Statement of Additional Information dated November 28, 2008, revised May 4, 2009

This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectus dated November 28, 2008, revised May 4, 2009. It should be read together with the Prospectus. You can obtain the Prospectus by writing to the Funds 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.

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Appendix B: Special Considerations Relating to Municipal Obligations in Pennsylvania and U.S. Territories, Commonwealths and Possessions B-1

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

The Funds Investment Policies. The composition of the Funds portfolio and the techniques and strategies that the Funds 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 in this Statement of Additional Information in seeking its objective. It may use some of the investment techniques and strategies at some times or not at all.

The Funds municipal securities that are held to maturity are redeemable by the securitys issuer at full principal value plus accrued interest. The values of those securities held by the Fund, however, 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 would rise.

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 securitys maturity. The Fund may dispose of securities prior to their maturity for investment purposes 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 category and between categories. 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.

Unless the Prospectus or Statement of Additional Information states that an investment percentage restriction applies on an ongoing basis, it applies only at the time the Fund makes an investment (except for 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 changes in proportion to the size of the Fund.

Municipal Securities. The types of municipal securities in which the Fund may invest are described in the Prospectus under What Does the Fund Mainly Invest In? and About the Funds Investments. Under normal market conditions, and 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 long-term municipal securities having a maturity (when the security is issued) of more than one year as municipal bonds. The principal classifications of long-term municipal bonds are general obligation and revenue bonds (including 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 to ten 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 issuers 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 states or local governments proportionate share of the tobacco Master Settlement Agreement (MSA) (as described in the section titled Tobacco Related Bonds). 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 revenue 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 issuers 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 states ability (without obligation) to make up deficiencies in the debt service reserve fund.

|X|Private Activity Bonds. The Tax Reform Act of 1986 amended and reorganized the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), including 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 from private activity bonds 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 (i) 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 (ii) 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. Generally 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 dependent solely on the ability of the facilitys 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 Funds 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 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| Auction Rate Securities. Auction rate securities are municipal debt instruments with long-term nominal maturities for which the interest rate is reset at specific shorter frequencies (typically every 7 - 35 days) through a dutch auction process. A dutch auction is a competitive bidding process used to determine rates on each auction date. In a dutch auction, a broker-dealer submits bids, on behalf of current and prospective investors, to the auction agent. The winning bid rate is the rate at which the auction clears, meaning the lowest possible interest rate at which all the securities can be sold at par. This clearing rate is paid on the entire issue for the upcoming period and includes current holders of the auction rate securities. Investors who bid a minimum rate above the clearing rate receive no securities, while those whose minimum bid rates were at or below the clearing rate receive the clearing rate for the next period.

While the auction rate process is designed to permit the holder to sell the auction rate securities in an auction at par value at specified intervals, there is the risk that an auction will fail due to insufficient demand for the securities. Auction rate securities may be subject to changes in interest rates, including decreased interest rates. Failed auctions may impair the liquidity of auction rate securities.

|X|Municipal Lease Obligations. The Funds 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. The Manager may determine that certain municipal leases are liquid under specific guidelines that require the Manager to evaluate:

|_| the number of dealers or other potential buyers willing to purchase or sell such securities;

Municipal leases have special risk considerations. Although lease obligations do not constitute general obligations of the municipality for which the municipalitys taxing power is pledged, a lease obligation is ordinarily backed by the municipalitys 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 Funds 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 states interest in the MSA described below, and (ii) tobacco bonds subject to a states 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 up to 25% of its total assets in tobacco settlement revenue bonds. Tobacco settlement revenue bonds are secured by an issuing states 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 (now three) U.S. tobacco manufacturers (Philip Morris, RJ Reynolds, Brown & Williamson (merged with R.J. Reynolds in 2004), and Lorillard). Subsequently, a number of smaller tobacco manufacturers signed on to the MSA. 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 by 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 Funds 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 states 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 issuers general funds. Appropriation debt differs from a states general obligation debt in that general obligation debt is backed by the states 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 (the Grand River and Freedom Holdings cases in federal court in New York and the Xcaliber case in federal court in Louisiana, each of which is discussed below) have survived initial appellate review of motions to dismiss. Moreover, these three cases and the A.B. Coker case in federal court in Louisiana (discussed below) are the only cases challenging the MSA or related legislation that 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 Grand River and Freedom Holdings, certain decisions by the U.S. Court of Appeals for the Second Circuit have created heightened uncertainty as a result of that courts interpretation of federal antitrust immunity and Commerce Clause doctrines as applied to the MSA and the states MSA-related legislation. The Second Circuits interpretation appears to conflict with interpretations by other courts which have rejected challenges to the MSA and the states MSA-related legislation. Prior district court and appellate decisions in circuits other than the Second Circuit rejecting such challenges (in the Third, Fourth, Fifth, Sixth, Ninth and Tenth Circuits) have concluded that the MSA and the MSA-related legislation do not violate the Commerce Clause of the U.S. Constitution and/or are protected from antitrust challenges based on established antitrust immunity doctrines. In addition, proceedings are pending or on appeal in certain other cases, including two challenged by certain tobacco companies not participating in the MSA in federal court in Louisiana. One case (Xcaliber) alleges, among other things, that the Louisiana MSA-related statute violates the rights of free speech, due process of law and equal protection of the laws guaranteed by the U.S. Constitution and the federal antitrust laws. On March 1, 2006, the U.S. Court of Appeals for the Fifth Circuit vacated the district courts dismissal of the plaintiffs complaint in this case and remanded the case for reconsideration. Following two years of trial motions, the federal district trial was expected to begin in mid-2008. The other case (A.B. Coker) alleges the MSA and Louisianas MSA-related legislation are violations of the Commerce Clause, Due Process Clause and First Amendment of the U.S. Constitution and other federal statutes. In late 2006, the federal district court granted in part and denied in part the defendants motion to dismiss. The court allowed the case to proceed on claims that the MSA and Louisianas related legislation are violations of the Commerce Clause, Due Process Clause and First Amendment of the U.S. Constitution and other federal statutes. A trial date was expected to be set in late 2008.

Such conflicts 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 30 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. These two suits have survived appellate review of motions to dismiss for failure to state a claim upon which relief can be granted. Grand River is in the discovery phase of litigation in preparation for the development of a factual record to support possible findings of fact that may be used by the court in its decision as to the pending claims. The discovery deadline has passed in Freedom Holdings and motions for summary judgment were fully submitted to the court on March 7, 2007, which are pending.

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 Funds outstanding investment.

In addition to the cases identified above, proceedings are pending in federal courts that challenge the MSA and/or the states MSA-related legislation in California, 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 manufacturers ability to make payments under the MSA.

|X| Credit Ratings of Municipal Securities. Ratings by ratings organizations such as Moodys Investors Service, Inc. (Moodys), Standard & Poors Rating Services, a division of the McGraw-Hill Companies, Inc. (Standard & Poors) and Fitch, Inc. (Fitch) represent the respective rating agencys 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.

After the Fund buys a municipal security, the security may cease to be rated or its rating may be reduced. Neither event requires the Fund to sell the security, but the Manager will consider such events in determining whether the Fund should continue to hold the security. To the extent that ratings given by Moodys, Standard & Poors, 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 Funds investment policies.

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

A list of the rating categories of Moodys, Standard & Poors and Fitch for municipal securities is contained in Appendix A to this Statement of Additional Information. Because the Fund also purchases securities that are unrated by nationally recognized rating organizations, the Manager will make its own assessment of the credit quality of those unrated issues. 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 Managers rating does not constitute a guarantee of the quality of a particular issue.

Special Risks of the Funds Investments in Pennsylvania and Other U.S. Territories, Commonwealths and Possessions. A discussion of the special considerations relating to the Funds municipal obligations and other economic conditions is provided in Appendix B to this SAI.

The Fund also invests in municipal securities issued by certain territories, commonwealths and possessions of the United States that pay interest that is exempt (in the opinion of the issuer's legal counsel when the security is issued) from federal income tax and the Funds state personal income tax. Therefore, the Fund's investments could be affected by the fiscal stability of, for example, Puerto Rico, the Virgin Islands or Guam. Additionally, the Funds investments could be affected by economic, legislative, regulatory or political developments affecting issuers in those territories, commonwealths or possessions. A discussion of the special considerations also is provided in Appendix B.

|X| Borrowing and Leverage. The Fund can borrow from banks for investment-related purposes such as purchasing securities that the Manager believes are attractive investments, funding amounts necessary to unwind or "collapse" trusts that issued "inverse floaters" to the Fund, or to contribute to such trusts to enable them to pay for tenders of their short-term securities by the holders. The Fund also can borrow from banks and other lenders to meet redemption obligations or for temporary and emergency purposes. When the Fund invests borrowed funds in portfolio securities, it is using a speculative investment technique known as "leverage." Under the Fund's investment policies, the Fund may not borrow money, except to the extent permitted under the Investment Company Act, the rules or regulations thereunder or any exemption from the Act that applies to the Fund. Currently, under the Investment Company Act, a mutual fund may borrow only from banks (for other than emergency purposes) and the maximum amount it may borrow is up to one-third of its total assets (including the amount borrowed) less all liabilities and indebtedness other than borrowings. When a Fund borrows, it earmarks securities on its books equal to 300% of the amount borrowed to cover its obligation to repay the loan. If the value of the Fund's assets fails to meet this 300% asset coverage requirement, the Fund will reduce its borrowings within three days to meet the requirement. To do so, the Fund might have to sell a portion of its investments at a disadvantageous time.

The Fund may also borrow up to 5% of its total assets for temporary or emergency purposes from any lender. 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 will pay interest on loans, and that interest expense will raise the overall expenses of the Fund and reduce its returns. If the Fund does borrow, its expenses will be greater than comparable funds that do not borrow. In the case of borrowing for leverage, the interest paid on a loan might be more (or less) than the yield on the securities purchased with the loan proceeds. Additionally, borrowing might cause the Fund's net asset value per share to fluctuate more than that of funds that do not borrow.

The Fund participates in a secured line of credit (the "Line of Credit") with certain conduit facilities, Citibank, N.A. ("Citibank"), and other banks. The Line of Credit enables the Fund to participate with certain other Oppenheimer funds in a committed, secured borrowing facility which was increased in October 2008 to permit borrowings of up to $3,000,000,000, in the aggregate by the participants. The Line of Credit is required to be operated in compliance with the terms of an exemptive order issued by the SEC to Citicorp North America, Inc. ("Citicorp"), which acts as agent for the lenders under the Line of Credit. That Line of Credit can be used to purchase securities for investment or for other business purposes. The Fund's Board determined that the Fund's participation in the Line of Credit is consistent with the Fund's investment objective and policies and is in the best interests of the Fund and its shareholders. The Board has adopted procedures that govern the Fund's participation in the Line of Credit. To facilitate the lender's willingness to increase the amount available to the Fund and other affiliated funds that are borrowers under that loan facility, the Manager has used its own resources to fund certain collateral accounts for the potential benefit of Citibank, one of the lenders in connection with another investment program unrelated to the Fund or the loan. The Manager has received no compensation from the Fund or the lender for establishing that collateral account or in connection with the increase in the Line of Credit available to the Fund and its affiliated funds.

Loans are typically secured by assets of the Fund. Liquidity support for loans from the Line of Credit facility is 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. Interest is charged to the Fund, based on its borrowings, at current commercial rates. The Fund has paid its pro rata portion of a loan commitment fee for the Line of Credit and the recent increase thereto, and pays additional fees on its outstanding borrowings annually for the lender to manage and administer the facility. The Fund can prepay such loans and terminate its participation in the Line of Credit at any time upon prior notice. As a borrower under the Line of Credit, the Fund has certain rights and remedies under state and federal law comparable to those it would have with respect to a loan from a bank.

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 and may not use them.

|X| Floating Rate and Variable Rate Obligations. Floating or 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 obligations.

     The interest rate on a floating rate demand note is based on a market rate, such as the percentage of LIBOR, the SIFMA Municipal Swap index or a banks prime rate and is adjusted automatically each time such rate is adjusted. The interest rate on a variable rate demand note is also based on a specified market rate but is adjusted automatically at specified intervals of not more than one year. Generally, the changes in the interest rates 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 Funds quality standards by reason of being backed by a letter of credit or guarantee issued by a bank that meets those quality standards.

     Floating rate and variable rate demand notes that have a stated maturity in excess of one year may have features that permit the holder to recover the principal amount of the underlying security at specified intervals not exceeding one year and upon no more than thirty 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 days are subject to the Funds limitations on investments in illiquid securities.

n 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 expose up to 20% of its total assets to the effects of leverage from its investments in inverse floaters.

An inverse floater is typically created by a trust that divides a fixed-rate municipal security into two securities: a short-term tax-exempt floating rate security (sometimes referred to as a "tender option bond") and a long-term tax-exempt floating rate security (referred to as a "residual certificate" or "inverse floater") that pays interest at rates that move in the opposite direction of the yield on the short-term floating rate security. The purchaser of a "tender option bond" has the right to tender the security periodically for repayment of the principal value. 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.

To facilitate the creation of inverse floaters, the Fund may purchase a fixed-rate municipal security and subsequently transfer it to a broker-dealer (the sponsor), which deposits the municipal security in a trust. The trust issues the residual certificates and short-term floating rate securities. The trust documents enable the Fund to withdraw the underlying bond to unwind or "collapse" the trust (upon tendering the residual certificate and paying the value of the short-term bonds and certain other costs). The Fund may also purchase inverse floaters created by municipal issuers directly or by other parties that have deposited municipal bonds into a sponsored trust.

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 Funds 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 forbearance 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.

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 will 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.

n Percentage of LIBOR Notes (PLNs). The Fund may invest in Percentage of LIBOR Notes (PLNs) which are variable rate municipal securities based on the London Interbank Offered Rate (LIBOR), a widely used benchmark for short-term interest rates and used by banks for interbank loans with other banks. The PLN typically pays interest based on a percentage of a LIBOR rate for a specified time plus an established yield premium. Due to their variable rate features, PLNs will generally pay higher levels of income in a rising interest rate environment and lower levels of income as interest rates decline. In times of substantial market volatility, however, the PLNs may not perform as anticipated. The value of a PLN also may decline due to other factors, such as changes in credit quality of the underlying bond.

The Fund also may invest in PLNs that are created when a broker-dealer/sponsor deposits a municipal bond into a trust created by the sponsor. The trust issues a percentage of LIBOR floating rate certificate (i.e., the PLN) to the Fund and a residual interest certificate to third parties who receive the remaining interest on the bond after payment of the interest distribution to the PLN holder and other fees.

|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 months of the purchase of municipal bonds and notes. However, the Fund may, from time to time, purchase municipal securities having a settlement date more than six months and possibly as long as two years or more after the trade date. The securities are subject to change in value from market fluctuation during the settlement period. The value at delivery may be less than the purchase price. For example, changes in interest rates in a direction other than that expected by the Manager before settlement will affect the value of such securities and may cause loss to the Fund. No income begins to accrue to the Fund on a when-issued security until the Fund receives the security at settlement of the trade.

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

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

At the time the Fund makes a commitment to purchase or sell a security on a when-issued or forward commitment basis, it records the transaction on its books and reflects the value of the security purchased. In a sale transaction, it records the proceeds to be received, in determining its net asset value. 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 issuers 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 Funds 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| 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 Managers opinion, present minimal credit risks. The Funds 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 Funds 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 Funds books as unrealized depreciation while the put or standby commitment is held, and a realized gain or loss when the put or commitment is exercised or expires. Interest income received by the Fund from municipal securities subject to puts or stand-by commitments may not qualify as tax-exempt in its hands if the terms of the put or stand-by commitment cause the Fund not to be treated as the tax owner of the underlying municipal securities.

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

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

Repurchase agreements, considered loans under the Investment Company Act of 1940 (Investment Company Act), are collateralized by the underlying security. The Funds repurchase agreements require that at all times while the repurchase agreement is in effect, the collaterals value must equal or exceed the repurchase price to fully collateralize the repayment obligation. However, if the vendor fails to pay the resale price on the delivery date, the Fund may incur costs in disposing of the collateral and may experience losses if there is any delay in its ability to do so.

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

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

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

|X| Illiquid Securities and Restricted Securities. The Fund has percentage limitations that apply to purchases of illiquid securities, as stated in the Prospectus. Those percentage restrictions do not limit purchases of restricted securities that are eligible for sale to qualified institutional purchasers under Rule 144A of the Securities Act of 1933, if those securities have been determined to be liquid by the Manager. This determination takes into account the trading activity for such securities and the availability of reliable pricing information, among other factors. If there is a lack of trading interest in a particular Rule 144A security, the Funds holdings of that security may be considered to be illiquid. Illiquid securities include repurchase agreements maturing in more than seven days. The Manager determines the liquidity of certain of the Funds investments and monitors holdings of illiquid securities on an ongoing basis to determine whether to sell any holdings to meet percentage restrictions.

The Fund may also acquire restricted securities through private placements. Those restrictions might limit the Funds ability to dispose of the securities and might lower the amount the Fund could realize upon the sale.

|X| Loans of Portfolio Securities or Securities Lending. 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 Funds Board of Trustees. These loans are limited to not more than 25% of the value of the Funds total assets. Income from securities loans does not constitute exempt-interest income for the purpose of paying tax-exempt dividends. The Fund did not engage in any securities lending during its fiscal year ended July 31, 2008.

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

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 Funds 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 Funds other investments. These techniques can cause losses if the counterparty does not perform its promises. An additional risk of investing in municipal securities that are derivative investments is that their market value could be expected to vary to a much greater extent than the market value of municipal securities that are not derivative investments but have similar credit quality, redemption provisions and maturities.

|X| Hedging. The Fund may use hedging to attempt to protect against declines in the market value of its portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities that have appreciated, or to facilitate selling securities for investment reasons. To do so the Fund may:

|_| write covered calls on securities, broadly-based municipal bond indices, interest rate futures or municipal bond index futures.

Covered calls may also be written on debt securities to attempt to increase the Funds income, but that income would not be tax-exempt. Therefore it is unlikely that the Fund would write covered calls for that purpose.

The Fund may also use hedging to establish a position in the debt securities market as a temporary substitute for purchasing individual debt securities. In that case the Fund will normally seek to purchase the securities, and then terminate that hedging position. For this type of hedging, the Fund may:

The Fund is not obligated to use hedging instruments, even though it is permitted to use them in the Managers discretion, as described below. The Funds strategy of hedging with futures and options on futures will be incidental to the Funds 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 Funds 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 Funds custodian bank in an account registered in the futures brokers 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 Funds 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 Funds call writing is subject to a number of restrictions:

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 Funds custodian bank, or a securities depository acting for the custodian bank will act as the Funds 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 Funds 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.

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 Funds receipt of an exercise notice as to that future put the Fund in a short futures position.

|_| Purchasing Puts and Calls. The Fund may buy calls only on securities, broadly-based municipal bond indices, municipal bond index futures and interest rate futures. It may also buy calls to close out a call it has written, as discussed above. Calls the Fund buys must be listed on a securities or commodities exchange, or quoted on NASDAQ, or traded in the over-the-counter market. A call or put option may not be purchased if the purchase would cause the value of all the Funds 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 Funds returns. The Fund could also experience losses if the prices of its futures and options positions were not correlated with its other investments.

The Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds 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. The Fund might experience losses if it could not close out a position because of an illiquid market for a future or option.

|_| 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 Funds 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 Funds 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 partys 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 counterpartys gain or loss on termination. The termination of all swaps and the netting of gains and losses on termination is generally referred to as aggregation.

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

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

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

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

|_| 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 Standard & Poors, or a comparable rating by another nationally recognized rating agency; and

|_| certificates of deposit of domestic banks with assets of $1 billion or more.

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

Liquidity Facility. The Fund can participate in a program offered by ReFlow, LLC (ReFlow) which provides additional liquidity to help the Fund meet shareholder redemptions without having to liquidate portfolio securities or borrow money, each of which impose certain costs on the Fund. ReFlow is designed to provide an alternative source of funding to help meet shareholder redemptions while minimizing the Funds costs and cash flow disruptions (compared to selling portfolio securities or other liquidity facilities such as a line of credit) and allowing the Fund to remain more fully invested. ReFlow provides this liquidity by being prepared to purchase Fund shares, at the Funds closing net asset value, equal to the amount of the Funds net redemptions on any given day. On subsequent days when the Fund experiences net subscriptions, ReFlow redeems its holdings at the Funds net asset value on that day. When the Fund participates in the ReFlow program, it pays ReFlow a fee at a rate determined by a daily auction with other participating mutual funds in the ReFlow program. There is no assurance that ReFlow will have sufficient funds available to meet the Funds liquidity needs on a particular day and ReFlow is prohibited from acquiring more than 3% of the outstanding shares of the Fund.

n Portfolio Turnover. A change in the securities held by the Fund from buying and selling investments is known as portfolio turnover. Short-term trading increases the rate of portfolio turnover and could increase the Funds transaction costs. However, the Fund ordinarily incurs little or no brokerage expense because most of the Funds 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| 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. Taxable investments include, for example, hedging instruments, repurchase agreements, and many of the types of securities it could buy for temporary defensive purposes.

At times, in connection with the restructuring of a municipal bond issuer either outside of bankruptcy court in a negotiated workout or in the context of bankruptcy proceedings, a Fund may determine or be required to accept equity or taxable debt securities from the issuer in exchange for all or a portion of the Funds holdings in the municipal security. Although the Manager will attempt to sell the equity security as soon as reasonably practicable in most cases, depending upon, among other things, the Managers valuation of the potential value of such securities in relation to the price that could be obtained by the Fund at any given time upon sale thereof, the Fund may determine to hold such securities in its portfolio for limited period of time in order to liquidate the equity securities in a manner that maximizes their value to the Fund.

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 Funds 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

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

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

The Fund has the additional operating policies which are stated below, that are not fundamental, and which can be changed by the Board of Trustees without shareholder approval, 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 Funds 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 Statement of Additional Information.

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

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

|_| The Fund cannot 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 Funds 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 diversified fund.

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 Funds 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 a private activity bond is backed only by the assets and revenues of the non-governmental user, then that user would be deemed to be the sole issuer. However, if in either case the creating government or some other entity guarantees a security, the guarantee would be considered a separate security and would be treated as an issue of such government or other entity.

Applying the Restriction Against Concentration. In implementing the Funds policy not to concentrate its investments, the Manager will consider a non-governmental user of facilities financed by private activity 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. 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.

Other types of municipal securities that are not considered a part of any industry under the Funds industry concentration policy include: general obligation, general appropriation, municipal leases, special assessment and special tax bonds. Although these types of municipal securities may be related to certain industries, because they are issued by governments or their political subdivisions rather than non-governmental users, these types of municipal securities are not considered a part of an industry for purposes of the Funds industry concentration policy.

Therefore, the Fund may invest more than 25% of its total assets in these types of municipal securities, which may finance similar types of projects or from which the interest is paid from revenues of similar types of projects. "Similar types of projects" are projects that are related in such a way that economic, business or political developments tend to have the same impact on each similar project. For example, a change that affects one project, such as proposed legislation on the financing of the project, a shortage of the materials needed for the project, or a declining economic need for the project, would likely affect all similar projects, thereby increasing market risk. Thus, market changes that affect a security issued in connection with one project also would affect securities issued in connection with similar types of projects.

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 Funds investment program or enable third parties to use that information in a manner that is harmful to the Fund.

Until publicly disclosed, the Funds portfolio holdings are proprietary, confidential business information. While recognizing the importance of providing Fund shareholders with information about their Funds 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 Funds 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 Funds 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 Funds 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 Funds 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 Funds complete portfolio holdings may be disclosed no sooner than 30-days after the relevant month-end, subject to the procedures below. If the Funds complete portfolio holdings have not been disclosed publicly, they may be disclosed pursuant to special requests for legitimate business reasons, provided that:

The Funds 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 Funds 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:

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 Funds 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 managers investment process for the Fund. Any third party receiving such information must first sign the Managers 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 Managers Securities Valuation Group and Accounting Departments in connection with portfolio pricing or other portfolio evaluation purposes:

Portfolio holdings information (which may include information on the Funds 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:

Portfolio managers and analysts may, subject to the Managers 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 Funds shareholders may, under unusual circumstances (such as a lack of liquidity in the Funds portfolio to meet redemptions), receive redemption proceeds of their Fund shares paid as pro rata shares of securities held in the Funds portfolio. In such circumstances, disclosure of the Funds portfolio holdings may be made to such shareholders.

Any permitted release of otherwise non-public portfolio holdings information must be in accordance with the Funds then-current policy on approved methods for communicating confidential information, including but not limited to the Funds 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 Funds Board on such compliance oversight and on the categories of entities and individuals to which disclosure of portfolio holdings of the Fund has been made during the preceding year pursuant to these policies. The CCO shall report to the Funds Board any material violation of these policies and procedures 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 Funds portfolio holdings. One or more of the Oppenheimer funds may currently disclose portfolio holdings information based on ongoing arrangements to the following parties:

Organization and History. The Fund, a series of Oppenheimer Multi-State Municipal Trust (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:

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

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

The Funds 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 Funds 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).

During the Funds fiscal year ended July 31, 2008, the Audit Committee held 4 meetings, the Regulatory & Oversight Committee held 5 meetings and the Governance Committee held 4 meetings.

The members of the Audit Committee are David K. Downes (Chairman), Phillip A. Griffiths, Mary F. Miller, Russell S. Reynolds, Jr., Joseph M. Wikler and Peter I. Wold. The Audit Committee furnishes the Board with recommendations regarding the selection of the Funds 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 Funds independent Auditors regarding the Funds internal accounting procedures and controls; (iii) reviewing reports from the Managers Internal Audit Department; (iv) maintaining a separate line of communication between the Funds independent Auditors and the Independent Trustees; (v) reviewing the independence of the Funds independent Auditors; and (vi) pre-approving the provision of any audit or non-audit services by the Funds 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 Matthew P. Fink (Chairman), David K. Downes Phillip A. Griffiths, Joel W. Motley, Mary Ann Tynan and Joseph M. Wikler. The Regulatory & Oversight Committee evaluates and reports to the Board on the Funds 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 Committees Charter.
The members of the Governance Committee are Joel W. Motley (Chairman), Matthew P. Fink, Mary F. Miller, Russell S. Reynolds, Jr., Mary Ann Tynan and Peter I. Wold. The Governance Committee reviews the Funds governance guidelines, the adequacy of the Funds Codes of Ethics, develops qualification criteria for Board members consistent with the Funds governance guidelines, provides the Board with recommendations for voting portfolio securities held by the Fund, and monitors the Funds proxy voting, among other duties set forth in the Governance Committees Charter.

The Governance Committees 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 Funds 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 Funds 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 individuals 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 individuals 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):

In addition to being a Board Member of each of the Board I Funds, Messrs. Downes, and Wruble are directors or trustees of ten other portfolios in the Oppenheimer Funds 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. Present or former officers, directors, trustees and employees (and their eligible family members) of the Fund, the Manager and its affiliates, its parent company and the subsidiaries of its parent company, and retirement plans established for the benefit of such individuals, are also permitted to purchase Class Y shares of the Oppenheimer funds that offer Class Y shares.

Messrs. Fielding, Cottier, Loughran, Willis, Stein, Edwards, Legg, Murphy, Petersen, Vandehey, Wixted, and Zack and Mss. Bloomberg, Bullington, Ives and Ruffle who are officers of the Fund, hold the same offices with one or more of the other Board I Funds. As of October 31 , 2008, the Trustees and officers of the Fund, as a group, owned of record or beneficially less than 1% of any class of shares of the Fund. The foregoing statement does not reflect ownership of shares held of record by an employee benefit plan for employees of the Manager, other than the shares beneficially owned under that plan by the officers of the Fund listed above. In addition, none of the Independent Trustees (nor any of their immediate family members), owns securities of either the Manager or Distributor of the Board I Funds or of any entity directly or indirectly controlling, controlled by or under common control with the Manager or Distributor.

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 Trustees 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.

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, 11^th 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.

The addresses of the officers in the chart below are as follows: for Messrs. Fielding, Loughran, Cottier, Willis, Stein, Zack and Edwards and Mses. Bloomberg and Ruffle, Two World Financial Center, 225 Liberty Street, New York, New York 10281-1008, for Messrs. Petersen, Vandehey, Legg and Wixted and Mses. Bullington and 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.

|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 compensation from the Fund, shown below, is for serving as a Trustee and member of a committee (if applicable), with respect to the Funds fiscal year ended July 31, 2008. 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, 2007.

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 Trustees 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). 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 accrued benefit as of that date (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.

Deferral of the Trustees fees under the plan will not materially affect a Funds 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 Trustees deferred compensation account.

|X|Major Shareholders. As of October 31, 2008, 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 Funds outstanding shares were:

MLPF&S for the sole benefit of its customers, Attn. Fund ADMN/#XXX, 4800 Deer Lake Drive East Floor 3, Jacksonville, FL 32246-6484, which owned 545,529.664 Class B shares (5.71% of the Class B shares then outstanding) for the benefit of its customers.

CITIGROUP Global Mkts Inc. ATTN Cindy Tempesta 7^th Fl 333 West 34^th Street, New York NY 1000-2483, which owned 528,614.802 Class B shares (5.53% 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/#XXX, 4800 Deer Lake Drive East Floor 3, Jacksonville, FL 32246-6484, which owned 4,229,099.026 Class C shares (16.76% of the Class C shares then outstanding) for the benefit of its customers.

CITIGROUP Global Mkts Inc. ATTN Cindy Tempesta 7^th Fl 333 West 34^th Street, New York NY 1000-2483, which owned 2,260,043.009 Class C shares (8.96% 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 Funds 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 Funds registration statement filed with the SEC and can be reviewed and copied at the SECs 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 Funds registration statement on the SECs EDGAR database at the SECs 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 SECs Public Reference Section, Washington, D.C. 20549-0102.

|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 Funds 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 Funds 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 Funds 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.

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 Funds right to use the name Oppenheimer as part of its name.

Pending Litigation. During 2009, a number of complaints have been filed in federal courts against the Manager, the Distributor, and the Fund or certain other mutual funds advised by the Manager and distributed by the Distributor. The complaints naming the Fund as a defendant also name certain officers and trustees and former trustees of the Fund. The plaintiffs are seeking class action status on behalf of those who purchased shares of the Fund during a particular time period. The complaints against the Fund raise claims under federal securities laws to the effect that, among other things, the disclosure documents of the Fund contained misrepresentations and omissions, that the Fund's investment policies were not followed, and that the Fund and the other defendants violated federal securities laws and regulations and certain state laws. The plaintiffs seek unspecified damages, equitable relief and an award of attorneys' fees and litigation expenses. The litigations involving certain other Oppenheimer funds are similar in nature.

A complaint brought in state court against the Manager, the Distributor and another subsidiary of the Manager (but not against the Fund), on behalf of the Oregon College Savings Plan Trust alleges a variety of claims, including breach of contract, breach of fiduciary duty, negligence and violation of state securities laws. Plaintiffs seek compensatory damages, equitable relief and an award of attorneys' fees and litigation expenses.

Other complaints have been filed in state and federal courts, by investors who made investments through an affiliate of the Manager, against the Manager and certain of its affiliates, regarding the alleged investment fraud perpetrated by Bernard Madoff and his firm (Madoff). Those lawsuits, in 2008 and 2009, allege a variety of claims, including breach of fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and an award of attorneys' fees and litigation expenses. None of the suits have named the Distributor, any of the Oppenheimer mutual funds or any of their independent Trustees or Directors. None of the Oppenheimer funds invested in any funds or accounts managed by Madoff.

The Manager believes that the lawsuits described above are without legal merit and intends to defend the suits vigorously. The Funds Board of Trustees has also engaged counsel to defend these suits vigorously on behalf of the Fund, the Funds Board and the individual independent Trustees named in those suits. While it is premature to render any opinion as to the likelihood of an outcome in these lawsuits, or whether any costs that the Fund may bear in defending the suits might not be reimbursed by insurance or the Manager, the Manager believes that these suits should not have any material effect on the operations of the Fund and that the outcome of all of the suits together should not impair the ability of the Manager or the Distributor to perform their respective duties to the Fund.

Portfolio Managers. The Funds portfolio is managed by a team of investment professionals including Ronald H. Fielding, Daniel G. Loughran, Scott S. Cottier, Troy E. Willis, Mark R. DeMitry, Marcus V. Franz and Michael L. 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 Funds investments.

Other Accounts Managed. In addition to managing the Funds 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, 2008. No account has a performance-based advisory fee:

2. Does not include personal accounts of portfolio managers and their families, 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 Funds 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 Managers 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 Funds 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 Funds Portfolio Managers are employed and compensated by the Manager, not the Fund. Under the Managers compensation program for its portfolio managers and portfolio analysts, Fund performance is the most important element of compensation with half of annual cash compensation based on relative 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 Managers 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, 2008, 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 Managers holding company parent. Senior portfolio managers may also be eligible to participate in the Managers 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 funds pre-tax performance for periods of up to five years, measured against an appropriate benchmark selected by management. The majority (80%) is based on three and five year data, with longer periods weighted more heavily. Below median performance in all three periods results in an extremely low, and in some cases no, performance based bonus. 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 Funds portfolio assets, although the Funds 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, 2008, the Portfolio Managers did not beneficially own any shares 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 investment advisory agreement contains provisions relating to the employment of broker-dealers to effect the Funds 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 Funds 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 brokerage and/or research services to the Fund and/or the other accounts over which the Manager or its affiliates have investment discretion. The commissions paid to those brokers may be higher than another qualified broker would charge; if the Manager makes a good faith determination that the commission is fair and reasonable in relation to the services provided.

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 and rules described below.

The Managers portfolio managers directly place trades and allocate brokerage based upon their judgment as to the execution capability of the broker or dealer. The Managers 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 funds shares by (1) directing to that broker or dealer any of the funds 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 funds 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 funds brokerage for the purpose of rewarding broker-dealers for selling the funds 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 Funds 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 Managers personnel who effect the Funds portfolio transactions from taking into account a brokers or dealers promotion or sales of the Fund shares when allocating the Funds 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 Funds brokerage directly, or through a step-out arrangement, to any broker or dealer in consideration of that brokers or dealers promotion or sale of the Funds 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 brokers 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, 2006, 2007 and 2008, the Fund paid no brokerage commissions.

The Distributor. Under its General Distributors Agreement with the Fund, the Distributor acts as the Funds principal underwriter in the continuous public offering of the Funds 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 Funds three most recent fiscal years are shown in the tables below:

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.

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 Trustees¹, 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 Funds shares. These payments, some of which may be referred to as revenue sharing, may relate to the Funds inclusion on a financial intermediarys 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 Funds 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 Funds 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 Fund makes these payments quarterly, based on an annual rate of up to 0.15% of the average annual net assets of Class A shares of the Fund. The Board of Trustees can increase that fee to 0.25% of average annual net assets without shareholder approval. 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, 2008 payments under the Class A plan totaled $1,243,143 of which $155 was retained by the Distributor and included $29,841paid to an affiliate of the Distributors 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 Distributors 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 the investor no longer has another broker-dealer of record for an existing account, the Distributor is automatically designated as the broker-dealer of record, but solely for the purpose of acting as the investors 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:

During a calendar year, the Distributors 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 Distributors 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 Funds 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.

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

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

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

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 Funds Prospectus and this Statement of Additional Information. You should ask your financial intermediary for information about any payments it receives from the Fund, the Manager or the Distributor and any services it provides, as well as the fees and commissions it charges.

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

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

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

For the year ended December 31, 2007, the following financial intermediaries and/or their respective affiliates offered shares of the Oppenheimer funds and received revenue sharing or similar distribution-related payments from the Manager or the Distributor for marketing or program support:

For the year ended December 31, 2007, 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:

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 (or distribution 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 Funds performance as of its most recent fiscal year end. You can obtain current performance information by calling the Funds Transfer Agent at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at www.oppenheimerfunds.com.

The Funds 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 Funds performance to the performance of other funds for the same periods. However, a number of factors should be considered before using the Funds performance information as a basis for comparison with other investments:

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 Funds 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 Funds 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:

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 Funds classes of shares will differ for any 30-day period.

Dividend (or Distribution) Yield. The Fund may quote a dividend yield (or distribution 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 (on 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 Funds tax-equivalent yield. It adjusts the Funds 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 Funds current yield (as calculated above) by one minus a stated income tax rate. The result is added to the portion (if any) of the Funds 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).

|X| Total Return Information. There are different types of total returns to measure the Funds 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:

|_| 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:

|_| 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.

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

|_| Lipper Rankings. From time to time the Fund may publish the ranking of the performance of its classes of shares by Lipper, Inc. (Lipper). Lipper is a widely-recognized

independent mutual fund monitoring service. Lipper monitors the performance of regulated investment companies, including the Fund, and ranks their performance for various periods in categories based on investment styles. The Lipper performance rankings are based on total returns that include the reinvestment of capital gain distributions and income dividends but do not take sales charges or taxes into consideration. Lipper also publishes peer-group indices of the performance of all mutual funds in a category that it monitors and averages of the performance of the funds in particular categories.

Morningstar 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 based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a funds 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, Barrons, or similar publications. That information may include performance quotations from other sources, including Lipper and Morningstar. The performance of the Funds 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 Funds 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 Funds 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 Funds 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,

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

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

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

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

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

Letters of Intent. Under a Letter of Intent (a Letter), you may be able to reduce the initial sales charge rate that applies to your Class A share purchases of the Fund if you purchase Class A, Class B or Class C shares of the Fund or other Oppenheimer funds or Class A, Class B, Class C, Class G and Class H units of advisor sold Section 529 plans, for which the Manager or the Distributor serves as the Program Manager or Program Distributor.

A Letter is an investors statement in writing to the Distributor of his or her intention to purchase a specified value of those shares or units during a 13-month period (the Letter period), which begins on the date of the investor's first share purchase following the establishment of the Letter. The sales charge on each purchase of Class A shares during the Letter period will be at the rate that would apply to a single lump-sum purchase of shares in the amount intended to be purchased. In submitting a Letter, the investor makes no commitment to purchase shares. However, if the investor does not fulfill the terms of the Letter within the Letter period, he or she agrees to pay the additional sales charges that would have been applicable to any purchases that are made. The investor agrees that shares equal in value to 2% of the intended purchase amount will be held in escrow by the Transfer Agent for that purpose, as described in "Terms of Escrow" below. It is the responsibility of the dealer of record and/or the investor to advise the Distributor about the Letter when placing purchase orders during the Letter period. The investor must also notify the Distributor or his or her financial intermediary of any qualifying 529 plan holdings.

To determine whether an investor has fulfilled the terms of a Letter, the Transfer Agent will count purchases of "qualified" Class A, Class B and Class C shares and Class A, Class B, Class C, Class G and Class H units during the Letter period. Purchases of Class N or Class Y shares, purchases made by reinvestment of dividends or capital gains distributions from the Fund or other Oppenheimer funds, purchases of Class A shares with redemption proceeds under the Reinvestment Privilege, and purchases of Class A shares of Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves on which a sales charge has not been paid do not count as "qualified" shares for satisfying the terms of a Letter. An investor will also be considered to have fulfilled the Letter if the value of the investors total holdings of qualified shares on the last day of the Letter period, calculated at the net asset value on that day, equals or exceeds the intended purchase amount.

If the terms of the Letter are not fulfilled within the Letter period, 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 on the first business day following the expiration of the Letter period to reflect the sales charge rates that are applicable to the actual total purchases.
If the total eligible purchases made during the Letter period exceed the intended purchase amount and also exceed the amount needed to qualify for the next sales charge rate reduction (stated in the Prospectus), the sales charges paid may be adjusted to that lower rate. That adjustment will only be made if and when the dealer returns to the Distributor the amount of the excess concessions allowed or paid to the dealer over the amount of concessions that are applicable to the actual amount of purchases. The reduced sales charge adjustment will be made by adding to the investors account the number of additional shares that would have been purchased if the lower sales charge rate had been used. Those additional shares will be determined using the net asset value per share in effect on the date of such adjustment.
By establishing a Letter, the investor agrees to be bound by the terms of the Prospectus, this Statement of Additional Information and the application used for a Letter, and if those terms are amended to be bound by the amended terms and that any amendments by the Fund will apply automatically to existing Letters. Group retirement plans qualified under section 401(a) of the Internal Revenue Code may not establish a Letter, however defined benefit plans and Single K sole proprietor plans may do so.

1. Out of the initial purchase, or out of subsequent purchases if necessary, the Transfer Agent will hold in escrow Fund shares equal to 2% of the intended purchase amount specified in the Letter. For example, if the intended purchase amount is $50,000, the escrow amount would be shares valued at $1,000 (computed at the offering price for a $50,000 share purchase). Any dividends and capital gains distributions on the escrowed shares will be credited to the investors account.

2. If the Letter applies to more than one fund account, the investor can designate the fund from which shares will be escrowed. If no fund is selected, the Transfer Agent will escrow shares in the fund account that has the highest dollar balance on the date of the first purchase under the Letter. If there are not sufficient shares to cover the escrow amount, the Transfer Agent will escrow shares in the fund account(s) with the next highest balance(s). If there are not sufficient shares in the accounts to which the Letter applies, the Transfer Agent may escrow shares in other accounts that are linked for Right of Accumulation purposes. Additionally, if there are not sufficient shares available for escrow at the time of the first purchase under the Letter, the Transfer Agent will escrow future purchases until the escrow amount is met.

3. If, during the Letter period, an investor exchanges shares of the Fund for shares of another fund (as described in the Prospectus section titled How to Exchange Shares), the Fund shares held in escrow will automatically be exchanged for shares of the other fund and the escrow obligations will also be transferred to that fund.

4. If the total purchases under the Letter are less than the intended purchases specified, on the first business day after the end of the Letter period the Distributor will redeem escrowed shares equal in value to the difference between the dollar amount of the sales charges actually paid and the amount of the sales charges that would have been paid if the total purchases had been made at a single time. Any shares remaining after such redemption will be released from escrow.

5. If the terms of the Letter are fulfilled, the escrowed shares will be promptly released to the investor at the end of the Letter period.

6. 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.

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 Funds 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 Funds 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 investors 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 Funds 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 Funds 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 Funds 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:

To access account documents electronically via eDocs Direct, please visit the Service Center on our website at www.oppenheimerfunds.comand click the hyperlink Sign Up for Electronic Document Delivery under the heading I Want To, or call 1.888.470.0862 for instructions.

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

Dealers other than NYSE members may conduct trading in 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 Funds net asset values will not be calculated on those days, the Funds net asset values per share may be significantly affected on such days when shareholders may not purchase or redeem shares.

n Securities Valuation. The Funds Board of Trustees has established procedures for the valuation of the Funds securities. In general those procedures are as follows:

In the case of municipal securities, the Manager uses 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.

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 shareholders 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 Funds 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:

Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of redemption proceeds may be delayed if the Funds 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 Funds 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:

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. This reinvestment privilege does not apply to reinvestment purchases made through automatic investment options.

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 shareholders 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.

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

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

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

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

n 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 that offer the exchange privilege on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount that may be exchanged to each other fund account is $50. Instructions should be provided on the OppenheimerFunds Application or signature-guaranteed instructions. Exchanges made under these plans are subject to the restrictions that apply to exchanges as set forth in How to Exchange Shares in the Prospectus and below in this Statement of Additional Information.

n 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 investors 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 investors 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.

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. The prospectus of each of the Oppenheimer funds indicates which share class or classes that fund offers and provides information about limitations on the purchase of particular share classes, as applicable for the particular fund. You can also obtain a current list showing which funds offer which classes of shares by calling the Distributor at the telephone number indicated on the front cover of this SAI.
The Fund may amend, suspend or terminate the exchange privilege at any time. Although the Fund may impose those changes at any time, it will provide you with notice of the 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, except 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:

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.

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

|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 Statement of Additional Information, or would include shares covered by a share certificate that is not tendered with the request. In those cases, only the shares available for exchange without restriction will be exchanged.

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

Dividends 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 banks 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 Funds practice of attempting to pay dividends on Class A shares at a constant level requires the Manager to monitor the Funds 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 Funds 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.

If a dividend check or check representing an automatic withdrawal payment is returned to the Transfer Agent by the Postal Service as undeliverable, it will be reinvested in shares of the Fund. Returned checks for the proceeds of other redemptions 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. Unclaimed accounts may be subject to state escheatment laws, and the Fund and the Transfer Agent will not be liable to shareholders or their representatives for compliance with those laws in good faith.

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

The tax discussion in the Prospectus and this Statement of Additional Information is based on tax law in effect on the date of the Prospectus and this Statement of Additional Information. Those laws and regulations may be changed by legislative, judicial, or administrative action, sometimes with retroactive effect. State and local tax treatment of exempt-interest dividends and potential capital gain distributions from regulated investment companies may differ from the treatment under the Internal Revenue Code described below. Potential purchasers of shares of the Fund are urged to consult their tax advisors 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 Funds dividends would be taxable to shareholders.

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

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

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 Funds taxable year, at least 50% of the value of the Funds 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 Funds 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 Funds total assets may be invested in the securities of any one issuer (other than U.S. government securities and securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses, or in the securities 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 gains 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.

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 Funds distributions will be treated as dividends to the extent paid from the Funds earnings and profits (as determined under the Internal Revenue Code). Distributions in excess of a Funds earnings and profits will first reduce the adjusted tax basis of a shareholders 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 Funds 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 Funds 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 Funds 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 Funds 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 shareholders 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 corporations adjusted current earnings, which more closely reflect a corporations economic income. Because an exemptinterest 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 shareholders 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);

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 Funds distributions are derived from income on debt securities, they will not be qualified dividend income. Consequently, the Funds 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 shareholders 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 shareholders 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 shareholders 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 shareholders 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 persons income from the Fund is effectively connected with the conduct of a U.S. trade or business. Typically, ordinary income dividends paid (not including exempt-interest dividends paid by the Fund) from a mutual fund are not considered effectively connected income.

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

If the ordinary income dividends from the Fund are effectively connected with the conduct of a U.S. trade or business, then the foreign person may claim an exemption from the U.S. tax described above provided the Fund obtains a properly completed Certificate of Foreign Status.

If the foreign person fails to provide a certification of his or her foreign status, the Fund will be required to withhold U.S. tax at a rate of 28% on ordinary income dividends (not including exempt-interest dividends), capital gains distributions (including short-term and long-term) and the proceeds of the redemption of shares, paid to any foreign person. Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury and all income and any tax withheld is identified in reports mailed to shareholders in January of each year with a copy sent to the IRS.

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

The Distributor. The Funds 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 Funds 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 Funds Transfer Agent, is a division of the Manager. It is responsible for maintaining the Funds 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 Funds assets. The custodians responsibilities include safeguarding and controlling the Funds 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 Funds cash balances with the custodian in excess of $100,000 are not protected by federal deposit insurance. Those uninsured balances at times may be substantial.

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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, 2008, 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 Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of July 31, 2008, 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, 2008, 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.

/s/ KPMG LLP

Denver, Colorado
September 16, 2008

STATEMENT OF INVESTMENTS July 31, 2008


Principal
Amount		Coupon		Maturity		Value

Municipal Bonds and Notes121.4%
Pennsylvania87.2%
$	10,000		Allegheny County, PA COP¹		5.000	%	12/01/2028	$	10,008
	24,475,000		Allegheny County, PA GO²		2.415	³	11/01/2026	21,264,099
	15,550,000		Allegheny County, PA GO²	5.000	11/01/2032	15,640,481
	275,000		Allegheny County, PA GO⁴		2.415	³	11/01/2026	238,906
	130,000		Allegheny County, PA HDA (Catholic Health East)¹	5.375	11/15/2022	130,309
	75,000		Allegheny County, PA HDA (Catholic Health East)¹	5.500	11/15/2032	73,906
	80,000		Allegheny County, PA HDA (Jefferson Regional Medical Center)¹	5.125	05/01/2025	75,648
	25,000		Allegheny County, PA HDA (Jefferson Regional Medical Center)	5.125	05/01/2029	23,262
	3,150,000		Allegheny County, PA HDA (Ohio Valley General Hospital)¹	5.125	04/01/2035	2,688,966
	3,600,000		Allegheny County, PA HDA (Ohio Valley General Hospital)¹	5.450	01/01/2028	3,366,684
	55,000		Allegheny County, PA HDA (Pittsburgh Mercy Health System)¹	5.625	08/15/2026	58,351
	25,000		Allegheny County, PA HDA (The Covenant at South Hills)^4,5	7.700	02/01/2009	12,795
	25,000		Allegheny County, PA HDA (The Covenant at South Hills)^4,5	7.800	02/01/2009	12,795
	1,535,000		Allegheny County, PA HDA (The Covenant at South Hills)^4,5	8.625	02/01/2021	785,613
	305,000		Allegheny County, PA HDA (The Covenant at South Hills)^4,5	8.750	02/01/2031	156,099
	21,000,000		Allegheny County, PA HDA (UPMC Health System)²		2.750	³	02/01/2037	15,277,500
	95,000		Allegheny County, PA HDA (UPMC Health System)⁴		2.745	³	02/01/2037	69,113
	5,000		Allegheny County, PA HDA (UPMC Health System)¹	5.000	11/01/2016	5,077
	10,000		Allegheny County, PA HDA (UPMC Health System)¹	5.000	12/15/2018	10,266
	20,000		Allegheny County, PA HDA (UPMC Health System)¹	5.000	11/01/2023	20,163
	50,000		Allegheny County, PA HEBA (Chatham College)¹	5.250	11/15/2019	49,244
	2,020,000		Allegheny County, PA HEBA (Chatham College)¹	5.750	11/15/2028	2,007,840
	8,000,000		Allegheny County, PA HEBA (Chatham College)¹	5.750	11/15/2035	7,837,440
	955,000		Allegheny County, PA HEBA (Chatham College)¹	5.850	03/01/2022	961,675
	1,000,000		Allegheny County, PA HEBA (Chatham College)¹	5.950	03/01/2032	1,002,490
	15,000		Allegheny County, PA HEBA (Robert Morris University)	6.000	05/01/2028	14,887
	115,000		Allegheny County, PA HEBA (Thiel College)	5.375	11/15/2019	111,583
	110,000		Allegheny County, PA HEBA (Thiel College)	5.375	11/15/2029	97,621
	3,245,000		Allegheny County, PA HEBA (Waynesburg College)¹	4.800	05/01/2036	2,745,432
	10,000		Allegheny County, PA IDA (ARC Allegheny Foundation)¹	5.000	12/01/2028	8,898
	1,000,000		Allegheny County, PA IDA (RR/RRSW/RRDC Obligated Group)	5.000	09/01/2021	932,950
	1,250,000		Allegheny County, PA IDA (RR/RRSW/RRDC Obligated Group)	5.100	09/01/2026	1,135,150
	1,500,000		Allegheny County, PA IDA (RR/RRSW/RRDC Obligated Group)	5.125	09/01/2031	1,327,665

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	100,000		Allegheny County, PA IDA (USX Corp.)¹		5.500	%	12/01/2029	$	95,324
	400,000		Allegheny County, PA IDA (USX Corp.)¹	5.600	09/01/2030	372,452
	25,000		Allegheny County, PA IDA (USX Corp.)¹	6.000	01/15/2014	25,058
	270,000		Allegheny County, PA IDA (USX Corp.)¹	6.100	01/15/2018	270,745
	20,000		Allegheny County, PA IDA (USX Corp.)¹	6.100	07/15/2020	20,014
	2,170,000		Allegheny County, PA Redevel. Authority (Pittsburgh Mills)	5.100	07/01/2014	2,165,421
	23,750,000		Allegheny County, PA Redevel. Authority (Pittsburgh Mills)	5.600	07/01/2023	22,719,488
	255,000		Allegheny County, PA Redevel. Authority (Robinson Mall)	6.875	11/01/2017	262,553
	7,545,000		Allegheny County, PA Redevel. Authority (Robinson Mall)	7.000	11/01/2017	7,940,358
	1,780,000		Allegheny County, PA Residential Finance Authority (Broadview Manor Apartments)	5.950	01/20/2043	1,601,252
	3,110,000		Allegheny County, PA Residential Finance Authority (Cambridge Square Apartments)¹	4.600	01/15/2037	2,750,795
	1,370,000		Allegheny County, PA Residential Finance Authority (Independence House Apartments)	6.100	01/20/2043	1,259,934
	365,000		Allegheny County, PA Residential Finance Authority (Single Family Mtg.)¹	4.850	11/01/2028	319,240
	1,975,000		Allegheny County, PA Residential Finance Authority (Single Family Mtg.)¹	4.950	11/01/2037	1,652,641
	1,200,000		Allegheny County, PA Residential Finance Authority (Single Family Mtg.)¹	5.000	05/01/2035	1,036,752
	450,000		Allegheny County, PA Residential Finance Authority (Single Family Mtg.)¹	5.150	11/01/2016	452,705
	1,780,000		Allegheny County, PA Residential Finance Authority (Versailles Apartments)	6.160	01/20/2043	1,651,288
	4,000,000		Allegheny, PA Airport Authority (Pittsburgh International Airport)¹	5.000	01/01/2018	3,932,080
	5,000		Armstrong County, PA IDA (Kittanning Care Center)¹	5.375	08/20/2012	5,303
	5,000		Beaver County, PA Hospital Authority (Valley Health System)¹	5.000	05/15/2028	5,006
	135,000		Beaver County, PA IDA (J. Ray McDermott and Company)¹	6.800	02/01/2009	135,316
	280,000		Beaver County, PA IDA (Pennsylvania Power and Light Company)¹	5.375	06/01/2028	267,330
	10,000		Bedford County, PA IDA (Brown Group)	7.125	02/01/2009	10,002
	300,000		Berks County, PA Municipal Authority (RHMC/HW Obligated Group)¹	5.000	03/01/2028	297,399
	50,000		Blair County, PA IDA (The Village at Penn State Retirement Community)	6.400	01/01/2012	50,513
	4,140,000		Blair County, PA IDA (The Village at Penn State Retirement Community)	6.900	01/01/2022	4,192,288
	7,135,000		Blair County, PA IDA (The Village at Penn State Retirement Community)	7.000	01/01/2034	7,215,840


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	50,000		Blair County, PA IDA (The Village at Penn State Retirement Community)^4,5,6		10.000	%	01/01/2012	$	3,585
	500,000		Bonneauville Borough, PA Municipal Authority¹	5.000	06/01/2027	465,820
	1,580,000		Bonneauville Borough, PA Municipal Authority¹	5.250	06/01/2037	1,436,331
	2,000,000		Bonneauville Borough, PA Municipal Authority	5.300	06/01/2043	1,816,180
	5,500,000		Bradford County, PA IDA (International Paper Company)¹	5.200	12/01/2019	4,958,030
	270,000		Bucks County, PA IDA (Chandler Hall Health Care Facility)	5.700	05/01/2009	268,680
	1,000,000		Bucks County, PA IDA (Chandler Hall Health Care Facility)	6.200	05/01/2019	952,220
	10,000		Bucks County, PA IDA (Chandler Hall Health Care Facility)¹	6.300	05/01/2029	9,273
	1,000,000		Bucks County, PA IDA (Lutheran Community Telford Center)	5.750	01/01/2027	903,200
	8,000,000		Bucks County, PA IDA (Pennsylvania Suburban Water Company)²	5.550	09/01/2032	7,731,760
	255,000		Bucks County, PA IDA (Pennsylvania Suburban Water Company)¹	5.550	09/01/2032	246,447
	80,000		Bucks County, PA IDA (USX Corp.)¹	5.600	03/01/2033	76,057
	5,000		Butler County, PA Hospital Authority (Butler Memorial Hospital)¹	5.250	07/01/2012	5,010
	145,000		Butler County, PA Hospital Authority (Butler Memorial Hospital)¹	5.250	07/01/2016	145,300
	80,000		Butler County, PA Hospital Authority (Butler Memorial Hospital)¹	5.250	07/01/2016	80,166
	480,000		Butler County, PA IDA (Greenview Gardens Apartments)¹	6.000	07/01/2023	482,798
	880,000		Butler County, PA IDA (Greenview Gardens Apartments)¹	6.250	07/01/2033	874,993
	200,000		Cambridge, PA Area Joint Authority¹	5.250	12/01/2021	200,296
	2,865,000		Cambridge, PA Area Joint Authority⁷	6.000	12/01/2037	2,821,968
	4,040,000		Carbon County, PA IDA (Panther Creek Partners)¹	6.650	05/01/2010	4,115,306
	10,000		Carbondale, PA Hsg. Corp.¹	8.125	05/01/2019	10,278
	900,000		Chartiers Valley, PA Industrial & Commercial Devel. Authority (Asbury Health Center)	5.750	12/01/2022	816,525
	7,890,000		Chester County, PA H&EFA (Chester County Hospital)¹	5.875	07/01/2016	7,911,303
	700,000		Chester County, PA H&EFA (Chester County Hospital)¹	6.750	07/01/2031	716,933
	245,000		Chester County, PA H&EFA (Devereaux Foundation)¹	5.500	05/01/2027	246,548
	25,000		Chester County, PA H&EFA (Immaculata College)¹	5.300	10/15/2011	25,011
	30,000		Chester County, PA H&EFA (Immaculata College)¹	5.400	10/15/2012	30,009
	65,000		Chester County, PA H&EFA (Immaculata College)¹	5.600	10/15/2018	63,151
	25,000		Chester County, PA H&EFA (Immaculata College)¹	5.625	10/15/2027	22,579
	45,000		Chester County, PA H&EFA (Jefferson Health System)¹	5.250	05/15/2022	45,515
	330,000		Chester County, PA H&EFA (Jefferson Health System)¹	5.375	05/15/2027	331,172
	2,040,000		Chester County, PA IDA (Collegium Charter School)¹	5.500	04/15/2031	1,559,050
	23,915,000		Chester County, PA IDA Water Facilities Authority (Aqua Pennsylvania)	5.000	02/01/2041	21,089,682

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	1,000,000		Clarion County, PA Hospital Authority (Clarion Hospital)¹		5.750	%	07/01/2012	$	995,730
	15,000		Clarion County, PA Hospital Authority (Clarion Hospital)¹	5.750	07/01/2017	15,031
	800,000		Crawford County, PA Hospital Authority (Wesbury United Methodist Community)¹	6.125	08/15/2019	771,240
	1,000,000		Cumberland County, PA Municipal Authority (Diakon Lutheran Ministries)	5.000	01/01/2027	872,740
	5,000,000		Cumberland County, PA Municipal Authority (Diakon Lutheran Ministries)	5.000	01/01/2036	4,181,900
	1,000,000		Cumberland County, PA Municipal Authority (Presbyterian Homes)¹	5.000	12/01/2020	965,120
	1,950,000		Cumberland County, PA Municipal Authority (Presbyterian Homes)¹	5.000	12/01/2021	1,867,457
	6,605,000		Delaware County, PA Authority (Cabrini College)¹	5.500	07/01/2024	6,380,562
	60,000		Delaware County, PA Authority (CCMC)¹	5.300	12/01/2027	54,085
	2,500,000		Delaware County, PA Authority (CCMC/CKHS/DCMH Obligated Group)¹	5.000	12/15/2026	2,103,375
	15,000		Delaware County, PA Authority (CCMC/CKHS/DCMH Obligated Group)¹	5.375	12/01/2018	14,373
	25,000		Delaware County, PA Authority (CCMC/CKHS/DCMH Obligated Group)¹	6.250	12/15/2022	28,066
	25,000		Delaware County, PA Authority (CCMC/CKHS/DCMH Obligated Group)¹	6.250	12/15/2031	28,066
	120,000		Delaware County, PA Authority (MAS/MCMCSPA/ MHH/MHP/MHSSPA Obligated Group)¹	5.375	11/15/2023	125,350
	1,360,000		Delaware County, PA Authority (Neumann College)¹	6.000	10/01/2025	1,377,938
	2,530,000		Delaware County, PA Authority (Neumann College)¹	6.000	10/01/2031	2,535,870
	1,000,000		Delaware County, PA Authority (Neumann College)¹	6.125	10/01/2034	1,014,250
	3,000,000		Delaware County, PA Authority (Neumann College)	6.250	10/01/2038	3,039,570
	11,055,000		Delaware County, PA IDA (Aqua Pennsylvania)¹	5.000	11/01/2037	9,801,363
	18,900,000		Delaware County, PA IDA (Aqua Pennsylvania)	5.000	11/01/2038	16,704,954
	4,580,000		Delaware County, PA IDA (Naamans Creek)	7.000	12/01/2036	4,537,956
	5,370,000		Delaware County, PA IDA (Pennsylvania Suburban Water Company)¹	5.150	09/01/2032	4,941,957
	45,000		Delaware County, PA IDA (Philadelphia Suburban Water Company)¹	5.350	10/01/2031	42,521
	45,000		Delaware County, PA IDA (Philadelphia Suburban Water Company)¹	6.000	06/01/2029	45,104
	50,000		Delaware River Port Authority PA/NJ¹	5.000	01/01/2026	50,039
	10,000		Derry Township, PA GO¹	5.700	09/15/2013	10,027
	25,000		Derry Township, PA Municipal Authority	5.100	12/01/2020	25,048
	15,000		East Hempfield Township, PA IDA (Homestead Village)	6.375	11/01/2023	13,770
	140,000		Erie County, PA IDA (International Paper Company)¹	5.000	11/01/2018	125,563


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	10,000		Erie County, PA IDA (International Paper Company)¹		5.850	%	12/01/2020	$	9,514
	3,000,000		Erie, PA Higher Education Building Authority (Mercyhurst College)¹	5.500	03/15/2038	2,824,740
	2,505,000		Erie-Western PA Port Authority	5.125	06/15/2016	2,522,911
	60,000		Falls Township, PA Hospital Authority (Delaware Valley Medical Center)¹	7.000	08/01/2022	60,475
	25,000		Ferndale, PA Area School District GO¹	6.750	07/15/2009	25,096
	45,000		Franklin County, PA IDA (The Chambersburg Hospital)¹	5.000	07/01/2022	45,012
	10,000		Gettysburg, PA Municipal Authority (Gettysburg College)¹	5.000	08/15/2023	10,035
	35,000		Grove City, PA Area Hospital Authority (United Community Hospital)¹	5.250	07/01/2012	35,006
	10,000		Grove City, PA Area Hospital Authority (United Community Hospital)¹	5.250	07/01/2012	10,002
	1,000,000		Harveys Lake, PA General Municipal Authority (Misericordia University)	6.000	05/01/2019	1,005,440
	7,220,000		Horsham, PA Industrial and Commercial Devel. Authority (Pennsylvania LTC)	6.000	12/01/2037	6,231,293
	40,000		Indiana County, PA IDA Pollution Control (Metropolitan Edison Company)¹	5.950	05/01/2027	40,075
	115,000		Indiana County, PA IDA Pollution Control (PSEG Power LLC)¹	5.850	06/01/2027	106,513
	10,000		Lancaster County, PA Hospital Authority (Lancaster General Hospital)	5.500	03/15/2026	11,049
	25,000		Lancaster County, PA Hospital Authority (Landis Homes Retirement Community)	5.700	09/01/2018	23,408
	20,000		Lancaster County, PA Hospital Authority (Landis Homes Retirement Community)	5.750	09/01/2023	18,124
	25,000		Lancaster County, PA Hospital Authority (St. Annes Home for the Aged)	6.500	04/01/2015	25,017
	25,000		Lancaster County, PA Solid Waste Management Authority¹	5.000	12/15/2014	25,156
	10,000		Latrobe, PA IDA (St. Vincent College)¹	5.375	05/01/2013	10,408
	10,000		Latrobe, PA IDA (St. Vincent College)¹	5.375	05/01/2018	10,015
	35,000		Latrobe, PA IDA (St. Vincent College)¹	5.700	05/01/2031	34,514
	14,025,000		Lawrence County, PA IDA (Shenango Presbyterian Center)	5.625	11/15/2037	11,501,903
	1,020,000		Lehigh County, PA GPA (Bible Fellowship Church Home)¹	6.000	12/15/2023	954,353
	1,060,000		Lehigh County, PA GPA (Bible Fellowship Church Home)	7.625	11/01/2021	1,113,021
	750,000		Lehigh County, PA GPA (Bible Fellowship Church Home)	7.750	11/01/2033	788,693
	1,265,000		Lehigh County, PA GPA (Kidspeace Obligated Group)	5.800	11/01/2012	1,239,434
	2,000,000		Lehigh County, PA GPA (Kidspeace Obligated Group)	6.000	11/01/2018	1,847,600
	8,190,000		Lehigh County, PA GPA (Kidspeace Obligated Group)¹	6.000	11/01/2018	7,565,922
	3,600,000		Lehigh County, PA GPA (Kidspeace Obligated Group)	6.000	11/01/2023	3,165,732

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	1,100,000		Lehigh County, PA GPA (Kidspeace Obligated Group)¹		6.000	%	11/01/2023	$	967,307
	115,000		Lehigh County, PA GPA (Lehigh Valley Hospital)¹	5.625	07/01/2015	115,277
	250,000		Lehigh County, PA Water Authority	5.000	11/01/2019	250,418
	650,000		Lehigh, PA Northampton Airport Authority (Lehigh Valley International Airport)¹	5.000	01/01/2021	619,320
	10,000		Luzerne County, PA Flood Protection Authority¹	5.000	01/15/2023	10,003
	22,510,000		Luzerne County, PA IDA (Pennsylvania-American Water Company)¹	5.100	09/01/2034	20,561,309
	170,000		Lycoming County, PA Hospital Authority (MVH/DPH Obligated Group)¹	5.250	11/15/2015	170,223
	30,000		Lycoming County, PA Hospital Authority (MVH/DPH Obligated Group)¹	5.500	11/15/2022	30,052
	70,000		Lycoming County, PA Hospital Authority (WH/NCPHS Obligated Group)¹	5.250	11/15/2015	70,092
	50,000		Lycoming County, PA Hospital Authority (WH/NCPHS Obligated Group)¹	5.375	11/15/2010	50,114
	30,000		Mars, PA Area School District¹	5.000	09/01/2027	30,077
	2,730,000		McKean County, PA Hospital Authority (Bradford Hospital)	5.000	10/01/2020	2,392,190
	2,900,000		McKean County, PA Hospital Authority (Bradford Hospital)	5.250	10/01/2030	2,375,970
	645,000		Millcreek, PA Richland Joint Authority¹	5.250	08/01/2022	611,899
	1,355,000		Millcreek, PA Richland Joint Authority¹	5.375	08/01/2027	1,275,841
	875,000		Millcreek, PA Richland Joint Authority¹	5.375	08/01/2027	823,883
	1,000,000		Millcreek, PA Richland Joint Authority¹	5.500	08/01/2037	903,840
	2,445,000		Millcreek, PA Richland Joint Authority¹	5.500	08/01/2037	2,209,889
	75,000		Monroe County, PA Hospital Authority (Pocono Medical Center)¹	5.625	01/01/2032	70,319
	10,000		Montgomery County, PA HEHA (Abington Memorial Hospital)¹	5.000	06/01/2028	9,766
	20,000		Montgomery County, PA HEHA (Abington Memorial Hospital)¹	5.125	06/01/2027	19,194
	20,000		Montgomery County, PA HEHA (Abington Memorial Hospital)¹	5.125	06/01/2032	18,657
	110,000		Montgomery County, PA HEHA (Holy Redeemer Health System)¹	5.250	10/01/2023	111,254
	50,000		Montgomery County, PA HEHA (Holy Redeemer Health System)¹	5.250	10/01/2027	47,786
	80,000		Montgomery County, PA HEHA (Holy Redeemer Physician & Ambulatory Services)¹	5.250	10/01/2023	80,912
	900,000		Montgomery County, PA IDA (ACTS Retirement Life Community)¹	5.250	11/15/2028	824,274


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	270,000		Montgomery County, PA IDA (Pennsylvania-American Water Company)		5.050	%	06/01/2029	$	243,203
	3,840,000		Montgomery County, PA IDA (Wordsworth Academy)¹	8.000	09/01/2024	3,842,880
	80,000		New Morgan, PA IDA (Browning-Ferris Industries)¹	6.500	04/01/2019	78,630
	2,085,000		New Wilmington, PA Municipal Authority (Westminster College)¹	5.000	05/01/2027	1,875,854
	135,000		Northampton County, PA Higher Education Authority (Lafayette College)¹	5.000	11/01/2027	135,231
	170,000		Northampton County, PA IDA (Moravian Hall Square)¹	5.350	07/01/2010	170,170
	25,000		Northampton County, PA IDA (Moravian Hall Square)¹	5.550	07/01/2014	25,011
	40,000		Northampton County, PA IDA (Moravian Hall Square)¹	5.700	07/01/2020	39,996
	390,000		Northeastern PA Hospital & Education Authority (WVHCS)¹	5.250	01/01/2026	390,569
	830,000		Northumberland County, PA IDA (Aqua Pennsylvania)	5.050	10/01/2039	739,032
	1,205,000		Northumberland County, PA IDA (NHS Youth Services)	5.500	02/15/2033	1,018,611
	1,795,000		Northumberland County, PA IDA (NHS Youth Services)	7.500	02/15/2029	1,851,309
	3,800,000		Northumberland County, PA IDA (NHS Youth Services)	7.750	02/15/2029	3,968,530
	11,400,000		PA EDFA (30th Street Garage)¹	5.875	06/01/2033	10,533,144
	50,000		PA EDFA (Amtrak)¹	6.000	11/01/2011	51,557
	250,000		PA EDFA (Amtrak)¹	6.125	11/01/2021	251,883
	5,005,000		PA EDFA (Amtrak)¹	6.250	11/01/2031	4,935,030
	12,445,000		PA EDFA (Amtrak)	6.375	11/01/2041	12,400,820
	40,000,000		PA EDFA (Bionol Clearfield)	8.500	07/15/2015	37,938,000
	500,000		PA EDFA (Fayette Thermal)	5.250	12/01/2016	455,865
	35,000		PA EDFA (Fayette Thermal)	5.500	12/01/2021	30,728
	14,700,000		PA EDFA (National Gypsum Company)	6.125	11/02/2027	12,451,635
	5,000,000		PA EDFA (National Gypsum Company)¹	6.250	11/01/2027	4,297,700
	4,100,000		PA EDFA (Northampton Generating)¹	6.400	01/01/2009	4,086,921
	8,515,000		PA EDFA (Northampton Generating)¹	6.500	01/01/2013	8,310,640
	21,800,000		PA EDFA (Northampton Generating)¹	6.600	01/01/2019	21,797,166
	1,200,000		PA EDFA (Northampton Generating)	6.875	01/01/2011	1,172,916
	12,000,000		PA EDFA (Northampton Generating)	6.950	01/01/2021	10,831,080
	45,000		PA EDFA (Northwestern Human Services)¹	5.125	06/01/2018	40,349
	3,000,000		PA EDFA (Northwestern Human Services)¹	5.250	06/01/2028	2,467,740
	10,000,000		PA EDFA (Reliant Energy)¹	6.750	12/01/2036	10,048,900
	8,000,000		PA EDFA (Reliant Energy)¹	6.750	12/01/2036	8,039,120
	2,000,000		PA EDFA (Reliant Energy)¹	6.750	12/01/2036	2,009,780
	21,500,000		PA EDFA (Reliant Energy/Reliant Seward Obligated Group)¹	6.750	12/01/2036	21,605,135
	57,825,000		PA EDFA (USG Corp.)¹	6.000	06/01/2031	50,184,005

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	4,870,000		PA EDFA (Waste Management)¹		5.100	%	10/01/2027	$	3,915,675
	20,000,000		PA Geisinger Authority Health System (Geisinger Health System)²		2.695	³	05/01/2037	15,308,273
	8,000,000		PA Geisinger Authority Health System (Geisinger Health System)⁴		2.695	³	05/01/2037	6,160,000
	1,500,000		PA Harrisburg University Authority (Harrisburg University of Science)	5.400	09/01/2016	1,485,900
	50,000		PA HEFA (Allegheny College)¹	5.000	11/01/2026	49,996
	3,185,000		PA HEFA (Allegheny Delaware Valley Obligated Group)⁴	5.875	11/15/2021	3,171,623
	1,025,000		PA HEFA (Assoc. of Independent Colleges & Universities)¹	5.125	05/01/2032	909,770
	100,000		PA HEFA (California University of Pennsylvania Student Assoc.)	5.000	07/01/2028	80,002
	1,500,000		PA HEFA (California University of Pennsylvania Student Assoc.)¹	6.750	09/01/2020	1,564,800
	110,000		PA HEFA (California University of Pennsylvania Student Assoc.)	6.750	09/01/2032	112,404
	50,000		PA HEFA (California University of Pennsylvania Student Assoc.)¹	6.800	09/01/2025	51,654
	1,475,000		PA HEFA (College of Science & Agriculture)	5.350	04/15/2028	1,334,123
	1,460,000		PA HEFA (Delaware Valley College of Science & Agriculture)	5.650	04/15/2025	1,404,170
	815,000		PA HEFA (Delaware Valley College of Science & Agriculture)	5.750	04/15/2029	775,660
	220,000		PA HEFA (Delaware Valley College of Science & Agriculture)	5.750	04/15/2034	205,594
	3,210,000		PA HEFA (Delaware Valley College of Science & Agriculture)	5.800	04/15/2030	3,055,760
	3,385,000		PA HEFA (Delaware Valley College of Science & Agriculture)	5.800	04/15/2033	3,188,128
	55,000		PA HEFA (Drexel University)¹	5.750	05/01/2022	55,655
	2,500,000		PA HEFA (Edinboro University Foundation)	5.750	07/01/2028	2,437,700
	2,000,000		PA HEFA (Edinboro University Foundation)	5.875	07/01/2038	1,929,020
	3,325,000		PA HEFA (Edinboro University Foundation)	6.000	07/01/2042	3,256,405
	1,830,000		PA HEFA (Elizabethtown College)¹	5.000	12/15/2021	1,752,408
	4,000,000		PA HEFA (Elizabethtown College)¹	5.000	12/15/2027	3,713,720
	500,000		PA HEFA (Gwynedd-Mercy College)¹	5.000	05/01/2027	454,600
	3,750,000		PA HEFA (La Salle University)¹	5.000	05/01/2037	3,337,163
	50,000		PA HEFA (La Salle University)¹	5.500	05/01/2034	47,810
	585,000		PA HEFA (Lycoming College)¹	5.250	11/01/2027	565,689
	1,490,000		PA HEFA (Marywood University)¹	5.125	06/01/2029	1,391,347
	140,000		PA HEFA (MCP/HUHS/AUS Obligated Group)¹	5.500	11/15/2008	139,965
	70,000		PA HEFA (MCP/HUHS/AUS Obligated Group)¹	5.875	11/15/2016	69,834
	35,085,000		PA HEFA (MCP/HUHS/AUS Obligated Group)¹	5.875	11/15/2016	35,001,849
	9,740,000		PA HEFA (MCP/HUHS/AUS Obligated Group)⁴	5.875	11/15/2021	9,699,092
	250,000		PA HEFA (Philadelphia University)¹	5.000	06/01/2035	220,465
	3,000,000		PA HEFA (Philadelphia University)¹	5.125	06/01/2025	2,805,390


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	2,000,000		PA HEFA (Philadelphia University)¹		5.250	%	06/01/2032	$	1,856,300
	105,000		PA HEFA (St. Francis University)¹	5.750	11/01/2023	103,991
	3,925,000		PA HEFA (St. Francis University)¹	6.250	11/01/2018	4,076,270
	25,000		PA HEFA (University of the Arts)¹	5.750	03/15/2030	24,484
	100,000		PA HEFA (UPMC Health System)¹	5.000	08/01/2029	100,110
	30,000		PA HEFA (UPMC Health System)¹	6.000	01/15/2031	31,582
	750,000		PA HEFA (Widener University)¹	5.000	07/15/2026	704,280
	100,000		PA HEFA (Widener University)¹	5.250	07/15/2024	97,468
	70,000		PA HEFA (Widener University)¹	5.400	07/15/2036	67,173
	11,835,000		PA HFA (Single Family Mtg.)¹	4.700	10/01/2037	9,455,928
	2,120,000		PA HFA (Single Family Mtg.)¹	5.450	10/01/2032	2,173,021
	34,740,000		PA HFA (Single Family Mtg.), Series 100A²	5.350	10/01/2033	31,908,169
	15,000,000		PA HFA (Single Family Mtg.), Series 102A²	5.500	10/01/2034	14,014,950
	7,500,000		PA HFA (Single Family Mtg.), Series 102A¹	5.375	10/01/2028	7,131,825
	85,000		PA HFA (Single Family Mtg.), Series 102A¹	5.500	10/01/2034	79,417
	9,180,000		PA HFA (Single Family Mtg.), Series 61A¹	5.450	10/01/2021	9,185,416
	260,000		PA HFA (Single Family Mtg.), Series 61A¹	5.500	04/01/2029	262,740
	4,715,000		PA HFA (Single Family Mtg.), Series 61A¹	5.500	04/01/2029	4,765,356
	25,000		PA HFA (Single Family Mtg.), Series 62A¹	5.200	10/01/2011	25,401
	570,000		PA HFA (Single Family Mtg.), Series 63A¹		5.448	⁸	04/01/2030	142,551
	60,000		PA HFA (Single Family Mtg.), Series 64¹	5.000	10/01/2017	59,952
	5,000		PA HFA (Single Family Mtg.), Series 66A¹	5.650	04/01/2029	5,122
	2,500,000		PA HFA (Single Family Mtg.), Series 67A¹	5.400	10/01/2024	2,526,800
	4,740,000		PA HFA (Single Family Mtg.), Series 70A¹	5.800	04/01/2027	4,744,313
	8,000,000		PA HFA (Single Family Mtg.), Series 72A²	5.250	04/01/2021	7,825,800
	18,000,000		PA HFA (Single Family Mtg.), Series 72A²	5.350	10/01/2031	16,628,850
	190,000		PA HFA (Single Family Mtg.), Series 72A¹	5.350	10/01/2031	175,526
	11,400,000		PA HFA (Single Family Mtg.), Series 73A²	5.350	10/01/2022	11,332,056
	10,000,000		PA HFA (Single Family Mtg.), Series 74B²	5.150	10/01/2022	9,734,700
	1,020,000		PA HFA (Single Family Mtg.), Series 74B¹	5.150	10/01/2022	992,929
	2,975,000		PA HFA (Single Family Mtg.), Series 74B¹	5.250	04/01/2032	2,708,619
	4,170,000		PA HFA (Single Family Mtg.), Series 95A¹	4.875	10/01/2031	3,544,959
	17,525,000		PA HFA (Single Family Mtg.), Series 96A²	4.700	10/01/2037	13,999,197
	12,990,000		PA HFA (Single Family Mtg.), Series 96A¹	4.700	10/01/2037	10,378,750
	4,380,000		PA HFA (Single Family Mtg.), Series 97A¹	5.500	10/01/2032	4,409,127
	7,495,000		PA HFA (Single Family Mtg.), Series 98A¹	4.850	10/01/2031	6,348,490
	9,000,000		PA HFA (Single Family Mtg.), Series 99A²	5.250	10/01/2032	8,186,535
	15,650,000		PA HFA (Single Family Mtg.), Series 99A²	5.300	10/01/2037	14,068,418
	10,000,000		PA HFA (Single Family Mtg.), Series B²	5.100	10/01/2020	9,830,400

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	55,000		PA Intergovernmental Cooperative Authority¹		5.000	%	06/15/2021	$	55,200
	1,265,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2020	1,199,030
	1,400,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2023	1,303,302
	2,245,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2025	2,059,294
	3,265,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2026	2,979,149
	950,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2027	862,277
	2,510,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2028	2,255,260
	1,470,000		PA Southcentral General Authority (Hanover Hospital)¹	5.000	12/01/2030	1,305,169
	26,100,000		PA St. Mary Hospital Authority (Catholic Health East)⁴		2.623	³	11/15/2034	19,836,000
	50,000		PA St. Mary Hospital Authority (Franciscan Health)¹	7.000	06/15/2015	50,525
	15,000		PA State Public School Building Authority (Butler College)¹	5.400	07/15/2012	15,630
	5,000		PA State Public School Building Authority (Chester Upland School District)¹	5.150	11/15/2026	5,057
	5,000		PA Turnpike Commission¹	5.000	12/01/2023	5,038
	300,000		PA West Shore Area Hospital Authority (Holy Spirit Hospital)¹	6.250	01/01/2032	301,809
	10,000		Patterson Township, PA Municipal Authority¹	5.500	04/15/2011	10,014
	25,000		Penn Hills, PA GO	5.850	12/01/2014	25,068
	10,000,000		Philadelphia, PA Airport²	5.000	06/15/2032	9,301,650
	235,000		Philadelphia, PA Airport¹	5.375	06/15/2015	235,717
	15,000		Philadelphia, PA Airport, Series B¹	5.250	06/15/2031	13,943
	5,000		Philadelphia, PA Authority for Industrial Devel.¹	5.250	10/01/2030	5,407
	100,000		Philadelphia, PA Authority for Industrial Devel. (Aero Philadelphia)	5.250	01/01/2009	99,356
	6,720,000		Philadelphia, PA Authority for Industrial Devel. (Aero Philadelphia)	5.500	01/01/2024	5,562,346
	3,870,000		Philadelphia, PA Authority for Industrial Devel. (Air Cargo)¹	7.500	01/01/2025	3,892,640
	25,000		Philadelphia, PA Authority for Industrial Devel. (American College of Physicians)¹	6.000	06/15/2030	25,564
	1,150,000		Philadelphia, PA Authority for Industrial Devel. (Baptist Home of Philadelphia)	5.500	11/15/2018	1,053,653
	786,000		Philadelphia, PA Authority for Industrial Devel. (Baptist Home of Philadelphia)¹	5.600	11/15/2028	680,676
	20,000		Philadelphia, PA Authority for Industrial Devel. (Cathedral Village)	5.600	04/01/2012	20,012
	35,000		Philadelphia, PA Authority for Industrial Devel. (Cathedral Village)	5.700	04/01/2015	35,091
	450,000		Philadelphia, PA Authority for Industrial Devel. (Cathedral Village)	6.750	04/01/2023	455,594
	1,100,000		Philadelphia, PA Authority for Industrial Devel. (Cathedral Village)	6.875	04/01/2034	1,121,120


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	2,750,000		Philadelphia, PA Authority for Industrial Devel. (First Mtg.-CPAP)¹		6.125	%	04/01/2019	$	1,851,438
	8,000,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport System), Series A²	5.400	07/01/2022	7,610,360
	30,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.000	07/01/2019	28,344
	19,710,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.000	07/01/2023	17,929,004
	10,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.125	07/01/2020	9,437
	3,915,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.125	07/01/2028	3,526,045
	115,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.250	07/01/2028	105,172
	400,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport)¹	5.300	07/01/2017	395,204
	1,640,000		Philadelphia, PA Authority for Industrial Devel. (Richard Allen Prep Charter School)¹	6.250	05/01/2033	1,542,732
	1,370,000		Philadelphia, PA Authority for Industrial Devel. (Stapeley Germantown)	5.000	01/01/2015	1,297,500
	1,580,000		Philadelphia, PA Authority for Industrial Devel. (Stapeley Germantown)	5.125	01/01/2021	1,402,282
	1,400,000		Philadelphia, PA Authority for Industrial Devel. Senior Living (Arbor House)¹	6.100	07/01/2033	1,363,740
	780,000		Philadelphia, PA Authority for Industrial Devel. Senior Living (GIH/PPAM)¹	5.125	07/01/2016	763,838
	1,240,000		Philadelphia, PA Authority for Industrial Devel. Senior Living (Miriam and Robert M. Rieder House)¹	6.100	07/01/2033	1,207,884
	3,000,000		Philadelphia, PA Authority for Industrial Devel. Senior Living (Presbyterian Homes Germantown)¹	5.625	07/01/2035	2,742,540
	1,160,000		Philadelphia, PA Authority for Industrial Devel. Senior Living (Robert Saligman House)¹	6.100	07/01/2033	1,129,956
	25,000		Philadelphia, PA Gas Works¹	5.000	07/01/2014	25,044
	15,000		Philadelphia, PA Gas Works¹	5.000	07/01/2026	15,002
	1,210,000		Philadelphia, PA H&HEFA (Centralized Comprehensive Human Services)	7.250	01/01/2021	1,238,024
	80,000		Philadelphia, PA H&HEFA (Jefferson Health System)¹	5.000	05/15/2018	80,719
	40,000		Philadelphia, PA H&HEFA (Jefferson Health System)¹	5.125	05/15/2021	40,452
	60,000		Philadelphia, PA H&HEFA (North Philadelphia Health System)¹	5.375	01/01/2028	60,855
	19,470,000		Philadelphia, PA H&HEFA (Temple University Hospital)¹	5.500	07/01/2026	18,327,500
	10,000		Philadelphia, PA H&HEFA (Temple University Hospital)¹	6.500	11/15/2008	10,082
	5,000		Philadelphia, PA New Public Housing Authority¹	5.000	04/01/2012	5,266

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	25,000		Philadelphia, PA Parking Authority (Airport)¹		5.500	%	09/01/2018	$	25,302
	20,000		Philadelphia, PA Parking Authority, Series A¹	5.250	02/15/2029	20,073
	175,000		Philadelphia, PA Redevel. Authority (Multifamily Hsg.)¹	5.450	02/01/2023	175,089
	2,580,000		Philadelphia, PA Redevel. Authority (Pavilion Apartments)¹	6.000	10/01/2023	2,591,662
	4,100,000		Philadelphia, PA Redevel. Authority (Pavilion Apartments)¹	6.250	10/01/2032	4,081,837
	10,000		Pittsburgh & Allegheny County, PA Public Auditorium Authority¹	5.000	02/01/2024	10,059
	50,000		Pittsburgh & Allegheny County, PA Public Auditorium Authority¹	5.000	02/01/2029	48,749
	40,000		Pittsburgh & Allegheny County, PA Public Auditorium Authority¹	5.250	02/01/2031	40,143
	3,025,000		Pittsburgh, PA Urban Redevel. Authority (Marian Plaza)	6.130	01/20/2043	2,813,190
	1,290,000		Pittsburgh, PA Urban Redevel. Authority (West Park Court)	4.900	11/20/2047	1,032,452
	20,000		Pittsburgh, PA Urban Redevel. Authority, Series A¹	5.200	10/01/2020	19,838
	30,000		Pittsburgh, PA Urban Redevel. Authority, Series A¹	5.250	10/01/2029	27,863
	15,000		Pittsburgh, PA Urban Redevel. Authority, Series A¹	7.250	02/01/2024	15,009
	40,000		Pittsburgh, PA Urban Redevel. Authority, Series B¹	5.350	10/01/2022	39,762
	60,000		Pittsburgh, PA Urban Redevel. Authority, Series C¹	5.600	04/01/2020	60,070
	25,000		Pittsburgh, PA Urban Redevel. Authority, Series C¹	5.700	04/01/2030	24,391
	35,000		Pittsburgh, PA Urban Redevel. Authority, Series C¹	5.900	10/01/2022	35,181
	750,000		Pittsburgh, PA Urban Redevel. Authority, Series C¹	5.950	10/01/2029	750,008
	10,000		Pittsburgh, PA Urban Redevel. Authority, Series C¹	7.125	08/01/2013	10,012
	30,000		Potter County, PA Hospital Authority (Charles Cole Memorial Hospital)¹	5.250	08/01/2028	27,563
	120,000		Potter County, PA Hospital Authority (Charles Cole Memorial Hospital)¹	6.050	08/01/2024	120,179
	1,000,000		Pottsville, PA Hospital Authority (Pottsville Hospital & Warne Clinic)¹	5.500	07/01/2018	925,270
	390,000		Pottsville, PA Hospital Authority (Pottsville Hospital & Warne Clinic)¹	5.500	07/01/2018	360,855
	4,170,000		Pottsville, PA Hospital Authority (Pottsville Hospital & Warne Clinic)¹	5.625	07/01/2024	3,715,220
	235,000		Pottsville, PA Hospital Authority (Pottsville Hospital & Warne Clinic)¹	5.625	07/01/2024	209,371
	10,000		Schuylkill County, PA IDA (DOCNHS/BSVHS/WMHS Obligated Group)¹	5.000	11/01/2028	10,006
	2,100,000		Scranton, PA Parking Authority¹	5.250	06/01/2034	1,846,929
	8,500,000		Scranton, PA Parking Authority	5.250	06/01/2039	7,343,150
	145,000		Scranton, PA School District¹	5.000	04/01/2022	146,032
	220,000		Scranton, PA School District¹	5.000	04/01/2025	220,475
	5,000		Sharon, PA Regional Health System Authority (SRPS/SRHS Obligated Group)¹	5.000	12/01/2028	4,863


Principal
Amount		Coupon		Maturity		Value

Pennsylvania Continued
$	460,000		South Fork, PA Municipal Authority (Conemaugh Valley Memorial Hospital)¹		5.000	%	07/01/2028	$	460,313
	5,000		South Fork, PA Municipal Authority (Conemaugh Valley Memorial Hospital)¹	5.375	07/01/2022	5,058
	355,000		South Fork, PA Municipal Authority (Good Samaritan Medical Center of Johnstown)¹	5.250	07/01/2026	355,387
	20,000		South Fork, PA Municipal Authority (Good Samaritan Medical Center of Johnstown)¹	5.375	07/01/2016	20,044
	100,000		Susquehanna, PA Area Regional Airport Authority¹	5.000	01/01/2028	88,617
	140,000		Susquehanna, PA Area Regional Airport Authority¹	5.375	01/01/2018	128,279
	4,300,000		Susquehanna, PA Area Regional Airport Authority	6.500	01/01/2038	4,110,241
	1,000,000		Susquehanna, PA Area Regional Airport Authority (Aero Harrisburg)	5.500	01/01/2024	827,730
	15,000		Union County, PA Hospital Authority (United Methodist Continuing Care Services)	6.250	04/01/2012	15,000
	880,000		Washington County, PA Authority (Capital Projects & Equipment Program)¹	6.150	12/01/2029	871,658
	35,000		Washington County, PA Hospital Authority (Washington Hospital)¹	5.125	07/01/2028	35,103
	8,000,000		Washington County, PA Redevel. Authority (Victory Centre)	5.450	07/01/2035	6,755,840
	650,000		Washington, PA Township Municipal Authority	5.875	12/15/2023	615,043
	2,500,000		Washington, PA Township Municipal Authority	6.000	12/15/2033	2,341,000
	1,085,000		Westmoreland County, PA IDA (Redstone Retirement Community)	5.875	01/01/2032	960,670
	35,000		Westmoreland County, PA Redevel. Authority (Harmon House)¹	5.400	06/20/2028	35,273
	5,000,000		Wilkes-Barre, PA Finance Authority (Wilkes University)¹	5.000	03/01/2027	4,534,150
	5,000,000		Wilkes-Barre, PA Finance Authority (Wilkes University)¹	5.000	03/01/2037	4,317,150
	10,000		York County, PA IDA (PSEG Power)¹	5.500	09/01/2020	9,640
	15,000		York, PA Hsg. Corp. Mtg., Series A¹	6.875	11/01/2009	15,032


				1,070,309,142

U.S. Possessions34.2%
	45,000		Guam GO¹	5.375	11/15/2013	45,000
	700,000		Guam Hsg. Corp. (Single Family Mtg.)¹	5.750	09/01/2031	716,401
	4,705,000		Guam Tobacco Settlement Economic Devel. & Commerce Authority (TASC)	5.250	06/01/2032	4,232,759
	500,000		Guam Tobacco Settlement Economic Devel. & Commerce Authority (TASC)	5.625	06/01/2047	462,020
	38,902,000		Guam Tobacco Settlement Economic Devel. & Commerce Authority (TASC)		7.250	⁸	06/01/2057	716,186
	600,000		Northern Mariana Islands Commonwealth, Series A¹	6.750	10/01/2033	606,030

STATEMENT OF INVESTMENTS Continued


Principal
Amount		Coupon		Maturity		Value

U.S. Possessions Continued
$	2,670,000		Northern Mariana Islands Ports Authority, Series A		5.500	%	03/15/2031	$	2,169,135
	1,905,000		Northern Mariana Islands Ports Authority, Series A	6.250	03/15/2028	1,544,574
	1,315,000		Northern Mariana Islands Ports Authority, Series A	6.600	03/15/2028	1,345,666
	10,000,000		Puerto Rico Aqueduct & Sewer Authority²	5.000	07/01/2028	10,054,000
	20,000,000		Puerto Rico Aqueduct & Sewer Authority²	5.125	07/01/2047	19,753,400
	4,250,000		Puerto Rico Aqueduct & Sewer Authority¹		0.000	⁹	07/01/2024	3,681,095
	7,700,000		Puerto Rico Aqueduct & Sewer Authority¹	6.000	07/01/2038	8,056,741
	9,145,000		Puerto Rico Aqueduct & Sewer Authority	6.000	07/01/2044	9,575,821
	30,920,000		Puerto Rico Childrens Trust Fund (TASC)¹	5.375	05/15/2033	28,552,456
	88,830,000		Puerto Rico Childrens Trust Fund (TASC)	5.500	05/15/2039	80,277,448
	68,400,000		Puerto Rico Childrens Trust Fund (TASC)	5.625	05/15/2043	63,263,844
	457,500,000		Puerto Rico Childrens Trust Fund (TASC)		6.432	⁸	05/15/2050	19,228,725
	97,000,000		Puerto Rico Childrens Trust Fund (TASC)		7.013	⁸	05/15/2055	2,340,610
	1,817,000,000		Puerto Rico Childrens Trust Fund (TASC)		7.625	⁸	05/15/2057	39,010,990
	10,020,000		Puerto Rico Commonwealth GO¹	5.250	07/01/2030	9,891,143
	9,000,000		Puerto Rico Commonwealth GO¹	5.500	07/01/2032	9,109,350
	4,725,000		Puerto Rico Commonwealth GO	6.000	07/01/2027	4,969,850
	525,000		Puerto Rico Commonwealth GO	6.000	07/01/2028	552,206
	9,800,000		Puerto Rico Electric Power Authority, Series UU²		2.550	³	07/01/2025	7,727,601
	31,890,000		Puerto Rico Electric Power Authority, Series UU²		2.570	³	07/01/2031	25,146,244
	3,500,000		Puerto Rico Electric Power Authority, Series UU⁴		2.550	³	07/01/2025	2,743,125
	885,000		Puerto Rico HFC, Series B¹	5.300	12/01/2028	849,830
	25,000		Puerto Rico Highway & Transportation Authority, Series A	5.000	07/01/2038	23,665
	445,000		Puerto Rico Highway & Transportation Authority, Series AA¹	5.000	07/01/2035	432,162
	325,000		Puerto Rico Highway & Transportation Authority, Series H	5.000	07/01/2028	319,755
	700,000		Puerto Rico Highway & Transportation Authority, Series M¹	5.000	07/01/2037	664,125
	2,105,000		Puerto Rico IMEPCF (American Airlines)¹	6.450	12/01/2025	982,635
	700,000		Puerto Rico Infrastructure (Mepsi Campus)	6.500	10/01/2037	657,867
	650,000		Puerto Rico ITEMECF (Ana G. Mendez University)¹	5.000	03/01/2036	566,384
	235,000		Puerto Rico ITEMECF (Ana G. Mendez University)¹	5.375	02/01/2019	235,489
	500,000		Puerto Rico ITEMECF (Ana G. Mendez University)¹	5.375	02/01/2029	474,995
	865,000		Puerto Rico ITEMECF (IEP/HESL/HECR Obligated Group)¹	5.750	06/01/2019	740,475
	2,750,000		Puerto Rico Municipal Finance Agency, Series A¹	5.250	08/01/2025	2,731,685
	25,305,000		Puerto Rico Port Authority (American Airlines), Series A¹	6.250	06/01/2026	11,814,651
	1,170,000		Puerto Rico Port Authority (American Airlines), Series A¹	6.300	06/01/2023	546,133
	85,000		Puerto Rico Port Authority, Series D¹	7.000	07/01/2014	85,420
	1,015,000		Puerto Rico Public Buildings Authority, Series D¹	5.250	07/01/2036	994,558
	15,000,000		Puerto Rico Sales Tax Financing Corp., Series A⁴		2.855	³	08/01/2057	11,550,000
	125,000		University of Puerto Rico¹	5.400	06/01/2009	125,335


Principal
Amount		Coupon		Maturity		Value

U.S. Possessions Continued
$	1,075,000		University of Puerto Rico, Series Q¹		5.000	%	06/01/2030	$	1,030,807
	6,645,000		V.I. Government Refinery Facilities (Hovensa Coker)¹	6.500	07/01/2021	6,716,700
	25,000		V.I. Public Finance Authority (Gross Receipts Taxes Loan)¹	5.000	10/01/2031	24,134
	4,000,000		V.I. Public Finance Authority (Hovensa Coker)¹	6.500	07/01/2021	4,043,160
	8,500,000		V.I. Public Finance Authority (Hovensa Refinery)¹	4.700	07/01/2022	7,078,545
	1,000,000		V.I. Public Finance Authority (Hovensa Refinery)¹	5.875	07/01/2022	948,080
	5,000,000		V.I. Public Finance Authority (Hovensa Refinery)¹	6.125	07/01/2022	4,863,050
	17,450,000		V.I. Tobacco Settlement Financing Corp.		6.250	⁸	05/15/2035	2,347,549
	2,195,000		V.I. Tobacco Settlement Financing Corp.		6.500	⁸	05/15/2035	277,207
	4,150,000		V.I. Tobacco Settlement Financing Corp.		6.875	⁸	05/15/2035	475,258
	7,000,000		V.I. Tobacco Settlement Financing Corp.		7.625	⁸	05/15/2035	717,780
	35,000		V.I. Tobacco Settlement Financing Corp. (TASC)	5.000	05/15/2021	32,613
	2,235,000		V.I. Tobacco Settlement Financing Corp. (TASC)	5.000	05/15/2031	1,891,001
	435,000		V.I. Water & Power Authority, Series A¹	5.000	07/01/2031	407,917


				420,421,385


Total Investments, at Value (Cost $1,602,430,488)121.4%					1,490,730,527

Liabilities in Excess of Other Assets(21.4)						(262,974,493	)


Net Assets100.0%					$	1,227,756,034

Footnotes to Statement of Investments


1.	All or a portion of the security has been segregated for collateral to cover borrowings. See Note 6 of accompanying Notes.

2.	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.

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

4.	Illiquid security. The aggregate value of illiquid securities as of July 31, 2008 was $54,438,746, which represents 4.43% of the Funds net assets. See Note 5 of accompanying Notes.

5.	Issue is in default. See Note 1 of accompanying Notes.

6.	Non-income producing security.

7.	When-issued security or delayed delivery to be delivered and settled after July 31, 2008. See Note 1 of accompanying Notes.

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

9.	Denotes a step bond: a zero coupon bond that converts to a fixed or variable interest rate at a designated future date.

STATEMENT OF INVESTMENTS Continued

To simplify the listings of securities, abbreviations are used per the table below:


ACTS	Adult Communities Total Services
ARC	Assoc. of Retarded Citizens
AUS	Allegheny United Hospital
BSVHS	Baptist/St. Vincents 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
EDFA	Economic Devel. Finance Authority
GIH	Germantown Interfaith Housing
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
HECR	Hospital Episcopal Cristo Redentor
HEFA	Higher Education Facilities Authority
HEHA	Higher Education and Health Authority
HESL	Hospital Episcopal San Lucas
HFA	Housing Finance Agency/Authority
HFC	Housing Finance Corp.
HUHS	Hahnemann University Hospital System
HW	Highlands at Wyomissing
IDA	Industrial Devel. Agency
IEP	Iglesia Episcopal Puertorriquena
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 Health System
PA/NJ	Pennsylvania/New Jersey
PPAM	Philadelphia Presbytery Apartments of Morrisville
PSEG	Public Service Enterprise Group
RHMC	Reading Hospital & Medical Center
RITES	Residential Interest Tax Exempt Security
ROLs	Residual Option Longs
RR	Resource Recovery
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

STATEMENT OF ASSETS AND LIABILITIES July 31, 2008



Assets
Investments, at value (cost $1,602,430,488)see accompanying statement of investments	$	1,490,730,527

Cash	437,966

Receivables and other assets:
Interest	16,371,859
Investments sold	4,821,494
Shares of beneficial interest sold	2,020,579
Other	118,421

Total assets	1,514,500,846


Liabilities
Payables and other liabilities:
Payable for short-term floating rate notes issued (See Note 1)	233,220,000
Payable on borrowings (See Note 6)	45,100,000
Shares of beneficial interest redeemed	3,617,584
Investments purchased on a when-issued or delayed delivery basis	2,827,688
Dividends	1,397,973
Distribution and service plan fees	153,059
Trustees compensation	138,089
Interest expense on borrowings	74,185
Shareholder communications	56,083
Transfer and shareholder servicing agent fees	50,671
Other	109,480

Total liabilities	286,744,812



Net Assets	$	1,227,756,034



Composition of Net Assets
Paid-in capital	$	1,364,943,804

Accumulated net investment income	4,639,350

Accumulated net realized loss on investments		(30,127,159	)

Net unrealized depreciation on investments		(111,699,961	)


Net Assets	$	1,227,756,034

STATEMENT OF ASSETS AND LIABILITIES Continued



Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of $816,644,949 and 73,423,476 shares of beneficial interest outstanding)	$	11.12
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)	$	11.67

Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $119,418,217 and 10,740,856 shares of beneficial interest outstanding)	$	11.12

Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $291,692,868 and 26,264,977 shares of beneficial interest outstanding)	$	11.11

STATEMENT OF OPERATIONS For the Year Ended July 31, 2008



Investment Income
Interest	$	87,832,230

Other income	656


Total investment income	87,832,886


Expenses
Management fees	5,949,796

Distribution and service plan fees:
Class A	1,243,143
Class B	1,335,820
Class C	2,786,087

Transfer and shareholder servicing agent fees:
Class A	325,641
Class B	102,052
Class C	163,532

Shareholder communications:
Class A	98,313
Class B	25,423
Class C	37,801

Interest expense and fees on short-term floating rate notes issued (See Note 1)	7,854,373

Interest expense on borrowings	1,518,651

Custodian fees and expenses	91,486

Trustees compensation	43,768

Other	402,093


Total expenses	21,977,979
Less reduction to custodian expenses		(11,835	)


Net expenses	21,966,144


Net Investment Income	65,866,742


Realized and Unrealized Loss
Net realized loss on investments		(28,869,031	)

Net change in unrealized depreciation on investments		(154,646,743	)



Net Decrease in Net Assets Resulting from Operations	$	(117,649,032	)

STATEMENTS OF CHANGES IN NET ASSETS


Year Ended July 31,	2008		2007

Operations
Net investment income	$	65,866,742	$	52,118,309

Net realized gain (loss)		(28,869,031	)	2,508,336

Net change in unrealized appreciation (depreciation)		(154,646,743	)		(7,691,060	)


Net increase (decrease) in net assets resulting from operations		(117,649,032	)	46,935,585


Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A		(42,432,302	)		(33,867,019	)
Class B		(6,216,699	)		(7,292,389	)
Class C		(13,133,368	)		(10,350,372	)


		(61,782,369	)		(51,509,780	)


Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest transactions:
Class A	65,431,917	271,053,312
Class B		(39,865,791	)		(17,991,036	)
Class C	11,416,068	104,040,881


	36,982,194	357,103,157


Net Assets
Total increase (decrease)		(142,449,207	)	352,528,962

Beginning of period	1,370,205,241	1,017,676,279


End of period (including accumulated net investment income of $4,639,350 and $554,977, respectively)	$	1,227,756,034	$	1,370,205,241

STATEMENT OF CASH FLOWS For the Year Ended July 31, 2008



Cash Flows from Operating Activities
Net decrease in net assets from operations	$	(117,649,032	)

Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
Purchase of investment securities		(693,617,937	)
Proceeds from disposition of investment securities	680,669,970
Short-term investment securities, net	24,251,706
Premium amortization	2,887,494
Discount accretion		(4,288,194	)
Net realized loss on investments	28,869,031
Net change in unrealized depreciation on investments	154,646,743
Increase in interest receivable		(787,005	)
Decrease in receivable for securities sold	14,610,265
Increase in other assets		(79,344	)
Decrease in payable for securities purchased		(17,201,707	)
Increase in payable for accrued expenses	83,480


Net cash provided by operating activities	72,395,470


Cash Flows from Financing Activities
Proceeds from bank borrowings	683,400,000
Payments on bank borrowings		(694,100,000	)
Payments on short-term floating rate notes issued		(43,265,000	)
Proceeds from shares sold	360,200,724
Payment on shares redeemed		(357,690,564	)
Cash distributions paid		(20,895,983	)


Net cash used in financing activities		(72,350,823	)

Net increase in cash	44,647

Cash, beginning balance	393,319


Cash, ending balance	$	437,966

Supplemental disclosure of cash flow information:

Noncash financing activities not included herein consist of reinvestment of dividends and distributions of $40,461,055.

Cash paid for interest on bank borrowings$1,515,345.

Cash paid for interest on short-term floating rate notes issued$7,854,373.

FINANCIAL HIGHLIGHTS


Class A Year Ended July 31,	2008		2007		2006		2005		2004

Per Share Operating Data
Net asset value, beginning of period	$	12.77	$	12.75	$	12.85	$	11.76	$	11.48

Income (loss) from investment operations:
Net investment income	.64¹	.59¹	.62¹	.67¹	.73
Net realized and unrealized gain (loss)		(1.69	)	.02		(.10	)	1.10	.25

Total from investment operations		(1.05	)	.61	.52	1.77	.98

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.60	)		(.59	)		(.62	)		(.68	)	(.70	)


Net asset value, end of period	$	11.12	$	12.77	$	12.75	$	12.85	$	11.76



Total Return, at Net Asset Value²		(8.42	)%		4.81	%		4.21	%		15.43	%	8.53	%


Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	816,645	$	868,070	$	600,716	$	384,863	$	229,450

Average net assets (in thousands)	$	847,089	$	747,558	$	484,153	$	295,002	$	211,061

Ratios to average net assets:³
Net investment income		5.33	%		4.57	%		4.88	%		5.35	%	6.01	%
Expenses excluding interest and fees on
short-term floating rate notes issued		0.81	%		0.74	%		0.82	%		0.81	%	0.86	%
Interest and fees on short-term floating rate notes issued⁴		0.60	%		0.61	%		0.59	%		0.40	%	0.26	%

Total expenses		1.41	%⁵		1.35	%⁵		1.41	%		1.21	%⁵	1.12	%^5,6

Portfolio turnover rate		51	%		4	%		19	%		14	%	25	%


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 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 less than one full year.

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

5.	Reduction to custodian expenses less than 0.005%.

6.	Voluntary waiver of transfer agent fees less than 0.005%.


Class B Year Ended July 31,	2008		2007		2006		2005		2004

Per Share Operating Data
Net asset value, beginning of period	$	12.76	$	12.75	$	12.85	$	11.76	$	11.48

Income (loss) from investment operations:
Net investment income	.54¹	.49¹	.53¹	.57¹	.63
Net realized and unrealized gain (loss)		(1.68	)	.01		(.10	)	1.11	.25

Total from investment operations		(1.14	)	.50	.43	1.68	.88

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.50	)		(.49	)		(.53	)		(.59	)	(.60	)


Net asset value, end of period	$	11.12	$	12.76	$	12.75	$	12.85	$	11.76



Total Return, at Net Asset Value²		(9.07	)%		3.93	%		3.41	%		14.56	%	7.71	%


Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	119,418	$	179,266	$	196,704	$	189,643	$	157,338

Average net assets (in thousands)	$	148,180	$	193,167	$	193,225	$	173,663	$	156,689

Ratios to average net assets:³
Net investment income		4.51	%		3.81	%		4.14	%		4.62	%	5.26	%
Expenses excluding interest and fees on short-term floating rate notes issued		1.60	%		1.52	%		1.59	%		1.59	%	1.62	%
Interest and fees on short-term floating rate notes issued⁴		0.60	%		0.61	%		0.59	%		0.40	%	0.26	%

Total expenses		2.20	%⁵		2.13	%⁵		2.18	%		1.99	%⁵	1.88	%^5,6

Portfolio turnover rate		51	%		4	%		19	%		14	%	25	%


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 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 less than one full year.

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

5.	Reduction to custodian expenses less than 0.005%.

6.	Voluntary waiver of transfer agent fees less than 0.005%.

FINANCIAL HIGHLIGHTS Continued


Class C Year Ended July 31,	2008		2007		2006		2005		2004

Per Share Operating Data
Net asset value, beginning of period	$	12.75	$	12.73	$	12.83	$	11.75	$	11.47

Income (loss) from investment operations:
Net investment income	.55¹	.49¹	.52¹	.57¹	.63
Net realized and unrealized gain (loss)		(1.68	)	.02		(.09	)	1.10	.25

Total from investment operations		(1.13	)	.51	.43	1.67	.88

Dividends and/or distributions to shareholders:
Dividends from net investment income		(.51	)		(.49	)		(.53	)		(.59	)	(.60	)


Net asset value, end of period	$	11.11	$	12.75	$	12.73	$	12.83	$	11.75



Total Return, at Net Asset Value²		(9.05	)%		4.02	%		3.41	%		14.48	%	7.71	%


Ratios/Supplemental Data
Net assets, end of period (in thousands)	$	291,693	$	322,869	$	220,256	$	133,569	$	76,489

Average net assets (in thousands)	$	309,446	$	274,274	$	174,354	$	96,508	$	74,956

Ratios to average net assets:³
Net investment income		4.56	%		3.80	%		4.10	%		4.56	%	5.25	%
Expenses excluding interest and fees on short-term floating rate notes issued		1.58	%		1.50	%		1.58	%		1.59	%	1.63	%
Interest and fees on short-term floating rate notes issued⁴		0.60	%		0.61	%		0.59	%		0.40	%	0.26	%

Total expenses		2.18	%⁵		2.11	%⁵		2.17	%		1.99	%⁵	1.89	%^5,6

Portfolio turnover rate		51	%		4	%		19	%		14	%	25	%


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 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 less than one full year.

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

5.	Reduction to custodian expenses less than 0.005%.

6.	Voluntary waiver of transfer agent fees less than 0.005%.

NOTES TO FINANCIAL STATEMENTS

1. Significant Accounting Policies

Oppenheimer Pennsylvania Municipal Fund (the Fund) is a separate series of Oppenheimer Multi-State Municipal Trust, a non-diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended. The Funds 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 Funds investment adviser 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 72 months 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 trading. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities traded on a registered U.S. securities exchange are valued based on the last sale price of the security traded on that exchange prior to the time when the Funds assets are valued. Securities whose principal exchange is NASDAQ are valued based on the closing price reported by NASDAQ prior to the time when the Funds 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 Funds 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, collateralized mortgage obligations and other asset-backed securities will be valued at the mean between the bid and asked prices. Securities for which market quotations are not readily available are valued at their fair value. Securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Funds assets are valued but after the close of their respective exchanges will be fair valued. Fair value is

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued

determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Shares of a registered investment company that are not traded on an exchange are valued at the acquired investment companys net asset value per share. Money market-type debt instruments with remaining maturities of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value.

Securities on a When-Issued or Delayed Delivery Basis. The Fund may purchase securities on a when-issued basis, and may purchase or sell securities on a delayed delivery basis. When-issued or delayed delivery refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the 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 purchase of securities on a when-issued basis may increase the volatility of the Funds net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. 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 or dispose of the security at a price and yield it considers advantageous. The Fund maintains internally designated assets with a market value equal to or greater than the amount of its purchase commitments. 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, 2008, the Fund had purchased securities issued on a when-issued or delayed delivery basis and sold securities issued on a delayed delivery basis as follows:


When-Issued or
Delayed Delivery
Basis Transactions

Purchased securities	$	2,827,688

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 may expose up to 20% of its total assets to the effects of leverage from its investments in inverse floaters. The Funds exposure to the effects of leverage from its investments in inverse floaters amount to $209,255,863 as of July 31, 2008, which represents 13.82% of the Funds total assets.

Certain inverse floating rate securities are created when the 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 Funds 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 secured 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 do 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 Trusts 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 Funds Statement of Operations. At July 31, 2008, municipal bond holdings with a value of $292,344,443 shown on the Funds Statement of Investments are held by such Trusts and serve as collateral for the $233,220,000 in short-term floating rate notes issued and outstanding at that date.

At July 31, 2008, the Funds residual exposure to these types of inverse floating rate securities were as follows:


Principal		Inverse	Coupon		Maturity
Amount		Floater¹	Rate²		Date		Value

$	2,435,000		Allegheny County, PA GO RITES		2.978	%	11/1/26	$	1,520,974
	10,500,000		Allegheny County, PA ROLs	2.770	2/1/37	4,777,500
	8,750,000		Allegheny County, PA ROLs	1.880	11/1/26	6,453,125
	3,890,000		Allegheny County, PA ROLs	11.070	11/1/32	3,980,481
	2,000,000		Bucks County, PA IDA ROLs³	9.400	9/1/32	1,731,760
	4,500,000		PA Austin Trust Various States Inverse Certificates	13.497	10/1/31	3,128,850
	3,750,000		PA Austin Trust Various States Inverse Certificates	14.106	10/1/34	2,764,950
	4,000,000		PA Austin Trust Various States Inverse Certificates	13.347	10/1/33	2,695,760
	5,655,000		PA Geisinger Authority Health System (Penn State Geisinger Health System Foundation) ROLs³	3.052	5/1/37	963,273
	2,000,000		PA HFA (Single Family Mtg.) RITES	12.278	4/1/21	1,825,800
	2,850,000		PA HFA (Single Family Mtg.) RITES	12.585	10/1/22	2,782,056
	2,500,000		PA HFA (Single Family Mtg.) RITES	11.992	10/1/22	2,234,700
	2,500,000		PA HFA (Single Family Mtg.) RITES	11.585	10/1/20	2,330,400
	2,500,000		PA HFA (Single Family Mtg.) ROLs	13.570	10/1/33	1,684,850
	3,915,000		PA HFA (Single Family Mtg.) ROLs³	13.380	10/1/37	2,333,418
	2,185,000		PA HFA (Single Family Mtg.) ROLs	13.280	10/1/33	1,472,559
	2,250,000		PA HFA (Single Family Mtg.) ROLs	12.890	10/1/32	1,436,535
	4,385,000		PA HFA (Single Family Mtg.) ROLs	10.680	10/1/37	859,197

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued


Principal		Inverse	Coupon		Maturity
Amount		Floater¹	Rate²		Date		Value

$	2,500,000		Philadelphia, PA Airport ROLs³		11.230	%	6/15/32	$	1,801,650
	2,000,000		Philadelphia, PA Authority for Industrial Devel. (Philadelphia Airport) ROLs³	8.760	7/1/22	1,610,360
	2,500,000		Puerto Rico Aqueduct & Sewer Authority ROLs	11.680	7/1/28	2,554,000
	5,000,000		Puerto Rico Aqueduct & Sewer Authority ROLs	12.180	7/1/47	4,753,400
	12,245,000		Puerto Rico Electric Power Authority ROLs³	2.784	7/1/31	3,428,845

				$	59,124,443


1.	For a list of abbreviations used in the Inverse Floater table see the Portfolio Abbreviations table on page F16 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.

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 short-term 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 Funds potential exposure with respect to these agreements on a daily basis and intends to take action to terminate the Funds investment in such inverse floating rate securities, if it deems it appropriate to do so. As of July 31, 2008, in addition to the exposure detailed in the preceding table, the Funds maximum exposure under such agreements is estimated at approximately $75,025,000.

Credit Risk. The Fund invests in high-yield, non-investment-grade bonds, which may be subject to a greater degree of credit risk. Credit risk relates to the ability of the issuer to meet interest or principal payments or both as they become due. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of July 31, 2008, securities with an aggregate market value of $970,887, representing 0.08% of the Funds net assets, were in default.

Concentration Risk. There are certain risks arising from geographic concentration in any state. Certain economic, regulatory or political developments occurring in the 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 offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Funds tax return filings generally remain open for the three preceding fiscal reporting period ends.

The tax components of capital shown in the following table 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

Depreciation

Based on Cost of

Securities and

Undistributed

Accumulated

Other Investments

Net Investment

Long-Term

Loss

for Federal Income

Income

Gain

Carryforward^1,2,3,4

Tax Purposes

6,253,173

29,620,746

112,206,377


1.	As of July 31, 2008, the Fund had $4,906,319 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, 2008, details of the capital loss carryforwards were as follows:


Expiring

2013	$	1,195,731
2016	3,710,588

Total	$	4,906,319

2.		As of July 31, 2008, the Fund had $24,714,427 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2017.

3.		During the fiscal year ended July 31, 2008, the Fund did not utilize any capital loss carryforward.

4.		During the fiscal year ended July 31, 2007, the Fund utilized $1,499,106 of capital loss carryforward to offset capital gains realized in that fiscal year.

The tax character of distributions paid during the years ended July 31, 2008 and July 31, 2007 was as follows:


Year Ended		Year Ended
July 31, 2008		July 31, 2007

Distributions paid from:
Exempt-interest dividends	$	61,443,123	$	51,443,295
Ordinary income	339,246	66,485

Total	$	61,782,369	$	51,509,780

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, 2008 are noted in the following table. 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.

NOTES TO FINANCIAL STATEMENTS Continued

1. Significant Accounting Policies Continued


Federal tax cost of securities	$	1,361,607,412


Gross unrealized appreciation	$	13,935,656
Gross unrealized depreciation		(126,142,033	)

Net unrealized depreciation	$	(112,206,377	)

Trustees Compensation. The Fund has adopted an unfunded retirement plan (the Plan) for the Funds independent trustees. Benefits are based on years of service and fees paid to each trustee during their period of service. The Plan was frozen with respect to adding new participants effective December 31, 2006 (the Freeze Date) and existing Plan Participants as of the Freeze Date will continue to receive accrued benefits under the Plan. Active independent trustees as of the Freeze Date have each elected a distribution method with respect to their benefits under the Plan. During the year ended July 31, 2008, the Funds projected benefit obligations, payments to retired trustees and accumulated liability were as follows:


Projected Benefit Obligations Increased	$	15,636
Payments Made to Retired Trustees		9,401
Accumulated Liability as of July 31, 2008		89,314

The Board of Trustees has adopted a compensation deferral 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 Funds assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the compensation deferral plan.

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, 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 is recognized on an accrual basis. Discount and premium, which are included in interest income on the Statement of Operations, are amortized or accreted daily.

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.

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 Funds 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 Funds 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations 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, 2008						Year Ended July 31, 2007
Shares		Amount		Shares		Amount

Class A
Sold	21,573,103	$	259,898,687	26,767,748	$	347,366,936
Dividends and/or distributions reinvested	2,369,899	28,250,705	1,660,583	21,530,452
Redeemed		(18,514,493	)		(222,717,475	)	(7,548,479	)		(97,844,076	)

Net increase	5,428,509	$	65,431,917	20,879,852	$	271,053,312



Class B
Sold	906,865	$	10,869,239	1,561,002	$	20,251,373
Dividends and/or distributions reinvested	314,181	3,754,212	323,730	4,196,999
Redeemed		(4,526,798	)		(54,489,242	)	(3,270,428	)		(42,439,408	)

Net decrease		(3,305,752	)	$	(39,865,791	)	(1,385,696	)	$	(17,991,036	)

NOTES TO FINANCIAL STATEMENTS Continued

2. Shares of Beneficial Interest Continued


Year Ended July 31, 2008						Year Ended July 31, 2007
Shares		Amount		Shares		Amount

Class C
Sold	7,042,961	$	84,742,682	10,021,100	$	129,802,452
Dividends and/or distributions reinvested	710,354	8,456,138	511,972	6,629,081
Redeemed		(6,814,346	)		(81,782,752	)	(2,504,155	)	(32,390,652	)

Net increase	938,969	$	11,416,068	8,028,917	$	104,040,881

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, 2008, were as follows:


Purchases		Sales

Investment securities	$	693,617,937	$	680,669,970

4. Fees and Other Transactions with Affiliates

Management Fees. Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:


Fee Schedule

Up to $200 million	0.60	%
Next $100 million	0.55
Next $200 million	0.50
Next $250 million	0.45
Next $250 million	0.40
Over $1 billion	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, 2008, the Fund paid $589,570 to OFS for services to the Fund.

Distribution and Service Plan (12b-1) Fees. Under its General Distributors Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Funds principal underwriter in the continuous public offering of the Funds 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 Board of Trustees can increase that fee to 0.25% of average net assets without shareholder approval. Shareholders will be notified of any such change. 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 0.15% per year under each plan. If either the Class B or Class C plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor determines its uncompensated expenses under the plan at calendar quarter ends. The Distributors aggregate uncompensated expenses under the plan at June 30, 2008 for Class B and Class C shares were $3,854,365 and $4,159,637, 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

Front-End

Deferred

Sales Charges

Retained by

Year Ended

Distributor

July 31, 2008

474,840

23,986

278,304

75,603

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

5. Illiquid Securities

As of July 31, 2008, investments in securities included issues that are illiquid. 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. The Fund will not invest more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with an applicable footnote on the Statement of Investments.

NOTES TO FINANCIAL STATEMENTS Continued

6. Borrowings

The Fund can borrow money from banks in amounts up to one third of its total assets (including the amount borrowed) less all liabilities and indebtedness other than borrowings to purchase portfolio securities, to meet redemption obligations or for temporary and emergency purposes. The purchase of securities with borrowed funds creates leverage in the Fund. The use of leverage will subject the Fund to greater costs than funds that do not borrow for leverage, and may also make the Funds share price more sensitive to interest changes. The interest on borrowed money is an expense that might reduce the Funds yield. Expenses incurred by the Fund with respect to interest on borrowings and commitment fees are disclosed separately or as other expenses on the Statement of Operations.

The Fund entered into a Revolving Credit and Security Agreement (the Agreement) with a conduit lender and a bank which enables it to participate with certain other Oppenheimer funds in a committed, secured borrowing facility that permits borrowings of up to $1.25 billion, 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 (2.7228% as of July 31, 2008). The Fund pays additional fees annually to its lender on its outstanding borrowings to manage and administer the facility and is allocated its pro-rata share of an annual commitment fee on the amount of the unused portion of the total facility size. The Fund has the right to prepay such loans and terminate its participation in the conduit loan facility at any time upon prior notice.

As of July 31, 2008, the Fund had borrowings outstanding at an interest rate of 2.7228%. Details of the borrowings for the year ended July 31, 2008 are as follows:


Average Daily Loan Balance	$	38,653,279
Average Daily Interest Rate		4.127	%
Fees Paid	$	228,775
Interest Paid	$	1,515,345

7. Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements. This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. As of July 31, 2008, the Manager does not believe the adoption of SFAS No. 157 will materially impact the financial statement amounts; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. This standard requires enhanced disclosures about derivative and hedging activities, including qualitative disclosures about how and why the Fund uses derivative instruments, how these activities are accounted for, and their effect on the Funds financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of SFAS No. 161 and its impact on the Funds financial statements and related disclosures.

A bond rating performs the isolated function of credit risk evaluation. A bond rating does not constitute a recommendation to invest in a bond and does not take into consideration the risk preference of the investor. While many factors go into the investment decision making process, the bond rating is often the single most important factor affecting the interest cost on bonds.

There are three major nationally-recognized rating agencies for municipal bonds: Standard & Poor's Ratings Services (Standard & Poor's), Moody's Investors Service, Inc. (Moody's) and Fitch Ratings (Fitch). Of the three rating agencies, Standard & Poor's and Moody's rate over 80% of all municipal and corporate bonds. Below are summaries of the rating definitions used by Standard & Poors, Moodys and Fitch for municipal securities.

In assigning a rating for general obligation bonds, the rating agencies generally assess, among other things, the following factors: economy, debt structure, financial c ondition, demographic factors, and management practices of the governing body and administration. The above criteria are also used to analyze revenue bonds and lease obligations although additional credit criteria is considered (e.g., users and user charges for utilities) and the covenants and protections offered by the bond documents are highly important. Rating agencies use mathematical ratios to compare an issuer to others; however, a rating is not a scientific evaluation and subjective evaluation appears to also play a role in the final rating assigned.

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.

Standard & Poors may modify ratings from AA to CCC by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

AAA: An obligation rated AAA has the highest rating assigned by Standard & Poors. The obligors 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 obligors 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 obligors 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.

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 obligors 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 obligors 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.

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 & Poors 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.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating category from Aa through Caa.

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

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

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

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

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

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

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

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

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

Plus (+) or Minus (-): The ratings from AA to C may be modified by the addition of a plus or minus sign to indicate the relative position of a credit within the rating category.

AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.

AA: Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+.

A: Bonds considered to be investment grade and of high credit quality. The obligors ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.

BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligors ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore, impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.

BB: Bonds are considered speculative. The obligors ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified that could assist the obligor in satisfying its debt service requirements.

B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligors limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.

CCC: Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.

CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.

DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. DDD represents the highest potential for recovery on these bonds, and D represents the lowest potential for recovery.

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 one year, including commercial paper.

A-1: A short-term obligation rated A-1 is rated in the highest category by Standard & Poors. The obligors 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 obligors 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 obligors 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 obligors 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 & Poors 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 & Poors 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:

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.

Moodys uses 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.

Variable Rate Demand Obligations (VRDOs). In the case of 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. If 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.

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.

F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.

F-2: Good Credit Quality. Issues carrying this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as the F-1+ and F-1 categories.

F-3: Fair Credit Quality. Issues carrying this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse change could cause these securities to be rated below investment grade.

Special Considerations Relating to Municipal Obligations in Pennsylvania and U.S. Territories, Commonwealths and Possessions.

Because the Fund invests in securities issued by Pennsylvania or entities within Pennsylvania, an investment in the Fund may involve greater risk than investments in certain other types of municipal bond funds. You should consider carefully the special risks inherent in the Funds investment in Pennsylvania municipal securities.

The Fund also invests in municipal securities issued by certain territories, commonwealths and possessions of the United States that pay interest that is exempt (in the opinion of the issuers legal counsel when the security is issued) from federal income tax and the Funds state personal income tax. Therefore, the Funds investments could be affected by the fiscal stability of, for example, Puerto Rico, the Virgin Islands, Guam or the Mariana Islands. Additionally, the Funds investments could be affected by economic, legislative, regulatory or political developments affecting issuers in those territories, commonwealths or possessions.

A discussion of the special considerations relating to the Funds investments in municipal securities issued by Pennsylvania, Puerto Rico, the Virgin Islands, Guam or the Mariana Islands.

The following information constitutes only a brief summary, does not purport to be a complete description, and is based on information drawn from official statements relating to securities offerings of the Commonwealth of Pennsylvania (the Commonwealth) and various local agencies available as of the date of this Statement of Additional Information. While neither the Manager nor the Fund has independently verified this information, neither has reason to believe that such information is not correct in all material respects. The information below is intended only as a general summary and is not intended as a discussion of any specific factor that may affect any particular obligation or issuer.

The Commonwealth had been historically identified as a heavy industry state, although declines in the coal, steel and railroad industries have led to diversification of the Commonwealths economy over the last thirty years. Current major sources of economic growth in Pennsylvania are in the service sector, including trade, medical, health services, education and financial institutions. Pennsylvanias agricultural industries also are an important component of the Commonwealths economic structure, accounting for more than $5.2 billion in crop and livestock products annually. Pennsylvania ranks among the top ten states in the production of a variety of agricultural products. In 2006, agribusiness and food related industries reached export sales surpassing $1.3 billion in economic activity. Agriculture exports have grown by more than 5.3% since 2003.

In 2007, the population of Pennsylvania was 12.4 million. The Commonwealth is highly urbanized, with 79% of the 2007 mid-year population estimate residing in the 15 metropolitan statistical areas of the Commonwealth. The cities of Philadelphia and Pittsburgh, the Commonwealths largest metropolitan areas, together contain almost 44% of the Commonwealths total population. Pennsylvanias workforce is estimated at 5.8 million people.

The Commonwealth utilizes the fund method of accounting, and over 150 funds have been established and currently exist for the purpose of recording receipts and disbursements, of which the General Fund is the largest. The General Fund receives all tax and non-tax revenues and Federal grants and entitlements that are not specified by law to be deposited elsewhere. The majority of the Commonwealths operating and administrative expenses are payable from the General Fund, including debt service on most bond indebtedness of the Commonwealth. The Motor License Fund receives all tax and fee revenues relating to motor fuels and vehicles, except the revenues from per gallon of the liquid fuels tax, which are deposited in the Liquid Fuels Tax Fund for distribution to local municipalities. All revenues relating to motor fuels and vehicles are constitutionally required to be used only for highway purposes. Similarly, other special revenue funds have been established by law to receive specified revenues appropriated to departments, boards and/or commissions for payment of their operating and administrative costs. Some of these special revenue funds are required to transfer excess revenues to the General Fund, and some receive funding, in addition to their specified revenues, through appropriations from the General Fund.

The Tobacco Settlement Fund is a special revenue fund established to receive tobacco litigation settlement payments paid to the Commonwealth. The Commonwealth is one of 46 states that settled certain smoking-related litigation in a November 1998 master settlement agreement with participating tobacco product manufacturers (the MSA). Under the MSA, the Commonwealth is entitled to receive a portion of payments made pursuant to the MSA by participating tobacco product manufacturers. Most revenues to the Tobacco Settlement Fund are subject to annual appropriation by the General Assembly and approval by the Governor.

The Budget Stabilization Reserve Fund (replacing the Tax Stabilization Reserve Fund in 2002, the BSRF) is a special revenue fund that receives a portion of any budgetary basis fiscal year-end surplus of the General Fund. The BSRF is to be used for emergencies threatening the health, safety or welfare of citizens or during downturns in the economy that result in significant unanticipated revenue shortfalls not able to be addressed through the normal budget process. Assets of the BSRF may be used upon recommendation by the Governor and an approving vote by two-thirds of the members of each house of the General Assembly. At the end of the Fiscal Year 2007, $176.9 million was transferred to the BSRF, which represented the required statutory transfer of 25% of the $707.8 million unappropriated surplus balance. At present, the Commonwealth maintains a balance of approximately $736.8 million in the BSRF. The Commonwealth currently anticipates an additional statutorily-required deposit of at least $133 million following the end of the Fiscal Year 2008. Additionally, the Commonwealth maintains balances in various funds and accounts, including the BSRF, totaling approximately 6.8% of the Commonwealths annual operating costs.

The Commonwealth maintains trust and agency funds that are used to administer funds received pursuant to a specific bequest or as an agent for other governmental units or individuals. Enterprise funds are maintained for departments or programs operated like private enterprises. Two of the largest of these funds are the State Stores Fund and the State Lottery Fund. The State Stores Fund is used for the receipts and disbursements of the Commonwealths liquor store system, as the sale and distribution of all liquor within Pennsylvania is a government enterprise. The State Lottery Fund is a an enterprise fund for the receipt of lottery ticket sales and lottery licenses and fees. Its revenues, after payment of prizes, are dedicated to paying the costs of programs benefiting the elderly and handicapped in the Commonwealth. In addition, the Commonwealth maintains funds classified as working capital, bond and sinking funds for specified purposes.

Financial information for the principal operating funds is maintained on a budgetary basis of accounting, which ensures compliance with the enacted operating budget and is governed by applicable Commonwealth statutes and by administrative procedures. The Commonwealth also prepares annual financial statements in accordance with generally accepted accounting principles (GAAP). The GAAP statements are audited jointly by the Department of the Auditor General and an independent public accounting firm. The Commonwealth maintains a June 30th fiscal year end.

Tax revenues constitute approximately 97% of Commonwealth revenues in the General Fund. The major tax sources for the General Fund of the Commonwealth are the personal income tax ($10.232 billion, 37.5% of Fiscal Year 2007 revenues), the sales tax ($8.591 billion, 31.3% of Fiscal Year 2007 revenues), the corporate net income tax ($2.493 billion, 9.1% of Fiscal Year 2007 revenues) and the utility gross receipts tax ($1.293 billion, 9.7% of Fiscal Year 2007 revenues).

The Commonwealths personal income tax is levied at a flat rate on the taxable income of all residents and resident trusts and estates and taxable income attributable to Pennsylvania non-resident estates and trusts. The current tax rate of 3.07% became effective on January 1, 2004. Credit against the tax is allowed for gross or net income taxes paid to other states by Pennsylvania residents.

The sales tax is levied at a rate of 6% on the sale, use, storage, rental or consumption of tangible personal property, cigarettes and certain services, and upon the occupancy of hotel rooms. Substantial exemptions from the tax include clothing, food purchased in grocery stores or supermarkets, medical supplies, drugs, residential use of certain utilities, motor fuels, and machinery, equipment and items used in manufacturing, processing, farming or dairying and utility service. Beginning in Fiscal Year 1998, 1.22% of collections, up to an annual limit of $75 million, were transferred to a special fund for mass transit assistance, and in Fiscal Year 2008 the percentage was increased by an additional 4.4%.

The utility gross receipts tax is levied on the gross receipts from business transacted within Pennsylvania by specified public utilities owned, operated or leased by corporations, associations or individuals. The tax rate is 50 mills for all utilities except electric utilities, which are taxed at the rate of 44 mills. The tax rate for electric utilities is adjusted annually under provisions of a formula enacted with the deregulation of electric generation in Pennsylvania. Beginning with Fiscal Year 1999, 0.18% of receipts are transferred to a special fund for mass transit purposes. Revenue from 0.2 mills of the tax is deposited in the Alternative Fuels Incentive Grant Fund.

Other taxes, including the capital stock and franchise taxes ($999.9 million, 3.6% of Fiscal Year 2007 revenues), the cigarette tax ($778.6 million, 2.8% of Fiscal Year 2007 revenues) and inheritance and estate taxes ($756.6 million, 2.8% of Fiscal Year 2007 revenues), also contribute significant revenues to the Commonwealths budget.

The major tax sources for the Motor License Fund are the liquid fuels taxes and the oil companies franchise tax. For Fiscal Year 2007, the liquid fuels tax accounted for $589.2 million (25.7%), and the oil company franchise tax accounted for $462.8 million (20.2%) of Motor License Fund revenues. Portions of certain taxes whose receipts are deposited into the Motor License Fund are legislatively restricted to specific transportation programs. These receipts are accounted for in restricted accounts in the Motor License Fund and are not included in the discussions of the tax revenues of the Motor License Fund.

License and fee receipts in the General Fund for Fiscal Year 2007 totaled $119.6 million representing 0.4% of Commonwealth revenues to the General Fund. A general increase in various General Fund fees was enacted in December 2003 and effective as of January 2004. Revenues from motor vehicle licenses and fees in Fiscal Year 2004 were $870.0 million, representing 38.0% of total Fiscal Year 2007 Motor License Fund revenues.

Federal Revenues. Receipts by the Commonwealth in its General Fund, Motor License Fund and State Lottery Fund from the Federal government during Fiscal Year 2007 totaled $17.5 billion, while such Federal receipts are expected to total $18.1 billion in Fiscal Year 2008 and $18.0 billion in Fiscal Year 2009. Approximately $11.8 billion, or 67.7% of total Federal revenue to the Commonwealth for Fiscal Year 2007, was attributable to public health and welfare programs. In Fiscal Year 2008, $12.3 billion, or 67.6% of Federal revenues, will be attributable to these types of programs.

Education. In Fiscal Year 2007, expenditures from Commonwealth revenues for education purposes were over $10.9 billion. The enacted budget for Fiscal Year 2008 included over $11.5 billion in education funding, an increase of 5.5% over Fiscal Year 2007. The proposed budget for Fiscal Year 2009 includes over $12 million in education funding.

Public Health and Human Services. The Commonwealth provides temporary support for its residents who are seeking to achieve and sustain independence. It also provides care, treatment and rehabilitation to persons with mental and physical disabilities and supports programs to prevent or reduce social, mental and physical diseases and disabilities. Expenditures were $23.9 billion in Fiscal Year 2007 and were projected to be $24.9 billion for Fiscal Year 2008. For Fiscal Year 2009, $25.4 billion is proposed for these purposes. Of the Fiscal Year 2008 expenditures, $10.0 billion will be funded from the General Fund, while $10.6 billion is estimated to be provided for Fiscal Year 2009. Federal funds are expected to decrease by $83.3 million, and augmentations are expected to decrease by $204.9 million for Fiscal Year 2009. The Fiscal Year 2009 budget includes $414.4 million of receipts from the Tobacco Settlement Fund that will be expended for health care.

Programs providing temporary financial assistance and medical assistance comprise the largest portion of public health and human services expenditures. General Fund expenditures for these assistance programs amounted to $5.86 billion in Fiscal Year 2007, while $5.92 billion was budgeted from the General Fund for Fiscal Year 2008 and $6.43 billion is proposed to be budgeted for Fiscal Year 2009. The Fiscal Year 2008 budget anticipates the use of $88.7 million in additional intergovernmental transfer funds to offset General Fund requirements. A nursing home assessment fee provided a General Fund offset of $145 million in Fiscal Year 2007, was expected to provide a $188.6 million offset in Fiscal Year 2008 and is projected to provide an offset of $189.9 million in Fiscal Year 2009. In addition, a managed care organization assessment provided a General Fund offset of $197.3 million in Fiscal Year 2007, was expected to provide a $198.9 million offset in Fiscal Year 2008 and is projected to provide a $215.3 million offset in Fiscal Year 2009.

Expenditures for medical assistance increased during the period from Fiscal Years 1997 through 2007 by an average annual rate of 12.6%. Expenditures from Commonwealth funds were projected to be $5.35 billion in Fiscal Year 2008 and are projected to be $5.83 billion in Fiscal Year 2009, an increase of 9.1% over the previous fiscal year. Income maintenance cash assistance payments to families in transition to independence are estimated to be $1.054 billion for Fiscal Year 2008, of which $474.5 million is from the General Fund. The proposed budget for Fiscal Year 2009 includes a total of $1.063 billion, with $488.3 million provided from the General Fund.

Transportation. The Commonwealth is responsible for the construction, restoration and maintenance of the highways and bridges in the 40,000-mile state highway system, including certain city streets that are a part of the state highway system. Assistance for the maintenance and construction of local roads and bridges is provided to municipalities through grants of financial aid. Highway maintenance costs, construction costs and assistance grants are paid from the Motor License Fund. The General Fund, the State Lottery Fund and other special funds, including the Public Transportation Assistance Fund, the Liquid Fuels Tax Fund, the Highway Beautification Fund, the Motor Vehicle Transaction Recovery Fund and the new Public Transportation Trust Fund provide the remainder of funding for transportation programs.
Act 44 of 2007 (Act 44), signed into law on July 18, 2007, provided the largest single-year increase in Commonwealth funding for transportation. Through a public-public partnership between the Pennsylvania Department of Transportation and the Pennsylvania Turnpike Commission, the Commonwealth will invest nearly $1 billion annually in transportation infrastructure. Act 44 provides an average of $950 million in new funding per year for highways, bridges and transit over the next ten years. In Fiscal Year 2008, $750 million in additional funding will be invested in the Commonwealths transportation system with $450 million going to highway and bridge projects and $300 million to mass transit projects. In Fiscal Year 2009, this increases to $850 million, with $500 million going to highway and bridge projects and $350 million to mass transit programs. By Fiscal Year 2010, $900 million will be invested annually with $500 million for highway and bridge projects and $400 million for mass transit. After Fiscal Year 2010, investments would rise 2.5% annually. The debt will be repaid over time with revenue from a 25% toll increase on the Pennsylvania Turnpike beginning in 2009 and from new tolls to be collected on Interstate 80.

The Commonwealth also provides subsidies for mass transit systems including passenger rail and bus service. In Fiscal Year 2008, the funding mechanisms for mass transit were changed with the enactment of Act 44. Mass transit funding was shifted from the General Fund to a combination of sources of revenue going into a new Public Transportation Trust Fund (the PTTF). The PTTF, established by Act 44, was created to provide a long-term, predictable and growing source of revenues for public transportation systems. A new, dedicated revenue stream consisting of 4.4% of the sales and use tax is earmarked for mass transit systems. The PTTF also receives revenues from the Public Transportation Assistance Fund, the Lottery Fund, and lease payments from the Pennsylvania Turnpike Commission relating to the proposed lease of Interstate 80. The Fiscal Year 2009 budget proposes $1.22 billion in funding for public transit through the PTTF. This funding supports mass transit programs statewide, providing financial assistance for operating costs, capital costs, and certain administrative costs for the Department of Transportation. Dedicated revenues streams to the PTTF and revenues generated through Act 44 are estimated to generate an increase of $300 million annually for local mass transit systems. For Fiscal Year 2007, Commonwealth funding available for mass transit was $635.67 million. The revised funding mechanisms have increased mass transit funding to $1.033 billion in Fiscal Year 2008 and the proposed Fiscal Year 2009 budget includes $1.099 billion.

Total funding for the Commonwealths highway and bridge program for Fiscal Year 2007 was $2.179 billion. This level increased to $2.345 billion in Fiscal Year 2008 and is proposed to rise to $2.413 billion in Fiscal Year 2009. Highway and bridge expenditures by local governments through grants paid from Motor License Fund and restricted revenues were $333.9 million in Fiscal Year 2007. A total of $366.3 million is available for Fiscal Year 2008, and $367 million is available for Fiscal Year 2009.

The Commonwealths current aviation program funds the development of public airport facilities through grants providing for airport development, runway rehabilitation and real estate tax rebates for public use airports. Taxes levied on aviation and jet fuel provide revenues for a restricted account for aviation programs in the Motor License Fund. In Fiscal Year 2007, $8.3 million was expended from the aviation restricted account for such purposes. A total of $9.3 million is budgeted for Fiscal Year 2008 and $9.0 million is proposed for Fiscal Year 2009.

Recent Developments. On February 5, 2008, the Governor submitted to the General Assembly his proposed Fiscal Year 2009 budget. The Commonwealths Comprehensive Annual Financial Report (the CAFR) for the fiscal year ended June 30, 2007 was issued on December 20, 2007. The CAFR, beginning with the one issued for the fiscal year ended June 30, 2002, incorporates several new accounting and reporting standards that affect the comparability of financial information for that fiscal year and subsequent fiscal years to GAAP basis financial information reported for fiscal years prior to the adoption of the new standards. Also beginning with the fiscal year ended June 30, 2002, the CAFR provides a new presentation of government-wide financial statements that are intended to provide an all-encompassing view of a governments financial condition and activities.

Despite an economic slowdown that is currently evolving in the national economy, the Commonwealths revenue receipts continue to exceed earlier estimates for Fiscal Year 2008. General Fund revenue estimates incorporated in the enacted budget for Fiscal Year 2008 included a projected growth in receipts of 1.13%, while actual receipts through April 2008 have grown by 3.22% on a year-over-year basis. In February 2008, the Governors proposed budget for Fiscal Year 2009 included a revision to the Fiscal Year 2008 revenue estimate for General Fund revenues to reflect expectations that revenues may exceed the original estimate by approximately $427.5 million. Actual revenues through April 2008 are $436.6 million or 1.9% above the estimate enacted in July 2008, as part of the Fiscal Year 2008 budget. Based on projections of revenues, as incorporated in the Governors proposed Fiscal Year 2009 budget released in February, the General Fund is currently projected to have a preliminary ending balance of nearly $533.3 million.

Fiscal Year 2008 Budget. The adopted Fiscal Year 2008 budget provides appropriations totaling $27.2 billion of Commonwealth funds against estimated revenues, net of tax refunds and proposed tax reductions, of $27.12 billion. The $77.6 million difference between estimated revenues and budgeted appropriations is expected to be funded by a draw down of the $530.9 million beginning balance. The year ending unappropriated balance is currently estimated to be $400 million for Fiscal Year 2008.

The Fiscal Year 2008 revenue estimate for the Commonwealth is based upon an economic forecast of 2.4% growth in GDP from the start of the third quarter of 2007 to the end of the second quarter of 2008. Trends in the Commonwealths 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 United States, 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 $435 million (1.2%) prior to reserves for refunds. The below average growth that is projected for Fiscal Year 2008 tax revenue is attributable to several legislative changes affecting certain tax receipts. The continued phase-out of the capital stock and franchise tax led to a reduction in Fiscal Year 2008 projected receipts by approximately $241 million. Further, Act 44 dedicates 4.4% of all sales and use tax receipts and transfers these funds to the PTTF, which is estimated to total approximately $321 million in sales tax receipts. Finally, the enacted budget for Fiscal Year 2008 provided miscellaneous tax reductions totaling $63 million. Fiscal Year 2008 Commonwealth revenues from the personal income tax are forecasted to increase by 4.8%, while receipts from the sales and use tax and the corporate net income tax are estimated to decrease by 0.7% and 0.6%, respectively. Projected decreases in these two taxes are the result of the aforementioned legislative changes recently enacted.

A major component of the Fiscal Year 2008 budget is the Prescription for Pennsylvania initiative, which implements a plan designed to increase access to affordable health care coverage for all Pennsylvanians, improve the quality of care delivered throughout the Commonwealth and help bring health care costs under control for employers and employees. The enacted budget includes $17.5 million in funding to implement several components of the Prescription for Pennsylvania, including plans to eliminate hospital-acquired infections, efforts to address chronic conditions and an initiative to address childhood obesity. The enacted budget also includes $99 million in state funds and $212.5 million in Federal funds for an expansion of the Cover All Kids program, which is intended to gradually expand available health insurance to all Pennsylvania children not currently covered by insurance. The Commonwealths prescription drug coverage program continues to expand coverage with the estimated addition of 32,000 seniors during Fiscal Year 2008, bringing the total to more than 357,000 enrollees by June 2008. Finally, the Governor and the General Assembly continue to negotiate additional programs proposed as part of the Prescription for Pennsylvania during the current legislative session, including the Cover All Pennsylvanians program, which would offer affordable basic health insurance to small businesses and uninsured individuals.

A new Energy Independence Initiative was proposed that would provide $850 million in additional investment in new, clean and alternative energy projects. The Energy Independence Fund would support early stage financing and project financing, along with new incentives for energy conservation and solar energy. A new Systems Benefit Charge of 1/20th cent per kilowatt-hour of electricity consumption would be imposed to support the Energy Independence Fund. Through this charge, approximately $75 million would be generated annually, which would support the issuance of $850 million of debt to be issued by the Pennsylvania Energy Development Authority.

Fiscal Year 2009 Proposed Budget. A proposed Fiscal Year 2009 budget was submitted on February 5, 2008. The proposed budget recommends appropriations totaling $28.34 billion of Commonwealth funds against estimated revenues, net of tax refunds and proposed tax reductions, of $27.94 billion. The $397.2 million difference between estimated revenues and recommended appropriations is to be funded by a draw down of the anticipated $400.0 million beginning balance. The Fiscal Year 2009 proposed budget represents a 4.2% ($1.14 billion) increase over the Fiscal Year 2008 budget. More than 40% of the year-over-year increase in appropriations ($476 million) would be dedicated to increased education funding. The proposed budget reduces spending by 2.1% in all areas other than education, welfare, corrections and probation and parole.

The proposed Fiscal Year 2009 budget includes the beginning of property tax cuts for all Pennsylvania homeowners, which are funded from the proceeds of expanded gaming in the Commonwealth. A total of $850 million in local property and wage tax relief will be distributed in Fiscal Year 2009. The proposed budget also includes a state level economic stimulus package, the Protecting Our Progress proposal, which would provide $260 million in general obligation bond proceeds for the Rebuilding Pennsylvania Infrastructure program, and the reintroduction of a previously proposed Energy Independence Initiative (See Fiscal Year 2008 Budget above) and the Jonas Salk Legacy Fund, which would provide $500 million from a partial securitization of the Commonwealths MSA revenues for capital investment in health research facilities.
A 5% increase in PreK-12 education funding is included in the proposed Fiscal Year 2009 budget, and the Basic Education appropriation is recommended to increase 6% over prior year levels, while funding for Special Education programs is recommended to receive a 3% increase. The proposed budget also includes the Cover All Pennsylvanians program which would provide $479.5 million in state and other funds to provide affordable healthcare to 149,500 eligible uninsured adults. The proposed budget includes an 11% increase in state and Federal funds for the Cover All Kids program, which provides basic healthcare coverage for 185,750 children. An increase of 14% is proposed for services to the disabled, and an increase of 7% is proposed for child care services.

Motor License FundFiscal Years 2006-08. Fiscal Year 2006 revenues for the Motor License Fund were $2.27 billion, an increase of 5.1% over actual Fiscal Year 2005 receipts. Liquid fuels tax receipts increased by 5.7% while license and fee revenues grew minimally (0.1%). Other revenue receipts, namely earnings on investments, increased by 34.9%. Appropriations and executive authorizations from Commonwealth funds for Fiscal Year 2006 totaled $2.34 million, an increase of 13%. The Motor License Fund ended the fiscal year with an unappropriated surplus of $283.7 million, a net increase of $71.3 million.

Fiscal Year 2007 revenues for the Motor License Fund were $2.29 billion, an increase of 1.1% over Fiscal Year 2007 receipts. Liquid fuels tax receipts increased by 2.4% while license and fee revenues declined slightly (0.9%). Other revenue receipts increased by 2.0%. The Fiscal Year 2007 Motor License Fund appropriations and executive authorizations totaled $2.57 billion, an increase of 9.6% from Fiscal Year 2006. The Motor License Fund ended the fiscal year with an unappropriated surplus of $96.6 million, a net decrease of 66%.

The enacted Fiscal Year 2008 budget for the Motor License Fund estimates revenues of $2.74 billion, or an increase of $449.1 million from prior year levels. This increase of 19.6% is attributable to statutory revisions enacted as part of the 2007 Transportation Act. The enacted Fiscal Year 2008 Motor License Fund budget appropriates and authorizes $2.8 billion, an increase of 9.2% over Fiscal Year 2007 expenditures. The enacted budget anticipates current and prior year lapses totaling $63 million to further support expenditures. As a result, the anticipated unappropriated year-end surplus is forecast to grow by $1 million to $97.6 million by June 30, 2008.

Through April 2008, Commonwealth revenues in the Motor License Fund are below estimate by 2.3% versus the certified revenue estimate for the same year-to-date period.

The proposed Fiscal Year 2009 budget for the Motor License Fund requests $2.89 billion of appropriations from the Motor License Funds revenues, which represents a 3% increase from prior year levels. The proposed budget includes $48.3 million in additional revenues to the Motor License Fund, as an additional $50 million is budgeted for payments from the Pennsylvania Turnpike pursuant to Act 44. Total revenues of the Motor License Fund are estimated to be $2.81 billion in Fiscal Year 2009.

State Lottery FundFiscal Years 2006-08. During Fiscal Year 2006, ticket sales less field prizes and commissions were $1.46 billion, a 20.4% increase in revenues from lottery sources, including instant ticket sales and the states participation in the multi-state Powerball game. Expenditures totaled $1.44 billion and were 26.2% above Fiscal Year 2005 expenditures. The fiscal year-end unappropriated balance and reserve totaled $439.0 million, an increase of 15.2%.
Fiscal Year 2007 net revenues from lottery sources increased by 2.7%. Total net revenues received by the Lottery Fund during Fiscal Year 2007 were $1.5 billion, while total appropriations were $1.44 billion. Additionally, Fiscal Year 2007 expenditures included a transfer of approximately $248.8 million in long-term care costs from the Commonwealths General Fund to the State Lottery Fund. The fiscal year-end unappropriated balance and reserve was $476.5 million (including $100 million of reserves), an increase of 8.5%.

The enacted Fiscal Year 2008 budget anticipates a $30.2 million increase in revenues from lottery sources. Total funds available are estimated to be $2.05 billion during Fiscal Year 2008, an increase of 1.5%. Appropriations totaling $1.65 billion are budgeted, which represents an increase of $208.6 million or 14.5% over Fiscal Year 2007. Additionally, the enacted Fiscal Year 2008 budget includes a transfer of approximately $248.8 million in long-term care costs from the Commonwealths General Fund to the State Lottery Fund. The projected fiscal year-end balance and reserve is estimated to total $301.1 million, a decrease of 36.8%.

The proposed Fiscal Year 2009 budget anticipates a 3.2% decrease in revenues from lottery sources. Revenues of the State Lottery Fund are estimated to be $1.4 billion in Fiscal Year 2009, a decrease of $45.8 million from Fiscal Year 2008 estimates. Appropriations totaling $1.76 billion are recommended, which represents an increase of $108.6 million or 6.6% over Fiscal Year 2008. The proposed Fiscal Year 2009 budget includes a transfer of approximately $248.8 million in long-term care costs from the Commonwealths General Fund to the State Lottery Fund. The proposed fiscal year-end balance is projected to total $34.7 million, a decrease of 88.5%.

Trend projections for fiscal years beyond Fiscal Year 2009 show estimated program and administrative costs above estimated net revenues, as the forecasted rate of increase in program expenditures, namely the pharmaceutical assistance program, is expected to outpace revenues. The estimated expenditures in excess of estimated revenues will be funded from a further draw-down of available reserves and balances in the State Lottery Fund. Based upon current projections, higher revenues and/or lower expenditures will be required for the State Lottery Fund to balance operations within a fiscal year.

The Constitution permits the Commonwealth to incur the following types of debt: (1) debt to suppress insurrection or rehabilitate areas affected by disaster; (2) electorate-approved debt; (3) debt for capital projects subject to an aggregate debt limit of 1.75 times the annual average tax revenues of the preceding five fiscal years; and (4) tax anticipation notes payable in the fiscal year of issuance. All debt except tax anticipation notes must be amortized in substantial and regular amounts. Debt service on general obligation debt is paid from General Fund appropriations, except for debt issued for highway purposes, which is paid from Motor License Fund appropriations.

Net outstanding general obligation debt totaled $7.834 billion at June 30, 2007, a net increase of $1.087 billion from June 30, 2006. Over the 10-year period ended June 30, 2007, total net outstanding general obligation debt increased at an annual rate of 4.5%. Within the most recent 5-year period, outstanding general obligation debt has increased at an annual rate of 7.7%.

General obligation debt for non-highway purposes of $7.72 billion was outstanding on June 30, 2007. Outstanding debt for these purposes increased by a net $1.14 billion since June 30, 2006. For the period ended June 30, 2007, the 10-year and 5-year average annual compound growth rate for total outstanding debt for non-highway purposes has been 6.3% and 8.8%, respectively. Current Commonwealth infrastructure investment projects include improvement and rehabilitation of existing capital facilities and construction of new facilities, such as public buildings, prisons and parks, transit facilities, economic development and community facilities, and environmental remediation projects.

Outstanding general obligation debt for highway purposes was $112.6 million on June 30, 2007, a decrease of $52.3 million from June 30, 2006. Highway outstanding debt has declined over the most recent 10-year and 5-year periods ended June 30, 2007, by 18.3% and 20.2%, respectively. The decline in outstanding highway debt is due to the policy begun in 1980 of funding highway capital projects with current revenues except for very limited exceptions.

When necessary, the Commonwealth engages in short-term borrowing to fund expenses within the fiscal year through the sale of tax anticipation notes. The Commonwealth may issue tax anticipation notes only for the account of the General Fund or the Motor License Fund or both such funds. The principal amount issued, when added to that outstanding, may not exceed in the aggregate 20% of the revenues estimated to accrue to the appropriate fund, or both funds, in the fiscal year. Tax anticipation notes must mature within the fiscal year in which they were issued. The Commonwealth is not permitted to fund deficits between fiscal years with any form of debt, and any year-end deficit balances must be funded within the succeeding fiscal years budget. Currently, the Commonwealth has no tax anticipation notes outstanding. The proposed Fiscal Year 2009 budget does not anticipate issuing tax anticipation notes.

Certain state-created organizations have statutory authorization to issue debt for which Commonwealth appropriations to pay debt service thereon are not required. The debt of these organizations is funded by assets of, or revenues derived from, the various projects financed, and the debt of such agencies is not an obligation of the Commonwealth, although some of the organizations are indirectly dependent on Commonwealth appropriations. The following organizations had debt currently outstanding as of December 31, 2007: Delaware River Joint Toll Bridge Commission ($459.7 million), Delaware River Port Authority ($1.19 billion), Pennsylvania Economic Development Financing Authority ($1.57 billion), Pennsylvania Energy Development Authority ($45.2 million), Pennsylvania Higher Education Assistance Agency ($11.15 billion), Pennsylvania Higher Educational Facilities Authority ($5.51 billion), Pennsylvania Industrial Development Authority ($404.5 million), Pennsylvania Infrastructure Investment Authority ($47.9 million), Pennsylvania Turnpike Commission ($3.19 billion), and the State Public School Building Authority ($1.79 billion).

The City of Philadelphia is the largest city in the Commonwealth. The Pennsylvania Intergovernmental Cooperation Authority (PICA) was created by Commonwealth legislation in 1991 to assist Philadelphia in remedying 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. Philadelphia currently is operating under a five-year fiscal plan approved by PICA on July 26, 2007.

No further bonds may be issued by PICA for the purpose of either financing capital projects or a deficit, as the authority for such bond issuance expired December 31, 1994. PICAs 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 $622.5 million in special tax revenue bonds outstanding as of June 30, 2007. Neither the taxing power nor the credit of the Commonwealth is pledged to pay debt service on PICAs bonds.

Pensions and Retirement Systems. The Commonwealth maintains contributory benefit pension plans covering all state employees, public school employees and employees of certain state-related organizations. State employees and employees of certain state-related organizations are members of the State Employees Retirement System (SERS). Public school employees are members of the Public School Employees Retirement System (PSERS). With certain exceptions, membership in the applicable retirement system is mandatory for covered employees.

The Commonwealths retirement programs are jointly contributory between the employer and employee. The contribution rate for PSERS new members who enroll in the pension plan is 7.5% of compensation. The contribution rates for PSERS members who enrolled prior to January 1, 2002 range from 5% to 7.5% of compensation depending upon their date of employment and elections made by the member. SERS contribution rate for most employees is 6.25%. Interest on each employees accumulated contributions is credited annually at a 4% rate mandated by state statute. Accumulated contributions plus interest credited are refundable to covered employees upon termination of their employment.

Commonwealth contributions to SERS and PSERS were $206.0 million and $368.8 million, respectively, in Fiscal Year 2007. The Fiscal Year 2008 budget includes Commonwealth contributions for SERS and PSERS of $222.0 million and $451.2 million, respectively, a 7.75% and 23% increase, respectively, in the year-over-year contribution to each system. The proposed budget for Fiscal Year 2009 includes contributions of $230.5 million for SERS and $475.3 million for PSERS, a moderate 4% and 5% increase, respectively, in the year-over-year contribution to each system.

Annual actuarial valuations are required by state law to determine the employer contribution rates necessary to accumulate sufficient assets and provide for payment of future benefits. The actuarys recommendations for employer contribution rates represent a funding plan for meeting current and future retirement obligations and are included in the budget for Fiscal Year 2008. As of June 30, 2007, the market value of investment assets for PSERS was $67.52 billion. As of December 31, 2006, the market value of investment assets for SERS was $32.05 billion.

The Commonwealth is a party to numerous pending or threatened lawsuits in which the Commonwealth has the potential for either a significant loss of revenue or a significant unanticipated expenditure.

In 1978, the General Assembly approved a limited waiver of sovereign immunity. Damages for any loss are limited to $250,000 for each person and $1,000,000 for each accident. The Supreme Court of Pennsylvania has held that this limitation is constitutional. Approximately 3,150 suits against the Commonwealth remain open. Tort claim payments for the departments and agencies, other than the Department of Transportation, are paid from departmental and agency operating and program appropriations. Tort claim payments for the Department of Transportation are paid from an appropriation from the Motor License Fund. The Motor License Fund tort claim appropriation for Fiscal Year 2008 was $20 million.

A significant portion of the Fund may be general obligations and/or revenue bonds of issuers located in the Commonwealth of Puerto Rico. These bonds may be affected by political, social and economic conditions in Puerto Rico. The following is a brief summary of factors affecting the economy of the Commonwealth of Puerto Rico and does not purport to be a complete description of such factors.

Puerto Rico is the fourth largest island in the Caribbean and an estimated 3.9 million people call it home. Puerto Rico's economy continues to track those of states on the U.S. mainland and as such has slowed. Tourism has improved in the last year. The number of rented hotel rooms has increased as has the number of rooms available. The Commonwealth has recently opened a new convention center, which it hopes will attract new business and continue to improve tourism. Since 2002, the Commonwealth reports its economy has been expanding at a moderate annual rate of 2.3%, but recently, several key economic indicators have begun to indicate a slowing of activity. The Planning Board recently lowered its real gross national product forecast to a decline of 1.4% in 2007 followed by a small improvement of 0.8% in 2008. It is possible this will be revised downward.

The island's unemployment rate dropped from 13.6% in 1998 down to an average of 10.6%, 11.7%, and 11.2% in 2005, 2006 and 2007, respectively. As of January 2008, unemployment was 10.9%. The largest employment sectors include government (29%), services (31%), trade (16%) and manufacturing (11%). The manufacturing sector has undergone some major changes as pharmaceuticals, biotech and technology have proven to be growth areas for the Commonwealth.

The Commonwealth's financial stresses continue. Its financial situation reached a low point in May 2006, when the government disclosed a significant budget gap of $738 million for the then current fiscal year. After a political impasse on how to handle the deficit, the Governor ordered the closing of certain non-essential government offices and schools due to the lack of money available for operations on May 1, 2006. During the shutdown, the Governor and legislative leaders were unable to agree on a loan from the Government Development Bank of Puerto Rico (GDB) and what sources would be used for repayment. After an impasse, a four-person commission of non-elected citizens was charged with resolving the fiscal crisis. The commission decided on a special 1% sales tax to repay the GDB loan, and the sales tax was expected to be part of a larger sales tax that could generate a net $300-$400 million for the General Fund. Employees went back to work on May 15, 2006. After much political wrangling, including taking the sales tax to court, the legislature and Governor were able to agree on a sales tax rate, agree on spending reductions and enable a loan from the GDB.

The budgeted General Fund expenses for fiscal year 2008 were $9.227 billion. Preliminary actual expenditures during fiscal year 2008 were $9.057 billion. Preliminary General Fund revenues for fiscal year 2008 totaled $8.253 billion, which is $418 million less than the Department of the Treasurys revised estimate for that period of $8.671 billion. This amount includes $4.359 billion in revenues from individual and corporate income taxes, $1.088 billion from non-resident withholding taxes, $864 million from excise taxes and $911 million of sales tax revenues. The foregoing difference between the preliminary General Fund revenues and preliminary actual expenses for fiscal year 2008 was covered by a recovery of approximately $287 million more in federal funds than had been budgeted, $150 million from the pending sale of certain government properties, cash flow savings resulting from restructuring of certain outstanding debt, and certain cash management procedures, which include delaying payments to certain vendors for a short period of time (carrying them over into the next fiscal year). The federal funds recovery represented reimbursement of amounts advanced by the Commonwealths Department of Education during fiscal years 2006 and 2007.
On July 20, 2008, the Governor signed into law the General Fund budget for fiscal year 2009 of $9.484 billion, or approximately $257 million more than budgeted expenditures for fiscal year 2009 of $9.227 billion. The increase in budgeted expenditures over fiscal year 2008 is mainly due to $105 million from University of Puerto Rico, judiciary and municipal increases based on the legislated formulas and salary increases mandated by law or collective bargaining agreements. An additional $41.2 million is budgeted for the State Election Commission. The General Fund revenue projection for fiscal year 2009 is $8.488 billion, an increase of $235 million, or 2.9%, from preliminary net revenues for fiscal year 2008 of $8.253 billion. The Commonwealths budgeted expenditures for fiscal year 2009 of $9.484 billion exceed projected revenues of $8.488 by approximately $1 billion. The Commonwealths economic team is working to enforce spending control measures that have been established to attempt to minimize the budget risk. In connection with the budget approval and in order to cover the approximately $1 billion difference between approved expenditures and projected revenues, legislation was approved and signed by the Governor authorizing the Commonwealth (i) to sell and or transfer delinquent tax receivables up to $1 billion, and (ii) as an exception to the general prohibition against borrowings to balance the budget, to issue limited special obligations of the Commonwealth payable from and collateralized with tax receivables. There is no guaranty that the Commonwealth will be able to issue such limited special obligations in amounts sufficient to cover the expected revenue shortfall in a timely manner, and, if that is the case, other funding sources, such as possible support from Government Development Bank, will have to be secured.

While Puerto Rico's debt per capita levels are at the higher end of the spectrum compared to U.S. states, this is partly explained by the fact that Puerto Rico generally centralizes the majority of its debt issuance at the territory level. These debt levels have increased as Puerto Rico financed significant capital and infrastructure improvements. Puerto Rico continues to maintain a large unfunded pension liability of almost $10 billion that risks running out of money as early as 2014. The Commonwealth issued pension obligation bonds in early 2008, which will help but not solve the pension issues. The bonds are secured by future employer contributions.

Puerto Rico will continue to face challenges from the 1996 passage of a bill eliminating Section 936 of the Internal Revenue Code. This section had given certain U.S. corporations operating in Puerto Rico significant tax advantages. These incentives had helped drive Puerto Rico's economic growth, especially with the development of its manufacturing sector. U.S. firms that had benefited from these incentives provided a significant portion of Puerto Rico's revenues, employment and deposits in local financial institutions.

In March 2008, the Governor of Puerto Rico and several other individuals were named in federal grand jury indictments relating to the use of political contributions and campaign funds during the period when the Governor was Resident Commissioner in Washington, D.C. In addition, on August 19, 2008, the Governor and other individuals were named in federal grand jury indictments relating to the use of political contributions and campaign funds during the Governors campaign and after his election as Governor. The Governor has denied any wrongdoing and has stated his intention to remain in his position and present his defense. It is not expected that such developments will have any impact on the fiscal affairs of the Commonwealth or on the payment of any obligations issued by the Commonwealth. On November 4, 2008, Luis G. Fortuno, the current Resident Commissioner of the Commonwealth, was elected as the next governor of Puerto Rico. Mr. Fortuno will assume his position as governor on January 1, 2009.

The island of Guam has an estimated population of 173,000. Its economy is driven by tourism and U.S. Military activity. The government of Guam also receives significant support from the U.S. Treasury. Japan accounts for a substantial amount of Guam's tourism (78% of visitors), which makes the island's economy very sensitive to fluctuations in the Japanese economy. Economic weakness in Japan and other parts of Asia has had a negative impact on Guam tourism. Combined with a typhoon in 1997, a super-typhoon in 2002, September 11, 2001 (9/11), SARS and the war in Iraq, tourism declined in the early to mid-part of this decade. However, tourism has seen improvement in recent years, helped by favorable weather and a steadying Japanese economy. In August 2007, visitor arrivals hit the highest mark since 9/11 and calendar year 2007 arrivals increased 1.1% from 2006. However, since then, arrivals have dropped off. In February 2008, arrivals were down 2.5% from a year earlier.

Employment has been quite volatile on Guam since 1998. Total employment reached a peak of 62,350 in March of 1999. Small increases followed in 2000 and 2001, but then employment fell by nearly 10% in early 2002. Employment has slowly increased during the past four years, reaching 58,040 in June 2007. Unemployment rates remain high and were 6.9% in March 2006, the last time it was calculated by the U.S. Bureau of Labor Statistics.

The U.S. Military presence on Guam has always been a positive contributor to the economy. Its strategic location close to Asia has increased its importance in the overall military strategy of the U.S. As a result, the U.S. government is in the process of a significant buildup of personnel and facilities on Guam. The Marines are planning on relocating some 8,000 Marines and their 9,000 dependents to Guam from Okinawa, Japan by 2014, and the U.S. Navy has stationed several submarines and carrier strike forces on the island. This planned growth requires a substantial amount of new facilities, upgrades to existing facilities and infrastructure improvements, possibly totaling as much as $10 billion. The short- and long-term implications of this growth are expected to be positive.

Guam's overall financial condition has deteriorated due to a slew of misfortunes and mismanagement. Natural disasters, the economic crisis in Japan, and the events of 9/11 have all contributed to Guam's financial hardship. Guam has seen negative financial results for most of the past decade. As a result, its fiscal year 2006 accumulated deficit had grown to almost $540 million. It has a large unfunded liability in its pension fund and a large liability to its residents for unpaid tax refunds. The government issued debt in 2007 to fund some of these liabilities, restructure debt and pay debt service on current obligations for which cash was not available. Guam has identified several steps that can be taken to improve its financial condition, but successful implementation is uncertain. The improvement in tourism and expected economic boost from the military buildup could also improve the territory's financial picture, but it is unclear whether Guam will be able to erase this deficit in the foreseeable future.

As of November 2008, S&P has assigned a rating of B+ to Guam's general obligation debt.

Approximately 112,801 people reside in the 70 small islands and cays that make up the U.S. Virgin Islands. The U.S. Virgin Islands continue to experience higher unemployment rates and lower wealth levels than realized in the U.S., although both of these measurements have improved in the past few years. The economy of the U.S. Virgin Islands is driven by tourism, which accounts for approximately 80% of gross domestic product and a significant share of employment. The islands' tourism industry was hit hard after the events of 9/11, but tourism activity experienced a modest recovery beginning in 2004. The majority of the islands' visitors arrive via cruise ships, and total cruise ship arrivals increased 11.9% in 2004. Total cruise ship arrivals decreased slightly in 2005 and 2006 and increased marginally in 2007. Air arrivals reached an all-time high in 2005 before decreasing slightly in 2006. Total air arrivals increased by a little more than 3.0% in 2007. Taking both air and cruise arrivals into account, tourism activity increased 1.4% in 2007. Hotel occupancy rates have been above 60% since 2004, including average rates of 60.6% in 2006 and 64.9% in 2007. In the five years prior to 2004, hotel occupancy had ranged between 55% and 58%. The unemployment rate peaked at 9.4% in 2003, but had fallen to 6.2% by the end of 2006 due to increased tourism. Private sector jobs comprise 72.7% of all non-farm jobs with 44.0% comprising services, including tourism employment. Manufacturing represents just more than 5.1% of employment, and construction represents about 6.9%.

The U.S. Virgin Islands government carries a large public sector payroll and relies heavily on taxes as a revenue source (roughly 91% of all revenues). These factors, together with the lingering effects of several major hurricanes in the past two decades, have contributed to the government's poor financial performance. The government has suffered numerous years of budget imbalances over the past decade, resulting in recurring annual General Fund deficits. The cash-flow crisis in the government intensified in fiscal year 2002 due to the slumping economy and lower tax receipts. In fiscal year 2003, the government stabilized cash flows with the help of approximately $81.5 million of financing proceeds. For the fiscal year 2003, the government reduced its operating deficit from $164.4 million to $109.8 million, and used transfers and bank anticipation notes proceeds to increase the fund balance by $68.3 million. The ending fund balance of $97.2 million was equal to 16.85% of expenditures. Financial results continued to be positive in fiscal year 2004 and fiscal year 2005. In fiscal year 2004, the General Fund balance increased by more than $30 million, and an additional increase of $52.4 million was achieved in fiscal year 2005. By the end of fiscal year 2005, the General Fund balance had reached $180.1 million, which was equal to 28.8% of expenditures. It should be noted that expenditures remain elevated and the General Fund is still producing operating deficits each year. However, securitized tax revenues have been sufficient to cover debt service and supplement the General Fund, and the fund balance should remain strong under these conditions. Financial results for fiscal years 2006 and 2007 are not available at this time.

In October 1999, the government and the U.S. Department of Interior entered into a Memorandum of Understanding stipulating that federal grants will be awarded contingent on several financial performance and accountability standards being met that will demonstrate improvement in the economic and financial condition of the islands. In recent years, the government has tried to improve its financial profile by implementing several cost-cutting measures, including renegotiating debt obligations, consolidating departments, cutting healthcare costs, hiring freezes, and a reduction in overtime.

The Mariana Islands became a U.S. territory in 1975. At that time, the U.S. government agreed to exempt the islands from federal minimum wage and immigration laws in an effort to help stimulate industry and the economy. The islands' minimum wage is currently $4.20 per hour below the U.S. level. Immigration from various Asian countries, however, has provided cheap labor for the islands' industries over the last several decades. Foreign workers have accounted for approximately four times the number of indigenous workers.

It is estimated that the garment industry contributes about 30% of General Fund expenditures compared to 40% just a few years ago and is expected to decline further in 2008. The decline is largely a result of the elimination of quota restrictions for World Trade Organization members in 2005. The export value of the industry dropped 13% in 2005, 26% in 2006 and an estimated 10% drop in 2007. Employment in the industry has dropped from 17,000 workers in 2001 to about 7,000 in 2007, and the number of factories has dropped from 34 to 16 over the same period. There is also additional legislation being considered in Congress that could negatively affect this industry further if passed, including implementation of the federal minimum wage rate in the Commonwealth of the Northern Mariana Islands (CNMI) and the implementation of federal immigration laws in the islands. The Commonwealth's gross business revenues were $1.4 billion in 1993, then increased to a high of $2.6 billion in 1997. Gross business revenues have since declined to $1.3 billion for 2006.

The tourism industry is the other large contributor to the CNMI economy. Tourism, which is largely driven by trends in Asia, is estimated to account for up to 35% of the economy. Visitors to the islands have declined over the last several years from 694,888 in 1997 to 459,458 in 2003 and 435,494 in 2006. Arrivals declined another 22% in 2007. The decline is a result of many factors including the weakening of the Asian economy, SARS, the war in Iraq and most recently the reduction in flights available from Japan to CNMI. The year-over-year decline in Japanese arrivals as of January 2008 has improved as flights from Osaka started in late December. It is important that available flights from Japan continue to increase since Japan makes up the largest visitor segment. The CNMI is trying to diversify its visitor profile and is working closely with Chinese officials to open up this channel and is currently seeing strong growth from Korea and Russia.

The Commonwealth's financials have been in a deficit position since 1994. The most recent audited financial statement is from 2006 and it identified a $174 million negative unreserved fund balance which is 88% of annual expenditures after transfers. The $16 million 2006 deficit was smaller, however, than the 2005 deficit. The Commonwealth attributes the deficit for 2006 to disbursements from bond proceeds received in 2004 and the inclusion of $11.9 million in employer retirement contributions even though employer retirement contributions had been suspended under public law.

In certain cases, the initial sales charge that applies to purchases of Class A shares² of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.³ That is because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as the Distributor), or by dealers or other financial institutions that offer those shares to certain classes of investors. Not all waivers apply to all funds.

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

1) plans created or under Sections 401(a) or 401(k) of the Internal Revenue Code,

3)     employee benefit plans,⁴
4)     Group Retirement Plans,⁵
5)     403(b)(7) custodial plan accounts, and
6)     Individual Retirement Accounts (IRAs), including traditional IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

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

Applicability of Class A Contingent Deferred Sales Charges in Certain Cases

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

There is no initial sales charge on purchases of Class A shares of any of the Oppenheimer funds in the cases listed below. However, these purchases may be subject to the Class A contingent deferred sales charge if redeemed within 18 months (24 months in the case of shares of Oppenheimer Rochester National Municipals and Rochester Fund Municipals purchased prior to October 22, 2007) of the beginning of the calendar month of their purchase, as described in the Prospectus (unless a waiver described elsewhere in this Appendix applies to the redemption). Additionally, on shares purchased under these waivers that are subject to the Class A contingent deferred sales charge, the Distributor will pay the applicable concession described in the Prospectus under Class A Contingent Deferred Sales Charge.⁶ This waiver provision applies to:

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.

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 funds 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).

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):

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):

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):

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:

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 participants account was established.

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.

7) To make substantially equal periodic payments as described in Section 72(t) of the Internal Revenue Code.

9) Separation from service.⁸
10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) if the plan has made special arrangements with the Distributor.

11) Plan termination or in-service distributions, if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.

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.

The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in the following cases:

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 participants account was established in an Oppenheimer fund.

4)     To make hardship withdrawals, as defined in the plan.¹⁰
5)     To make distributions required under a Qualified Domestic Relations Order or, in the case of an IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code.
6)     To meet the minimum distribution requirements of the Internal Revenue Code.
7)     To make substantially equal periodic payments as described in Section 72(t) of the Internal Revenue Code.
8)     For loans to participants or beneficiaries.¹¹
9)     On account of the participants separation from service.¹²
10)     Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) offered as an investment option in a Retirement Plan if the plan has made special arrangements with the Distributor.
11)     Distributions made on account of a plan termination or in-service distributions, if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
12)     For distributions from a participants account under an Automatic Withdrawal Plan after the participant reaches age 59, as long as the aggregate value of the distributions does not exceed 10% of the accounts 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 accounts 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.

The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases:

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 adviser to those former Quest for Value Funds. Those funds include:

Oppenheimer Rising Dividends Fund, Inc. Oppenheimer Small- & Mid- Cap Value Fund

Oppenheimer Quest Balanced Value Fund Oppenheimer Quest International Value Fund, Inc.

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

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:

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.

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 funds 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 funds 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.

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.

A shareholders account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, Class B or Class C shares of the Oppenheimer fund described in this section if the proceeds are invested in the same Class of shares in that fund or another Oppenheimer fund within 90 days after redemption.

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

The initial and contingent deferred sale charge rates and waivers for Class A and Class B shares described in the respective Prospectus (or this Appendix) of the following Oppenheimer funds (each is referred to as a Fund in this section):

Oppenheimer U. S. Government Trust,
Oppenheimer Core Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund

are modified as described below for those Fund shareholders who were shareholders of the following funds (referred to as the Former Connecticut Mutual Funds) on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds:

Connecticut Mutual Government Securities Account CMIA LifeSpan Capital Appreciation Account

Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account

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).

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 Funds policies on Combined Purchases or Rights of Accumulation, who still hold those shares in that Fund or other Former Connecticut Mutual Funds, and

2) persons whose intended purchases under a Statement of Intention entered into prior to March 18, 1996, with the former general distributor of the Former Connecticut Mutual Funds to purchase shares valued at $500,000 or more over a 13-month period entitled those persons to purchase shares at net asset value without being subject to the Class A initial sales charge

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

Class A Sales Charge Waivers. Additional Class A shares of a Fund may be purchased without a sales charge, by a person who was in one (or more) of the categories below and acquired Class A shares prior to March 18, 1996, and still holds Class A shares:

1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase and such investment is still held in one or more of the Former Connecticut Mutual Funds or a Fund into which such Fund merged;

2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more;

3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families;

4) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. (CMFS), the prior distributor of the Former Connecticut Mutual Funds, and its affiliated companies;

5) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; and

6) an institution acting as a fiduciary on behalf of an individual or individuals, if such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS.

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

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

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:

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;

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 Funds 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 Funds Articles of Incorporation, or as adopted by the Board of Directors of the Fund.

Special Reduced Sales Charge for Former Shareholders of Advance America Funds, Inc.

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

Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible Securities Fund

Oppenheimer Convertible Securities Fund (referred to as the Fund in this section) may sell Class M shares at net asset value without any initial sales charge to the classes of current Class M shareholders listed below who, prior to March 11, 1996, owned shares of the Funds then-existing Class A and were permitted to purchase those shares at net asset value without a sales charge:

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

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 Funds 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.

⁸ This provision only applies to qualified retirement plans and 403(b)(7) custodial plans after your separation from service in or after the year you reached age 55.

⁹ The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an investment option under the Plan.

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.

ABG Securities	Fixed Income Securities	Nomura Securities
ABN AMRO	Fortis Securities	Oppenheimer & Co.
AG Edwards	Fox-Pitt, Kelton	Oscar Gruss
Allen & Co	Friedman, Billing, Ramsey	OTA
American Technology Research	Gabelli	Pacific Crest Securities
Auerbach Grayson	Garp Research	Piper Jaffray Inc.
Avondale	Gartner	Portales Partners
Banc of America Securities	George K Baum & Co.	Punk Ziegel & Co
Barra	Goldman Sachs	Raymond James
BB&T	Howard Weil	RBC
Bear Stearns	HSBC	Reuters
Belle Haven	ISI Group	RiskMetrics/ISS
Bloomberg	ITG	Robert W. Baird
BMO Capital Markets	Janco	Roosevelt & Cross
BNP Paribas	Janney Montgomery	Russell
Brean Murray	Jefferies	Sandler O'Neill
Brown Brothers	JMP Securities	Sanford C. Bernstein
Buckingham Research Group	JNK Securities	Scotia Capital Markets
Canaccord Adams	Johnson Rice & Co	Sidoti
Caris & Co.	JP Morgan Securities	Simmons
CIBC World Markets	Kaufman Brothers	Sanders Morris Harris
Citigroup Global Markets	Keefe, Bruyette & Woods	Societe Generale
CJS Securities	Keijser Securities	Soleil Securities Group
Cleveland Research	Kempen & Co. USA Inc.	Standard & Poors
Cogent	Kepler Equities/Julius Baer Sec	Stanford Group
Collins Stewart	KeyBanc Capital Markets	State Street Bank
Cowen & Company	Lazard Freres & Co	Stephens, Inc.
Craig-Hallum Capital Group LLC	Leerink Swann	Stifel Nicolaus
Credit Agricole Cheuvreux N.A. Inc.	Lehman Brothers	Stone & Youngberg
Credit Suisse	Loop Capital Markets	Strategas Research
Data Communique	Louise Yamada Tech Research	Sungard
Daiwa Securities	MainFirst Bank AG	Suntrust Robinson Humphrey
Davy	Makinson Cowell US Ltd	SWS Group
Deutsche Bank Securities	McAdams Wright	Think Equity Partners
Dougherty Markets	Merrill Lynch	Thomas Weisel Partners
Dowling	Miller Tabak	Thomson Financial
Empirical Research	Mizuho Securities	UBS
Enskilda Securities	Moodys Research	Virtusa Corporation
Exane BNP Paribas	Morgan Stanley	Wachovia Securities
Factset	Natixis Bleichroeder	Wedbush
Fidelity Capital Markets	Ned Davis Research Group	Weeden
First Albany	Needham & Co	William Blair

Oppenheimer Absolute Return Fund	Oppenheimer Real Estate Fund
Oppenheimer AMT-Free Municipals	Oppenheimer Rochester Arizona Municipal Fund
Oppenheimer AMT-Free New York Municipals	Oppenheimer Rochester Maryland Municipal Fund
Oppenheimer Balanced Fund	Oppenheimer Rochester Massachusetts Municipal Fund
Oppenheimer Baring China Fund	Oppenheimer Rochester Michigan Municipal Fund
Oppenheimer Baring Japan Fund	Oppenheimer Rochester Minnesota Municipal Fund
Oppenheimer Baring SMA International Fund	Oppenheimer Rochester North Carolina Municipal Fund
Oppenheimer California Municipal Fund	Oppenheimer Rochester Ohio Municipal Fund
Oppenheimer Capital Appreciation Fund	Oppenheimer Rochester Virginia Municipal Fund
Oppenheimer Developing Markets Fund	Oppenheimer Select Value Fund
Oppenheimer Discovery Fund	Oppenheimer Series Fund, Inc.
Oppenheimer Emerging Growth Fund	Oppenheimer SMA Core Bond Fund
Oppenheimer Global Fund	Oppenheimer SMA International Bond Fund
Oppenheimer Global Opportunities Fund	Oppenheimer Transition 2010 Fund
Oppenheimer Global Value Fund	Oppenheimer Transition 2015 Fund
Oppenheimer Gold & Special Minerals Fund	Oppenheimer Transition 2020 Fund
Oppenheimer International Diversified Fund	Oppenheimer Transition 2025 Fund
Oppenheimer International Growth Fund	Oppenheimer Transition 2030 Fund
Oppenheimer International Small Company Fund	Oppenheimer Transition 2040 Fund
Oppenheimer Institutional Money Market Fund	Oppenheimer Transition 2050 Fund
Oppenheimer Limited Term California Municipal Fund	OFI Tremont Core Strategies Hedge Fund
Oppenheimer Master International Value Fund, LLC	Oppenheimer Tremont Market Neutral Fund LLC
Oppenheimer Money Market Fund, Inc.	Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer Multi-State Municipal Trust	Oppenheimer U.S. Government Trust
Oppenheimer Portfolio Series

Independent Trustees
Name, Position(s) Held with the Fund, Length of Service, Age	Principal Occupation(s) During the Past 5 Years; Other Trusteeships/Directorships Held; Number of Portfolios in the Fund Complex Currently Overseen	Dollar Range of Shares Beneficially Owned in the Fund	Aggregate Dollar Range Of Shares Beneficially Owned in Supervised Funds
		As of December 31, 2007
Brian F. Wruble, Chairman of the Board of Trustees since 2007, Trustee since 2005, Age: 65	General Partner of Odyssey Partners, L.P. (hedge fund) ( September 1995-December 2007); Director of Special Value Opportunities Fund, LLC (registered investment company) (affiliate of the Managers parent company) (since September 2004); Chairman (since August 2007) and Trustee (since August 1991) of the Board of Trustees of The Jackson Laboratory (non-profit); Treasurer and Trustee of the Institute for Advanced Study (non-profit educational institute) (since May 1992 ); Member of Zurich Financial Investment Management Advisory Council (insurance) (2004-2007); Special Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January 1999-September 2004); Oversees 62 portfolios in the OppenheimerFunds complex.	None	Over $100,000
David K. Downes, Trustee since 2007 Age: 6 8	Independent Chairman GSK Employee Benefit Trust (since April 2006); Director of Correctnet (since January 2006); Trustee of Employee Trusts (since January 2006); President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment management company) (since January 2004); Director of Internet Capital Group (information technology company) (since October 2003); Independent Chairman of the Board of Trustees of Quaker Investment Trust (registered investment company) (2004-2007); President of The Community Reinvestment Act Qualified Investment Fund (investment management company) (2004-2007); Chief Operating Officer and Chief Financial Officer of Lincoln National Investment Companies, Inc. (subsidiary of Lincoln National Corporation, a publicly traded company) and Delaware Investments U.S., Inc. (investment management subsidiary of Lincoln National Corporation) (1993-2003); President, Chief Executive Officer and Trustee of Delaware Investment Family of Funds (1993-2003); President and Board Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of Retirement Financial Services, Inc. (registered transfer agent and investment adviser and subsidiary of Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive Officer of Delaware Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief Financial Officer, Vice Chairman and Director of Equitable Capital Management Corporation (investment subsidiary of Equitable Life Assurance Society) (1985-1992); Corporate Controller of Merrill Lynch & Company (financial services holding company) (1977-1985); held the following positions at the Colonial Penn Group, Inc. (insurance company): Corporate Budget Director (1974-1977), Assistant Treasurer (1972-1974) and Director of Corporate Taxes (1969-1972); held the following positions at Price Waterhouse & Company (financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967) and Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees 62 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Matthew P. Fink, Trustee since 2005 Age: 6 7	Trustee of the Committee for Economic Development (policy research foundation) (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 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Phillip A. Griffiths, Trustee since 1999 Age: 70	Fellow of the Carnegie Corporation (since 2007); Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI Lumonics Inc. (precision technology products company) (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 52 portfolios in the OppenheimerFunds complex.	None	None
Mary F. Miller, Trustee since 2004 Age: 6 6	Trustee of International House (not-for-profit) (since June 2007); Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice President and General Auditor of American Express Company (financial services company) (July 1998-February 2003). Oversees 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Joel W. Motley, Trustee since 2002 Age: 56	Managing Director of Public Capital Advisors, LLC (privately held financial adviser) (since January 2006). Managing Director of Carmona Motley, Inc. (privately-held financial adviser) (since January 2002); Director of Columbia Equity Financial Corp. (privately-held financial advisor) (2002-2007); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial advisor) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council on Foreign Relations, Member of the Investment Committee of the Episcopal Church of America, Member of the Investment Committee and Board of Human Rights Watch and Member of the Investment Committee of Historic Hudson Valley. Oversees 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Russell S. Reynolds, Jr., Trustee since 1989 Age: 7 6	Chairman of RSR Partners (formerly The Directorship Search Group, Inc.) (corporate governance consulting and executive recruiting) (since 1993); Life Trustee of International House (non-profit educational organization); Former Trustee of The Historical Society of the Town of Greenwich; Former Director of Greenwich Hospital Association. Oversees 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Mary Ann Tynan, Trustee since 2008 Age: 63	Vice Chair of Board of Trustees of Brigham and Woman's Hospital (non-profit hospital) (since 2000); Chair of Board of Directors of Faulkner Hospital (non-profit hospital) (since 1990); Member of Audit and Compliance Committee of Partners Health Care System (non-profit) (since 2004); Board of Trustees of Middlesex School (educational institution) (since 1994); Board of Directors of Idealswork, Inc. (financial services provider) (since 2003); Member of Capital Campaign Committee of Island Medical Center (medical facility) (2006-2008); Partner, Senior Vice President and Director of Regulatory Affairs of Wellington Management Company, LLP (global investment manager) (1976-2002); Vice President and Corporate Secretary, John Hancock Advisers, Inc. (mutual fund investment adviser) (1970-1976). Oversees 52 portfolios in the OppenheimerFunds complex.	None*	None*
Joseph M. Wikler, Trustee since 2005 Age: 6 7	Director of C-TASC (bio-statistics services) (since 2007); Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996); Director of Lakes Environmental Association (environmental protection organization) (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 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000
Peter I. Wold, Trustee since 2005 Age: 60	President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President, Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production) (1996 - 2006); 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 52 portfolios in the OppenheimerFunds complex.	None	Over $100,000

Interested Trustee and Officer
Name, Position(s) Held with Fund, Length of Service Age	Principal Occupation(s) During Past 5 Years; Other Trusteeships/Directorships Held by Trustee; Number of Portfolios in Fund Complex Currently Overseen by Trustee	Dollar Range of Shares Beneficially Owned in the Fund		Aggregate Dollar Range Of Shares Beneficially Owned in Supervised Funds
		As of December 31, 2007
John V. Murphy, Trustee since 2001 and President and Principal Executive Officer since 2001 Age: 59	Chairman, Chief Executive Officer and Director of the Manager since June 2001; President of the Manager (September 2000-February 2007); President and a director or trustee of other Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp. (OAC) (the Managers 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) (November 2001-December 2006); 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 (OACs 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 Institutes Board of Governors (since October 3, 2003); Chairman of the Investment Companys Institutes Board of Governors (since October 2007).. Oversees 103 portfolios in the OppenheimerFunds complex.	None	Over $100,000

Other Officers of the Fund
Name, Position(s) Held with Fund, Length of Service, Age	Principal Occupation(s) During Past 5 Years
Ronald H. Fielding, Vice President and Senior Portfolio Manager since 1999 Age: 59	Senior Vice President of the Manager and Chairman of the Rochester Division of the Manager since January 1996; Vice President of the Fund since 1999; Chief Strategist, Senior Portfolio Manager and a trader for the Fund and other Oppenheimer funds. A Portfolio Manager and officer of 18 portfolios in the OppenheimerFunds complex.
Daniel G. Loughran, Vice President since 2005 and Portfolio Manager since 2003 Age: 45	Senior Vice President of the Manager since April 2001; Vice President of the Rochester division of the Manager since January 1996. Vice President of the Fund since 2005 Team leader, a Senior Portfolio Manager and a trader for the Fund and other Oppenheimer funds. A Portfolio Manager and officer of 18 portfolios in the OppenheimerFunds complex.
Scott Cottier, Vice President since 2005 and Portfolio Manager since 2003 Age: 37	Vice President of the Manager since 2002; Vice President of the Fund since October 2005; Portfolio Manager and trader at Victory Capital Management (1999-2002). Senior Portfolio Manager and trader for the Fund and other Oppenheimer Funds. An officer of 18 portfolios in the OppenheimerFunds complex.
Troy Willis, Vice President since 2005 and Portfolio Manager since 2005 Age: 33	Assistant Vice President of the Manager since July 2005; Associate Portfolio Manager of the Manager since 2003; A corporate attorney for Southern Resource Group (1999-2003). A Portfolio Manager and officer of 18 portfolios in the OppenheimerFunds complex.
Richard Stein Vice President since 2007 Age: 51	Director of the Rochester Credit Analysis team (since 2003) and a Vice President of the Manager (since 1997) ; Headed Rochesters Credit Analysis team (since 1993).
Mark S. Vandehey, Vice President and Chief Compliance Officer since 2004 Age: 58	Senior Vice President and Chief Compliance Manager of the Manager (since March 2004); Chief Compliance Officer of OppenheimerFunds Distributor, Inc., Centennial Asset Management and Shareholder Services, Inc. (Since March 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983). Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An officer of 101 portfolios in the OppenheimerFunds complex.
Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer since 1999 Age: 4 9	Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust program established by the Manager) (since June 2003); Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999),Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003). An officer of 101 portfolios in the OppenheimerFunds complex.
Brian Petersen, Assistant Treasurer since 2004 Age: 38	Vice President of the Manager (since February 2007); Assistant Vice President of the Manager (August 2002-February 2007). Manager/Financial Product Accounting of the Manager (November 1998-July 2002). An officer of 10 1 portfolios in the OppenheimerFunds complex.
Stephanie Bullington, Assistant Treasurer since 2008 Age: 31	Assistant Vice President of the Manager (since October 2005); Assistant Vice President of ButterField Fund Services (Bermuda) Limited, part of The Bank of N.T. Butterfield & Son Limited (Butterfield) (February 2004-June 2005; Fund Accounting Officer of Butterfield Fund Services (Bermuda) Limited (September 2003-February 2004. An officer of 101 portfolios in the OppenheimerFunds complex.
Robert G. Zack, Secretary since 2001 Age: 60	Executive Vice President (since January 2004) and General Counsel (since March 2002) of the Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice President and General Counsel of HarbourView Asset Management Corporation (since December 2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice President and General Counsel of OFI Institutional Asset Management, Inc. (since November 2001); Director of OppenheimerFunds International Distributor Limited (since December 2003); Senior Vice President (May 1985-December 2003). An officer of 101 portfolios in the OppenheimerFunds complex.
Kathleen T. Ives, Assistant Secretary since 2001 Age: 43	Vice President (since June 1998), Deputy General Counsel (since May 2008) and Assistant Secretary (since October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since December 2001); Senior Counsel of the Manager (October 2003-May 2008) . An officer of 101 portfolios in the OppenheimerFunds complex.
Lisa I. Bloomberg, Assistant Secretary since 2004 Age: 40	Vice President (since May 2004) and Deputy General Counsel (since May 2008) of the Manager; Associate Counsel of the Manager (May 2004-May 2008); First Vice President (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), of UBS Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 101 portfolios in the OppenheimerFunds complex.
Taylor V. Edwards, Assistant Secretary since 2008 Age: 41	Vice President and Assistant Counsel of the Manager (since February 2007); Assistant Vice President and Assistant Counsel of the Manager (January 2006-January 2007 ); Formerly an Associate at Dechert LLP (September 2000-December 2005). An officer of 101 portfolios in the OppenheimerFunds complex.
Randy G. Legg, Assistant Secretary since 2008 Age: 43	Vice President (since June 2005) and Associate Counsel (since January 2007) of the Manager; Assistant Vice President (February 2004-June 2005) and Assistant Counsel (February 2004-January 2007) of the Manager. An officer of 101 portfolios in the OppenheimerFunds complex.
Adrienne M. Ruffle, Assistant Secretary since 2008 Age: 31	Vice President (since February 2007) and Assistant Counsel (since February 2005) of the Manager; Assistant Vice President of the Manager (February 2005-February 2007); Associate (September 2002-February 2005) at Sidley Austin LLP. An officer of 101 portfolios in the OppenheimerFunds complex.

Name and Other Fund Position(s) (as applicable)	Aggregate Compensation From the Fund⁽¹ ⁾	Retirement Benefits Accrued as Part of Fund Expenses	Estimated Annual Benefits Upon Retirement⁽²⁾	Total Compensation From the Fund and Fund Complex
Name and Other Fund Position(s) (as applicable)	Fiscal year ended July 31, 2008			Year ended December 31, 2007
Brian F. Wruble ⁽³⁾ Chairman of the Board	$3,422⁽⁴⁾	N/A	$65,868⁽⁵⁾	$335,190⁽⁶⁾
David K. Downes⁽⁷⁾ Audit Committee Chairman And Regulatory & Oversight Committee Member	$2,539	N/A	$26,112⁽⁸⁾	$180,587⁽⁹⁾
Matthew P. Fink Regulatory & Oversight Committee Chairman and Governance Committee Member	$2,640	N/A	$10,004⁽¹⁰⁾	$154,368
Phillip A. Griffiths Audit Committee Member and Regulatory & Oversight Committee Member	$3,112⁽1¹⁾	N/A	$51,621⁽¹²⁾	$198,211
Mary F. Miller Audit Committee Member and Governance Committee Member	$2,555⁽¹³⁾	N/A	$13,201⁽¹²⁾	$152,698
Joel W. Motley Governance Committee Chairman and Regulatory & Oversight Committee Member	$2,701⁽¹⁴⁾	N/A	$32,741⁽¹²⁾	$171,223
Russell S. Reynolds, Jr. Audit Committee Member and Governance Committee Member	$2,555	N/A	$77,288	$153,530
Joseph M. Wikler Audit Committee Member and Regulatory & Oversight Committee Member	$2,555⁽¹⁵⁾	N/A	$28,814⁽¹²⁾	$150,770
Peter I. Wold Audit Committee Member and Governance Committee Member	$2,555⁽¹⁶⁾	N/A	$28,814⁽¹²⁾	$150,770

Fiscal Year Ended 7/31	Management Fees paid to OppenheimerFunds, Inc.
2006	$4,276,821
2007	$5,624,125
2008	$5,949,796

Portfolio Manager	Registered Investment Companies Managed	Total Assets in Registered Investment Companies Managed¹	Other Pooled Investment Vehicles Managed	Total Assets in Other Pooled Investment Vehicles Managed¹	Other Accounts Managed	Total Assets in Other Accounts Managed²
Ronald H. Fielding	17	$29,049	None	None	None	None
Daniel G. Loughran	17	$29,049	None	None	None	None
Scott S. Cottier	17	$29,049	None	None	None	None
Troy E. Willis	17	$29,049	None	None	None	None
Marcus V. Franz	17	$29,049	None	None	None	None
Mark R. DeMitry	17	$29,049	None	None	None	None
Michael L. Camarella	17	$29,049	None	None	None	None

Fiscal Year Ended 7/31:	Aggregate Front-End Sales Charges on Class A Shares	Class A Front-End Sales Charges Retained by Distributor¹	Concessions on Class A Shares Advanced by Distributor²	Concessions on Class B Shares Advanced by Distributor²	Concessions on Class C Shares Advanced by Distributor²
2006	$5,112,325	$845,762	$135,293	$1,043,784	$888,524
2007	$5,537,757	$917,406	$238,954	$716,025	$925,902
2008	$2,969,743	$474,840	$209,749	$321,127	$505,763

Fiscal Year Ended 7/31:	Class A Contingent Deferred Sales Charges Retained by Distributor	Class B Contingent Deferred Sales Charges Retained by Distributor	Class C Contingent Deferred Sales Charges Retained by Distributor
2006	$9,524	$383,285	$56,182
2007	$4,098	$273,902	$59,298
2008	$23,986	$278,304	$75,603

Distribution and Service Fees Paid to the Distributor in the Fiscal Year Ended 7/31/08
Class:	Total Payments Under Plan	Amount Retained by Distributor	Distributors Aggregate Unreimbursed Expenses Under Plan	Distributors Unreimbursed Expenses as % of Net Assets of Class
Class B Plan	$1,335,820	$1,136,148¹	$3,854,365	3.23%
Class C Plan	$2,786,087	$803,775²	$4,159,637	1.43%

1st Global Capital Company	Legend Equities Corporation
Advantage Capital Corporation	Lincoln Benefit National Life
Aegon USA	Lincoln Financial Advisors Corporation
Aetna Life Insurance & Annuity Company	Lincoln Investment Planning, Inc.
AG Edwards & Sons, Inc.	Linsco Private Ledger Financial
AIG Financial Advisors	Massachusetts Mutual Life Insurance Company
AIG Life Variable Annuity	McDonald Investments, Inc.
Allianz Life Insurance Company	Merrill Lynch Pierce Fenner & Smith, Inc.
Allmerica Financial Life Insurance & Annuity Company	Merrill Lynch Insurance Group
Allstate Life Insurance Company	MetLife Investors Insurance Company
American Enterprise Life Insurance	MetLife Securities, Inc.
American General Annuity Insurance	Minnesota Life Insurance Company
American Portfolios Financial Services, Inc.	MML Investor Services, Inc.
Ameriprise Financial Services, Inc.	Mony Life Insurance Company
Ameritas Life Insurance Company	Morgan Stanley & Company, Inc.
Annuity Investors Life Insurance Company	Multi-Financial Securities Corporation
Associated Securities Corporation	Mutual Service Corporation
AXA Advisors LLC	NFP Securities, Inc.
AXA Equitable Life Insurance Company	Nathan & Lewis Securities, Inc.
Banc One Securities Corporation	National Planning Corporation
Cadaret Grant & Company, Inc.	Nationwide Financial Services, Inc.
CCO Investment Services Corporation	New England Securities Corporation
Charles Schwab & Company, Inc.	New York Life Insurance & Annuity Company
Chase Investment Services Corporation	Oppenheimer & Company
Citicorp Investment Services, Inc.	PFS Investments, Inc.
Citigroup Global Markets Inc.	Park Avenue Securities LLC
CitiStreet Advisors LLC	Phoenix Life Insurance Company
Citizen's Bank of Rhode Island	Plan Member Securities
Columbus Life Insurance Company	Prime Capital Services, Inc.
Commonwealth Financial Network	Primevest Financial Services, Inc.
Compass Group Investment Advisors	Protective Life Insurance Company
CUNA Brokerage Services, Inc.	Prudential Investment Management Services LLC
CUSO Financial Services, LLP	Raymond James & Associates, Inc.
E*TRADE Clearing LLC	Raymond James Financial Services, Inc.
Edward Jones	RBC Dain Rauscher Inc.
Essex National Securities, Inc.	Royal Alliance Associates, Inc.
Federal Kemper Life Assurance Company	Securities America, Inc.
Financial Network	Security Benefit Life Insurance Company
Financial Services Corporation	Security First-Metlife Investors Insurance Company
GE Financial Assurance	SII Investments, Inc.
GE Life & Annuity	Signator Investors, Inc.
Genworth Financial, Inc.	Sorrento Pacific Financial LLC
GlenBrook Life & Annuity Company	Sun Life Assurance Company of Canada
Great West Life & Annuity Company	Sun Life Insurance & Annuity Company of New York
GWFS Equities, Inc.	Sun Life Annuity Company Ltd.
Hartford Life Insurance Company	SunTrust Bank
HD Vest Investment Services, Inc.	SunTrust Securities, Inc.
Hewitt Associates LLC	Thrivent Financial Services, Inc.
IFMG Securities, Inc.	Towers Square Securities, Inc.
ING Financial Advisers LLC	Travelers Life & Annuity Company
ING Financial Partners, Inc.	UBS Financial Services, Inc.
Invest Financial Corporation	Union Central Life Insurance Company
Investment Centers of America, Inc.	United Planners Financial Services of America
Jefferson Pilot Life Insurance Company	Wachovia Securities, Inc.
Jefferson Pilot Securities Corporation	Walnut Street Securities, Inc.
John Hancock Life Insurance Company	Waterstone Financial Group
JP Morgan Securities, Inc.	Wells Fargo Investments
Kemper Investors Life Insurance Company	Wescom Financial Services

1st Global Capital Co.	Lincoln Investment Planning, Inc.
AG Edwards	Lincoln National Life Insurance Co.
ACS HR Solutions	Linsco Private Ledger Financial
ADP	Massachusetts Mutual Life Insurance Company
AETNA Life Ins & Annuity Co.	Matrix Settlement & Clearance Services
Alliance Benefit Group	McDonald Investments, Inc.
American Enterprise Investments	Mercer HR Services
American Express Retirement Service	Merrill Lynch
American United Life Insurance Co.	Mesirow Financial, Inc.
Ameriprise Financial Services, Inc.	MetLife
Ameritrade, Inc.	MFS Investment Management
AMG (Administrative Management Group)	Mid Atlantic Capital Co.
AST (American Stock & Transfer)	Milliman USA
AXA Advisors	Morgan Keegan & Co, Inc.
Bear Stearns Securities Co.	Morgan Stanley Dean Witter
Benefit Administration Company, LLC	Mutual of Omaha Life Insurance Co.
Benefit Administration, Inc.	Nathan & Lewis Securities, Inc.
Benefit Consultants Group	National City Bank
Benefit Plans Administration	National Deferred Comp
Benetech, Inc.	National Financial
Bisys	National Investor Services Co.
Boston Financial Data Services	Nationwide Life Insurance Company
Charles Schwab & Co, Inc.	Newport Retirement Services, Inc.
Citigroup Global Markets Inc.	Northwest Plan Services, Inc.
CitiStreet	NY Life Benefits
City National Bank	Oppenheimer & Co, Inc.
Clark Consulting	Peoples Securities, Inc.
CPI Qualified Plan Consultants, Inc.	Pershing LLC
DA Davidson & Co.	PFPC
DailyAccess Corporation	Piper Jaffray & Co.
Davenport & Co, LLC	Plan Administrators, Inc.
David Lerner Associates, Inc.	Plan Member Securities
Digital Retirement Solutions, Inc.	Primevest Financial Services, Inc.
DR, Inc.	Principal Life Insurance Co.
Dyatech, LLC	Prudential Investment Management Services LLC
E*Trade Clearing LLC	PSMI Group, Inc.
Edward D Jones & Co.	Quads Trust Company
Equitable Life / AXA	Raymond James & Associates, Inc.
ERISA Administrative Svcs, Inc.	Reliance Trust Co.
ExpertPlan, Inc.	Reliastar Life Insurance Company
FASCore LLC	Robert W Baird & Co.
Ferris Baker Watts, Inc.	RSM McGladrey
Fidelity	Scott & Stringfellow, Inc.
First Clearing LLC	Scottrade, Inc.
First Southwest Co.	Southwest Securities, Inc.
First Trust Datalynx	Standard Insurance Co
First Trust Corp	Stanley, Hunt, Dupree & Rhine
Franklin Templeton	Stanton Group, Inc.
Geller Group	Sterne Agee & Leach, Inc.
Great West Life	Stifel Nicolaus & Co, Inc.
H&R Block Financial Advisors, Inc.	Sun Trust Securities, Inc.
Hartford Life Insurance Co.	Symetra Financial Corp.
HD Vest Investment Services	T. Rowe Price
Hewitt Associates LLC	The 401k Company
HSBC Brokerage USA, Inc.	The Princeton Retirement Group Inc.
ICMA - RC Services	The Retirement Plan Company, LLC
Independent Plan Coordinators	TruSource Union Bank of CA
Ingham Group	UBS Financial Services, Inc.
Interactive Retirement Systems	Unified Fund Services (UFS)
Invesmart (Standard Retirement Services, Inc.)	US Clearing Co.
Janney Montgomery Scott, Inc.	USAA Investment Management Co.
JJB Hillard W L Lyons, Inc.	USI Consulting Group
John Hancock	VALIC Retirement Services
JP Morgan	Vanguard Group
July Business Services	Wachovia
Kaufman & Goble	Web401K.com
Legend Equities Co.	Wedbush Morgan Securities
Legg Mason Wood Walker	Wells Fargo Bank
Lehman Brothers, Inc.	Wilmington Trust
Liberty Funds Distributor, Inc./Columbia Management

The Funds Yields for the 30-Day Periods Ended 7/31/08
Class of Shares	Standardized Yield		Dividend Yield		Tax-Equivalent Yield (37.0 0% Combined Federal/Pennsylvania Tax Bracket)
Class of Shares	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge
Class A	5.58%	5.32%	6.20%	5.91%	9.84%	9.38%
Class B	4.80%	N/A	5.35%	N/A	8.49%	N/A
Class C	4.87%	N/A	5.40%	N/A	8.58%	N/A

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

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

The Funds Total Returns for the Periods Ended 7/31/08
Class of Shares	Cumulative Total Returns (10 years)		Average Annual Total Returns
			1-Year		5-Years		10-Years
	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge	After Sales Charge	Without Sales Charge
Class A	47.38%	54.74%	-12.77%	-8.42%	3.60%	4.62%	3.95%	4.46%
Class B	48.00%	48.00%	-13.43%	-9.07%	3.48%	3.81%	4.00%	4.00%
Class C	43.48%	43.48%	-9.92%	-9.05%	3.82%	3.82%	3.68%	3.68%

Average Annual Total Returns for Class A Shares (After Taxes) For the Periods Ended 7/31/08
	1-Year	5-Year	10 Years
After Taxes on Distributions	-12.77%	3%	.60	3%	.95
After Taxes on Distributions and Redemption of Fund Shares	-6%	.69	3%	.90	4%	.17

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

Life Cycle Funds
Oppenheimer Transition 2010 Fund
Oppenheimer Transition 2015 Fund
Oppenheimer Transition 2020 Fund
Oppenheimer Transition 2025 Fund
Oppenheimer Transition 2030 Fund
Oppenheimer Transition 2040 Fund
Oppenheimer Transition 2050 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

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