more when interest rates change.

     TOBACCO RELATED BONDS.  The Fund may invest in two types of tobacco related
bonds: (i) tobacco  settlement revenue bonds, for which payments of interest and
principal  are made  solely  from a state's  interest  in the Master  Settlement
Agreement  ("MSA")  described below, and (ii) tobacco bonds subject to a state's
appropriation  pledge, for which payments may come from both the MSA revenue and
the applicable state's appropriation pledge.

     |X| Tobacco  Settlement  Revenue  Bonds.  The Fund may invest a significant
portion of its assets in tobacco  settlement  revenue bonds.  Tobacco settlement
revenue bonds are secured by an issuing state's  proportionate share in the MSA.
The MSA is an agreement, reached out of court in November 1998 between 46 states
and six other U.S.  jurisdictions  (including Puerto Rico and Guam) and the four
largest U.S. tobacco  manufacturers  (Phillip Morris,  RJ Reynolds,  Brown &
Williamson,   and  Lorillard).   Subsequently,   a  number  of  smaller  tobacco
manufacturers  signed on to the MSA,  bringing the current combined market share
of tobacco  manufacturers  to  approximately  92%. 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.  The MSA established a base payment  schedule and a formula
for adjusting payments each year. 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 the risk to the Fund,  are highly  dependent on
the  receipt  of future  settlement  payments  by the state or its  governmental
entity, as well as several other factors. The actual amount of future settlement
payments 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 reduced if the decrease in tobacco consumption is
significantly greater than the forecasted decline.

     Because  tobacco  settlement  bonds are backed by payments from the tobacco
manufacturers,  and generally not by the credit of the state or local government
issuing  the bonds,  their  creditworthiness  depends on the  ability of tobacco
manufacturers  to  meet  their  obligations.  A  market  share  loss  by the MSA
companies to non-MSA  participating tobacco manufacturers could cause a downward
adjustment  in the payment  amounts.  A  participating  manufacturer  filing for
bankruptcy  also could cause delays or reductions in bond payments,  which could
affect a Fund's net asset value.

     The MSA and tobacco  manufacturers  have been and continue to be subject to
various legal claims.  An adverse outcome to any litigation  matters relating to
the MSA or affecting  tobacco  manufacturers  could adversely affect the payment
streams  associated  with the MSA or cause delays or reductions in bond payments
by tobacco  manufacturers.  The MSA itself has been subject to legal  challenges
and has, to date,  withstood  those  challenges.  The  Statement  of  Additional
Information  ("SAI")  contains more detailed  information  about the  litigation
related to the tobacco industry and the MSA.

     o "Subject  to  Appropriation"  (STA)  Tobacco  Bonds.  In  addition to the
tobacco  settlement  bonds discussed  above, the Fund also may invest in tobacco
related bonds that are subject to a state's  appropriation  pledge ("STA Tobacco
Bonds").  STA Tobacco  Bonds rely on both the revenue  source from the MSA and a
state appropriation pledge.

     These STA Tobacco  Bonds are part of a larger  category of municipal  bonds
that are subject to state  appropriation.  Although specific provisions may vary
among  states,   "subject  to   appropriation   bonds"  (also   referred  to  as
"appropriation  debt") are typically  payable from two distinct  sources:  (i) a
dedicated  revenue source such as a municipal  enterprise,  a special tax or, in
the case of tobacco  bonds,  the MSA funds,  and (ii) from the issuer's  general
funds. Appropriation debt differs from a state's general obligation debt in that
general  obligation debt is backed by the state's full faith,  credit and taxing
power,  while  appropriation debt requires the state to pass a specific periodic
appropriation to pay interest and/or principal on the bonds as the payments come
due. The  appropriation is usually made annually.  While STA Tobacco Bonds offer
an  enhanced  credit  support   feature,   that  feature  is  generally  not  an
unconditional guarantee of payment by a state and states generally do not pledge
the full faith,  credit or taxing  power of the state.  The Fund  considers  STA
Tobacco Bonds to be  "municipal  securities"  for purposes of its  concentration
policies.

     Taxability  Risk--The Fund will invest in municipal  securities in reliance
at the time of  purchase  on an opinion of bond  counsel to the issuer  that the
interest  paid on those  securities  will be  excludable  from gross  income for
federal  income tax  purposes.  Subsequent to the Fund's  acquisition  of such a
municipal security,  however,  the security may be determined to pay, or to have
paid, taxable income. As a result, the treatment of dividends previously paid or
to be paid  by the  Fund  as  "exempt-interest  dividends"  could  be  adversely
affected,  subjecting the Fund's  shareholders  to increased  federal income tax
liabilities.

     |X| Risks of Non-Diversification. The Fund is "non-diversified." That means
that compared to funds that are diversified,  it can invest a greater portion of
its  assets  in the  securities  of one  issuer,  such as  bonds  issued  by the
Commonwealth of Pennsylvania (or governments of certain possessions, territories
and  commonwealths  of the United  States).  Having a higher  percentage  of its
assets  invested in the  securities of fewer  issuers,  particularly  government
issuers of one state,  could result in greater  fluctuations of the Fund's share
prices due to economic,  regulatory or political  problems in  Pennsylvania  (or
possessions, territories and commonwealths of the United States).

     |X| Risks in Using Derivative Investments.  The Fund can use derivatives to
seek increased  returns or to try to hedge investment risks. In general terms, a
derivative  investment is an investment  contract  whose value depends on (or is
derived from) the value of an underlying asset, interest rate or index. "Inverse
floaters" are examples of derivatives the Fund can use.

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

     When the Fund invests in certain derivatives, for example, inverse floaters
with  "shortfall"  agreements  (as  discussed  below) and  swaps,  the Fund must
segregate cash or readily  marketable  short-term debt  instruments in an amount
equal to the obligation.

     |X| Inverse Floaters.  The Fund may invest up to 20% of its total assets in
"inverse  floaters" to seek greater income and total return.  An inverse floater
typically  is  a  derivative  instrument  created  by a  trust  that  divides  a
fixed-rate  municipal  security  into  two  securities:  a  short-term  tax free
floating  rate  security and a long-term  tax free  floating  rate security (the
inverse floater) that pays interest at rates that move in the opposite direction
of the yield on the short-term  floating rate security.  As short-term  interest
rates rise, inverse floaters produce less current income (and, in extreme cases,
may pay no income)  and as  short-term  interest  rates fall,  inverse  floaters
produce more current income.

     Certain  inverse  floaters are created when the Fund purchases a fixed rate
municipal bond and subsequently  transfers the municipal bond to a broker dealer
(the  sponsor).  The  sponsor  sells the  municipal  bond to a trust.  The trust
creates the inverse floater, pursuant to an arrangement that enables the Fund to
withdraw the underlying  bond to collapse the inverse  floater (upon the payment
of the value of the short-term  security and certain costs).  Additionally,  the
Fund may be able to  purchase  inverse  floaters  created by  municipal  issuers
directly or by other parties depositing securities into a sponsored trust.

     The Fund may also enter into  "shortfall and  forbearance"  agreements with
respect to inverse  floaters.  Under those  agreements,  on  liquidation  of the
trust,  the Fund is  committed  to pay the  trust  the  difference  between  the
liquidation value of the underlying  municipal bond on which the inverse floater
is based and the  principal  amount  payable to the  holders  of the  short-term
floating rate security that is based on the same underlying  municipal security.
Although  the Fund has the risk that it may be required to make such  additional
payment,  these  agreements may offer higher  interest  payments than a standard
inverse floater.

     The Fund's  investments in inverse floaters may involve  additional  risks.
The  market  value of  inverse  floaters  can be more  volatile  than  that of a
conventional   fixed-rate  bond  having  similar  credit   quality,   redemption
provisions and maturity.  Typically, inverse floaters tend to underperform fixed
rate  bonds  in a  rising  long-term  interest  rate  environment,  but  tend to
outperform  fixed  rate  bonds in a falling or stable  long-term  interest  rate
environment.  All inverse  floaters  entail some degree of leverage.  An inverse
floater  that has a higher  degree of  leverage  usually is more  volatile  with
respect to its price and income than an inverse  floater that has a lower degree
of leverage.  Some inverse floaters have a "cap," so that if interest rates rise
above the "cap," the security pays additional  interest income.  If rates do not
rise above the "cap," the Fund will have paid an additional amount for a feature
that proved worthless.

     Because of the  accounting  treatment for inverse  floaters  created by the
Fund's transfer of a municipal bond to a trust, the Fund's financial  statements
reflect these  transactions  as "secured  borrowings,"  which affects the Fund's
expense  ratios,  statements of income and assets and liabilities and causes the
Fund's Statement of Investments to include the underlying municipal bond.


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

     The value of the Fund's  investments  will change over time due to a number
of factors. They include changes in general bond market movements, the change in
value of particular  bonds because of an event affecting the issuer,  or changes
in  interest  rates that can affect bond prices  overall.  The Fund  focuses its
investments in Pennsylvania municipal securities and is non-diversified. It will
therefore  be  vulnerable  to  the  effects  of  economic  changes  that  affect
Pennsylvania  governmental  issuers.  These  changes can affect the value of the
Fund's  investments  and its prices per share.  The Fund's focus on  longer-term
bonds and its use of inverse floaters can cause fluctuations in the Fund's share
prices.  In the  OppenheimerFunds  spectrum,  the Fund is more conservative than
some types of taxable bond funds, such as high yield bond funds, but has greater
risks than money market funds.

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

The Fund's Past Performance

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

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

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

[See bar chart in Appendix to the Prospectus]

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

     For the period from 1/1/06 through  12/31/06,  the cumulative return before
taxes for Class A shares was 7.60%.

     During  the  period  shown  in the  bar  chart,  the  highest  return  (not
annualized)  before  taxes for a calendar  quarter  was 5.24% (3Qtr '04) and the
lowest return (not  annualized)  before taxes for a calendar  quarter was -5.29%
(2Qtr '04).

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

Average Annual Total Returns     1 Year          5 Years           10 Years
for the periods ended
December 31, 2006
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares (inception
9/18/89)                         2.49%           7.81%          5.90%
Return Before Taxes              2.48%           7.81%          5.90%
Return After Taxes on            3.25%           7.52%          5.82%
Distributions
Return After Taxes on
Distributions and Sale of Fund
Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                 1.77%           7.73%          5.94%
Class B Shares (inception
5/3/93)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                 5.79%           8.03%          5.61%
Class C Shares (inception
8/29/95)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Lehman  Brothers  Municipal Bond
Index   (reflects  no  deduction 4.84%           5.53%          5.76%
for fees, expenses or taxes)
--------------------------------------------------------------------------------

     The Fund's  average  annual  total  returns  include the  applicable  sales
charges:  for Class A, the current  maximum  initial sales charge of 4.75%;  for
Class B, the  contingent  deferred sales charges of 5% (1-year) and 2% (5-year);
and for Class C, the 1% contingent  deferred sales charge for the 1-year period.
Because Class B shares convert to Class A shares 72 months after purchase, Class
B 10 Years performance does not include any contingent deferred sales charge and
uses Class A performance  for the period after  conversion.  The returns measure
the  performance  of a  hypothetical  account and assume that all  dividends and
capital gains  distributions  have been  reinvested in  additional  shares.  The
performance  of the Fund's  Class A shares is  compared  to the Lehman  Brothers
Municipal Bond Index,  an unmanaged  index of a broad range of investment  grade
municipal bonds. The index includes municipal  securities from many states while
the Fund focuses on Pennsylvania  municipal  securities.  The index  performance
includes  reinvestment of income but does not reflect  transaction  costs, fees,
expenses or taxes. The Fund's investments vary from those in the index.

Fees and Expenses of the Fund

     The following tables are meant to help you understand the fees and expenses
you may pay if you buy and hold  shares of the Fund.  The Fund pays a variety of
expenses directly for management of its assets, administration,  distribution of
its shares and other  services.  Those expenses are  subtracted  from the Fund's
assets to  calculate  the Fund's net asset  values per share.  All  shareholders
therefore  pay  those  expenses  indirectly.  Shareholders  pay  other  expenses
directly,  such as sales charges and account  transaction  charges.  The numbers
below are based on the Fund's  expenses  during  its fiscal  year ended July 31,
2006.

Shareholder Fees (charges paid directly from your investment):
----------------------------------------------------------------------------------

                                 Class A Shares  Class B Shares   Class C Shares
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Maximum Sales Charge (Load) on
purchases (as % of offering           4.75%           None             None
price)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load) (as % of the lower of
the original offering price or                        5%(2)
redemption proceeds)                 None(1)                          1%(3)
----------------------------------------------------------------------------------


Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
-----------------------------------------------------------------------------------
                                             Class A                    Class C
                                                          Class B
                                             Shares        Shares       Shares
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Management Fees                               0.50%        0.50%         0.50%
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees      0.15%        0.90%         0.90%
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Total Other Expenses                          0.76%        0.78%         0.77%
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
     Interest and Related Expenses from       0.59%        0.59%         0.59%
     Inverse Floaters(4)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
     Other Expenses                           0.17%        0.19%         0.18%
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Total Annual Operating Expenses               1.41%        2.18%         2.17%
-----------------------------------------------------------------------------------

     Expenses may vary in future years.  "Other Expenses" include transfer agent
fees,  custodial  fees and accounting and legal expenses that the Fund pays. The
"Other  Expenses"  in the table are based on, among other  things,  the fees the
Fund would have paid if the  transfer  agent had not waived a portion of its fee
under a  voluntary  undertaking  to the  Fund to  limit  these  fees to 0.35% of
average daily net assets per fiscal year for all classes.  That  undertaking may
be amended or withdrawn at any time.

     1.  A  contingent  deferred  sales  charge  may  apply  to  redemptions  of
investments of $1 million or more of Class A shares. See "How to Buy Shares" for
details.

     2. Applies to  redemptions  in first year after  purchase.  The  contingent
deferred sales charge gradually  declines from 5% to 1% in years one through six
and is eliminated after that.

     3. Applied to shares redeemed within 12 months of purchase.

     4. Interest and Related  Expenses  from Inverse  Floaters  include  certain
expenses and fees related to the Fund's investments in inverse floaters. Some of
those  expenses  are  liabilities  with respect to interest  paid on  short-term
floating rate notes issued by the trusts whose inverse floater  certificates are
held by the Fund.  Under accounting  rules, the Fund also recognizes  additional
income in an amount that directly corresponds to these expenses.  Therefore, the
Fund's net asset  values per share and total  return  have not been  affected by
these additional  expenses.  Those expenses affected the statement of the Fund's
Total Other Expenses and Total Annual Operating  Expenses in the table above and
the Examples below.


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

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

---------------------------------------------------------------------------------
If shares are redeemed:   1 year      3 years      5 years      10 years
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A Shares            $613        $903         $1,215       $2,097
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Shares            $723        $989         $1,382       $2,160*
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Shares            $322        $686         $1,177       $2,530
---------------------------------------------------------------------------------

---------------------------------------------------------------------------------
If shares are not         1 year      3 years      5 years      10 years
redeemed:
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A Shares            $613        $903         $1,215       $2,097
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Shares            $223        $689         $1,182       $2,160*
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Shares            $222        $686         $1,177       $2,530
---------------------------------------------------------------------------------

     In the first example, expenses include the initial sales charge for Class A
and the applicable Class B and Class C contingent deferred sales charges. In the
second example,  the Class A expenses include the sales charge,  but Class B and
Class C expenses do not include  contingent  deferred sales  charges.  * Class B
expenses  for years 7 through  10 are based on Class A  expenses  since  Class B
shares automatically convert to Class A shares 72 months after purchase.

About the Fund's Investments

     The Fund's Principal  Investment  Policies and Risks. The allocation of the
Fund's  portfolio among different types of investments will vary over time based
on the Manager's  evaluation of economic and market trends. The Fund's portfolio
might not always include all of the different types of investments  described in
this prospectus.

     The Manager  tries to reduce risks by selecting a wide variety of municipal
investments and by carefully  researching  securities before they are purchased.
However,  changes in the overall  market prices of municipal  securities and the
income they pay can occur at any time.  The Fund's  share  prices and yields may
change daily based on changes in the prices or interest  rates of the securities
in which the Fund invests. Those securities prices or interest rates may vary in
response to changes in interest  rates  generally,  other market  conditions  or
other economic or political events.  The SAI contains more detailed  information
about the Fund's investment policies and risks.

     |X|  Municipal  Securities.  The  Fund  buys  municipal  bonds  and  notes,
certificates of participation  in municipal  leases and other debt  obligations.
These  debt  obligations  are  issued  by  state  governments,  as well as their
political subdivisions (such as cities, towns and counties),  and their agencies
and authorities. Pennsylvania municipal securities are municipal securities that
are not  subject to  Pennsylvania  personal  income tax (in the  opinion of bond
counsel to the issuer). They include debt obligations issued by the Commonwealth
of  Pennsylvania  and its  political  subdivisions.  They also may include  debt
obligations  of  the  governments  of  certain   possessions,   territories  and
commonwealths   of  the  United  States  if  the  interest  is  not  subject  to
Pennsylvania personal income tax.

     The Fund can also buy other municipal  securities issued by the governments
of the  District  of  Columbia  and of other  states,  or by any  commonwealths,
territories or possessions of the United States,  (for example,  Puerto Rico) or
their respective  agencies,  instrumentalities  or authorities,  if the interest
paid on the  security  is not  subject  to federal  personal  income tax (in the
opinion of bond counsel to the issuer at the time the security is issued). Under
highly unusual circumstances,  the Internal Revenue Service may determine that a
municipal bond issued as tax-exempt should in fact be taxable.  If the Fund held
such a bond, it might have to distribute  taxable  ordinary income  dividends or
reclassify  as  taxable  income   previously   distributed  as   exempt-interest
dividends.

     Municipal  securities  are issued to raise money for a variety of public or
private  purposes,  including  financing state or local  governments,  financing
specific  projects  or  financing  public  facilities.  The  Fund  can buy  both
long-term and short-term municipal securities.  For purposes of this prospectus,
long-term  securities  have a maturity of more than one year. The Fund generally
focuses on longer-term securities, to seek higher income.

     The Fund can buy  municipal  securities  that  are  "general  obligations,"
secured by the  issuer's  pledge of its full faith,  credit and taxing power for
the  payment  of  principal  and  interest.  The  Fund  can  also  buy  "revenue
obligations,"  whose  interest is payable only from the revenues  derived from a
particular  facility or class of facilities,  or a specific  excise tax or other
revenue source.  Some of these revenue  obligations  are industrial  development
bonds and private  activity bonds that pay interest that may be a tax preference
item for  investors  subject to the federal  alternative  minimum  tax. The Fund
selects investments without regard to this type of tax treatment.

     |X| Municipal  Lease  Obligations.  Municipal  leases are used by state and
local  government  authorities  to obtain  funds to acquire  land,  equipment or
facilities.  The Fund can invest in certificates of participation that represent
a proportionate  interest in payments made under  municipal  lease  obligations.
Most municipal  leases,  while secured by the leased  property,  are not general
obligations of the issuing municipality.  They often contain "non-appropriation"
clauses under which the municipal  government has no obligation to make lease or
installment  payments in future years unless money is  appropriated  on a yearly
basis.

     If the municipal  government stops making payments or transfers its payment
obligations  to a private  entity,  the  obligation  could  lose value or become
taxable.  Although  the  obligation  may be secured by the leased  equipment  or
facilities, the disposition of the property in the event of non-appropriation or
foreclosure might prove difficult,  time consuming and costly, and may result in
a delay in  recovering or the failure to recover the original  investment.  Some
lease obligations may not have an active trading market, making it difficult for
the Fund to sell them quickly at an acceptable price.

     |X| Ratings of Municipal  Securities  the Fund Buys.  Most of the municipal
securities  the Fund buys are  "investment  grade" at the time of purchase.  The
Fund can invest up to 25% of its total  assets in municipal  securities  that at
the time of purchase are not "investment-grade." Securities that are rated below
"investment-grade"  are those rated below "Baa" by Moody's,  or lower than "BBB"
by  Standard  &  Poor's  Rating  Services,  or  comparable  ratings by other
nationally recognized  statistical rating organizations,  or (if unrated) judged
by the Manager to be  comparable  to securities  rated below  investment  grade.
Rating  categories  are  described  in the SAI.  If the rating of a security  is
reduced  after  the Fund  buys it,  the Fund is not  required  automatically  to
dispose of that security. However, the Manager will evaluate those securities to
determine whether to keep them in the Fund's portfolio.

     The  Manager  relies  to  some  extent  on  credit  ratings  by  nationally
recognized  statistical  rating  organizations  in evaluating the credit risk of
securities selected for the Fund's portfolio.  It also uses its own research and
analysis to evaluate  risks.  Many  factors  affect an issuer's  ability to make
timely payments,  and the credit risks of a particular  security may change over
time.

     The  Fund  can  invest a  significant  portion  of its  assets  in  unrated
securities.  If a security the Fund buys is not rated,  the Manager will use its
judgment to assign a rating that it believes is  comparable  to that of a rating
organization.  Some of these unrated  securities  may not have an active trading
market, which means that the Fund might have difficulty valuing them and selling
them promptly at an acceptable price.

     |X| Floating Rate/Variable Rate Obligations. Some municipal securities have
variable or floating  interest  rates.  Variable  rates are adjustable at stated
periodic intervals.  Floating rates are automatically  adjusted in relation to a
specified  market rate,  such as the prime rate of a bank or the ninety-one (91)
day U.S. Treasury Bill rate. These obligations may be secured by bank letters of
credit or other  credit  support  arrangements  and can  include  "participation
interests"  purchased  from banks that give the Fund an undivided  interest in a
municipal obligation in proportion to its investment.

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

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

     |X|  Borrowing  for  Leverage.  The Fund can borrow  from banks to purchase
additional  securities,  a technique referred to as "leverage," in amounts up to
one  third  of its  total  assets  (including  the  amount  borrowed)  less  all
liabilities and  indebtedness  other than  borrowings.  The use of leverage will
subject  the Fund to greater  costs than funds that do not borrow for  leverage,
and may also make the  Fund's  share  price  more  sensitive  to  interest  rate
changes.  The  interest on borrowed  money is an expense  that might  reduce the
Fund's yield.

     |X|  "When-Issued"  and  "Delayed  Delivery"  Transactions.  The  Fund  can
purchase municipal  securities on a "when-issued" basis and can purchase or sell
such  securities  on a  "delayed  delivery"  basis.  Between  the  purchase  and
settlement,  no payment is made for the security and no interest  accrues to the
buyer from the  investment.  There is a risk of loss to the Fund if the value of
the when-issued security declines prior to the settlement date.

     |X|  Puts  and  Stand-By  Commitments.   The  Fund  can  acquire  "stand-by
commitments"  or "puts" with respect to municipal  securities.  The  investments
give the Fund the  right to sell  securities  at a set  price on  demand  to the
issuing  broker-dealer or bank. However, a security having this feature may have
a lower interest rate. The Fund will acquire stand-by commitments or puts solely
to enhance portfolio liquidity.

     |X| Illiquid and Restricted Securities. Investments may be illiquid because
they do not have an active trading market,  making it difficult to value them or
dispose of them promptly at an acceptable price.  Restricted securities may have
terms that limit their  resale to other  investors  or may require  registration
under federal  securities  laws before they can be sold publicly.  The Fund will
not invest  more than 15% of its net assets in  illiquid  securities  and cannot
invest  more  than  10% of its net  assets  in  restricted  securities.  Certain
restricted  securities  that are eligible for resale to qualified  institutional
purchasers may not be subject to those limits.  The Manager monitors holdings of
illiquid  securities  on an  ongoing  basis  to  determine  whether  to sell any
holdings to maintain adequate liquidity.

     |X|  Hedging.  The Fund can buy and sell  futures  contracts,  put and call
options, or enter into interest rate swap agreements.  These are all referred to
as  "hedging  instruments."  The  Fund  does  not use  hedging  instruments  for
speculative  purposes  and has limits on its use of them.  The Fund does not use
hedging  instruments to a substantial  degree and is not required to use them in
seeking its investment objective.

     Hedging  involves  risks.  If the Manager uses a hedging  instrument at the
wrong  time  or  judges  market  conditions  incorrectly,  the  hedge  might  be
unsuccessful  and the strategy  could reduce the Fund's  return.  The Fund could
also experience  losses if the prices of its futures and options  positions were
not  correlated  with its  other  investments  or if it could  not  close  out a
position because of an illiquid market for the future or option.

     Portfolio Turnover. A change in the securities held by the Fund is known as
"portfolio  turnover." The Fund can engage in active and frequent trading to try
to achieve  its  objective,  and may have a high  portfolio  turnover  rate (for
example, over 100%). While increased portfolio turnover creates higher brokerage
and transaction costs for the Fund (and may reduce  performance),  in most cases
the Fund does not pay brokerage  commissions on debt  securities it buys. If the
Fund  realizes  capital  gains  when it  sells  its  portfolio  investments,  it
generally  must pay those gains out to  shareholders,  increasing  their taxable
distributions.  The  Financial  Highlights  table at the end of this  prospectus
shows the Fund's portfolio turnover rates during recent prior fiscal years.

     Temporary Defensive and Interim  Investments.  In times of unstable adverse
market, political or economic conditions,  the Fund can invest up to 100% of its
total assets in temporary  defensive  investments that are inconsistent with the
Fund's  principal  investment  strategies.   Generally,   the  Fund's  defensive
investments  will  be  short-term  municipal  securities,   but  could  be  U.S.
government securities or highly-rated corporate debt securities. The income from
some temporary defensive investments might not be tax-exempt, and therefore when
making those investments the Fund might not achieve its objective.

     Under  normal  market  conditions,  the Fund can also hold  these  types of
investments for cash management purposes pending the investment of proceeds from
the  sale  of  Fund  shares  or  portfolio  securities  or to  meet  anticipated
redemptions of Fund shares. These are referred to as interim investments.

     PORTFOLIO   HOLDINGS.   The  Fund's  portfolio  holdings  are  included  in
semi-annual  and annual reports that are distributed to shareholders of the Fund
within 60 days  after the close of the  period  for which  such  report is being
made.  The Fund also  discloses  its  portfolio  holdings in its  Statements  of
Investments  on Form N-Q,  which  are filed  with the  Securities  and  Exchange
Commission ("SEC"), no later than 60 days after the close of its first and third
fiscal  quarters.  These  required  filings are  publicly  available at the SEC.
Therefore,  portfolio  holdings of the Fund are made publicly available no later
than 60 days after the close of each of the Fund's fiscal quarters.

     A description  of the Fund's  policies and  procedures  with respect to the
disclosure of the Fund's portfolio securities is available in the Fund's SAI.

How the Fund is Managed

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

     The Manager has been an investment  advisor since 1960. The Manager and its
subsidiaries and controlled  affiliates managed more than $235 billion in assets
as of December  31, 2006,  including  other  Oppenheimer  funds with more than 6
million  shareholder  accounts.  The  Manager is located at Two World  Financial
Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008.

     |X| Advisory Fees. Under the investment advisory  agreement,  the Fund pays
the Manager an advisory fee at an annual rate that declines as the Fund's assets
grow: 0.60% 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.  The Fund's  management  fee for its last  fiscal year
ended July 31,  2006,  was 0.50% of average  annual net assets for each class of
shares.

     A discussion regarding the basis for the Board of Trustees' approval of the
Fund's  investment  advisory  contract is  available  in the Fund's  Semi-Annual
Report to shareholders for the six-month period ended January 31, 2006.

     Portfolio Managers. The Fund's portfolio is managed by a team of investment
professionals,  including  Ronald  H.  Fielding,  Daniel G.  Loughran,  Scott S.
Cottier, Troy Willis, Mark DeMitry, Marcus Franz, and Michael Camarella, who are
primarily responsible for the day-to-day management of the Fund's investments.

     Mr. Fielding has been a Vice President and Senior Portfolio  Manager of the
Fund since January 1999.  Mr.  Fielding has been a Senior Vice  President of the
Manager  since  January 1996.  He is the Chief  Strategist,  a Senior  Portfolio
Manager, an officer and a trader for the Fund and other Oppenheimer funds.

     Mr. Loughran has been a Vice President of the Fund since October 2005 and a
Senior  Portfolio  Manager  of the Fund  since July  2005.  Mr.  Loughran  was a
Portfolio Manager of the Fund from January 1999 to June 2005. He has been a Vice
President of the Manager since April 2001 and has been a portfolio  manager with
the Manager since 1999. He is a portfolio  manager and officer of other funds in
the OppenheimerFunds complex.

     Mr.  Cottier has been a Vice President of the Fund since October 2005 and a
Senior  Portfolio  Manager of the Fund since 2002.  Mr.  Cottier has been a Vice
President of the Manager since 2002.  Prior to joining the Manager in 2002,  Mr.
Cottier was a portfolio  manager and trader at Victory  Capital  Management from
1999 to 2002. He is a Senior  Portfolio  Manager,  an officer and trader for the
Fund and other Oppenheimer funds.

     Mr.  Willis has been a Vice  President of the Fund since October 2005 and a
Senior  Portfolio  Manager of the Fund since  January  2006.  He was a Portfolio
Manager  of the Fund from May 2003 to  December  2005.  Mr.  Willis  has been an
Assistant  Vice  President of the Manager since July 2005.  Prior to joining the
Manager in 2003, Mr. Willis was a Corporate Attorney for Southern Resource Group
from 1999 to 2003. He is a Senior Portfolio Manager, an officer and a trader for
the Fund and other Oppenheimer funds.

     Mr. DeMitry has been an Associate  Portfolio Manager of the Fund and of the
Manager since September 2006. Mr. DeMitry was a Research  Analyst of the Manager
from June 2003 to August 2006. He was a Credit  Analyst of the Manager from July
2001 to May 2003. He is an Associate Portfolio Manager and a trader for the Fund
and other Oppenheimer funds.

     Mr.  Franz has been an Associate  Portfolio  Manager of the Fund and of the
Manager since  September  2006. Mr. Franz was a Research  Analyst of the Manager
from June 2003 to August  2006.  Prior to joining the  Manager,  Mr. Franz was a
summer  intern  in the  Securities  Division  at  TIAA-CREF  from  June  2002 to
September 2002. He is an Associate  Portfolio  Manager and a trader for the Fund
and other Oppenheimer funds.

     Mr.  Camarella is a Research  Analyst for the Fund.  He has been a Research
Analyst of the Manager since February  2006. Mr.  Camarella was a Credit Analyst
of the Manager from June 2003 to January 2006. Prior to joining the Manager,  he
was  employed as an  Investment  Banking  Analyst  for  Wachovia  Securities  in
Charlotte,  North  Carolina  from January 2000 to June 2002. He is also a trader
for the Fund and other Oppenheimer funds.

     Additional   information  about  the  Fund's  Portfolio   Management  Team,
regarding  compensation,  other  accounts  managed and their  ownership  of Fund
shares, is provided in the Statement of Additional Information.


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

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

     Buying Shares  Through Your Dealer.  You can buy shares through any dealer,
broker or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.  A broker
or dealer may charge a processing fee for that service.

     Buying Shares Through the  Distributor.  Complete an  OppenheimerFunds  new
account  application  and return it with a check  payable  to  "OppenheimerFunds
Distributor,  Inc." Mail it to P.O. Box 5270, Denver,  Colorado 80217. If you do
not list a dealer on the  application,  Class A shares  are your  only  purchase
option.  The  Distributor  will act as your  agent  in  buying  Class A  shares.
However,  we recommend that you discuss your investment with a financial advisor
before  you make a  purchase  to be sure that the Fund is  appropriate  for you.
Class B or Class C shares may not be purchased by a new investor  directly  from
the   Distributor   without  the   investor   designating   another   registered
broker-dealer.  If a current  investor  no longer has another  broker-dealer  of
record  for  an  existing  Class  B or  Class  C  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.

     o Paying by Federal Funds Wire.  Shares  purchased  through the Distributor
may be paid for by Federal  Funds  wire.  The minimum  wire  purchase is $2,500.
Before sending a wire, call the Distributor's  Wire Department at 1.800.225.5677
to notify the Distributor of the wire and to receive further instructions.

     o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
can pay for shares by electronic funds transfers from your bank account.  Shares
are  purchased  for your  account by a transfer of money from your bank  account
through the  Automated  Clearing  House  (ACH)  system.  You can  provide  share
purchase  instructions  automatically,  under an Asset Builder  Plan,  described
below,  or by telephone  instructions  using  OppenheimerFunds  PhoneLink,  also
described below. Please refer to "AccountLink," below for more details.

     o Buying Shares Through Asset Builder Plans. You may purchase shares of the
Fund  automatically  from your account at a bank or other financial  institution
under an Asset Builder Plan with  AccountLink.  Details are in the Asset Builder
application and the Statement of Additional Information.

     WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares  with  a  minimum  initial  investment  of  $1,000  and  make  additional
investments  at any time  with as  little as $50.  There  are  reduced  minimums
available under the following special investment plans:

     o By using an Asset Builder Plan or Automatic Exchange Plan (details are in
the Statement of Additional Information),  or government allotment plan, you can
make an  initial  investment  for as  little  as $500.  The  minimum  subsequent
investment is $50,  except that for any account  established  under one of these
plans prior to November 1, 2002, the minimum  additional  investment will remain
$25.

     o A  minimum  initial  investment  of $250  applies  to  certain  fee based
programs that have an agreement  with the  Distributor.  The minimum  subsequent
investment for those programs is $50.

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

     AT WHAT PRICE ARE SHARES  SOLD?  Shares  are sold at their  offering  price
which is the net asset  value per  share  plus any  initial  sales  charge  that
applies.  The offering  price that  applies to a purchase  order is based on the
next  calculation  of the net  asset  value  per  share  that is made  after the
Distributor receives the purchase order at its offices in Colorado, or after any
agent appointed by the Distributor  receives the order.  Your financial  adviser
can provide you with more  information  regarding  the time you must submit your
purchase order and whether the adviser is an authorized agent for the receipt of
purchase orders.

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

     The net asset value per share for a class of shares on a "regular  business
day" is determined  by dividing the value of the Fund's net assets  attributable
to that class by the number of shares of that class  outstanding on that day. To
determine net asset values, the Fund assets are valued primarily on the basis of
current market quotations.  If market quotations are not readily available or do
not accurately reflect fair value for a security (in the Manager's  judgment) or
if a security's value has been materially affected by events occurring after the
close of the market on which the security is principally  traded,  that security
may be valued by another method that the Board of Trustees  believes  accurately
reflects the fair value.

     The Board has adopted  valuation  procedures for the Fund and has delegated
the day-to-day  responsibility  for fair value  determinations  to the Manager's
Valuation  Committee.  Fair value  determinations  by the Manager are subject to
review,  approval and  ratification  by the Board at its next scheduled  meeting
after the fair valuations are determined.  In determining whether current market
prices are readily available and reliable,  the Manager monitors the information
it receives in the ordinary course of its investment management responsibilities
for  significant  events  that it  believes in good faith will affect the market
prices of the  securities of issuers held by the Fund.  Those may include events
affecting  specific issuers (for example, a halt in trading of the securities of
an issuer on an exchange during the trading day) or events affecting  securities
markets (for  example,  a securities  market  closes early  because of a natural
disaster).  The Fund uses fair value  pricing  procedures  to  reflect  what the
Manager  and  the  Board  believe  to be more  accurate  values  for the  Fund's
portfolio securities, although it may not always be able to accurately determine
such values. There can be no assurance that the Fund could obtain the fair value
assigned to a security if it were to sell the security at the same time at which
the Fund determines its net asset value per share.

     If, after the close of the principal market on which a security held by the
Fund is traded and  before the time as of which the Fund's net asset  values are
calculated  that day, an event occurs that the Manager learns of and believes in
the exercise of its judgment  will cause a material  change in the value of that
security from the closing price of the security on the principal market on which
it is traded,  the Manager will use its best  judgment to determine a fair value
for that security.

     The Offering Price. To receive the offering price for a particular day, the
Distributor or its designated  agent must receive your order,  in proper form as
described  in this  prospectus,  by the time the NYSE  closes  that day. If your
order is received  on a day when the NYSE is closed or after it has closed,  the
order will receive the next offering  price that is determined  after your order
is received.

     Buying Through a Dealer.  If you buy shares  through an authorized  dealer,
your dealer  must  receive the order by the close of the NYSE for you to receive
that day's offering  price.  If your order is received on a day when the NYSE is
closed or after it is closed,  the order will  receive the next  offering  price
that is determined.

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


     Class A Shares. If you buy Class A shares,  you pay an initial sales charge
(on  investments  up to $1  million).  The amount of that sales charge will vary
depending  on the amount you invest.  The sales  charge rates are listed in "How
Can You Buy Class A Shares?" below.

     Class B Shares.  If you buy Class B shares,  you pay no sales charge at the
time of purchase,  but you will pay an annual  asset-based  sales charge. If you
sell  your  shares  within 6 years of  buying  them,  you  will  normally  pay a
contingent  deferred sales charge.  That contingent deferred sales charge varies
depending  on how long you own your  shares,  as  described  in "How Can You Buy
Class B Shares?" below.

     Class C Shares.  If you buy Class C shares,  you pay no sales charge at the
time of purchase,  but you will pay an annual  asset-based  sales charge. If you
sell your  shares  within 12 months of  buying  them,  you will  normally  pay a
contingent deferred sales charge of 1.0%, as described in "How Can You Buy Class
C Shares?" below.



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

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

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

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

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

     If you invest $1 million or more,  in most cases Class A shares will be the
most advantageous choice, no matter how long you intend to hold your shares. The
Distributor  normally will not accept  purchase orders of more than $100,000 for
Class B shares or $1 million or more of Class C shares  from a single  investor.
Dealers or other financial intermediaries  purchasing shares for their customers
in omnibus accounts are responsible for compliance with those limits.

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

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

     Additionally,  the  dividends  payable to Class B and Class C  shareholders
will be reduced by the  additional  expenses borne by those classes that are not
borne by Class A  shares,  such as the  Class B and  Class C  asset-based  sales
charge  described  below and in the Statement of Additional  Information.  Also,
checkwriting is not available on accounts subject to a contingent deferred sales
charge.

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

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

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



 ------------------------------------------------------------------------------
 Amount of Purchase       Front-End Sales  Front-End Sales   Concession As a
                                           Charge As a
                          Charge As a      Percentage of
                          Percentage of    Net               Percentage of
                          Offering Price   Amount Invested   Offering Price
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Less than $50,000             4.75%             4.98%             4.00%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $50,000 or more but           4.50%             4.71%             4.00%
 less than $100,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $100,000 or more but          3.50%             3.63%             3.00%
 less than $250,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $250,000 or more but          2.50%             2.56%             2.25%
 less than $500,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $500,000 or more but          2.00%             2.04%             1.80%
 less than $1 million
 ------------------------------------------------------------------------------
Due to rounding,  the actual sales charge for a particular  transaction may
be higher or lower than the rates listed above.

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

     CAN YOU REDUCE CLASS A SALES  CHARGES?  You and your spouse may be eligible
to buy Class A shares of the Fund at reduced sales charge rates set forth in the
table above under the Fund's  "Right of  Accumulation"  or a "Letter of Intent."
The Fund reserves the right to modify or to cease offering these programs at any
time

     o Right of  Accumulation.  To qualify for the reduced  Class A sales charge
that would apply to a larger purchase than you are currently making (as shown in
the table  above),  you can add the value of any  Class A,  Class B or,  Class C
shares of the Fund or other  Oppenheimer funds that you or your spouse currently
own, or are currently  purchasing,  to the value of your Class A share purchase.
Your Class A shares of Oppenheimer  Money Market Fund, Inc. or Oppenheimer  Cash
Reserves on which you have not paid a sales  charge will not be counted for this
purpose. In totaling your holdings, you may count shares held in your individual
accounts  (including  IRAs and  403(b)  plans),  your joint  accounts  with your
spouse,  or accounts you or your spouse hold as trustees or custodians on behalf
of your children who are minors.  A fiduciary can count all shares purchased for
a trust, estate or other fiduciary account that has multiple accounts (including
employee benefit plans for the same employer). If you are buying shares directly
from the Fund, you must inform the Distributor of your  eligibility and holdings
at the time of your purchase in order to qualify for the Right of  Accumulation.
If you are buying shares  through your  financial  intermediary  you must notify
your financial intermediary of your eligibility for the Right of Accumulation at
the time of your purchase.

     To count  shares of  eligible  Oppenheimer  funds held in accounts at other
intermediaries under this Right of Accumulation, you may be requested to provide
the  Distributor  or  your  current  intermediary  with  a copy  of all  account
statements  showing  your  current  holdings  of  the  Fund  or  other  eligible
Oppenheimer funds, including statements for accounts held by you and your spouse
or in  retirement  plans or trust or custodial  accounts  for minor  children as
described  above.  The Distributor or intermediary  through which you are buying
shares will calculate the value of your eligible  Oppenheimer fund shares, based
on the current  offering price, to determine which Class A sales charge rate you
qualify for on your current purchase.

     o Letters of Intent. You may also qualify for reduced Class A sales charges
by  submitting  a Letter of Intent to the  Distributor.  A Letter of Intent is a
written  statement of your  intention to purchase a specified  value of Class A,
Class B or Class C shares of the Fund or other Oppenheimer funds over a 13-month
period.  The total  amount of your  intended  purchases  of Class A, Class B and
Class C shares will  determine  the reduced sales charge rate that will apply to
your Class A share  purchases of the Fund during that period.  Purchases made up
to 90 days  before the date that you submit a Letter of Intent  will be included
in that determination. Any Class A shares of Oppenheimer Money Market Fund, Inc.
or Oppenheimer Cash Reserves on which you have not paid a sales charge, will not
be counted for this purpose. Submitting a Letter of Intent does not obligate you
to purchase the  specified  amount of shares.  You may also be able to apply the
Right of Accumulation to these purchases.

     You can choose to include purchases made up to 90 days before the date that
you submit a Letter of Intent.  Your Class A shares of Oppenheimer  Money Market
Fund,  Inc.  or  Oppenheimer  Cash  Reserves  on which you have not paid a sales
charge will not be counted for this purpose.  Submitting a Letter of Intent does
not  obligate you to purchase the  specified  amount of shares.  You may also be
able to apply the Right of Accumulation to these purchases.

     If you do not complete the Letter of Intent, the front-end sales charge you
paid on your  purchases  will be  recalculated  to reflect  the actual  value of
shares you purchased. A certain portion of your shares will be held in escrow by
the Fund's Transfer Agent for this purpose. Please refer to "How to Buy Shares -
Letters of Intent" in the Fund's  Statement of Additional  Information  for more
complete information.

     Other  Special  Sales Charge  Arrangements  and  Waivers.  The Fund and the
Distributor  offer other  opportunities to purchase shares without  front-end or
contingent  deferred sales charges under the programs  described below. The Fund
reserves the right to amend or  discontinue  these  programs at any time without
prior notice.

     o Dividend  Reinvestment.  Dividends  and/or  capital  gains  distributions
received by a shareholder  from the Fund may be reinvested in shares of the Fund
or any of the  other  Oppenheimer  funds  into  which  shares of the Fund may be
exchanged  without a sales charge, at the net asset value per share in effect on
the payable  date.  You must notify the Transfer  Agent in writing to elect this
option and must have an existing account in the fund selected for reinvestment.

     o Exchanges of Shares.  Shares of the Fund may be  exchanged  for shares of
certain  other  Oppenheimer  funds at net  asset  value per share at the time of
exchange,  without  sales  charge,  and shares of the Fund can be  purchased  by
exchange of shares of certain other Oppenheimer funds on the same basis.  Please
refer to "How to Exchange  Shares" in this  prospectus  and in the  Statement of
Additional Information for more details, including a discussion of circumstances
in which sales charges may apply on exchanges.

     o  Reinvestment  Privilege.  Within six months of a  redemption  of certain
Class A and Class B shares,  the proceeds may be reinvested in Class A shares of
the Fund,  or any of the other  Oppenheimer  funds into which shares of the Fund
may be exchanged,  without a sales charge. This privilege applies to redemptions
of Class A shares  that were  subject to an initial  sales  charge or Class A or
Class B shares that were  subject to a  contingent  deferred  sales  charge when
redeemed.  The  investor  must ask the  Transfer  Agent or his or her  financial
intermediary  for that privilege at the time of  reinvestment  and must identify
the account from which the redemption was made.

     o Other Special Reductions and Waivers.  The Fund and the Distributor offer
additional  arrangements  to reduce or eliminate  front-end  sales charges or to
waive  contingent  deferred sales charges for certain types of transactions  and
for certain  categories of investors.  These are described in greater  detail in
Appendix C to the Statement of Additional  Information.  The Fund's Statement of
Additional  Information  may be  ordered  by  calling  1.800.225.5677  or may be
accessed  through  the  OppenheimerFunds  website,  at  www.oppenheimerfunds.com
(under the heading "I Want To," follow the hyperlink "Access Fund Documents" and
click on the icon in the column "SAI" next to the Fund's name). A description of
these  waivers and special  sales  charge  arrangements  is also  available  for
viewing on the  OppenheimerFunds  website (under the heading "Fund Information,"
click on the hyperlink "Sales Charge  Waivers").  To receive a waiver or special
sales  charge  rate  under  these  programs,   the  purchaser  must  notify  the
Distributor  (or other  financial  intermediary  through  which shares are being
purchased)  at the time of purchase,  or must notify the  Transfer  Agent at the
time of redeeming  shares for waivers that apply to  contingent  deferred  sales
charges.

     Class A Contingent Deferred Sales Charge.  There is no initial sales charge
on  purchases  of Class A  shares  of any one or more of the  Oppenheimer  funds
aggregating  $1  million  or  more.  The  Distributor  pays  dealers  of  record
concessions in an amount equal to 0.50% of purchases of $1 million or more. That
concession  will not be paid on  purchases  of shares by  exchange  or that were
previously subject to a front-end sales charge and dealer concession.

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

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

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

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

--------------------------------------------------------------------------------
Years Since Beginning of Month in       Contingent Deferred Sales Charge on
Which Purchase Order Was Accepted       Redemptions in That Year
                                        (As % of Amount Subject to Charge)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
0 - 1                                   5.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1 - 2                                   4.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2 - 3                                   3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3 - 4                                   3.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
4 - 5                                   2.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5 - 6                                   1.0%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
More than 6                             None
--------------------------------------------------------------------------------

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

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

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

DISTRIBUTION AND SERVICE (12b-1) PLANS.

     Service  Plan for Class A Shares.  The Fund has adopted a Service  Plan for
Class A  shares.  It  reimburses  the  Distributor  for a  portion  of its costs
incurred  for  services   provided  to  accounts   that  hold  Class  A  shares.
Reimbursement  is made quarterly at an annual rate of up to 0.15% 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  periodically  for providing  personal  service and  maintenance of
accounts of their customers that hold Class A shares.

     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 pay the
Distributor  for its  services  and  costs in  distributing  Class B and Class C
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 shares and on Class
C shares.  The  Distributor  also receives a service fee of up to 0.15% per year
under each plan.

     The asset-based  sales charge and service fees increase Class B and Class C
expenses by 0.90% of the net assets per year of the  respective  class.  Because
these fees are paid out of the  Fund's  assets on an  ongoing  basis,  over time
these fees will increase the cost of your  investment and may cost you more than
other types of sales charges.

     The Distributor  uses the service fees to compensate  dealers for providing
personal  services  for  accounts  that  hold  Class B or  Class C  shares.  The
Distributor  normally  pays the 0.15% service fees to dealers in advance for the
first year after the shares are sold by the  dealer.  After the shares have been
held for a year, the Distributor pays the service fees to dealers periodically.

     The Distributor  currently pays a sales concession of 3.85% of the purchase
price of Class B shares to dealers  from its own  resources at the time of sale.
Including  the  advance  of the  service  fee,  the  total  amount  paid  by the
Distributor  to the  dealer at the time of sale of Class B shares  is  therefore
4.00% of the  purchase  price.  The  Distributor  normally  retains  the Class B
asset-based  sales  charge.  See the  Statement of  Additional  Information  for
exceptions.

     The Distributor  currently pays a sales concession of 0.75% of the purchase
price of Class C shares to dealers  from its own  resources at the time of sale.
Including  the  advance  of the  service  fee,  the  total  amount  paid  by the
Distributor  to the  dealer at the time of sale of Class C shares  is  therefore
0.90% of the purchase price. The Distributor  pays the asset-based  sales charge
as an  ongoing  concession  to the  dealer  on Class C  shares  that  have  been
outstanding  for a year or more. The  Distributor  normally  retains the Class C
asset-based  sales  charge  during  the  first  year  after  Class C shares  are
purchased. See the Statement of Additional Information for exceptions.

     Under certain  circumstances,  the  Distributor may pay the full Class B or
Class C asset-based  sales charge and the service fee to the dealer beginning in
the first year after  purchase  of such  shares in lieu of paying the dealer the
sales  concession and the advance of the first year's service fee at the time of
purchase,   if  there  is  a  special  agreement  between  the  dealer  and  the
Distributor.  In those  circumstances,  the sales concession will not be paid to
the dealer.

     OTHER  PAYMENTS TO  FINANCIAL  INTERMEDIARIES  AND SERVICE  PROVIDERS.  The
Manager and the Distributor,  in their discretion, also may pay dealers or other
financial   intermediaries   and  service  providers  for  distribution   and/or
shareholder servicing  activities.  These payments are made out of the Manager's
and/or the Distributor's own resources,  including from the profits derived from
the advisory fees the Manager receives from the Fund. These cash payments, which
may be substantial,  are paid to many firms having business  relationships  with
the Manager and Distributor.  These payments are in addition to any distribution
fees, servicing fees, or transfer agency fees paid directly or indirectly by the
Fund to these financial  intermediaries and any commissions the Distributor pays
to these firms out of the sales charges paid by investors. These payments by the
Manager or Distributor  from their own resources are not reflected in the tables
in the section called "Fees and Expenses of the Fund" in this prospectus because
they are not paid by the Fund.

     "Financial  intermediaries"  are firms that  offer and sell Fund  shares to
their clients, or provide shareholder services to the Fund, or both, and receive
compensation  for doing so. Your  securities  dealer or financial  adviser,  for
example,  is a financial  intermediary,  and there are other types of  financial
intermediaries  that receive  payments  relating to the sale or servicing of the
Fund's shares.  In addition to dealers,  the financial  intermediaries  that may
receive payments include sponsors of fund "supermarkets,"  sponsors of fee-based
advisory  or wrap fee  programs,  sponsors  of college  and  retirement  savings
programs, banks and trust companies offering products that hold Fund shares, and
insurance  companies  that offer  variable  annuity or variable  life  insurance
products.

     In general,  these payments to financial  intermediaries can be categorized
as    "distribution-related"    or    "servicing"    payments.    Payments   for
distribution-related  expenses,  such as marketing or promotional expenses,  are
often referred to as "revenue  sharing." Revenue sharing payments may be made on
the basis of the sales of shares  attributable  to that dealer,  the average net
assets of the Fund and other Oppenheimer  funds  attributable to the accounts of
that dealer and its  clients,  negotiated  lump sum  payments  for  distribution
services provided, or sales support fees. In some circumstances, revenue sharing
payments may create an incentive for a dealer or financial  intermediary  or its
representatives  to recommend  or offer shares of the Fund or other  Oppenheimer
funds  to its  customers.  These  payments  also  may  give an  intermediary  an
incentive to  cooperate  with the  Distributor's  marketing  efforts.  A revenue
sharing payment may, for example, qualify the Fund for preferred status with the
intermediary receiving the payment or provide representatives of the Distributor
with access to representatives of the intermediary's  sales force, in some cases
on a  preferential  basis  over  funds  of  competitors.  Additionally,  as firm
support,   the  Manager  or  Distributor  may  reimburse   expenses  related  to
educational  seminars and "due  diligence"  or training  meetings (to the extent
permitted  by  applicable  laws or the rules of the NASD)  designed  to increase
sales  representatives'  awareness about Oppenheimer funds, including travel and
lodging  expenditures.  However,  the  Manager  does not  consider  a  financial
intermediary's  sale of  shares  of the Fund or  other  Oppenheimer  funds  when
selecting brokers or dealers to effect portfolio transactions for the funds.

     Various  factors  are used to  determine  whether to make  revenue  sharing
payments.  Possible  considerations  include,  without limitation,  the types of
services  provided by the  intermediary,  sales of Fund shares,  the  redemption
rates on  accounts of clients of the  intermediary  or overall  asset  levels of
Oppenheimer funds held for or by clients of the intermediary, the willingness of
the  intermediary to allow the  Distributor to provide  educational and training
support for the  intermediary's  sales  personnel  relating  to the  Oppenheimer
funds, the  availability of the Oppenheimer  funds on the  intermediary's  sales
system,  as  well  as the  overall  quality  of  the  services  provided  by the
intermediary   and  the   Manager  or   Distributor's   relationship   with  the
intermediary.  The Manager and Distributor have adopted guidelines for assessing
and implementing  each prospective  revenue sharing  arrangement.  To the extent
that financial intermediaries receiving  distribution-related  payments from the
Manager or Distributor sell more shares of the Oppenheimer  funds or retain more
shares  of the funds in their  client  accounts,  the  Manager  and  Distributor
benefit from the incremental management and other fees they receive with respect
to those assets.

     Payments may also be made by the Manager,  the  Distributor or the Transfer
Agent  to  financial   intermediaries   to  compensate  or  reimburse  them  for
administrative  or other client services  provided such as  sub-transfer  agency
services for shareholders or retirement plan participants, omnibus accounting or
sub-accounting,   participation  in  networking  arrangements,  account  set-up,
recordkeeping  and other  shareholder  services.  Payments  may also be made for
administrative  services  related to the distribution of Fund shares through the
intermediary.  Firms that may receive  servicing  fees include  retirement  plan
administrators,  qualified tuition program sponsors,  banks and trust companies,
and others.  These fees may be used by the service  provider to offset or reduce
fees that would otherwise be paid directly to them by certain  account  holders,
such as retirement plans.

     The Statement of Additional  Information  contains more  information  about
revenue  sharing and service  payments  made by the Manager or the  Distributor.
Your dealer may charge you fees or commissions in addition to those disclosed in
this  prospectus.  You  should ask your  dealer or  financial  intermediary  for
details about any such payments it receives from the Manager or the  Distributor
and their affiliates, or any other fees or expenses it charges.

Special Investor Services

     ACCOUNTLINK.  You can use our AccountLink feature to link your Fund account
with an account at a U.S.  bank or other  financial  institution.  It must be an
Automated Clearing House (ACH) member. AccountLink lets you:

     o transmit funds  electronically to purchase shares by telephone (through a
service  representative  or by PhoneLink) or  automatically  under Asset Builder
Plans, or

     o have the Transfer Agent send  redemption  proceeds or transmit  dividends
and distributions directly to your bank account.  Please call the Transfer Agent
for more information.

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

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

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

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

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

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

How to Sell Shares

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

     Certain Requests Require a Signature Guarantee. To protect you and the Fund
from  fraud,  the  following  redemption  requests  must be in writing  and must
include a signature  guarantee (although there may be other situations that also
require a signature guarantee):

   o  You wish to redeem more than $100,000 and receive a check.
   o  The redemption check is not payable to all shareholders listed on the
      account statement.
   o  The redemption check is not sent to the address of record on your account
      statement.
   o  Shares are being transferred to a Fund account with a different owner or
      name.
   o  Shares are being redeemed by someone (such as an Executor) other than the
      owners.

     Where Can You Have Your  Signature  Guaranteed?  The  Transfer  Agent  will
accept a guarantee  of your  signature  by a number of  financial  institutions,
including:

o     a U.S. bank, trust company, credit union or savings association,
o     a foreign bank that has a U.S. correspondent bank,
o     a U.S. registered dealer or broker in securities, municipal securities or
      government securities, or
o     a U.S. national securities exchange, a registered securities association
      or a clearing agency.

     If you are  signing  on  behalf  of a  corporation,  partnership  or  other
business or as a fiduciary, you must also include your title in the signature.

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

     CHECKWRITING.  To write  checks  against  your Fund  account,  request that
privilege  on your  account  application,  or  contact  the  Transfer  Agent for
signature cards. They must be signed (with a signature  guarantee) by all owners
of the account and returned to the Transfer  Agent so that checks can be sent to
you to use. Shareholders with joint accounts can elect in writing to have checks
paid over the signature of one owner. If you previously  signed a signature card
to   establish   checkwriting   in  another   Oppenheimer   fund,   simply  call
1.800.225.5677 to request checkwriting for an account in this Fund with the same
registration as the other account.

     o Checks can be written to the order of whomever  you wish,  but may not be
cashed at the bank the checks are payable through or the Fund's custodian bank.

     o  Checkwriting  privileges  are not available for accounts  holding shares
that are subject to a contingent deferred sales charge.

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

     o Checks  cannot be paid if they are  written  for more  than your  account
value. Remember, your shares fluctuate in value and you should not write a check
close to the total account value.

     o You may not write a check that would  require  the Fund to redeem  shares
that were purchased by check or Asset Builder Plan payments  within the prior 10
days.

     o Don't use your checks if you changed your Fund account number,  until you
receive new checks.

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

Use the following address for            Send courier or express mail
requests by mail:                        requests to:
OppenheimerFunds Services                OppenheimerFunds Services
P.O. Box 5270                            10200 E. Girard Avenue, Building D
Denver, Colorado 80217                   Denver, Colorado 80231


     HOW DO YOU SELL SHARES BY TELEPHONE?  You and your dealer representative of
record may also sell your shares by telephone.  To receive the redemption  price
calculated on a particular  regular  business day, your call must be received by
the  Transfer  Agent by the close of the NYSE that day,  which is normally  4:00
p.m. Eastern time, but may be earlier on some days.

     You may not redeem shares under a share certificate by telephone.

     o To redeem shares through a service  representative  or  automatically  on
PhoneLink, call 1.800.225.5677.

     Whichever  method you use,  you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.

Are There Limits on Amounts Redeemed by Telephone?

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

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

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

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

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

     A contingent  deferred  sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:

     o the amount of your account value  represented by an increase in net asset
value over the initial purchase price,

     o shares  purchased  by the  reinvestment  of  dividends  or capital  gains
distributions, or

     o shares redeemed in the special  circumstances  described in Appendix C to
the Statement of Additional Information.

     To  determine  whether a  contingent  deferred  sales  charge  applies to a
redemption, the Fund redeems shares in the following order:

   1. shares acquired by reinvestment of dividends and capital gains distributions,
   2. shares held for the holding period that applies to the class, and
   3. shares held the longest during the holding period.

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

How to Exchange Shares

     If you want to change all or part of your  investment  from one Oppenheimer
fund to another,  you can  exchange  your shares for shares of the same class of
another  Oppenheimer fund that offers the exchange privilege.  For example,  you
can exchange Class A shares of the Fund only for Class A shares of another fund.
To exchange shares, you must meet several conditions:

     o Shares of the fund  selected for exchange  must be available  for sale in
your state of residence.

     o The selected fund must offer the exchange privilege.

     o When you  establish  an account,  you must hold the shares you buy for at
least seven days before you can  exchange  them.  After your account is open for
seven days, you can exchange shares on any regular  business day, subject to the
limitations described below.

     o You must meet the minimum purchase requirements for the selected fund.

     o  Generally,  exchanges  may be made only between  identically  registered
accounts,  unless all account owners send written exchange  instructions  with a
signature  guarantee.  o Before  exchanging  into a fund,  you must  obtain  its
prospectus and should read it carefully.

     For tax purposes, an exchange of shares of the Fund is considered a sale of
those  shares  and a  purchase  of the  shares  of the fund  into  which you are
exchanging. An exchange may result in a capital gain or loss.

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

     A contingent  deferred sales charge (CDSC) is not charged when you exchange
shares of the Fund for  shares of  another  Oppenheimer  fund.  However,  if you
exchange  your shares during the  applicable  CDSC holding  period,  the holding
period will carry over to the fund shares that you  acquire.  Similarly,  if you
acquire  shares of the Fund in exchange for shares of another  Oppenheimer  fund
that are subject to a CDSC holding  period,  that holding period will carry over
to the acquired shares of the Fund. In either of these situations, a CDSC may be
imposed if the acquired  shares are redeemed  before the end of the CDSC holding
period that applied to the exchanged shares.

     There are a number of other special  conditions and limitations  that apply
to certain types of exchanges.  These conditions and circumstances are described
in detail in the "How to Exchange Shares" section in the Statement of Additional
Information.

     HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing,
by telephone or internet, or by establishing an Automatic Exchange Plan.

     Written Exchange Requests.  Send a request letter,  signed by all owners of
the account,  to the Transfer Agent at the address on the back cover.  Exchanges
of shares for which  share  certificates  have been issued  cannot be  processed
unless the Transfer Agent receives the certificates with the request letter.

     Telephone and Internet Exchange  Requests.  Telephone exchange requests may
be made  either by calling a service  representative  or by using  PhoneLink  by
calling  1.800.225.5677.  You  may  submit  internet  exchange  requests  on the
OppenheimerFunds  internet website, at  www.oppenheimerfunds.com.  You must have
obtained  a user  I.D.  and  password  to make  transactions  on  that  website.
Telephone  and/or internet  exchanges may be made only between accounts that are
registered   with  the  same  name(s)  and  address.   Shares  for  which  share
certificates have been issued may not be exchanged by telephone or the internet.

     Automatic  Exchange Plan.  Shareholders can authorize the Transfer Agent to
exchange  a  pre-determined   amount  of  shares  automatically  on  a  monthly,
quarterly, semi-annual or annual basis.

     Please refer to "How to Exchange  Shares" in the  Statement  of  Additional
Information for more details.

ARE THERE LIMITATIONS ON FREQUENT PURCHASES, REDEMPTIONS AND EXCHANGES?

     Risks from Excessive Purchase, Redemption and Short-Term Exchange Activity.
The OppenheimerFunds  exchange privilege affords investors the ability to switch
their  investments  among  Oppenheimer  funds if their  investment needs change.
However, there are limits on that privilege. Frequent purchases, redemptions and
exchanges of Fund shares may interfere with the Manager's  ability to manage the
Fund's   investments   efficiently,   increase   the  Fund's   transaction   and
administrative costs and/or affect the Fund's performance,  depending on various
factors, such as the size of the Fund, the nature of its investments, the amount
of Fund assets the portfolio manager maintains in cash or cash equivalents,  the
aggregate dollar amount and the number and frequency of trades.  If large dollar
amounts are involved in exchange and/or redemption transactions,  the Fund might
be required to sell portfolio securities at unfavorable times to meet redemption
or exchange requests, and the Fund's brokerage or administrative  expenses might
be increased.

     Therefore,  the Manager and the Fund's  Board of Trustees  have adopted the
following  policies  and  procedures  to  detect  and  prevent  frequent  and/or
excessive exchanges,  and/or purchase and redemption  activity,  while balancing
the needs of investors who seek liquidity from their  investment and the ability
to exchange  shares as investment  needs change.  There is no guarantee that the
policies and procedures described below will be sufficient to identify and deter
excessive short-term trading.

     o Timing of Exchanges. Exchanged shares are normally redeemed from one fund
and the proceeds are  reinvested  in the fund  selected for exchange on the same
regular  business  day on  which  the  Transfer  Agent or its  agent  (such as a
financial  intermediary holding the investor's shares in an "omnibus" or "street
name" account) receives an exchange request that conforms to these policies. The
request  must be received  by the close of the NYSE that day,  which is normally
4:00 p.m.  Eastern  time,  but may be earlier on some days,  in order to receive
that day's net asset value on the exchanged  shares.  Exchange requests received
after the close of the NYSE will  receive  the next net asset  value  calculated
after  the  request  is  received.   However,   the  Transfer  Agent  may  delay
transmitting  the proceeds  from an exchange for up to five  business days if it
determines,  in its  discretion,  that an earlier  transmittal of the redemption
proceeds  to the  receiving  fund would be  detrimental  to either the fund from
which the  exchange  is being made or the fund into which the  exchange is being
made. The proceeds will be invested in the fund into which the exchange is being
made at the next net asset value calculated after the proceeds are received.  In
the event that such a delay in the reinvestment of proceeds occurs, the Transfer
Agent will notify you or your financial representative.

     o Limits on Disruptive Activity. The Transfer Agent may, in its discretion,
limit or  terminate  trading  activity by any person,  group or account  that it
believes would be  disruptive,  even if the activity has not exceeded the policy
outlined in this  prospectus.  The  Transfer  Agent may review and  consider the
history of frequent  trading  activity in all accounts in the Oppenheimer  funds
known to be under common  ownership  or control as part of the Transfer  Agent's
procedures to detect and deter excessive trading activity.

     o Exchanges  of Client  Accounts by  Financial  Advisers.  The Fund and the
Transfer Agent permit dealers and financial  intermediaries  to submit  exchange
requests on behalf of their customers  (unless that authority has been revoked).
The  Distributor  and/or the  Transfer  Agent have  agreements  with a number of
financial  intermediaries  that permit them to submit exchange orders in bulk on
behalf of their  clients.  Those  intermediaries  are  required  to  follow  the
exchange policies stated in this prospectus and to comply with additional,  more
stringent restrictions. Those additional restrictions include limitations on the
funds  available  for  exchanges,  the  requirement  to give  advance  notice of
exchanges to the Transfer Agent,  and limits on the amount of client assets that
may be invested in a particular  fund. A fund or the Transfer Agent may limit or
refuse bulk exchange requests submitted by such financial  intermediaries if, in
the Transfer Agent's judgment,  exercised in its discretion, the exchanges would
be disruptive to any of the funds involved in the transaction.

     o  Redemptions  of Shares.  These  exchange  policy  limits do not apply to
redemptions of shares.  Shareholders are permitted to redeem their shares on any
regular business day,  subject to the terms of this prospectus.  Further details
are provided under "How to Sell Shares."

     o Right to Refuse Exchange and Purchase Orders.  The Distributor and/or the
Transfer Agent may refuse any purchase or exchange order in their discretion and
are not  obligated to provide  notice  before  rejecting an order.  The Fund may
amend, suspend or terminate the exchange privilege at any time. You will receive
60  days'  notice  of any  material  change  in the  exchange  privilege  unless
applicable law allows otherwise.

     o Right to Terminate or Suspend Account Privileges.  The Transfer Agent may
send a written warning to direct  shareholders  that the Transfer Agent believes
may be engaging in excessive purchases, redemptions and/or exchange activity and
reserves the right to suspend or terminate the ability to purchase shares and/or
exchange  privileges  for any account that the  Transfer  Agent  determines,  in
carrying out these policies and in the exercise of its  discretion,  has engaged
in disruptive or excessive trading activity, with or without such warning.

     o Omnibus Accounts. If you hold your shares of the Fund through a financial
intermediary  such as a  broker-dealer,  a bank, an insurance  company  separate
account, an investment adviser, an administrator or trustee of a retirement plan
or 529 plan,  that holds your  shares in an  account  under its name  (these are
sometimes  referred to as "omnibus" or "street name"  accounts),  that financial
intermediary  may impose  its own  restrictions  or  limitations  to  discourage
short-term or excessive trading. You should consult your financial  intermediary
to find out what trading restrictions,  including limitations on exchanges,  may
apply.

     While the  Fund,  the  Distributor,  the  Manager  and the  Transfer  Agent
encourage  financial  intermediaries  to  apply  the  Fund's  policies  to their
customers who invest  indirectly in the Fund, the Transfer Agent may not be able
to detect excessive short term trading  activity  facilitated by, or in accounts
maintained   in,  the  "omnibus"  or  "street  name"  accounts  of  a  financial
intermediary.  Therefore  the  Transfer  Agent  might not be able to apply  this
policy to accounts  such as (a)  accounts  held in omnibus form in the name of a
broker-dealer  or other financial  institution,  or (b) omnibus accounts held in
the name of a  retirement  plan or 529 plan  trustee  or  administrator,  or (c)
accounts held in the name of an insurance  company for its separate  account(s),
or (d) other  accounts  having  multiple  underlying  owners but registered in a
manner such that the  underlying  beneficial  owners are not  identified  to the
Transfer Agent.

     However,  the Transfer Agent will attempt to monitor  overall  purchase and
redemption  activity in those  accounts to seek to  identify  patterns  that may
suggest  excessive  trading by the  underlying  owners.  If evidence of possible
excessive  trading  activity is observed by the Transfer  Agent,  the  financial
intermediary  that is the  registered  owner  will be  asked to  review  account
activity,  and to confirm to the  Transfer  Agent and the Fund that  appropriate
action has been taken to curtail any excessive  trading activity.  However,  the
Transfer  Agent's ability to monitor and deter excessive  short-term  trading in
omnibus  or street  name  accounts  ultimately  depends  on the  capability  and
cooperation of the financial intermediaries controlling those accounts.

     Additional  Policies  and  Procedures.  The Fund's  Board has  adopted  the
following  additional  policies and  procedures  to detect and prevent  frequent
and/or excessive exchanges and purchase and redemption activity:

     o 30-Day Limit. A direct shareholder may exchange some or all of the shares
of the Fund held in his or her account to another eligible Oppenheimer fund once
in a 30 calendar-day period. When shares are exchanged into a fund account, that
account will be "blocked" from further  exchanges into another fund for a period
of 30 calendar days from the date of the  exchange.  The block will apply to the
full account balance and not just to the amount exchanged into the account.  For
example,  if a shareholder  exchanged  $1,000 from one fund into another fund in
which the shareholder  already owned shares worth $10,000,  then,  following the
exchange,  the full account  balance  ($11,000 in this example) would be blocked
from further  exchanges  into  another fund for a period of 30 calendar  days. A
"direct  shareholder"  is one whose  account is  registered  on the Fund's books
showing the name, address and tax ID number of the beneficial owner.

     o Exchanges Into Money Market Funds. A direct shareholder will be permitted
to  exchange  shares of a stock or bond fund for shares of a money  market  fund
that offers an  exchange  privilege  at any time,  even if the  shareholder  has
exchanged shares into the stock or bond fund during the prior 30 days.  However,
all of the shares  held in that  money  market  fund would then be blocked  from
further exchanges into another fund for 30 calendar days.

     o Dividend Reinvestments/B Share Conversions.  Reinvestment of dividends or
distributions  from  one  fund  to  purchase  shares  of  another  fund  and the
conversion  of  Class B  shares  into  Class A  shares  will  not be  considered
exchanges for purposes of imposing the 30-day limit.

     o Asset Allocation.  Third-party asset allocation and rebalancing  programs
will be subject to the 30-day limit described above. Asset allocation firms that
want to  exchange  shares held in  accounts  on behalf of their  customers  must
identify  themselves to the Transfer  Agent and execute an  acknowledgement  and
agreement to abide by these policies with respect to their customers'  accounts.
"On-demand"  exchanges outside the parameters of portfolio  rebalancing programs
will be subject to the  30-day  limit.  However,  investment  programs  by other
Oppenheimer   "funds-of-funds"   that  entail   rebalancing  of  investments  in
underlying Oppenheimer funds will not be subject to these limits.

     o Automatic Exchange Plans. Accounts that receive exchange proceeds through
automatic or systematic exchange plans that are established through the Transfer
Agent will not be subject to the 30-day block as a result of those  automatic or
systematic exchanges (but may be blocked from exchanges, under the 30-day limit,
if they receive proceeds from other exchanges).


Shareholder Account Rules and Policies

     More  information  about the Fund's  policies  and  procedures  for buying,
selling and  exchanging  shares is  contained  in the  Statement  of  Additional
Information.

     A $12 annual "Minimum  Balance Fee" is assessed on each Fund account with a
value of less than $500. The fee is automatically  deducted from each applicable
Fund account annually in September.  See the Statement of Additional Information
to learn how you can avoid this fee and for  circumstances  under which this fee
will not be assessed.

     The  offering  of shares  may be  suspended  during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.

     Telephone  transaction  privileges for purchases,  redemptions or exchanges
may be modified,  suspended or terminated by the Fund at any time. The Fund will
provide you notice  whenever it is  required to do so by  applicable  law. If an
account has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner.  Telephone  privileges apply to each owner of the
account  and the  dealer  representative  of record for the  account  unless the
Transfer Agent receives cancellation instructions from an owner of the account.

     The  Transfer  Agent  will  record  any  telephone  calls  to  verify  data
concerning  transactions  and has  adopted  other  procedures  to  confirm  that
telephone  instructions  are  genuine,  by  requiring  callers  to  provide  tax
identification  numbers  and  other  account  data  or by  using  PINs,  and  by
confirming such  transactions  in writing.  The Transfer Agent and the Fund will
not be liable for  losses or  expenses  arising  out of  telephone  instructions
reasonably believed to be genuine.

     Redemption  or transfer  requests  will not be honored  until the  Transfer
Agent  receives all required  documents in proper form.  From time to time,  the
Transfer  Agent in its  discretion  may waive  certain of the  requirements  for
redemptions stated in this prospectus.

     Dealers   that  perform   account   transactions   for  their   clients  by
participating in NETWORKING through the National Securities Clearing Corporation
are  responsible  for  obtaining  their  clients'  permission  to perform  those
transactions,  and are responsible to their clients who are  shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.

     The redemption price for shares will vary from day to day because the value
of the securities in the Fund's  portfolio  fluctuates.  The  redemption  price,
which is the net asset value per share,  will normally  differ for each class of
shares.  The  redemption  value of your  shares  may be more or less than  their
original cost.

     Payment for redeemed shares  ordinarily is made in cash. It is forwarded by
check,  or  through  AccountLink  or by Federal  Funds  wire (as  elected by the
shareholder)  within seven days after the  Transfer  Agent  receives  redemption
instructions in proper form. However, under unusual circumstances  determined by
the Securities and Exchange Commission, payment may be delayed or suspended. For
accounts  registered  in the name of a  broker-dealer,  payment will normally be
forwarded within three business days after redemption.

     The Transfer Agent may delay  processing any type of redemption  payment as
described  under "How to Sell Shares" for recently  purchased  shares,  but only
until the  purchase  payment has  cleared.  That delay may be as much as 10 days
from the date the  shares  were  purchased.  That  delay may be  avoided  if you
purchase shares by Federal Funds wire or certified check.

     Involuntary  redemptions  of small  accounts may be made by the Fund if the
account  value has fallen  below $200 for  reasons  other than the fact that the
market value of shares has dropped. In some cases,  involuntary  redemptions may
be made to repay the  Distributor  for  losses  from the  cancellation  of share
purchase orders.

     Shares may be "redeemed  in kind" under  unusual  circumstances  (such as a
lack of liquidity in the Fund's portfolio to meet redemptions).  This means that
the  redemption  proceeds  will be paid with liquid  securities  from the Fund's
portfolio.  If the Fund  redeems your shares in kind,  you may bear  transaction
costs  and will  bear  market  risks  until  such  time as such  securities  are
converted into cash.

     Federal  regulations may require the Fund to obtain your name, your date of
birth (for a natural person), your residential street address or principal place
of business and your Social Security Number,  Employer  Identification Number or
other  government  issued  identification  when you open an account.  Additional
information  may be  required  in  certain  circumstances  or to open  corporate
accounts.  The Fund or the Transfer Agent may use this information to attempt to
verify your  identity.  The Fund may not be able to  establish an account if the
necessary information is not received. The Fund may also place limits on account
transactions  while it is in the process of attempting to verify your  identity.
Additionally,  if the Fund is unable to verify your identity  after your account
is  established,  the Fund may be  required to redeem your shares and close your
account.

     "Backup  withholding"  of federal income tax may be applied against taxable
dividends,  distributions and redemption proceeds  (including  exchanges) if you
fail to furnish the Fund your  correct,  certified  Social  Security or Employer
Identification  Number when you sign your  application,  or if you  under-report
your income to the Internal Revenue Service.

     To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each prospectus,  annual and semi-annual report and annual
notice of the Fund's  privacy policy to  shareholders  having the same last name
and address on the Fund's records.  The consolidation of these mailings,  called
householding, benefits the Fund through reduced mailing expense.

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

Dividends, Capital Gains and Taxes
DIVIDENDS.  The Fund intends to declare dividends separately for each class
of shares from net tax-exempt  income and/or net taxable  investment income each
regular  business day and to pay those dividends  monthly.  Daily dividends will
not be  declared  or paid on  newly-purchased  shares  until  Federal  Funds are
available to the Fund from the purchase payment for such shares.

     The Fund attempts to pay  dividends on Class A shares at a constant  level.
There is no  assurance  that it will be able to do so. The Board of Trustees may
change  the  targeted  dividend  level at any  time,  without  prior  notice  to
shareholders.  The amount of those dividends and any other distributions paid on
other classes of shares may vary over time, depending on market conditions,  the
composition of the Fund's portfolio,  and expenses borne by the particular class
of  shares.  Dividends  and  other  distributions  paid on Class A  shares  will
generally  be higher  than  dividends  for  Class B and  Class C  shares,  which
normally have higher  expenses than Class A. The Fund cannot  guarantee  that it
will pay any dividends or other distributions.

     CAPITAL  GAINS.  Although  the Fund  does not seek  capital  gains,  it may
realize  capital gains on the sale of portfolio  securities.  If it does, it may
make  distributions  out  of any  net  short-term  or  long-term  capital  gains
annually. The Fund may make supplemental  distributions of dividends and capital
gains  following the end of its fiscal year.  There can be no assurance that the
Fund will pay any capital gains  distributions in a particular  year.  Long-term
capital gains will be  separately  identified  in the tax  information  the Fund
sends you after the end of the calendar year.

     WHAT CHOICES DO YOU HAVE FOR  RECEIVING  DISTRIBUTIONS?  When you open your
account,  specify on your application how you want to receive your dividends and
distributions. You have four options:

     Reinvest  All  Distributions  in the Fund.  You can elect to  reinvest  all
dividends and capital gains distributions in additional shares of the Fund.

     Reinvest  Dividends  or  Capital  Gains.  You can  elect to  reinvest  some
distributions  (dividends,  short-term  capital gains or long-term capital gains
distributions)  in the Fund while receiving the other types of  distributions by
check or having them sent to your bank account through AccountLink.

     Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank through
AccountLink.

     Reinvest Your Distributions in Another  OppenheimerFunds  Account.  You can
reinvest   all   distributions   in  the  same   class  of  shares  of   another
OppenheimerFunds account you have established.

     TAXES.  Dividends  paid from net  investment  income  earned by the Fund on
municipal securities will be excludable from gross income for federal income tax
purposes.  All or a portion of the  dividends  paid by the Fund that are derived
from interest  paid on certain  "private  activity  bonds" may be an item of tax
preference  if you are  subject to the  federal  alternative  minimum  tax.  The
portion of the Fund's  exempt-interest  dividends that was a tax preference item
for the most recent calendar year, is available on the OppenheimerFunds  website
at  www.oppenheimerfunds.com.  Under the  heading "I Want To," click on the link
"Access  the Tax  Center"  and under  the drop  down  menu for "Tax  Preparation
Information,"  click  the  link  "Municipal   Income/Tax  Preference  Percentage
Tables."  You'll  find  a  link  to  the  Oppenheimer  Municipal  Fund  AMT  Tax
Percentages at the end of that page. This amount will vary from year to year.

     Dividends and capital gains distributions may be subject to federal,  state
or local taxes. Any short-term  capital gain distributions are taxable to you as
ordinary income.  Any long-term capital gain distributions are taxable to you as
long-term  capital gains,  no matter how long you have owned shares in the Fund.
The Fund may derive gains in part from municipal  obligations the Fund purchased
below their  principal or face  values.  All, or a portion of these gains may be
taxable to you as  ordinary  income  rather  than  capital  gains.  Whether  you
reinvest your  distributions in additional  shares or take them in cash, the tax
treatment is the same.

     Exempt-interest dividends earned by residents of Pennsylvania should not be
subject  to  federal,  state,  or  local  income  taxes,  and  for  Philadelphia
residents,   from  the  investment   income  tax  of  the  School   District  of
Philadelphia.  Shares  of the  Fund  will be  exempt  from  Pennsylvania  county
personal  property  taxes to the  extent  that the Fund's  portfolio  securities
consist of Pennsylvania  municipal securities on the annual assessment date. The
portion of the Fund's  dividends that is  attributable to income earned on other
obligations (not Pennsylvania  municipal securities) will normally be subject to
Pennsylvania personal income taxes.

     It is  possible  that,  because of events  occurring  after the date of its
issuance,  a  municipal  security  owned by the Fund will be  determined  to pay
interest that is  includable in gross income for purposes of the federal  income
tax, and that the  determination  could be  retroactive to the date of issuance.
Such a determination may cause a portion of prior  distributions to shareholders
to be taxable to shareholders in the year of receipt.

     Every  year the Fund  will  send you and the IRS a  statement  showing  the
amount of any taxable  distribution  you received in the previous year. The Fund
will also send you a separate statement summarizing the total distributions paid
by the Fund.

     The Fund intends each year to qualify as a "regulated  investment  company"
under the Internal  Revenue  Code,  but  reserves  the right not to qualify.  It
qualified  during its last fiscal  year.  The Fund,  as a  regulated  investment
company,  will not be  subject  to federal  income  taxes on any of its  income,
provided that it satisfies  certain  income,  diversification  and  distribution
requirements.

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

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

Financial Highlights

     The  Financial  Highlights  Table is presented to help you  understand  the
Fund's financial performance for the past five fiscal years. Certain information
reflects  financial  results for a single Fund share.  The total  returns in the
table  represent  the rate that an  investor  would have  earned (or lost) on an
investment   in  the  Fund   (assuming   reinvestment   of  all   dividends  and
distributions).

     The Fund's  financial  highlights  for the Fund's fiscal years 2002 through
2006 have been  restated  from those  originally  included in the Fund's  Annual
Report for the Fund's fiscal year ended July 31, 2006. The  restatement  changes
the accounting  treatment of the Fund's portfolio  holdings of certain municipal
bond derivative  securities referred to as "inverse floaters." Expenses for each
class of shares were restated to reflect the interest and fee expense related to
the Fund's  liability for  short-term  floating rate notes issued in conjunction
with inverse floating rate securities  transactions.  However,  these changes in
accounting  treatment have not affected the Fund's net asset values per share or
the investment performance of each class of shares.

     This  information  has been  audited by KPMG LLP,  the  Fund's  independent
registered public accounting firm, whose report, along with the Fund's financial
statements,  is included in the  Statement of Additional  Information,  which is
available upon request.


FINANCIAL HIGHLIGHTS
(As restated, see Note 8 to the Fund's Financial Statements which are included
in the Fund's Statement of Additional Information)
--------------------------------------------------------------------------------



CLASS A         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.85     $      11.76      $     11.48     $     11.57     $     11.46
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .62 1            .67 1            .73             .75             .70
Net realized and unrealized gain (loss)                    (.10)            1.10              .25            (.11)            .11
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .52             1.77              .98             .64             .81
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.62)            (.68)            (.70)           (.73)           (.70)
------------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                    $       12.75     $      12.85      $     11.76     $     11.48     $     11.57
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         4.21%           15.43%            8.53%           5.36%           7.36%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     600,716     $    384,863      $   229,450     $   184,638     $   144,592
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     484,153     $    295,002      $   211,061     $   172,228     $   120,251
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.88%            5.35%            6.01%           6.11%           6.03%
Expenses excluding interest and fees on
short-term floating rate notes issued                      0.82%            0.81%            0.86%           0.86%           0.85%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             1.41%            1.21%            1.12%           1.14%           1.13%
Expenses after payments and waivers and
reduction to custodian expenses                            1.41%            1.21%            1.12%           1.14%           1.10% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 to the Fund's Financial Statements which are included
in the Fund's Statement of Additional Information.

5. Excludes interest expense.





FINANCIAL HIGHLIGHTS  Continued
(As restated, see Note 8 to the Fund's Financial Statements which are included
in the Fund's Statement of Additional Information)

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



CLASS B         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.85     $      11.76      $     11.48     $     11.57     $     11.46
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .53 1            .57 1            .63             .65             .62
Net realized and unrealized gain (loss)                    (.10)            1.11              .25            (.11)            .11
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .43             1.68              .88             .54             .73
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.53)            (.59)            (.60)           (.63)           (.62)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $       12.75     $      12.85      $     11.76     $     11.48     $     11.57
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         3.41%           14.56%            7.71%           4.56%           6.55%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     196,704     $    189,643      $   157,338     $   146,369     $   101,126
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     193,225     $    173,663      $   156,689     $   127,280     $    75,772
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.14%            4.62%            5.26%           5.34%           5.26%
Expenses excluding interest and fees on
short-term floating rate notes issued                      1.59%            1.59%            1.62%           1.63%           1.61%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             2.18%            1.99%            1.88%           1.91%           1.89%
Expenses after payments and waivers and
reduction to custodian expenses                            2.18%            1.99%            1.88%           1.91%           1.86% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 to the Fund's Financial Statements which are included
in the Fund's Statement of Additional Information.

5. Excludes interest expense.









CLASS C         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.83     $      11.75      $     11.47     $     11.56     $     11.45
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .52 1            .57 1            .63             .65             .61
Net realized and unrealized gain (loss)                    (.09)            1.10              .25            (.11)            .12
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .43             1.67              .88             .54             .73
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.53)            (.59)            (.60)           (.63)           (.62)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $       12.73     $      12.83      $     11.75     $     11.47     $     11.56
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         3.41%           14.48%            7.71%           4.57%           6.55%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     220,256     $    133,569      $    76,489     $    69,916     $    47,163
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     174,354     $     96,508      $    74,956     $    60,202     $    33,327
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.10%            4.56%            5.25%           5.34%           5.26%
Expenses excluding interest and fees on
short-term floating rate notes issued                      1.58%            1.59%            1.63%           1.63%           1.61%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             2.17%            1.99%            1.89%           1.91%           1.89%
Expenses after payments and waivers and
reduction to custodian expenses                            2.17%            1.99%            1.89%           1.91%           1.86% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 to the Fund's Financial Statements which are included
in the Fund's Statement of Additional Information.

5. Excludes interest expense.




INFORMATION AND SERVICES

For More Information on Oppenheimer Pennsylvania Municipal Fund
     The following  additional  information  about the Fund is available without
charge upon request:

     STATEMENT OF  ADDITIONAL  INFORMATION.  This document  includes  additional
information about the Fund's investment policies,  risks, and operations.  It is
incorporated by reference into this  prospectus  (which means it is legally part
of this prospectus).

     ANNUAL AND SEMI-ANNUAL  REPORTS.  Additional  information  about the Fund's
investments  and  performance is available in the Fund's Annual and  Semi-Annual
Reports to  shareholders.  The Annual  Report  includes a  discussion  of market
conditions  and investment  strategies  that  significantly  affected the Fund's
performance during its last fiscal year.

How to Get More Information
     You can request the  Statement of  Additional  Information,  the Annual and
Semi-Annual  Reports,  the notice explaining the Fund's privacy policy and other
information about the Fund or your account:

------------------------------------------------------------------------------
By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.CALL OPP (225.5677)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
By Mail:                      Write to:
                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270
------------------------------------------------------------------------------
------------------------------------------------------------------------------
On the Internet:              You can request these documents by e-mail or
                              through the OppenheimerFunds website. You may
                              also read or download certain documents on the
                              OppenheimerFunds website at:
                              www.oppenheimerfunds.com
------------------------------------------------------------------------------

     Information   about  the  Fund   including   the  Statement  of  Additional
Information  can be reviewed  and copied at the SEC's Public  Reference  Room in
Washington,  D.C.  Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1.202.942.8090.  Reports and other information
about the Fund are available on the EDGAR database on the SEC's Internet website
at  www.sec.gov.  Copies may be obtained  after payment of a duplicating  fee by
electronic request at the SEC's e-mail address: publicinfo@sec.gov or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.

     No one has been authorized to provide any information  about the Fund or to
make any  representations  about the Fund other than what is  contained  in this
prospectus.  This  prospectus is not an offer to sell shares of the Fund,  nor a
solicitation  of an offer to buy shares of the Fund,  to any person in any state
or other jurisdiction where it is unlawful to make such an offer.

The Fund's shares are distributed by:       [logo]  OppenheimerFunds
                                                    Distributor, Inc.
The Fund's SEC File No. 811-5867
PR0740.001.0307
Printed on recycled paper



                               Appendix to Prospectus of
                          Oppenheimer Pennsylvania Municipal Fund

     Graphic  material  included in the prospectus of  Oppenheimer  Pennsylvania
Municipal Fund: "Annual Total Returns (Class A) (as of December 31 each year)":

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

Calendar                  Oppenheimer
Year                      Pennsylvania Municipal Fund
Ended                     Class A Shares

12/31/97                     8.96%
12/31/98                     4.45%
12/31/99                    -6.18%
12/31/00                     7.06%
12/31/01                     6.51%
12/31/02                     10.95%
12/31/03                     9.81%
12/31/04                     7.06%
12/31/05                     8.97%
12/31/06                     7.60%


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

Revised Statement of Additional Information dated March 5, 2007

      This Statement of Additional Information is not a Prospectus.  This
document contains additional information about the Fund and supplements
information in the Revised Prospectus dated March 5, 2007.  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
Report of Independent Registered Public Accounting Firm.......................
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 ("SAI"), 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 varies
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 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 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.

Private Activity Bonds.  The Tax Reform Act of 1986 amended and reorganized,
under the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code"), the rules governing tax-exemption for interest on certain types of
municipal securities known as "private activity bonds" (or, "industrial
development bonds" as they were referred to under pre-1986 law), the proceeds
of which are used to finance various non-governmental privately owned and/or
operated facilities.  Under the Internal Revenue Code, interest on private
activity bonds is excludable from gross income for federal income tax
purposes if the financed activities fall into one of seven categories of
"qualified private activity bonds," consisting of mortgage bonds, veterans
mortgage bonds, small issue bonds, student loan bonds, redevelopment bonds,
exempt facility bonds and 501(c)(3) bonds, and certain tests are met.  The
types of facilities that may be financed with exempt facility bonds include
airports, docks and wharves, water furnishing facilities, sewage facilities,
solid waste disposal facilities, qualified residential rental projects,
hazardous waste facilities and high speed intercity rail facilities.  The
types of facilities that may be financed with 501(c)(3) bonds include
hospitals and educational facilities that are owned by 501(c)(3)
organizations.

      Whether a municipal security is a private activity bond (the interest
on which is taxable unless it is a qualified private activity bond) depends
on whether (i) more than a certain percentage (generally 10%) of (a) the
proceeds of the security are used in a trade or business carried on by a
non-governmental person and (b) the payment of principal or interest on the
security is directly or indirectly derived from such private use, or is
secured by privately used property or payments in respect of such property,
or (ii) more than the lesser of 5% of the issue or $5 million is used to make
or finance loans to non-governmental persons.

      Moreover, a private activity bond of certain types 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 financed
by the bond, or a "related person" of such a substantial user.  A
"substantial user" is a non-exempt person who regularly uses part of a
facility in a trade or business.

      Thus, certain municipal securities could lose their tax-exempt status
retroactively if the issuer or user fails to meet certain continuing
requirements, for the entire period during which the securities are
outstanding, as to the use and operation of the bond-financed facilities and
the use and expenditure of the proceeds of such securities.  The Fund makes
no independent investigation into the use of such facilities or the
expenditure of such proceeds.  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.

      The payment of the principal and interest on such qualified private
activity bonds is dependant solely on the ability of the facility's user to
meet its financial obligations, generally from the revenues derived from the
operation of the financed facility, and the pledge, if any, of real and
personal property financed by the bond as security for those payments.

      Limitations on the amount of private activity bonds that each state may
issue may reduce the supply of such bonds.  The value of the Fund's portfolio
could be affected by these limitations if they reduce the availability of
such bonds.

      Interest on certain  qualified private activity bonds that is tax-exempt
may   nonetheless  be  treated  as  a  tax  preference  item  subject  to  the
alternative  minimum  tax to which  certain  taxpayers  are  subject.  If such
qualified  private activity bonds are held by the Fund, a proportionate  share
of the  exempt-interest  dividends paid by the Fund will constitute an item of
tax preference to such shareholders.

      |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  RELATED  BONDS.  The Fund may invest in two types of tobacco  related
bonds:   (i) tobacco  settlement revenue bonds, for which payments of interest
and  principal  are  made  solely  from  a  state's  interest  in  the  Master
Settlement  Agreement ("MSA") described below, and (ii) tobacco  bonds subject
to a state's  appropriation  pledge, for which payments may come from both the
MSA revenue and the applicable state's appropriation pledge.

Tobacco Settlement Revenue Bonds. The Fund may invest a significant portion
of its assets in tobacco settlement revenue 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 six other U.S. jurisdictions (including
Puerto Rico and Guam) and the four largest U.S. tobacco manufacturers
(Phillip Morris, RJ Reynolds, Brown & Williamson, and Lorillard).
Subsequently, a number of smaller tobacco manufacturers signed on to the MSA,
bringing the current combined market share of participating tobacco
manufacturers to approximately 92%.  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. The MSA established a base payment schedule and a
formula for adjusting payments each year. 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 the risk to a Fund, are highly dependent on
the receipt of future settlement payments to the state or its governmental
entity, as well as other factors. The actual amount of future settlement
payments 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 reduced if the decrease in
tobacco consumption is significantly greater than the forecasted decline.

      Because tobacco settlement bonds are backed by payments from the
tobacco manufacturers, and generally not by the credit of the state or local
government issuing the bonds, their creditworthiness depends on the ability
of tobacco manufacturers to meet their obligations. A market share loss by
the MSA companies to non-MSA participating tobacco manufacturers could also
cause a downward adjustment in the payment amounts. A participating
manufacturer filing for bankruptcy also could cause delays or reductions in
bond payments, which could affect a Fund's net asset value.

      The MSA and tobacco manufacturers have been and continue to be subject
to various legal claims.  An adverse outcome to any litigation matters
relating to the MSA or affecting tobacco manufacturers could adversely affect
the payment streams associated with the MSA or cause delays or reductions in
bond payments by tobacco manufacturers. The MSA itself has been subject to
legal challenges and has, to date, withstood those challenges.

Tobacco Bonds Subject to Appropriation (STA) Bonds. In addition to the
tobacco settlement bonds discussed above, the Fund also may invest in tobacco
related bonds that are subject to a state's appropriation pledge ("STA
Tobacco Bonds").  STA Tobacco Bonds rely on both the revenue source from the
MSA and a state appropriation pledge.

      These STA  Tobacco  Bonds  are part of a larger  category  of  municipal
bonds that are subject to state  appropriation.   Although specific provisions
may vary among states,  "subject to appropriation  bonds" (also referred to as
"appropriation  debt") are typically payable from two distinct sources:  (i) a
dedicated revenue source such as a municipal enterprise,  a special tax or, in
the case of tobacco bonds,  the MSA funds,  and (ii) from the issuer's general
funds.   Appropriation  debt differs from a state's general obligation debt in
that general  obligation debt is backed by the state's full faith,  credit and
taxing power,  while  appropriation debt requires the state to pass a specific
periodic  appropriation  to pay interest and/or  principal on the bonds as the
payments  come due. The  appropriation  is usually made  annually.   While STA
Tobacco  Bonds offer an  enhanced  credit  support  feature,  that  feature is
generally  not an  unconditional  guarantee  of  payment by a state and states
generally  do not pledge the full faith,  credit or taxing power of the state.
The Funds  consider the STA Tobacco  Bonds to be  "municipal  securities"  for
purposes of their concentration policies.

      Litigation Challenging the MSA.  The participating manufacturers and
states in the MSA are subject to several pending lawsuits challenging the MSA
and/or related state legislation or statutes adopted by the states to
implement the MSA (referred to herein as the "MSA-related legislation"). One
or more of the lawsuits allege, among other things, that the MSA and/or the
states' MSA-related legislation are void or unenforceable under the Commerce
Clause and certain other provisions of the U.S. Constitution, the federal
antitrust laws, federal civil rights laws, state constitutions, consumer
protection laws and unfair competition laws.

      To date, challenges to the MSA or the states' MSA-related legislation
have not been ultimately successful, although three such challenges have
survived initial appellate review of motions to dismiss. Two of these three
challenges (referred to herein as Grand River and Freedom Holdings) are
pending in the U.S. District Court for the Southern District of New York and
have proceeded to a stage of litigation where the ultimate outcome may be
determined by, among other things, findings of fact based on extrinsic
evidence as to the operation and impact of the MSA and the states'
MSA-related legislation. In these two cases, certain decisions by the U.S.
Court of Appeals for the Second Circuit have created heightened uncertainty
as a result of that court's interpretation of federal antitrust immunity and
Commerce Clause doctrines as applied to the MSA and the states' MSA-related
legislation, which interpretation appears to conflict with interpretations by
other courts that have rejected challenges to the MSA and the states'
MSA-related legislation. Prior decisions rejecting such challenges have
concluded that the MSA and the MSA-related legislation do not violate the
Commerce Clause of the U.S. Constitution and are protected from antitrust
challenges based on established antitrust immunity doctrines.  Such a
conflict may result in significant uncertainty regarding the validity and
enforceability of the MSA and/or the states' related MSA-legislation and
could adversely affect payment streams associated with the MSA and the bonds.
The existence of a conflict as to the rulings of different federal courts on
these issues, especially between Circuit Courts of Appeals, is one factor
that the U.S. Supreme Court may take into account when deciding whether to
exercise its discretion in agreeing to hear an appeal. No assurance can be
given that the U.S. Supreme Court would choose to hear and determine any
appeal relating to the substantive merits of the cases challenging the MSA or
the states' MSA-related legislation.

      Grand River and Freedom Holdings.   Both cases are pending in the U.S.
District Court for the Southern District of New York and seek to enjoin the
enforcement of states' MSA-related legislation. The Grand River case is
pending against the attorneys general of 31 states.  The plaintiffs seek to
enjoin the enforcement of the states' MSA-related legislation, and allege,
among other things, (a) violations of federal antitrust law, the accompanying
state legislation enacted pursuant to the MSA mandates or authorizes such
violations and is thus preempted by federal law and that (b) the MSA and
related statutes are invalid or unenforceable under the Commerce Clause of
the U.S. Constitution. Grand River was remanded and remains pending in the
Southern District and the parties have engaged in discovery with respect to
the antitrust and Commerce Clause claims.

      The Freedom Holdings case is pending against the attorney general and
the commissioner of taxation and finance of the State of New York and is
based on the same purported claims as the Grand River case.  On February 10,
2006, plaintiffs filed an amended complaint seeking (1) a declaratory
judgment that the operation of the MSA and New York's MSA-related legislation
implements an illegal per se output cartel in violation of the federal
antitrust laws and is preempted thereby, (2) a declaratory judgment that New
York's MSA-related legislation, together with the similar legislation of
other states, regulates interstate commerce in violation of the Commerce
Clause of the U.S. Constitution and (3) an injunction permanently enjoining
the enforcement of New York's MSA-related legislation.

      To date, the Second Circuit is the only federal court that has
sustained a Commerce Clause challenge to the MSA and MSA-related legislation
after reviewing a motion to dismiss.  A final decision in these cases by the
District Court would be subject to appeal to the Second Circuit and would
likely be further appealed to the U.S. Supreme Court.  A Supreme Court
decision to affirm or to decline to review a Second Circuit ruling that is
adverse to the participating manufacturers and states, challenging validity
or enforceability of MSA or the states' MSA-related legislation, could
potentially lead to invalidation of the MSA and states' MSA-related
legislation in their entirety, materially affect the payment streams under
the MSA and/or result in the complete loss of the Fund's outstanding
investment.

      A third case challenging the MSA (Xcaliber v. Ieyoub) in federal court
in Louisiana (Fifth Circuit) also has survived appellate review of motions to
dismiss.  Certain non-participating manufacturers are alleging, among other
things, that certain provisions of Louisiana's MSA-related legislation
violate various provisions of the U.S. Constitution and the Louisiana
constitution.  On March 1, 2006, the U.S. Court of Appeals for the Fifth
Circuit vacated the district court's dismissal of the plaintiffs' complaint
and remanded the case for reconsideration. In addition to the three cases
identified above, proceedings are pending in federal courts that challenge
the MSA and/or the states' MSA-related legislation in California, Louisiana,
Oklahoma, Kansas, Kentucky, Tennessee and Arkansas. The issues raised in
Freedom Holdings or Grand River are also raised in many of these other
cases.  The MSA and states' MSA-related legislation may also continue to be
challenged in the future. A determination that the MSA or states' MSA-related
legislation is void or unenforceable would have a material adverse effect on
the payments made by the participating manufacturers under the MSA.

      Litigation Seeking Monetary Relief from Tobacco Industry Participants.
The tobacco industry has been the target of litigation for many years. Both
individual and class action lawsuits have been brought by or on behalf of
smokers alleging that smoking has been injurious to their health, and by
non-smokers alleging harm from environmental tobacco smoke, also known as
"secondhand smoke."  Plaintiffs seek various forms of relief, including
compensatory and punitive damages aggregating billions of dollars,
treble/multiple damages and other statutory damages and penalties, creation
of medical monitoring and smoking cessation funds, disgorgement of profits,
legal fees, and injunctive and equitable relief.

      The MSA does not release participating manufacturers from liability in
either individual or class action cases.  Healthcare cost recovery cases have
also been brought by governmental and non-governmental healthcare providers
seeking, among other things, reimbursement for healthcare expenditures
incurred in connection with the treatment of medical conditions allegedly
caused by smoking. The participating manufacturers are also exposed to
liability in these cases, because the MSA only settled healthcare cost
recovery claims of the participating states. Litigation has also been brought
against certain participating manufacturers and their affiliates in foreign
countries.

      The ultimate outcome of any pending or future lawsuit is uncertain.
Verdicts of substantial magnitude that are enforceable as to one or more
participating manufacturers, if they occur, could encourage commencement of
additional litigation, or could negatively affect perceptions of potential
triers of fact with respect to the tobacco industry, possibly to the
detriment of pending litigation. An unfavorable outcome or settlement or one
or more adverse judgments could result in a decision by the affected
participating manufacturers to substantially increase cigarette prices,
thereby reducing cigarette consumption beyond the forecasts under the MSA.
In addition, the financial condition of any or all of the participating
manufacturer defendants could be materially and adversely affected by the
ultimate outcome of pending litigation, including bonding and litigation
costs or a verdict or verdicts awarding substantial compensatory or punitive
damages. Depending upon the magnitude of any such negative financial impact
(and irrespective of whether the participating manufacturer is thereby
rendered insolvent), an adverse outcome in one or more of the lawsuits could
substantially impair the affected participating manufacturer's ability to
make payments under the MSA.

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

      The rating definitions of Moody's, S&P and Fitch for municipal
securities are contained in Appendix A to this SAI.  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 and has a
diversified economy.  Pennsylvania had been historically identified as a
heavy industry state.  That reputation has changed over the last thirty years
as the coal, steel and railroad industries declined.  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, health services, education and financial
institutions.

Financial Condition and Results of Operations (GAAP Basis).  During the five
year period ending with fiscal 2005, total revenues and other sources
increased by an average of 6.5% annually.  Tax revenues during this same
period increased by an annual average of 4.3%.  During the past several
fiscal years, 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 2001
through 2005 rose at an average annual rate of 6.9%.  Comparison of
expenditures by individual category in fiscal year 2002 to prior fiscal years
is not reliable due to a change to the definitions for these expenditure
categories in fiscal year 2002.

Beginning with its GAAP basis financial statements for the fiscal year ended
June 30, 2002, the Commonwealth adopted several new accounting and reporting
standards established by the Governmental Accounting Standards Board in its
Statements 33, 34, 35, 36, 37 and 38 (collectively, the "New Standards").
Among other things, these New Standards require presentation of
government-wide and fund financial statements that constitute basic financial
statements and replace general-purpose financial statements reported under
formal standards.  Government-wide financial statements are intended to
portray the government "as a whole" while fund financial statements provide
fund-specific information.  Government-wide financial statements are intended
to describe the total cost of providing governmental services and disclose
whether the Commonwealth's financial condition improved or weakened during
the fiscal year.  Other features of the new government-wide financial
statements are the reporting of infrastructure assets and related
depreciation.  Previously, the Commonwealth did not report infrastructure
values or accumulated depreciation related to general fixed assets.  As part
of implementing the New Standards, effective July 1, 2001, the Commonwealth
reclassified and/or restated numerous fund balance amounts previously
reported at June 30, 2001 and reported governmental activities net assets at
June 30, 2001.  Note B to the financial statements in the June 30, 2003
Comprehensive Annual Financial Report provides a detailed explanation of the
nature and amount of such restatements.  The New Standards also require
providing supplementary information, including a Management's Discussion and
Analysis of the financial statements.  Beginning with fiscal year 2002 the
Commonwealth also changed how functional expenditure categories are defined.
All of these changes may hamper the comparability of GAAP basis financial
statements.

The Commonwealth restated its GAAP basis financial statements for the fiscal
year ended June 30, 2002 (the "2002 GAAP Financial Statements").  This
restatement was triggered by a reporting change for certain assets included
in the June 30, 2002 audited financial statements for the State System of
Higher Education ("SSHE"), which is a component unit of the Commonwealth for
which separate audited financial statements are obtained.  Since the auditors
for the 2002 GAAP Financial Statements rely on the audits of component units
of the Commonwealth and related opinions, the auditors for the 2002 GAAP
Financial Statements determined that the audit developments affecting SSHE
required a restatement of the 2002 GAAP Financial Statements.  Accordingly,
the 2002 GAAP Financial Statements were restated and on February 23, 2004
were filed with each NRMSIR and posted on the Office of the Budget's website.

Assets in the Commonwealth's governmental fund types as of June 30, 2005 were
$15,984.09 million.  Liabilities for the same date were $49,002.10 million.
The fund balance at the end of fiscal 2005 totaled $6,981.99 million.

Fiscal 2005 Results.

Total fiscal year 2005 revenues, net of reserves for tax refunds and
including intergovernmental transfers and additional resources, totaled
$24,405.6 million.  Total expenditures net of appropriation lapses and
including intergovernmental transfers and expenditures from additional
resources were $24,053.9 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 $429.2 million, an increase of $162.5 million
from the fiscal year 2004 preliminary ending balance.  Following the
statutorily required 25 percent transfer to the Budget Stabilization Reserve
Fund ($64.4 million) the fiscal year 2005 final unappropriated surplus
balance was $364.8 million as of June 30, 2005.

The fiscal year 2005 budget 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.
Total fiscal year 2005 Commonwealth revenues net of reserves for tax refunds,
exceeded $24,308.5 million, a 6.5 percent increase over fiscal year 2004
receipts.  The tax revenue component of Commonwealth receipts, including the
effects of the tax rate and tax base changes enacted in fiscal year 2004,
rose $1,666.4 million or 7.6 percent over fiscal year 2004 actual receipts.
An estimated two-thirds of the increase in tax revenues is associated with
the various tax rate and tax base changes.  Major components of the tax
revisions were: (i) an increase in the personal income tax from 2.8 percent
to 3.07 percent; (ii) a restructuring of taxation of telecommunications to
include the imposition of the gross receipts tax on cellular and interstate
telecommunication as well as certain sales and use tax exemptions for
particular telecommunications activities; (iii) an increase to the cigarette
tax from $1.00 per pack to $1.35 per pack, a portion of which was transferred
to the new Health Care Provider Retention Account to be used to provide
financial assistance for malpractice premiums for certain physicians
practicing in particular high-risk medical specializations under the medical
malpractice abatement program.  This program was enacted for calendar years
2003 and 2004, and the General Assembly approved an extension for an
additional year in 2005; (iv) a modification of the scheduled phase-out of
the capital stock and franchise tax for tax years 2003 and 2004; and (v)
various other tax rate and tax base revisions, including some tax cuts. Total
revenues to the Commonwealth exceeded the budget estimate by $442.0 million
or 1.9 percent.  Personal income tax receipts grew by $1,013 million or 13.1
percent over fiscal year 2004 revenues.  Revisions to the personal income tax
rate in December 2003 contributed to the large year-over-year increase in
these receipts.  During fiscal year 2005, corporate tax receipts grew $285.1
million or 10.7 percent, which generally reflected improvements in the
overall state and national economy.  Sales and use tax revenues to the
Commonwealth grew $271.4 million or 3.5 percent over fiscal year 2004
receipts. Receipts of Commonwealth non-tax revenues continued to exceed the
estimate as total revenue from this source exceeded $596.0 million. Earnings
from investments and revisions to the Commonwealth's escheats program
continued to provide revenues well in excess of the estimate for fiscal year
2005.  Various revisions to the Commonwealth's escheat program were enacted
as part of the fiscal year 2003 and 2004 budgets.  These revisions to the
escheat program have produced substantial non-recurring revenues during each
of the two most recent fiscal years.  Additionally, significant non-recurring
capital gains earnings on the investment of available General Fund cash
balances and increased contributions from the Commonwealth's liquor store
profits contributed to enhanced non-tax revenues during the prior two fiscal
years.  Reserves for tax refunds in fiscal year 2005 were $1,000.0 million, a
decrease of $14.7 million or 1.4 percent from fiscal year 2004 levels.

Fiscal year 2005 state-level expenditures, including supplemental
appropriations and net of appropriation lapses, totaled $22,956.8 million, an
increase of 5.6 percent from fiscal year 2004 appropriations.  A total of
$148.1 million in appropriations were lapsed in fiscal year 2005 and the
fiscal year 2005 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 2004.  Intergovernmental transfers
replaced $697.9 million of General Fund medical assistance costs in fiscal
year 2005, compared to $738.7 million in fiscal year 2004.  In addition,
approximately $399 million in additional funds, primarily $377.6 million of
remaining federal fiscal relief, was appropriated in fiscal year 2005 to fund
expenditures normally funded from Commonwealth revenues.  The ending
unappropriated balance was $364.8 million for fiscal year 2005.

Fiscal 2006 Results.

The adopted fiscal year 2006 budget is based on an estimated 2.8 percent
increase in Commonwealth General Fund revenues from those received in fiscal
year 2005.  The enacted budget appropriates $24,277.6 million of Commonwealth
funds against estimated revenues net of tax refunds, of $23,914.9 million.
The $362 million difference between estimated revenues and recommended
appropriations is to be funded by a draw down of the $364 million fiscal year
2006 beginning balance. Additionally, the enacted fiscal year 2006 budget
allocates additional state funds to replace significant amounts of formerly
available federal funds.

The fiscal year 2006 revenue estimate for the Commonwealth, as estimated in
June 2005, is based upon an economic forecast of 3.3 percent growth in
national real gross domestic product from the start of the third quarter of
2005 to the end of the second quarter of 2006.  Trends in the Commonwealth's
economy are expected to maintain their close association with national
economic trends.  Personal income growth in Pennsylvania is projected to
remain slightly below that of the U.S., while the Pennsylvania unemployment
rate is anticipated to be close to the national rate.  The tax revenue
component of Commonwealth General Fund receipts is expected to increase by
$731.8 million or approximately 3.1 percent prior to reserves for refunds.
Fiscal year 2006 Commonwealth revenues from the personal income tax are
forecasted to increase by 5.0 percent, while receipts from the sales and use
tax are estimated to rise 3.4 percent over fiscal year 2005 receipts.
Corporate receipts are expected to grow minimally in fiscal year 2006, at a
rate of 0.3 percent, whereas revenues from non-tax sources such as earnings
on investments and escheats are forecast to decline by 8.5 percent.  A
majority of the projected decline in non-tax revenues is attributable to the
phase out of onetime revenue enhancements achieved in fiscal years 2004 and
2005 from revisions to the Commonwealth's escheats program.

The ongoing economic expansion and job creation as experienced both
nationally and within the Commonwealth during 2005 has contributed to
Commonwealth revenues exceeding the estimates used to certify fiscal year
2006 General Fund revenues.  Estimates for fiscal year 2006 General Fund
revenues were revised in February 2006 as part of the Governor's proposed
fiscal year 2007 budget.  Based on a continuation of economic growth from the
third quarter of 2005 and trends in actual receipts through January, the
fiscal year 2006 General fund revenue estimate was increased by $363.7
million.  Total General Fund revenues for fiscal year 2006 are projected to
be $25,353.6 million.  Actual Commonwealth revenues for the fiscal
year-to-date through April 2006, are over $588 million above the estimate for
that period, a surplus of 2.8 percent. Corporate taxes are $302.4 million
over estimate, a 7.2 percent surplus to the year-to-date estimate.  Personal
income taxes are $201.1 million over the estimate, a surplus of 2.6 percent
versus the year-to-date estimate.  Sales and use taxes are essentially at
estimate as actual receipts through April 2006, are $40.3 million above
estimate, a difference of only 0.6 percent from the fiscal year-to-date
estimate.  Realty transfer tax revenues also exceed the year-to-date estimate
by $ 49.3 million or 12.0 percent based in part on continuation of a strong
housing market within the Commonwealth.

In July 2005, the General Assembly approved and the Governor signed into law
Act 45 of 2005, which authorized the issuance of up to $625 million in debt
of the Commonwealth to support programs commonly referred to as "Growing
Greener II." The enactment of Act 45 implements the Governor's major
environmental initiative in the fiscal year 2006 budget.  The Growing Greener
II program will provide bond funding for the maintenance and protection of
the environment, open space and farmland preservation, watershed protection,
abandoned mine reclamation, acid mine drainage remediation and other
environmental initiatives.  Additionally, Act 45 of 2005 authorizes the
Governor to direct up to $60 million in existing Growing Greener fees, that
are otherwise directed into the Commonwealth's Environmental Stewardship
Fund, to support General Fund debt service for the authorized Growing Greener
II bond issuances.

The enacted fiscal year 2006 budget provides $24,304.0 million of
appropriations from Commonwealth revenues, an increase of 5.4 percent from
fiscal year 2005 expenditures and represents a planned draw down of $364
million of the unappropriated surplus balance available at the end of fiscal
year 2005.  A portion of the increased level of state funded appropriations
is attributable to the replacement of federal funds received, on a one-time
basis, which were utilized during the fiscal year 2004 and 2005 budgets.  The
enacted budget also includes $856.8 million in funding for various medical
assistance expenditures through intergovernmental transfer proceeds, certain
nursing home assessments and a tax on managed care organizations.  This
amount is an increase of 23 percent from the $697.9 million in such proceeds
utilized during fiscal year 2005.  Under the intergovernmental transfer
transactions, certain county governments contribute funds to the Commonwealth
to help pay Medicaid expenses.  The Commonwealth receives the contributions
as augmentations to appropriations of Commonwealth revenues for the medical
assistance program.  These augmentations have the effect of supplementing the
amount of Commonwealth revenues available for the medical assistance program
and are available to match federal Medicaid funds.  Federal authority for
Pennsylvania to use the county contributions to pool transactions to match
additional federal funds is currently scheduled to expire in 2010.  Included
in the Governor's proposed fiscal year 2007 budget is a request for
supplemental appropriations for fiscal year 2006 totaling $197 million.
Additional funding via requested supplemental appropriations includes $168
million in additional medical and other assistance funds and $25 million in
volunteer company grants (first responders).  The preliminary fiscal year
ending unappropriated balance, net of lapses and supplemental appropriations
is currently estimated to be nearly $272 million for fiscal year 2006.
Following a statutorily-required transfer of 25 percent of this preliminary
ending balance totaling nearly $68 million, the 2006 fiscal year ending
unappropriated balance is currently estimated to be nearly $204 million.

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

Fiscal 2007 Budget.

The fiscal year 2007 budget was signed by the Governor on July 2, 2006.  The
total General Fund budget totals $26.1 billion, an increase of 5.8 percent,
or $1.4 billion, over 2005-06.  The budget increases the balance of the
Commonwealth; Rainy Day Fund by 50 percent to $512 million.  Additionally,
the fiscal year 2007 budget allocates additional state funds to replace
significant amounts of formerly available intergovernmental transfer
transaction-derived federal funds.  The fiscal year 2007 budget provides for
significant increases in funding for local school districts and higher
education within the Commonwealth.  With over half of the $1.4 billion
increase going to fund education.  The budget also includes a new children's
health insurance program called "Cover All Kids" which is intended to
gradually expand available health insurance to all Pennsylvania children not
currently covered by insurance.  The Commonwealth's prescription drug
coverage program is also expanded to cover an additional 120,000 seniors
within the next 18 months by building upon the federal Medicare Part D
program.  The fiscal year 2007 budget includes initiatives to increase the
efficiency of government operations within the Commonwealth and includes
estimates to save over $1 billion annually in fiscal year 2007.  The fiscal
year 2007 budget includes an increase in expenditures of 1.1 percent
exclusive of expenditures covering education, public welfare and Commonwealth
debt service.  The budget also includes $25 million to rebuild bridges and
communities that were affected by the June 2006 flooding.


As part of his fiscal year 2007 budget proposal, the Governor proposed a
major program revision to the Commonwealth's Health Investment Plan, a series
of health-related programs funded entirely from Tobacco MSA revenues.
Currently, 100 percent of Tobacco MSA payments received are utilized for
health care related expenditures and revenues received are statutorily
distributed based upon enacted funding formula.  The Commonwealth's health
research component currently receives 19 percent of annual Tobacco MSA funds
and these funds are annually expended on health-related research projects
undertaken by Pennsylvania-based researchers.  The Governor's fiscal year
2007 budget proposes to create the Jonas Salk Legacy Fund, which would
utilize half of the 19 percent (9.5 percent) of Tobacco MSA payments,
currently dedicated to health research activities, to accelerate funding for
bioscience research in Pennsylvania. Under this proposal, 9.5 percent of
Tobacco MSA payments would be securitized through the issuance of
approximately $500 million in bonds, the proceeds of which would be used to
accelerate the construction of bioscience facilities, including laboratories,
incubators and research parks.  The proposed debt would be issued over a
two-year period following approval by the General Assembly and programs
funded with this debt from the Jonas Salk Legacy Fund would require a
dollar-for-dollar private match, thereby increasing total investment in
biosciences research and facility construction to over $1 billion.  The
proposed debt would be secured and paid solely from a pledge of 9.5 percent
of the revenue from the Tobacco MSA.

Debt Limits and Outstanding Debt.  The Pennsylvania Constitution permits 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 outstanding debt
limit of 1.75 times the annual average tax revenues of the preceding five
fiscal years; and (iv) tax anticipation notes payable in the fiscal year of
issuance.

Under the Pennsylvania Fiscal Code, the Auditor General is required to
certify to the Governor and the General Assembly certain information
regarding the Commonwealth's indebtedness.  According to the March 1, 2004
Auditor General certificate, the average annual tax revenues deposited in all
funds in the five fiscal years ended February 29, 2004 was approximately
$24.3 billion, and, therefore, the net debt limitation for the 2003 fiscal
year is approximately $36.2 billion.  Outstanding net debt totaled
approximately $6.2 billion at February 29, 2004.  On February 29, 2004 the
amount of debt authorized by law to be issued, but not yet incurred, was
approximately $34.6 billion.

Debt Ratings.  All outstanding general obligation bonds of the Commonwealth
are rated by S&P and by Moody's.

City of Philadelphia.  The City of Philadelphia (the "City" or
"Philadelphia") is the largest city in the Commonwealth.  Philadelphia
experienced a series of general fund deficits for fiscal years 1988 through
1992 which culminated in serious financial difficulties for the City.

The Pennsylvania Intergovernmental Cooperation Authority ("PICA") was created
by Commonwealth legislation in 1991 to assist Philadelphia, in remedying its
fiscal emergencies.  PICA is designed to provide assistance through the
issuance of funding debt and to make factual findings and recommendations to
Philadelphia concerning its budgetary and fiscal affairs.  This financial
assistance has included grants used by the City for defeasance of certain
city general obligation bonds, funding of capital projects and the
liquidation of the cumulative general fund balance deficit of Philadelphia as
of June 30, 1992, of $224.9 million.  At this time, Philadelphia is operating
under a five-year fiscal plan approved by PICA on June 26, 2003.

No further bonds are to be issued by PICA for the purpose of financing a
capital project or deficit as the authority for such bond sales expired
December 31, 1994.  PICA's authority to issue debt for the purpose of
financing a cash flow deficit expired on December 31, 1995.  Its ability to
refund existing outstanding debt is unrestricted.  PICA had $806.4 million in
special tax revenue bonds outstanding as of June 30, 2003.  Neither the
taxing power nor the credit of the Commonwealth is pledged to pay debt
service on PICA's bonds.

S&P and Moody's rate Philadelphia's general obligation bonds.

Litigation.  The Commonwealth is a party to numerous lawsuits in which an
adverse final decision could materially affect the Commonwealth's
governmental operations and consequently its ability to pay debt service on
its obligations.  The Commonwealth also faces tort claims made possible by
the limited waiver of sovereign immunity effected by Act 152, approved
September 28, 1978, as amended.  Under Act 152, damages for any loss are
limited to $250,000 per person and $1 million for each accident.

      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. The Fund invests in "inverse floaters" which are
derivative instruments that pay interest at rates that move in the opposite
direction of yields on short-term securities. As short-term interest rates
rise, the interest rate on inverse floaters falls and they produce less
current income. As short-term interest rates fall, the interest rates on the
inverse floaters increase and they pay more current income. Their market
value can be more volatile than that of a conventional fixed-rate security
having similar credit quality, redemption provisions and maturity. The Fund
can invest up to 20% of its total assets in inverse floaters.

     Currently, most of the inverse floaters the Fund buys are created when
the Fund purchases a fixed-rate municipal security and subsequently transfers
it to a broker-dealer which sells it to a trust. The trust divides the
fixed-rate security into two floating rate securities: (i) a short-term
tax-free floating rate security paying interest at rates that usually reset
daily or weekly, typically with the option to be tendered for par value on
each reset date, and (ii) a residual interest (the "inverse floater") that is
a long-term tax-free floating rate security, sometimes also referred to as a
"residual interest certificate." The inverse floater pays interest at rates
that move in the opposite direction of the yield on the short-term floating
rate security. The terms of the inverse floaters in which the Fund invests
grant the Fund the right to  require a tender of the short-term floating rate
securities, upon payment of the principal amount due to the holders of the
short-term floating rate notes issued by the trust and certain other fees.
The Fund may then require the trust to exchange the underlying fixed-rate
security for the short-term floating rate security and the inverse floater
that the Fund owns.

     The Fund may also purchase inverse floaters created when another party
transfers a fixed-rate municipal security to a trust. The trust then issues
short-term floating rate notes to third parties and sells the inverse floater
to the Fund. Under some circumstances, 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.

     Additionally, the Fund may be able to purchase inverse floaters created
by municipal issuers directly. To provide investment leverage, a municipal
issuer might issue two variable rate obligations instead of a single
long-term, fixed-rate security. For example, the interest rate on one
obligation reflecting short-term interest rates and the interest rate on the
other instrument, the inverse floater, reflecting the approximate rate the
issuer would have paid on a fixed-rate security, multiplied by a factor of
two, minus the rate paid on the short-term instrument.

      Inverse floaters may offer relatively high current income, reflecting
the spread between long-term and short-term tax exempt interest rates. As
long as the municipal yield curve remains positively sloped, and short-term
rates remain low relative to long-term rates, owners of inverse floaters will
have the opportunity to earn interest at above-market rates. If the yield
curve flattens and shifts upward, an inverse floater will lose value more
quickly than a conventional long-term security having similar credit quality,
redemption provisions and maturity.

      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. 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.

      The Fund may enter into a "shortfall and forbearance" agreement with
the sponsor of an inverse floater held by the Fund. Under such an agreement,
on liquidation of the trust, the Fund would be committed to pay the trust the
difference between the liquidation value of the underlying security on which
the inverse floater is based and the principal amount payable to the holders
of the short-term floating rate security that is based on the same underlying
security. The Fund would not be required to make such a payment under the
standard terms of a more typical inverse floater. Although entering into a
"shortfall and forebearance" agreement would expose the Fund to the risk that
it may be required to make the payment described above, the Fund may receive
higher interest payments than under a typical inverse floater.

      An investment in inverse floaters may involve greater risk than an
investment in a fixed-rate municipal security. All inverse floaters entail
some degree of leverage. The interest rate on inverse floaters varies
inversely at a pre-set multiple of the change in short-term rates. An inverse
floater that has a higher multiple, and therefore more leverage, will be more
volatile with respect to both price and income than an inverse floater with a
lower degree of leverage or than the underlying security.

      The Fund has changed its accounting treatment of inverse floater
transactions in which the Fund has transferred a municipal security it owned
to a trust. Prior to 2007, for accounting presentation purposes, these
transactions were treated as a sale of the municipal security and a purchase
of the inverse floater. Under applicable financial accounting standards
however, the transfer of the security is considered a form of secured
borrowing for financial reporting purposes. This change in accounting
treatment does not apply to inverse floaters acquired by the Fund that were
created by a third-party's transfer of a municipal security to the issuing
trust.

      |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. In a purchase transaction, the Fund will identify on its books
liquid securities of any type with a value 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 be required to 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 Securities and Restricted Securities. The Fund has
percentage limitations that apply to purchases of illiquid and restricted
securities, as stated in the Prospectus. The Manager determines the liquidity
of certain of the Fund's investments and monitors holdings of illiquid and
restricted securities on an ongoing basis to determine whether to sell any
holdings to meet percentage restrictions or maintain adequate liquidity.  The
Manager takes into account the trading activity for such securities and the
availability of reliable pricing information, among other factors.  Illiquid
securities include repurchase agreements maturing in more than seven days.
 The Fund may also acquire restricted securities that have contractual
restrictions on their public resale. Those restrictions might limit the
Fund's ability to dispose of the securities and might lower the amount the
Fund could realize upon the sale.

      |X| Borrowing for Leverage.  The Fund has the ability to invest
borrowed funds in portfolio securities. This speculative investment technique
is known as "leverage". Under its fundamental 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| 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.

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 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 Puts and Calls.  The Fund may buy calls only on
securities, broadly-based municipal bond indices, municipal bond index
futures and interest rate futures.  It may also buy calls to close out a call
it has written, as discussed above.  Calls the Fund buys must be listed on a
securities or commodities exchange, or quoted on NASDAQ(R), 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 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 does not 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 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") 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 adviser (as they may be amended from time to time), and as
otherwise set forth in the Fund's Prospectus or this SAI.

      Transactions in options by the Fund are subject to limitations
established by the option exchanges.  The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert.  Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges, or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers.  Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same 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 such gains 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 paying exempt-interest dividends 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 SAI are "fundamental" only if
they are identified as such.  The Fund's Board of Trustees can change
non-fundamental policies without shareholder approval.  However, significant
changes to investment policies will be described in supplements or updates to
the Prospectus or this SAI, as appropriate.  The Fund's 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 SAI states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund makes an
investment (except in the case of borrowing and investments in illiquid
securities). 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 several additional restrictions on its investment policies
that are not fundamental, which means that they can be changed by the Board
of Trustees, without obtaining shareholder approval, except that with respect
to the first policy stated below, the Board of Trustees would not permit this
policy to be changed to permit investments in physical commodities or
commodity contracts without the vote of a majority of the Fund's outstanding
voting securities:

      |_| 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 SAI.

      |_| 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.

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. If it qualifies, the Fund 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 (other than
Government securities and securities of other regulated investment
companies), two or more issuers that are engaged in the same or related
trades or businesses and are controlled by the Fund, or one or more qualified
publicly traded partnerships (i.e., publicly-traded partnerships that are
treated as partnerships for tax purposes and derive at least 90% of their
income from certain passive sources). 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.

Concentration. 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 SAI would be supplemented to reflect the change.
The Manager categorizes tobacco industry related municipal bonds as either
tobacco settlement revenue bonds or tobacco bonds that are subject to
appropriation ("STA Bonds"). For purposes of the Funds' industry
concentration policies, STA Bonds are considered to be "municipal" bonds, as
distinguished from "tobacco" bonds.  As municipal bonds, STA Bonds are not
within any industry and are not subject to the Funds' industry concentration
policies.
For the purposes of the Fund's policy not to concentrate in securities of
issuers as described in the investment restrictions listed in the Prospectus
and this SAI, the Fund has adopted the industry classifications set forth in
Appendix B to this SAI. This is not a fundamental policy. Bonds which are
refunded with escrowed U.S. government securities are considered U.S.
government securities for purposes of the Fund's policy not to concentrate.

    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 its semi-annual and annual reports to
            shareholders, and in its Statements of Investments on Form N-Q.
            Those documents are publicly available at the SEC. In addition,
            the top 20 month-end holdings may be posted on the
            OppenheimerFunds' website at www.oppenheimerfunds.com (select the
            Fund's name under the "View Fund Information for:" menu) with a
            15-day lag.  The Fund may release a more restrictive list of
            holdings (e.g., the top five or top 10 portfolio holdings) or may
            release no holdings if that is in the best interests of the Fund
            and its shareholders.  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.

          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 20 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.

    Any permitted release of otherwise non-public portfolio holdings
    information must be in accordance with the Fund's then-current policy on
    approved methods for communicating confidential information, including
    but not limited to the Fund's policy as to use of secure e-mail
    technology.

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

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

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


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 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 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, preemptive rights or
subscription rights.  Shares may be voted in person or by proxy at
shareholder meetings.

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

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

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

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

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

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

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

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

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

      The members of the Governance Committee are Phillip A. Griffiths
(Chairman), Matthew P. Fink, Robert G. Galli, Mary F. Miller, Kenneth A.
Randall, Russell S. Reynolds, Jr. and Peter I. Wold. The Governance Committee
held 9 meetings during the Fund's fiscal year ended July 31, 2006. The
Governance Committee reviews the Fund's governance guidelines, the adequacy
of the Fund's Codes of Ethics, and develops qualification criteria for Board
members consistent with the Fund's governance guidelines, provides the Board
with recommendations for voting portfolio securities held by the Fund, and
monitors the Fund's proxy voting, among other duties set forth in the
Governance Committee's Charter.

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

      To date, the Governance Committee has been able to identify from its
own resources an ample number of qualified candidates. Nonetheless, under the
current policy of the Board, if the Board determines that a vacancy exists or
is likely to exist on the Board, the Governance Committee will consider
candidates for Board membership including those recommended by the Fund's
shareholders. The Governance Committee will consider nominees recommended by
Independent Board members or recommended by any other Board members including
Board members affiliated with the Fund's Manager. The Governance Committee
may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Governance Committee
may also use the services of legal, financial, or other external counsel that
it deems necessary or desirable in the screening process. Shareholders
wishing to submit a nominee for election to the Board may do so by mailing
their submission to the offices of OppenheimerFunds, Inc., Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008, to the attention of the Board of Trustees of Oppenheimer
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; and (4) the name and address of the person submitting the
recommendation and, if that person is a shareholder, the period for which
that person held Fund shares. Shareholders should note that a person who owns
securities issued by Massachusetts Mutual Life Insurance Company (the parent
company of the Manager) would be deemed an "interested person" under the
Investment Company Act. In addition, certain other relationships with
Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may cause
a person to be deemed an "interested person."

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

      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 Money Market Fund, Inc.
Oppenheimer AMT-Free New York Municipals Oppenheimer Multi-State Municipal Trust
Oppenheimer Balanced Fund                Oppenheimer Portfolio Series
Oppenheimer Baring China Fund            Oppenheimer Real Estate Fund
                                         Oppenheimer Rochester Arizona Municipal
Oppenheimer Baring Japan Fund            Fund
                                         Oppenheimer Rochester Maryland Municipal
Oppenheimer California Municipal Fund    Fund
                                         Oppenheimer Rochester Massachusetts
Oppenheimer Capital Appreciation Fund    Municipal Fund
                                         Oppenheimer Rochester Michigan Municipal
Oppenheimer Developing Markets Fund      Fund
                                         Oppenheimer Rochester Minnesota Municipal
Oppenheimer Discovery Fund               Fund
                                         Oppenheimer Rochester North Carolina
Oppenheimer Dividend Growth Fund         Municipal Fund
Oppenheimer Emerging Growth Fund         Oppenheimer Rochester Ohio Municipal Fund
                                         Oppenheimer Rochester Virginia Municipal
Oppenheimer Emerging Technologies Fund   Fund
Oppenheimer Enterprise Fund              Oppenheimer Select Value Fund
Oppenheimer Global Fund                  Oppenheimer Series Fund, Inc.
Oppenheimer Global Opportunities Fund    Oppenheimer Transition 2010 Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Transition 2015 Fund
Oppenheimer Growth Fund                  Oppenheimer Transition 2020 Fund
Oppenheimer International Diversified
Fund                                     Oppenheimer Transition 2030 Fund
Oppenheimer International Growth Fund    OFI Tremont Core Strategies Hedge Fund
Oppenheimer International Small Company
Fund                                     OFI Tremont Market Neutral Hedge Fund
Oppenheimer International Value Fund     Oppenheimer Tremont Market Neutral Fund LLC
Oppenheimer Institutional Money Market
Fund                                     Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer Limited Term California
Municipal Fund                           Oppenheimer U.S. Government Trust

      In  addition  to  being a Board  member  of each of the  Board I  Funds,
Messrs.  Galli and Wruble are directors or trustees of ten other portfolios 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. Cottier, Fielding, Loughran, Willis, Gillespie, Murphy,
Petersen, Szilagyi, Vandehey, Wixted and Zack and Mss. Bloomberg and Ives,
who are officers of the Fund, hold the same offices with one or more of the
other Board I Funds. As of February 9, 2007, the Trustees and officers of the
Fund, as a group, owned of record or beneficially less than 1% of any class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under that plan by the
officers of the Fund listed above. In addition, none of the Independent
Trustees (nor any of their immediate family members) owns securities of
either the Manager or the Distributor of the Board I Funds or of any entity
directly or indirectly controlling, controlled by or under common control
with the Manager or the Distributor.

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

-------------------------------------------------------------------------------------------
                                   Independent Trustees
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Name, Position(s)   Principal Occupation(s) During the Past 5     Dollar      Aggregate
                                                                             Dollar Range
                                                                 Range of     Of Shares
                                                                  Shares     Beneficially
Held with the       Years; Other Trusteeships/Directorships     Beneficially   Owned in
Fund, Length of     Held; Number of Portfolios in the Fund       Owned in     Supervised
Service, Age        Complex Currently Overseen                   the Fund       Funds
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
                                                                 As of December 31, 2006
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Brian F. Wruble,    General Partner of Odyssey Partners, L.P.   None        Over $100,000
Chairman of the     (hedge fund) (since September 1995);
Board of Trustees   Director of Special Value Opportunities
since 2007,         Fund, LLC (registered investment company)
Trustee since 2005, (since September 2004); Investment
Age: 63             Advisory Board Member of Zurich Financial
                    Services (insurance) (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) and Managing
                    Principal (1997- December 1998); 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 59
                    portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Matthew P. Fink,    Trustee of the Committee for Economic       None        Over $100,000
Trustee since 2005  Development (policy research foundation)
Age: 66             (since 2005); Director of ICI Education
                    Foundation (education foundation) (October
                    1991-August 2006); President of the
                    Investment Company Institute (trade
                    association) (October 1991-June 2004);
                    Director of ICI Mutual Insurance Company
                    (insurance company) (October 1991-June
                    2004). Oversees 49 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Robert G. Galli,    A director or trustee of other Oppenheimer  None        Over $100,000
Trustee since 1993  funds. Oversees 59 portfolios in the
Age: 73             OppenheimerFunds complex.

-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Phillip A.          Distinguished Presidential Fellow for       None        None
Griffiths,          International Affairs (since 2002) and
Trustee since 1999  Member (since 1979) of the National
Age: 68             Academy of Sciences; Council on Foreign
                    Relations (since 2002); Director of GSI
                    Lumonics Inc. (precision medical equipment
                    supplier) (since 2001); Senior Advisor of
                    The Andrew W. Mellon Foundation (since
                    2001); Chair of Science Initiative Group
                    (since 1999); Member of the American
                    Philosophical Society (since 1996);
                    Trustee of Woodward Academy (since 1983);
                    Foreign Associate of Third World Academy
                    of Sciences; Director of the Institute for
                    Advanced Study (1991-2004); Director of
                    Bankers Trust New York Corporation
                    (1994-1999); Provost at Duke University
                    (1983-1991). Oversees 49 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Mary F. Miller,     Trustee of the American Symphony Orchestra  None        Over $100,000
Trustee since 2004  (not-for-profit) (since October 1998); and
Age: 64             Senior Vice President and General Auditor
                    of American Express Company (financial
                    services company) (July 1998-February
                    2003). Oversees 49 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joel W. Motley,     Director of Columbia Equity Financial       None        Over $100,000
Trustee since 2002  Corp. (privately-held financial adviser)
Age: 54             (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 and Board of Human Rights Watch
                    and the Investment Committee of Historic
                    Hudson Valley. Oversees 49 portfolios in
                    the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Kenneth A.          Director of Dominion Resources, Inc.        None        Over $100,000
Randall,            (electric utility holding company)
Trustee since 1989  (February 1972-October 2005); Former
Age: 79             Director of Prime Retail, Inc. (real
                    estate investment trust), Dominion Energy
                    Inc. (electric power and oil & gas
                    producer), Lumberman's 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 49 portfolios
                    in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Russell S.          Chairman of The Directorship Search Group,  None        $10,001-$50,000
Reynolds, Jr.,      Inc. (corporate governance consulting and
Trustee since 1989  executive recruiting) (since 1993); Life
Age: 75             Trustee of International House (non-profit
                    educational organization); Founder,
                    Chairman and Chief Executive Officer of
                    Russell Reynolds Associates, Inc.
                    (1969-1993); Banker at J.P. Morgan & Co.
                    (1958-1966); 1st Lt. Strategic Air
                    Command, U.S. Air Force (1954-1958).
                    Oversees 49 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Joseph M. Wikler,   Director of the  following  medical  device None        Over $100,000
Trustee since 2005  companies:   Medintec   (since   1992)  and
Age: 65             Cathco  (since  1996);  Director  of  Lakes
                    Environmental   Association  (since  1996);
                    Member of the  Investment  Committee of the
                    Associated  Jewish  Charities  of Baltimore
                    (since 1994);  Director of  Fortis/Hartford
                    mutual    funds    (1994-December    2001).
                    Oversees    49     portfolios     in    the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Peter I. Wold,      President of Wold Oil Properties, Inc.      None        Over $100,000
Trustee since 2005  (oil and gas exploration and production
Age: 59             company) (since 1994); Vice President,
                    Secretary and Treasurer of Wold Trona
                    Company, Inc. (soda ash processing and
                    production) (since 1996); Vice President
                    of Wold Talc Company, Inc. (talc mining)
                    (since 1999); Managing Member of
                    Hole-in-the-Wall Ranch (cattle ranching)
                    (since 1979); Director and Chairman of the
                    Denver Branch of the Federal Reserve Bank
                    of Kansas City (1993-1999); and Director
                    of PacifiCorp. (electric utility)
                    (1995-1999). Oversees 49 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

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

-------------------------------------------------------------------------------------------
                              Interested Trustee and Officer
-------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Name, Position(s)  Principal Occupation(s) During the Past 5      Dollar      Aggregate
                                                                            Dollar Range
                                                                 Range of     Of Shares
                                                                  Shares    Beneficially
Held with Fund,    Years; Other Trusteeships/Directorships      Beneficially  Owned in
Length of          Held; Number of Portfolios in the Fund        Owned in    Supervised
Service, Age       Complex Currently Overseen                    the Fund       Funds
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
                                                                 As of December 31, 2006
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
John V. Murphy,    Chairman, Chief Executive Officer and        None        Over $100,000
Trustee and        Director (since June 2001) and President
President and      (since September 2000) of the Manager;
Principal          President and a director or trustee of
Executive Officer  other Oppenheimer funds; President and
since 2001         Director of Oppenheimer Acquisition Corp.
Age: 57            ("OAC") (the Manager's parent holding
                   company) and of Oppenheimer Partnership
                   Holdings, Inc. (holding company subsidiary
                   of the Manager) (since July 2001); Director
                   of OppenheimerFunds Distributor, Inc.
                   (subsidiary of the Manager) (since November
                   2001); Chairman and Director of Shareholder
                   Services, Inc. and of Shareholder Financial
                   Services, Inc. (transfer agent subsidiaries
                   of the Manager) (since July 2001);
                   President and Director of OppenheimerFunds
                   Legacy Program (charitable trust program
                   established by the Manager) (since July
                   2001); Director of the following investment
                   advisory subsidiaries of the Manager: OFI
                   Institutional Asset Management, Inc.,
                   Centennial Asset Management Corporation,
                   Trinity Investment Management Corporation
                   and Tremont Capital Management, Inc. (since
                   November 2001), HarbourView Asset
                   Management Corporation and OFI Private
                   Investments, Inc. (since July 2001);
                   President (since November 1, 2001) and
                   Director (since July 2001) of Oppenheimer
                   Real Asset Management, Inc.; Executive Vice
                   President of Massachusetts Mutual Life
                   Insurance Company (OAC's parent company)
                   (since February 1997); Director of DLB
                   Acquisition Corporation (holding company
                   parent of Babson Capital Management LLC)
                   (since June 1995); Member of the Investment
                   Company Institute's Board of Governors
                   (since October 3, 2003); Chief Operating
                   Officer of the Manager (September 2000-June
                   2001); President and Trustee of MML Series
                   Investment Fund and MassMutual Select Funds
                   (open-end investment companies) (November
                   1999-November 2001); Director of C.M. Life
                   Insurance Company (September 1999-August
                   2000); President, Chief Executive Officer
                   and Director of MML Bay State Life
                   Insurance Company (September 1999-August
                   2000); Director of Emerald Isle Bancorp and
                   Hibernia Savings Bank (wholly-owned
                   subsidiary of Emerald Isle Bancorp) (June
                   1989-June 1998). Oversees 96 portfolios in
                   the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------------
                             Other Officers of the Fund
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Name, Position(s) Held  Principal Occupation(s) During Past 5 Years
with Fund, Length of
Service, Age
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Ronald H. Fielding,     Vice  President  and  Senior  Portfolio  Manager  of the Fund
Vice President and      (since  July  2002);  Senior  Vice  President  of the Manager
Portfolio Manager       (since January 1996).  Mr. Fielding is the Chief  Strategist,
since 2002              a Senior Portfolio  Manager,  an officer and a trader for the
Age: 57                 Fund and other Oppenheimer funds.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Scott S. Cottier,       Vice  President  of the Fund  (since  October  2005);  Senior
Vice President since    Portfolio  Manager of the Fund (since 2002);  Vice  President
October 2005 and        of the Manager  (since  2002).  Portfolio  manager and trader
Portfolio Manager       at Victory  Capital  Management  (1999 to 2002).  Mr. Cottier
since 2002              is a Senior Portfolio Manager,  an officer and trader for the
Age: 35                 Fund and other Oppenheimer funds.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Daniel G. Loughran,     Vice  President  of the Fund  (since  October  2005);  Senior
Vice President since    Portfolio  Manager of the Fund (since  July 2005);  Portfolio
October 2005 and        Manager  of  the  Fund  (April  2002  to  June  2005);   Vice
Portfolio Manager       President  of  the  Manager  (since  April  2001);  portfolio
since 2002              manager  with the Manager  (since  1999).  Mr.  Loughran is a
Age: 43                 portfolio   manager   and  officer  of  other  funds  in  the
                        OppenheimerFunds   complex.  He  is  team  leader,  a  Senior
                        Portfolio  Manager,  an  officer  and trader for the Fund and
                        other Oppenheimer funds.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Troy Willis,            Vice  President  of the Fund  (since  October  2005);  Senior
Vice President since    Portfolio   Manager  of  the  Fund  (since   January   2006);
October 2005 and        Portfolio  Manager of the Fund (May 2003 to  December  2005);
Portfolio Manager       Assistant  Vice  President of the Manager  (since July 2005).
since 2002              Corporate  Attorney  for  Southern  Resource  Group  (1999 to
Age: 33                 2003). Mr. Willis is a Senior Portfolio  Manager,  an officer
                        and a trader for the Fund and other Oppenheimer funds.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mark S. Vandehey,       Senior Vice President and Chief Compliance Officer of the
Vice President and      Manager (since March 2004); Vice President of
Chief Compliance        OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004      Management Corporation and Shareholder Services, Inc. (since
Age: 56                 June 1983). Former Vice President and Director of Internal
                        Audit of the Manager (1997-February 2004). An officer of 96
                        portfolios in the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice President and Treasurer of the Manager (since
Treasurer and           March 1999); Treasurer of the following: HarbourView Asset
Principal Financial &   Management Corporation, Shareholder Financial Services,
Accounting Officer      Inc., Shareholder Services, Inc., Oppenheimer Real Asset
since 1999              Management Corporation, and Oppenheimer Partnership
Age: 47                 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 96
                        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 96 portfolios in
Age: 36                 the OppenheimerFunds complex.

--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian C. Szilagyi,      Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer     Director of Financial Reporting and Compliance of First Data
since 2005              Corporation (April 2003-July 2004); Manager of Compliance of
Age: 36                 Berger Financial Group LLC (May 2001-March 2003); Director
                        of Mutual Fund Operations at American Data Services, Inc.
                        (September 2000-May 2001). An officer of 96 portfolios in
                        the OppenheimerFunds complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Zack,         Executive Vice President (since January 2004) and General
Secretary since 2001    Counsel (since March 2002) of the Manager; General Counsel
Age: 58                 and Director of the Distributor (since December 2001);
                        General Counsel of Centennial Asset Management Corporation
                        (since December 2001); Senior Vice President and General
                        Counsel of HarbourView Asset Management Corporation (since
                        December 2001); Secretary and General Counsel of OAC (since
                        November 2001); Assistant Secretary (since September 1997)
                        and Director (since November 2001) of OppenheimerFunds
                        International Ltd. and OppenheimerFunds plc; Vice President
                        and Director of Oppenheimer Partnership Holdings, Inc.
                        (since December 2002); Director of Oppenheimer Real Asset
                        Management, Inc. (since November 2001); Senior Vice
                        President, General Counsel and Director of Shareholder
                        Financial Services, Inc. and Shareholder Services, Inc.
                        (since December 2001); Senior Vice President, General
                        Counsel and Director of OFI Private Investments, Inc. and
                        OFI Trust Company (since November 2001); Vice President of
                        OppenheimerFunds Legacy Program (since June 2003); Senior
                        Vice President and General Counsel of OFI Institutional
                        Asset Management, Inc. (since November 2001); Director of
                        OppenheimerFunds (Asia) Limited (since December 2003);
                        Senior Vice President (May 1985-December 2003), Acting
                        General Counsel (November 2001-February 2002) and Associate
                        General Counsel (May 1981-October 2001) of the Manager;
                        Assistant Secretary of the following: Shareholder Services,
                        Inc. (May 1985-November 2001), Shareholder Financial
                        Services, Inc. (November 1989-November 2001), and
                        OppenheimerFunds International Ltd. (September 1997-November
                        2001). An officer of 96 portfolios in the OppenheimerFunds
                        complex.
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice President (since June 1998) and Senior Counsel and
Assistant Secretary     Assistant Secretary (since October 2003) of the Manager;
since 2001              Vice President (since 1999) and Assistant Secretary (since
Age: 41                 October 2003) of the Distributor; Assistant Secretary of
                        Centennial Asset Management Corporation (since October
                        2003); Vice President and Assistant Secretary of Shareholder
                        Services, Inc. (since 1999); Assistant Secretary of
                        OppenheimerFunds Legacy Program and Shareholder Financial
                        Services, Inc. (since December 2001); Assistant Counsel of
                        the Manager (August 1994-October 2003). An officer of 96
                        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: 39                 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 96 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: 43                 First Vice President (2001-September 2004); Director
                        (2000-September 2004) and Vice President (1998-2000). An
                        officer of 96 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,  2006.  The
total  compensation  from the Fund and  fund  complex  represents  compensation,
including accrued retirement benefits,  for serving as a Trustee and member of a
committee  (if  applicable)  of the  Boards of the Fund and  other  funds in the
OppenheimerFunds complex during the calendar year ended December 31, 2006.



--------------------------------------------------------------------------------------
Name and Other Fund      Aggregate                     Estimated          Total
                                       Retirement
                                        Benefits
                       Compensation    Accrued as       Annual        Compensation
Position(s) (as          From the     Part of Fund   Benefits Upon    From the Fund
applicable)               Fund(1)       Expenses     Retirement(2)  and Fund Complex
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
                        Fiscal year ended July 31,                     Year ended
                                   2006                             December 31, 2006
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Brian F. Wruble(3)        $1,236          $866        $49,899 (4)     $241,260 (5)
Chairman of the Board
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Clayton K. Yeutter(6)    $2,496(7)       $1,825        $103,146         $173,700

--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Matthew P. Fink           $1,495         $1,009         $9,646          $113,472
Governance Committee
Member and Regulatory
& Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Robert G. Galli           $1,858         $5,629      $107,096((4))    $264,812 (8)
Regulatory &
Oversight Committee
Chairman
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Phillip A. Griffiths    $2,166(9)      $2,938                         $150,760
Governance Committee
Chairman and
Regulatory &
Oversight Committee                                     $42,876
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Mary F. Miller
Audit Committee
Member and Governance     $1,534         $1,515         $11,216         $106,792
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joel W. Motley         $2,166(10)      $1,288         $27,099         $150,760
Audit Committee
Chairman and
Regulatory &
Oversight Committee
Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Kenneth A. Randall        $1,926       None(11)       $91,953         $134,080
Audit Committee
Member and Governance
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Russell S. Reynolds,      $1,582         $3,095         $72,817         $110,120
Jr.
Audit Committee
Member and Governance
Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Joseph M. Wikler(12)   $1,326(13)      $4,953         $26,121          $99,080
Audit Committee Member
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Peter I. Wold(12)
Audit Committee
Member and Governance     $1,326         $2,954         $26,121          $99,080
Committee Member
--------------------------------------------------------------------------------------
1.    "Aggregate Compensation From the Fund" includes fees and deferred
   compensation, if any.

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

     3. Mr.  Wruble was appointed as Trustee of the Board I Funds on October 10,
2005 and became Chairman of the Board I Funds on January 1, 2007.

     4. Estimated benefits to be paid to Mr. Wruble and Mr. Galli for serving as
a director or trustee of 10 other Oppenheimer funds that are not Board I Funds.

     5.  Includes  $135,500  paid to Mr.  Wruble for  serving  as a director  or
trustee of 10 other  Oppenheimer funds (at December 31, 2006) that are not Board
I Funds.

     6. Mr. Yeutter  retired as Chairman of the Board of Trustees of the Board I
Funds effective December 31, 2006.

     7. Includes $624 deferred by Mr. Yeutter under the  "Compensation  Deferral
Plan" described below.

     8. Includes $135,500 paid to Mr. Galli for serving as a director or trustee
of 10 other Oppenheimer funds (at December 31, 2006) that are not Board I Funds.

     9.  Includes  $2,166  deferred  by Mr.  Griffiths  under the  "Compensation
Deferral Plan" described below.

     10. Includes $866 deferred by Mr. Motley under the  "Compensation  Deferral
Plan" described below.

     11. Due to actuarial considerations, no additional retirement benefits were
accrued with respect to Mr. Randall.

     12. Mr.  Wikler  and Mr.  Wold were  elected as Board  members of 23 of the
Board I Funds,  including  the Fund as of August  17,  2005.  They had served as
Board members of 10 other Board I Funds prior to that date.

     13. Includes $627 deferred by Mr. Wikler under the  "Compensation  Deferral
Plan" described below.

      Retirement Plan for Trustees. The Board I Funds 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 Board has frozen the
retirement plan with respect to new accruals as of December 31, 2006 (the
"Freeze Date").  Retirees as of the Freeze Date will continue to receive
benefits under the previous terms of the Plan.  Each Trustee continuing to
serve on the Board of any of the Board I Funds after the Freeze Date (each
such Trustee a "Continuing Board Member") may elect to have his frozen
benefit (i.e., an amount equivalent to the actuarial present value of his
benefit under the retirement plan as of the Freeze Date) (i) paid at once or
over time, (ii) rolled into the Compensation Deferral Plan described below,
or (iii) in the case of Continuing Board Members having at least 7 years of
service as of the Freeze Date paid in the form of an annual benefit or joint
and survivor annual benefit.  The Board determined to freeze the retirement
plan after considering a recent trend among corporate boards of directors to
forego retirement plan payments in favor of current compensation.

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

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

      |X|  Major Shareholders.  As of February 9, 2007, 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,  4800
Deer  Lake  Drive  East  Floor  3,  Jacksonville,  FL  32246-6484,  which  owned
749,956.841  Class B shares (5.01% of the Class B shares then  outstanding)  for
the benefit of its customers.

      CITIGROUP  Global Mkts Inc. ATTN Cindy  Tempesta,  7th Fl, 333 West 34th
Street,  New  York NY  1000-2483,  which  owned  1,048,468.036  Class B shares
(7.01%  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
3,114,280.669 Class C shares (14.61% of the Class C shares then outstanding) for
the benefit of its customers.

      CITIGROUP  Global Mkts Inc. ATTN Cindy  Tempesta,  7th Fl, 333 West 34th
Street,  New  York NY  1000-2483,  which  owned  2,000,804.403  Class C shares
(9.38%  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, which include Proxy Voting Guidelines, under which the Fund
votes proxies relating to securities ("portfolio proxies") held by the Fund.
The Fund's primary consideration in voting portfolio proxies is the financial
interests of the Fund and its shareholders. The Fund has retained an
unaffiliated third-party as its agent to vote portfolio proxies in accordance
with the Fund's 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 Proxy Voting Guidelines, the Manager will vote the portfolio proxy in
accordance with the Proxy Voting Guidelines, provided that they do not
provide discretion to the Manager on how to vote on the matter; and (2) if
such proposal is not specifically addressed in the Proxy Voting Guidelines or
the Proxy Voting Guidelines provide discretion to the Manager on how to vote,
the Manager will vote in accordance with the third-party proxy voting agent's
general recommended guidelines on the proposal provided that the Manager has
reasonably determined that there is no conflict of interest on the part of
the proxy voting agent.  If neither of the previous two procedures provides
an appropriate voting recommendation, the Manager may retain an independent
fiduciary to advise the Manager on how to vote the proposal or may abstain
from voting.  The Proxy Voting Guidelines' provisions with respect to certain
routine and non-routine proxy proposals are summarized below:

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

o     The Fund generally  considers executive  compensation  questions such as
   stock option plans and bonus plans to be ordinary  business  activity.  The
   Fund analyzes  stock option  plans,  paying  particular  attention to their
   dilutive effect.  While the Fund generally supports  management  proposals,
   the Fund opposes plans it considers to be excessive.

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

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

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

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

      Fiscal Year           Management Fees paid to
      Ended 7/31            OppenheimerFunds, Inc.

--------------------------------------------------------
--------------------------------------------------------
         2004                     $2,465,343
--------------------------------------------------------
--------------------------------------------------------
         2005                     $3,034,961
--------------------------------------------------------
--------------------------------------------------------
         2006                     $4,276,821
--------------------------------------------------------

      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
in connection with matters to which the agreement relates.

      The agreement permits the Manager to act as investment adviser 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
adviser or general distributor. If the Manager shall no longer act as
investment adviser to the Fund, the Manager may withdraw the Fund's right to
use the name "Oppenheimer" as part of its name.

Portfolio Managers. The Fund's portfolio is managed by a team of investment
professionals including Ronald H. Fielding, Daniel G. Loughran, Scott
Cottier, Troy Willis, Mark DeMitry, Marcus Franz and Michael Camarella (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, Franz and
Camarella 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 the Portfolio Managers as
of July 31, 2006. No account has a performance-based advisory fee:

   Portfolio     Registered  Total     Other      Total      Other   Total
                             Assets               Assets in
                             in                   Other
                             RegisteredPooled     Pooled               Assets
                 Investment  InvestmentInvestment Investment         in Other
                 Companies   Companies Vehicles   Vehicles   AccountsAccounts
   Manager        Managed    Managed(1) Managed   Managed(1) Managed Managed(2)
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Ronald H.        13     $25,254.30     None       None     None      None
   Fielding
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Daniel G.        13     $25,254.30     None       None     None      None
   Loughran
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Scott S.         13     $25,254.30     None       None     None      None
   Cottier
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Troy Willis      13     $25,254.30     None       None     None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Marcus Franz     13     $25,254.30     None       None     None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Mark DeMitry     13     $25,254.30     None       None     None      None
   -----------------------------------------------------------------------------
   -----------------------------------------------------------------------------
   Michael          13     $25,254.30     None       None     None      None
   Camarella

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


     As indicated above, 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,  2006,  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, 2006, 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 arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager is authorized by the advisory agreement
to employ broker-dealers including "affiliated" brokers as that term is
defined in the Investment Company Act, that the Manager thinks, in its best
judgment based on all relevant factors, will implement the policy of the Fund
to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution
at the most favorable price obtainable for the services provided. The Manager
need not seek competitive commission bidding. However, it is expected to be
aware of the current rates of eligible brokers and to minimize the
commissions paid to the extent consistent with the interests and policies of
the Fund as established by its Board of Trustees.

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

Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and other applicable rules and procedures described below.  The Manager's
portfolio managers directly place trades and allocate brokerage based upon
their judgment as to the execution capability of the broker or dealer. The
Manager's executive officers supervise the allocation of brokerage.

      Most securities purchases made by the Fund are in principal
transactions at net prices (i.e., without commissions). 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.
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.  Therefore, the Fund generally does not
incur substantial brokerage costs. On occasion, however, the Manager may
determine that a better price or execution may be obtained by using the
services of a broker on an agency basis.  In that situation, the Fund would
incur a brokerage commission.

      Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities
as the Fund at the same time as the Fund, which could affect the supply and
price of the securities. When possible, the Manager tries to combine
concurrent orders to purchase or sell the same security by more than one of
the funds managed by the Manager or its affiliates. The transactions under
those combined orders are generally allocated on a pro rata basis based on
the funds' respective net asset sizes and other factors, including the funds'
cash flow requirements, investment policies and guidelines and capacity.

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

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

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

      Investment research services include information and 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.

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

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

During the fiscal years ended July 31, 2004, 2005 and 2006, the Fund paid no
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
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   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
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
   2006    $5,112,325     $845,762      $135,293     $1,043,784    $888,524
 ------------------------------------------------------------------------------
   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
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2004            $2,555              $425,206               $18,275
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2005            $4,305              $276,297               $16,742
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
    2006            $9,524              $383,285               $56,182
 ------------------------------------------------------------------------------

      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, 2006 payments under the Class A plan
totaled $703,170 all of which was paid by the Distributor to recipients, and
included $18,960 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 a new investor directly from the Distributor
without the investor designating another registered broker-dealer.  If a
current investor no longer has another broker-dealer of record for an
existing account, the Distributor is automatically designated as the
broker-dealer of record, but solely for the purpose of acting as the
investor's agent to purchase the shares.  In those cases, the Distributor
retains the asset-based sales charge paid on Class B 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 0.90% 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 bears the excess costs. 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 7/31/06
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 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        $1043,784     $1,738,069(1)      $5,089,067         2.59%
 Plan
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C        $888,524      $1,566,330(2)      $2,691,282         1.22%
 Plan
 -------------------------------------------------------------------------------
1.    Includes $7,539 paid to an affiliate of the Distributor's parent
      company.
2.    Includes $27,867 paid to an affiliate of the Distributor's parent
      company.

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

Payments to Fund Intermediaries

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

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

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

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

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

o     These types of payments may reflect compensation for marketing support,
              support provided in offering the Fund or other Oppenheimer
              funds through certain trading platforms and programs,
              transaction processing or other services;


o     The Manager and Distributor each may also pay other compensation to the
              extent the payment is not prohibited by law or by any
              self-regulatory agency, such as the NASD. Payments are made
              based on the guidelines established by the Manager and
              Distributor, subject to applicable law.

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

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

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

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

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

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

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

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

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


Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its 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:


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

      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 7/31/06
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                           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           4.54%       4.32%      4.91%      4.67%       7.20%      6.85%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B           3.77%         N/A      4.20%        N/A       5.98%        N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C           3.77%         N/A      4.20%        N/A       5.98%        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:

                                        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 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 7/31/06
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          Cumulative Total              Average Annual Total Returns
             Returns (10
               years)

Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

                                  1-Year           5-Years          10-Years

---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After    Without  After    Without   After    Without After   Without
          Sales    Sales    Sales    Sales     Sales    Sales   Sales   Sales
           Charge   Charge   Charge   Charge    Charge  Charge  Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A   76.82%(1)85.62%(1) -0.74%    4.21%    7.06%    8.11%  5.86%(1)6.38%(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B   77.58%(2)77.58%(2) -1.55%    3.41%    6.98%    7.29%  5.91%(2)5.91%(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C   71.99%(3)71.99%(3) 2.42%     3.41%    7.27%    7.27%  5.57%(3)5.57%(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 7/31/06
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------

                                   1-Year           5-Year         10 Years
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 After Taxes on Distributions      -0.74%           7.06%            5.86%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 After Taxes on Distributions
 and Redemption of Fund Shares      1.18%           6.88%            5.81%
 -------------------------------------------------------------------------------

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

      |_| 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 SAI 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 MidCap Fund
Oppenheimer AMT-Free New York Municipals  Oppenheimer New Jersey Municipal Fund
Oppenheimer Balanced Fund                 Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Baring China Fund             Oppenheimer Portfolio Series:
Oppenheimer Baring Japan Fund                Active Allocation Fund
Oppenheimer Core Bond Fund                   Equity Investor Fund
Oppenheimer California Municipal Fund        Conservative Investor Fund
Oppenheimer Capital Appreciation Fund        Moderate Investor Fund
                                          Oppenheimer Principal Protected Main
Oppenheimer Capital Income Fund           Street Fund
                                          Oppenheimer Principal Protected Main
Oppenheimer Champion Income Fund          Street Fund II
Oppenheimer Commodity Strategy Total      Oppenheimer Principal Protected Main
Return Fund                               Street Fund III
Oppenheimer Convertible Securities Fund   Oppenheimer Quest Balanced Fund
                                          Oppenheimer Quest Capital Value Fund,
Oppenheimer Developing Markets Fund       Inc.
                                          Oppenheimer Quest International Value
Oppenheimer Discovery Fund                Fund, Inc.
Oppenheimer Dividend Growth Fund          Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Growth Fund          Oppenheimer Quest Value Fund, Inc.
Oppenheimer Emerging Technologies Fund    Oppenheimer Real Estate Fund
                                          Oppenheimer Rochester Arizona Municipal
Oppenheimer Enterprise Fund               Fund
                                          Oppenheimer Rochester Maryland
Oppenheimer Equity Fund, Inc.             Municipal Fund
                                          Oppenheimer Rochester Massachusetts
Oppenheimer Global Fund                   Municipal Fund
                                          Oppenheimer Rochester Michigan
Oppenheimer Global Opportunities Fund     Municipal Fund
                                          Oppenheimer Rochester Minnesota
Oppenheimer Gold & Special Minerals Fund  Municipal Fund
                                          Oppenheimer Rochester National
Oppenheimer Growth Fund                   Municipals
                                          Oppenheimer Rochester North Carolina
Oppenheimer International Bond Fund       Municipal Fund
Oppenheimer International Diversified     Oppenheimer Rochester Ohio Municipal
Fund                                      Fund
                                          Oppenheimer Rochester Virginia
Oppenheimer International Growth Fund     Municipal Fund
Oppenheimer International Small Company
Fund                                      Oppenheimer Select Value Fund
Oppenheimer International Value Fund      Oppenheimer Senior Floating Rate Fund
Oppenheimer Limited Term California
Municipal Fund                            Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer Limited-Term Government Fund  Oppenheimer Strategic Income Fund
Oppenheimer Limited Term Municipal Fund   Oppenheimer U.S. Government Trust
Oppenheimer Main Street Fund              Oppenheimer Value Fund
Oppenheimer Main Street Opportunity Fund  Limited-Term New York Municipal Fund
Oppenheimer Main Street Small Cap Fund    Rochester Fund Municipals

LifeCycle Funds
  Oppenheimer Transition 2010 Fund
  Oppenheimer Transition 2015 Fund
  Oppenheimer Transition 2020 Fund
  Oppenheimer Transition 2030 Fund

And the following money market funds:
Oppenheimer Cash Reserves                 Centennial Government Trust
Oppenheimer Institutional Money Market
Fund                                      Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc.       Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust    Centennial Tax Exempt Trust


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


Letters of Intent. Under a Letter of Intent ("Letter"), you can reduce the
sales charge rate that applies to your purchase 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. Purchases made up
to 90 days before the date that you submit a Letter of Intent will be
included in that determination. Class A shares of Oppenheimer Money Market
Fund, Inc. and Oppenheimer Cash Reserves on which you have not paid a sales
charge and any Class N shares you purchase, or may have purchased, will not
be counted towards satisfying the purchases specified in a Letter.

      A Letter is an investor's statement in writing to the Distributor of
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"). The Letter states the investor's intention to make the
aggregate amount of purchases of shares which will equal or exceed the amount
specified in the Letter. Purchases made by reinvestment of dividends or
capital gains distributions and purchases made at net asset value (i.e.
without paying a front-end or contingent deferred sales charge) do not count
toward satisfying the amount of the Letter.

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

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

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

      The  Transfer  Agent  will not hold  shares in escrow for  purchases  of
shares of 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 a new 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 and click the
hyperlink "Sign Up for Electronic Document Delivery" under the heading "I
Want To,"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 value per share of
each class of shares of the Fund is determined as of the close of business of
the NYSE on each day that the NYSE is open. The calculation is done by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The NYSE normally closes
at 4:00 p.m., Eastern time, but may close earlier on some other days (for
example, in case of weather emergencies or on days falling before a U.S.
holiday).  All references to time in this SAI mean "Eastern time." The NYSE's
most recent annual announcement 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, as
applicable, as determined by a pricing service approved by the Board of
Trustees or by the Manager. If there were no sales that day, they shall be
valued at the last sale price on the preceding trading day if it is within
the spread of the closing "bid" and "asked" prices on the principal exchange
on the valuation date. If not, the value shall be the closing bid price on
the principal exchange on the valuation date. If the put, call or future is
not traded on an exchange, it shall be valued by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In
certain cases that may be at the "bid" price if no "asked" price is available.

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

How to Sell Shares

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

Checkwriting. When a check is presented to United Missouri Bank (the "Bank")
for clearance, the Bank will ask the Fund to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount
of the check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's custodian.
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.

      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 SAI).

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

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

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

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

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

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

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

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

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

How to Exchange Shares

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

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

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

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

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

o     Oppenheimer  Money  Market  Fund,  Inc.  only offers Class A and Class Y
   shares.
o     Oppenheimer  Institutional  Money  Market Fund only  offers  Class E and
   Class L shares.
o     Class B and Class C shares of Oppenheimer Cash Reserves are generally
      available only by exchange from the same class of shares of other
      Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be
      exchanged only for Class A shares of other Oppenheimer funds. They may
      not be acquired by exchange of shares of any class of any other
      Oppenheimer funds except Class A shares of Oppenheimer Money Market
      Fund, Inc. or Oppenheimer Cash Reserves acquired by exchange of Class M
      shares.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
      for shares of certain money market funds offered by the Distributor.
      Shares of any money market fund purchased without a sales charge may be
      exchanged for shares of Oppenheimer funds offered with a sales charge
      upon payment of the sales charge.
o     Shares of the Fund acquired by reinvestment of dividends or
      distributions from any of the other Oppenheimer funds or from any unit
      investment trust for which reinvestment arrangements have been made
      with the Distributor may be exchanged at net asset value for shares of
      the same class of any of the other Oppenheimer funds into which you may
      exchange shares.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be
      exchanged at net asset value for shares of the same class of any of the
      other Oppenheimer funds into which you may exchange shares.  However,
      shareholders are not permitted to exchange shares of other Oppenheimer
      funds for shares of Oppenheimer Principal Protected Main Street Fund
      until after the expiration of the warranty period (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be
      exchanged at net asset value for shares of the same class of any of the
      other Oppenheimer funds into which you may exchange shares. However,
      shareholders are not permitted to exchange shares of other Oppenheimer
      funds for shares of Oppenheimer Principal Protected Main Street Fund II
      until after the expiration of the warranty period (3/3/2011).
o     Shares of Oppenheimer Principal Protected Main Street Fund III may be
      exchanged at net asset value for shares of the same class of any of the
      other Oppenheimer funds into which you may exchange shares. However,
      shareholders are not permitted to exchange shares of other Oppenheimer
      funds for shares of Oppenheimer Principal Protected Main Street Fund
      III until after the expiration of the warranty period (12/16/2011).
o     Class A, Class B, Class C and Class N shares of each of Oppenheimer
      Developing Markets Fund and Oppenheimer International Small Company
      Fund may be acquired by exchange only with a minimum initial investment
      of $50,000.  An existing shareholder of each fund may make additional
      exchanges into that fund with as little as $50.
      The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.

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

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

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

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

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

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

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

o     With respect to Class B shares of Oppenheimer 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 features that are available in the new fund (such as an
Asset Builder Plan or Automatic Withdrawal Plan) will be switched to the new
fund account unless you tell the Transfer Agent not to do so.

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. 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 SAI is based on tax law
in effect on the date of the Prospectus and this SAI. Those laws and
regulations may be changed by legislative, judicial, or administrative
action, sometimes with retroactive effect. State and local tax treatment of
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.

      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 capital gains over capital  losses) that it  distributed  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 distributions from earnings and profits to its shareholders would be
taxable as ordinary dividend income eligible for the maximum 15% tax rate for
non-corporate shareholders (for taxable years beginning prior to 2011) and
the dividends-received deduction for corporate shareholders.  However,
distributions of income derived from tax-exempt municipal securities would no
longer qualify for treatment as exempt-interest dividends.

            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.

            The Fund also 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, net income from qualified publicly-traded partnerships (i.e.,
publicly-traded partnerships that are treated as partnerships for tax
purposes and derive at least 90% of their income from certain passive
sources) 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 this 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 other issuers, the Fund
must not have invested more than 5% of the value of the Fund's total assets
in securities of such issuer and the Fund must not hold more than 10% of the
outstanding voting securities of such issuer.  No more than 25% of the value
of the Fund's 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), of two or more issuers (other than regulated
investment companies) that the Fund controls and that are engaged in the same
or similar trades or businesses, or of one or more qualified publicly-traded
partnerships.  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.

            Excise Tax on Regulated Investment Companies.  Under the Internal
Revenue Code, by December 31 each year, the Fund must distribute 98% of its
taxable net investment income earned from January 1 through December 31 of
that year and 98% of its capital gain net income 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 these requirements.  To meet
these requirements in certain circumstances the Fund might be required to
liquidate portfolio investment 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.  The distribution requirement applies to only taxable income of
the Fund, and therefore, may have little effect because it is anticipated
that most of the Fund's income will be tax-exempt.

            Taxation of Fund Distributions.  Distributions by the Fund will
be treated in the manner described below regardless of whether the
distributions are paid in cash or reinvested in additional shares of the Fund
(or of another fund).  The Fund's distributions will be treated as dividends
to the extent paid from the Fund's earnings and profits (as determined under
the Internal Revenue Code).  Distributions in excess of a Fund's earnings and
profits will first reduce the adjusted tax basis of a shareholder's shares
and, after such tax basis is reduced to zero, will constitute capital gain to
the shareholder (assuming the shares are held as a capital asset).  The
Fund's dividends will not be eligible for the dividends-received deduction
for corporations.  Shareholders reinvesting a distribution in shares of the
Fund or another fund 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.

            Exempt-Interest Dividends.  The Fund intends to satisfy the
requirements under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders.  To qualify, at the end of
each quarter of its taxable year, at least 50% of the value of the Fund's
total assets must consist of obligations described in Section 103(a) of the
Internal Revenue Code, as amended.  Dividends that are derived from net
interest income earned by the Fund on tax-exempt municipal securities and
designated as "exempt-interest dividends" in a written notice sent by the
Fund to its shareholders within 60 days after the close of the Fund's taxable
year 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 taxable year, such dividends would be included in the
gross income of shareholders for federal income tax purposes.

            The Fund will allocate interest from tax-exempt municipal
securities (as well as ordinary income, capital gains, and tax preference
items discussed below) among the shares according to a method that is based
on the gross income allocable to each class of shareholders during the
taxable year (or under another method, if prescribed by the IRS and SEC).
The percentage of each distribution with respect to a taxable year of the
Fund that is an exempt-interest dividend will be the same, even though that
percentage may differ substantially from the percentage of the Fund's income
that was tax-exempt during a particular portion of the year.  This percentage
normally will be designated after the close of the taxable year.

            Exempt-interest dividends are excludable from a shareholder's
gross income for federal income tax purposes.  Interest on indebtedness
incurred or continued to purchase or carry shares of a regulated investment
company paying exempt-interest dividends, such as the Fund, will not be
deductible by the investor for federal income tax purposes to the extent
attributable to exempt-interest dividends.   Shareholders receiving Social
Security or railroad retirement benefits should be aware that exempt-interest
dividends are a factor in determining whether, and to what extent, such
benefits are subject to federal income tax.

            A portion of the exempt-interest dividends paid by the Fund may
give rise to liability under the federal alternative minimum tax for
individual or corporate shareholders.  Income on certain private activity
bonds issued after August 7, 1986, while excludable from gross income for
purposes of the federal income tax, is an item of "tax preference" that must
be included in income for purposes of the federal alternative minimum tax for
individuals and corporations.  "Private activity bonds" are bonds that are
used for purposes not generally performed by governmental entities and that
benefit non-governmental entities.  The amount of any exempt-interest
dividends that is attributable to tax preference items for purposes of the
alternative minimum tax will be identified when tax information is
distributed by the Fund.

            In addition, corporate taxpayers are subject to the federal
alternative minimum tax based in part on certain differences between taxable
income as adjusted for other tax preferences and the corporation's "adjusted
current earnings," which more closely reflect a corporation's economic
income.  Because an exempt-interest dividend paid by the Fund will be
included in adjusted current earnings, a corporate shareholder may be
required to pay alternative minimum tax on exempt-interest dividends paid by
the Fund.

            Shareholders are advised to consult their tax advisers with
respect to their liability for federal alternative minimum tax, and for
advice concerning the loss of exclusion from gross income for exempt-interest
dividends paid to a shareholder who would be treated as a "substantial user"
or "related person" under Section 147(a) of the Internal Revenue Code with
respect to property financed with the proceeds of an issue of private
activity bonds held by the Fund.

            Ordinary Interest Dividends.  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 accrual on tax-exempt bonds.

      Certain dividend income and long-term capital gains are eligible for
taxation at a reduced rate that applies to non-corporate shareholders for
taxable years beginning prior to 2011.  Under these rules, a portion of
ordinary income dividends constituting "qualified dividend income," when paid
by a regulated investment company to non-corporate shareholders, may be
taxable to such shareholders at long-term capital gain rates.  However, to
the extent the Fund's distributions are derived from income on debt
securities, they will not be qualified dividend income.  Consequently, the
Fund's ordinary income dividends generally will not be eligible for taxation
at the reduced rate.

      State Tax Treatment. 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.

      Capital Gains.  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 properly designated as a capital gain dividend in reports
sent to shareholders in January of each year, it will be taxable to
shareholders as a long-term capital gain, regardless of how long a
shareholder has held his or her shares or whether that gain was recognized by
the Fund before the shareholder acquired his or her shares.  The tax rate on
long-term capital gain applicable to non-corporate shareholders has been
reduced for taxable years beginning prior to 2011.

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

      Backup withholding.  The Fund will be required in certain cases to
withhold 28% of ordinary income dividends, capital gain 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 properly the receipt of interest or dividend income, or
(3) who has failed to certify to the Fund that the shareholder is not subject
to backup withholding or is an "exempt recipient" (such as a corporation).
Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and
is identified in reports mailed to shareholders in January of each year with
a copy sent to the IRS.  Backup withholding is not an additional tax.  Any
amount withheld generally may be allowed as a refund or a credit against a
shareholder's federal income tax liability, provided the required information
is timely provided to the IRS.

      Tax Effects of Redemptions of Shares.  If a shareholder redeems all or
a portion of his or 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 (including tax basis arising from reinvestment of dividends).  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  (including purchases through the reinvestment of dividends).
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.  Losses realized by a shareholder 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.  If a shareholder of the Fund exercises an exchange privilege
within 90 days of acquiring the shares of the Fund, then the loss that the
shareholder recognizes on the exchange will be reduced (or the gain
increased) to the extent any sales charge paid on the exchanged Fund shares
reduces any charge the shareholder would have owed upon the purchase of the
new shares in the absence of the exchange privilege.  Instead, such sales
charge will be treated as an amount paid for the new 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.

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

      Ordinary income dividends that are paid by the Fund (and are deemed not
"effectively connected income") to foreign persons will be subject to a U.S.
tax withheld by the Fund at a rate of 30%, provided the Fund obtains a
properly completed and signed IRS Form W-8BEN or substitute form.  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. withholding tax described above
provided the Fund obtains a properly completed and signed IRS Form W-8ECI or
substitute form.  Exempt-interest dividends as well as ordinary income
dividends paid by the Fund would be included in the earnings and profits of a
foreign corporation for purposes of the branch profits tax on dividend
equivalent amounts.

      If a foreign person fails to provide a certification of foreign status,
the Fund will be required to withhold U.S. tax at a rate of 28% on ordinary
income dividends, capital gains distributions (including short-term and
long-term) and the proceeds of the redemption of shares under the backup
withholding provisions.  Any tax withheld (in this situation) by the Fund is
remitted by the Fund to the U.S. Treasury and all income and any tax withheld
is identified in reports mailed to shareholders in January of each year with
a copy sent to the IRS.

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

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


Additional Information About the Fund

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

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

The Custodian 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
--------------------------------------------------------------------------------

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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, 2006, and the related statements of operations and
cash flows 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.
 and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of July 31, 2006, by correspondence with the
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Pennsylvania Municipal Fund as of July 31, 2006, the results of its
operations and its cash flows 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.

      As discussed in Note 8 the Fund has restated its financial statements and
financial highlights as of and for the year ended July 31, 2006.

/s/ KPMG LLP
KPMG LLP

Denver, Colorado
September 14, 2006 (Except for Notes 3 and 8, for which the date is February 20,
2007)



STATEMENT OF INVESTMENTS  July 31, 2006
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

MUNICIPAL BONDS AND NOTES--116.1%
----------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA--78.5%
$       5,000   Abington School District                                             5.125%     05/15/2026   $         5,036
----------------------------------------------------------------------------------------------------------------------------
    7,375,000   Allegheny County Airport
                (Pittsburgh International Airport) 1                                 5.000      01/01/2019         7,513,208
----------------------------------------------------------------------------------------------------------------------------
       45,000   Allegheny County Airport
                (Pittsburgh International Airport)                                   5.250      01/01/2016            45,964
----------------------------------------------------------------------------------------------------------------------------
       10,000   Allegheny County COP                                                 5.000      12/01/2028            10,186
----------------------------------------------------------------------------------------------------------------------------
      130,000   Allegheny County HDA (Catholic Health East)                          5.375      11/15/2022           134,706
----------------------------------------------------------------------------------------------------------------------------
       40,000   Allegheny County HDA (Catholic Health East)                          5.500      11/15/2032            41,446
----------------------------------------------------------------------------------------------------------------------------
    3,150,000   Allegheny County HDA (Ohio Valley General Hospital)                  5.125      04/01/2035         3,165,971
----------------------------------------------------------------------------------------------------------------------------
       55,000   Allegheny County HDA (Pittsburgh Mercy Health System)                5.625      08/15/2026            58,205
----------------------------------------------------------------------------------------------------------------------------
      570,000   Allegheny County HDA (Presbyterian University Hospital)              5.625      04/01/2027           586,604
----------------------------------------------------------------------------------------------------------------------------
       25,000   Allegheny County HDA (The Covenant at South Hills) 2                 7.700      02/01/2008            12,405
----------------------------------------------------------------------------------------------------------------------------
       25,000   Allegheny County HDA (The Covenant at South Hills) 2                 7.800      02/01/2009            12,589
----------------------------------------------------------------------------------------------------------------------------
    1,535,000   Allegheny County HDA (The Covenant at South Hills) 2                 8.625      02/01/2021           765,934
----------------------------------------------------------------------------------------------------------------------------
      305,000   Allegheny County HDA (The Covenant at South Hills) 2                 8.750      02/01/2031           152,122
----------------------------------------------------------------------------------------------------------------------------
       10,000   Allegheny County HDA (UPMC Health System)                            5.000      12/15/2018            10,267
----------------------------------------------------------------------------------------------------------------------------
       20,000   Allegheny County HDA (UPMC Health System)                            5.000      11/01/2023            20,406
----------------------------------------------------------------------------------------------------------------------------
       20,000   Allegheny County HDA (UPMC Health System)                            5.125      07/01/2022            20,475
----------------------------------------------------------------------------------------------------------------------------
    3,570,000   Allegheny County HDA
                (West Penn Allegheny Health System)                                  9.250      11/15/2015         4,243,159
----------------------------------------------------------------------------------------------------------------------------
    1,650,000   Allegheny County HDA
                (West Penn Allegheny Health System)                                  9.250      11/15/2022         1,955,316
----------------------------------------------------------------------------------------------------------------------------
   12,705,000   Allegheny County HDA
                (West Penn Allegheny Health System)                                  9.250      11/15/2030        15,029,761
----------------------------------------------------------------------------------------------------------------------------
    9,000,000   Allegheny County HDA
                (West Penn Allegheny Health System) 3,5                              6.500      11/15/2030        10,016,685
----------------------------------------------------------------------------------------------------------------------------
      300,000   Allegheny County HEBA (Carnegie Mellon University)                   5.450      03/01/2027           300,303
----------------------------------------------------------------------------------------------------------------------------
    2,020,000   Allegheny County HEBA (Chatham College)                              5.750      11/15/2028         2,119,586
----------------------------------------------------------------------------------------------------------------------------
    7,980,000   Allegheny County HEBA (Chatham College)                              5.750      11/15/2035         8,329,524
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Allegheny County HEBA (Chatham College)                              5.850      03/01/2022         1,050,600
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Allegheny County HEBA (Chatham College)                              5.950      03/01/2032         1,044,500
----------------------------------------------------------------------------------------------------------------------------
       60,000   Allegheny County HEBA (Thiel College)                                5.375      11/15/2029            61,675
----------------------------------------------------------------------------------------------------------------------------
        5,000   Allegheny County IDA (Coltec Industries)                             7.250      06/01/2008             4,960
----------------------------------------------------------------------------------------------------------------------------
    1,145,000   Allegheny County IDA (Residential Resources)                         5.700      09/01/2012         1,205,330
----------------------------------------------------------------------------------------------------------------------------
    4,665,000   Allegheny County IDA (Residential Resources)                         6.600      09/01/2031         5,176,564
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Allegheny County IDA
                (RR/RRSW/RRDC Obligated Group) 4                                     5.000      09/01/2021         1,003,890








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$   1,250,000   Allegheny County IDA
                (RR/RRSW/RRDC Obligated Group) 4                                     5.100%     09/01/2026   $     1,249,950
----------------------------------------------------------------------------------------------------------------------------
    1,250,000   Allegheny County IDA
                (RR/RRSW/RRDC Obligated Group) 4                                     5.125      09/01/2031         1,246,788
----------------------------------------------------------------------------------------------------------------------------
       35,000   Allegheny County IDA (USX Corp.)                                     5.500      12/01/2029            35,988
----------------------------------------------------------------------------------------------------------------------------
      260,000   Allegheny County IDA (USX Corp.)                                     5.600      09/01/2030           269,139
----------------------------------------------------------------------------------------------------------------------------
      205,000   Allegheny County IDA (USX Corp.)                                     6.100      01/15/2018           210,533
----------------------------------------------------------------------------------------------------------------------------
       10,000   Allegheny County IDA (USX Corp.)                                     6.100      07/15/2020            10,290
----------------------------------------------------------------------------------------------------------------------------
    2,265,000   Allegheny County Redevel. Authority (Pittsburgh Mills)               5.100      07/01/2014         2,300,719
----------------------------------------------------------------------------------------------------------------------------
   11,500,000   Allegheny County Redevel. Authority (Pittsburgh Mills)               5.600      07/01/2023        11,956,320
----------------------------------------------------------------------------------------------------------------------------
      100,000   Allegheny County Redevel. Authority (Robinson Mall)                  6.875      11/01/2017           106,597
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Allegheny County Residential Finance Authority                       7.000      11/01/2017         8,565,520
----------------------------------------------------------------------------------------------------------------------------
    1,060,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      4.850      11/01/2028         1,050,661
----------------------------------------------------------------------------------------------------------------------------
    1,260,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      5.000      05/01/2035         1,260,391
----------------------------------------------------------------------------------------------------------------------------
      450,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      5.150      11/01/2016           458,663
----------------------------------------------------------------------------------------------------------------------------
       30,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      5.625      11/01/2023            30,017
----------------------------------------------------------------------------------------------------------------------------
       30,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      5.950      11/01/2024            31,216
----------------------------------------------------------------------------------------------------------------------------
       60,000   Allegheny County Residential Finance Authority
                (Single Family)                                                      7.100      05/01/2024            60,077
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Allegheny County Sanitation Authority 1                              5.000      12/01/2030         1,032,700
----------------------------------------------------------------------------------------------------------------------------
       10,000   Armstrong County IDA (Kittanning Care Center)                        5.375      08/20/2012            10,380
----------------------------------------------------------------------------------------------------------------------------
      375,000   Beaver County IDA (J. Ray McDermott & Company)                       6.800      02/01/2009           376,388
----------------------------------------------------------------------------------------------------------------------------
      150,000   Beaver County IDA (Pennsylvania Power & Light Company)               5.375      06/01/2028           155,072
----------------------------------------------------------------------------------------------------------------------------
       45,000   Beaver County IDA (St. Joe Minerals Corp.)                           6.000      05/01/2007            45,064
----------------------------------------------------------------------------------------------------------------------------
       35,000   Bedford County IDA (Brown Group)                                     7.125      02/01/2009            35,044
----------------------------------------------------------------------------------------------------------------------------
      300,000   Berks County Municipal Authority
                (RHMC/HW Obligated Group)                                            5.000      03/01/2028           303,573
----------------------------------------------------------------------------------------------------------------------------
      775,000   Blair County IDA (The Village at Penn State
                Retirement Community)                                                6.050      01/01/2034           772,396
----------------------------------------------------------------------------------------------------------------------------
       75,000   Blair County IDA (The Village at Penn State
                Retirement Community)                                                6.400      01/01/2012            76,643
----------------------------------------------------------------------------------------------------------------------------
    4,085,000   Blair County IDA (The Village at Penn State
                Retirement Community)                                                6.900      01/01/2022         4,257,305
----------------------------------------------------------------------------------------------------------------------------
    7,120,000   Blair County IDA (The Village at Penn State
                Retirement Community)                                                7.000      01/01/2034         7,403,732
----------------------------------------------------------------------------------------------------------------------------
       50,000   Blair County IDA (The Village at Penn State
                Retirement Community) 2                                             10.000      01/01/2012            26,863






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$   4,500,000   Bradford County IDA (International Paper Company)                    5.200%     12/01/2019   $     4,491,540
----------------------------------------------------------------------------------------------------------------------------
      500,000   Brighton Township Municipal Authority                                5.100      07/15/2022           503,695
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   Bucks County IDA (Ann's Choice)                                      6.125      01/01/2025         3,123,870
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   Bucks County IDA (Ann's Choice)                                      6.250      01/01/2035         3,137,220
----------------------------------------------------------------------------------------------------------------------------
       15,000   Bucks County IDA (Pennswood Village)                                 5.800      10/01/2020            15,695
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Bucks County IDA (Pennswood Village)                                 6.000      10/01/2027         1,054,910
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Bucks County IDA
                (Pennsylvania Suburban Water Company) 1,3,5                          5.550      09/01/2032         8,375,360
----------------------------------------------------------------------------------------------------------------------------
      240,000   Bucks County IDA (Pennsylvania Suburban
                Water Company)                                                       5.550      09/01/2032           251,261
----------------------------------------------------------------------------------------------------------------------------
       15,000   Bucks County IDA (USX Corp.)                                         5.600      03/01/2033            15,484
----------------------------------------------------------------------------------------------------------------------------
       10,000   Butler County Hospital Authority
                (Butler Memorial Hospital)                                           5.250      07/01/2012            10,010
----------------------------------------------------------------------------------------------------------------------------
       20,000   Butler County Hospital Authority
                (Butler Memorial Hospital)                                           5.250      07/01/2016            20,021
----------------------------------------------------------------------------------------------------------------------------
      480,000   Butler County IDA (Greenview Gardens Apartments)                     6.000      07/01/2023           500,659
----------------------------------------------------------------------------------------------------------------------------
      880,000   Butler County IDA (Greenview Gardens Apartments)                     6.250      07/01/2033           913,106
----------------------------------------------------------------------------------------------------------------------------
       65,000   Cambria County GO                                                    5.000      08/15/2023            66,542
----------------------------------------------------------------------------------------------------------------------------
      200,000   Cambridge Area Joint Authority                                       5.250      12/01/2021           202,372
----------------------------------------------------------------------------------------------------------------------------
    7,870,000   Chester County H&EFA (Chester County Hospital)                       5.875      07/01/2016         7,960,899
----------------------------------------------------------------------------------------------------------------------------
      700,000   Chester County H&EFA (Chester County Hospital)                       6.750      07/01/2031           760,977
----------------------------------------------------------------------------------------------------------------------------
    2,250,000   Chester County H&EFA (Devereaux Foundation)                          5.000      11/01/2031         2,279,565
----------------------------------------------------------------------------------------------------------------------------
       95,000   Chester County H&EFA (Devereaux Foundation)                          6.000      11/01/2019            99,925
----------------------------------------------------------------------------------------------------------------------------
       25,000   Chester County H&EFA (Immaculata College)                            5.300      10/15/2011            24,999
----------------------------------------------------------------------------------------------------------------------------
       30,000   Chester County H&EFA (Immaculata College)                            5.400      10/15/2012            30,001
----------------------------------------------------------------------------------------------------------------------------
       25,000   Chester County H&EFA (Immaculata College)                            5.625      10/15/2027            25,053
----------------------------------------------------------------------------------------------------------------------------
       70,000   Chester County H&EFA (Jefferson Health System)                       5.375      05/15/2027            71,823
----------------------------------------------------------------------------------------------------------------------------
    7,500,000   Chester County H&EFA (Jenners Pond)                                  7.625      07/01/2034         8,461,200
----------------------------------------------------------------------------------------------------------------------------
    2,040,000   Chester County IDA (Collegium Charter School)                        5.500      04/15/2031         2,116,724
----------------------------------------------------------------------------------------------------------------------------
    1,575,000   Chester County IDA (Renaissance Academy-Edison
                Charter School)                                                      5.250      10/01/2010         1,576,922
----------------------------------------------------------------------------------------------------------------------------
    1,870,000   Chester County IDA (Renaissance Academy-Edison
                Charter School)                                                      5.625      10/01/2015         1,874,993
----------------------------------------------------------------------------------------------------------------------------
      800,000   Crawford County Hospital Authority
                (Wesbury United Methodist Community)                                 6.125      08/15/2019           821,616
----------------------------------------------------------------------------------------------------------------------------
    2,100,000   Cumberland County Municipal Authority
                (Presbyterian Homes)                                                 5.000      12/01/2020         2,173,500
----------------------------------------------------------------------------------------------------------------------------
    1,050,000   Cumberland County Municipal Authority
                (Presbyterian Homes)                                                 5.000      12/01/2021         1,083,527
----------------------------------------------------------------------------------------------------------------------------
    1,685,000   Cumberland County Municipal Authority
                (Wesley Affiliated Services)                                         7.250      01/01/2035         1,831,393








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$     545,000   Delaware County Authority (CCMC)                                     5.300%     12/15/2020   $       548,532
----------------------------------------------------------------------------------------------------------------------------
      120,000   Delaware County Authority
                (MAS/MCMCSPA/MHH/MHP/MHSSPA Obligated Group)                         5.375      11/15/2023           124,212
----------------------------------------------------------------------------------------------------------------------------
    2,530,000   Delaware County Authority (Neumann College)                          6.000      10/01/2031         2,636,159
----------------------------------------------------------------------------------------------------------------------------
       15,000   Delaware County Hospital Authority
                (CCMC/CKHS/DCMH Obligated Group)                                     5.375      12/01/2018            15,342
----------------------------------------------------------------------------------------------------------------------------
       25,000   Delaware County Hospital Authority
                (CCMC/CKHS/DCMH Obligated Group)                                     6.250      12/15/2022            26,784
----------------------------------------------------------------------------------------------------------------------------
       25,000   Delaware County Hospital Authority
                (CCMC/CKHS/DCMH Obligated Group)                                     6.250      12/15/2031            26,649
----------------------------------------------------------------------------------------------------------------------------
      335,000   Delaware County Hospital Authority (DCMH)                            5.500      08/15/2019           338,735
----------------------------------------------------------------------------------------------------------------------------
       10,000   Delaware County IDA (American Ref-Fuel Company)                      6.100      07/01/2013            10,404
----------------------------------------------------------------------------------------------------------------------------
       25,000   Delaware County IDA (American Ref-Fuel Company)                      6.200      07/01/2019            25,643
----------------------------------------------------------------------------------------------------------------------------
       30,000   Delaware County IDA (Philadelphia Suburban Water)                    5.350      10/01/2031            31,175
----------------------------------------------------------------------------------------------------------------------------
    5,670,000   Delaware County IDA Water Facilities (Aqua Pennsylvania)             5.000      02/01/2035         5,770,189
----------------------------------------------------------------------------------------------------------------------------
    5,000,000   Delaware County IDA Water Facilities (Aqua Pennsylvania)             5.000      11/01/2036         5,094,950
----------------------------------------------------------------------------------------------------------------------------
       55,000   Delaware County IDA Water Facilities (Aqua Pennsylvania)             5.000      11/01/2037            56,003
----------------------------------------------------------------------------------------------------------------------------
   11,000,000   Delaware County IDA Water Facilities (Aqua Pennsylvania) 3,5         5.000      11/01/2037        11,200,695
----------------------------------------------------------------------------------------------------------------------------
      900,000   Delaware County IDA Water Facilities (Aqua Pennsylvania)             5.000      11/01/2038           916,281
----------------------------------------------------------------------------------------------------------------------------
   18,000,000   Delaware County IDA Water Facilities (Aqua Pennsylvania) 1,3,5       5.000      11/01/2038        18,325,710
----------------------------------------------------------------------------------------------------------------------------
       25,000   Delaware River Port Authority PA/NJ                                  5.000      01/01/2026            25,351
----------------------------------------------------------------------------------------------------------------------------
       50,000   Delaware River Port Authority PA/NJ                                  5.400      01/01/2014            51,038
----------------------------------------------------------------------------------------------------------------------------
      175,000   Delaware River Port Authority PA/NJ                                  5.400      01/01/2015           178,631
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Delaware River Port Authority PA/NJ                                  5.400      01/01/2016         2,042,060
----------------------------------------------------------------------------------------------------------------------------
    9,515,000   Delaware River Port Authority PA/NJ                                  5.500      01/01/2026         9,717,860
----------------------------------------------------------------------------------------------------------------------------
      250,000   Delaware River Port Authority PA/NJ                                  5.500      01/01/2026           254,830
----------------------------------------------------------------------------------------------------------------------------
      150,000   Doylestown Hospital Authority (Doylestown Hospital)                  5.000      07/01/2023           150,084
----------------------------------------------------------------------------------------------------------------------------
      255,000   Eastern York County Sewer Authority                                  6.000      09/15/2016           255,349
----------------------------------------------------------------------------------------------------------------------------
      270,000   Eastern York County Sewer Authority                                  6.000      09/15/2019           270,319
----------------------------------------------------------------------------------------------------------------------------
      170,000   Erie County Hospital Authority (St. Mary's Home of Erie)             6.000      08/15/2029           180,710
----------------------------------------------------------------------------------------------------------------------------
      140,000   Erie County IDA (International Paper Company)                        5.000      11/01/2018           138,600
----------------------------------------------------------------------------------------------------------------------------
    2,990,000   Erie-Western PA Port Authority                                       5.125      06/15/2016         3,046,690
----------------------------------------------------------------------------------------------------------------------------
       80,000   Falls Township Hospital Authority
                (Delaware Valley Medical Center)                                     7.000      08/01/2022            80,538
----------------------------------------------------------------------------------------------------------------------------
       40,000   Ferndale Area School District GO                                     6.750      07/15/2009            40,090
----------------------------------------------------------------------------------------------------------------------------
       50,000   Geisinger Authority Health System
                (Penn State Geisinger Health System Foundation)                      5.000      08/15/2028            50,499
----------------------------------------------------------------------------------------------------------------------------
       10,000   Gettysburg Municipal Authority (Gettysburg College)                  5.000      08/15/2023            10,237






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$   1,000,000   Horsham, PA Industrial & Commercial Devel. Authority
                (GF/Pennsylvania Property)                                           8.375%     09/01/2024   $     1,000,520
----------------------------------------------------------------------------------------------------------------------------
       65,000   Indiana County IDA Pollution Control (PSEG Power LLC)                5.850      06/01/2027            68,315
----------------------------------------------------------------------------------------------------------------------------
      250,000   Jeannette Health Services Authority
                (Jeannette District Memorial Hospital)                               6.000      11/01/2018           248,263
----------------------------------------------------------------------------------------------------------------------------
      100,000   Lancaster County Hospital Authority
                (Masonic Homes of PA)                                                5.300      11/15/2007           100,358
----------------------------------------------------------------------------------------------------------------------------
       25,000   Lancaster County Hospital Authority
                (Saint Anne's Home for the Aged)                                     6.500      04/01/2015            25,023
----------------------------------------------------------------------------------------------------------------------------
       40,000   Lancaster County IDA (Garden Spot Village)                           7.600      05/01/2022            45,497
----------------------------------------------------------------------------------------------------------------------------
    2,300,000   Lancaster County IDA (Garden Spot Village)                           7.625      05/01/2031         2,618,067
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Langhorne Manor Boro Higher Education Authority
                (Lower Bucks Hospital)                                               7.350      07/01/2022         1,000,110
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Langhorne Manor Boro Higher Education Authority
                (Philadelphia Biblical University)                                   5.200      04/01/2020           988,470
----------------------------------------------------------------------------------------------------------------------------
      575,000   Langhorne Manor Boro Higher Education Authority
                (Philadelphia Biblical University)                                   5.500      04/01/2025           575,150
----------------------------------------------------------------------------------------------------------------------------
       35,000   Latrobe IDA (St. Vincent College)                                    5.700      05/01/2031            36,384
----------------------------------------------------------------------------------------------------------------------------
       55,000   Lawrence County IDA
                (Pennsylvania Power & Light Company)                                 5.400      09/15/2017            55,110
----------------------------------------------------------------------------------------------------------------------------
      115,000   Lawrence County IDA (Shenango Presbyterian Center)                   7.000      11/15/2016           115,316
----------------------------------------------------------------------------------------------------------------------------
    5,190,000   Lawrence County IDA (Shenango Presbyterian Center)                   7.500      11/15/2031         5,565,964
----------------------------------------------------------------------------------------------------------------------------
    1,020,000   Lehigh County GPA (Bible Fellowship Church Home)                     6.000      12/15/2023         1,028,874
----------------------------------------------------------------------------------------------------------------------------
    1,060,000   Lehigh County GPA (Bible Fellowship Church Home)                     7.625      11/01/2021         1,169,095
----------------------------------------------------------------------------------------------------------------------------
      750,000   Lehigh County GPA (Bible Fellowship Church Home)                     7.750      11/01/2033           825,893
----------------------------------------------------------------------------------------------------------------------------
    1,485,000   Lehigh County GPA (Kidspeace Obligated Group)                        5.800      11/01/2012         1,455,939
----------------------------------------------------------------------------------------------------------------------------
    1,265,000   Lehigh County GPA (Kidspeace Obligated Group)                        5.800      11/01/2012         1,329,717
----------------------------------------------------------------------------------------------------------------------------
    8,190,000   Lehigh County GPA (Kidspeace Obligated Group)                        6.000      11/01/2018         7,995,078
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Lehigh County GPA (Kidspeace Obligated Group)                        6.000      11/01/2018         2,106,380
----------------------------------------------------------------------------------------------------------------------------
    1,100,000   Lehigh County GPA (Kidspeace Obligated Group)                        6.000      11/01/2023         1,056,528
----------------------------------------------------------------------------------------------------------------------------
    2,940,000   Lehigh County GPA (Kidspeace Obligated Group)                        6.000      11/01/2023         3,090,528
----------------------------------------------------------------------------------------------------------------------------
       55,000   Lehigh County GPA (Lehigh Valley Health Network)                     5.000      07/01/2028            55,739
----------------------------------------------------------------------------------------------------------------------------
       20,000   Lehigh County GPA (Lehigh Valley Hospital)                           5.625      07/01/2015            20,423
----------------------------------------------------------------------------------------------------------------------------
        5,000   Lehigh County GPA (St. Lukes Hospital Bethlehem)                     5.375      08/15/2033             5,161
----------------------------------------------------------------------------------------------------------------------------
      190,000   Lehigh County IDA (Lifepath)                                         5.850      06/01/2008           188,978
----------------------------------------------------------------------------------------------------------------------------
   23,340,000   Lehigh County IDA (Pollution Control Pennsylvania
                Power & Light Electric Utilities Corp.) 3,5                          4.750      02/15/2027        23,429,042
----------------------------------------------------------------------------------------------------------------------------
      650,000   Lehigh Northampton Airport Authority
                (Lehigh Valley International Airport)                                5.000      01/01/2021           667,264








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$     750,000   Lehigh Northampton Airport Authority
                (Lehigh Valley International Airport)                                5.000%     01/01/2023   $       767,295
----------------------------------------------------------------------------------------------------------------------------
       15,000   Lewistown Boro Municipal Water Authority                             5.250      01/01/2028            15,228
----------------------------------------------------------------------------------------------------------------------------
   12,640,000   Luzerne County IDA Water Facilities
                (American Water Company) 3,5                                         4.950      09/01/2034        12,903,734
----------------------------------------------------------------------------------------------------------------------------
       50,000   Lycoming County Hospital Authority
                (MVH/DPH Obligated Group)                                            5.250      11/15/2015            50,734
----------------------------------------------------------------------------------------------------------------------------
       10,000   Lycoming County Hospital Authority
                (MVH/DPH Obligated Group)                                            5.500      11/15/2022            10,185
----------------------------------------------------------------------------------------------------------------------------
       20,000   Lycoming County Hospital Authority
                (WH/NCPHS Obligated Group)                                           5.250      11/15/2015            20,293
----------------------------------------------------------------------------------------------------------------------------
       50,000   Lycoming County Hospital Authority
                (WH/NCPHS Obligated Group)                                           5.375      11/15/2010            50,866
----------------------------------------------------------------------------------------------------------------------------
      975,000   Lycoming County Recreation Authority 1                               5.000      12/15/2027           977,330
----------------------------------------------------------------------------------------------------------------------------
    2,730,000   McKean County Hospital Authority (Bradford Hospital)                 5.000      10/01/2020         2,774,990
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   McKean County Hospital Authority (Bradford Hospital)                 5.250      10/01/2030         3,073,230
----------------------------------------------------------------------------------------------------------------------------
      100,000   Mifflin County Hospital Authority (Lewiston Hospital)                6.200      07/01/2030           108,793
----------------------------------------------------------------------------------------------------------------------------
    8,740,000   Montgomery County HEHA (Arcadia University)                          5.000      04/01/2036         8,890,241
----------------------------------------------------------------------------------------------------------------------------
    5,750,000   Montgomery County HEHA (Dickinson College)                           5.000      05/01/2031         5,935,495
----------------------------------------------------------------------------------------------------------------------------
       35,000   Montgomery County HEHA
                (Holy Redeemer Health System)                                        5.250      10/01/2023            35,721
----------------------------------------------------------------------------------------------------------------------------
      260,000   Montgomery County IDA
                (ACTS Retirement Life Community)                                     5.250      11/15/2028           262,912
----------------------------------------------------------------------------------------------------------------------------
    1,445,000   Montgomery County IDA (ACTS/BPE Obligated Group)                     5.875      11/15/2022         1,478,249
----------------------------------------------------------------------------------------------------------------------------
    1,750,000   Montgomery County IDA (Meadowood Corp.)                              6.250      12/01/2017         1,806,595
----------------------------------------------------------------------------------------------------------------------------
       50,000   Montgomery County IDA
                (Pennsylvania-American Water Company)                                5.050      06/01/2029            50,325
----------------------------------------------------------------------------------------------------------------------------
    2,500,000   Montgomery County IDA (Whitemarsh Continued Care) 1                  6.250      02/01/2035         2,636,375
----------------------------------------------------------------------------------------------------------------------------
    3,840,000   Montgomery County IDA (Wordsworth Academy)                           8.000      09/01/2024         3,839,616
----------------------------------------------------------------------------------------------------------------------------
       15,000   Montgomery County Redevel. Authority (Pheasant Run)                  5.600      01/15/2024            15,052
----------------------------------------------------------------------------------------------------------------------------
      145,000   Montgomery County Redevel. Authority (Pheasant Run)                  5.600      01/15/2024           145,500
----------------------------------------------------------------------------------------------------------------------------
       50,000   Moon IDA (Ellis School)                                              5.650      03/01/2020            52,244
----------------------------------------------------------------------------------------------------------------------------
      600,000   Myerstown Water Authority                                            5.000      11/15/2018           600,540
----------------------------------------------------------------------------------------------------------------------------
      360,000   Myerstown Water Authority                                            5.100      11/15/2028           360,230
----------------------------------------------------------------------------------------------------------------------------
    2,905,000   New Morgan IDA (Browning-Ferris Industries)                          6.500      04/01/2019         2,883,416
----------------------------------------------------------------------------------------------------------------------------
       40,000   New Wilmington Municipal Authority
                (Westminster College)                                                5.300      03/01/2018            40,399
----------------------------------------------------------------------------------------------------------------------------
       55,000   New Wilmington Municipal Authority
                (Westminster College)                                                5.350      03/01/2028            55,258
----------------------------------------------------------------------------------------------------------------------------
      100,000   Northampton County Higher Education Authority
                (Lafayette College)                                                  5.000      11/01/2027           100,943
----------------------------------------------------------------------------------------------------------------------------
      170,000   Northampton County IDA (Moravian Hall Square)                        5.350      07/01/2010           170,177






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$      40,000   Northampton County IDA (Moravian Hall Square)                        5.700%     07/01/2020   $        40,051
----------------------------------------------------------------------------------------------------------------------------
      470,000   Northeastern PA Hospital & Education Authority
                (Wilkes University)                                                  5.625      10/01/2018           471,081
----------------------------------------------------------------------------------------------------------------------------
       20,000   Northeastern PA Hospital & Education Authority
                (Wilkes University)                                                  5.625      10/01/2018            20,056
----------------------------------------------------------------------------------------------------------------------------
      100,000   Northeastern PA Hospital & Education Authority (WVHCS)               5.250      01/01/2026           102,247
----------------------------------------------------------------------------------------------------------------------------
      830,000   Northumberland County IDA (Aqua Pennsylvania)                        5.050      10/01/2039           845,455
----------------------------------------------------------------------------------------------------------------------------
      665,000   Northumberland County IDA (NHS Youth Services)                       5.500      02/15/2033           690,436
----------------------------------------------------------------------------------------------------------------------------
    1,845,000   Northumberland County IDA (NHS Youth Services)                       7.500      02/15/2029         1,903,099
----------------------------------------------------------------------------------------------------------------------------
    3,905,000   Northumberland County IDA (NHS Youth Services) 1                     7.750      02/15/2029         4,077,952
----------------------------------------------------------------------------------------------------------------------------
   10,000,000   PA EDFA (30th Street Garage) 1                                       5.875      06/01/2033        10,664,000
----------------------------------------------------------------------------------------------------------------------------
       50,000   PA EDFA (Amtrak)                                                     6.000      11/01/2011            52,527
----------------------------------------------------------------------------------------------------------------------------
      250,000   PA EDFA (Amtrak)                                                     6.125      11/01/2021           266,608
----------------------------------------------------------------------------------------------------------------------------
    5,005,000   PA EDFA (Amtrak)                                                     6.250      11/01/2031         5,339,584
----------------------------------------------------------------------------------------------------------------------------
      930,000   PA EDFA (Amtrak)                                                     6.375      11/01/2041           996,439
----------------------------------------------------------------------------------------------------------------------------
   10,000,000   PA EDFA (Clover) 3,5                                                 4.625      12/01/2018        10,050,700
----------------------------------------------------------------------------------------------------------------------------
   14,700,000   PA EDFA (National Gypsum Company) 1                                  6.125      11/02/2027        15,372,525
----------------------------------------------------------------------------------------------------------------------------
    5,000,000   PA EDFA (National Gypsum Company) 1                                  6.250      11/01/2027         5,266,500
----------------------------------------------------------------------------------------------------------------------------
    7,000,000   PA EDFA (Northampton Generating) 1                                   6.400      01/01/2009         6,999,090
----------------------------------------------------------------------------------------------------------------------------
    4,965,000   PA EDFA (Northampton Generating)                                     6.500      01/01/2013         4,964,404
----------------------------------------------------------------------------------------------------------------------------
    6,000,000   PA EDFA (Northampton Generating)                                     6.600      01/01/2019         6,063,480
----------------------------------------------------------------------------------------------------------------------------
    1,400,000   PA EDFA (Northampton Generating)                                     6.875      01/01/2011         1,398,684
----------------------------------------------------------------------------------------------------------------------------
   12,000,000   PA EDFA (Northampton Generating)                                     6.950      01/01/2021        11,991,480
----------------------------------------------------------------------------------------------------------------------------
    4,310,000   PA EDFA (Northwestern Human Services)                                5.250      06/01/2014         4,266,124
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   PA EDFA (Northwestern Human Services)                                5.250      06/01/2028         2,828,760
----------------------------------------------------------------------------------------------------------------------------
   12,500,000   PA EDFA (Reliant Energy)                                             6.750      12/01/2036        13,408,875
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   PA EDFA (Reliant Energy)                                             6.750      12/01/2036         8,581,680
----------------------------------------------------------------------------------------------------------------------------
   10,000,000   PA EDFA (Reliant Energy) 3,5                                         6.750      12/01/2036        10,727,050
----------------------------------------------------------------------------------------------------------------------------
   40,155,000   PA EDFA (USG Corp.)                                                  6.000      06/01/2031        41,813,402
----------------------------------------------------------------------------------------------------------------------------
    4,500,000   PA EDFA (Waste Management)                                           5.100      10/01/2027         4,553,235
----------------------------------------------------------------------------------------------------------------------------
       95,000   PA HEFA (Allegheny Delaware Valley Obligated Group)                  5.875      11/15/2021            97,420
----------------------------------------------------------------------------------------------------------------------------
      115,000   PA HEFA (Allegheny General Hospital)                                 7.125      09/01/2007           115,161
----------------------------------------------------------------------------------------------------------------------------
       55,000   PA HEFA (Allegheny General Hospital)                                 7.250      09/01/2017            55,083
----------------------------------------------------------------------------------------------------------------------------
    1,830,000   PA HEFA (Assoc. Independent Colleges & Universities)                 5.000      12/15/2021         1,891,140
----------------------------------------------------------------------------------------------------------------------------
    3,070,000   PA HEFA (Assoc. Independent Colleges & Universities)                 5.000      12/15/2024         3,155,346
----------------------------------------------------------------------------------------------------------------------------
    4,000,000   PA HEFA (Assoc. Independent Colleges & Universities)                 5.000      12/15/2027         4,088,920
----------------------------------------------------------------------------------------------------------------------------
      230,000   PA HEFA (Bryn Mawr College)                                          5.625      12/01/2027           237,489
----------------------------------------------------------------------------------------------------------------------------
      100,000   PA HEFA (CA University of PA Student Assoc.)                         5.000      07/01/2028           101,267
----------------------------------------------------------------------------------------------------------------------------
    1,500,000   PA HEFA (CA University of PA Student Assoc.)                         6.750      09/01/2020         1,626,990
----------------------------------------------------------------------------------------------------------------------------
      110,000   PA HEFA (CA University of PA Student Assoc.)                         6.750      09/01/2032           118,168








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$      50,000   PA HEFA (CA University of PA Student Assoc.)                         6.800%     09/01/2025   $        53,996
----------------------------------------------------------------------------------------------------------------------------
    1,475,000   PA HEFA (College of Science & Agriculture)                           5.350      04/15/2028         1,483,349
----------------------------------------------------------------------------------------------------------------------------
    1,460,000   PA HEFA (Delaware Valley College of Science & Agriculture)           5.650      04/15/2025         1,520,429
----------------------------------------------------------------------------------------------------------------------------
      815,000   PA HEFA (Delaware Valley College of Science & Agriculture)           5.750      04/15/2029           848,146
----------------------------------------------------------------------------------------------------------------------------
      220,000   PA HEFA (Delaware Valley College of Science & Agriculture)           5.750      04/15/2034           228,202
----------------------------------------------------------------------------------------------------------------------------
    3,210,000   PA HEFA (Delaware Valley College of Science & Agriculture)           5.800      04/15/2030         3,350,373
----------------------------------------------------------------------------------------------------------------------------
    3,385,000   PA HEFA (Delaware Valley College of Science & Agriculture)           5.800      04/15/2033         3,517,726
----------------------------------------------------------------------------------------------------------------------------
    1,820,000   PA HEFA (Geneva College)                                             5.375      04/01/2023         1,858,657
----------------------------------------------------------------------------------------------------------------------------
      860,000   PA HEFA (Geneva College)                                             5.450      04/01/2018           883,039
----------------------------------------------------------------------------------------------------------------------------
    1,035,000   PA HEFA (Geneva College)                                             6.125      04/01/2022         1,103,051
----------------------------------------------------------------------------------------------------------------------------
       50,000   PA HEFA (La Salle University)                                        5.500      05/01/2034            51,494
----------------------------------------------------------------------------------------------------------------------------
      735,000   PA HEFA (Lycoming College)                                           5.250      11/01/2027           766,671
----------------------------------------------------------------------------------------------------------------------------
    1,490,000   PA HEFA (Marywood University)                                        5.125      06/01/2029         1,533,329
----------------------------------------------------------------------------------------------------------------------------
        5,000   PA HEFA (MCP/HUHS/AUS Obligated Group)                               5.875      11/15/2016             5,127
----------------------------------------------------------------------------------------------------------------------------
       50,000   PA HEFA (MCP/HUHS/AUS Obligated Group)                               5.875      11/15/2016            51,289
----------------------------------------------------------------------------------------------------------------------------
    3,040,000   PA HEFA (MCP/HUHS/AUS Obligated Group)                               5.875      11/15/2021         3,118,341
----------------------------------------------------------------------------------------------------------------------------
      250,000   PA HEFA (Philadelphia University)                                    5.000      06/01/2035           248,848
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   PA HEFA (Philadelphia University)                                    5.125      06/01/2025         3,032,580
----------------------------------------------------------------------------------------------------------------------------
    2,200,000   PA HEFA (Philadelphia University)                                    5.250      06/01/2032         2,227,302
----------------------------------------------------------------------------------------------------------------------------
      250,000   PA HEFA (Philadelphia University)                                    6.000      06/01/2029           266,083
----------------------------------------------------------------------------------------------------------------------------
       35,000   PA HEFA (Philadelphia University)                                    6.100      06/01/2030            37,344
----------------------------------------------------------------------------------------------------------------------------
      100,000   PA HEFA (St. Francis University)                                     5.750      11/01/2023           105,532
----------------------------------------------------------------------------------------------------------------------------
    3,925,000   PA HEFA (St. Francis University)                                     6.250      11/01/2018         4,265,926
----------------------------------------------------------------------------------------------------------------------------
       50,000   PA HEFA (St. Joseph University)                                      5.875      07/15/2015            50,542
----------------------------------------------------------------------------------------------------------------------------
      830,000   PA HEFA (St. Joseph University)                                      5.875      07/15/2025           838,989
----------------------------------------------------------------------------------------------------------------------------
      575,000   PA HEFA (St. Joseph University)                                      5.875      07/15/2025           581,227
----------------------------------------------------------------------------------------------------------------------------
    1,215,000   PA HEFA (University of the Arts)                                     5.000      09/15/2033         1,237,648
----------------------------------------------------------------------------------------------------------------------------
       25,000   PA HEFA (University of the Arts)                                     5.750      03/15/2030            26,258
----------------------------------------------------------------------------------------------------------------------------
       20,000   PA HEFA (UPMC Health System)                                         5.000      08/01/2029            20,430
----------------------------------------------------------------------------------------------------------------------------
       30,000   PA HEFA (UPMC Health System)                                         6.000      01/15/2031            32,492
----------------------------------------------------------------------------------------------------------------------------
    1,650,000   PA HEFA (Ursinus College)                                            5.000      01/01/2036         1,677,819
----------------------------------------------------------------------------------------------------------------------------
      750,000   PA HEFA (Widener University)                                         5.000      07/15/2026           760,523
----------------------------------------------------------------------------------------------------------------------------
       45,000   PA HFA (Multifamily FHA Mtg.)                                        8.200      07/01/2024            46,657
----------------------------------------------------------------------------------------------------------------------------
      105,000   PA HFA (Single Family Mtg.)                                          5.450      10/01/2032           107,355
----------------------------------------------------------------------------------------------------------------------------
   10,000,000   PA HFA (Single Family Mtg.) Series B 3,5                             5.100      10/01/2020        10,193,650
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   PA HFA (Single Family Mtg.) Series 72A 3,5                           5.250      04/01/2021         8,162,680
----------------------------------------------------------------------------------------------------------------------------
   11,400,000   PA HFA (Single Family Mtg.) Series 73A 3,5                           5.350      10/01/2022        11,692,068
----------------------------------------------------------------------------------------------------------------------------
   10,000,000   PA HFA (Single Family Mtg.) Series 74B 3,5                           5.150      10/01/2022        10,185,600
----------------------------------------------------------------------------------------------------------------------------
    9,180,000   PA HFA (Single Family Mtg.), Series 61A 1                            5.450      10/01/2021         9,300,533
----------------------------------------------------------------------------------------------------------------------------
    4,235,000   PA HFA (Single Family Mtg.), Series 61A                              5.500      04/01/2029         4,305,047






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$     100,000   PA HFA (Single Family Mtg.), Series 61A                              5.500%     04/01/2029   $       101,654
----------------------------------------------------------------------------------------------------------------------------
      195,000   PA HFA (Single Family Mtg.), Series 63A                              5.430 6    04/01/2030            53,071
----------------------------------------------------------------------------------------------------------------------------
        5,000   PA HFA (Single Family Mtg.), Series 66A                              5.650      04/01/2029             5,075
----------------------------------------------------------------------------------------------------------------------------
    4,740,000   PA HFA (Single Family Mtg.), Series 70A                              5.800      04/01/2027         4,884,428
----------------------------------------------------------------------------------------------------------------------------
    3,145,000   PA HFA (Single Family Mtg.), Series 74B 1                            5.250      04/01/2032         3,193,244
----------------------------------------------------------------------------------------------------------------------------
    2,365,000   PA Infrastructure Investment Authority 1                             5.625      09/01/2014         2,415,516
----------------------------------------------------------------------------------------------------------------------------
       40,000   PA Intergovernmental Cooperative Authority                           5.000      06/15/2021            40,899
----------------------------------------------------------------------------------------------------------------------------
       30,000   PA State University, Series A                                        5.000      08/15/2027            30,498
----------------------------------------------------------------------------------------------------------------------------
       20,000   Patterson Township Municipal Authority                               5.250      04/15/2007            20,019
----------------------------------------------------------------------------------------------------------------------------
       10,000   Patterson Township Municipal Authority                               5.500      04/15/2011            10,009
----------------------------------------------------------------------------------------------------------------------------
      220,000   Philadelphia Airport                                                 5.375      06/15/2015           228,241
----------------------------------------------------------------------------------------------------------------------------
    1,310,000   Philadelphia Airport, Series A                                       5.000      06/15/2023         1,349,195
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Philadelphia Airport, Series A 1                                     5.000      06/15/2024         2,056,900
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Philadelphia Airport, Series A                                       5.000      06/15/2025         2,052,500
----------------------------------------------------------------------------------------------------------------------------
       15,000   Philadelphia Airport, Series B                                       5.250      06/15/2031            15,422
----------------------------------------------------------------------------------------------------------------------------
       15,000   Philadelphia Airport, Series B                                       5.250      06/15/2012            15,418
----------------------------------------------------------------------------------------------------------------------------
       85,000   Philadelphia Airport, Series B                                       5.400      06/15/2027            86,822
----------------------------------------------------------------------------------------------------------------------------
    6,720,000   Philadelphia Authority for Industrial Devel.
                (Aero Philadelphia) 1                                                5.500      01/01/2024         6,750,845
----------------------------------------------------------------------------------------------------------------------------
    3,870,000   Philadelphia Authority for Industrial Devel. (Air Cargo)             7.500      01/01/2025         4,229,407
----------------------------------------------------------------------------------------------------------------------------
       25,000   Philadelphia Authority for Industrial Devel.
                (American College of Physicians)                                     6.000      06/15/2030            26,546
----------------------------------------------------------------------------------------------------------------------------
    1,150,000   Philadelphia Authority for Industrial Devel.
                (Baptist Home of Philadelphia)                                       5.500      11/15/2018         1,101,367
----------------------------------------------------------------------------------------------------------------------------
      776,000   Philadelphia Authority for Industrial Devel.
                (Baptist Home of Philadelphia)                                       5.600      11/15/2028           727,275
----------------------------------------------------------------------------------------------------------------------------
      450,000   Philadelphia Authority for Industrial Devel.
                (Cathedral Village)                                                  6.750      04/01/2023           493,704
----------------------------------------------------------------------------------------------------------------------------
    1,100,000   Philadelphia Authority for Industrial Devel.
                (Cathedral Village)                                                  6.875      04/01/2034         1,208,053
----------------------------------------------------------------------------------------------------------------------------
    2,565,000   Philadelphia Authority for Industrial Devel.
                (City of Philadelphia) 1                                             5.375      02/15/2027         2,632,254
----------------------------------------------------------------------------------------------------------------------------
    2,750,000   Philadelphia Authority for Industrial Devel.
                (First Mtg.-CPAP)                                                    6.125      04/01/2019         2,080,925
----------------------------------------------------------------------------------------------------------------------------
    1,330,000   Philadelphia Authority for Industrial Devel.
                (International Educational & Community Project)                      5.875      06/01/2022         1,413,724
----------------------------------------------------------------------------------------------------------------------------
       35,000   Philadelphia Authority for Industrial Devel.
                (PGH Devel. Corp.)                                                   5.250      07/01/2017            35,037
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport) 3,5                                           5.400      07/01/2022         8,416,240
----------------------------------------------------------------------------------------------------------------------------
       35,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                               5.250      07/01/2028            35,965








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$      25,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                               5.000%     07/01/2019   $        25,448
----------------------------------------------------------------------------------------------------------------------------
      365,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                               5.000      07/01/2023           369,577
----------------------------------------------------------------------------------------------------------------------------
    1,065,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                               5.125      07/01/2028         1,081,124
----------------------------------------------------------------------------------------------------------------------------
      400,000   Philadelphia Authority for Industrial Devel.
                (Philadelphia Airport)                                               5.300      07/01/2017           410,604
----------------------------------------------------------------------------------------------------------------------------
    1,640,000   Philadelphia Authority for Industrial Devel.
                (Richard Allen Prep Charter School)                                  6.250      05/01/2033         1,628,208
----------------------------------------------------------------------------------------------------------------------------
    1,370,000   Philadelphia Authority for Industrial Devel.
                (Stapeley Germantown)                                                5.000      01/01/2015         1,357,889
----------------------------------------------------------------------------------------------------------------------------
    1,580,000   Philadelphia Authority for Industrial Devel.
                (Stapeley Germantown)                                                5.125      01/01/2021         1,540,484
----------------------------------------------------------------------------------------------------------------------------
       25,000   Philadelphia Authority for Industrial Devel.
                (The Franklin Institute)                                             5.200      06/15/2018            25,571
----------------------------------------------------------------------------------------------------------------------------
   13,700,000   Philadelphia Authority for Industrial Devel. Series B 1,3,5          5.125      10/01/2026        14,224,505
----------------------------------------------------------------------------------------------------------------------------
    1,400,000   Philadelphia Authority for Industrial Devel. Senior Living
                (Arbor House)                                                        6.100      07/01/2033         1,451,814
----------------------------------------------------------------------------------------------------------------------------
    1,240,000   Philadelphia Authority for Industrial Devel. Senior Living
                (Miriam and Robert M. Rieder House)                                  6.100      07/01/2033         1,285,892
----------------------------------------------------------------------------------------------------------------------------
    3,000,000   Philadelphia Authority for Industrial Devel. Senior Living
                (Presbyterian Homes Germantown)                                      5.625      07/01/2035         3,003,330
----------------------------------------------------------------------------------------------------------------------------
    1,160,000   Philadelphia Authority for Industrial Devel. Senior Living
                (Robert Saligman House)                                              6.100      07/01/2033         1,202,932
----------------------------------------------------------------------------------------------------------------------------
      105,000   Philadelphia Gas Works                                               5.250      08/01/2024           105,102
----------------------------------------------------------------------------------------------------------------------------
    7,125,000   Philadelphia Gas Works 3,5                                           5.125      08/01/2031         7,554,906
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Philadelphia Gas Works 3,5                                           5.250      08/01/2021         8,528,240
----------------------------------------------------------------------------------------------------------------------------
    8,025,000   Philadelphia GO                                                      5.000      05/15/2020         8,152,598
----------------------------------------------------------------------------------------------------------------------------
      180,000   Philadelphia GO                                                      5.000      05/15/2025           181,719
----------------------------------------------------------------------------------------------------------------------------
      300,000   Philadelphia GO                                                      5.000      03/15/2028           305,868
----------------------------------------------------------------------------------------------------------------------------
    1,210,000   Philadelphia H&HEFA
                (Centralized Comprehensive Human Services)                           7.250      01/01/2021         1,272,666
----------------------------------------------------------------------------------------------------------------------------
      240,000   Philadelphia H&HEFA (Frankford Hospital)                             5.750      01/01/2019           242,618
----------------------------------------------------------------------------------------------------------------------------
    1,475,000   Philadelphia H&HEFA (Jeanes Health System)                           6.600      07/01/2010         1,568,913
----------------------------------------------------------------------------------------------------------------------------
       80,000   Philadelphia H&HEFA (Jefferson Health System)                        5.000      05/15/2018            81,898
----------------------------------------------------------------------------------------------------------------------------
    2,380,000   Philadelphia H&HEFA (Philadelphia Protestant Home)                   6.500      07/01/2027         2,393,661
----------------------------------------------------------------------------------------------------------------------------
       15,000   Philadelphia H&HEFA
                (Temple University Children's Medical Center)                        5.750      06/15/2029            15,497
----------------------------------------------------------------------------------------------------------------------------
       10,000   Philadelphia H&HEFA (Temple University Hospital)                     5.500      11/15/2027            10,258
----------------------------------------------------------------------------------------------------------------------------
      205,000   Philadelphia H&HEFA (Temple University Hospital)                     5.500      11/15/2027           207,019
----------------------------------------------------------------------------------------------------------------------------
       35,000   Philadelphia H&HEFA (Temple University Hospital)                     5.875      11/15/2023            35,736






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$      20,000   Philadelphia H&HEFA (Temple University Hospital)                     6.500%     11/15/2008   $        20,571
----------------------------------------------------------------------------------------------------------------------------
       35,000   Philadelphia IDA Authority for Industrial Devel.
                (Cathedral Village in Philadelphia)                                  5.700      04/01/2015            35,359
----------------------------------------------------------------------------------------------------------------------------
        5,000   Philadelphia New Public Housing Authority                            5.000      04/01/2012             5,202
----------------------------------------------------------------------------------------------------------------------------
       50,000   Philadelphia Parking Authority                                       5.000      02/01/2027            51,019
----------------------------------------------------------------------------------------------------------------------------
       20,000   Philadelphia Parking Authority, Series A                             5.250      02/15/2029            20,611
----------------------------------------------------------------------------------------------------------------------------
      190,000   Philadelphia Redevel. Authority (Multifamily Hsg.)                   5.450      02/01/2023           192,687
----------------------------------------------------------------------------------------------------------------------------
    2,580,000   Philadelphia Redevel. Authority (Pavilion Apartments)                6.000      10/01/2023         2,657,632
----------------------------------------------------------------------------------------------------------------------------
    4,100,000   Philadelphia Redevel. Authority (Pavilion Apartments) 1              6.250      10/01/2032         4,205,329
----------------------------------------------------------------------------------------------------------------------------
    9,000,000   Philadelphia Redevel. Authority
                (Neighborhood Transformation) 1,3,5                                  5.000      04/15/2028         9,284,580
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Philadelphia School District 3,5                                     5.625      08/01/2022         8,765,520
----------------------------------------------------------------------------------------------------------------------------
       55,000   Philadelphia Water & Wastewater, Series A                            5.125      08/01/2027            56,327
----------------------------------------------------------------------------------------------------------------------------
   16,645,000   Philadelphia, PA H&HEFA (Temple University Hospital)                 6.625      11/15/2023        16,866,545
----------------------------------------------------------------------------------------------------------------------------
       45,000   Pine-Richland School District                                        5.625      09/01/2018            45,064
----------------------------------------------------------------------------------------------------------------------------
       10,000   Pittsburgh & Allegheny County
                Public Auditorium Authority                                          5.000      02/01/2024            10,306
----------------------------------------------------------------------------------------------------------------------------
       50,000   Pittsburgh & Allegheny County
                Public Auditorium Authority                                          5.000      02/01/2029            50,979
----------------------------------------------------------------------------------------------------------------------------
       40,000   Pittsburgh & Allegheny County
                Public Auditorium Authority                                          5.250      02/01/2031            41,514
----------------------------------------------------------------------------------------------------------------------------
       60,000   Pittsburgh Urban Redevel. Authority                                  5.600      04/01/2020            60,963
----------------------------------------------------------------------------------------------------------------------------
       20,000   Pittsburgh Urban Redevel. Authority
                (Home Improvement Loans), Series A                                   5.650      08/01/2015            20,004
----------------------------------------------------------------------------------------------------------------------------
       20,000   Pittsburgh Urban Redevel. Authority (Oliver Garage)                  5.450      06/01/2028            20,650
----------------------------------------------------------------------------------------------------------------------------
       20,000   Pittsburgh Urban Redevel. Authority Mtg., Series A                   7.250      02/01/2024            20,022
----------------------------------------------------------------------------------------------------------------------------
       10,000   Pittsburgh Urban Redevel. Authority Mtg., Series C                   5.700      04/01/2030            10,149
----------------------------------------------------------------------------------------------------------------------------
      605,000   Pittsburgh Urban Redevel. Authority Mtg., Series C                   5.950      10/01/2029           619,974
----------------------------------------------------------------------------------------------------------------------------
       10,000   Pittsburgh Urban Redevel. Authority Mtg., Series C                   7.125      08/01/2013            10,010
----------------------------------------------------------------------------------------------------------------------------
       10,000   Pittsburgh Water & Sewer Authority, Series A                         5.050      09/01/2025            10,106
----------------------------------------------------------------------------------------------------------------------------
      120,000   Potter County Hospital Authority
                (Charles Cole Memorial Hospital)                                     6.050      08/01/2024           122,586
----------------------------------------------------------------------------------------------------------------------------
      220,000   Pottstown Boro Authority                                             5.500      11/01/2021           220,843
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Pottsville Hospital Authority
                (Pottsville Hospital & Warne Clinic)                                 5.500      07/01/2018         1,000,130
----------------------------------------------------------------------------------------------------------------------------
    4,170,000   Pottsville Hospital Authority
                (Pottsville Hospital & Warne Clinic)                                 5.625      07/01/2024         4,144,188
----------------------------------------------------------------------------------------------------------------------------
       25,000   Pottsville Hospital Authority
                (Pottsville Hospital & Warne Clinic)                                 5.625      07/01/2024            25,311
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Saxonburg Area Authority (Sewer & Water)                             5.000      03/01/2030         1,033,420
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Sayre Health Care Facilities (Guthrie Healthcare System)             7.125      12/01/2031         2,360,140








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$      10,000   Schuylkill County IDA
                (DOCNHS/BSVHS/WMHS Obligated Group)                                  5.000%     11/01/2028   $        10,129
----------------------------------------------------------------------------------------------------------------------------
      145,000   Scranton School District                                             5.000      04/01/2022           150,110
----------------------------------------------------------------------------------------------------------------------------
        5,000   Sharon Regional Health System Authority
                (SRPS/SRHS Obligated Group)                                          5.000      12/01/2028             5,074
----------------------------------------------------------------------------------------------------------------------------
       30,000   Somerset County Hospital Authority
                (Somerset Community Hospital)                                        5.375      03/01/2017            30,729
----------------------------------------------------------------------------------------------------------------------------
      450,000   South Fork Municipal Authority
                (Conemaugh Valley Memorial Hospital)                                 5.000      07/01/2028           456,044
----------------------------------------------------------------------------------------------------------------------------
      305,000   South Fork Municipal Authority
                (Good Samaritan Medial Center of Johnstown)                          5.250      07/01/2026           310,658
----------------------------------------------------------------------------------------------------------------------------
       25,000   South Fork Municipal Authority
                (Good Samaritan Medial Center of Johnstown)                          5.375      07/01/2016            25,528
----------------------------------------------------------------------------------------------------------------------------
    1,400,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2023         1,436,141
----------------------------------------------------------------------------------------------------------------------------
    2,245,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2025         2,293,036
----------------------------------------------------------------------------------------------------------------------------
    3,265,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2026         3,329,764
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2027         2,042,510
----------------------------------------------------------------------------------------------------------------------------
    2,510,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2028         2,561,647
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Southcentral General Authority (Hanover Hospital) 3,4,5              5.000      12/01/2030         1,018,985
----------------------------------------------------------------------------------------------------------------------------
    5,280,000   Southeastern PA Transportation Authority                             5.375      03/01/2022         5,425,675
----------------------------------------------------------------------------------------------------------------------------
    3,250,000   St. Mary Hospital Authority (Catholic Health East)                   5.375      11/15/2034         3,382,633
----------------------------------------------------------------------------------------------------------------------------
       95,000   St. Mary Hospital Authority (Catholic Health Initiatives)            5.000      12/01/2028            97,067
----------------------------------------------------------------------------------------------------------------------------
       50,000   St. Mary Hospital Authority (Franciscan Health)                      7.000      06/15/2015            50,431
----------------------------------------------------------------------------------------------------------------------------
        5,000   State Public School Building Authority
                (Chester Upland School District)                                     5.150      11/15/2026             5,172
----------------------------------------------------------------------------------------------------------------------------
    2,060,000   State Public School Building Authority
                (Haverford Township School District)                                 5.000      03/15/2029         2,132,285
----------------------------------------------------------------------------------------------------------------------------
       35,000   State Public School Building Authority
                (Lehigh Carbon Community College)                                    5.000      11/01/2017            35,422
----------------------------------------------------------------------------------------------------------------------------
    1,000,000   Susquehanna Area Regional Airport Authority
                (Aero Harrisburg)                                                    5.500      01/01/2024           957,720
----------------------------------------------------------------------------------------------------------------------------
       10,000   Venango IDA (Boise Cascade Corp.)                                    5.900      09/01/2007            10,005
----------------------------------------------------------------------------------------------------------------------------
    5,450,000   Washington County Authority
                (Capital Projects & Equipment Program)                               6.150      12/01/2029         5,832,754
----------------------------------------------------------------------------------------------------------------------------
      750,000   Washington Township Municipal Authority                              5.875      12/15/2023           775,725
----------------------------------------------------------------------------------------------------------------------------
    2,500,000   Washington Township Municipal Authority                              6.000      12/15/2033         2,581,600
----------------------------------------------------------------------------------------------------------------------------
      300,000   West Shore Area Hospital Authority
                (Holy Spirit Hospital)                                               6.250      01/01/2032           316,641
----------------------------------------------------------------------------------------------------------------------------
        5,000   Westmoreland County IDA
                (Redstone Health Care Facilities)                                    8.125      11/15/2030             5,802
----------------------------------------------------------------------------------------------------------------------------
    1,550,000   Westmoreland County IDA
                (Redstone Retirement Community)                                      5.750      01/01/2026         1,589,556






STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------------

PENNSYLVANIA Continued
$   1,085,000   Westmoreland County IDA
                (Redstone Retirement Community)                                      5.875%     01/01/2032   $     1,106,548
----------------------------------------------------------------------------------------------------------------------------
       20,000   York County Hospital Authority (York Hospital)                       5.500      07/01/2008            20,024
----------------------------------------------------------------------------------------------------------------------------
       10,000   York County IDA (PSEG Power)                                         5.500      09/01/2020            10,516
----------------------------------------------------------------------------------------------------------------------------
       25,000   York Hsg. Corp. Mtg., Series A                                       6.875      11/01/2009            25,024
                                                                                                             ---------------
                                                                                                                 798,941,655
----------------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--37.6%
    1,485,000   Guam EDA (TASC) 1                                                    5.400      05/15/2031         1,507,691
----------------------------------------------------------------------------------------------------------------------------
    3,900,000   Guam EDA (TASC) 1                                                    5.500      05/15/2041         3,966,066
----------------------------------------------------------------------------------------------------------------------------
      105,000   Guam GO, Series A                                                    5.375      11/15/2013           105,085
----------------------------------------------------------------------------------------------------------------------------
    3,640,000   Guam GO, Series A                                                    5.400      11/15/2018         3,642,038
----------------------------------------------------------------------------------------------------------------------------
    2,000,000   Guam Government Waterworks
                Authority & Wastewater System                                        5.875      07/01/2035         2,091,620
----------------------------------------------------------------------------------------------------------------------------
      500,000   Guam Government Waterworks
                Authority & Wastewater System                                        6.000      07/01/2025           531,340
----------------------------------------------------------------------------------------------------------------------------
      195,000   Guam Power Authority, Series A                                       5.250      10/01/2013           195,072
----------------------------------------------------------------------------------------------------------------------------
      710,000   Guam Power Authority, Series A                                       5.250      10/01/2023           711,519
----------------------------------------------------------------------------------------------------------------------------
    2,725,000   Northern Mariana Islands Ports Authority, Series A                   5.500      03/15/2031         2,697,614
----------------------------------------------------------------------------------------------------------------------------
    1,380,000   Northern Mariana Islands Ports Authority, Series A                   6.600      03/15/2028         1,510,438
----------------------------------------------------------------------------------------------------------------------------
       60,000   Northern Mariana Islands, Series A                                   6.000      06/01/2014            63,104
----------------------------------------------------------------------------------------------------------------------------
   10,100,000   Northern Mariana Islands, Series A                                   6.750      10/01/2033        11,226,554
----------------------------------------------------------------------------------------------------------------------------
       50,000   Puerto Rico Aqueduct & Sewer Authority                               5.000      07/01/2019            50,983
----------------------------------------------------------------------------------------------------------------------------
   29,870,000   Puerto Rico Children's Trust Fund (TASC)                             5.375      05/15/2033        30,582,997
----------------------------------------------------------------------------------------------------------------------------
   77,435,000   Puerto Rico Children's Trust Fund (TASC)                             5.500      05/15/2039        79,530,391
----------------------------------------------------------------------------------------------------------------------------
   73,495,000   Puerto Rico Children's Trust Fund (TASC)                             5.625      05/15/2043        75,643,259
----------------------------------------------------------------------------------------------------------------------------
  355,000,000   Puerto Rico Children's Trust Fund (TASC)                             6.360 6    05/15/2050        22,432,450
----------------------------------------------------------------------------------------------------------------------------
   97,000,000   Puerto Rico Children's Trust Fund (TASC)                             7.010 6    05/15/2055         3,231,070
----------------------------------------------------------------------------------------------------------------------------
      290,000   Puerto Rico Electric Power Authority, Series AA                      5.375      07/01/2027           297,711
----------------------------------------------------------------------------------------------------------------------------
       20,000   Puerto Rico Electric Power Authority, Series DD                      5.000      07/01/2028            20,130
----------------------------------------------------------------------------------------------------------------------------
    1,450,000   Puerto Rico Highway & Transportation Authority                       5.500      07/01/2036         1,546,382
----------------------------------------------------------------------------------------------------------------------------
      395,000   Puerto Rico Highway & Transportation Authority, Series A             5.000      07/01/2038           396,165
----------------------------------------------------------------------------------------------------------------------------
    3,145,000   Puerto Rico Highway & Transportation Authority, Series G             5.000      07/01/2033         3,171,387
----------------------------------------------------------------------------------------------------------------------------
    4,740,000   Puerto Rico Highway & Transportation Authority, Series G             5.000      07/01/2042         4,748,579
----------------------------------------------------------------------------------------------------------------------------
      945,000   Puerto Rico Highway & Transportation Authority, Series H             5.000      07/01/2028           953,486
----------------------------------------------------------------------------------------------------------------------------
   12,000,000   Puerto Rico Highway & Transportation Authority, Series J             5.125      07/01/2039        12,142,680
----------------------------------------------------------------------------------------------------------------------------
    7,620,000   Puerto Rico Highway & Transportation Authority, Series J             5.125      07/01/2043         7,702,144
----------------------------------------------------------------------------------------------------------------------------
    8,855,000   Puerto Rico Highway & Transportation Authority, Series K             5.000      07/01/2030         8,959,489
----------------------------------------------------------------------------------------------------------------------------
    2,925,000   Puerto Rico Highway & Transportation Authority, Series K             5.000      07/01/2035         2,953,168
----------------------------------------------------------------------------------------------------------------------------
    5,000,000   Puerto Rico Highway & Transportation Authority, Series K             5.000      07/01/2040         5,014,750
----------------------------------------------------------------------------------------------------------------------------
    8,000,000   Puerto Rico Highway & Transportation Authority, Series K             5.000      07/01/2045         8,017,920








    PRINCIPAL                                                                                                          VALUE
       AMOUNT                                                                       COUPON        MATURITY        SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------

U.S. POSSESSIONS Continued
$   2,105,000   Puerto Rico IMEPCF (American Airlines) 1                             6.450%     12/01/2025   $     2,108,452
-----------------------------------------------------------------------------------------------------------------------------
   12,250,000   Puerto Rico Infrastructure 1                                         5.000      07/01/2041        12,277,440
-----------------------------------------------------------------------------------------------------------------------------
      235,000   Puerto Rico ITEMECF (Ana G. Mendez University)                       5.375      02/01/2019           239,792
-----------------------------------------------------------------------------------------------------------------------------
      500,000   Puerto Rico ITEMECF (Ana G. Mendez University)                       5.375      02/01/2029           507,575
-----------------------------------------------------------------------------------------------------------------------------
    2,750,000   Puerto Rico Municipal Finance Agency, Series A                       5.250      08/01/2025         2,854,858
-----------------------------------------------------------------------------------------------------------------------------
   18,010,000   Puerto Rico Port Authority (American Airlines), Series A 1           6.250      06/01/2026        17,866,640
-----------------------------------------------------------------------------------------------------------------------------
    1,175,000   Puerto Rico Port Authority (American Airlines), Series A 1           6.300      06/01/2023         1,172,215
-----------------------------------------------------------------------------------------------------------------------------
      105,000   Puerto Rico Port Authority, Series D                                 7.000      07/01/2014           106,995
-----------------------------------------------------------------------------------------------------------------------------
    9,540,000   Puerto Rico Public Buildings Authority 1                             5.250      07/01/2033         9,867,222
-----------------------------------------------------------------------------------------------------------------------------
      100,000   University of Puerto Rico                                            5.400      06/01/2009           100,881
-----------------------------------------------------------------------------------------------------------------------------
      280,000   University of Puerto Rico, Series M                                  5.250      06/01/2025           282,355
-----------------------------------------------------------------------------------------------------------------------------
    1,760,000   University of Puerto Rico, Series O                                  5.375      06/01/2030         1,767,667
-----------------------------------------------------------------------------------------------------------------------------
    6,645,000   V.I. Government Refinery Facilities (Hovensa Coker) 1                6.500      07/01/2021         7,454,893
-----------------------------------------------------------------------------------------------------------------------------
    4,000,000   V.I. Public Finance Authority (Hovensa Coker) 1                      6.500      07/01/2021         4,487,520
-----------------------------------------------------------------------------------------------------------------------------
    5,000,000   V.I. Public Finance Authority (Hovensa Refinery) 1                   6.125      07/01/2022         5,484,200
-----------------------------------------------------------------------------------------------------------------------------
   12,980,000   V.I. Public Finance Authority (Gross Receipts Taxes Loan) 1,3,5      5.000      10/01/2024        13,441,825
-----------------------------------------------------------------------------------------------------------------------------
   17,450,000   V.I. Tobacco Settlement Financing Corp. 1                            6.250 6    05/15/2035         2,979,762
-----------------------------------------------------------------------------------------------------------------------------
    2,195,000   V.I. Tobacco Settlement Financing Corp. 1                            6.500 6    05/15/2035           348,895
-----------------------------------------------------------------------------------------------------------------------------
    4,150,000   V.I. Tobacco Settlement Financing Corp. 1                            6.880 6    05/15/2035           594,197
-----------------------------------------------------------------------------------------------------------------------------
    7,000,000   V.I. Tobacco Settlement Financing Corp. 1                            7.630 6    05/15/2035           824,180
-----------------------------------------------------------------------------------------------------------------------------
       40,000   V.I. Tobacco Settlement Financing Corp. (TASC)                       5.000      05/15/2021            40,090
-----------------------------------------------------------------------------------------------------------------------------
    2,235,000   V.I. Tobacco Settlement Financing Corp. (TASC) 1                     5.000      05/15/2031         2,220,696
                                                                                                             ----------------
                                                                                                                 382,671,632
                                                                                                             ----------------
Total Municipal Bonds and Notes (Cost $1,130,975,445)                                                          1,181,613,287
-----------------------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--0.7%

    7,000,000   Government Devel. Bank for Puerto Rico (Cost $7,000,000)             4.750      08/01/2006         7,000,000

-----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,137,975,445)--116.8%                                                      1,188,613,287
-----------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(16.8)                                                                   (170,937,008)
                                                                                                             ----------------
NET ASSETS--100.0%                                                                                           $ 1,017,676,279
                                                                                                             ================


FOOTNOTES TO STATEMENT OF INVESTMENTS

1. All or a portion of the security has been segregated for collateral to cover
borrowings. See Note 5 of accompanying Notes.

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

3. Security represents the underlying municipal bond on an inverse floating rate
security. The bond was purchased by the Fund and subsequently segregated and
transferred to a trust. See Note 1 of accompanying Notes.

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

5. Security has been restated. See Note 8 of accompanying Notes.

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





STATEMENT OF INVESTMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

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

ACTS        Adult Communities Total Services
AUS         Allegheny United Hospital
BPE         Brittany Pointe Estates
BSVHS       Baptist/St. Vincent's Health System
CCMC        Crozer-Chester Medical Center
CKHS        Crozer-Keystone Health System
COP         Certificates of Participation
CPAP        Crime Prevention Assoc. of Philadelphia
DCMH        Delaware County Memorial Hospital
DOCNHS      Daughters of Charity National Health
            Systems
DPH         Divine Providence Hospital
EDA         Economic Devel. Authority
EDFA        Economic Devel. 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 Devel. Authority
HEBA        Higher Education Building Authority
HEFA        Higher Education Facilities Authority
HEHA        Higher Education and Health Authority
HFA         Housing Finance Agency
HUHS        Hehnemann University Hospital System
HW          Highlands at Wyomissing
IDA         Industrial Devel. Agency
IMEPCF      Industrial, Medical and Environmental
            Pollution Control Facilities
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
            Pennsylvania
MVH         Muncy Valley Hospital
NCPHS       North Central Pennsylvania Helath System
PSEG        Public Service Enterprise Group
RHMC        Reading Hospital & Medical Center
RITES       Residual Interest Tax Exempt Security
ROLs        Residual Option Longs
RR          Residential Resources
RRDC        Residential Resources Devel. Corp.
RRSW        Residential Resources Southwest
SRHS        Sharon Regional Health System
SRPS        Sharon Regional Physicians Services
TASC        Tobacco Settlement Asset-Backed Bonds
UPMC        University of Pittsburgh Medical Center
V.I.        United States Virgin Islands
WH          Williamsport Hospital
WMHS        Western Maryland Health Systems
WVHCS       Wyoming Valley Health Care System





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

INDUSTRY                                             VALUE 1      PERCENT 1
----------------------------------------------------------------------------
Tobacco Settlement Payments                   $  223,901,744           18.8%
Higher Education                                  96,432,881            8.1
Hospital/Health Care                              85,577,806            7.2
Water Utilities                                   82,734,163            7.0
Adult Living Facilities                           71,204,093            6.0
Highways/Railways                                 67,686,983            5.7
Single Family Housing                             65,775,326            5.5
Manufacturing, Durable Goods                      62,868,819            5.3
Electric Utilities                                57,581,261            4.8
Marine/Aviation Facilities                        56,706,666            4.8
Not-for-Profit Organization                       50,470,309            4.3
Resource Recovery                                 44,387,301            3.7
General Obligation                                32,666,384            2.8
Municipal Leases                                  26,734,167            2.2
Airlines                                          21,147,307            1.8
Education                                         19,570,828            1.7
Pollution Control                                 18,101,947            1.5
Special Tax                                       17,890,999            1.5
Gas Utilities                                     16,188,248            1.4
Special Assessment                                14,257,039            1.2
Sales Tax Revenue                                 13,544,624            1.1
Sewer Utilities                                   10,955,591            0.9
Parking Fee Revenue                               10,756,280            0.9
Multifamily Housing                                8,758,454            0.7
Commercial Banks                                   7,000,000            0.6
Paper, Containers & Packaging                      4,630,140            0.4
Sports Facility Revenue                              977,330            0.1
Hotels, Restaurants & Leisure                        106,597            0.0
                                              ------------------------------
Total                                         $1,188,613,287          100.0%
                                              ==============================

1. Restated. See Note 8 of accompanying Notes.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





STATEMENT OF ASSETS AND LIABILITIES  July 31, 2006
(As restated, see Note 8)
--------------------------------------------------------------------------------



JULY 31, 2006
----------------------------------------------------------------------------------------------------------------

ASSETS
----------------------------------------------------------------------------------------------------------------
Investments, at value (cost $1,137,975,445)--see accompanying statement of investments          $ 1,188,613,287
----------------------------------------------------------------------------------------------------------------
Cash                                                                                                    568,694
----------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                                     19,197,109
Interest                                                                                             12,201,308
Shares of beneficial interest sold                                                                    5,719,348
Other                                                                                                    20,717
                                                                                                ----------------
Total assets                                                                                      1,226,320,463

----------------------------------------------------------------------------------------------------------------
LIABILITIES
----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Payable on borrowings (See Note 5)                                                                   36,100,000
Investments purchased on a when-issued basis or forward commitment                                    6,888,801
Payable for short-term floating rate notes issued (See Note 1)                                      163,440,000
Shares of beneficial interest redeemed                                                                  963,639
Dividends                                                                                               831,616
Distribution and service plan fees                                                                      124,468
Trustees' compensation                                                                                   82,127
Interest expense                                                                                         80,625
Shareholder communications                                                                               41,804
Transfer and shareholder servicing agent fees                                                            40,674
Other                                                                                                    50,430
                                                                                                ----------------
Total liabilities                                                                                   208,644,184

----------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                      $ 1,017,676,279
                                                                                                ================

----------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
----------------------------------------------------------------------------------------------------------------
Paid-in capital                                                                                 $   970,858,453
----------------------------------------------------------------------------------------------------------------
Accumulated net investment loss                                                                         (53,552)
----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments                                                         (3,766,464)
----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                           50,637,842
                                                                                                ----------------
NET ASSETS                                                                                      $ 1,017,676,279
                                                                                                ================







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

NET ASSET VALUE PER SHARE
----------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $600,716,202
and 47,115,115 shares of beneficial interest outstanding)                                             $   12.75
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price)                                                                           $   13.39
----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $196,703,839 and 15,432,304
shares of beneficial interest outstanding)                                                            $   12.75
----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $220,256,238 and 17,297,091
shares of beneficial interest outstanding)                                                            $   12.73


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





STATEMENT OF OPERATIONS
(As restated, see Note 8)
--------------------------------------------------------------------------------



FOR THE YEAR ENDED JULY 31, 2006
-----------------------------------------------------------------------------------------------------------------

INVESTMENT INCOME
-----------------------------------------------------------------------------------------------------------------
Interest                                                                                         $    53,576,528
-----------------------------------------------------------------------------------------------------------------
Other income                                                                                                 507
                                                                                                 ----------------
Total investment income                                                                               53,577,035

-----------------------------------------------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------------------------------------------
Management fees                                                                                        4,276,821
-----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                                  703,170
Class B                                                                                                1,738,069
Class C                                                                                                1,566,330
-----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                                                  197,586
Class B                                                                                                  111,469
Class C                                                                                                   93,210
-----------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                                                   45,244
Class B                                                                                                   21,170
Class C                                                                                                   19,679
-----------------------------------------------------------------------------------------------------------------
Interest expense and fees on short-term floating rate notes issued (See Note 1)                        5,037,215
-----------------------------------------------------------------------------------------------------------------
Interest expense on borrowings                                                                           799,633
-----------------------------------------------------------------------------------------------------------------
Trustees' compensation                                                                                    47,610
-----------------------------------------------------------------------------------------------------------------
Other                                                                                                    164,149
                                                                                                 ----------------
Total expenses                                                                                        14,821,355

-----------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                                                 38,755,680

-----------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED LOSS
-----------------------------------------------------------------------------------------------------------------
Net realized gain on investments                                                                         217,417
-----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                                                  (5,353,422)

-----------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                             $    33,619,675
                                                                                                 ================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





STATEMENTS OF CHANGES IN NET ASSETS
(As restated, see Note 8)
--------------------------------------------------------------------------------



YEAR ENDED JULY 31                                                                       2006              2005
----------------------------------------------------------------------------------------------------------------

OPERATIONS
----------------------------------------------------------------------------------------------------------------
Net investment income                                                         $    38,755,680    $   28,197,440
----------------------------------------------------------------------------------------------------------------
Net realized gain (loss)                                                              217,417          (405,749)
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                              (5,353,422)       49,258,422
                                                                              ----------------------------------
Net increase in net assets resulting from operations                               33,619,675        77,050,113

----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                           (23,712,877)      (16,117,132)
Class B                                                                            (7,996,967)       (8,235,507)
Class C                                                                            (7,208,027)       (4,521,666)

----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                           218,682,144       130,474,143
Class B                                                                             8,520,749        17,198,067
Class C                                                                            87,696,234        48,949,671

----------------------------------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------------------------------
Total increase                                                                    309,600,931       244,797,689
----------------------------------------------------------------------------------------------------------------
Beginning of period                                                               708,075,348       463,277,659
                                                                              ----------------------------------
End of period (including accumulated net investment income
(loss) of $(53,552) and $108,639, respectively)                               $ 1,017,676,279    $  708,075,348
                                                                              ==================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------



FOR THE YEAR ENDED JULY 31, 2006
----------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES
----------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations                                                      $    33,619,675
----------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net increase in net assets from operations
to net cash used in operating activities:
Purchase of investment securities                                                                  (462,441,889)
Proceeds from disposition of investment securities                                                  176,385,124
Short-term investment securities, net                                                               (43,777,206)
Premium amortization                                                                                  2,749,561
Discount accretion                                                                                   (1,522,316)
Net realized gain on investments                                                                       (217,417)
Net change in unrealized appreciation on investments                                                  5,353,422
Increase in interest receivable                                                                      (2,149,277)
Increase in receivable for securities sold                                                           (5,326,214)
Increase in other assets                                                                                 (5,905)
Decrease in payable for securities purchased                                                         (5,169,838)
Increase in payable for accrued expenses                                                                 92,295
                                                                                                ----------------
Net cash used in operating activities                                                              (302,409,985)

----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
----------------------------------------------------------------------------------------------------------------
Proceeds from bank borrowing                                                                        340,000,000
Payments on bank borrowing                                                                         (335,400,000)
Proceeds from short-term floating rate notes issued                                                  24,305,000
Payments on bank overdraft                                                                           (2,162,884)
Proceeds from shares sold                                                                           392,330,067
Payment on shares redeemed                                                                          (99,811,619)
Cash distributions paid                                                                             (16,281,885)
                                                                                                ----------------
Net cash provided by financing activities                                                           302,978,679
----------------------------------------------------------------------------------------------------------------
Net increase in cash                                                                                    568,694
----------------------------------------------------------------------------------------------------------------
Cash, beginning balance                                                                                       0
                                                                                                ----------------
Cash, ending balance                                                                            $       568,694
                                                                                                ================


Supplemental disclosure of cash flow information:
Noncash  financing  activities not included  herein consist of  reinvestment  of
dividends and distributions of $22,278,293.
Cash paid for interest on bank borrowings--$789,762.
Cash paid for interest on short-term floating rate notes issued--$5,037,215.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





FINANCIAL HIGHLIGHTS
(As restated, see Note 8)
--------------------------------------------------------------------------------



CLASS A         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.85     $      11.76      $     11.48     $     11.57     $     11.46
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .62 1            .67 1            .73             .75             .70
Net realized and unrealized gain (loss)                    (.10)            1.10              .25            (.11)            .11
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .52             1.77              .98             .64             .81
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.62)            (.68)            (.70)           (.73)           (.70)
------------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                    $       12.75     $      12.85      $     11.76     $     11.48     $     11.57
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         4.21%           15.43%            8.53%           5.36%           7.36%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     600,716     $    384,863      $   229,450     $   184,638     $   144,592
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     484,153     $    295,002      $   211,061     $   172,228     $   120,251
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.88%            5.35%            6.01%           6.11%           6.03%
Expenses excluding interest and fees on
short-term floating rate notes issued                      0.82%            0.81%            0.86%           0.86%           0.85%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             1.41%            1.21%            1.12%           1.14%           1.13%
Expenses after payments and waivers and
reduction to custodian expenses                            1.41%            1.21%            1.12%           1.14%           1.10% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 of accompanying Notes.

5. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





FINANCIAL HIGHLIGHTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------



CLASS B         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.85     $      11.76      $     11.48     $     11.57     $     11.46
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .53 1            .57 1            .63             .65             .62
Net realized and unrealized gain (loss)                    (.10)            1.11              .25            (.11)            .11
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .43             1.68              .88             .54             .73
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.53)            (.59)            (.60)           (.63)           (.62)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $       12.75     $      12.85      $     11.76     $     11.48     $     11.57
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         3.41%           14.56%            7.71%           4.56%           6.55%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     196,704     $    189,643      $   157,338     $   146,369     $   101,126
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     193,225     $    173,663      $   156,689     $   127,280     $    75,772
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.14%            4.62%            5.26%           5.34%           5.26%
Expenses excluding interest and fees on
short-term floating rate notes issued                      1.59%            1.59%            1.62%           1.63%           1.61%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             2.18%            1.99%            1.88%           1.91%           1.89%
Expenses after payments and waivers and
reduction to custodian expenses                            2.18%            1.99%            1.88%           1.91%           1.86% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 of accompanying Notes.

5. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.







CLASS C         YEAR ENDED JULY 31,                        2006             2005             2004            2003            2002
------------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $       12.83     $      11.75      $     11.47     $     11.56     $     11.45
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                       .52 1            .57 1            .63             .65             .61
Net realized and unrealized gain (loss)                    (.09)            1.10              .25            (.11)            .12
                                                  ----------------------------------------------------------------------------------
Total from investment operations                            .43             1.67              .88             .54             .73
------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                       (.53)            (.59)            (.60)           (.63)           (.62)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $       12.73     $      12.83      $     11.75     $     11.47     $     11.56
                                                  ==================================================================================

------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                         3.41%           14.48%            7.71%           4.57%           6.55%
------------------------------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $     220,256     $    133,569      $    76,489     $    69,916     $    47,163
------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $     174,354     $     96,508      $    74,956     $    60,202     $    33,327
------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                      4.10%            4.56%            5.25%           5.34%           5.26%
Expenses excluding interest and fees on
short-term floating rate notes issued                      1.58%            1.59%            1.63%           1.63%           1.61%
Interest and fees on short-term floating
rate notes issued 4                                        0.59%            0.40%            0.26%           0.28%           0.28%
                                                  ----------------------------------------------------------------------------------
Total expenses                                             2.17%            1.99%            1.89%           1.91%           1.89%
Expenses after payments and waivers and
reduction to custodian expenses                            2.17%            1.99%            1.89%           1.91%           1.86% 5
------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                      19%              14%              25%             20%             23%


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 distribuions or the redemption of fund shares.

3. Annualized for periods of less than one full year.

4. Interest and fee expense relates to the Fund's liability for short-term
floating rate notes issued in conjunction with inverse floating rate security
transactions. See Note 1 of accompanying Notes.

5. Excludes interest expense.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





NOTES TO FINANCIAL STATEMENTS
(As restated, see Note 8)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Futures contracts traded on a
commodities or futures exchange will be valued at the final settlement price or
official closing price on the principal exchange as reported by such principal
exchange at its trading session ending at, or most recently prior to, the time
when the Fund's assets are valued. Securities (including restricted securities)
for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value).

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment take place generally at least 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, 2006, the Fund had purchased $6,888,801 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 not invest more than 20% of its total assets in inverse floaters.
Inverse floaters amount to $64,720,873 as of July 31, 2006, which represents
5.28% of the Fund's total assets.

      Certain inverse floating rate securities are created when a Fund purchases
and subsequently transfers a municipal bond security (the "municipal bond") to a
broker dealer. The municipal bond is typically a fixed rate security. The broker
dealer (the "sponsor") creates a trust (the "Trust") and deposits the municipal
bond. The Trust issues short-term floating rate notes available to third parties
and a residual interest in the municipal bond (referred to as an "inverse
floating rate security") to the Fund. The terms of these inverse floating rate
securities grant the Fund the right to require that the Trust issuing the
inverse floating rate security compel a tender of the short-term floating rate
notes to facilitate the Fund's repurchase of the underlying municipal bond.
Following such a request, the Fund pays the sponsor the principal amount due to
the holders of the short-term floating rate notes issued by the Trust and
exchanges the inverse floating rate security for the underlying municipal bond.
These transactions are considered secure borrowings for financial reporting
purposes. As a result of such accounting treatments, the Fund includes the municipal bond position on its Statement of Investments (but does not separately include the inverse floating rate securities received). The Fund also includes the value of the municipal bond and a payable amount equal to the short-term floating rate notes issued by the Trust on its Statement of Assets and Liabilities. The interest rates on these short-term floating rate notes reset periodically, usually weekly. The holders of these short-term floating rate notes have the option to tender their investment to the sponsor or the Trust's liquidity provider, for redemption at par at each reset date. Income from the municipal bond position and the interest expense on the payable for the
short-term floating rate notes issued by the Trust are recorded on the Fund's
Statement of Operations. At July 31, 2006 municipal bond holdings with a value
of $228,160,873 shown on the Fund's Statement of Investments are held by such
Trusts and serve as collateral for the $163,440,000 in short-term floating rate
notes issued and outstanding at that date. See Note 8.

At July 31, 2006 the Fund's residual exposure to these types of inverse floating
rate securities were as follows:



PRINCIPAL                                                                 MATURITY     VALUE AS OF
AMOUNT        INVERSE FLOATER 1                                COUPON 2       DATE   JULY 31, 2006
---------------------------------------------------------------------------------------------------

$   350,000   Allegheny County HDA RITES                         12.502%  11/15/30   $     508,151
  1,900,000   Allegheny County HDA RITES                         12.502   11/15/30       2,758,534
  2,000,000   Bucks County IDA RITES                              8.587     9/1/32       2,375,360
  2,250,000   Delaware County IDA
              (Aqua Pennsylvania) RITES                           6.639    11/1/38       2,412,855
  2,250,000   Delaware County IDA Water Facilities
              (Aqua Pennsylvania) RITES                           6.639    11/1/38       2,412,855
  2,750,000   Delaware County IDA
              (Aqua Pennsylvania) RITES                           6.639    11/1/37       2,950,695
  1,000,000   Lehigh County IDA (Pennsylvania Power
              & Light Company) RITES 3                            6.165    2/15/27       1,022,890
  4,335,000   Lehigh County IDA Pollution Control RITES           5.595    2/15/27       4,401,152
  3,160,000   Luzerne County IDA ROLs                             8.375     9/1/34       3,423,734
  5,000,000   PA EDFA (Reliant Energy) RITES 3                    8.656    12/1/36       5,727,050
  2,500,000   PA EDFA ROLs                                        6.967    12/1/18       2,550,700
  2,000,000   PA HFA (Single Family Mtg.) RITES                   7.490     4/1/21       2,162,680
  2,850,000   PA HFA (Single Family Mtg.) RITES                   7.797    10/1/22       3,142,068
  2,500,000   PA HFA (Single Family Mtg.) RITES                   6.997    10/1/22       2,685,600
  2,500,000   PA HFA (Single Family Mtg.) RITES                   6.797    10/1/20       2,693,650
  2,000,000   Philadelphia Airport Authority for Industrial
              Devel. RITES                                        7.790     7/1/22       2,416,240
  3,425,000   Philadelphia Authority for Industrial
              Devel. RITES                                        6.966    10/1/26       3,949,505
  2,000,000   Philadelphia Gas Works RITES                        7.836     8/1/21       2,528,240
  1,780,000   Philadelphia Gas Works RITES                        6.956     8/1/31       2,209,906
  2,250,000   Philadelphia Redevel. Authority ROLs                8.578    4/15/28       2,534,580
  2,000,000   Philadelphia School District GO RITES               8.970     8/1/22       2,765,520
    350,000   Southcentral General Authority ROLs 4               0.000    12/1/23         386,141
    565,000   Southcentral General Authority ROLs 4               0.000    12/1/25         613,036
    820,000   Southcentral General Authority ROLs 4               0.000    12/1/26         884,764
    500,000   Southcentral General Authority ROLs 4               0.000    12/1/27         542,510
    630,000   Southcentral General Authority ROLs 4               0.000    12/1/28         681,647








PRINCIPAL                                                                 MATURITY     VALUE AS OF
AMOUNT        INVERSE FLOATER 1                                COUPON 2       DATE   JULY 31, 2006
---------------------------------------------------------------------------------------------------

$   250,000   Southcentral General Authority ROLs 4               0.000%   12/1/30   $      268,985
  3,250,000   V.I. Public Finance Authority ROLs                  8.481    10/1/24        3,711,825
                                                                                     --------------
                                                                                     $   64,720,873
                                                                                     ==============


1. For a list of abbreviations used in the Inverse Floater table see the
Portfolio Abbreviations table on page 36 of the Statement of Investments.

2. Represents the current interest rate for a variable rate bond known as an
"inverse floater."

3. Security is subject to a shortfall and forbearance agreement.

4. When-issued security or forward commitment to be delivered or settled after
July 31, 2006.

The Fund enters into shortfall and forbearance agreements with the sponsors of
certain inverse floaters held by the Fund. These agreements commit the Fund to
reimburse the sponsor of the inverse floater, in certain circumstances, for the
amount of the difference between the liquidation value of the underlying
security (which is the basis of the inverse floater) and the principal amount
due to the holders of the floating rate notes issued by the Trust in conjunction
with the inverse floating rate security. Under the standard terms of an inverse
floating rate security, absent such a shortfall and forbearance agreement, the
Fund would not be required to make such a reimbursement. The Manager monitors
the Fund's potential exposure with respect to these agreements on a daily basis
and intends to take action to terminate the Fund's investment in such inverse
floating rate securities, if it deems it appropriate to do so. As of July 31,
2006, in addition to the exposure detailed in the preceding table, the Fund's
maximum exposure under such agreements is estimated at approximately
$10,000,000.

--------------------------------------------------------------------------------
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, 2006, securities with an aggregate
market value of $969,913, representing 0.10% 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.

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





NOTES TO FINANCIAL STATEMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

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

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 1,2,3,4         TAX PURPOSES
    --------------------------------------------------------------------------
    $944,941                   $--             $3,561,585          $50,432,960

1. As of July 31, 2006, the Fund had $2,694,837 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, 2006, details
of the capital loss carryforwards were as follows:

                              EXPIRING
                              ----------------------
                              2010        $1,035,477
                              2013         1,659,360
                                          ----------
                              TOTAL       $2,694,837
                                          ==========

2. As of July 31, 2006, the Fund had $866,748 of post-October losses available
to offset future realized capital gains, if any. Such losses, if unutilized,
will expire in 2015.

3. During the fiscal year ended July 31, 2006, the Fund utilized $526,030 of
capital loss carryforward to offset capital gains realized in that fiscal year.

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

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

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

                                      YEAR ENDED      YEAR ENDED
                                   JULY 31, 2006   JULY 31, 2005
      ----------------------------------------------------------
      Distributions paid from:
      Exempt-interest dividends      $38,917,871     $28,874,305

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, 2006 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    $ 974,740,327
                                                   ==============

                 Gross unrealized appreciation     $  54,492,633
                 Gross unrealized depreciation        (4,059,673)
                                                   --------------
                 Net unrealized appreciation       $  50,432,960
                                                   ==============

--------------------------------------------------------------------------------
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,
2006, the Fund's projected benefit obligations were increased by $28,229 and
payments of $4,719 were made to retired trustees, resulting in an accumulated
liability of $63,339 as of July 31, 2006.

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

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

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





NOTES TO FINANCIAL STATEMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

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

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

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

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

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



                                  YEAR ENDED JULY 31, 2006    YEAR ENDED JULY 31, 2005
                                     SHARES         AMOUNT       SHARES         AMOUNT
---------------------------------------------------------------------------------------

CLASS A
Sold                             20,449,939   $260,522,610   12,116,018   $151,196,257
Dividends and/or
distributions reinvested          1,082,853     13,793,427      695,852      8,652,502
Redeemed                         (4,370,506)   (55,633,893)  (2,365,369)   (29,374,616)
                                 ------------------------------------------------------
Net increase                     17,162,286   $218,682,144   10,446,501   $130,474,143
                                 ======================================================

---------------------------------------------------------------------------------------
CLASS B
Sold                              2,237,664   $ 28,510,720    2,375,112   $ 29,515,607
Dividends and/or
distributions reinvested            317,279      4,041,219      314,290      3,897,091
Redeemed                         (1,886,359)   (24,031,190)  (1,305,293)   (16,214,631)
                                 ------------------------------------------------------
Net increase                        668,584   $  8,520,749    1,384,109   $ 17,198,067
                                 ======================================================

---------------------------------------------------------------------------------------
CLASS C
Sold                              8,181,321   $104,120,434    4,460,811   $ 55,895,068
Dividends and/or
distributions reinvested            349,259      4,443,647      221,073      2,744,414
Redeemed                         (1,641,297)   (20,867,847)    (784,051)    (9,689,811)
                                 ------------------------------------------------------
Net increase                      6,889,283   $ 87,696,234    3,897,833   $ 48,949,671
                                 ======================================================






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



                                       PREVIOUSLY REPORTED                  RESTATED, SEE NOTE 8
                           PURCHASES                 SALES      PURCHASES                  SALES
------------------------------------------------------------------------------------------------

Investment securities   $462,441,889          $209,520,233   $462,441,889           $176,385,124


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

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:

        FEE SCHEDULE
        ---------------------------------------------
        Up to $200 million of net assets        0.60%
        Next $100 million of net assets         0.55
        Next $200 million of net assets         0.50
        Next $250 million of net assets         0.45
        Next $250 million of net assets         0.40
        Over $1 billion of net assets           0.35

--------------------------------------------------------------------------------
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, 2006, the Fund paid $389,649
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
periodically 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 periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the Plan are detailed in the Statement
of Operations.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B 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% on Class B and Class C
shares. The Distributor also receives a service fee of up to 0.15% 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





NOTES TO FINANCIAL STATEMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

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

4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued

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, 2006 for Class B and Class C
shares were $5,089,067 and $2,691,282, 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 following table 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, 2006                $845,762          $9,524        $383,285         $56,182


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

      The Fund has 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 $900 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 (5.3126% as of July 31, 2006). 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 $900
million facility size.





      For the year ended July 31, 2006, the average daily loan balance was
$18,232,055 at an average daily interest rate of 4.351%. The Fund had borrowings
outstanding of $36,100,000 at July 31, 2006 at an interest rate of 5.3126%. The
Fund had gross borrowings and gross loan repayments of $340,000,000 and
$335,400,000, respectively, during the year ended July 31, 2006. The maximum
amount of borrowings outstanding at any month-end during the year ended July 31,
2006 was $36,100,000. The Fund paid $87,985 in fees and $789,762 in interest
during the year ended July 31, 2006.

--------------------------------------------------------------------------------
6. RECENT ACCOUNTING PRONOUNCEMENT

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

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

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

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

      The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the





NOTES TO FINANCIAL STATEMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

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

appeal of the decisions of the district court, and that no estimate can yet be
made with any degree of certainty as to the amount or range of any potential
loss.

--------------------------------------------------------------------------------
8. RESTATEMENT

Subsequent to the issuance of the July 31, 2006 financial statements, the
Manager determined that transfers of certain municipal bond securities by the
Fund to trusts in connection with its investment in inverse floating rate
securities during the fiscal years ended July 31, 2002 through 2006, do not
qualify as sales under Statement of Financial Accounting Standard No. 140,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES, and should have been accounted for as secured borrowings.
Accordingly, the Fund has restated its July 31, 2006 Statement of Investments,
its July 31, 2006 Statement of Assets and Liabilities, its fiscal 2006 Statement
of Operations, its fiscal 2006 Statements of Changes in Net Assets and its
fiscal 2002 through fiscal 2006 Financial Highlights. In connection with the
reinstatement, the Fund also included a Statement of Cash Flows for its fiscal
year ending July 31, 2006.

The restatement has no effect on the Fund's previously reported net assets, net
asset values per share or total return.

STATEMENT OF ASSETS AND LIABILITIES AS OF JULY 31, 2006



                                                       PREVIOUSLY REPORTED               RESTATED
---------------------------------------------------------------------------------------------------

ASSETS
   Investments, at value                               $     1,025,173,287   $      1,188,613,287
   Cost of investments                                         974,740,327          1,137,975,445*
   Total assets                                              1,062,880,463          1,226,320,463
LIABILITIES
   Payable for short-term floating rate notes issued                   N/A            163,440,000
   Total liabilities                                            45,204,184            208,644,184
NET ASSETS
   Accumulated net realized loss on investments                 (3,561,582)            (3,766,464)*
   Net unrealized appreciation on investments                   50,432,960             50,637,842*


*The restated amounts include an increase to "Accumulated net realized loss on
investments", a decrease to "Cost of investments" and an increase to "Net
unrealized appreciation on investments" in the amount of $735,407 related to
reversals of gains previously realized in the Fund's fiscal years prior to 2005.

STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 2006



INVESTMENT INCOME
   Interest                                            $        48,539,313   $         53,576,528
   Total investment income                                      48,539,820             53,577,035
EXPENSES
   Interest expense and fees on short-term
   floating rate notes issued                                          N/A              5,037,215
   Total expenses                                                9,784,140             14,821,355
REALIZED AND UNREALIZED GAIN (LOSS)
   Net realized gain (loss) on investments                        (313,108)               217,417
   Net change in unrealized appreciation on
   investments                                                  (4,822,897)            (5,353,422)






STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDING
JULY 31, 2006 AND 2005

OPERATIONS 2006                               PREVIOUSLY REPORTED      RESTATED
--------------------------------------------------------------------------------
   Net realized gain (loss)                         $    (313,108)  $   217,417
   Net change in unrealized appreciation               (4,822,897)   (5,353,422)

OPERATIONS 2005                               PREVIOUSLY REPORTED      RESTATED
--------------------------------------------------------------------------------
   Net realized loss                                 $   (396,855)  $  (405,749)
   Net change in unrealized appreciation               49,249,528    49,258,422

FINANCIAL HIGHLIGHTS FOR THE YEARS ENDING JULY 31,
2006, 2005, 2004, 2003 AND 2002

                       INTEREST AND                  EXPENSES AFTER
                            FEES ON                    PAYMENTS AND
                         SHORT-TERM                     WAIVERS AND   PORTFOLIO
RATIOS TO AVERAGE     FLOATING RATE      TOTAL         REDUCTION TO    TURNOVER
NET ASSETS:            NOTES ISSUED   EXPENSES   CUSTODIAN EXPENSES        RATE
--------------------------------------------------------------------------------
CLASS A
2006 Previously
     Reported                  0.00%      0.82%                0.82%         29%
2006 Restated                  0.59%      1.41%                1.41%         19%
2005 Previously
     Reported                  0.00%      0.81%                0.81%         30%
2005 Restated                  0.40%      1.21%                1.21%         14%
2004 Previously
     Reported                  0.00%      0.86%                0.86%         37%
2004 Restated                  0.26%      1.12%                1.12%         25%
2003 Previously
     Reported                  0.00%      0.86%                0.86%         33%
2003 Restated                  0.28%      1.14%                1.14%         20%
2002 Previously
     Reported                  0.00%      0.85%                0.82%         39%
2002 Restated                  0.28%      1.13%                1.10%         23%

--------------------------------------------------------------------------------
CLASS B
2006 Previously
     Reported                  0.00%      1.59%                1.59%         29%
2006 Restated                  0.59%      2.18%                2.18%         19%
2005 Previously
     Reported                  0.00%      1.59%                1.59%         30%
2005 Restated                  0.40%      1.99%                1.99%         14%
2004 Previously
     Reported                  0.00%      1.62%                1.62%         37%
2004 Restated                  0.26%      1.88%                1.88%         25%
2003 Previously
     Reported                  0.00%      1.63%                1.63%         33%
2003 Restated                  0.28%      1.91%                1.91%         20%
2002 Previously
     Reported                  0.00%      1.61%                1.58%         39%
2002 Restated                  0.28%      1.89%                1.86%         23%





NOTES TO FINANCIAL STATEMENTS  Continued
(As restated, see Note 8)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
8. RESTATEMENT Continued

FINANCIAL HIGHLIGHTS FOR THE YEARS ENDING JULY 31,
2006, 2005, 2004, 2003, AND 2002 Continued

                     INTEREST AND                  EXPENSES AFTER
                          FEES ON                    PAYMENTS AND
                       SHORT-TERM                     WAIVERS AND   PORTFOLIO
RATIOS TO AVERAGE   FLOATING RATE      TOTAL         REDUCTION TO    TURNOVER
NET ASSETS:          NOTES ISSUED   EXPENSES   CUSTODIAN EXPENSES        RATE
--------------------------------------------------------------------------------
CLASS C
2006 Previously
     Reported                0.00%      1.58%                1.58%         29%
2006 Restated                0.59%      2.17%                2.17%         19%
2005 Previously
     Reported                0.00%      1.59%                1.59%         30%
2005 Restated                0.40%      1.99%                1.99%         14%
2004 Previously
     Reported                0.00%      1.63%                1.63%         37%
2004 Restated                0.26%      1.89%                1.89%         25%
2003 Previously
     Reported                0.00%      1.63%                1.63%         33%
2003 Restated                0.28%      1.91%                1.91%         20%
2002 Previously
     Reported                0.00%      1.61%                1.58%         39%
2002 Restated                0.28%      1.89%                1.86%         23%

While the Statements of Assets and Liabilities as of July 31, 2005, 2004, 2003
and 2002 (not included herein) have not been reissued to give effect to the
restatement, the principal effects of the restatement would be to increase
investments at value and to add a liability for short-term floating rate notes
issued by corresponding amounts at each year end, with no resulting effect on
previously reported Fund net assets. While the Statements of Operations for the
years ended July 31, 2005, 2004, 2003 and 2002 (not included herein) have not
been reissued to give effect to the restatement, the principal effects of the
restatement would be to increase interest income and interest expense and fees
by corresponding amounts each year, with no effect on the previously reported
net increase in net assets resulting from operations.




                                     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.

                                  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


                                  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.

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

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

      There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."(5) This waiver provision applies to:
|_|   Purchases of Class A shares aggregating $1 million or more.
|_|   Purchases of Class A shares by a Retirement Plan that was permitted to
         purchase such shares at net asset value but subject to a contingent
         deferred sales charge prior to March 1, 2001. That included plans
         (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
         costing $500,000 or more, 2) had at the time of purchase 100 or more
         eligible employees or total plan assets of $500,000 or more, or 3)
         certified to the Distributor that it projects to have annual plan
         purchases of $200,000 or more.
|_|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and  (b)  funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $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.    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.    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.    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.
|_|   At the sole discretion of the Distributor, the contingent deferred
         sales charge may be waived for redemptions of shares requested by
         the shareholder of record within 60 days following the termination
         by the Distributor of the selling agreement between the Distributor
         and the shareholder of record's broker-dealer of record for the
         account.
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.

D.    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.
|_|   At the sole discretion of the Distributor, the contingent deferred
         sales charge may be waived for redemptions of shares requested by
         the shareholder of record within 60 days following the termination
         by the Distributor of the selling agreement between the Distributor
         and the shareholder of record's broker-dealer of record for the
         account.
|_|   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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

V.         Special Sales Charge Arrangements for Shareholders of Certain
          Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                            Investment Accounts, Inc.
---------------------------------------------------------------------------

The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
   Oppenheimer U. S. Government Trust,
   Oppenheimer Core Bond Fund,
   Oppenheimer Value Fund and
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

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

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

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

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

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

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

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

J.    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.

     (1) In accordance  with Rule 12b-1 of the Investment  Company Act, the term
"Independent  Trustees" in this  Statement of Additional  Information  refers to
those Trustees who are not "interested  persons" of the Fund and who do not have
any direct or indirect  financial  interest in the operation of the distribution
plan or any agreement under the plan.

     (2) Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.

     (3)  In  the  case  of   Oppenheimer   Senior   Floating   Rate   Fund,   a
continuously-offered  closed-end fund,  references to contingent  deferred sales
charges mean the Fund's Early Withdrawal Charges and references to "redemptions"
mean "repurchases" of shares.

     (4) An "employee  benefit plan" means any plan or  arrangement,  whether or
not it is  "qualified"  under the  Internal  Revenue  Code,  under which Class N
shares of an  Oppenheimer  fund or funds are  purchased  by a fiduciary or other
administrator  for the account of  participants  who are  employees  of a single
employer or of affiliated  employers.  These may include,  for example,  medical
savings  accounts,  payroll  deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator  purchasing the
shares for the benefit of participants in the plan.

(5) The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment
dealer, broker or other financial institution designated by the group. Such
plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans
other than plans for public school employees. The term "Group Retirement
Plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer fund or
funds through a single investment dealer, broker or other financial
institution that has made special arrangements with the Distributor.

     (6)  However,  that  concession  will not be paid on purchases of shares in
amounts  of $1  million  or more  (including  any  right of  accumulation)  by a
Retirement Plan that pays for the purchase with the redemption proceeds of Class
C shares  of one or more  Oppenheimer  funds  held by the Plan for more than one
year.

     (7) This provision does not apply to IRAs.

     (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.

     (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

Internet Website
     www.oppenheimerfunds.com

Investment Adviser
     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

(OppenheimerFunds logo)

PX740.001.0307