OPPENHEIMER MUNICIPAL BOND FUND, 485APOS, 1998-09-24

OPPENHEIMER MUNICIPAL BOND FUND
485APOS, 1998-09-24

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REGISTRATION NO. 2-57116
FILE NO. 811-2668

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

PRE-EFFECTIVE AMENDMENT NO. ___ / /

POST-EFFECTIVE AMENDMENT NO. 40 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/

Amendment No. 28 /X/

OPPENHEIMER MUNICIPAL BOND FUND
- ------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Two World Trade Center, New York, New York 10048-0203
- -------------------------------------------------------------------
(Address of Principal Executive Offices)

212-323-0200
- ------------------------------------------------------------------
(Registrant's Telephone Number)

ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
- ------------------------------------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

/ / Immediately upon filing pursuant to paragraph (b)

/ / On__________________, pursuant to paragraph (b)

/ / 60 days after filing pursuant to paragraph (a)(1)

/X/ On November 27, 1998, pursuant to paragraph (a)(1)

/ / 75 days after filing, pursuant to paragraph (a)(2)

/ / On _________, pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND

Prospectus Dated November 24, 1998

Oppenheimer Municipal Bond Fund is a mutual fund. It seeks current income
exempt from Federal income taxes by investing in municipal securities, while
attempting to preserve capital.

This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.

(logo) OppenheimerFunds, Inc.
THE RIGHT WAY TO INVEST

AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THE FUND'S SECURITIES NOR HAS IT DETERMINED THAT THIS
PROSPECTUS IS ACCURATE OR COMPLETE. IT IS A CRIMINAL OFFENSE TO REPRESENT
OTHERWISE.

<PAGE>

CONTENTS

<PAGE>

ABOUT THE FUND

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

THE FUND'S OBJECTIVE AND INVESTMENT STRATEGY

MAIN RISKS OF INVESTING IN THE FUND

THE FUND'S PAST PERFORMANCE

FEES AND EXPENSES OF THE FUND

ABOUT THE FUND'S INVESTMENTS

HOW THE FUND IS MANAGED

About Your Account

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

HOW TO BUY SHARES
Class A Shares
Class B Shares
Class C Shares

SPECIAL INVESTOR SERVICES
AccountLink
PhoneLink
OppenheimerFunds Web Site

HOW TO SELL SHARES
By Mail
By Telephone
By Checkwriting

HOW TO EXCHANGE SHARES

SHAREHOLDER ACCOUNT RULES AND POLICIES

DIVIDENDS AND TAX INFORMATION

FINANCIAL HIGHLIGHTS

<PAGE>

ABOUT THE FUND

THE FUND'S OBJECTIVE AND INVESTMENT STRATEGY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund's investment objective is to
seek as high a level of current interest income exempt from Federal income taxes
as is available from investing in municipal securities, while attempting to
preserve capital.

WHAT DOES THE FUND INVEST IN? The Fund invests mainly in municipal securities
that pay interest exempt from Federal individual income tax. The Fund may also
use hedging instruments and certain derivative investments to try to manage
investment risks. These investments are more fully explained in "About the
Fund's Investments," below.

WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors who are seeking
income exempt from federal income taxes. It does not seek capital gains or
growth. Because it invests in tax-exempt securities, the Fund is not appropriate
for retirement plan accounts or for investors who want to pursue capital growth.

MAIN RISKS OF INVESTING IN THE FUND

All investments carry risks to some degree. For bond funds one risk is
that the market prices of the fund's investment will fluctuate (this is known as
"market risk"). Another risk is that the issuer of the bond will experience
financial difficulties and may default on its obligation to pay interest and
repay principal (this is referred to as "credit risk"). These general investment
risks, and the special risks of certain types of investments that the Fund may
hold are described below. They may affect the value of the Fund's investments,
its investment performance, and the prices of its shares. THESE RISKS MEAN THAT
YOU CAN LOSE MONEY BY INVESTING IN THE FUND. When you redeem your shares, they
may be worth more or less than what you paid for them.

The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by diversifying investments, by carefully researching securities before
they are purchased, and in some cases by using hedging techniques. However,
changes in the overall market prices of municipal securities and the income they
pay can occur at any time. The yield and share price of the Fund will change
daily based on changes in interest rates and market conditions, and in response
to other economic events. There is no assurance that the Fund will achieve its
investment objective.

HOW RISKY IS THE FUND? The value of the Fund's investments in municipal
securities will change over time due to a number of factors. They include
changes in general bond market movements, the change in value of particular
bonds because of an event affecting the issuer, or changes in interest rates
that can affect bond prices overall. These changes can affect the value of the
Fund's investments and its price per share. The Fund may invest in derivative
investments. These have additional risks and can cause fluctuations in the
Fund's share prices. In the OppenheimerFunds spectrum, the Fund is more
conservative than some types of taxable bond funds, such as high yield bond
funds, but more aggressive than money market funds.

AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF ANY BANK, AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.

|X| CREDIT RISK. Municipal securities are subject to credit risk. Credit
risk relates to the ability of the issuer of a Municipal Security to make
interest or principal payments on the security as they become due. If the issuer
fails to pay interest, the Fund's income may be reduced and if the issuer fails
to repay principal, the value of that bond and of the Fund's shares may be
reduced. Because the Fund can invest as much as 25% of its assets in municipal
securities below investment grade to seek higher income, the Fund's credit risks
are greater than those of funds that buy only investment grade bonds. The
Manager may rely to some extent on credit ratings by nationally recognized
rating agencies in evaluating the credit risk of securities selected for the
Fund's portfolio. It may also use its own research and analysis. Many factors
affect an issuer's ability to make timely payments, and the credit risks of a
particular security may change over time.

|X| INTEREST RATE RISKS. In addition to credit risks, municipal securities
are subject to changes in value when prevailing interest rates change. When
interest rates fall, the values of outstanding municipal securities generally
rise and the bonds may sell for more than their face amount. When interest rates
rise, the values of outstanding municipal securities generally decline, and the
bonds may sell at a discount from their face amount. The magnitude of these
price changes is generally greater for bonds with longer maturities. The Fund
focuses on longer term securities to seek higher income. Therefore, when the
average maturity of the Fund `s portfolio is longer, its share price may
fluctuate more when interest rates change.

|X| THERE ARE SPECIAL RISKS IN USING DERIVATIVE investments. A derivative
investment in general terms is an investment contract whose value depends on (or
is derived from) the value of an underlying asset, interest rate or index. The
Fund may use derivatives to seek increased returns or to try to hedge investment
risks. Options, futures, "inverse floaters" and variable rate contracts are
examples of derivatives. If the issuer of the derivative investment does not pay
the amount due on the maturity of the investment, the Fund can lose money on its
investment. Also, the underlying security or investment on which the derivative
is based, and the derivative itself, may not perform the way the Manager
expected it to perform. If that happens, the Fund will get less income than
expected. While the Fund has limits on the amount of particular types of
derivatives it can hold, to try to preserve capital, the use of derivatives can
cause the Fund to lose money on its investments, or increase the volatility of
its share prices.

<PAGE>

THE FUND'S PAST PERFORMANCE

The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year over a ten-year period and by showing how the average annual total
returns of the Fund's shares compare to those of a broad-based market index. The
Fund's past investment performance is not necessarily an indication of how the
Fund will perform in the future.

[see appendix to the prospectus]

For the period from 1/1/98 through 9/30/98, the cumulative return (not
annualized) for Class A shares was ___%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown.

During the 10-year period shown in the bar chart, the highest return (not
annualized) for a calendar quarter was 8.58% (1Q'95) and the lowest return for a
calendar quarter was -6.51% (1Q'94).

AVERAGE ANNUAL
TOTAL RETURNS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS
FOR THE PERIODS (OR LIFE OF
ENDING DECEMBER CLASS, IF LESS)
31, 1997

Oppenheimer
Municipal Bond 4.18% 6.02% 7.66%
Fund (Class A
Shares)
Oppenheimer
Municipal Bond
Fund (Class B
Shares)
Oppenheimer
Municipal Bond
Fund (Class C
Shares)
Lehman Brothers
Municipal Bond
Index

Inception dates of classes: Class A: 10/27/75; Class B: 3/16/93;
Class C: 8/29/95.

The Fund's average annual total returns in the table include the applicable
sales charge: for Class A, the current maximum initial sales charge of 4.75%;
for Class B, the applicable contingent deferred sales charges of 5% (1-year) and
2% (life of class); for Class C, the 1% contingent deferred sales charge for the
1-year period.

The returns measure the performance of a hypothetical $10,000 account and assume
that all dividends and capital gains distributions have been reinvested in
additional shares. Because the Fund invests in a variety of municipal
securities, the Fund's performance is compared to the Lehman Brothers Municipal
Bond Index, an unmanaged index of a broad range of investment grade municipal
bonds that is a measure of the performance of the general municipal bond market.
However, it must be remembered that the index performance does not consider the
effects of capital gains or transaction costs, and that the Fund's investments
are not limited to the securities in the index.

FEES AND EXPENSES OF THE FUND

The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset value
per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during the fiscal year ended July
31, 1998.

SHAREHOLDER TRANSACTION EXPENSES (charges paid directly from your
investment):
(% OF AMOUNT OF TRANSACTION)
CLASS A CLASS B CLASS C
SHARES SHARES SHARES

Maximum Sales Charge 4.75% None None
(Load) on
purchases (as a % of
offering price)
Maximum Contingent None1 5%2 1%3
Deferred Sales
Charge (Load) (as % of the
lower of the original
offering price or
redemption proceeds)

1. A 1% contingent deferred sales charge may apply to redemptions of investments
of $1 million or more of Class A shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.

ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets):
(% OF AVERAGE DAILY NET ASSETS)
CLASS A CLASS B CLASS C
SHARES SHARES SHARES

Management Fees 0. % 0. % 0. %
Distribution and/or Service
(12b-1) Fees 0. % 1.00% 1.00%
Other Expenses 0. % 0. % 0. %
Total Annual Operating Expenses 0. % % %

Numbers in the table are based on the Fund's expenses in the last fiscal year,
ended 7/31/98. Expenses may vary in future years. "Other expenses" include
transfer agent fees, custodial fees, and accounting and legal expenses the Fund
pays.

<PAGE>

EXAMPLES. These examples are intended to help you compare the
cost of investing in the Fund with the cost of investing in other
mutual funds.

The examples assume that you invest $10,000 in a class of shares of the Fund for
the time periods indicated, and reinvest your dividends and distributions. In
the first case it assumes that you redeem all of your shares at the end of those
periods. In the second case it assumes you keep your shares. The examples also
assume that your investment has a 5% return each year and that the class's
operating expenses remain the same. Your actual costs may be higher or lower,
because expenses will vary over time. Based on these assumptions your expenses
would be as follows:

IF SHARES ARE REDEEMED: 1 YEAR 3 YEARS 5 YEARS 10 YEARS

Class A Shares $ $ $ $
Class B Shares $ $ $ $
Class C Shares $ $ $ $

IF SHARES ARE NOT REDEEMED: 1 YEAR 3 YEARS 5 YEARS 10 YEARS

Class A Shares $ $ $ $
Class B Shares $ $ $ $
Class C Shares $ $ $ $

1. In the first example, expenses include the initial sales charge for Class A
and the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include contingent deferred sales charges. Class B
expense for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A after 6 years.

ABOUT THE FUND'S INVESTMENTS

THE FUND'S PRINCIPAL INVESTMENT POLICIES. The Fund's goal is to seek a high
level of interest income that is exempt from Federal income taxes by investing
in municipal securities, while trying to preserve capital. Under normal market
conditions, the Fund attempts to invest 100% of its assets in municipal
securities. As a matter of fundamental policy, the Fund attempts to invest at
least 80% of its assets in municipal securities.

|X| WHAT MUNICIPAL SECURITIES DOES THE FUND INVEST IN? The Fund buys
municipal bonds and notes, tax-exempt commercial paper, certificates of
participation and other debt obligations. They are debt obligations issued by
the governments of states, as well as their political subdivisions (such as
cities, towns and counties), or by the District of Columbia. The Fund may also
buy securities issued by any commonwealths, territories or possessions of the
United States, or their respective agencies, instrumentalities or authorities,
if the interest paid on the security is not subject to Federal individual income
tax (in the opinion of bond counsel to the issuer at the time the security is
issued).

The Fund may buy both long-term and short-term municipal securities.
Long-term securities have a maturity of more than one year. The Fund generally
focuses on longer-term securities, to seek higher income. In general, the values
of longer-term bonds are affected by changes in interest rates more than
short-term bonds. Therefore, the longer the average maturity of the Fund's
portfolio, the more its share prices will be affected by changes in interest
rates.

Municipal securities are issued to raise money for a variety of public or
private purposes, including financing state or local governments, financing
specific projects or public facilities. The Fund invests in municipal securities
that are "general obligations," secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest. It
also buys "revenue obligations," payable only from the revenues derived from a
particular facility or class of facilities, or a specific excise tax or other
revenue source.

|X| RATINGS OF MUNICIPAL SECURITIES THE FUND BUYS. Most of the municipal
securities the Fund buys are "investment grade" at the time of purchase. It
limits its investments in municipal securities that at the time of purchase are
not "investment-grade" to no more than 25% of its total assets. "Investment
grade" securities are those rated within the four highest rating categories of
Moody's, S&P, Fitch or Duff's & Phelps or another nationally recognized rating
organization, or (if unrated) judged by the Manager to be investment grade.
Rating categories are described in the Statement of Additional Information. If
the securities are not rated, the Manager will use its judgment to assign a
rating category equivalent to that of a rating agency. A reduction in the rating
of a security after its purchase by the Fund will not automatically require the
Fund to dispose of that security.

Lower-grade municipal securities may be subject to greater market
fluctuations and greater risks of loss of income and principal than higher-rated
municipal securities. Securities that are (or that have fallen) below investment
grade entail a greater risk that the issuers of such securities may not meet
their debt obligations. However, by limiting its investments in non-investment
grade municipal securities, the Fund may reduce the effect of some of these
risks on its share price and income.

|X| MUNICIPAL LEASE OBLIGATIONS. Municipal leases are used by state and
local government authorities to obtain funds to acquire land, equipment or
facilities. The Fund may invest in certificates of participation that represent
a proportionate interest in payments made under municipal lease obligations. If
the government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable.

|X| HOW DOES THE MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Manager looks nationwide for municipal
securities using a variety of factors:

|_| Securities that provide high income

The goal of diversification among a wide range of
securities

Issues with favorable credit characteristics

|_| Special situations among issuers that provide
opportunities for value

INVESTMENT STRATEGIES. To seek its objective, the Fund may also use the
investment techniques and strategies described below. These techniques involve
certain risks or are designed to help reduce some of the risks.

|X| FLOATING RATE/VARIABLE RATE OBLIGATIONS. Some of the municipal
securities the Fund may purchase may have variable or floating interest rates.
Variable rates are adjustable at stated periodic intervals. Floating rates are
automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the 91-day
U.S. Treasury Bill rate. These obligations may be secured by bank letters of
credit or other credit support arrangements.

Certain types of variable rate bonds known as "inverse floaters" pay
interest at a rate that varies as the yields generally available on short-term
tax-exempt bonds change. However, the yields on inverse floaters move in the
opposite direction of yields on short-term bonds in response to market changes.
As interest rates rise, inverse floaters produce less current income, and their
market value can become volatile. Inverse floaters are a type of "derivative
security." Some have a "cap," so that if interest rates rise above the "cap,"
the security pays additional interest income. If rates do not rise above the
"cap," the Fund will have paid an additional amount for a feature that proves
worthless. The Fund anticipates that it will invest no more than 10% of its
total assets in inverse floaters.

|X| OTHER DERIVATIVES. The Fund may also invest in municipal derivative
securities that pay interest that depends on an external pricing mechanism.
Examples of external pricing mechanisms are interest rate swaps, municipal bond
indices or swap indices.

|X| WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
municipal securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. These terms refer to securities that
have been created and for which a market exists, but which are not available for
immediate delivery. The Fund does not intend to make such purchases for
speculative purposes. During the period between the purchase and settlement, no
payment is made for the security and no interest accrues to the buyer from the
investment. There is a risk of loss to the Fund if the value of the security
declines prior to the settlement date.

|X| PUTS AND STAND-BY COMMITMENTS. The Fund may acquire "stand-by
commitments" or "puts" with respect to municipal securities. The Fund would have
the right to sell specified securities at a set price on demand to the issuing
broker-dealer or bank. However, this feature may result in a lower interest rate
on the security. The Fund will acquire stand-by commitments or puts solely to
enhance portfolio liquidity.

|X| REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
for cash management purposes. In a repurchase transaction, the Fund buys a
security and simultaneously sells it to the vendor for delivery at a future
date. Repurchase agreements must be fully collateralized. 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. There is no limit on the amount of the Fund's net assets
that may be subject to repurchase agreements of seven days or less.

|X| ILLIQUID SECURITIES. Under the policies and procedures established by
the Fund's Board of Trustees, the Manager determines the liquidity of the Fund's
investments. Investments may be illiquid because of the absence of 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 10% of its net assets in
illiquid securities (the Board may increase that limit to 15%). The Manager
monitors holdings of illiquid securities on an ongoing basis to determine
whether to sell any holdings to maintain adequate liquidity. The Fund cannot buy
a security that has a restriction on its resale.

|X| HEDGING. The Fund may purchase and sell certain kinds of futures
contracts, put and call options, and options on futures and broadly-based
municipal bond indices, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them.

The Fund may buy and sell options and futures for a number of purposes. It
may do so to try to manage its exposure to the possibility that the prices of
its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It may do so to try to manage its exposure to changing interest
rates. Some of these strategies hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call options,
tend to increase the Fund's exposure to the securities market.

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

Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. The Fund may not enter into
swaps with respect to more than 25% of its total assets.

TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the Fund may
invest up to 100% of its total assets in temporary defensive investments from
time to time. This may happen during periods of unusual market conditions.
Generally they would be U.S. government securities or highly-rated corporate
debt securities. The income from temporary defensive investments may not be
tax-exempt, and therefore when making those investments the Fund may not achieve
its objective. The Fund may also hold these types of investments pending the
investment of proceeds from the sale of Fund shares or portfolio securities, or
to meet anticipated redemptions of Fund shares.

YEAR 2000 RISKS. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.

The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative affect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.

HOW THE FUND IS MANAGED

THE MANAGER. The Fund's investment adviser is the Manager, OppenheimerFunds,
Inc., which is responsible for selecting the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Board of Trustees, under an Investment Advisory Agreement
which states the Manager's responsibilities. The Agreement sets forth the fees
paid by the Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.

The Manager has operated as an investment advisor since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $85 billion as of September 30,
1998, and with more than 4 million shareholder accounts. The Manager is located
at Two World Trade Center, 34th Floor, New York, New York 10048-0203.

|X| PORTFOLIO MANAGERS. The Portfolio managers of the Fund
are Robert E. Patterson and Jerry Webman, Senior Vice Presidents
of the Manager. Mr. Patterson and Mr. Webman are the persons
principally responsible for the day-to-day management of the
Fund's portfolio, and have had this responsibility since November
___, 1985 and April 20, 1996, respectively. Mr. Patterson and
Mr. Webman also serve as officers and portfolio managers for
other Oppenheimer funds. Prior to joining OppenheimerFunds, Mr.
Webman was an officer and analyst with Prudential Mutual Funds
Investment Management, Inc.

|X| ADVISORY FEES. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at an annual rate which declines on additional
assets as the Fund grows: 0.60% of the first $200 million of average annual net
assets, 0.55% of the next $100 million, 0.50% of the next $200 million, 0.45% of
the next $250 million, 0.40% of the next $250 million, and 0.35% of average
annual net assets in excess of $1 billion. The Fund's management fee for its
last fiscal year ended July 31, 1998, was 0.___% of average annual net assets
for Class A, Class B and Class C shares.

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES

HOW ARE SHARES PURCHASED? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, directly through the Distributor, or automatically through an Asset
Builder Plan under the OppenheimerFunds AccountLink service. The Distributor may
appoint certain servicing agents to accept purchase (and redemption) orders. THE
DISTRIBUTOR, IN ITS SOLE DISCRETION, MAY REJECT ANY PURCHASE ORDER FOR THE
FUND'S SHARES.

|X| BUYING SHARES THROUGH YOUR DEALER. Your dealer will
place your order with the Distributor on your behalf.

|X| BUYING SHARES THROUGH THE DISTRIBUTOR. Complete an OppenheimerFunds New
Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, it is recommended that you discuss your
investment with a financial advisor before your make a purchase to be sure that
the Fund is appropriate for you.

|X| BUYING SHARES BY FEDERAL FUNDS WIRE. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.

|X| BUYING SHARES THROUGH OPPENHEIMERFUNDS ACCOUNTLINK. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy the shares.
You can provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds PhoneLink,
also described below. Please refer to "AccountLink," below for more details.

|X| BUYING SHARES THROUGH ASSET BUILDER PLANS. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.

HOW MUCH MUST YOU INVEST? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.

|_| With Asset Builder Plans, Automatic Exchange Plans and military
allotment plans, you can make initial and subsequent investments for as little
as $25. Subsequent purchases of at least $25 can be made by telephone through
AccountLink.

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

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their PUBLIC OFFERING PRICE
(the net asset value per share plus any initial sales charge that applies). The
public offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Denver, Colorado, or after any
agent appointed by the Distributor receives the order and sends it to the
Distributor.

|_| THE NET ASSET VALUE of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. (All references to time in this Prospectus mean "New York time").

The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that class
that are outstanding. To determine net asset value, the Fund's Board of Trustees
has established procedures to value the Fund's securities, in general based on
market value. The Board has adopted special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be readily
obtained.

|_| TO RECEIVE THE OFFERING PRICE FOR A PARTICULAR DAY, in most cases the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes that day. If your order is received on a day
when the Exchange is closed or after it has closed, it will receive the next
offering price that is determined after your order is received.

|_| IF YOU BUY SHARES THROUGH A DEALER, your dealer must receive the order
by the close of The New York Stock Exchange and transmit it to the Distributor
so that it is received before the Distributor's close of business on a regular
business day (normally 5:00 P.M.) to receive that day's offering price.
Otherwise, it will receive the next offering price that is determined.

WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors three
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. WHEN YOU BUY
SHARES, BE SURE TO SPECIFY CLASS A, CLASS B OR CLASS C SHARES. IF YOU DO NOT
CHOOSE A CLASS, YOUR INVESTMENT WILL BE MADE IN CLASS A SHARES.

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

|X| CLASS B SHARES. If you buy Class B shares, you pay no sales charge at
the time of purchase, but if you sell your shares within six years of buying
them, you will normally pay a contingent deferred sales charge. That sales
charge varies depending on how long you own your shares, as described in "How
Can I Buy Class B Shares?" below.

|X| CLASS C SHARES. If you buy Class C shares, you pay no sales charge at
the time of purchase, but if you sell your shares within 12 months of buying
them, you will normally pay a contingent deferred sales charge of 1%, as
described in "How Can I Buy Class C Shares?" below.

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

The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only ONE class of shares, and not a
combination of shares of different classes.

|X| HOW LONG DO YOU EXPECT TO HOLD YOUR INVESTMENT? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment, compared to the effect over
time of higher class-based expenses on shares of Class B or Class C .

|_| INVESTING FOR THE SHORT TERM. If you have a relatively short-term
investment horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares rather
than Class B shares. That is because of the effect of the Class B contingent
deferred sales charge if you redeem within six years, as well as the effect of
the Class B asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.

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

And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.

|_| INVESTING FOR THE LONGER TERM. If you are investing for the
longer-term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000.

Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.

|X| ARE THERE DIFFERENCES IN ACCOUNT FEATURES THAT MATTER TO YOU? Some
account features (such as checkwriting) may not be available to Class B or Class
C shareholders. Other features (such as Automatic Withdrawal Plans) may not be
advisable (because of the effect of the contingent deferred sales charge) for
Class B or Class C shareholders. Therefore, you should carefully review how you
plan to use your investment account before deciding which class of shares to
buy. Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are not
borne by Class A shares, such as the Class B and Class C asset-based sales
charge described below and in the Statement of Additional Information. Share
certificates are not available for Class B and Class C shares, and if you are
considering using your shares as collateral for a loan, that may be a factor to
consider.

|X| HOW DOES IT AFFECT PAYMENTS TO MY BROKER? A salesperson, such as a
broker, may receive different compensation for selling one class of shares than
for selling another class. It is important to remember that Class B and Class C
contingent deferred sales charges and asset-based sales charges have the same
purpose as the front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions it pays to dealers and financial institutions
for selling shares. The Distributor may pay additional compensation from its own
resources to securities dealers or financial institutions based upon the value
of shares of the Fund owned by the dealer or financial institution for its own
account or for its customers.

SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. The Statement of Additional
Information details the conditions for the waiver of sales charges that apply in
certain cases, and the special sales charge rates that apply to purchases of
shares of the Fund by certain groups, or under specified retirement plan
arrangements or in other special types of transactions.

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

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

Front-End
Sales Charge
Commission as
As a Percentage of: Percentage
Offering of Amount Offering
Amount of Purchase Price Invested Price

Less than $50,000 4.75% 4.98% 4.00%

$50,000 or more but 4.50% 4.71% 4.00%
less than $100,000

$100,000 or more but 3.50% 3.63% 3.00%
less than $250,000

$250,000 or more but 2.50% 2.56% 2.25%
less than $500,000

$500,000 or more but 2.00% 2.04% 1.80%
less than $1 million

|X| CLASS A CONTINGENT DEFERRED SALES CHARGE. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more. The Distributor pays dealers of record
commissions in an amount equal to 1.0% of purchases of $1 million or more other
than by retirement accounts. That commission will be paid only on purchases that
were not previously subject to a front-end sales charge and dealer commission.

If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (excluding shares purchased by
reinvestment of dividends or capital gain distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were subject
to the Class A contingent deferred sales charge.

In determining whether a contingent deferred sales charge is payable when
shares are redeemed, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of dividends and
capital gains. Then the Fund will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived in
certain cases described in "Waivers of Class A Sales Charges" in the Statement
of Additional Information.

The Class A contingent deferred sales charge is not charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However, if the
shares ACQUIRED by exchange are redeemed within 18 calendar months of the end of
the calendar month in which the EXCHANGED shares were originally purchased, then
the sales charge will apply.

HOW CAN I REDUCE SALES CHARGES FOR CLASS A SHARE PURCHASES? You may be eligible
to buy Class A shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information:

|X| WAIVERS OF CLASS A SALES CHARGES. The initial and contingent Class A
sales charges are not imposed in the circumstances described in "Reduced Sales
Charges" in the Statement of Additional Information. In order to receive a
waiver of the Class A contingent deferred sales charge, you must notify the
Transfer Agent when purchasing shares whether any of the special conditions
apply.

HOW CAN I BUY CLASS B SHARES? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.

The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption OR the original
offering price (which is the original net asset value). The contingent deferred
sales charge is NOT imposed on

|_| the amount of your account value represented by an
increase in net asset value over the initial purchase price
or

|_| shares purchased by the reinvestment of dividends or
capital gains distributions.

|_| Shares redeemed in the special circumstances described in "Waivers of
Class B and Class C Sales Charges" in the Statement of Additional
Information.

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

(1) shares acquired by reinvestment of dividends and
capital gains distributions,

(2) shares held for over 6 years, and

(3) shares held the longest during the 6-year period.

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

Years Since Beginning of Contingent Deferred Sales Charge
Month in which Purchase On Redemptions in That Year
Order Was Accepted (As % of Amount Subject to Charge)

0-1 5.0%

1-2 4.0%

2-3 3.0%

3-4 3.0%

4-5 2.0%

5-6 1.0%

6 and following None

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

|X| AUTOMATIC CONVERSION OF CLASS B SHARES. 72 months after you purchase
Class B shares, those shares will automatically convert to Class A shares. This
conversion feature relieves Class B shareholders of the asset-based sales charge
that applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in the Statement of Additional Information.

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

|_| the amount of your account value represented by the
increase in net asset value over the initial purchase price,
or

|_| shares purchased by the reinvestment of dividends or
capital gains distributions.

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

(1) shares acquired by reinvestment of dividends and
capital gains distributions,

(2) shares held for over 12 months, and

(3) shares held the longest during the 12-month period.

DISTRIBUTION AND SERVICE (12B-1) PLANS.

|X| SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan
for Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to compensate dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.

|X| 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 and costs in distributing Class B
and Class C shares and servicing accounts. Under the Plans, the Fund pays the
Distributor an annual "asset-based sales charge" of 0.75% per year on Class B
shares and on Class C shares. The Distributor also receives a service fee of
0.25% per year under each plan.

The asset-based sales charge and service fees increase Class B and Class C
expenses by up to 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than other types of sales charges.

The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after the shares were sold by the dealer. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.

The Distributor currently pays sales commission of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.

The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor plans to pay the asset-based sales
charge as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.

SPECIAL INVESTOR SERVICES

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

|_| transmit funds electronically to PURCHASE SHARES by telephone (through
a service representative or by PhoneLink) or automatically under Asset
Builder Plans, or

|_| have the Transfer Agent SEND REDEMPTION PROCEEDS or to TRANSMIT
DIVIDENDS AND DISTRIBUTIONS directly to your bank account. Please call the
Transfer Agent for more information.

Purchases may be made by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The purchase payment
will be debited from your bank account.

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

PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.

|_| PURCHASING SHARES. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these purchases.

|_| EXCHANGING SHARES. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your Fund
account to another Oppenheimer funds account you have already established by
calling the special PhoneLink number.

|_| SELLING SHARES. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below for
details.

CAN I SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.

OPPENHEIMERFUNDS INTERNET WEB SITE. Information about the Fund, as well as your
account balance, may be obtained on the OppenheimerFunds Internet web site, at
HTTP://WWW.OPPENHEIMERFUNDS.COM. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.

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

REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C shares. You must be sure to ask
the Distributor for this privilege when you send your payment.

HOW TO SELL SHARES

You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter, by using the Fund's checkwriting privilege or
by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on
a regular basis. IF YOU HAVE QUESTIONS ABOUT ANY OF THESE PROCEDURES, AND
ESPECIALLY IF YOU ARE REDEEMING SHARES IN A SPECIAL SITUATION, SUCH AS DUE TO
THE DEATH OF THE OWNER, PLEASE CALL THE TRANSFER AGENT FIRST, AT 1-800-525-7048,
FOR ASSISTANCE.

|X| CERTAIN REQUESTS REQUIRE A SIGNATURE GUARANTEE. To protect you and the
Fund from fraud, certain redemption requests must be in writing and must include
a signature guarantee in the following situations (there may be other situations
also requiring a signature guarantee):

|_| You wish to redeem $50,000 or more and receive a check

|_| The redemption check is not payable to all shareholders
listed on the account statement

|_| The redemption check is not sent to the address of
record on your account statement

|_| Shares are being transferred to a Fund account with a
different owner or name

|_| Shares are being redeemed by someone (such as an
Executor) other than the owners

|X| WHERE CAN I HAVE MY SIGNATURE GUARANTEED? The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that
has a U.S. correspondent bank, or by a U.S. registered dealer or
broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, a
registered securities association or a clearing agency. IF YOU
ARE SIGNING ON BEHALF OF A CORPORATION, PARTNERSHIP OR OTHER
BUSINESS OR AS A FIDUCIARY, YOU MUST ALSO INCLUDE YOUR TITLE IN
THE SIGNATURE.

HOW DO I SELL SHARES BY MAIL? Write a "letter of instructions"
that includes:

|_| Your name

|_| The Fund's name

|_| Your Fund account number (from your account statement)

|_| The dollar amount or number of shares to be redeemed

|_| Any special payment instructions

|_| Any share certificates for the shares you are selling

|_| The signatures of all registered owners exactly as the
account is registered, and

|_| Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.

USE THE FOLLOWING ADDRESS FOR REQUESTS BY MAIL:
OppenheimerFunds Services
P.O. Box 5270, Denver, Colorado 80217

SEND COURIER OR EXPRESS MAIL REQUESTS TO:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231

HOW DO I SELL SHARES BY TELEPHONE? You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price on a
regular business day, your call must be received by the Transfer Agent by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. YOU MAY NOT REDEEM SHARES HELD UNDER A SHARE
CERTIFICATE BY TELEPHONE.

|_| To redeem shares through a service representative, call
1-800-852-8457

|_| To redeem shares automatically on PhoneLink, call
1-800-533-3310

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

ARE THERE LIMITS ON AMOUNTS REDEEMED BY TELEPHONE?

|X|TELEPHONE REDEMPTIONS PAID BY CHECK. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.

|X| TELEPHONE REDEMPTIONS THROUGH ACCOUNTLINK. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.

CHECKWRITING AGAINST YOUR ACCOUNT. To write checks against your Fund account,
request that privilege on your account Application, or contact the Transfer
Agent for signature cards. They must be signed (with a signature guarantee) by
all owners of the account and returned to the Transfer Agent so that checks can
be sent to you to use. Shareholders with joint accounts can elect in writing to
have checks paid over the signature of one owner. If you previously signed a
signature card to establish checkwriting in another Oppenheimer fund, simply
call 1-800-525-7048 to request checkwriting for an account in this Fund with the
same registration as the other account.

|_| Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or Custodian.

|_| CHECKWRITING PRIVILEGES ARE NOT AVAILABLE FOR ACCOUNTS HOLDING CLASS B
SHARES OR CLASS C SHARES, OR CLASS A SHARES THAT ARE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE.

|_| Checks must be written for at least $100.

|_| Checks cannot be paid if they are written for more than
your account value. REMEMBER: YOUR SHARES FLUCTUATE IN VALUE AND
YOU SHOULD NOT WRITE A CHECK CLOSE TO THE TOTAL ACCOUNT VALUE.

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

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

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

HOW TO EXCHANGE SHARES

Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. To
exchange shares, you must meet several conditions:

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

|_| The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.

|_| You must hold the shares you buy when you establish your account for
at least 7 days before you can exchange them. After the account is open 7 days,
you can exchange shares every regular business day.

|_| You must meet the minimum purchase requirements for the fund you
purchase by exchange.

|_| BEFORE EXCHANGING INTO A FUND, YOU SHOULD OBTAIN AND
READ ITS PROSPECTUS.

SHARES OF A PARTICULAR CLASS OF THE FUND MAY BE EXCHANGED ONLY FOR SHARES
OF THE SAME CLASS IN THE OTHER OPPENHEIMER funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale of the shares of the fund you own and a
purchase of the shares of the other fund, which may result in a capital gain or
loss. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.

HOW DO I SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in
writing or by telephone:

|X| WRITTEN EXCHANGE REQUESTS. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account. Send
it to the Transfer Agent at the address on the Back Cover.

|X| TELEPHONE EXCHANGE REQUESTS. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457, or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.

You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.

ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange
policies you should be aware of:

|_| Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that is in proper form. It must
be received by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M. but may be earlier on some days. However, either fund may
delay the purchase of shares of the fund you are exchanging into up to seven
days if it determines it would be disadvantaged by a same-day exchange.

|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.

|_| The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.

|_| If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.

SHAREHOLDER ACCOUNT RULES AND POLICIES

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

|X| TELEPHONE TRANSACTION PRIVILEGES for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless and
until the Transfer Agent receives cancellation instructions from an owner of the
account.

|X| THE TRANSFER AGENT WILL RECORD ANY TELEPHONE CALLS to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund will
not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.

|X| REDEMPTION OR TRANSFER REQUESTS WILL NOT BE HONORED UNTIL THE TRANSFER
AGENT RECEIVES ALL REQUIRED DOCUMENTS IN PROPER FORM. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.

|X| DEALERS THAT CAN PERFORM ACCOUNT TRANSACTIONS FOR THEIR CLIENTS BY
PARTICIPATING IN NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.

|X| THE REDEMPTION PRICE FOR SHARES WILL VARY from day to day because the
value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for Class A,
Class B and Class C shares. The redemption value of your shares may be more or
less than their original cost.

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

|X| THE TRANSFER AGENT MAY DELAY FORWARDING A CHECK OR PROCESSING A
PAYMENT VIA ACCOUNTLINK FOR RECENTLY PURCHASED SHARES, BUT ONLY UNTIL THE
PURCHASE PAYMENT HAS CLEARED. THAT DELAY MAY BE AS MUCH AS 10 DAYS FROM THE DATE
THE SHARES WERE PURCHASED. THAT DELAY MAY BE AVOIDED IF YOU PURCHASE SHARES BY
FEDERAL FUNDS WIRE OR CERTIFIED CHECK, OR ARRANGE WITH YOUR BANK TO PROVIDE
TELEPHONE OR WRITTEN ASSURANCE TO THE TRANSFER AGENT THAT YOUR PURCHASE PAYMENT
HAS CLEARED.

|X| INVOLUNTARY REDEMPTIONS OF SMALL ACCOUNTS may be made by the Fund if
the account value has fallen below $500 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share purchase
orders.

|X| SHARES MAY BE "REDEEMED IN KIND" under unusual circumstances (such as
a lack of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with securities from the Fund's
portfolio.

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

|X| TO AVOID SENDING DUPLICATE COPIES OF MATERIALS TO HOUSEHOLDS, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.

DIVIDENDS AND TAX INFORMATION

DIVIDENDS. The Fund intends to declare dividends separately for Class A, Class B
and Class C shares from net tax-exempt income and/or net investment income each
regular business day and to pay those dividends to shareholders monthly on a
date selected by the Board of Trustees. Daily dividends will not be declared or
paid on newly purchased shares until Federal Funds are available to the Fund
from the purchase payment for such shares.

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

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

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

|X| REINVEST ALL DISTRIBUTIONS IN THE FUND. You can elect
to reinvest all dividends and long-term capital gains
distributions in additional shares of the Fund.

|X| REINVEST LONG-TERM CAPITAL GAINS ONLY. You can elect to reinvest
long-term capital gains distributions in the Fund while receiving dividends by
check or having them sent to your bank account through AccountLink.

|X| RECEIVE ALL DISTRIBUTIONS IN CASH. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent to
your bank through AccountLink.

|X| REINVEST YOUR DISTRIBUTIONS IN ANOTHER OPPENHEIMERFUNDS
ACCOUNT. You can reinvest all distributions in the same class of
shares of another Oppenheimer fund account you have established.

TAXES. Dividends paid from net investment income earned by the Fund on Municipal
Securities will be excludable from gross income for Federal income tax purposes.
A portion of a dividend that is derived from interest paid on certain "private
activity bonds" may be an item of tax preference if you are subject to the
alternative minimum tax. If the Fund earns interest on taxable investments, any
dividends derived from those earnings will be taxable as ordinary income to
shareholders.

Dividends and capital gains distributions may be subject to state or local
taxes. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders, and may be taxable at different rates depending on
how long the Fund holds the asset. It does not matter how long you have held
your shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Whether you reinvest your distributions
in additional shares or take them in cash, the tax treatment is the same. Every
year the Fund will send you and the IRS a statement showing the amount of any
taxable distribution you received in the previous year as well as the amount of
your tax-exempt income.

|X| AVOID "BUYING A DIVIDEND". If you buy shares just before the Fund
declares a capital gain distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable capital gain.

|X| REMEMBER THERE MAY BE TAXES ON TRANSACTIONS. Even though the Fund
seeks to distribute tax-exempt income to shareholders, you may have a capital
gain or loss when you sell or exchange your shares. A capital gain or loss is
the difference between the price you paid for the shares and the price you
received when you sold them. Any capital gain is subject to capital gains tax.

|X| WHAT ARE RETURNS OF CAPITAL? In certain cases, distributions made by
the Fund may be considered a non-taxable return of capital to shareholders. If
that occurs, it will be identified in notices to shareholders.

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

<PAGE>

FINANCIAL HIGHLIGHTS

The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned[or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report, along with the Fund's financial statements, is included
in the Statement of Additional Information, which is available on request.

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND
SEC File No. 811-2668

FOR MORE INFORMATION:
The following additional information about the Fund is available without charge
upon request:

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

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

HOW TO GET MORE INFORMATION:
You can request the Statement of Additional Information, the
Annual and Semi-Annual Report, and other information about the
Fund or your account:
BY TELEPHONE:
Call OppenheimerFunds Services toll-free:
1-800-525-7048

BY MAIL:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217

ON THE INTERNET:
You can read or down-load documents on the OppenheimerFunds web
site:
HTTP://WWW.OPPENHEIMERFUNDS.COM

You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Information Room in
Washington, D.C. (Phone 1-800-SEC-0330) or the SEC's Internet web site at
HTTP://WWW.SEC.GOV. Copies may be obtained upon payment of a duplicating fee by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009.

NO ONE HAS BEEN AUTHORIZED TO PROVIDE ANY INFORMATION ABOUT THE FUND OR TO MAKE
ANY REPRESENTATIONS ABOUT THE FUND OTHER THAN WHAT IS CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL SHARES OF THE FUND, NOR A
SOLICITATION OF AN OFFER TO BUY SHARES OF THE FUND, TO ANY PERSON IN ANY STATE
OR OTHER JURISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH AN OFFER.

The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.

PR0310.001.1198 Printed on recycled paper.

<PAGE>

APPENDIX TO PROSPECTUS OF
OPPENHEIMER MUNICIPAL BOND FUND

Graphic material included in Prospectus of Oppenheimer Municipal Bond Fund:
"Annual Total Returns (Class A) % as of 12/31 each year (Class A)."

A bar chart will be included in the Prospectus of Oppenheimer Municipal
Bond Fund (the "Fund") depicting the annual total returns of a hypothetical
$10,000 investment in Class A shares of the Fund for each of the ten most recent
calendar years without deducting sales charges. Set forth below are the relevant
data points that will appear on the bar chart.

CALENDAR OPPENHEIMER
Year Municipal Bond Fund
ENDED CLASS A SHARES

12/31/88 10.03%
12/31/89 9.42%
12/31/90 5.93%
12/31/91 12.11%
12/31/92 9.20%
12/31/93 13.79%
12/31/94 -9.19%
12/31/95 18.28%
12/31/96 5.17%
12/31/97 9.38%

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND

Two World Trade Center, New York, New York 10048-0203
1-800-525-7048

Statement of Additional Information dated November 24, 1998

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 24, 1998. It should be read
together with the Prospectus, which may be obtained by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217 or by calling the Transfer Agent at the toll-free number shown above or by
downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.

Content Page
About the Fund
Additional Information About the Fund's Investment Policies and
Risks..............................................................
The Fund's Principal Investment Policies.......................
Municipal Securities...........................................
Other Investment Techniques and Strategies.....................
Investment Restrictions........................................
How the Fund is Managed............................................
Organization and History.......................................
Trustees and Officers of the Fund..............................
The Manager ...................................................
Brokerage Policies of the Fund.....................................
Distribution and Service Plans.....................................
Performance of the Fund............................................

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

Financial Information About the Fund
Independent Auditors' Report.......................................
Financial Statements ..............................................
Appendix A: Municipal Bond Ratings..............................A-1
Appendix B: Tax-Equivalent Yield Table..........................B-1
Appendix C: Industry Classifications............................C-1
Appendix D: Special Sales Charge Arrangements and Waivers......D-1

<PAGE>

ABOUT THE FUND

ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENT POLICIES
AND RISKS

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

THE FUND'S PRINCIPAL INVESTMENT POLICIES. The Fund does not make investments
with the objective of seeking capital growth, since that would generally be
inconsistent with its goal of seeking tax-exempt income. However, the value of
the securities held by the Fund may be affected by changes in general interest
rates. Because the current value of debt securities varies inversely with
changes in prevailing interest rates, if interest rates increased after a
security was purchased, that security would normally decline in value.
Conversely, should interest rates decrease after a security was purchased,
normally its value would rise.

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

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

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

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

MUNICIPAL SECURITIES. The types of municipal securities in which the Fund may
invest are described in the Prospectus under "The Fund and its Investment
Policies." 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. We have classified longer term municipal securities
as "municipal bonds." The principal classifications of long-term municipal bonds
are "general obligation" and "revenue" (or "industrial development") bonds. They
may have fixed, variable or floating rates of interest, as described below.

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

|_| REVENUE BONDS. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise tax or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects. Examples include electric, gas, water and sewer systems;
highways, bridges, and tunnels; port and airport facilities; colleges and
universities; and hospitals.

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

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

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

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

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

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

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

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

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

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

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

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

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

|_| REVENUE ANTICIPATION NOTES. These are notes issued
in expectation of receipt of other types of revenue, such as
Federal revenues available under Federal revenue-sharing programs.

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

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

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

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

Those guidelines require the Manager to evaluate:

|_| the frequency of trades and price quotations for such
securities;

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

|_| the availability of market-makers; and

|_| the nature of the trades for such securities.

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

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

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

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

|X| RATINGS OF MUNICIPAL SECURITIES. Ratings by ratings organizations such
as Moody's Investors Service, Standard & Poor's Corporation and Fitch IBCA, Inc.
represent the respective rating agency's opinions of the credit quality of the
municipal securities they undertake to rate. However, their ratings are general
opinions and are not guarantees of quality. Municipal securities that have the
same maturity, coupon and rating may have different yields, while other
municipal securities that have the same maturity and coupon but different
ratings may have the same yield.

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

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

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

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

OTHER INVESTMENT TECHNIQUES AND STRATEGIES. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below.

|X| FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The interest rate on a
floating rate demand note is based on a stated prevailing market rate, such as a
bank's prime rate, the 90-day U.S. Treasury Bill rate, or some other standard,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand note is also based on a stated prevailing market rate
but is adjusted automatically at specified intervals of no less than one year.
Generally, the changes in the interest rate on such securities reduce the
fluctuation in their market value. As interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than that for
fixed-rate obligations of the same maturity. The Fund's investment manager,
OppenheimerFunds, Inc. (the "Manager") may determine that an unrated floating
rate or variable rate demand obligation meets the Fund's quality standards by
reason of being backed by a letter of credit or guarantee issued by a bank that
meets those quality standards.

Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally the issuer must provide a specified number of days' notice to the
holder.

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

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

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

|X| WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery.

When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date. Normally the
settlement date is within six months of the purchase of municipal bonds and
notes. However, the Fund may, from time to time, purchase municipal securities
having a settlement date more than six months and possibly as long as two years
or more after the trade date. The securities are subject to change in value from
market fluctuation during the settlement period. The value at delivery may be
less than the purchase price. For example, changes in interest rates in a
direction other than that expected by the Manager before settlement will affect
the value of such securities and may cause loss to the Fund.

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

When the Fund engages in when-issued and delayed delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes a commitment to purchase or sell a security on
a when-issued or forward commitment basis, it records the transaction on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its net asset value. The
Fund will identify to its Custodian cash, U.S. Government securities or other
high grade debt obligations at least equal to the value of purchase commitments
until the Fund pays for the investment.

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

|X| PUTS AND STANDBY COMMITMENTS. 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 at the
time of exercise. A put purchased in conjunction with a municipal security
enables the Fund to sell the underlying security within a specified period of
time at a fixed exercise price.

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

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

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

|X| REPURCHASE AGREEMENTS. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities. In a
repurchase transaction, the Fund acquires a security from, and simultaneously
resells it to an approved vendor for delivery on an agreed upon future date.
Approved vendors include U.S. commercial banks, U.S. branches of foreign banks
or broker-dealers that have been designated a primary dealer in government
securities, which meet the credit requirements set by the Fund's Board of
Trustees from time to time. The 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.

The majority of these transactions run from day to day. Delivery pursuant
to resale typically will occur within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments.

Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price to
fully collateralize the repayment obligation. Additionally, the Manager will
impose creditworthiness requirements to confirm that the vendor is financially
sound and will continuously monitor the collateral's value.

|_| ILLIQUID 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
pursuant to Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of Trustees of the
Fund or by the Manager under Board-approved guidelines. Those guidelines take
into account the trading activity for such securities and the availability of
reliable pricing information, among other factors. If there is a lack of trading
interest in a particular Rule 144A security, the Fund's holding of that security
may be deemed to be illiquid. The Fund's fundamental policies prohibit it from
purchasing any restricted security that would require registration with the
Securities and Exchange Commission before it could be sold publicly.

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

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

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

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

|_| sell interest rate futures or municipal bond index
futures,

|_| buy puts on such futures or securities, or

|_| write covered calls on securities, interest rate futures or municipal
bond index futures. Covered calls may also be written on debt securities
to attempt to increase the Fund's income, but that income would not be
tax-exempt. Therefore it is unlikely that the Fund would write covered
calls for that purpose.

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

|_| buy interest rate futures or municipal bond index
futures, or

|_| buy calls on such futures or on securities.

The Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's investment activities in the underlying cash market.
The particular hedging instruments the Fund can use are described below. The
Fund may employ new hedging instruments and strategies when they are developed,
if those investment methods are consistent with the Fund's investment objective
and are permissible under applicable regulations governing the Fund.

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

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

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

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

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

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

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

|_| PUT AND CALL OPTIONS. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls). These
strategies are described below.

|_| WRITING COVERED CALL OPTIONS. The Fund may write (that
is, sell) call options. The Fund's call writing is subject to a
number of restrictions:

(1) After the Fund writes a call, not more than 25% of the Fund's total
assets may be subject to calls.

(2) Calls the Fund sells must be listed on a securities or commodities
exchange or quoted on NASDAQ, the automated quotation system of The
Nasdaq Stock Market, Inc. or traded in the over-the-counter market.

(3) Each call the Fund writes must be "covered" while it is outstanding.
That means the Fund must own the investment on which the call was
written.

(4) The Fund may write calls on futures contracts that it owns, but these
calls must be covered by securities or other liquid assets that the Fund
owns and segregates to enable it to satisfy its obligations if the call
is exercised.

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

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

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

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

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

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

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

Calls on municipal bond indices, interest rate futures and municipal bond
index futures are settled in case 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). The Fund may
not sell puts other than puts it has previously purchased.

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

|_| RISKS OF HEDGING WITH OPTIONS AND FUTURES. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's returns.

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

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

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

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

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

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

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

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

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

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

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

|_| REGULATORY ASPECTS OF HEDGING INSTRUMENTS. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions established by the Commodity Futures Trading Commission (the
"CFTC"). In particular, the Fund is exempted from registration with the CFTC as
a "commodity pool operator" if the Fund complies with the requirements of Rule
4.5 adopted by the CFTC. That Rule does not limit the percentage of the Fund's
assets that may be used for Futures margin and related options premiums for a
BONA FIDE hedging position. However, under the Rule the Fund must limit its
aggregate initial futures margin and related options premiums to no more than 5%
of the Fund's net assets for hedging strategies that are not considered BONA
FIDE hedging strategies under the Rule. Under the Rule, the Fund also must use
short futures and options on futures positions solely for BONA FIDE hedging
purposes within the meaning and intent of the applicable provisions of the
Commodity Exchange Act.

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

Under the Investment Company Act, when the Fund purchases an interest rate
future or municipal bond index future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal to the market value of
the investments underlying 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 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 S&P, or a comparable
rating by another nationally recognized rating agency;
and

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

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

INVESTMENT RESTRICTIONS

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

|_| 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or

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

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

|X| DOES THE FUND HAVE ADDITIONAL FUNDAMENTAL POLICIES? The
following investment restrictions are fundamental policies of the
Fund:

|_| The Fund cannot invest in securities or other investments other than
municipal securities, the temporary investments described in its Prospectus,
repurchase agreements, covered calls, private activity municipal securities and
hedging instruments described in "About the Fund" in the Prospectus or this
Statement of Additional Information.

|_| The Fund cannot lend any of its assets. However, repurchase agreements
and the purchase of debt securities in accordance with the Fund's other
investment policies and restrictions are permitted. The Fund may also lend its
portfolio securities as described in "Loans of Portfolio Securities.

|_| The Fund cannot borrow money in excess of 10% of the value of its
total assets. The Fund may borrow only from banks as a temporary measure for
extraordinary or emergency purposes, and not for the purpose of leveraging its
investments. No assets of the Fund may be pledged, mortgaged or otherwise
encumbered, transferred or assigned to secure a debt. However, the use of escrow
or other collateral arrangements in connection with hedging instruments is
permitted.

|_| The Fund cannot invest more than 5% of the value of its total assets
in the securities of any one issuer. The Fund cannot acquire more than 10% of
the total value of all outstanding securities of any one issuer. In both cases,
this restriction does not apply to securities of the U.S. Government or its
agencies or instrumentalities.

|_| The Fund cannot concentrate its investments to the extent of 25% of
its total assets in any industry. However, there is no limitation as to the
Fund's investments in municipal securities or in obligations issued by the U.S.
Government and its agencies or instrumentalities.

|_| The Fund cannot invest in real estate. This restriction shall not
prevent the Fund from investing in Municipal Securities or other permitted
securities that are secured by real estate or interests in real estate.

|_| The Fund cannot purchase securities on margin. However, the Fund may
obtain such short-term credits that may be necessary for the clearance of
purchases and sales of securities. Furthermore, the Fund may make margin
deposits in connection with the use of hedging instruments as permitted by any
of its other fundamental policies.

|_| The Fund cannot sell securities short.

|_| The Fund cannot underwrite securities or invest in securities that are
subject to restrictions on resale.

|_| The Fund cannot invest in or hold securities of any issuer if officers
and Trustees of the Fund or the Manager individually beneficially own more than
1/2 of 1% of the securities of that issuer and together own more than 5% of the
securities of that issuer.

|_| The Fund cannot invest in securities of any other investment company,
except in connection with a merger with another investment company.

|_| The Fund cannot issue any bonds, debentures or senior equity
securities.

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

DIVERSIFICATION. The Fund intends to be "diversified" as defined in the
Investment Company Act and to satisfy the restrictions against investing too
much of its assets in any "issuer" as set forth in the restrictions above. In
implementing this policy, the identification of the issuer of a municipal
security depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating it and the
security is backed only by the assets and revenues of the subdivision, agency,
authority or instrumentality, the latter would be deemed to be the sole issuer.
Similarly, if an industrial development bond is backed only by the assets and
revenues of the non-governmental user, then that user would be deemed to be the
sole issuer. However, if in either case the creating government or some other
entity guarantees a security, the guarantee would be considered a separate
security and would be treated as an issue of such government or other entity.

APPLYING THE RESTRICTION AGAINST CONCENTRATION. For purposes of
implementing its policy not to concentrate its assets, the Fund has adopted the
industry classifications set forth in Appendix C to this Statement of Additional
Information. Those industry classifications are not a fundamental policy.

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

The Manager has no present intention of investing more than 25% of the
total assets of the Fund in securities of issuers located in the same state, or
in securities paying interest derived from revenues of similar types of
projects. Neither of these is a fundamental policy, and therefore, either of
them may be changed without shareholder approval. Should any such change occur,
the Prospectus and/or this Statement of Additional Information will be
supplemented or revised to reflect the change.

HOW THE FUND IS MANAGED

ORGANIZATION AND HISTORY

The Fund is an open-end, diversified management investment company with an
unlimited number of authorized shares of beneficial interest. The Fund was
originally incorporated in Maryland in 1976 but was reorganized in 1987 as a
Massachusetts business trust.

The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. Although the Fund will
not normally hold annual meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and shareholders have the right
to call a meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.

CLASSES OF SHARES. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has three classes of
shares, Class A, Class B and Class C. All classes invest in the same investment
portfolio. Shares are freely transferable. Each class of shares:

o has its own dividends and distributions,

o pays certain expenses which may be different for the
different classes,

o may have a different net asset value,

o has one vote at shareholder meetings, with fractional
shares voting proportionally on matters submitted to the
vote of shareholders,

o may have separate voting rights on matters in which the interests of one
class are different from the interests of another class, and

o votes as a class on matters that affect that class alone.

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. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.

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

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

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

TRUSTEES AND OFFICERS OF THE FUND

The Fund's Trustees and officers and their principal occupations and
business affiliations and occupations during the past five years are listed
below. Trustees denoted with an asterisk (*) below are deemed to be "interested
persons" of the Fund under the Investment Company Act. All of the Trustees are
Trustees or Directors of the following New York-based Oppenheimer funds1:

- -------------------
1 Ms. Macaskill is not a Director of Oppenheimer Money Market
Fund, Inc.

<PAGE>

Oppenheimer Growth Fund

Oppenheimer Global Fund

Oppenheimer Money Market Fund, Inc.

Oppenheimer U.S. Government Trust

Oppenheimer Gold & Special Minerals Fund

Oppenheimer Discovery Fund

Oppenheimer Enterprise Fund

Oppenheimer Capital Appreciation Fund

Oppenheimer Multiple Strategies Fund

Oppenheimer Global Growth & Income Fund

Oppenheimer International Growth Fund

Oppenheimer California Municipal Fund

Oppenheimer New York Municipal Fund

Oppenheimer Multi-State Municipal Trust

Oppenheimer Multi-Sector Income Trust

Oppenheimer World Bond Fund

Oppenheimer Series Fund, Inc.

Oppenheimer Developing Markets Fund

Oppenheimer Small Company Fund

OppenheimerMunicipalBondFund

<PAGE>

Ms. Macaskill and Messrs. Spiro, Donohue, Bowen, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of November ___, 1998, the Trustees and officers of
the Fund as a group owned of record or beneficially less than 1% of each class
of shares of the Fund. The foregoing statement does not reflect ownership of
shares of the Fund held of record by an employee benefit plan for employees of
the Manager, other than the shares beneficially owned under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.

LEON LEVY, CHAIRMAN OF THE BOARD OF TRUSTEES, Age 73
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).

ROBERT G. GALLI, TRUSTEE, Age 65
19750 Beach Road, Jupiter Island, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 to
December 1997); Vice President (June 1990 to March 1994) and General Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company; Executive
Vice President (December 1977 to October 1995), General Counsel and a director
(December 1975 to October 1993) of the Manager; Executive Vice President and a
director (July 1978 to October 1993) and General Counsel of the Distributor,
OppenheimerFunds Distributor, Inc.; Executive Vice President and a director
(April 1986 to October 1995) of HarbourView Asset Management Corporation; Vice
President and a director (October 1988 to October 1993) of Centennial Asset
Management Corporation, (HarbourView and Centennial are investment adviser
subsidiaries of the Manager); and an officer of other Oppenheimer funds.

BENJAMIN LIPSTEIN, TRUSTEE, Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.

BRIDGET A. MACASKILL, PRESIDENT AND TRUSTEE*, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corp.; Chairman and a director of
Shareholder Services, Inc. (since August 1994), and Shareholder Financial
Services, Inc. (since September 1995) (both are transfer agent subsidiaries of
the Manager); President (since September 1995) and a director (since October
1990) of Oppenheimer Acquisition Corp.; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director (since July 1996) of
Oppenheimer Real Asset Management, Inc., an investment advisory subsidiary of
the Manager; President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund management subsidiary of the Manager, and
of Oppenheimer Millennium Funds plc, an offshore investment company; President
and a director or trustee of other Oppenheimer funds; a director of Hillsdown
Holdings plc (a U.K. food company); formerly an Executive Vice President of the
Manager and a director (until 1998) of NASDAQ Stock Market, Inc..

ELIZABETH B. MOYNIHAN, TRUSTEE, Age 69
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York University), and
the National Building Museum; a member of the Trustees Council, Preservation
League of New York State, and of the Indo-U.S. Sub-Commission on Education and
Culture.

KENNETH A. RANDALL, TRUSTEE, Age 71
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer), Texan
Cogeneration Company (cogeneration company), and Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.

EDWARD V. REGAN, TRUSTEE, Age 68
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of River Bank America (real estate
manager); Trustee, Financial Accounting Foundation (FASB and GASB); formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.

RUSSELL S. REYNOLDS, JR., TRUSTEE, Age 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive recruiting);
Chairman of Directorship Inc. (corporate governance consulting); a director of
Professional Staff Limited (U.K); a trustee of Mystic Seaport Museum,
International House and Greenwich Historical Society.

DONALD W. SPIRO, VICE CHAIRMAN AND TRUSTEE*, Age 72
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.

PAULINE TRIGERE, TRUSTEE, Age 86
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).

CLAYTON K. YEUTTER, TRUSTEE, Age 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T. Industries, Ltd.
(tobacco and financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order) Counselor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture, and U.S. Trade Representative.

ROBERT E. PATTERSON, VICE PRESIDENT AND PORTFOLIO MANAGER, Age 55
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President of the Manager (since February 1993); an officer of other
Oppenheimer funds.

JERRY A. WEBMAN - VICE PRESIDENT AND PORTFOLIO MANAGER, Age 49
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President of the Manager (since February 1996); an officer of other
Oppenheimer funds; previously (until February 1996) an officer and portfolio
manager with Prudential Mutual Funds -- Investment Management Inc.

ANDREW J. DONOHUE, SECRETARY, Age 48
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp., Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since September 1995); President and a director of Centennial Asset Management
Corp. (since September 1995); President and a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); General Counsel (since May 1996) and
Secretary (since April 1997) of Oppenheimer Acquisition Corp.; Vice President of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer funds.

GEORGE C. BOWEN, TREASURER, Age 62
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView Asset Management Corp.; Senior Vice President (since
February 1992), Treasurer (since July 1991) and a director (since December 1991)
of Centennial Asset Management Corp.; Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of Shareholder Services, Inc.; Vice
President, Treasurer and Secretary of Shareholder Financial Services, Inc.
(since November 1989); Assistant Treasurer of Oppenheimer Acquisition Corp.
(since March 1998); Treasurer of Oppenheimer Partnership Holdings, Inc. (since
November 1989); Vice President and Treasurer of Oppenheimer Real Asset
Management, Inc. (since July 1996); Treasurer of OppenheimerFunds International
Ltd. and Oppenheimer Millennium Funds plc (since October 1997); a trustee or
director and an officer of other Oppenheimer funds; formerly Treasurer of
Oppenheimer Acquisition Corp. (June 1990 - March 1998).

ROBERT G. ZACK, ASSISTANT SECRETARY, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager; Assistant Secretary of Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.

ROBERT J. BISHOP, ASSISTANT TREASURER, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.

SCOTT T. FARRAR, ASSISTANT TREASURER, Age 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of OppenheimerFunds International Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly
an Assistant Vice President of the Manager/Mutual Fund Accounting (April
1994-May 1996), and a Fund Controller for the Manager.

|_| REMUNERATION OF TRUSTEES. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. The remaining Trustees of the
Fund received the compensation shown below. The compensation from the Fund was
paid during its fiscal year ended July 31, 1998. The compensation from all of
the New York-based Oppenheimer funds (including the Fund) was received as a
director, trustee or member of a committee of the boards of those funds during
the calendar year 1997.

<TABLE>
<CAPTION>
Retirement Total
Benefits Compensation
Aggregate Accrued from all
Compensation as Part New York based
Name and from of Fund Oppenheimer
Position Fund Expenses Funds (19 Funds)
<S> <C> <C> <C>
Leon Levy $ $ $
Chairman and
Trustee

Benjamin Lipstein $ $ $
Study Committee
Chairman, Audit
Committee Member
and Trustee

Elizabeth B. Moynihan $ $ $
Study Committee
Member and Trustee

Kenneth A. Randall $ $ $
Audit Committee
Chairman and Trustee

Edward V. Regan $ $ $
Proxy Committee
Chairman, Audit
Committee Member
and Trustee1

Russell S. Reynolds, Jr. $ $
$
Proxy Committee
Member and Trustee1

Pauline Trigere $ $ $
Trustee

Clayton K. Yeutter $ $ $
Proxy Committee
Member and Trustee
- ----------------------------
1 For the 1997 calendar year.
2 Committee position held during a portion of the period shown.
</TABLE>

The Fund has adopted a retirement plan that provides for payments to
retired Trustees. Payments are up to 80% of the average compensation paid during
a Trustee's five years of service in which the highest compensation was
received. A Trustee must serve as trustee for any of the New York-based
Oppenheimer funds for at least 15 years to be eligible for the maximum payment.
Each Trustee's retirement benefits will depend on the amount of the Trustee's
future compensation and length of service. Therefore the amount of those
benefits cannot be determined at this time, nor can we estimate the number of
years of credited service that will be used to determine those benefits. For the
fiscal year ended July 31, 1998, $_________ was accrued for the Fund's projected
retirement benefit obligations. A payment of $________ was made for the fiscal
period August 1, 1997 through July 31, 1998.

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

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

|_| MAJOR SHAREHOLDERS. As of November ____,1998, the only persons who
owned of record or who were known by the Fund to own beneficially 5% or more of
the Fund's outstanding Class A, Class B or Class C shares were:

Merrill Lynch Pierce Fenner & Smith Inc. (which advised the Fund that such
shares were held beneficially for its customers), 4800 Deer Lake Drive
East, Floor 3, Jacksonville, Florida 32246; 696,355.688 Class B shares
(approximately 8.21% of the Class B shares then outstanding); 211,212.000
Class C shares (approximately 23.61% of the Class C shares then
outstanding)

THE MANAGER

The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding
company controlled by Massachusetts Mutual Life Insurance Company. The Manager
and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and strictly enforced
by the Manager.

The portfolio managers of the Fund are principally responsible for the
day-to-day management of the Fund's investment portfolio. Other members of the
Manager's fixed-income portfolio department, particularly security analysts,
traders and other portfolio managers have broad experience with fixed-income
securities. They provide the Fund's portfolio managers with research and support
in managing the Fund's investments.

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

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

- -------------------------------------------------------------------
Fiscal Year Management Fee Paid to
ending 7/31 OppenheimerFunds, Inc.
- ------------------------------------------------------------------
1996 $2,079,375
(7 months)

1997 $3,493,873

1998 $

The investment advisory agreement contains an indemnity of the Manager. 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
sustained by reason of any investment of the Fund assets made with due care and
in good faith. The agreement permits the Manager to act as investment adviser
for any other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
adviser or general distributor. If the Manager shall no longer act as investment
adviser to the Fund, the Manager may withdraw the Fund's right to use the name
"Oppenheimer" as part of its name.

BROKERAGE POLICIES OF THE FUND

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

Under the investment advisory agreement, the Manager may select brokers
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such 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. Subject
to the those other considerations, as a factor in selecting brokers for the
Fund's portfolio transactions, the Manager may also consider sales of shares of
the Fund and other investment companies managed by the Manager or its
affiliates.

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

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

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

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

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

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

Other funds advised by the Manager have investment objectives and policies
similar to those of the Fund. Those other funds may purchase or sell the same
securities as the Fund at the same time as the Fund, which could affect the
supply and price of the securities. If two or more of funds advised by the
Manager purchase the same security on the same day from the same dealer, the
Manager may average the price of the transactions and allocate the average among
the funds.

DISTRIBUTION AND SERVICE PLANS

THE DISTRIBUTOR. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's Class A, Class B and Class C shares. The Distributor is
not obligated to sell a specific number of shares. Expenses normally
attributable to sales are borne by the Distributor. They exclude payments under
the Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses (other than those furnished to existing
shareholders).

The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is discussed in the table below:

<TABLE>
<CAPTION>
Class B Class C
Contingent Contingent
Aggregate Class A Deferred Deferred
Sales Sales Sales Sales
Charges Charges Charges Charges
Fiscal Year on Class Retained by Retained by Retained by
ending 7/31 A Shares Distributor* Distributor** Distributor**
<S> <C> <C> <C> <C>
1996 $519,750 $161,377 $123,046 0
(7 months)

1997 $829,188 $210,262 $166,262 $1,308

1998
</TABLE>

*Includes amounts retained by a broker-dealer that is an
affiliate of a parent of the Distributor.
** There are no initial commissions received by the Distributor on the sale of
Class B or Class C shares.

For additional information about distribution of the Fund's shares,
including fees and expenses, please refer to "Distribution and Service Plans."

DISTRIBUTION AND SERVICE PLANS

The Fund has adopted a Service Plan for its Class A shares and
Distribution and Service Plans for its Class B and Class C shares under Rule
12b-1 of the Investment Company Act. Under those plans, the Fund makes payments
to the Distributor in connection with the distribution and/or servicing of the
shares of the particular class.

Each plan has been approved by a vote of the Board of Trustees of the
Fund, including a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on that plan. Each plan has also been
approved by a vote of the holders of a "majority" (as defined in the Investment
Company Act) of the shares of each class. The Manager cast the vote to approve
the Class C plan as the sole initial holder of Class C shares.

Under the Plans the Manager and the Distributor, in their sole discretion,
from time to time may use their own resources to make payments to brokers,
dealers or other financial institutions for distribution and administrative
services they perform at no cost to the Fund. In the case of the Manager, those
resources may include profits from the advisory fee it receives from the Fund.
The Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make to plan recipients from their own
resources.

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

The Board 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 the plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares automatically convert into Class A
shares after six years, the Fund must obtain the approval of Class B
shareholders (as well as Class A shareholders) for an amendment to the Class A
plan that would materially increase the amount to be paid under that plan. That
approval must be by a "majority" of the Class A and Class B shares (as defined
in the Investment Company Act), voting separately by Class.

While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Fund's Board of Trustees at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The report on the Class B and Class C plans
shall also include the Distributor's distribution costs for the quarter, and any
costs for previous fiscal periods that have been carried forward. Those reports
are subject to the review and approval of the Independent Trustees in the
exercise of their fiduciary duty.

Each plan states that while it is in effect, the selection or replacement
and nomination of those Trustees of the Fund who are not "interested persons" of
the Fund is committed to the discretion of the Independent Trustees. This
provision 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, no payment will be made to any recipient in any quarter
in which the aggregate net asset value of all Fund shares 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 Fund's Independent Trustees.
Initially, the Board of Trustees has set the fees at the maximum rate allowed
under the plans and has set no minimum asset amount needed to qualify for
payments.

|_| CLASS A SERVICE PLAN FEES. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets of Class A shares held in accounts of the
service providers or their customers.

For the fiscal year ended July 31, 1998, payments under the Plan for Class
A shares totaled $_____________, all of which was paid by the Distributor to
recipients. That included $_________ paid to an affiliate of the Distributor.
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 SERVICE AND DISTRIBUTION PLAN FEES. Under each
plan, service fees and distribution 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. The Class B and Class C plans
provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plans during that period. The Class B and Class C plans
permit 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 quarterly basis,
without payment in advance.

The Distributor presently intends to pay recipients the service fee on
Class B and Class C shares in advance for the first year the shares are
outstanding. After the first year shares are outstanding, the Distributor makes
payments quarterly on those shares. The advance payment is based on the net
asset value of shares sold. Shares purchased by exchange do not qualify for an
advance service fee payment. If Class B or Class C shares are redeemed during
the first year after their purchase, the recipient of the service fees on those
shares will be obligated to repay the Distributor a pro rata portion of the
advance payment made on those shares.

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 commission to the dealer on Class C shares outstanding for a year
or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commission and
service fee 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 Distributor's
actual expenses in selling Class B and Class C shares may be more than the
payments it receives from contingent deferred sales charges collected on
redeemed shares and from the Fund under the plans. The Fund pays the asset-based
sales charge to the Distributor for its services rendered in distributing Class
B and Class C shares. The payments are made to the Distributor in recognition
that the Distributor:

o pays sales commissions to authorized brokers and dealers at the time of
sale and pays service fees as described in the Prospectus,

may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,

o employs personnel to support distribution of shares, and

o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.

Payments made under the Class B Plan for the fiscal year ended July 31,
1998, totaled $__________ (including $_______ paid to an affiliate of the
Distributor). The Distributor retained $_____________ of that amount. Payments
made under the Class C Plan for the fiscal year ended July 31, 1998 totaled
$________, of which $__________ was retained by the Distributor. At July 31,
1998, the Distributor had incurred unreimbursed expenses under the Class B plan
in the amount of $__________ (equal to ____% of the Fund's net assets
represented by Class B shares on that date). At July 31, 1998, the Distributor
had incurred unreimbursed expenses under the Class C plan of $___________ (equal
to _____% of the Fund's net assets represented by Class C shares on that date).
If either plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to the Distributor for
distributing shares before the plan was terminated.

All payments under the Class B and Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees to NASD members.

PERFORMANCE OF THE FUND

EXPLANATION OF PERFORMANCE TERMINOLOGY. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"tax-equivalent yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"total return at net asset value." An explanation of how yields and total
returns are calculated is set forth below. The charts below show the Fund's
performance of the Fund's most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.

The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. 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. Those returns must be shown for the 1, 5 and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.

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

|_| Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model.

|_| An investment in the Fund is not insured by the FDIC or
any other government agency.

|_| The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.

|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| YIELDS AND TOTAL RETURNS FOR ANY GIVEN PAST PERIOD REPRESENT
HISTORICAL PERFORMANCE INFORMATION AND ARE NOT, AND SHOULD NOT BE CONSIDERED, A
PREDICTION OF FUTURE YIELDS OR RETURNS.

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

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

|_| STANDARDIZED YIELD. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period. It
is not based on actual distributions paid by the Fund to shareholders in the
30-day period, but is a hypothetical yield based upon the net investment income
from the Fund's portfolio investments for that period. It may therefore differ
from the "dividend yield" for the same class of shares, described below.

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

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

The symbols above represent the following factors:

a =dividends and interest earned during the 30-day period.

b =expenses accrued for the period (net of any expense assumptions).

c =the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.

d =the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.

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

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

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

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

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

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

The tax-equivalent yield may be used to compare the tax effects of income
derived from the Fund with income from taxable investments at the tax rates
stated. Appendix B includes a tax-equivalent yield table, based on various
effective tax brackets for individual taxpayers. Your tax bracket is determined
by your Federal taxable income (the net amount subject to Federal income tax
after deductions and exemptions). The tax-equivalent yield table assumes that
the investor is taxed at the highest bracket, regardless of whether a switch to
non-taxable investments would cause a lower bracket to apply.

The Fund's Yields for the Periods Ended 7/31/98
<TABLE>
<CAPTION>
Tax-Equivalent Yield
Standardized Yield Dividend Yield (39.6% Tax Bracket)
Without After Without After Without After
Class of Sales Sales Sales Sales Sales Sales
Shares Charge Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
Class A
Class B N/A N/A N/A
Class C N/A N/A N/A
</TABLE>

|X| TOTAL RETURN INFORMATION. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribe 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") (unless the return is shown without sales charge, as
described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-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") to achieve an Ending Redeemable Value ("ERV" in the
formula) of that investment, according to the following formula:

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

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

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

|_| TOTAL RETURNS AT NET ASSET VALUE. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B or Class C shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.

<TABLE>
<CAPTION>
The Fund's Total Returns for the Periods Ended 7/31/98
Cummulative Total Average Annual Total Returns
Returns (10 Years) 5-Year 10-Year
(or life of class) 1-Year (or life of class) (or life of class)
After Without After Without After Without After Without
Class of Sales Sales Sales Sales Sales Sales Sales Sales
SHARES CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE CHARGE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
Class B
Class C
</TABLE>

Inception of Class A: 10/27/76
Inception of Class B: 3/1/94
Inception of Class C: 8/29/95

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 Class A, Class B or Class C shares by Lipper Analytical
Services, 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
based on categories relating to investment objectives. The performance of the
Fund is ranked by Lipper against all other bond funds, other than money market
funds, and all general municipal bond funds. 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 RANKINGS. From time to time the Fund may publish the star
ranking of the performance of its Class A, Class B or Class C shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
ranks mutual funds in broad investment categories: domestic stock funds,
international stock funds, taxable bond funds and municipal bond funds. The Fund
is ranked among municipal bond funds.

Morningstar star rankings are based on risk-adjusted total investment
return. Investment return measures a fund's (or class's) one, three, five and
ten-year average annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after considering the
fund's sales charges and expenses. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and investment return
are combined to produce star rankings reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top 10%
of funds in a category), four stars is "above average" (next 22.5%), three stars
is "average" (next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). The current star ranking is the fund's (or class's)
3-year ranking or its combined 3- and 5-year ranking (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year ranking (weighted 40%, 30%
and 30%, respectively), depending on the inception date of the fund (or class).
Rankings are subject to change monthly.

The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.

|_| PERFORMANCE RANKINGS AND COMPARISONS BY OTHER ENTITIES AND
PUBLICATIONS. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as THE NEW YORK TIMES, THE WALL STREET JOURNAL, BARRON'S,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's Class A, Class B or Class C 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 Fund's Class A, Class B or Class C
returns to the return on fixed-income investments available from banks and
thrift institutions. Those include certificates of deposit, ordinary
interest-paying checking and savings accounts, and other forms of fixed or
variable time deposits, and various other instruments such as Treasury bills.
However, the Fund's returns and share price are not guaranteed or insured by the
FDIC or any other agency and will fluctuate daily, while bank depository
obligations may be insured by the FDIC and may provide fixed rates of return.
Repayment of principal and payment of interest on Treasury securities is backed
by the full faith and credit of the U.S. government.

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

ABOUT YOUR ACCOUNT

HOW TO BUY SHARES

Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix D 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.

ACCOUNTLINK. When shares are purchased through AccountLink, each purchase must
be at least $25. 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 Exchange 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 Exchange, 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 3 days after the transfers are initiated. 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 D to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.

|X| RIGHT OF ACCUMULATION. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together:

|_| Class A and Class B shares you purchase for your individual accounts,
or for your joint accounts, or for trust or custodial accounts on behalf
of your children who are minors, and

|_| Current purchases of Class A and Class B shares of the Fund and other
Oppenheimer funds to reduce the sales charge rate that applies to
current purchases of Class A shares, and

|_| Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the Oppenheimer
funds.

A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.

|_| THE OPPENHEIMER FUNDS. The Oppenheimer funds are those
mutual funds for which the Distributor acts as the distributor or
the sub-distributor and currently include the following:

<PAGE>

Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer California Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund
Oppenheimer Enterprise Fund
Oppenheimer International Growth Fund
Oppenheimer Developing Markets Fund
Oppenheimer Real Asset Fund
Oppenheimer International Small Company Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer MidCap Fund
Oppenheimer Convertible Securities Fund
Rochester Fund Municipals
Limited-Term New York Municipal Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer World Bond Fund

and the following Money Market Funds:

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

<PAGE>

There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds 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.

|X| LETTERS OF INTENT. Under a Letter of Intent, if you purchase Class A shares
or Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.

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

A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the public offering price
(including the sales charge) that applies to a single lump-sum purchase of
shares in the amount intended to be purchased under the Letter.

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

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

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

|_| TERMS OF ESCROW THAT APPLY TO LETTERS OF INTENT.

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

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

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

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

5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:

(a) Class A shares sold with a front-end sales charge or subject to a
Class A contingent deferred sales charge,

(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and

(c) Class A or Class B shares acquired by exchange of either (1) Class
A shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or
(2) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.

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

ASSET BUILDER PLANS. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. 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 also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.

If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmission.

Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. The amount of the
Asset Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.

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

CHECKWRITING. When a check is presented to the Fund's bank for clearance, the
bank will ask the Fund to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue to receive 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 listed on the check or at the Fund's custodian bank.
That 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 without prior notice.

In choosing to take advantage of the Checkwriting privilege by signing the
Account Application or by completing a Checkwriting card, each individual who
signs:

(1) for individual accounts, represents that they are either the
registered owner(s) of the shares of the Fund in that account;

(2) for accounts for corporations, partnerships, trusts and other
entities, represents that they are an officer, general partner, trustee
or other fiduciary or agent, as applicable, duly authorized to act on
behalf of such registered owner(s);

(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each checks;

(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;

(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and

(6) that neither the Fund nor its bank shall incur any liability for that
amendment or termination of privileges or for redeeming shares to pay
checks reasonably believed by them to be genuine, or for returning or
not paying checks that have not been accepted for any reason.

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 three 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 in
general 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 for selling Fund shares may
receive different levels of compensation for selling to one class of shares than
another.

The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.

|_| CLASS B CONVERSION. The conversion of Class B shares to Class A shares
after six years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature may
be suspended, in which event no further conversions of Class B shares would
occur while such 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 holder, and absent such exchange, Class
B shares might continue to be subject to the asset-based sales charge for longer
than six years.

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

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

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

DETERMINATION OF NET ASSET VALUES PER SHARE. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. It is done by
dividing the value of the Fund's net assets attributable to that class by the
number of shares of that class that are outstanding. The Exchange normally
closes at 4:00 P.M., New York time, but may close earlier on some other days
(for example, in case of weather emergencies or on days falling before a
holiday). The Exchange's most recent annual announcement (which is subject to
change) states that it will close on New Year's Day, Presidents' Day, Good
Friday, Martin Luther King, Jr. Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. It may also close on other days.

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

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

|_| Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.

|_| The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:

(1) debt instruments that have a maturity of more than 397 days when
issued,

(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and

(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or less.

|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:

(1) money market debt securities held by a non-money market fund that had
a maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and

(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.

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

In the case of municipal securities, when last sale information is not
generally available, the Manager may use pricing services approved by the Board
of Trustees. The pricing service may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, 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, interest rate futures and municipal bond index futures are
valued at the last sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, as determined by a pricing service approved by the
Board of Trustees or by the Manager. If there were no sales that day, they shall
be valued at the last sale price on the preceding trading day if it is within
the spread of the closing "bid" and "asked" prices on the principal exchange or
on NASDAQ on the valuation date. If not, the value shall be the closing bid
price on the principal exchange or on NASDAQ on the valuation date. If the put,
call or future is not traded on an exchange or on NASDAQ, it shall be valued by
the mean between "bid" and "asked" prices obtained by the Manager from two
active market makers. In certain cases that may be at the "bid" price if no
"asked" price is available.

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

HOW TO SELL SHARES

Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.

REINVESTMENT PRIVILEGE. Within six months of a redemption, a
shareholder may reinvest all or part of the redemption proceeds
of:

|_| Class A shares that you purchased subject to an initial sales charge
or Class A shares on which a contingent deferred sales charge which was
paid, or

|_| Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.

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

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

PAYMENTS "IN KIND". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, 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 securities from the portfolio of
the Fund, in lieu of cash.

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

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

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

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

SPECIAL ARRANGEMENTS FOR REPURCHASE OF SHARES FROM DEALERS AND BROKERS. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).

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

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

Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
Account Application or by signature-guaranteed instructions. 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 withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in "Waivers of Class B
and Class C Sales Charges" below).

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

|_| AUTOMATIC EXCHANGE PLANS. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares (of
the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $25.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.

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

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

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

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

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

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

To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.

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

HOW TO EXCHANGE SHARES

As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.

|_| All of the Oppenheimer funds currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares.

|_| Oppenheimer Main Street California Municipal Fund currently offers
only Class A and Class B shares.

|_| Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds sponsored 401 (k) plans.

Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund. Shares of any Money Market Fund purchased
without a sales charge may be exchanged for shares of Oppenheimer funds offered
with a sales charge upon payment of the sales charge. They may also be used to
purchase shares of Oppenheimer funds subject to a contingent deferred sales
charge. Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge. To
qualify for that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must
supply proof of entitlement to this privilege.

For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange of Class M shares. No other exchanges may be made to Class
M shares.

Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.

|_| 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. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years of the
initial purchase of the exchanged Class B 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.

When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. SHAREHOLDERS OWNING SHARES OF MORE THAN ONE
CLASS MUST SPECIFY WHETHER THEY INTEND TO EXCHANGE CLASS A, CLASS B OR CLASS C
SHARES.

|_| LIMITS ON MULTIPLE EXCHANGE ORDERS. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.

|_| TELEPHONE EXCHANGE REQUESTS. When exchanging shares by telephone, a
shareholder must either 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. For full or partial
exchanges of an account made by telephone, any special account features such as
Asset Builder Plans and Automatic Withdrawal Plans will be switched to the new
account unless the Transfer Agent is instructed otherwise. 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.

|_| 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.

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

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

DIVIDENDS, CAPITAL GAINS AND TAXES

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

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

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

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

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

TAX STATUS OF THE FUND'S DIVIDENDS AND DISTRIBUTIONS. The Fund intends to
qualify under the Internal Revenue Code during each fiscal year to pay
"exempt-interest dividends" to its shareholders. Exempt-interest dividends that
are derived from net investment income earned by the Fund on municipal
securities will be excludable from gross income of shareholders for Federal
income tax purposes.

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

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

A shareholder receiving a dividend from income earned by the Fund from one
or more of the following sources treats the dividend as a receipt of either
ordinary income or long-term capital gain in the computation of gross income,
regardless of whether the dividend is reinvested:

(1) certain taxable temporary investments (such as certificates of
deposit, repurchase agreements, commercial paper and obligations of the
U.S. government, its agencies and instrumentalities);

(2) income from securities loans;

(3) income or gains from options or futures; or

(4) an excess of net short-term capital gain over net long-term capital
loss from the Fund.

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

If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and 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 distributions made to shareholders.

Under the Internal Revenue Code, by December 31 each year the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Fund's Board of Trustees and the Manager might determine in a particular year
that it would be in the best interest of shareholders not to make 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.

At July 31, 1998, the Fund had available for federal income tax purposes
an unused capital loss carryover of approximately $_____________, which will
expire in 2003.

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 at net asset value without sales charge. 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 must
first obtain a prospectus for that fund and an application from the Transfer
Agent to establish an account. The investment will be made at the net asset
value per share in effect at the close of business on the payable date of the
dividend or distribution. Dividends and/or distributions from certain of the
other Oppenheimer funds may be invested in shares of this Fund on the same
basis.

ADDITIONAL INFORMATION ABOUT THE FUND

THE TRANSFER AGENT. The Fund's Transfer Agent, OppenheimerFunds Services, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders of the Fund. It also handles
shareholder servicing and administrative functions.

Address for Mail Inquiries: For Phone Inquiries:
OppenheimerFunds Services 1-800-525-7048 (toll free)
P.O. Box 5270
Denver Colorado 80217

On the Internet:
http://www.oppenheimerfunds.com

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

INDEPENDENT AUDITORS. KPMG Peat Marwick are the independent auditors of the
Fund. They audit the Fund's financial statements and perform other related audit
services. They also act as auditors for certain other funds advised by the
Manager and its affiliates.

<PAGE>

APPENDIX A

Descriptions of Municipal Bond Ratings Categories

OF PRINCIPAL RATING AGENCIES

MUNICIPAL BONDS

MOODY'S INVESTOR SERVICES, INC. The ratings of Moody's Investors Service, Inc.
("Moody's") for municipal bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C. Those
bonds in the Aa, A, Baa, Ba and B groups which Moody's believes possess the
strongest investment attributes are designated Aa1, A1, Baa1, Ba1 and B1
respectively.

|_| AAA. Municipal bonds rated "Aaa" are judged to be of the "best quality."

|_|AA. The rating "Aa" is assigned to bonds which are judged of "high quality
by all standards," but as to which margins of protection or other elements
make long-term risks appear somewhat larger than "Aaa" rated municipal bonds.
"Aaa" and "Aa" rated bonds are generally known as "high grade bonds."

|_|A. Municipal bonds rated "A" by Moody's possess many favorable investment
attributes and are considered "upper medium grade obligations." Factors
giving security to principal and interest of A rated bonds are considered
adequate, but elements may be present which suggest a susceptibility to
impairment at some time in the future.

|_|BAA. Municipal bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. These bonds lack outstanding investment characteristics
and have speculative characteristics as well.

|_|BA. Bonds rated "Ba" are judged to have speculative elements. Their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

|_|B. Bonds rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

|_|CAA. Bonds rated "Caa" are in poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.

|_|CA. Bonds rated "Ca" represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.

|_|C. Bonds rated "C" are the lowest rated class of bonds. Issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Municipal bonds rated by Moody's that have a demand feature that provides
the holder with the ability to periodically tender ("put") the portion of the
debt covered by the demand feature, may also have a short-term rating assigned
to such demand feature. The short-term rating uses the symbol "VMIG" to
distinguish characteristics that include payment upon periodic demand rather
than fund or scheduled maturity dates and potential reliance upon external
liquidity, as well as other factors. The highest investment quality is
designated by the VMIG 1 rating and the lowest by VMIG 4.

STANDARD & POOR'S CORPORATION. The ratings of Standard & Poor's
Corporation ("S&P") for municipal bonds are AAA (Prime), AA (High Grade), A
(Good Grade), BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade).
Bonds rated in the top four categories (AAA, AA, A, BBB) are commonly referred
to as "investment grade." The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

|_| AAA. Municipal bonds rated AAA are "obligations of the
highest quality."

|_| AA. The rating AA is given to issues with investment
characteristics "only slightly less marked than those of the
prime quality issues."

|_|A. The rating A describes "the third strongest capacity for payment of debt
service." Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because, with
respect to general obligations bonds, there is some weakness, either in the
local economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date. With respect to revenue bonds,
debt service coverage is good, but not exceptional. Stability of the pledged
revenues could show some variations because of increased competition or
economic influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance appears adequate.

|_|BBB. The BBB rating is the lowest "investment grade" security rating. The
difference between A and BBB ratings is that the latter shows more than one
fundamental weakness, or one very substantial fundamental weakness, whereas
the former shows only one deficiency among the factors considered. With
respect to revenue bonds, debt coverage is only fair. Stability of the
pledged revenues could show variations, with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
|_|BB. Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which would
lead to inadequate capacity to meet timely interest and principal payments.

|_|B. Bonds rated B have a greater vulnerability to default, but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

|_|CCC. Bonds rated CCC have a current identifiable vulnerability to default,
and are dependent upon favorable business, financial, and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, they are not likely
to have the capacity to pay interest and repay principal.

|_|CC. Bonds noted CC typically are debt subordinated to senior debt which is
assigned on actual or implied CCC debt rating.

|_|C. Bonds rated C typically are debt subordinated to senior debt that is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

|_|D. Bonds rated D are in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during the grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

FITCH. The ratings of Fitch IBCA, Inc. for municipal bonds are AAA, AA, A, BBB,
BB, B, CCC, CC, C, DDD, DD, and D. Bonds rated AAA, AA, A and BBB are considered
to be of investment grade quality. Bonds rated below BBB are considered to be of
speculative quality.

|_| AAA. Municipal Bonds rated AAA are judged to be of the
"highest credit quality."

|_| AA. The rating of AA is assigned to bonds of "very high
credit quality."

|_| A. Municipal bonds rated A are considered to be of "high
credit quality."

|_|BBB. The rating BBB is assigned to bonds of "satisfactory credit quality." A
and BBB rated bonds are more vulnerable to adverse changes in economic
conditions than bonds with higher ratings.

|_| BB. The rating BB is assigned to bonds considered to be
"speculative."

|_| B. The rating B is assigned to bonds considered to be "highly
speculative."

|_| CCC. Bonds rated CCC have certain identifiable
characteristics which, if not remedied, may lead to default.

|_| CC. Bonds rated CC are considered minimally protected.
Default in payment of interest and/or principal seems probable
over time.

|_| C. Bonds rated C are in imminent default in payment of
interest or principal.

|_|DDD AND BELOW. Bonds rated DDD, DD and D are in default on interest and/or
principal payments. DDD represents the highest potential for recovery on
these bonds, and D represents the lowest potential for recovery.

DUFF & PHELPS. The ratings of Duff & Phelps are as follows:

|_| AAA. These are judged to be the "highest credit quality". The
risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.

|_|AA+, AA & AA-. High credit quality protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic
conditions.

|_|A+, A & A-. Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.

|_|BBB+, BBB & BBB-. These have below average protection factors but are still
considered sufficient for prudent investment. They have considerable
variability in risk during economic cycles.
|_|BB+, BB & BB-. These are below investment grade but are deemed to be able to
meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes.
Overall quality may move up or down frequently within the category.

|_|B+, B & B-. These are below investment grade and possess risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher of lower rating grade.

|_|CCC. Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable economic
industry conditions, and/or with unfavorable company developments.

|_| DD. These are defaulted debt obligations. The issuer failed
to meet scheduled principal and/or interest payments.

MUNICIPAL NOTES

MOODY'S. Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for financing. Notes bearing the designation
"MIG-2" are of high quality with ample margins of protection, although not as
large as notes rated "MIG-1." Such short-term notes that have demand features
may also carry a rating using the symbol VMIG as described above, with the
designation MIG-1/VMIG 1 denoting best quality, with superior liquidity support
in addition to those characteristics attributable to the designation MIG-1.

STANDARD & POOR'S. S&P's ratings for municipal notes due in three years or less
are SP-1, SP-2, and SP-3. SP-1 describes issues with a very strong capacity to
pay principal and interest and compares with bonds rated A by S&P. If modified
by a plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes
issues with a satisfactory capacity to pay principal and interest, and compares
with bonds rated BBB by S&P. SP-3 describes issues that have a speculative
capacity to pay principal and interest.

FITCH. Fitch's rating for municipal notes due in three years or less are F-1+,
F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment. F-1
describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.

CORPORATE DEBT

The other debt securities included in the definition of temporary
defensive investments the Fund may hold are corporate (as opposed to municipal)
debt obligations. The Moody's, S&P and Fitch corporate debt ratings do not
differ materially from those set forth above for municipal bonds.

COMMERCIAL PAPER

MOODY'S. The ratings of commercial paper by Moody's are Prime-1, Prime-2,
Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.

S&P. The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C, and D. A-1
indicates that the degree of safety regarding timely payment is strong. A-2
indicates capacity for timely payment is satisfactory. However, the relative
degree of safety is not as high as for issues designated A-1. A-3 indicates an
adequate capacity for timely payments. These issues are, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B indicates only speculative capacity for
timely payment. C indicates a doubtful capacity for payment. D is assigned to
issues in default.

FITCH. The ratings of commercial paper by Fitch are similar to
its ratings of Municipal Notes, above.

<PAGE>

APPENDIX B

Tax-Exempt/Tax-Equivalent Yields

The equivalent yield table below compares tax-free income with taxable income
under Federal income tax rates effective in 1998. The tables assume that an
investor's highest tax bracket applies to the change in taxable income resulting
from a switch between taxable and non-taxable investments, that the investor is
notsubject to the Alternative Minimum Tax, and that the state income tax
payments are fully deductible for Federal income tax purposes. The income tax
brackets are subject to indexing in future years to reflect changes in the
Consumer Price Index.

Example: Assuming a 4% tax-free yield on an investment, the equivalent taxable
yield would be 5.80% for a person in the 31% tax bracket.

<TABLE>
<CAPTION>
FEDERAL EFFECTIVE AN OPPENHEIMER MUNICIPAL BOND FUND YIELD OF:
TAXABLE TAX 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 7.50%
INCOME BRACKETIS APPROXIMATELY EQUIVALENT TO A TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JOINT RETURN

OVER NOT OVER

$ 0 $ 41,200 15.00% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65% 8.24% 8.82%
$ 41,200 $ 99,600 28.00% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42%
$ 99,600 $151,750 31.00% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87%
$151,750 $271,050 36.00% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72%
$271,050 and above 39.60% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12/42%

SINGLE RETURN

OVER NOT OVER

$ 0 $ 24,650 15.00% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.06% 8.24% 8.82%
$ 24,650 $ 59,750 28.00% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03% 9.72% 10.42%
$ 59,750 $124,650 31.00% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42% 10.14% 10.87%
$124,650 $271,050 36.00% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16% 10.94% 11.72%
$271,050 and above 39.60% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76% 11.59% 12/42%
</TABLE>

<PAGE>

APPENDIX C

Municipal Bond Industry Classifications

Electric
Resource Recovery
Gas
Water
Higher Education
Sewer
Education
Telephone
Lease Rental
Adult Living Facilities
Hospital
General Obligation
Highways
Special Assessment
Marine/Aviation Facilities
Sales Tax
Multi Family Housing
Manufacturing, Non Durables
Single Family Housing
Manufacturing, Durables
Pollution Control

<PAGE>

APPENDIX D

SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS

WAIVERS OF CLASS A SALES CHARGES

|X| 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:

|_| The Manager or its affiliates.

|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.

|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose.

|_| Dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees.

|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are identified
as such to the Distributor) or with the Distributor. The purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or minor
children).

|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients. Those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares.

|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients.

|_| "Rabbi trusts" that buy shares for their own accounts, in each case if
those purchases are made through a broker or agent or other financial
intermediary that has made special arrangements with the Distributor for those
purchases.

|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who buy shares
for their own accounts may also purchase shares without sales charge but only if
their accounts are linked to a master account of their investment advisor or
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements .
Each of these investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.

|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons;

|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which is the
beneficial owner of such accounts; and

|_| Any unit investment trust that has entered into an appropriate
agreement with the Distributor.

|X| WAIVERS OF INITIAL AND CONTINGENT DEFERRED SALES CHARGES IN CERTAIN
TRANSACTIONS. Class A shares issued or purchased in the following transactions
are not subject to sales charges:

|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.

|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.

|_| Shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner. This waiver must be requested when the purchase
order is placed for shares of the Fund, and the Distributor may require evidence
of qualification for this waiver.

|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.

|X| WAIVERS OF THE CLASS A CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN
REDEMPTIONS. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:

|_| To make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value.

|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies," in
the Prospectus).

WAIVERS OF CLASS B AND CLASS C SALES CHARGES.

The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below. In order to receive a waiver of the Class B and
Class C contingent deferred sales charge, you must notify the Transfer Agent
which conditions apply.

|X| WAIVERS FOR REDEMPTIONS IN CERTAIN CASES.

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

|_| Redemptions from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary. The
death or disability must have occurred after the account was established. For
disability you must provide evidence of a determination of disability by the
Social Security Administration.

|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the Statement of Additional Information.

|X| WAIVERS FOR SHARES SOLD OR ISSUED IN CERTAIN TRANSACTIONS.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:

|_| Shares sold to the Manager or its affiliates.

|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose.

|_| Shares issued in plans of reorganization to which the Fund is a party.

SPECIAL SALES CHARGE ARRANGEMENTS FOR SHAREHOLDERS OF THE FUND
WHO WERE SHAREHOLDERS OF THE FORMER QUEST FOR VALUE FUNDS

The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described in the Prospectus or Statement
of Additional Information of the Fund are modified as described below for
certain persons who were shareholders of the former Quest for Value Funds. Those
funds include:

Oppenheimer Quest Value Fund, Inc.,
Oppenheimer Quest Growth & Income Fund,
Oppenheimer Quest Opportunity Value Fund,
Oppenheimer Quest Small Cap Value Fund and
Oppenheimer Quest Global Value Fund, Inc.

To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds.

The table also applies to shareholders of the following funds when they merged
into various Oppenheimer funds on November 24, 1995:

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

All of the funds listed above are referred to in this Appendix as the "Former
Quest for Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund that are either:

|_| acquired by such shareholder pursuant to an exchange of shares of one of the
Oppenheimer funds that was one of the Former Quest for Value Funds or

|_| purchased by such shareholder by exchange of other Oppenheimer funds that
were acquired pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.

WAIVERS OF CLASS A SALES CHARGES.

|X| REDUCED CLASS A INITIAL SALES CHARGE RATES FOR CERTAIN FORMER QUEST FOR
VALUE FUNDS SHAREHOLDERS

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

INITIAL SALES
NUMBER OF INITIAL SALES CHARGE AS
ELIGIBLE CHARGE AS A A PERCENTAGE COMMISSION AS
EMPLOYEES PERCENTAGE OF OF AMOUNT PERCENTAGE OF
OR MEMBERS OFFERING PRICE INVESTED 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%

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 Fund's Prospectus.

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

|X| WAIVER OF CLASS A SALES CHARGES FOR CERTAIN SHAREHOLDERS. Class A shares of
the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:

|_| Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.

|_| Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.

|X| WAIVER OF CLASS A CONTINGENT DEFERRED SALES CHARGE IN CERTAIN TRANSACTIONS.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:

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

CLASS A, CLASS B AND CLASS C CONTINGENT DEFERRED SALES CHARGE WAIVERS

|X| WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED PRIOR TO MARCH 6, 1995. In the
following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund. The Fund shares
must have been acquired by the merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged. Those shares must have been purchased prior
to March 6, 1995 in connection with:

|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10%
of the initial value of the account, and |_| liquidation of a
shareholder's account if the aggregate net asset value of shares held in
the account is less than the required minimum value of such accounts.

|X| WAIVERS FOR REDEMPTIONS OF SHARES PURCHASED ON OR AFTER MARCH 6, 1995 BUT
PRIOR TO NOVEMBER 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund. The Fund shares must have been acquired by the merger of a
Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest For Value Fund or into which such fund merged.
Those shares must have been purchased on or after March 6, 1995, but prior to
November 24, 1995:

|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);

|_| withdrawals under an automatic withdrawal plan (but only for Class B
or Class C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account; and

|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum
account value.

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

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND

INTERNET WEB SITE:
www.oppenheimerfunds.com

INVESTMENT ADVISER
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203

DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203

TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048

CUSTODIAN OF PORTFOLIO SECURITIES
Citibank, N.A.
399 Park Avenue
New York, New York 10043

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202

LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036

[logo]

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND

FORM N-1A

PART C

OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Amended and Restated Declaration of Trust dated September 16, 1996:
Previously filed with Registrant's Post-Effective Amendment No. 37 (11/20/96)
and incorporated herein by reference .

(b) Amended By-Laws dated as of August 6, 1987: Filed with Form SE to
Registrant's Form N-SAR for the fiscal year ended 12/31/87, refiled with
Registrant's Post-Effective Amendment No. 33 (4/28/95) pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(c) (i) Specimen Class A Share Certificate: Previously filed with Registrant's
Post-Effective Amendment No. 37 (11/20/96), and incorporated herein by
reference.

(ii) Specimen Class B Share Certificate: Previously filed with Registrant's
Post-Effective Amendment No. 37 (11/20/96), and incorporated herein by
reference.

(iii) Specimen Class C Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 37 (11/20/96), and incorporated herein
by reference.

(d) Investment Advisory Agreement dated October 22, 1990: Previously filed with
Registrant's Post-Effective Amendment No. 27 (2/28/91), refiled with
Registrant's Post-Effective Amendment No. 33 (4/28/95) pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(e) (i) General Distributor's Agreement dated December 10, 1992: Previously
filed with Registrant's Post-Effective Amendment No. 30 (3/16/93), refiled with
Registrant's Post-Effective Amendment No. 33 (4/28/95) pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.

(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.

(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds, Inc.
(Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.

(f) (i) Retirement Plan for Non-Interested Trustees or Directors dated 6/7/90:
Previously filed with Post-Effective Amendment No. 97 of Oppenheimer Fund (Reg.
No. 2-14586), 8/30/90, refiled with Post-Effective Amendment No. 45 of
Oppenheimer Growth Fund (Reg. No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(ii) Form of Deferred Compensation Arrangement for Disinterested
Trustees/Directors: To be filed by Post-Effective Amendment

(g) (i) Custody Agreement dated October 7, 1976: Previously filed with
Registrant's Post-Effective Amendment No. 2 (5/18/77), refiled with Registrant's
Post-Effective Amendment No. 33 (4/28/95) pursuant to Item 102 of Regulation S-T
and incorporated herein by reference .

(ii) Assignment and Amendment dated May 1, 1987 of Custody Agreement dated
October 7, 1976 among Oppenheimer Tax-Free Bond Fund, Inc., Citibank, N.A., and
Oppenheimer Tax-Free Bond Fund: Previously filed with Registrant's
Post-Effective Amendment No. 22, 5/1/87, refiled with Registrant's
Post-Effective Amendment No. 33, 4/28/95, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.

(iii)Amendment dated as of March, 1978 to Custody Agreement of Oppenheimer
Tax-Free Bond Fund, Inc.: Previously filed with Registrant's Post-Effective
Amendment No. 24, 5/2/88, refiled with Registrant's Post-Effective Amendment No.
33, 4/28/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.

(iv) Amendment dated as of August 13, 1980 to Custody Agreement of
Oppenheimer Tax-Free Bond Fund, Inc.: Previously filed with Registrant's
Post-Effective Amendment No. 24, 5/2/88, refiled with Registrant's
Post-Effective Amendment No. 33, 4/28/95, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.

(v) Amendment dated September 28, 1984 to Custody Agreement of Oppenheimer
Tax-Free Bond Fund, Inc.: Previously filed with Registrant's Post-Effective
Amendment No. 24, 5/2/88, refiled with Registrant's Post-Effective Amendment No.
33, 4/28/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.

(vi) Amendment dated June 16, 1986 to Custody Agreement of Oppenheimer
Tax-Free Bond Fund, Inc.: Previously filed with Registrant's Post-Effective
Amendment No. 24, 5/2/88, refiled with Registrant's Post-Effective Amendment No.
33, 4/28/95, pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.

(h) Not applicable.

(i) Opinion and Consent of Counsel dated May 1, 1987: Previously filed with
Registrant's Post-Effective Amendment No. 22 (5/1/87) , refiled with
Registrant's Post-Effective Amendment No. 33 (4/28/95) pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.

(j) Independent Auditor's Consent: To be filed by Post-Effective Amendment.

(k) Not applicable.

(l) Investment Letter from OppenheimerFunds, Inc. to Registrant dated October 1,
1976: Filed herewith.

(m) (i) Service Plan and Agreement for Class A shares dated June 10, 1993:
Previously filed with Registrant's Post-Effective Amendment No. 31 (3/1/94), and
incorporated herein by reference.

(ii) Distribution and Service Plan and Agreement for Class B shares
dated February 12, 1998: Filed herewith.

(iii) Distribution and Service Plan and Agreement for Class C shares
dated February 12, 1998: Filed herewith.

(n) (i) Financial Data Schedule for Class A Shares: To be filed by
Post-Effective Amendment.

(ii) Financial Data Schedule for Class B Shares: To be filed by
Post-Effective Amendment.

(iii) Financial Data Schedule for Class C Shares: To be filed by
Post-Effective Amendment.

(o) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/25/98: Previously filed with Post-Effective Amendment No. 70 to the
Registration Statement of Oppenheimer Global Fund (Reg. No. 2-31661), 9/14/98,
and incorporated herein by reference.

- -- Powers of Attorney (including Certified Board resolutions): Previously filed
(Bridget A. Macaskill) with Registrant's Post-Effective Amendment No. 36
(4/20/96), and previously filed (all other Trustees) with Registrant's
Post-Effective Amendment No. 31 (3/1/94) and incorporated herein by reference.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND

None.

ITEM 25. INDEMNIFICATION

Reference is made to the provisions of Article Seventh of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER

(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
26(b) below.

(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.

<TABLE>
<CAPTION>
Name and Current Position Other Business and Connections
WITH OPPENHEIMERFUNDS, INC. DURING THE PAST TWO YEARS
<S> <C>
Charles E. Albers,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since April
1998); a Chartered Financial Analyst; formerly, a
Vice President and portfolio manager for Guardian
Investor Services, the investment management
subsidiary of The Guardian Life Insurance Company
(since 1972).

Edward Amberger,
Assistant Vice President

Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset Management, Inc.
("ORAMI"); formerly, Vice President of Equity Derivatives at
Salomon Brothers, Inc.

Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
a Chartered Financial Analyst; Senior Vice President of
HarbourView Asset Management Corporation ("HarbourView"); prior
to March, 1996 he was the senior equity portfolio manager for the
Panorama Series Fund, Inc. (the "Company") and other mutual funds
and pension funds managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment adviser, which was a
subsidiary of Connecticut Mutual Life Insurance Company; he was
also responsible for managing the common stock department and
common stock investments of Connecticut Mutual Life Insurance Co.

Lawrence Apolito,
Vice President None.

Victor Babin,
Senior Vice President None.

Bruce Bartlett,
Vice President An officer and/or portfolio manager of certain Oppenheimer
funds. Formerly, a Vice President and Senior Portfolio Manager
at First of America Investment Corp.

George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group Executive, and Senior
Systems Officer for American International Group (October 1994 -
May, 1998).

John R. Blomfield,
Vice President Formerly Senior Product Manager (November, 1995 - August, 1997)
of International Home Foods and American Home Products (March,
1994 - October, 1996).
Kathleen Beichert,
Vice President None.

Rajeev Bhaman,
Vice President Formerly, Vice President (January 1992 - February, 1996) of Asian
Equities for Barclays de Zoete Wedd, Inc.

Robert J. Bishop,
Vice President Vice President of Mutual Fund
Accounting (since May 1996); an officer of other
Oppenheimer funds; formerly, an Assistant Vice
President of OFI/Mutual Fund Accounting (April
1994-May 1996), and a Fund Controller for OFI.

George C. Bowen,
Senior Vice President, Treasurer
and Director Vice President (since June 1983) and Treasurer (since March
1985) of OppenheimerFunds Distributor, Inc. (the "Distributor");
Vice President (since October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice President (since February
1992), Treasurer (since July 1991)and a director (since December
1991) of Centennial; President, Treasurer and a director of
Centennial Capital Corporation (since June 1989); Vice President
and Treasurer (since August 1978) and Secretary (since April
1981) of Shareholder Services, Inc. ("SSI"); Vice President,
Treasurer and Secretary of Shareholder Financial Services, Inc.
("SFSI") (since November 1989); Assistant Treasurer of
Oppenheimer Acquisition Corp. ("OAC") (since March, 1998);
Treasurer of Oppenheimer Partnership Holdings, Inc. (since
November 1989); Vice President and Treasurer of ORAMI (since
July 1996); an officer of other Oppenheimer funds.

Scott Brooks,
Vice President None.

Susan Burton,
Vice President None.

Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester Fund Services,
Inc.

Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President of
Centennial.

John Cardillo,
Assistant Vice President None.

Erin Cawley,
Assistant Vice President None.

H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.

O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia College - Greece.

William DeJianne, None.
Assistant Vice President

Robert A. Densen,
Senior Vice President None.

Sheri Devereux,
Assistant Vice President None.

Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of
Human Resources for Fidelity Investments-Retail
Division (January, 1995 - January, 1996),
Fidelity Investments FMR Co. (January, 1996 -
June, 1997) and Fidelity Investments FTPG (June,
1997 - January, 1998).

Robert Doll, Jr.,
Executive Vice President & Director An officer and/or
portfolio manager of certain Oppenheimer funds.

John Doney,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September 1993), and a director
(since January 1992) of the Distributor; Executive Vice
President, General Counsel and a director of HarbourView, SSI,
SFSI and Oppenheimer Partnership Holdings, Inc. since (September
1995); President and a director of Centennial (since September
1995); President and a director of ORAMI (since July 1996);
General Counsel (since May 1996) and Secretary (since April
1997) of OAC; Vice President and Director of OppenheimerFunds
International, Ltd. ("OFIL") and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.

Patrick Dougherty, None.
Assistant Vice President

Bruce Dunbar, None.
Vice President

George Evans,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Edward Everett,
Assistant Vice President None.

Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds; formerly, an
Assistant Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a Fund
Controller for OFI.

Leslie A. Falconio,
Assistant Vice President None.

Katherine P. Feld,
Vice President and Secretary Vice President and
Secretary of the Distributor; Secretary of
HarbourView, and Centennial; Secretary, Vice
President and Director of Centennial Capital
Corporation; Vice President and Secretary of
ORAMI.

Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager of certain
Oppenheimer funds; Presently he holds the following other
positions: Director (since 1995) of ICI Mutual Insurance Company;
Governor (since 1994) of St. John's College; Director (since 1994
- present) of International Museum of Photography at George
Eastman House. Formerly, he held the following positions:
formerly, Chairman of the Board and Director of Rochester Fund
Distributors, Inc. ("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President and Director of
Rochester Capital Advisors, Inc. ("RCAI"); Managing Partner of
Rochester Capital Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS"); President and Director of
Rochester Tax Managed Fund, Inc.; Director (1993 - 1997) of
VehiCare Corp.; Director (1993 - 1996) of VoiceMode.

John Fortuna,
Vice President None.

Patricia Foster,
Vice President Formerly, she held the following
positions: An officer of certain former Rochester
funds (May, 1993 - January, 1996); Secretary of
Rochester Capital Advisors, Inc. and General
Counsel (June, 1993 - January 1996) of Rochester
Capital Advisors, L.P.

Jennifer Foxson,
Vice President None.

Erin Gardiner,
Assistant Vice President None.

Linda Gardner,
Vice President None.

Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for Schroder Capital
Management International.

Jill Glazerman,
Assistant Vice President None.

Mikhail Goldverg
Assistant Vice President None.

Jeremy Griffiths,
Chief Financial Officer Chief Financial Officer and Treasurer (since March, 1998) of
Oppenheimer Acquisition Corp.; a Member and Fellow of the
Institute of Chartered Accountants; formerly, an accountant for
Arthur Young (London, U.K.).

Robert Grill,
Vice President Formerly, Marketing Vice President for
Bankers Trust Company (1993-1996); Steering
Committee Member, Subcommittee Chairman for
American Savings Education Council (1995-1996).

Caryn Halbrecht,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989 - January, 1997) of
Bankers Trust Company.

Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust Company
(January, 1991 - November, 1997).

Thomas B. Hayes,
Vice President None.

Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and Director of
SFSI; President and Chief executive Officer of
SSI.

Dorothy Hirshman, None.
Assistant Vice President

Merryl Hoffman,
Vice President None.

Nicholas Horsley,
Vice President Formerly, a Senior Vice President and Portfolio Manager for
Warburg, Pincus Counsellors, Inc. (1993-1997), Co-manager of
Warburg, Pincus Emerging Markets Fund (12/94 - 10/97), Co-manager
Warburg, Pincus Institutional Emerging Markets Fund - Emerging
Markets Portfolio (8/96 - 10/97), Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of Warburg Pincus International
Equity Fund, Warburg Pincus Institutional Fund - Intermediate
Equity Portfolio, and Warburg Pincus EAFE Fund.

Scott T. Huebl,
Assistant Vice President None.

Richard Hymes,
Vice President None.

Jane Ingalls,
Vice President None.

Kathleen T. Ives,
Vice President None.

Frank Jennings,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Thomas W. Keffer,
Senior Vice President None.

Avram Kornberg,
Vice President None.

John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds; formerly,
Managing Director and Senior Portfolio Manager at
Prudential Global Advisors (1989 - 1998).

Joseph Krist,
Assistant Vice President None.

Michael Levine,
Assistant Vice President None.

Shanquan Li,
Vice President None.

Stephen F. Libera,
Vice President
An officer and/or portfolio manager for certain Oppenheimer
funds; a Chartered Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the senior bond portfolio
manager for Panorama Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; also responsible for
managing the public fixed-income securities department at
Connecticut Mutual Life Insurance Co.

Mitchell J. Lindauer,
Vice President None.

David Mabry,
Assistant Vice President None.

Steve Macchia,
Assistant Vice President None.

Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995); President and
director (since June 1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and SFSI (September 1995);
President (since September 1995) and a director (since October
1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of OFI; a director of ORAMI (since
July 1996) ; President and a director (since October 1997) of
OFIL, an offshore fund manager subsidiary of OFI and Oppenheimer
Millennium Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director of Hillsdown
Holdings plc (a U.K. food company); formerly, an Executive Vice
President of OFI.

Wesley Mayer,
Vice President Formerly, Vice President (January, 1995 - June, 1996) of
Manufacturers Life Insurance Company.

Loretta McCarthy,
Executive Vice President None.

Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June 1995- October,
1997) of Merrill Lynch Pierce Fenner & Smith.

Beth Michnowski,
Assistant Vice President Formerly Senior Marketing Manager May, 1996 - June, 1997) and
Director of Product Marketing (August, 1992 - May, 1996) with
Fidelity Investments.

Lisa Migan,
Assistant Vice President None.

Denis R. Molleur,
Vice President None.

Nikolaos Monoyios,
Vice President A Vice President and/or portfolio
manager of certain Oppenheimer funds (since April
1998); a Certified Financial Analyst; formerly, a
Vice President and portfolio manager for Guardian
Investor Services, the management subsidiary of
The Guardian Life Insurance Company (since 1979).

Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November 1996) for Chase
Investment Services Corp.

Kenneth Nadler,
Vice President None.

David Negri,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Barbara Niederbrach,
Assistant Vice President None.

Robert A. Nowaczyk,
Vice President None.

Ray Olson,
Assistant Vice President None.

Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.

Gina M. Palmieri,
Assistant Vice President None.

Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.

James Phillips
Assistant Vice President None.

Caitlin Pincus,
Vice President Formerly, Manager (June 1995 - December 1997) of McKinsey & Co.

Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Michael Quinn,
Assistant Vice President Formerly, Assistant Vice President (April, 1995 - January, 1998)
of Van Kampen American Capital.

Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset Management, Inc. (since
March, 1995).

Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly, a Securities
Analyst for the Manager.

Ruxandra Risko,
Vice President None.

Michael S. Rosen,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.

Lawrence Rudnick,
Assistant Vice President None.

James Ruff,
Executive Vice President & Director None.

Valerie Sanders,
Vice President None.

Ellen Schoenfeld,
Assistant Vice President None.

Stephanie Seminara,
Vice President None.

Michelle Simone,
Assistant Vice President None.

Richard Soper,
Vice President None.

Stuart J. Speckman
Vice President Formerly, Vice President and Wholesaler for Prudential Securities
(December, 1990 - July, 1997).
Nancy Sperte,
Executive Vice President None.

Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee
of the New York-based Oppenheimer Funds;
formerly, Chairman of the Manager and the
Distributor.

Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol
Advisors, L.P.

Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.

Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.

John Stoma,
Senior Vice President, Director
of Retirement Plans None.

Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of HarbourView.

James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; President and a Director of
Centennial; formerly, President and Director of OAMC, and
Chairman of the Board of SSI.

Susan Switzer,
Assistant Vice President

James Tobin,
Vice President None.

Susan Torrisi,
Assistant Vice President None.

Jay Tracey,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

James Turner,
Assistant Vice President None.

Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.

Teresa Ward,
Assistant Vice President None.

Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed income Oppenheimer
funds.

Christine Wells,
Vice President None.

Joseph Welsh,
Assistant Vice President None.

Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered Financial
Analyst; Vice President of HarbourView.

William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.

Carol Wolf,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial; Vice President, Finance and
Accounting; Point of Contact: Finance Supporters of Children;
Member of the Oncology Advisory Board of the Childrens
Hospital.

Caleb Wong,
Assistant Vice President None.

Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985), SFSI
(since November 1989), OFIL (since 1998), Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer
funds.

Jill Zachman,
Assistant Vice President:
Rochester Division None.

Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
</TABLE>

The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set
forth below:

NEW YORK-BASED OPPENHEIMER FUNDS

Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund

QUEST/ROCHESTER FUNDS

Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals

DENVER-BASED OPPENHEIMER FUNDS

Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.

The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.

The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.

The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.

Item 27. Principal Underwriter

(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above.

(b) The directors and officers of the Registrant's principal underwriter are:

Positions Positions
Name & Principal and Offices and Offices
Business Address with Underwriter with Registrant

Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364

Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093

Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379

George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.

Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825

Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division

Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921

Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030

William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657

Mary Crooks(1)

Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428

Christopher DeSimone Vice President None
110 W. Grant Street, #25A
Minneapolis, MN 55403

Rhonda Dixon-Gunner(1) Assistant Vice President None

Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
And General Counsel

John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798

Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109

Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753

Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016

Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137

John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422

George Fahey Vice President None
412 Commons Way
Doylestown, PA 18901

Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158

Katherine P. Feld(2) Vice President None
& Secretary

Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697

Ronald H. Fielding(3) Vice President None

Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249

Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880

Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277

Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347

L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319

Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209

Ralph Grant(2) Vice President/NationalNone
Sales Manager

Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103

Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656

C. Webb Heidinger Vice President None
28 Cable Road
Rye, NH 03870

Byron Ingram(1) Assistant Vice President None

Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118

Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011

Elyse Jurman Vice President None
10499 Lake Vista Circle
Boca Raton, FL 33498

Michael Keogh(2) Vice President None

Brian Kelly Vice President None
4628 Colfax Avenue So.
Minneapolis, MN 55408

John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382

Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409

Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022

Ilene Kutno(2) Vice President/ None
Director of Sales

Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116

Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209

Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069

Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747

James Loehle Vice President None
30 John Street
Cranford, NJ 07016

Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657

Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928

Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021

LuAnn Mascia(2) Assistant Vice President None

Theresa-Marie Maynier Vice President None
4411 Spicewood Springs, #811
Austin, TX 78759

Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212

John McDonough Vice President None
6010 Ocean Front Avenue
Virginia Beach, VA 23451

Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005

Tanya Mrva(2) Assistant Vice President None

Laura Mulhall(2) Senior Vice President None

Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931

Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043

Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362

Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014

Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115

Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210

Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672

Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534

Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202

Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614

Elaine Puleo(2) Senior Vice President None

Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923

Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220

Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538

John C. Reinhardt(3) Vice President None

Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230

Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066

Michael S. Rosen(3) Vice President None

Kenneth Rosenson Vice President None
28214 Rey de Copas Lane
Malibu, CA 90265

James Ruff(2) President None

Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479

Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471

Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677

Timothy Stegman Vice President None
749 Jackson Street
Denver, CO 80206

Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029

David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923

Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017

George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036

Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242

Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214

David G. Thomas Vice President None
8116 Arlingon Blvd. #123
Falls Church, VA 22042

Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201

Mark Stephen Vandehey(1) Vice President None

James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331

Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331

(1) 6803 South Tuscon Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 South Tucson Way, Englewood, CO 80112.

ITEM 29. MANAGEMENT SERVICES

Not applicable.

ITEM 30. UNDERTAKINGS

Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York and State of New York on the 24th day
of September, 1998.

OPPENHEIMER MUNICIPAL BOND FUND

/s/ Bridget A. Macaskill
--------------------------------------
Bridget A. Macaskill, President

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>

/s/ Leon Levy* Chairman of the September 24, 1998
- -------------- Board of Trustees
Leon Levy

/s/ Donald W. Spiro* Vice Chairman and September 24, 1998
- ------------------ Trustee
Donald W. Spiro

/s/ George Bowen* Treasurer and September 24, 1998
- ----------------- Principal Financial
George Bowen and Accounting
Officer

/s/ Robert G. Galli* Trustee September 24, 1998
- -------------------
Robert G. Galli

/s/ Benjamin Lipstein* Trustee September 24, 1998
- ----------------------
Benjamin Lipstein

/s/ Bridget A. Macaskill* President, September 24, 1998
- ------------------------ Principal Executive
Bridget A. Macaskill Officer, Trustee

/s/ Elizabeth B. Moynihan* Trustee September 24, 1998
- --------------------------
Elizabeth B. Moynihan

/s/ Kenneth A. Randall* Trustee September 24, 1998
- -----------------------
Kenneth A. Randall

/s/ Edward V. Regan* Trustee September 24, 1998
- ------------------
Edward V. Regan

/s/ Russell S. Reynolds, Jr.* Trustee September 24, 1998
- -----------------------------
Russell S. Reynolds, Jr.

/s/ Pauline Trigere* Trustee September 24, 1998
- --------------------
Pauline Trigere

/s/ Clayton K. Yeutter* Trustee September 24, 1998
- -----------------------
Clayton K. Yeutter

*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact

</TABLE>

<PAGE>

OPPENHEIMER MUNICIPAL BOND FUND

Post-Effective Amendment No. 40

Index to Exhibits

23(l) Investment Letter from OppenheimerFunds, Inc. to Registrant dated
10/1/76

23(m)(ii) Distribution and Service Plan and Agreement for for Class B shares
dated 2/12/98

23(m)(iii) Distribution and Service Plan and Agreement for Class C shares dated
2/12/98

October 1, 1976

The Board of Directors
Oppenheimer Tax-Free Bond Fund, Inc.
One New York Plaza
New York, New York 10004

Gentlemen:

The undersigned hereby represents and warrants to you that the 10,000 shares of
capital stock of the Oppenheimer Tax-Free Bond Fund, Inc. to be purchased by it
will be purchased for investment and without any present intention to resell or
redeem the same.

Very truly yours,

OPPENHEIMER & CO.

/s/ Donald W. Spiro

By___________________________
Donald W. Spiro
General Partner

AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT

WITH

OPPENHEIMERFUNDS DISTRIBUTOR, INC.

FOR CLASS B SHARES OF

OPPENHEIMER MUNICIPAL BOND FUND

This Amended and Restated Distribution and Service Plan and Agreement (the
"Plan") is dated as of the 12th day of February, 1998, by and between
Oppenheimer Municipal Bond Fund (the "Fund") and OppenheimerFunds Distributor,
Inc. (the "Distributor").

1. THE PLAN. This Plan is the Fund's written distribution and service plan for
Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").

2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:

(a) "Recipient" shall mean any broker, dealer, bank or other person or
entity which: (i) has rendered assistance (whether direct, administrative or
both) in the distribution of Shares or has provided administrative support
services with respect to Shares held by Customers (defined below) of the
Recipient; (ii) shall furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to answer such questions
as may arise concerning the sale of Shares; and (iii) has been selected by the
Distributor to receive payments under the Plan.

(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any agreement relating to this Plan.

(c) "Customers" shall mean such brokerage or other customers or investment
advisory or other clients of a Recipient, and/or accounts as to which such
Recipient provides administrative support services or is a custodian or other
fiduciary.

(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.

-1-

<PAGE>

3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT
SERVICES.

(a) PAYMENTS TO THE DISTRIBUTOR. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares (1) sold in purchase transactions,
(2) issued in exchange for shares of another investment company for which the
Distributor serves as distributor or sub-distributor, or (3) issued pursuant to
a plan of reorganization to which the Fund is a party.
If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:

(i) ADMINISTRATIVE SUPPORT SERVICES FEES. Within forty-five (45)
days of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.

(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge") outstanding for no more than
six years (the "Maximum Holding Period"). Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor for providing
distribution assistance in connection with the sale of Shares.

The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.

(b) PAYMENTS TO RECIPIENTS. The Distributor is authorized under the Plan
to pay Recipients (1)
distribution assistance fees for rendering distribution assistance in
connection with the sale of Shares and/or (2) service fees for rendering
administrative support services with respect to Accounts. However, no such
payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.

-2-

<PAGE>

(i) SERVICE FEE. In consideration of the administrative support
services provided by a Recipient during a calendar quarter, the Distributor
shall make service fee payments to that Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter, at a rate not to exceed 0.0625%
(0.25% on an annual basis) of the average during the calendar quarter of the
aggregate net asset value of Shares, computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.

Alternatively, the Distributor may, at its sole option, make the
following service fee payments to any Recipient quarterly, within forty-five
(45) days of the end of each calendar quarter: (i) "Advance Service Fee
Payments" at a rate not to exceed 0.25% of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
business on the day such Shares are sold, constituting Qualified Holdings, sold
by the Recipient during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) service fee payments at a rate not to
exceed 0.0625% (0.25% on an annual basis) of the average during the calendar
quarter of the aggregate net asset value of Shares, computed as of the close of
each business day, constituting Qualified Holdings owned beneficially or of
record by the Recipient or by its Customers for a period of more than one (1)
year. At the Distributor's sole option, the Advance Service Fee Payments may be
made more often than quarterly, and sooner than the end of the calendar quarter.
In the event Shares are redeemed less than one year after the date such Shares
were sold, the Recipient is obligated to and will repay the Distributor on
demand a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such Shares were held to one (1) year.

The administrative support services to be rendered by Recipients in
connection with the Accounts may include, but shall not be limited to, the
following: answering routine inquiries concerning the Fund, assisting in the
establishment and maintenance of accounts or sub-accounts in the Fund and
processing Share redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other information and
services in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may reasonably request.

(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE)
PAYMENTS. In its sole discretion and irrespective of whichever alternative
method of making service fee payments to Recipients is selected by the
Distributor, in addition the Distributor may make distribution assistance fee
payments to a Recipient quarterly, within forty-five (45) days after the end of
each calendar quarter, at a rate not to exceed 0.1875% (0.75% on an annual
basis) of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day constituting
Qualified Holdings owned beneficially or of record by the Recipient or its
Customers for no more than six years and for any minimum period that the
Distributor may establish. Distribution assistance fee payments shall be made
only to Recipients that are registered with the SEC as a broker-dealer or are
exempt from registration.

The distribution assistance to be rendered by the Recipients in
connection with the sale of Shares may include, but shall not be limited to, the
following: distributing sales literature and prospectuses other than those
furnished to current Shareholders, providing compensation to and paying expenses
of personnel of the Recipient who support the distribution of Shares by the
Recipient, and providing such other information and services in connection with
the distribution of Shares as the Distributor or the Fund may reasonably
request.

(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease the Maximum Holding Period, any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any

-3-

<PAGE>

Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a revised current prospectus shall constitute
sufficient notice.

(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD Conduct Rules.

(e) Under the Plan, payments may also be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings, in either case, in
the discretion of OFI or the Distributor, respectively.

(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board, shall require the Recipient to provide a written
report or other information to verify that said Recipient is providing
appropriate distribution assistance and/or services in this regard. If the
Distributor or the Board of Trustees still is not satisfied after the receipt of
such report, either may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such Recipient's rights as a
third-party beneficiary hereunder shall terminate. Additionally, in their
discretion, a majority of the Fund's Independent Trustees at any time may remove
any broker, dealer, bank or other person or entity as a Recipient, where upon
such person's or entity's rights as a third-party beneficiary hereof shall
terminate. Notwithstanding any other provision of this Plan, this Plan does not
obligate or in any way make the Fund liable to make any payment whatsoever to
any person or entity other than directly to the Distributor. The Distributor has
no obligation to pay any Service Fees or Distribution Assistance Fees to any
Recipient if the Distributor has not received payment of Service Fees or
Distribution Assistance Fees from the Fund.

4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.

5. REPORTS. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing the amount
of all payments made under this Plan and the purpose for which the payments were
made. The reports shall be provided quarterly, and shall state whether all
provisions of Section 3 of this Plan have been complied with.

-4-

<PAGE>

its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.

7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class B
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.

This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class B Shareholders at a
meeting called for that purpose, and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.

This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset- Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.

8. DISCLAIMER OF SHAREHOLDER AND TRUSTEE LIABILITY. The Distributor understands
that the obligations of the Fund under this Plan are not binding upon any
Trustee or shareholder of the Fund personally, but bind only the Fund and the
Fund's property. The Distributor represents that it has notice of the provisions
of the Declaration of Trust of the Fund disclaiming shareholder and Trustee
liability for acts or obligations of the Fund.

Oppenheimer Municipal Bond Fund

/s/ Andrew Donohue
By:
------------------------------
Andrew Donohue, Secretary

OppenheimerFunds Distributor, Inc.

/s/ Katherine P. Feld
By:
------------------------------
Katherine P. Feld,
Vice President and Secretary

OFMI\88512B-B.698
6/98

-5-

AMENDED AND RESTATED
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT

WITH

OPPENHEIMERFUNDS DISTRIBUTOR, INC.

FOR CLASS C SHARES OF

OPPENHEIMER MUNICIPAL BOND FUND

1. THE PLAN. This Plan is the Fund's written distribution and service plan for
Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it may
be amended from time to time (the "Rule") under the Investment Company Act of
1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").

2. DEFINITIONS. As used in this Plan, the following terms shall have the
following meanings:

-1-

<PAGE>

3. PAYMENTS FOR DISTRIBUTION ASSISTANCE AND ADMINISTRATIVE SUPPORT
SERVICES.

(a) PAYMENTS TO THE DISTRIBUTOR. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:

(i) ADMINISTRATIVE SUPPORT SERVICE FEES. Within forty-five (45) days
of the end of each calendar quarter, the Fund will make payments in the
aggregate amount of 0.0625% (0.25% on an annual basis) of the average during
that calendar quarter of the aggregate net asset value of the Shares computed as
of the close of each business day (the "Service Fee"). Such Service Fee payments
received from the Fund will compensate the Distributor for providing
administrative support services with respect to Accounts. The administrative
support services in connection with Accounts may include, but shall not be
limited to, the administrative support services that a Recipient may render as
described in Section 3(b)(i) below.

(ii) DISTRIBUTION ASSISTANCE FEES (ASSET-BASED SALES CHARGE). Within
ten (10) days of the end of each month, the Fund will make payments in the
aggregate amount of 0.0625% (0.75% on an annual basis) of the average during the
month of the aggregate net asset value of Shares computed as of the close of
each business day (the "Asset-Based Sales Charge"). Such Asset-Based Sales
Charge payments received from the Fund will compensate the Distributor for
providing distribution assistance in connection with the sale of Shares.

The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.

(b) PAYMENTS TO RECIPIENTS. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.

-2-

<PAGE>

In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:

(i) SERVICE FEE. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than the minimum period (the "Minimum
Holding Period"), if any, that may be set from time to time by a majority of the
Independent Trustees.

Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.

(ii) DISTRIBUTION ASSISTANCE FEE (ASSET-BASED SALES CHARGE)
PAYMENTS. Irrespective of whichever alternative method of making service fee
payments to Recipients is selected by the Distributor, in addition the
Distributor shall make distribution assistance fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at the rate
described above, on Shares constituting Qualified Holdings owned beneficially or
of record by the Recipient or its Customers without regard to the 1-year holding
period described above. Distribution assistance fee payments shall be made only
to Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.

The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and paying expenses of personnel
of the Recipient who support the distribution of Shares by the Recipient, and
providing such other information and services in connection with the
distribution of Shares as the Distributor or the Fund may reasonably request.

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<PAGE>

(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period"), or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period
that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.

(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. If
either the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor. The Distributor has no obligation to pay any
Service Fees or Distribution Assistance Fees to any Recipient if the Distributor
has not received payment of Service Fees or Distribution Assistance Fees from
the Fund.

4. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.

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<PAGE>

6. RELATED AGREEMENTS. Any agreement related to this Plan shall be in writing
and shall provide that: (i) such agreement may be terminated at any time,
without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.

7. EFFECTIVENESS, CONTINUATION, TERMINATION AND AMENDMENT. This Amended and
Restated Plan has been approved by a vote of the Board and of the Independent
Trustees and replaces the Fund's prior Distribution and Service Plan for Class C
Shares. Unless terminated as hereinafter provided, it shall continue in effect
until renewed by the Board in accordance with the Rule and thereafter from year
to year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.

This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders at a
meeting called for that purpose and all material amendments must be approved by
a vote of the Board and of the Independent Trustees.

This Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.

Oppenheimer Municipal Bond Fund

/s/ Andrew Donohue
By:
------------------------------
Andrew Donohue, Secretary

OppenheimerFunds Distributor, Inc.

/s/ Katherine P. Feld
By:
------------------------------
Katherine P. Feld,
Vice President and Secretary

OFMI\88512B-C.698
6/98