Oppenheimer
Municipal Bond Fund




Prospectus dated November 27, 2002



                                          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.

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.





CONTENTS




                    ABOUT THE FUND

                    The Fund's Investment Objective and Strategies
                    Main Risks of Investing in the Fund
                    The Fund's Past Performance
                    Fees and Expenses of the Fund
                    About the Fund's Investments
                    How the Fund is Managed


                    ABOUT YOUR ACCOUNT

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

                    Special Investor Services
                    AccountLink
                    PhoneLink
                    OppenheimerFunds Internet Website

                    How to Sell Shares
                    By Mail
                    By Telephone
                    By Checkwriting

                    How to Exchange Shares
                    Shareholder Account Rules and Policies
                    Dividends, Capital Gains and Taxes
                    Financial Highlights






ABOUT THE FUND

The Fund's Investment Objective and Strategies
WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks 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 MAINLY INVEST IN? The Fund invests mainly in municipal
securities that pay interest exempt from federal individual income tax. These
primarily include municipal bonds (which are long term obligations), municipal
notes (short term obligations), interests in municipal leases, and tax-exempt
commercial paper. Most of the securities the Fund buys must be "investment
grade" (the four highest rating categories of national rating organizations such
as Moody's).


     The Fund does not normally limit its investments to securities of a
particular maturity range, but currently focuses on longer-term securities with
maturities between 5 and 30 years when issued. This portfolio strategy is
subject to change. The Fund can buy general obligation bonds as well as "private
activity" municipal securities that pay income subject to alternative minimum
taxation. These investments are more fully explained in "About the Fund's
Investments," below.


HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the portfolio managers look nationwide for
municipal securities using a variety of factors which may change over time and
may vary in particular cases. The portfolio managers currently look for:
   o Securities that provide high current income, o A wide range of securities
   to diversify the portfolio, o Securities having favorable credit
   characteristics, and o Special situations that provide opportunities for
   value.


      The portfolio managers may consider selling a security if one or more of
these factors no longer apply to a security purchased for the Fund.


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

Main Risks of Investing in the Fund

      All investments have risks to some degree. The Fund's investments are
subject to changes in their value from a number of factors, described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds
having a similar objective. There is no assurance that the Fund will achieve its
objective.


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

Special Risks of Lower-Grade Securities. The Fund's credit risks are greater
   than those of funds that buy only investment-grade securities. Lower-grade
   debt securities (these are sometimes called "junk bonds") may be subject to
   greater market fluctuations and greater risks of loss of income and principal
   than investment-grade debt securities. Securities that are (or that have
   fallen) below investment grade are exposed to a greater risk that the issuers
   of those securities might not meet their debt obligations. These risks can
   reduce the Fund's share prices and the income it earns.


   While investment grade securities are subject to risks of non-payment of
   interest and principal, generally, higher yielding lower-grade bonds, whether
   rated or unrated, have greater risks than investment grade securities. The
   market for lower-grade securities may be less liquid, especially during times
   of general economic distress, and therefore they may be harder to sell at an
   acceptable price.


INTEREST RATE RISKS. Municipal securities are subject to changes in value when
prevailing interest rates change. When prevailing interest rates fall, the
values of already-issued municipal securities generally rise. When prevailing
interest rates rise, the values of already-issued municipal securities generally
fall and the securities may sell at a discount from their face amount. The
magnitude of these price changes is generally greater for bonds with longer
maturities. When the average maturity of the Fund's portfolio is longer, its
share price may fluctuate more if interest rates change. Additionally, the Fund
can buy variable rate obligations. When interest rates fall, the yields of these
securities decline. Callable bonds the Fund buys are more likely to be called
when interest rates fall, and the Fund might then have to reinvest the proceeds
of the callable instrument in other securities that have lower yields, reducing
its income. When interest rates fall, the income the Fund earns on its
investments, and the Fund's distributions to shareholders, may decline. The Fund
currently focuses on longer term securities to seek higher income. Therefore,
its share prices may fluctuate more when interest rates change.

Borrowing for Leverage. As a fundamental policy, the Fund can borrow from banks
   in amounts up to one-third of its total assets (including the amount
   borrowed) less all liabilities and indebtedness other than borrowings. It may
   also borrow up to 5% of its total assets for temporary purposes from any
   person. This use of "leverage" will subject the Fund to greater costs than
   funds that do not borrow for leverage, and may also make the Fund's share
   price more sensitive to interest rate changes. The interest in borrowed money
   is an expense that might reduce the Fund's yield.


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


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

Inverse Floaters Have Special Risks. Variable rate bonds known as "inverse
   floaters" pay interest at rates that 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 will not invest more than 20% of its total assets in inverse
   floaters.

HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance, and the prices of its shares.
Particular investments and investment strategies also entail risks. This means
that you can lose money by investing in the Fund. When you redeem your shares,
they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objective. The value of the
Fund's investments 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 or the income they pay 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 prices per
share. The Fund's derivative investments have additional risks that can have
fluctuations in the Fund's share prices. In the OppenheimerFunds spectrum, the
Fund is more conservative than some types of taxable bond funds, such as high
yield bond funds, but has greater risks than money market funds.


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





The Fund's Past Performance

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


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


                                   (BAR CHART)
                        [see appendix to the prospectus]


Sales charges and taxes are not included in the calculations of return in this
bar chart, and if those charges and taxes were included, the returns may be less
than those shown.
For the period from 1/1/02 through 9/30/02, the cumulative return for Class A
shares before taxes was 8.28%. During the period shown in the bar chart, the
highest return (not annualized) before taxes for a calendar quarter was 8.58%
(1st Qtr `95) and the lowest return (not annualized) before taxes for a calendar
quarter was -6.51% (1st Qtr `94).


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

Average Annual Total Returns                                       10 Years
for the periods ended                                             (or life of
December 31, 2001                  1 Year          5 Years      class, if less)

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

Class A Shares (inception
10/27/76)                          -2.51%           2.99%            4.99%
  Return Before Taxes              -2.51%           2.97%            4.87%
  Return After Taxes on             0.50%           3.44%            5.06%
  Distributions
  Return After Taxes on
  Distributions and Sale of
  Fund Shares

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

Lehman Brothers Municipal
Bond Index  (reflects no
deduction for fees, expenses
or taxes)                           5.13%           5.98%           6.63%1

--------------------------------------------------------------------------------
Class B Shares (inception          -3.17%           -2.88%           4.16%
3/16/93)
--------------------------------------------------------------------------------
Class C Shares (inception           0.72%           3.21%            4.11%
8/29/95)
--------------------------------------------------------------------------------


from 12/31/91
The Fund's average annual total returns 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% (5-years);
and for Class C, the 1% contingent deferred sales charge for the 1-year period.
Because Class B shares convert to Class A shares 72 months after purchase, Class
B "life-of-class" performance does not include the contingent deferred sales
charge and uses Class A performance for the period after conversion. The returns
measure the performance of a hypothetical account and assume that all dividends
and capital gains distributions have been reinvested in additional shares. The
performance of the Fund's Class A shares is compared to the Lehman Brothers
Municipal Bond Index, an unmanaged index of a broad range of investment grade
municipal bonds. The index performance reflects investment of income but does
not consider transaction costs or taxes. The Fund's investments will vary from
the securities in the index.


Fees and Expenses of the Fund


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 Fund pays a variety of
expenses directly for management of its assets, administration, distribution of
its shares and other services. Those expenses are subtracted from the Fund's
assets to calculate the Fund's net asset values per share. All shareholders
therefore pay those expenses indirectly. Shareholders pay other transaction
expenses directly, such as sales charges. The numbers below are based on the
Fund's expenses during its fiscal year ended July 31, 2002.


Shareholder Fees (charges paid directly from your investment):

-------------------------------------------------------------------------------
                                  Class A Shares    Class B    Class C Shares
                                                    Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Maximum Sales Charge (Load) on        4.75%          None           None
Purchases (as a % of offering
price)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Maximum Deferred Sales Charge
(Load)                                None1           5%2            1%3
(as % of the lower of the
original offering
price or redemption proceeds)
-------------------------------------------------------------------------------

1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more of Class A shares. See "How to Buy Shares" for details. 2.
Applies to redemptions in first year after purchase. The contingent deferred
sales charge 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 Shares    Class C
                                      Shares                       Shares
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Management Fees                        0.53%         0.53%          0.53%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Distribution and/or Service            0.23%         1.00%          1.00%
(12b-1) Fees
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Other Expenses                         0.12%         0.12%          0.12%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Annual Operating Expenses        0.88%         1.65%          1.65%
------------------------------------------------------------------------------


Expenses may vary in future years. "Other Expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays. The "Other
Expenses" in the table are based on, among other things, the fees the Fund would
have paid if the transfer agent had not waived a portion of its fee under a
voluntary undertaking to the Fund to limit these fees to 0.35% of average daily
net assets per fiscal year for all classes. That undertaking may be amended or
withdrawn at any time. For the Fund's fiscal year ended July 31, 2002, the
transfer agent fees did not exceed the expense limitation described above.
Effective January 1, 2002, the Manager voluntarily agreed to waive advisory fees
at an annual rate equal to 0.05% of the Fund's average daily net assets until
the Fund's trailing one year performance percentile at the end of the preceding
quarter is in the third quintile or better of the Fund's Lipper peer group.
After the voluntary waiver of a portion of the management fee, the actual
management fee paid by the Fund during its last fiscal year was 0.50% of average
daily net assets for all share classes. The foregoing waiver is voluntary and
may be terminated by the Manager at any time.


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

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

-------------------------------------------------------------------------------
If shares are redeemed:           1 year      3 years    5 years    10 years
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Shares                     $561        $742        $939      $1,508
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Shares                     $668        $820       $1,097     $1,5601
-------------------------------------------------------------------------------
Class C Shares                     $268        $520        $897      $1,955
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
If shares are not redeemed:       1 year      3 years    5 years    10 years
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Shares                     $561        $742        $939      $1,508
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Shares                     $168        $520        $897      $1,5601
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Shares                     $168        $520        $897      $1,955
-------------------------------------------------------------------------------

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.
1. 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 allocation of the Fund's portfolio
among different types of investments will vary over time based upon the
Manager's evaluation of economic and market trends. Under normal market
conditions, the Fund attempts to invest 100% of its assets in municipal
securities. As a fundamental policy, the Fund invests at least 80% of its net
assets (plus borrowing for investment purposes) in municipal securities.
Securities that generate income subject to alternative minimum tax (AMT) will
count towards the 80% municipal securities requirement. The Fund's portfolio
might not always include all of the different types of investments described
below.


      The Manager tries to reduce risks by carefully researching securities
before they are purchased. The Fund attempts to reduce its exposure to market
risks by diversifying its investments, that is, by not holding a substantial
amount of securities of any one issuer and by not investing too great a
percentage of the Fund's assets in any one issuer. 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. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.

MUNICIPAL SECURITIES. The Fund buys municipal bonds and notes, tax-exempt
commercial paper, certificates of participation in municipal leases, and other
debt obligations. These debt obligations are issued by state governments, as
well as their political subdivisions (such as cities, towns and counties), and
their agencies and authorities. The Fund can also buy securities issued by the
District of Columbia, 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).

     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 can buy both long-term and
short-term municipal securities. Long-term securities have a maturity of more
than one year. The Fund currently focuses on longer-term securities with
maturities between 5 and 30 years when issued, to seek higher income.


     The Fund can buy municipal securities that are "general obligations,"
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Some debt securities, such as zero coupon
securities may be subject to calls by the issuer to redeem the debt or to
prepayment prior to their stated maturity. The Fund can also buy "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. Some
of these revenue obligations are private activity bonds that pay interest that
may be a tax preference for investors subject to alternative minimum tax.


o Municipal Lease Obligations. Municipal leases are used by state and local
governments to obtain funds to acquire land, equipment or facilities. The Fund
can invest in certificates of participation that represent a proportionate
interest in payments made under municipal lease obligations. Most municipal
leases, while secured by the leased property, are not general obligations of the
issuing municipality. They often contain "non-appropriation" clauses under which
the municipal government has no obligation to make lease or installment payments
in future years unless money is appropriated on a yearly basis. If the
government stops making payments or transfers its payment obligations to a
private entity, the obligation could lose value or become taxable. Some lease
obligations might not have an active trading market, making it difficult for the
Fund to sell them quickly at an acceptable price.


Ratings of Municipal Securities the Fund Buys. Most of the municipal securities
   the Fund buys are "investment grade" at the time of purchase. The Fund does
   not invest more than 25% of its total assets in municipal securities that at
   the time of purchase are not "investment-grade." The Fund can invest in
   securities rated as low as "C" or "D" or which may be in default at the time
   the Fund buys them. While securities rated "Baa" by Moody's or "BBB" by
   Standard & Poor's are considered "investment grade," they have some
   speculative characteristics. "Investment grade" securities are those rated
   within the four highest rating categories of Moody's, Standard & Poor's or
   Fitch or another nationally recognized rating organization, or (if unrated)
   are judged by the Manager to be comparable to rated investment grade
   securities. Rating categories are described in the Statement of Additional
   Information. A reduction in the rating of a security after the Fund buys it
   will not automatically require the Fund to dispose of that security. However,
   the Manager will evaluate those securities to determine whether to keep them
   in the Fund's portfolio.

   The Manager 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.

CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental policies without shareholder approval,
although significant changes will be described in amendments to this Prospectus.
Fundamental policies cannot be changed without the approval of a majority of the
Fund's outstanding voting shares. The Fund's investment objective is a
fundamental policy. Other investment restrictions that are fundamental policies
are listed in the Statement of Additional Information. An investment policy or
technique is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.


OTHER INVESTMENT STRATEGIES. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques involve risks although some are designed to
help reduce overall investment risks.

Floating Rate/Variable Rate Obligations. Some municipal securities have variable
   or floating interest rates. Variable rates are adjustable at stated periodic
   intervals. Floating rates are automatically adjusted 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.


         Variable rate bonds known as "inverse floaters" pay interest at rates
     that 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.

Other Derivatives. The Fund can invest in derivative securities that pay
   interest that depends on the change in value of an underlying asset, interest
   rate or index. Options and futures (discussed below) are also examples of
   derivatives. The Fund may use derivatives to seek increased returns or to try
   to hedge investment risks. Examples of external pricing mechanisms are
   interest rate swaps, municipal bond indices or swap indices.

Puts and Stand-By Commitments. The Fund can acquire "stand-by commitments" or
   "puts" with respect to municipal securities. The Fund obtains 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 acquires stand-by commitments or puts solely
   to enhance portfolio liquidity.
"When-Issued" and "Delayed Delivery" Transactions. The Fund can purchase
   municipal securities on a "when-issued" basis and can purchase or sell such
   securities on a "delayed delivery" basis. Between the purchase and
   settlement, no payment is made for the security and no interest accrues to
   the buyer from the investment. There is a risk of loss to the Fund if the
   value of the security declines prior to the settlement date.
Borrowing for Investment Leverage. The Fund can borrow money to purchase
   additional securities, a technique referred to as "leverage." As a
   fundamental policy, the Fund's borrowing for investment purposes must be from
   banks and is limited to not more than 33 1/3% of the Fund's total assets. The
   interest on borrowed money is an expense that might reduce the Fund's yield.
Illiquid Securities. Investments may be illiquid because they do not have an
   active trading market, making it difficult to value them or dispose of them
   promptly at an acceptable price. The Fund will not invest more than 10% of
   its net assets in illiquid securities. 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.
Hedging. The Fund can buy and sell futures contracts, put and call options, or
   enter into interest rate swap agreements. These are all referred to as
   "hedging instruments." The Fund does not use hedging instruments for
   speculative purposes, and has limits on the use of them. The Fund does not
   use hedging instruments to a substantial degree and is not required to use
   them in seeking its objective. Hedging involves risks. If the Manager uses a
   hedging instrument at the wrong time or judges market conditions incorrectly,
   the hedge might fail and the strategy could reduce the Fund's returns. The
   Fund could also experience losses if the prices of its futures and options
   positions were not correlated with its other investments or if it could not
   close out a position because of an illiquid market for the future or option.

Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
   its objective. While portfolio turnover can affect transaction costs the Fund
   pays, in most cases the Fund does not pay brokerage commissions on debt
   securities it buys. If the Fund realizes capital gains when it sells its
   portfolio investments, it generally must pay those gains out to shareholders,
   increasing their taxable distributions. The Financial Highlights table at the
   end of this Prospectus shows the Fund's portfolio turnover rates during
   recent prior fiscal years.

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





How the Fund is Managed


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

     The Manager has been an investment advisor since 1960. The Manager and its
subsidiaries and affiliates managed more than $120 billion in assets as of
September 30, 2002, including other Oppenheimer funds, with more than 7 million
shareholder accounts. The Manager is located at 498 Seventh Avenue, New York, NY
10018.

Portfolio Manager.  Since July 1, 2002, the Fund has been managed by a portfolio
   management team comprised of Ronald Fielding and other investment professionals
   selected from the Manager's Rochester Division.  This portfolio management team
   is primarily responsible for the day-to-day management of the Fund's portfolio.
   Mr. Fielding is a Senior Vice President of the Manager (since January 1996). Mr.
   Fielding serves in a similar capacity for other Oppenheimer funds.

Advisory Fees. Under the investment advisory agreement, the Fund pays the
     Manager an advisory fee at an annual rate which declines as the Fund's
     assets grow: 0.60% of the first $200 million of average annual net assets,
     0.55% of the next $100 million, 0.50% of the next $200 million, 0.45% of
     the next $250 million, 0.40% of the next $250 million, and 0.35% of average
     annual net assets over $1 billion. The Fund's management fee for its last
     fiscal year ended July 31, 2002, was 0.53% of average annual net assets for
     each class of shares prior to giving effect to the manager's voluntary
     waiver of management fees. The Manager has voluntarily agreed to waive
     advisory fees at an annual rate equal to 0.05% of the Fund's average daily
     net assets until the Fund's trailing one-year performance percentile at the
     end of the preceding calendar quarter is in the third quintile or better of
     the Lipper general municipal bond fund peer group.
   That waiver is voluntary and may be terminated by the Manager at any time.


ABOUT YOUR ACCOUNT

How to Buy Shares


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

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

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, we recommend that you discuss your
   investment with a financial advisor before you make a purchase to be sure
   that the Fund is appropriate for you.
   o  Paying 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
      1.800.225.5677 to notify the Distributor of the wire and to receive
      further instructions.
   o  Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
      pay for shares by electronic funds transfers from your bank account.
      Shares are purchased for your account by a transfer of money from your
      bank account through the Automated Clearing House (ACH) system. You can
      provide 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.

   o  Buying Shares Through Asset Builder Plans. You may purchase shares of the
      Fund 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.


WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
   By using an Asset Builder Plan or Automatic Exchange Plan (details are in the
      Statement of Additional Information), or government allotment plan, you
      can make subsequent investments (after making the initial investment of
      $500) for as little as $50. For any type of account established under one
      of these plans prior to November 1, 2002, the minimum additional
      investment will remain $25.

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

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

NetAsset Value. The Fund calculates the net asset value of each class of shares
   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., Eastern time, but may close
   earlier on some days. All references to time in this Prospectus mean "Eastern
   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.

   If, after the close of the principal market on which a security held by the
   Fund is traded, and before the time the Fund's securities are priced that
   day, an event occurs that the Manager deems likely to cause a material change
   in the value of such security, the Fund's Board of Trustees has authorized
   the Manager, subject to the Board's review, to ascertain a fair value for
   such security. A security's valuation may differ depending on the method used
   for determining value.

TheOffering Price. 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 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, the order will
   receive the next offering price that is determined after your order is
   received.

Buying Through a Dealer. If you buy shares through 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, unless your dealer has made alternative arrangements with the
   Distributor. Otherwise, the order will receive the next offering price that
   is determined.


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

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

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

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

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

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

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


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

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


HowLong Do You Expect to Hold Your Investment? While future financial needs
   cannot be predicted with certainty, knowing how long you expect to hold your
   investment will assist you in selecting the appropriate class of shares.
   Because of the effect of class-based expenses, your choice will also depend
   on how much you plan to invest. For example, the reduced sales charges
   available for larger purchases of Class A shares may, over time, offset the
   effect of paying an initial sales charge on your investment, compared to the
   effect over time of higher class-based expenses on shares of Class B or Class
   C.
   o  Investing for the Shorter Term. While the Fund is meant to be a long-term
      investment, if you have a relatively short-term investment horizon (that
      is, you plan to hold your shares for not more than six years), you should
      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.
   o  Investing for the Longer Term. If you are investing less than $100,000 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
      appropriate.

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


   Additionally, the dividends payable to Class B and Class C shareholders will
   be reduced by the additional expenses borne by those classes that are not
   borne by Class A shares, such as the Class B and Class C asset-based sales
   charge described below and in the Statement of Additional Information. Share
   certificates are only available for Class A shares, and if you are
   considering using your shares as collateral for a loan, that may be a factor
   to consider. Also, checkwriting is not available on accounts subject to a
   contingent deferred sales charge.


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


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


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

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












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

Amount of Purchase              Front-End Sales Front-End Sales  Concession As
                                            a     Charge As a    Percentage of
                                  Charge As of   Percentage of     Offering
                                 Percentageice        Net            Price
                                Offering Pr     Amount Invested

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

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


-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$50,000 or more but less than        4.50%           4.71%           4.00%
$100,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$100,000 or more but less than       3.50%           3.63%           3.00%
$250,000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
$250,000 or more but less than       2.50%           2.56%           2.25%
$500,000
-------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $500,000 or more but          2.00%             2.04%             1.80%
 less than $1 million
 ------------------------------------------------------------------------------

CanYou Reduce Class A Sales Charges? 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.

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

   If you redeem any of those shares within an 18 month "holding period"
   measured from the beginning of the calendar month of their purchase, a
   contingent deferred sales charge (called the "Class A contingent deferred
   sales charge") may be deducted from the redemption proceeds. That sales
   charge will be equal to 1.0% of the lesser of:


o     the aggregate net asset value of the redeemed shares at the time of redemption
      (excluding shares purchased by reinvestment of dividends or capital gain
      distributions) or
o     the original net asset value of the redeemed shares.

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

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

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

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

 Years Since Beginning of Month in    Contingent Deferred Sales Charge on
 Which Purchase Order was Accepted    Redemptions in That Year
                                      (As % of Amount Subject to Charge)

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

 0 - 1                                5.0%

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

1 - 2                                   4.0%

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

2 - 3                                   3.0%

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

3 - 4                                   3.0%

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

4 - 5                                   2.0%

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

5 - 6                                   1.0%

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

More than 6                             None

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

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


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

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

DISTRIBUTION AND SERVICE (12b-1) PLANS.

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


Distribution and Service Plans for Class B and Class C Shares. The Fund has
   adopted Distribution and Service Plans for Class B and Class C shares to pay
   the Distributor for its services and costs in distributing Class B and Class
   C shares and servicing accounts. Under the plans, the Fund pays the
   Distributor an annual asset-based sales charge of 0.75% per year on Class B
   shares and on Class C shares. The Distributor also receives a service fee of
   up to 0.25% per year under each plan.

   The asset-based sales charge and service fees increase Class B and Class C
   expenses by 1.00% of the net assets per year of the respective 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 are 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 a sales concession 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 sale of Class B shares is therefore
   4.00% of the purchase price. The Distributor retains the Class B asset-based
   sales charge. See the Statement of Additional Information for exceptions.


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

Special Investor Services

ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
   o  transmit funds electronically to purchase shares by telephone (through a
      service representative or by PhoneLink) or automatically under Asset
      Builder Plans, or
   o  have the Transfer Agent send redemption proceeds or transmit dividends and
      distributions directly to your bank account. Please call the Transfer
      Agent for more information.

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


     AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions and proper documentation to the Transfer
Agent. AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer representative of record
unless and until the Transfer Agent receives written instructions terminating or
changing those privileges. After you establish AccountLink for your account, any
change 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
PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
   by calling 1.800.225.5677. You must have established AccountLink privileges
   to link your bank account with the Fund to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
   below, you can exchange shares automatically by phone from your Fund account
   to another OppenheimerFunds account you have already established by calling
   the special PhoneLink number.

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

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


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


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

REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to six 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 in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter, by wire, by using the Fund's checkwriting
privilege, or by telephone. You can also set up Automatic Withdrawal Plans to
redeem shares on a regular basis. If you have questions about any of these
procedures, and especially if you are redeeming shares in a special situation,
such as due to the death of the owner, please call the Transfer Agent first, at
1.800.225.5677, for assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund from
   fraud, the following redemption requests must be in writing and must include
   a signature guarantee (although there may be other situations that also
   require a signature guarantee):
   o You wish to redeem more than $100,000 and receive a check o The redemption
   check is not payable to all shareholders listed on the account
      statement
   o  The redemption check is not sent to the address of record on your account
      statement
   o Shares are being transferred to a Fund account with a different owner or
   name o Shares are being redeemed by someone (such as an Executor) other than
   the
      owners

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
   guarantee of your signature by a number of financial institutions, including:
   o  a U.S. bank, trust company, credit union or savings association,
   o  a foreign bank that has a U.S. correspondent bank,
   o  a U.S. registered dealer or broker in securities, municipal securities or
      government securities, or
   o  a U.S. national securities exchange, a registered securities association or a
      clearing agency.

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

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

Checkwriting. To write checks against your Fund account, request that privilege
on your account application, or contact the Transfer Agent for signature cards.
They must be signed (with a signature guarantee) by all owners of the account
and returned to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.225.5677
to request checkwriting for an account in this Fund with the same registration
as the other account.
o     Checks can be written to the order of whomever you wish, but may not be
      cashed at the bank the checks are payable through or the Fund's custodian
      bank.
o     Checkwriting privileges are not available for accounts holding shares that
      are subject to a contingent deferred sales charge.

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

o     Checks cannot be paid if they are written for more than your account
      value. Remember, your shares fluctuate in value and you should not write a
      check close to the total account value.
o     You may not write a check that would require the Fund to redeem shares
      that were purchased by check or Asset Builder Plan payments within the
      prior 10 days.
o     Don't use your checks if you changed your Fund account number, until you
      receive new checks.


HOWDO YOU SELL SHARES BY MAIL? Write a "letter of instruction" that includes: o
   Your name o The Fund's name o Your Fund account number (from your account
   statement) o The dollar amount or number of shares to be redeemed o Any
   special payment instructions o Any share certificates for the shares you are
   selling o The signatures of all registered owners exactly as the account is
   registered,

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

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

HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The 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 under a share certificate by telephone.
   o  To redeem shares through a service representative or automatically on
      PhoneLink, call 1.800.225.5677. Whichever method you use, you may have a
      check sent to the address on the account
statement, or, if you have linked your Fund account to your bank account on
     AccountLink, you may
have the proceeds sent to that bank  account.

Are There Limits on Amounts Redeemed by Telephone?

Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
   in any seven-day period. The check must be payable to all owners of record of
   the shares and must be sent to the address on the account statement. This
   service is not available within 30 days of changing the address on an
   account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
   on telephone redemption proceeds sent to a bank account designated when you
   establish AccountLink. Normally the ACH transfer to your bank is initiated on
   the business day after the redemption. You do not receive dividends on the
   proceeds of the shares you redeemed while they are waiting to be transferred.

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

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

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

      A contingent deferred sales charge will be based on the lesser of the net
asset value of the redeemed shares at the time of redemption or the original net
asset value. A contingent deferred sales charge is not imposed on:
   o  the amount of your account value represented by an increase in net asset value
      over the initial purchase price,
   o  shares purchased by the reinvestment of dividends or capital gains
      distributions, or
   o  shares redeemed in the special circumstances described in Appendix C to
      the Statement of Additional Information.

      To determine whether a contingent deferred sales charge applies to a
 redemption, the Fund redeems shares in the following order:
   1. shares acquired by reinvestment of dividends and capital gains
   distributions, 2. shares held for the holding period that applies to the
   class, and 3. shares held the longest during the holding period.

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

How to Exchange Shares

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. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
   o  Shares of the fund selected for exchange must be available for sale in
      your state of residence.
   o The prospectuses of both funds must offer the exchange privilege. o You
   must hold the shares you buy when you establish your account for at least
      seven days before you can exchange them. After the account is open seven
      days, you can exchange shares every regular business day.
   o  You must meet the minimum purchase requirements for the fund whose shares
      you purchase by exchange.
   o Before exchanging into a fund, you must 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.


     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 1.800.225.5677. That list can change from time to time.

HOW DO YOU SUBMIT EXCHANGE REQUESTS?  Exchanges may be requested in writing or by
telephone:
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. Exchanges of shares held under certificates cannot be
   processed unless the Transfer Agent receives the certificates with the
   request.

Telephone Exchange Requests. Telephone exchange requests may be made either by
   calling a service representative or by using PhoneLink for automated
   exchanges by calling 1.800.225.5677. 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.


ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
   o  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 conforms to the
      policies described above. 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.
   o  The interests of the Fund's long-term shareholders and its ability to
      manage its investments may be adversely affected when its shares are
      repeatedly bought and sold in response to short-term market
      fluctuations--also known as "market timing." When large dollar amounts are
      involved, the Fund may have difficulty implementing long-term investment
      strategies, because it cannot predict how much cash it will have to
      invest. Market timing also may force the Fund to sell portfolio securities
      at disadvantageous times to raise the cash needed to buy a market timer's
      Fund shares. These factors may hurt the Fund's performance and its
      shareholders. When the Manager believes frequent trading would have a
      disruptive effect on the Fund's ability to manage its investments, the
      Manager and the Fund may reject purchase orders and exchanges into the
      Fund by any person, group or account that the Manager believes to be a
      market timer.
   o  The Fund may amend, suspend or terminate the exchange privilege at any
      time. The Fund will provide you notice whenever it is required to do so by
      applicable law, but it may impose changes at any time for emergency
      purposes.
   o  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

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


A  $12 annual fee is assessed on any account valued at less than $500. The fee
   is automatically deducted from accounts annually on or about the second to
   last business day of September. See the Statement of Additional Information,
   or visit the OppenheimerFunds website, to learn how you can avoid this fee
   and for circumstances when this fee will not be assessed.
Theoffering of shares may be suspended during any period in which the
   determination of net asset value is suspended, and the offering may be
   suspended by the Board of Trustees at any time the Board believes it is in
   the Fund's best interest to do so.

Telephone transaction privileges for purchases, redemptions or exchanges may be
   modified, suspended or terminated by the Fund at any time. The Fund will
   provide you notice whenever it is required to do so by applicable law. If an
   account has more than one owner, the Fund and the Transfer Agent may rely on
   the instructions of any one owner. Telephone privileges apply to each owner
   of the account and the dealer representative of record for the account unless
   the Transfer Agent receives cancellation instructions from an owner of the
   account.
TheTransfer Agent will record any telephone calls to verify data concerning
   transactions and has adopted other procedures to confirm that telephone
   instructions are genuine, by requiring callers to provide tax identification
   numbers and other account data or by using PINs, and by confirming such
   transactions in writing. The Transfer Agent and the Fund will not be liable
   for losses or expenses arising out of telephone instructions reasonably
   believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
   receives all required documents in proper form. From time to time, the
   Transfer Agent in its discretion may waive certain of the requirements for
   redemptions stated in this Prospectus.

Dealers that perform account transactions for their clients by participating in
   NETWORKING through the National Securities Clearing Corporation are
   responsible for obtaining their clients' permission to perform those
   transactions, and are responsible to their clients who are shareholders of
   the Fund if the dealer performs any transaction erroneously or improperly.
Theredemption price for shares will vary from day to day because the value of
   the securities in the Fund's portfolio fluctuates. The redemption price,
   which is the net asset value per share, will normally differ for each class
   of shares. The redemption value of your shares may be more or less than their
   original cost.

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

TheTransfer Agent may delay processing any type of redemption payment as
   described under "How to Sell Shares" for recently purchased shares, but only
   until the purchase payment has cleared. That delay may be as much as 10 days
   from the date the shares were purchased. That delay may be avoided if you
   purchase shares by Federal Funds wire or certified check, or arrange with
   your bank to provide telephone or written assurance to the Transfer Agent
   that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
   value has fallen below $200 for reasons other than the fact that the market
   value of shares has dropped. In some cases, involuntary redemptions may be
   made to repay the Distributor for losses from the cancellation of share
   purchase orders.
Shares may be "redeemed in kind" under unusual circumstances (such as a lack of
   liquidity in the Fund's portfolio to meet redemptions). This means that the
   redemption proceeds will be paid with liquid securities from the Fund's
   portfolio.
"Backup withholding" of federal income tax may be applied against taxable
   dividends, distributions and redemption proceeds (including exchanges) if you
   fail to furnish the Fund your correct, certified Social Security or Employer
   Identification Number when you sign your application, or if you under-report
   your income to the Internal Revenue Service.

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

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

Dividends, Capital Gains and Taxes

DIVIDENDS. The Fund intends to declare dividends separately for each class of
shares from net tax-exempt income and/or net taxable investment income each
regular business day and to pay those dividends 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 any other
distributions paid on Class B and Class 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 other 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 other distributions.

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

WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
   and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
   distributions (dividends, short-term capital gains or long-term capital gains
   distributions) in the Fund while receiving the other types of distributions
   by check or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
   dividends and capital gains distributions or have them sent to your bank
   through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
   reinvest all distributions in the same class of shares of another
   OppenheimerFunds account you have established.


TAXES. Dividends paid from net investment income earned by the Fund on municipal
securities will be excludable from gross income for federal income tax purposes.
A portion of a dividend that is derived from interest paid on certain "private
activity bonds" may be an item of tax preference subject to alternative minimum
taxation 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 distribution may be subject to federal, state
or local taxes. Any short-term capital gain distributions are taxable to you as
ordinary income. Any long-term capital gain distributions are taxable to you as
long-term capital gains, no matter how long you have owned shares in the Fund.
The Fund may derive gains in part from municipal obligations the Fund purchased
below their principal or face values. All, or a portion, of these gains may be
taxable to you as ordinary income rather than capital gains. Whether you
reinvest your distributions in additional shares or take them in cash, the tax
treatment is the same.

     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. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
calendar year.

Remember There May be Taxes on Transactions. Because the Fund's share price
   fluctuates, you may have a capital gain or loss when you sell or exchange
   your shares. A capital gain or loss is the difference between the price you
   paid for the shares and the price you received when you sold them. Any
   capital gain is subject to capital gains tax.

Returns of Capital Can Occur. In certain cases, distributions made by the Fund
   may be considered a non-taxable return of capital to shareholders. If that
   occurs, it will be identified in notices to shareholders.

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

Financial Highlights


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


FINANCIAL HIGHLIGHTS


 CLASS A   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.57     $9.35    $10.02    $10.27    $10.24
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .50       .52       .52       .52       .51
 Net realized and unrealized gain (loss)                           (.10)      .22      (.61)     (.25)      .04
                                                                  -------------------------------------------------
 Total from investment operations                                   .40       .74      (.09)      .27       .55
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.49)     (.52)     (.52)     (.52)     (.52)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                  -------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.49)     (.52)     (.58)     (.52)     (.52)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.48     $9.57    $ 9.35    $10.02    $10.27
                                                                  =================================================
===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               4.39%     8.03%    (0.85)%    2.57%     5.55%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                      $568,935  $584,325  $482,152  $568,673  $579,570
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                             $568,951  $531,286  $515,007  $587,197  $581,630
-------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                                             5.35%     5.38%     5.54%     5.00%     5.00%
 Expenses                                                          0.88%     0.85%     0.90%     0.87%     0.87%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            0.85%     0.85%     0.90%     0.87%     0.87%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



24 OPPENHEIMER MUNICIPAL BOND FUND




 CLASS B   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.55     $9.33    $10.00    $10.25    $10.22
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .43       .45       .43       .44       .43
 Net realized and unrealized gain (loss)                           (.11)      .21      (.60)     (.25)      .04
                                                                ---------------------------------------------------
 Total from investment operations                                   .32       .66      (.17)      .19       .47
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.42)     (.44)     (.44)     (.44)     (.44)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                ---------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.42)     (.44)     (.50)     (.44)     (.44)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.45     $9.55     $9.33    $10.00    $10.25
                                                                ===================================================


===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               3.50%     7.23%   (1.62)%     1.78%     4.75%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                       $72,241   $76,880   $57,204   $90,022   $91,677
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $73,571   $65,563   $70,072   $96,352   $88,531
-------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                                             4.58%     4.60%     4.75%     4.22%     4.21%
 Expenses                                                          1.65%     1.62%     1.67%     1.65%     1.65%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            1.62%     1.62%     1.67%     1.65%     1.65%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



25 OPPENHEIMER MUNICIPAL BOND FUND




FINANCIAL HIGHLIGHTS  CONTINUED



 CLASS C   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.55     $9.33    $10.00    $10.25    $10.22
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .43       .44       .44       .44       .43
 Net realized and unrealized gain (loss)                           (.11)      .22      (.61)     (.25)      .04
                                                                ---------------------------------------------------
 Total from investment operations                                   .32       .66      (.17)      .19       .47
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.42)     (.44)     (.44)     (.44)     (.44)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                ---------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.42)     (.44)     (.50)     (.44)     (.44)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.45     $9.55     $9.33    $10.00    $10.25
                                                                ===================================================

===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               3.50%     7.23%    (1.62)%    1.78%     4.75%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                       $20,491   $17,134   $12,173   $18,621   $12,857
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $17,776   $14,506   $14,497   $16,868   $10,655
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
 Net investment income                                             4.57%     4.60%     4.76%     4.22%     4.30%
 Expenses                                                          1.65%     1.62%     1.67%     1.65%     1.64%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            1.62%     1.62%     1.67%     1.65%     1.64%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.





INFORMATION AND SERVICES

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

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

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

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

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

By Telephone:                    Call OppenheimerFunds Services toll-free:
                                 1.800.CALL.OPP (225.5677)

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
By Mail:                         Write to:
                                 OppenheimerFunds Services
                                 P.O. Box 5270
                                 Denver, Colorado 80217-5270
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

On the Internet:                 You can send us a request by e-mail or
                                 read or download documents on
                                 the OppenheimerFunds website:
                                 WWW.OPPENHEIMERFUNDS.COM

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


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


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

The Fund's SEC File No. 811-2668          The Fund's shares are distributed by:
PR0310.001.1102.                    [logo] Oppenheimer Funds Distributors, Inc.
Printed on recycled paper.







                            Appendix to Prospectus of
                         Oppenheimer Municipal Bond Fund

      Graphic Material included in the Prospectus of Oppenheimer Municipal Bond
Fund: "Annual Total Returns (Class A) (% as of 7/31 each year)":

      A bar chart will be included in the Prospectus of Oppenheimer Municipal
Bond Fund (the "Fund") depicting the annual total returns of a hypothetical
investment in Class A shares of the Fund for each of the last ten calendar
years, without deducting sales charges. 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
                  -----             --------------
                  12/31/01               2.35%
                  12/31/00               7.98%
                  12/31/99              -5.09%
                  12/31/98               6.05%
                  12/31/97               9.38%
                  12/31/96               5.17%
                  12/31/95              18.28%
                  12/31/94              -9.19%
                  12/31/93              13.79%
                   12/31/92               9.20%




Oppenheimer Municipal Bond Fund

6803 South Tucson Way, Centennial, Colorado 80112

1.800.225.5677


Statement of Additional Information dated November 27, 2002


     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 27, 2002. 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.


Contents
                                                                         Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks...  2
    The Fund's Investment Policies......................................  2
    Other Investment Techniques and Strategies..........................  7
    Investment Restrictions.............................................  19

How the Fund is Managed ................................................  21
    Organization and History............................................  21
    Board of Trustees and Oversight Committees..........................  23
    Trustees and Officers of the Fund...................................  23
    The Manager.........................................................  32
Brokerage Policies of the Fund..........................................  35
Distribution and Service Plans..........................................  36
Performance of the Fund.................................................  40


About Your Account

How To Buy Shares.......................................................  47
How To Sell Shares......................................................  55
How to Exchange Shares..................................................  59
Dividends, Capital Gains and Taxes......................................  63
Additional Information About the Fund...................................  68


Financial Information About the Fund

Independent Auditors' Report............................................  69
Financial Statements ...................................................  70


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






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks


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


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


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


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

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


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


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


            |_| Revenue Bonds. The principal security for a revenue bond is
generally the net revenues derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise tax or other
specific revenue source. 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 governments, the proceeds of which are
used to finance the operations of such governments, continues to be tax-exempt.
However, the Tax Reform Act limited the use of tax-exempt bonds for
non-governmental (private) purposes. More stringent restrictions were placed on
the use of proceeds of such bonds. Interest on certain private activity bonds is
taxable under the revised rules. There is an exception for "qualified"
tax-exempt private activity bonds, for example, exempt facility bonds including
certain industrial development bonds, qualified mortgage bonds, qualified
Section 501(c)(3) bonds, and qualified student loan bonds.

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

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

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


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


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


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

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

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


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

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

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

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

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

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

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


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

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

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

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


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

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


         |_| Special Risks of Lower-Grade Securities. 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.


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.

     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%.

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


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

     Floating rate and variable rate demand notes that have a stated maturity in
excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon not 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 or decrease the Fund's exposure to changing security
prices, interest rates or other factors that affect the value of securities.
However, these techniques could result in losses to the Fund, if the Manager
judges market conditions incorrectly or employs a strategy that does not
correlate well with the Fund's other investments. These techniques can cause
losses if the counterparty does not perform its promises. An additional risk of
investing in municipal securities that are derivative investments is that their
market value could be expected to vary to a much greater extent than the market
value of municipal securities that are not derivative investments but have
similar credit quality, redemption provisions and maturities.


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

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


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

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

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

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

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

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

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

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


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

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



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


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

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


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

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


     |X| Illiquid Securities. The Fund has percentage limitations that apply to
purchases of illiquid securities, as stated in the Prospectus. 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. The Fund presently does not
intend to engage in loans of securities that will exceed 5% of the value of the
Fund's total assets in the coming year. Income from securities loans does not
constitute exempt-interest income for the purpose of paying tax-exempt
dividends.

     There are risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities.not The Fund must receive collateral
for a loan. Under current applicable regulatory requirements (which are subject
to change), on each business day the loan collateral must be at least equal to
the value of the loaned securities. It must consist of cash, bank letters of
credit, securities of the U.S. government or its agencies or instrumentalities,
or other cash equivalents in which the Fund is permitted to invest. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by the Fund if the demand meets the terms of the letter. The terms of
the letter of credit and the issuing bank both must be satisfactory to the Fund.

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

      |X| Borrowing for Leverage. The Investment Company Act imposes certain
restrictions on the borrowing activities of mutual funds. The restrictions on
borrowing are designed to protect shareholders and their investment in a fund by
limiting a fund's ability to leverage its assets. Leverage exists when a fund
has the right to a return on an investment that exceeds the amount the fund
contributed to the investment. Borrowing money to make an investment is an
example of how a fund leverages its assets. The use of leverage exposes
shareholders and their investments in a fund to a greater risk of loss. For
example, borrowing may cause the value of a fund's shares to be more volatile
than if the fund did not borrow. A fund's borrowing policy must be a fundamental
investment policy. Act,Currently, under the Investment Company Act, a mutual
fundcurrently may borrow only from banks isand the maximum amount it may borrow
is up to one-third of its total assets (including the amount borrowed) less all
liabilities and indebtedness other than borrowing. The Fund may also borrow up
to 5% of its total assets for temporary purposes from any person. Under the
Investment Company Act, there is a rebuttable presumption that a loan is
temporary if it is repaid within 60 days and not extended or renewed.


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

     |X| Hedging. The Fund may use hedging to attempt to protect against
declines in the market value of its portfolio, to permit the Fund to retain
unrealized gains in the value of portfolio securities that have appreciated, or
to facilitate selling securities for investment reasons. To do so the Fund may:
     |_| sell interest rate futures or municipal bond index futures, |_| buy
     puts on such futures or securities, or |_| write covered calls on
     securities, broadly-based municipal bond

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


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


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

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


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


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

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

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


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

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

     |_| 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 whether or not it owns
         them.

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


     The Fund's Custodian, 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 Puts and Calls. The Fund may buy calls only on securities,
broadly-based municipal bond indices, municipal bond index futures and interest
rate futures. It may also buy calls to close out a call it has written, as
discussed above. Calls the Fund buys must be listed on a securities or
commodities exchange, or quoted on NASDAQ, or traded in the over-the-counter
market. A call or put option 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 cash rather than by delivering the underlying
investment. Gain or loss depends on changes in the securities included in the
index in question (and thus on price movements in the debt securities market
generally) rather than on changes in price of the individual futures contract.

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

     Buying a put on an investment the Fund does not own (such as an index or
future) permits the Fund to resell the put or to buy the underlying investment
and sell it at the exercise price. The resale price will vary inversely to the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and, as a result, the put is not
exercised, the put will become worthless on its expiration date.


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

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

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


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


     There is a risk in using short hedging by selling interest rate futures and
municipal bond index futures or purchasing puts on municipal bond indices or
futures to attempt to protect against declines in the value of the Fund's
securities. The risk is that the prices of such futures or the applicable index
will correlate imperfectly with the behavior of the cash (that is, market)
prices of the Fund's securities. It is possible for example, that while the Fund
has used hedging instruments in a short hedge, the market may advance and the
value of debt securities held in the Fund's portfolio 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, and
could experience losses.


     |_| Interest Rate Swap Transactions. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to pay
interest on a security. For example, they may swap a right to receive floating
rate payments for fixed rate payments. The Fund enters into swaps only on
securities it owns. The Fund 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 transactions. An exchange may order the liquidation of positions
found to be in violation of those limits and may impose certain other sanctions.

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


     |X| Temporary Defensive Investments. The securities the Fund may invest in
for temporary defensive purposes include the following:
     |_| short-term municipal securities;
     |_|     obligations  issued or guaranteed  by the U.S.  Government or its
       agencies or instrumentalities;
     |_|     corporate debt  securities  rated within the three highest grades
       by a nationally recognized rating agency;

     |_|     commercial  paper rated "A-1" by S&P, or a  comparable  rating by
       another nationally recognized rating agency; and

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


     |X| Taxable Investments. While the Fund can invest up to 20% of its net
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 the Fund 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 make loans, except to the extent permitted under the
1940 Act, the rules or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statute, rules or regulations may be amended or
interpreted from time to time.

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


     |_| The Fund cannot buy securities or other instruments issued or
guaranteed by any one issuer if more than 5% of its total assets would be
invested in securities or other instruments of that issuer or if it would then
own more than 10% of that issuer's voting securities. This limitation applies to
75% of the Fund's total assets. The limit does not apply to securities issued or
guranteed by the U.S. Government or any of its agencies or instrumentalities or
securities of other investment companies.

     |_| The Fund cannot invest 25% or more of its total assets in any industry.
That limit does not apply to securities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities or securities issued by
investment companies. Nor does that limit apply to municipal securities in
general.


     |_| The Fund cannot invest in real estate, physical commodities or
commodity contracts, except to the extent permitted under the 1940 Act, the
rules or regulations thereunder or any exemption therefrom, as such statute,
rules or regulations may be amended or interpreted from time to time.

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

Does the Fund Have Additional Non-Fundamental Policies?

     |_| The Fund currently has an operating policy (which is not a fundamental
policy but will not be changed without the approval of a shareholder vote) that
prohibits the Fund from issuing senior securities. However, that policy does not
prohibit certain activities that are permitted by the Fund's other policies,
including borrowing, entering into delayed-delivery and when-issued arrangements
for portfolio securities transactions, and entering into contracts to buy or
sell derivatives, hedging instruments, options, futures and the related margin,
collateral or escrow arrangements permitted under its other investment policies.

     |_| The Fund cannot invest more than 10% of its net assets in illiquid or
restricted securities (including repurchase agreements maturing beyond seven (7)
days).


     |_| The Fund cannot invest in securities of other investment companies,
except to the extent permitted under the 1940 Act, the rules or regulations
thereunder or any exemption therefrom, as such statute, rules or regulations may
be amended or interpreted from time to time. The Fund would be permitted under
this policy to invest its assets in the securities of one or more open-end
management investment companies for which the Manager, one of its affiliates or
a successor is the investment advisor or sub-advisor. That fund must have
substantially the same fundamental investment objective, policies and
limitations as the Fund.


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


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


     The Manager has no present intention of investing more than 25% of the
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.

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

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

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

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. 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. Additionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.

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

      The Board of Trustees has an Audit Committee, a Study Committee and a
Proxy Committee. The members of the Audit Committee are Kenneth Randall
(Chairman), Benjamin Lipstein and Edward Regan. The Audit Committee held 5
meetings during the Fund's fiscal year ended July 31, 2002. The Audit Committee
provides the Board with recommendations regarding the selection of the Fund's
independent auditor. The Audit Committee also reviews the scope and results of
audits and the audit fees charged, reviews reports from the Fund's independent
auditor concerning the Fund's internal accounting procedures, and controls and
reviews reports of the Manager's internal auditor, among other duties as set
forth in the Committee's charter.


      The members of the Study Committee are Benjamin Lipstein (Chairman),
Robert Galli and Elizabeth Moynihan. The Study Committee held 8 meetings during
the Fund's fiscal year ended July 31, 2002. The Study Committee evaluates and
reports to the Board on the Fund's contractual arrangements, including the
Investment Advisory and Distribution Agreements, transfer and shareholder
service agreements and custodian agreements as well as the policies and
procedures adopted by the Fund to comply with the Investment Company Act and
other applicable law, among other duties as set forth in the Committee's
charter.

      The members of the Proxy Committee are Edward Regan (Chairman), Russell
Reynolds and Clayton Yeutter. The Proxy Committee held 1 meeting during the
Fund's fiscal year ended July 31, 2002. The Proxy Committee provides the Board
with recommendations for proxy voting and monitors proxy voting by the Fund.


Trustees and Officers of the Fund. Except for Mr. Murphy, each of the
Trustees is an independent trustee of the Fund ("Independent Trustee"). Mr.
Murphy is an "Interested Trustee," because he is affiliated with the Manager
by virtue of his positions as an officer and director of the Manager, and as
a shareholder of its parent company.


      The Fund's Trustees and officers and their positions held with the Fund
and length of service in such position(s) and their principal occupations and
business affiliations during the past five years are listed in the chart below.
The information for the Trustees also includes the dollar range of shares of the
Fund as well as the aggregate dollar range of shares beneficially owned in any
of the Oppenheimer funds overseen by the Trustees. All of the Trustees are also
trustees or directors of the following publicly offered Oppenheimer funds
(referred to as "Board I Funds"):


Oppenheimer California Municipal Fund   Oppenheimer International Growth Fund
                                        Oppenheimer  International  Small Company
Oppenheimer Capital Appreciation Fund   Fund

Oppenheimer Capital Preservation Fund   Oppenheimer Money Market Fund, Inc.
Oppenheimer Developing Markets Fund     Oppenheimer Multiple Strategies Fund
Oppenheimer Discovery Fund              Oppenheimer Multi-Sector Income Trust
Oppenheimer Emerging Growth Fund        Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Technologies Fund  Oppenheimer Municipal Bond Fund
Oppenheimer Enterprise Fund             Oppenheimer New York Municipal Fund
Oppenheimer Europe Fund                 Oppenheimer Series Fund, Inc.
Oppenheimer Global Fund                 Oppenheimer Trinity Core Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer  Gold  &  Special  Minerals
Fund                                    Oppenheimer Trinity Value Fund
Oppenheimer Growth Fund                 Oppenheimer U.S. Government Trust

      In addition to being a trustee or director of the Board I Funds, Mr. Galli
is also a director or trustee of 10 other portfolios in the OppenheimerFunds
complex. Present or former officers, directors, trustees and employees (and
their immediate family members) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees are permitted to
purchase Class A shares of the Fund and the other Oppenheimer funds at net asset
value without sales charge. The sales charges on Class A shares is waived for
that group because of the economies of sales efforts realized by the
Distributor.

      Messrs. Murphy, Masterson, Molleur, Vottiero, Wixted and Zack, and Mses.
Bechtolt, Feld and Ives and respectively hold the same offices with one or more
of the other Board I Funds as with the Fund. As of August 31, 2002, the Trustees
and officers of the Fund, as a group, owned of record or beneficially less than
1% of each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares of the Fund held of record by an employee benefit plan for
employees of the Manager, other than the shares beneficially owned under the
plan by the officers of the Fund listed above. In addition, each Independent
Trustee, and his or her family members, do not own securities of either the
Manager or Distributor of the Board I Funds or any person directly or indirectly
controlling, controlled by or under common control with the Manager or
Distributor.

|X| Affiliated Transactions and Material Business Relationships. Mr. Reynolds
has reported that he has a controlling interest in The Directorship Search
Group, Inc. ("The Directorship Search Group"), a director recruiting firm that
provided consulting services to Massachusetts Mutual Life Insurance Company
(which controls the Manager) for fees aggregating $110,000 from January 1, 2000
through December 31, 2001, an amount representing less than 5% of the annual
revenues of The Directorship Search Group. Mr. Reynolds estimates that The
Directorship Search Group will bill Massachusetts Mutual Life Insurance Company
$150,000 for services to be provided during the calendar year 2002.


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

      The address of each Trustee in the chart below is 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his
or her resignation, retirement, death or removal.

-------------------------------------------------------------------------------------
                                Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

                                                                           Aggregate
                                                                           Dollar
                                                                           Range of
                                                                           Shares
                                                                           Beneficially
Name;             Principal Occupation(s) During Past 5       Dollar       Owned in
Position(s) Held  Years;                                      Range of     any of the
with Fund;        Other Trusteeships/Directorships Held by    Shares       Oppenheimer
Length of         Trustee;                                    Beneficially Funds
Service;          Number of Portfolios in Fund Complex        Owned in     Overseen
Age               Currently Overseen by Trustee               the Fund     by Trustee

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                             As of December 31,
                                                                        2001
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Leon Levy,        General  Partner  (since  1982) of  Odyssey    $0         $0
Chairman of the   Partners,  L.P.  (investment   partnership)
Board of Trustees and  Chairman of the Board  (since 1981) of
Trustee           Avatar   Holdings,    Inc.   (real   estate
Since 1976        development).  Oversees  31  portfolios  in
Age: 77           the OppenheimerFunds complex.

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

Robert G. Galli,  A trustee or director of other  Oppenheimer    $0      Over
Trustee           funds.   Formerly  Vice  Chairman  (October           $100,000
Since 1993        1995-December   1997)   of   the   Manager.
Age: 69           Oversees    41     portfolios     in    the
                  OppenheimerFunds complex.

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

Phillip A.         The   Director   (since   1991)   of   the    $0     Over
Griffiths,         Institute for Advanced  Study,  Princeton,          $100,000
Trustee            N.J.,   director   (since   2001)  of  GSI
Since 1999         Lumonics  and a  member  of  the  National
Age: 64            Academy   of   Sciences    (since   1979);
                   formerly  (in   descending   chronological
                   order)  a  director   of   Bankers   Trust
                   Corporation,   Provost  and  Professor  of
                   Mathematics   at   Duke   University,    a
                   director of Research  Triangle  Institute,
                   Raleigh,   N.C.,   and  a   Professor   of
                   Mathematics    at   Harvard    University.
                   Oversees    31     portfolios    in    the
                   OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Benjamin Lipstein,  Professor  Emeritus of  Marketing,  Stern    $0     Over
Trustee since 1976  Graduate      School     of      Business           $100,000
Age: 79             Administration,   New  York   University.
                    Oversees 31 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Joel W. Motley1,    Director (January 2002-present),             $0      $0
Trustee since 2002  Columbia Equity Financial Corp.
Age: 50             (privately-held financial adviser);
                    Managing Director (January
                    2002-present), Carmona Motley, Inc.
                    (privately-held financial adviser);
                    Formerly he held the following
                    positions: Managing Director (January
                    1998-December 2001), Carmona Motley
                    Hoffman Inc. (privately-held financial
                    adviser); Managing Director (January
                    1992-December 1997), Carmona Motley &
                    Co. (privately-held financial adviser).
                    Oversees 31 portfolios in the
                    OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Elizabeth B.        Author  and  architectural  historian;  a    $0    $50,001-
Moynihan,           trustee  of the Freer  Gallery of Art and          $100,000
Trustee since 1992  Arthur M.  Sackler  Gallery  (Smithsonian
Age: 73             Institute),   Trustees   Council  of  the
                    National Building Museum; a member of the Trustees
                    Council, Preservation League of New York State.
                    Oversees 31 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Kenneth A.        A  director  of  Dominion  Resources,  Inc.   $10,001- Over
Randall, Trustee  (electric   utility  holding  company)  and   $50,000 $100,000
since 1980        Prime Retail,  Inc. (real estate investment
Age: 75           trust);  formerly  a director  of  Dominion
                  Energy,  Inc. (electric power and oil & gas
                  producer),  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.
                  Oversees    31     portfolios     in    the
                  OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward V. Regan,  President,    Baruch   College,   CUNY;   a    $1-$10,000  $50,001-
Trustee since     director of RBAsset (real estate  manager);                $100,000
1993              a director of OffitBank;  formerly Trustee,
Age: 72           Financial  Accounting  Foundation (FASB and
                  GASB),   Senior   Fellow  of  Jerome   Levy
                  Economics    Institute,    Bard    College,
                  Chairman of Municipal Assistance Corporation for the
                  City of New York, New York State Comptroller and Trustee
                  of New York State and Local Retirement
                  Fund. Oversees 31 investment companies in the OppenheimerFunds
                  complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Russell S.          Chairman     (since    1993)    of    The    $0    $10,001-
Reynolds, Jr.,      Directorship     Search    Group,    Inc.          $50,000
Trustee since       (corporate   governance   consulting  and
1989                executive recruiting);  a life trustee of
Age: 70             International      House      (non-profit
                    educational organization),  and a trustee
                    (since 1996) of the Greenwich  Historical
                    Society.  Oversees 31  portfolios  in the
                    OppenheimerFunds complex.

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Donald W. Spiro,
Vice Chairman of    Chairman  Emeritus  (since  January 1991)
the Board of        of  the  Manager.   Formerly  a  director
Trustees,           (January   1969-August   1999)   of   the   $0      Over
Trustee since       Manager.  Oversees 31  portfolios  in the          $100,000
1985                OppenheimerFunds complex.
Age: 76
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Clayton K.          Of Counsel (since 1993),  Hogan & Hartson   $0  $50,001-
Yeutter, Trustee    (a  law   firm).   Other   directorships:          $100,000
since 1991          Caterpillar,   Inc.   (since   1993)  and
Age: 71             Weyerhaeuser  Co. (since 1999).  Oversees
                    31  portfolios  in  the  OppenheimerFunds
                    complex.
-------------------------------------------------------------------------------------





      The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New
York, NY 10018.  Mr. Murphy serves for an indefinite term, until his
resignation, retirement, death or removal.


-------------------------------------------------------------------------------------
                           Interested Trustee and Officer
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

                                                                           Aggregate
                                                                           Dollar
                                                                           Range of
                                                                           Shares
                                                                           Beneficially
Name;             Principal Occupation(s) During Past 5       Dollar       Owned in
Position(s) Held  Years;                                      Range of     any of the
with Fund;        Other Trusteeships/Directorships Held by    Shares       Oppenheimer
Length of         Trustee;                                    Beneficially Funds
Service;          Number of Portfolios in Fund Complex        Owned in     Overseen
Age               Currently Overseen by Trustee               the Fund     by Trustee


-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                             As of December 31,
                                                                       2001
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

John V. Murphy,   Chairman,   Chief  Executive   Officer  and  $0       Over
President and     director  (since  June 2001) and  President          $100,000
Trustee,          (since  September  2000)  of  the  Manager;
Trustee since     President  and a  director  or  trustee  of
October 2001      other  Oppenheimer  funds;  President and a
Age: 53           director  (since July 2001) of  Oppenheimer
                  Acquisition  Corp.  (the  Manager's  parent
                  holding   company)   and   of   Oppenheimer
                  Partnership   Holdings,   Inc.  (a  holding
                  company  subsidiary  of  the  Manager);   a
                  director    (since    November   2001)   of
                  OppenheimerFunds   Distributor,   Inc.   (a
                  subsidiary of the Manager);  Chairman and a
                  director  (since July 2001) of  Shareholder
                  Services,    Inc.   and   of    Shareholder
                  Financial  Services,  Inc.  (transfer agent
                  subsidiaries  of  the  Manager);  President
                  and  a  director   (since   July  2001)  of
                  OppenheimerFunds    Legacy    Program    (a
                  charitable  trust  program  established  by
                  the Manager);  a director of the investment
                  advisory  subsidiaries of the Manager:  OFI
                  Institutional  Asset  Management,  Inc. and
                  Centennial  Asset  Management   Corporation
                  (since  November 2001),  HarbourView  Asset
                  Management   Corporation  and  OFI  Private
                  Investments,   Inc.   (since   July  2001);
                  President  (since  November  1, 2001) and a
                  director  (since July 2001) of  Oppenheimer
                  Real  Asset  Management,  Inc.;  a director
                  (since    November    2001)   of    Trinity
                  Investment  Management  Corp.  and  Tremont
                  Advisers,    Inc.    (Investment   advisory
                  affiliates of the Manager);  Executive Vice
                  President    (since   February   1997)   of
                  Massachusetts    Mutual   Life    Insurance
                  Company (the Manager's parent  company);  a
                  director   (since   June   1995)   of   DLB
                  Acquisition  Corporation (a holding company
                  that owns the  shares of David L.  Babson &
                  Company,  Inc.); formerly,  Chief Operating
                  Officer  (September  2000-June 2001) of the
                  Manager;  President  and trustee  (November
                  1999-November    2001)   of   MML    Series
                  Investment      Fund     and     MassMutual
                  Institutional  Funds  (open-end  investment
                  companies);     a    director    (September
                  1999-August  2000) of C.M.  Life  Insurance
                  Company;    President,    Chief   Executive
                  Officer     and     director     (September
                  1999-August  2000)  of MML Bay  State  Life
                  Insurance   Company;   a   director   (June
                  1989-June  1998) of  Emerald  Isle  Bancorp
                  and Hibernia  Savings Bank (a  wholly-owned
                  subsidiary   of  Emerald   Isle   Bancorp).
                  Oversees    69     portfolios     in    the
                  OppenheimerFunds complex.

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


      The address of the Officers in the chart below is as follows: Messrs.
Molleur, Fielding and Zack and Ms. Feld is 498 Seventh Avenue, New York, NY
10018, Messrs. Masterson, Vottiero and Wixted and Mses. Bechtolt and Ives is
6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an
annual term or until his or her resignation, retirement, death or removal.


-------------------------------------------------------------------------------------
                                Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Name;                      Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund; Length of
Service;
Age

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

Ronald H. Fielding,   Senior Vice President (since January 1996) of the Manager;
Vice President and    Chairman of the Rochester Division of the Manager (since
Portfolio Manager     January 1996); an officer of 9 portfolios in the
Age: 53               OppenheimerFunds complex; prior to joining the Manager in
                      January 1996, he was President and a director of Rochester
                      Capital Advisors, Inc. (1993 - 1995), the Fund's prior
                      investment advisor, and of Rochester Fund Services, Inc.
                      (1986 - 1995), the Fund's prior distributor; President
                      and a trustee of Limited Term New York Municipal Fund
                      (1991 - 1995), Oppenheimer Convertible Securities Fund
                      (1986 - 1995) and Rochester Fund Municipals (1986 -
                      1995); President and a director of Rochester Tax Managed
                      Fund, Inc. (1982 - 1995) and of Fielding Management
                      Company, Inc. (1982 - 1995), an investment advisor.

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

Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer, Principal    the Manager;  Treasurer  (since  March 1999) of  HarbourView
Financial and           Asset Management  Corporation,  Shareholder Services,  Inc.,
Accounting Officer      Oppenheimer Real Asset Management  Corporation,  Shareholder
(since April 1999)      Financial Services,  Inc., Oppenheimer Partnership Holdings,
Age: 43                 Inc.,  OFI Private  Investments,  Inc.  (since  March 2000),
                        OppenheimerFunds International Ltd. and Oppenheimer
                        Millennium Funds plc (since May 2000) and OFI
                        Institutional Asset Management, Inc. (since November
                        2000) (offshore fund management subsidiaries of the
                        Manager); Treasurer and Chief Financial Officer (since
                        May 2000) of Oppenheimer Trust Company (a trust company
                        subsidiary of the Manager); Assistant Treasurer (since
                        March 1999) of Oppenheimer Acquisition Corp. and
                        OppenheimerFunds Legacy Program (since April 2000);
                        formerly Principal and Chief Operating Officer (March
                        1995-March 1999), Bankers Trust Company-Mutual Fund
                        Services Division. An officer of 85 portfolios in the
                        OppenheimerFunds complex.

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

Philip Vottiero,        Vice  President/Fund  Accounting of the Manager (since March
                        2002;  formerly Vice  President/Corporate  Accounting of the
Assistant Treasurer     Manager (July  1999-March  2002) prior to which he was Chief
(since August 15, 2002) Financial  Officer at Sovlink  Corporation  (April 1996-June
Age: 39                 1999).  An officer of 85 portfolios in the  OppenheimerFunds
                        complex.

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

Connie Bechtolt,
Assistant Treasurer     Assistant Vice President of the Manager  (since September
(since October 10,      1998); formerly Manager/Fund Accounting (September
2002)                   1994-September 1998) of the Manager. An officer of 85
Age: 39                 portfolios in the OppenheimerFunds complex.

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

Robert G. Zack,         Senior Vice President  (since May 1985) and General  Counsel
Secretary               (since February 2002) of the Manager;  General Counsel and a
(since November 1,      director   (since   November   2001)   of   OppenheimerFunds
2001)                   Distributor,   Inc.;   Senior  Vice  President  and  General
Age: 54                 Counsel  (since   November   2001)  of   HarbourView   Asset
                        Management  Corporation;   Vice  President  and  a  director
                        (since November 2000) of Oppenheimer  Partnership  Holdings,
                        Inc.; Senior Vice President,  General Counsel and a director
                        (since  November  2001)  of  Shareholder   Services,   Inc.,
                        Shareholder   Financial   Services,    Inc.,   OFI   Private
                        Investments,   Inc.,   Oppenheimer  Trust  Company  and  OFI
                        Institutional   Asset  Management,   Inc.;  General  Counsel
                        (since  November  2001)  of  Centennial   Asset   Management
                        Corporation;   a   director   (since   November   2001)   of
                        Oppenheimer   Real   Asset   Management,   Inc.;   Assistant
                        Secretary   and  a  director   (since   November   2001)  of
                        OppenheimerFunds  International  Ltd.; Vice President (since
                        November   2001)   of   OppenheimerFunds   Legacy   Program;
                        Secretary  (since November 2001) of Oppenheimer  Acquisition
                        Corp.;    formerly   Acting   General   Counsel    (November
                        2001-February  2002)  and  Associate  General  Counsel  (May
                        1981-October  2001) of the Manager;  Assistant  Secretary of
                        Shareholder   Services,   Inc.  (May  1985-November   2001),
                        Shareholder     Financial    Services,     Inc.    (November
                        1989-November  2001);  OppenheimerFunds  International  Ltd.
                        and Oppenheimer  Millennium Funds plc (October 1997-November
                        2001).  An officer of 85 portfolios in the  OppenheimerFunds
                        complex.

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

Philip T. Masterson,    Vice President and Assistant Counsel of the Manager (since
Assistant Secretary     July 1998); formerly, an associate with Davis, Graham, &
(since August 15, 2002) Stubbs LLP (January 1997-June 1998). An officer of 85
Age: 38                 portfolios in the OppenheimerFunds complex.

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

Denis R. Molleur,       Vice  President  and Senior  Counsel of the  Manager  (since
Assistant Secretary
(since November 1,      July 1999);  formerly a Vice President and Associate Counsel
2001)                   of the Manager (September  1995-July 1999). An officer of 82
Age: 45                 portfolios in the OppenheimerFunds complex.

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

Katherine P. Feld,      Vice  President and Senior  Counsel (since July 1999) of the
Assistant Secretary     Manager;    Vice    President    (since    June   1990)   of
(since November 1,      OppenheimerFunds    Distributor,    Inc.;   Director,   Vice
2001)                   President  and  Assistant  Secretary  (since  June  1999) of
Age: 44                 Centennial  Asset  Management  Corporation;  Vice  President
                        (since 1997) of  Oppenheimer  Real Asset  Management,  Inc.;
                        formerly  Vice  President  and  Associate   Counsel  of  the
                        Manager (June  1990-July  1999). An officer of 85 portfolios
                        in the OppenheimerFunds complex.

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

Kathleen T. Ives,       Vice  President and Assistant  Counsel  (since June 1998) of
Assistant Secretary     the    Manager;    Vice    President    (since    1999)   of
(since November 1,      OppenheimerFunds  Distributor,   Inc.;  Vice  President  and
2001)                   Assistant  Secretary  (since 1999) of Shareholder  Services,
Age: 36                 Inc.;   Assistant   Secretary   (since   December  2001)  of
                        OppenheimerFunds  Legacy Program and  Shareholder  Financial
                        Services,   Inc.;  formerly  Assistant  Vice  President  and
                        Assistant  Counsel of the Manager (August  1997-June  1998);
                        Assistant Counsel of the Manager (August  1994-August 1997).
                        An officer of 85 portfolios in the OppenheimerFunds complex.

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


      |X| Remuneration of Trustees. The officers of the Fund and one of the
Trustees of the Fund (Mr. Murphy) 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 from the Fund with respect to the Fund's fiscal year
ended July 31, 2002. The compensation from all of the Board I Funds (including
the Fund) represents compensation received as a director, trustee or member of a
committee of the Board during the calendar year 2001.






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

Trustee Name and
Other Fund
Position(s)            For Fiscal Year Ended       For Calendar Year Ended
(as applicable)        7/31/02                     12/31/01

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                   Total
                                                                   Compensation
                                                   Estimated       From All
                                                   Annual          Oppenheimer
                                                   Retirement      Funds
                                     Retirement    Benefits Paid   For Which
                                     Benefits      at Retirement   Individual
                       Aggregate     Accrued as    from all Board  Serves As
                       Compensation  Part of Fund  I Funds         Trustee/Director
                       from Fund1    Expenses      (33 Funds) 2    (33 Funds)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Leon Levy              $0            $728          $137,560        $173,700
Chairman
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli        $0            $2,156        $32,766 2       $202,8863
Study Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip Griffiths      $0            $569          $6,803          $54,889
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Benjamin Lipstein      $0            $0            $118,911        $150,152
Study   Committee
Chairman, Audit
Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------

Joel W. Motley         $0            $0            $0              $0

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Elizabeth B. Moynihan  $0            $2,784        $52,348         $105,760
Study Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kenneth A. Randall     $0            $1,694        $76,827         $97,012
Audit        Committee
Chairman
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward V. Regan        $0            $2,951        $42,748         $95,960
Proxy  Committee
Chairman, Audit
Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Russell  S.  Reynolds, $0            $1,826        $46,197         $71,792
Jr.
Proxy Committee Member
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Donald Spiro           $0            $685          $3,625          $64,080
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Clayton K. Yeutter     $0            $1,393        $31,982         $71,792
Proxy Committee
Member
-------------------------------------------------------------------------------------

1. Aggregate compensation from the Fund includes fees and deferred compensation,
   if any.
2. Estimated annual retirement benefits paid at retirement is based on a
   straight life payment plan election. The amount for Mr. Galli includes
   $14,818 for serving as a trustee or director of 10 Oppenheimer funds that are
   not Board I Funds.  Includes $97,126 for Mr. Galli for serving as trustee or
   director of 10 Oppenheimer funds that are not Board I Funds.

     |X| Retirement Plan for Trustees. 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 Board I 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.


     |X| 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 or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the 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.

     |X| Major Shareholders. As of October 29, 2002, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of any class
of the Fund's outstanding shares were the following:

      Merrill Lynch Pierce Fenner & Smith, Inc. for the Sole Benefit of its
      Customers, Attn: Fund Admin./#97A91, 4800 Deer Lake Drive East, Floor 3,
      Jacksonville, Florida 32246-6484, which owned 575,529.21 Class B shares
      (7.67% of the Class B shares then still outstanding), for the benefit of
      its customers.


      Merrill Lynch Pierce Fenner & Smith, Inc. for the Sole Benefit of its
      Customers, Attn: Fund Admin./#97HF8, 4800 Deer Lake Drive East, Floor 3,
      Jacksonville, Florida 32246-6484, which owned 176,142.55 Class C shares
      (7.97% of the Class C shares then still outstanding), for the benefit of
      its customers.


      Smith Barney House Acct. 00109801250, Attn. Cindy Tempesta, 7th Floor, 333
      West 34th Street, New York, New York 10001-2483, which owned 133,584.44
      Class C shares (6.04% of the Class C shares then still outstanding), for
      the benefit of its customers.


The Manager.  The Manager is wholly-owned by Oppenheimer  Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.

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

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


     |X| 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. The investment
advisory 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.
          ------------------------------------------------------------
          ------------------------------------------------------------
          2000                       $3,203,499
          ------------------------------------------------------------
          ------------------------------------------------------------
          2001                       $3,246,173
          ------------------------------------------------------------
          ------------------------------------------------------------

          2002                       $3,282,631

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

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

     Effective January 1, 2002, the Manager voluntarily agreed to waive advisory
fees at an annual rate equal to 0.05% of the Fund's average daily net assets
until the Fund's trailing one year performance percentile at the end of the
preceding calendar quarter is in the third quintile or better of the Fund's
Lipper peer group. This waiver is voluntary and may be terminated by the Manager
at any time. Therefore, until the trailing one year performance percentile of
the Fund is in the third quartile or better of the Lipper general municipal bond
fund peer group, the advisory fee paid by the Fund to the Manager will be 0.55%
of the first $200 million of average annual net assets, 0.50% of the next $100
million, 0.45% of the next $200 million, 0.40% of the next $250 million, 0.35%
of the next $250 million and 0.30% of average annual net assets over $1 billion.
Had this waiver not been in effect during the Fund's fiscal year ended 7/31/02,
the Fund would have paid $3,471,570 in management fees.


         |X| Annual Approval of Investment Advisory Agreement. Each year, the
Board of Trustees, including a majority of the Independent Trustees, is required
to approve the renewal of the investment advisory agreement. The Investment
Company Act requires that the Board request and evaluate and the Manager provide
such information as may be reasonably necessary to evaluate the terms of the
investment advisory agreement. The Board employs an independent consultant to
prepare a report that provides such information as the Board requests for this
purpose.

      The Board also receives information about the 12b-1 distribution fees the
Fund pays. These distribution fees are reviewed and approved at a different time
of the year.

      The Board reviewed the foregoing information in arriving at its decision
to renew the investment advisory agreement. Among other factors, the Board
considered:
o     The nature,  cost, and quality of the services  provided to the Fund and
      its shareholders;
o     The profitability of the Fund to the Manager;
o     The  investment  performance of the Fund in comparison to regular market
   indices;


o Economies of scale that may be available to the Fund from the Manager; o Fees
paid by other mutual funds for similar services; o The value and quality of any
other benefits or services received by the

         Fund from its relationship with the Manager;

o        The direct and indirect benefits the Manager received from its
         relationship with the Fund. These included services provided by the
         Distributor and the Transfer Agent, and brokerage and soft dollar
         arrangements permissible under Section 28(e) of the Securities Exchange
         Act.

      The Board considered that the Manager must be able to pay and retain high
quality personnel at competitive rates to provide services to the Fund. The
Board also considered that maintaining the financial viability of the Manager is
important so that the Manager will be able to continue to provide quality
services to the Fund and its shareholders in adverse times. The Board also
considered the investment performance of other mutual funds advised by the
Manager. The Board is aware that there are alternatives to the use of the
Manager.

      These matters were also considered by the Independent Trustees, meeting
separately from the full Board with experienced Counsel to the Fund who assisted
the Board in its deliberations. The Fund's Counsel is independent of the Manager
within the meaning and intent of the SEC Rules regarding the independence of
counsel.

      In arriving at a decision, the Board did not single out any one factor or
group of factors as being more important than other factors, but considered all
factors together. The Board judged the terms and conditions of the investment
advisory agreement, including the investment advisory fee, in light of all of
the surrounding circumstances.

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, the Manager is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.


     Under the investment advisory agreement, 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 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 commissions 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.

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

 Fiscal Year Ended 7/31:      Total Brokerage Commissions Paid by the Fund1

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

           2000                                    $0

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

           2001                                    $0

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

           2002                                 $104,040

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

1. Amounts do not include spreads or commissions on principal transactions on a
net trade basis. 2. In the fiscal year ended 7/31/02, there were no transactions
directed to brokers for research services, and the amount of the commissions
paid to broker-dealers for those services was $0.



Distribution and Service Plans


The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor, whose primary address is P.O. Box 5270, Denver, CO 80217, 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 bears the expenses normally
attributable to sales, including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing shareholders. The
Distributor is not obligated to sell a specific number of shares. Expenses
normally attributable to sales are borne by the Distributor. They exclude
payments under the Distribution and Service Plans but include advertising and
the cost of printing and mailing prospectuses (other than those furnished to
existing shareholders).

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


 ------------------------------------------------------------------------------
          Aggregate     Class A      Commissions    Commissions  Commissions
 Fiscal   Front-End     Front-End    on Class A     on Class B   on Class C
 Year     Sales         Sales        Shares         Shares       Shares
 Ended    Charges on    Charges      Advanced by    Advanced by  Advanced by
 7/31:    Class A       Retained by  Distributor1   Distributor1 Distributor1
          Shares        Distributor
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 2000     $447,841      $117,360     $42,151        $282,071     $28,093
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 2001     $609,480      $149,558     $64,279        $419,512     $36,090
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 2002     $579,291      $139,453     $14,344        $316,517     $39,262
 ------------------------------------------------------------------------------
 1.The Distributor advances concession payments to dealers for certain sales of
   Class A shares and for sales of Class B and Class C shares from its own
   resources at the time of sale.

 ------------------------------------------------------------------------------
             Class A Contingent   Class B Contingent    Class C Contingent
 Fiscal Year Deferred Sales       Deferred Sales        Deferred Sales Charges
 Ended 7/31: Charges              Charges               Retained by
             Retained by          Retained by           Distributor
             Distributor          Distributor
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

 2000        $28,514              $299,760              $20,741

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 2001        $13,322              $169,513              $6,081
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 2002        $2,654               $169,760              $3,721
 ------------------------------------------------------------------------------


     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.

     Under the plans the Manager and the Distributor may make payments to
affiliates and, 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. The Manager may use 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 both Class A and Class B
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" (as
defined in the Investment Company Act) of the shares of each class, voting
separately by Class.

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

     For the fiscal year ended July 31, 2002, payments under the Plan for Class
A shares totaled $1,306,220, all of which was paid by the Distributor to
recipients. That included $82,195 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 Plans. 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 concession to the dealer on Class C shares outstanding for a year or
more. If a dealer has a special agreement with the Distributor, the Distributor
will pay the Class B and/or Class C service fees and the asset-based sales
charge to the dealer quarterly in lieu of paying the sales concession and
service fee in advance at the time of purchase.


     The asset-based sales charge on Class B and Class C shares allows investors
to buy shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The 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:
     |_|pays sales concessions to authorized brokers and dealers at the time of
        sale and pays service fees as described in the Prospectus,
     |_|may finance payment of sales concessions and/or the advance of the
        service fee payment to recipients under the plans, or may provide such
        financing from its own resources or from the resources of an affiliate,

     |_| employs personnel to support distribution of shares, and
|_|   bears  the  costs  of sales  literature,  advertising  and  prospectuses

        (other than those furnished to current shareholders) and state "blue
        sky" registration fees and certain other distribution expenses,

|_|     may not be able to adequately compensate dealers that sell Class B and
        Class C shares without receiving payment under the plans and therefore
        may not be able to offer such Classes for sale absent the plans,
|_|     receives payment under the plans consistent with the service fees and
        asset-based sales charges paid by other non-proprietary funds that
        charge 12b-1 fees,
|_|     may use the payments under the plan to include the Fund in various
        third-party distribution programs that may increase sales of Fund
        shares,
|_|     may experience increased difficulty selling the Fund's shares if
        payments under the plan are discontinued because most competitor funds
        have plans that pay dealers for rendering distribution services as much
        or more than the amounts currently being paid by the Fund, and
|_|     may not be able to continue providing, at the same or at a lesser cost,
        the same quality distribution sales efforts and services, or to obtain
        such services from brokers and dealers, if the plan payments were to be
        discontinued.

      When Class B and Class C shares are sold without the designation of a
broker-dealer, the Distributor is automatically designated as the broker-dealer
of record. In those cases, the Distributor retains the service fee and
asset-based sales charge paid on Class B and Class C shares.

     If either the Class B or Class C 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.

-------------------------------------------------------------------------------
  Distribution Fees Paid to the Distributor in the Fiscal Year Ended 7/31/02
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
                                              Distributor's     Distributor's
                                              Aggregate         Unreimbursed
                 Total         Amount         Unreimbursed      Expenses as %
                 Payments      Retained by    Expenses          of Net Assets
                 Under Plan    Distributor    Under Plan        of Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class A Plan     $1,306,220    $0             N/A               N/A
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan     $735,837      $577,565       $2,274,881        3.15%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan     $177,661      $43,166        $392,826          1.92%
-------------------------------------------------------------------------------

     All payments under the Class B and the 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.

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 during its most recent fiscal year end. You can obtain current
performance information by calling the Fund's Transfer Agent at 1.800.225.5677
or by visiting the OppenheimerFunds Internet web site at
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.

     |_|The Fund's performance returns may not reflect the effect of taxes,
        dividends and capital gains distributions.

     |_|An investment in the Fund is not insured by the FDIC or any other
        government agency.
     |_|The principal value of the Fund's shares, and its yields and total
        returns are not guaranteed and normally will fluctuate on a daily basis.
     |_|When an investor's shares are redeemed, they may be worth more or less
        than their original cost.
     |_|Yields and total returns for any given past period represent historical
        performance information and are not, and should not be considered, a
        prediction of future yields or returns.

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

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


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


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

                                                6
                Standardized Yield = 2[(a-b + 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 during monthly period x 12
                Maximum Offering Price (Payment date).


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


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

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


     The tax-equivalent yield may be used to compare the tax effects of income
derived from the Fund with income from taxable investments at the tax rates
stated. Your tax bracket is determined by your Federal 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 30-Day Periods Ended 7/31/02
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

                                                        Tax-Equivalent Yield
              Standardized Yield   Dividend Yield       (39.1%    Fed.     Tax
                                                        Bracket)
 Class     of
 Shares

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
              Without    After     Without    After     Without    After
              Sales      Sales     Sales      Sales     Sales      Sales
              Charge     Charge    Charge     Charge    Charge     Charge
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

 Class A      4.79%      4.57%     5.20%      4.95%     7.87%      7.50%

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

 Class B      4.02%      N/A       4.46%      N/A       6.60%      N/A

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

 Class C      4.02%      N/A       4.46%      N/A       6.60%      N/A

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

     |X| Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, 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 prescribed by the
SEC. The methodology is discussed below.


            In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted from
the initial investment ("P") (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


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


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


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


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



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


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

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


-------------------------------------------------------------------------------
            The Fund's Total Returns for the Periods Ended 7/31/02
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
          Cumulative Total  Average Annual Total Returns
          Returns (10 years
          or life of class)

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

                                                              10-Year
                            1-Year           5-Year          (or    life    of
                                                               class)

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
          After    Without  After    Without After   Without After    Without
          Sales    Sales    Sales    Sales   Sales   Sales   Sales    Sales
          Charge   Charge   Charge   Charge  Charge  Charge  Charge   Charge
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Class A1  59.18%   67.13%   -0.57%   4.39%   2.89%   3.89%   4.76%    5.27%

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

Class B2  51.39%   51.39%   -1.45%   3.50%   2.75%   3.08%   4.52%    4.52%

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

Class C3  35.82%   35.82%   2.51%    3.50%   3.08%   3.08%   4.52%    4.52%

-------------------------------------------------------------------------------
  1.Inception of Class A: 10/27/76
  2.Inception of Class B: 3/16/93.
  3.Inception of Class C: 8/29/95


 ------------------------------------------------------------------------------
     Average Annual Total Returns for Class A Shares1 (After Sales Charge)
                          For the Periods Ended 7/31/02
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

                           1-Year            5-Years         10-Years

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

 After Taxes on            -0.57%            2.86%           4.65%
 Distributions

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

 After Taxes on            1.62%             3.30%           4.82%
 Distributions and
 Redemption of Fund
 Shares

 ------------------------------------------------------------------------------
  1. Inception of Class A shares: 10/27/76.

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


     |_| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper, Inc. ("Lipper"). Lipper is a
widely-recognized independent mutual fund monitoring service. Lipper monitors
the performance of regulated investment companies, including the Fund, and ranks
their performance for various periods based on categories relating to investment
objectives. The performance of the Fund is ranked by Lipper against all other
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 Rating. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar rates mutual funds in
their specialized market sector. The Fund is rated among municipal bond funds.

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


     The Fund may also compare its total return ranking to that of other funds
in its Morningstar category. In addition to its star ratings. Those total return
rankings are percentage from one percent to one hundred percent and are not risk
adjusted. For example, if a fund is in the 94th percentile, that means that 94%
of the funds in the same category performed better than it did.


     |_| 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.

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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


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


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

     |X| 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
        (including IRAs and 403(b) plans), 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.

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

Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund Oppenheimer California
Municipal Fund Oppenheimer New York Municipal Fund Oppenheimer Capital
Appreciation Fund Oppenheimer New Jersey Municipal Fund Oppenheimer Capital
Preservation Fund Oppenheimer Pennsylvania Municipal Fund Oppenheimer Capital
Income Fund Oppenheimer Quest Balanced Value Fund
                                         Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Champion Income Fund         Inc.

                                         Oppenheimer  Quest  Global  Value  Fund,
Oppenheimer Convertible Securities Fund  Inc.
Oppenheimer Developing Markets Fund      Oppenheimer Quest Opportunity Value Fund
Oppenheimer Disciplined Allocation Fund  Oppenheimer Quest Value Fund, Inc.
Oppenheimer Discovery Fund               Oppenheimer Real Asset Fund
                                         Oppenheimer      Rochester      National
Oppenheimer Emerging Growth Fund         Municipals
Oppenheimer Emerging Technologies Fund   Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund              Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund                  Oppenheimer Strategic Income Fund
Oppenheimer Global Fund                  Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth & Income Fund  Oppenheimer Trinity Core Fund

                                         Oppenheimer  Trinity  Large  Cap  Growth
Oppenheimer Gold & Special Minerals Fund Fund
Oppenheimer Growth Fund Oppenheimer Trinity Value Fund Oppenheimer High Yield
Fund Oppenheimer U.S. Government Trust Oppenheimer Limited Term Municipal Fund
Oppenheimer Value Fund Oppenheimer International Bond Fund Limited-Term New York
Municipal Fund Oppenheimer International Growth Fund Rochester Fund Municipals
Oppenheimer International Small Company OSM1 - Gartmore Millennium Growth Fund
Fund II Oppenheimer Limited-Term Government Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street Growth & Income OSM1 - Mercury Advisors S&P 500 Index
Fund Fund
                                         OSM1 -  Mercury  Advisors  Focus  Growth
Oppenheimer Main Street Opportunity Fund Fund
Oppenheimer Main Street Small Cap Fund   OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund                  OSM1 - Salomon Brothers All Cap Fund
Oppenheimer Multiple Strategies Fund

And the following money market funds:

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


1"OSM" stands for Oppenheimer Select Managers


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


Letters of Intent. Under a Letter of Intent, 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. Letters of Intent do not consider
Class C shares you purchase or may have purchased.


     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 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 bound 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 concessions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter 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 concessions allowed or paid to the dealer over the amount of concessions that
apply to the actual amount of purchases. The excess concessions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.


     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 offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.


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

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

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

     5. The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include: (a) Class A shares
sold with a front-end sales charge or subject to a Class
            A contingent deferred sales charge,
(b)         Class B 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. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to November
1, 2002 and which have previously established Asset Builder Plans, additional
purchases will remain at $25. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans are available only if
your bank is an ACH member. Asset Builder Plans may not be used to buy shares
for OppenheimerFunds-employer-sponsored qualified retirement accounts. 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 debited automatically. Normally the debit will be made
two business days prior to the investment dates you selected on your
application. Neither the Distributor, the Transfer Agent or the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.

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


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


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

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


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


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

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


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


Account  Fees.  As stated in the  Prospectus,  a $12 annual fee is assessed on
any  account  valued at less than $500.  This fee will not be  assessed on the
following accounts:

o     Accounts that have balances below $500 due to the automatic conversion of
      shares from Class B to Class A shares;
o     Accounts with an active Asset Builder Plan, payroll deduction plan or a
      military allotment plan;
o     OppenheimerFunds-sponsored  group  retirement  accounts  that are making
      continuing purchases;
o     Certain accounts held by broker-dealers  through the National Securities
      Clearing Corporation; and
o     Accounts that fall below the $500 threshold due solely to market
      fluctuations within the 12-month period preceding the date the fee is
      deducted.


      The fee is automatically deducted from qualifying accounts annually on or
about the second to last business day of September. This annual fee is waived
for any shareholders who elect to access their account documents through
electronic document delivery rather than in paper copy and who elect to utilize
the Internet or PhoneLink as their primary source for their general servicing
needs. To sign up to access account documents electronically via eDocs Direct,
please visit the Service Center on our website at WWW.OPPENHEIMERFUNDS.COM or
call 1.888.470.0862 for instructions.

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 (the "Exchange") on each day that the Exchange is
open. The calculation is done by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M., Eastern time, but may
close earlier on some other days (for example, in case of weather emergencies or
on days falling before a U.S. holiday). All references to time in this Statement
of Additional Information mean "Eastern time." The Exchange's most recent annual
announcement (which is subject to change) states that it will close on New
Year's Day, Presidents' Day, Martin Luther King, Jr. Day, Good Friday, 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 and maturity. Other
special factors may be involved (such as the tax-exempt status of the interest
paid by municipal securities). The Manager will monitor the accuracy of the
pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.

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

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


How to Sell Shares

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


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


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

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

Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
     |_| Class A shares purchased subject to an initial sales charge or Class A
         shares on which a contingent deferred sales charge 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, under certain circumstances, the
Board of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment of a
redemption order wholly or partly in cash. In that case, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of liquid
securities from the portfolio of the Fund, in lieu of cash.

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

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


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


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

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

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


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


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


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

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


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

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

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


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

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


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


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

     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
of shares by calling the Distributor.


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

      The following funds only offer Class A shares:
      Centennial America Fund, L.P.           Centennial Tax Exempt Trust
      Centennial California Tax Exempt Trust  Oppenheimer Concentrated Growth
                                              Fund
      Centennial Government Trust             Oppenheimer Money Market Fund, Inc.
      Centennial Money Market Trust           Oppenheimer Real Estate Fund
      Centennial New York Tax Exempt Trust    Oppenheimer Special Value Fund


      The following funds do not offer Class N shares:
      Oppenheimer California Municipal Fund   Oppenheimer Pennsylvania Municipal
                                              Fund
      Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National
                                              Municipals
      Oppenheimer Municipal Bond Fund         Rochester Fund Municipals
      Oppenheimer New Jersey Municipal Fund   Oppenheimer Senior Floating Rate
                                              Fund
      Oppenheimer New York Municipal Fund     Limited Term New York Municipal
                                              Fund

      The following funds do not offer Class Y shares:
      Oppenheimer California Municipal Fund   Oppenheimer Limited Term Municipal
                                              Fund
      Oppenheimer Capital Income Fund         Oppenheimer New Jersey Municipal
                                              Fund
      Oppenheimer Cash Reserves               Oppenheimer New York Municipal Fund
      Oppenheimer Champion Income Fund        Oppenheimer Pennsylvania Municipal
                                              Fund
      Oppenheimer Convertible Securities Fund Oppenheimer Rochester National
                                              Municipals
      Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate
                                              Fund
      Oppenheimer Gold & Special Minerals     Oppenheimer Small Cap Value Fund
      Fund
      Oppenheimer International Small         Limited Term New York Municipal
      Company Fund                            Fund

o        Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
         shares of any other fund.
o        Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
         generally available only by exchange from the same class of shares of
         other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
         plans.
      o  Class M shares of Oppenheimer Convertible Securities Fund may be
         exchanged only for Class A shares of other Oppenheimer funds. They may
         not be acquired by exchange of shares of any class of any other
         Oppenheimer funds except Class A shares of Oppenheimer Money Market
         Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
         shares.
      o  Class X shares of Limited Term New York Municipal Fund may be exchanged
         only for Class B shares of other Oppenheimer funds and no exchanges may
         be made to Class X shares.
      o  Shares of Oppenheimer Capital Preservation Fund may not be exchanged
         for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
         Reserves or Oppenheimer Limited-Term Government Fund. Only participants
         in certain retirement plans may purchase shares of Oppenheimer Capital
         Preservation Fund, and only those participants may exchange shares of
         other Oppenheimer funds for shares of Oppenheimer Capital Preservation
         Fund.
      o  Class A shares of Oppenheimer Senior Floating Rate Fund are not
         available by exchange of shares of Oppenheimer Money Market Fund or
         Class A shares of Oppenheimer Cash Reserves.
o        Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund
         and Oppenheimer Select Managers QM Active Balanced Fund are only
         available to retirement plans and are available only by exchange from
         the same class of shares of other Oppenheimer funds held by retirement
         plans.
o        Class A shares of Oppenheimer funds may be exchanged at net asset value
         for shares of any money market fund offered by the Distributor. Shares
         of any money market fund purchased without a sales charge may be
         exchanged for shares of Oppenheimer funds offered with a sales charge
         upon payment of the sales charge. They may also be used to purchase
         shares of Oppenheimer funds subject to an early withdrawal charge or
         contingent deferred sales charge.
o     Shares  of  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 sales charge 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.
o        Shares of the Fund acquired by reinvestment of dividends or
         distributions from any of the other Oppenheimer funds or from any unit
         investment trust for which reinvestment arrangements have been made
         with the Distributor may be exchanged at net asset value for shares of
         any of the Oppenheimer funds.

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

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


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


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

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

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


     With respect to Class B shares, the Class B contingent deferred sales
        charge is imposed on Class B shares acquired by exchange if they are
        redeemed within six years of the initial purchase of the exchanged Class
        B shares.

     With respect to Class C shares, the Class C contingent deferred sales
        charge is imposed on Class C shares acquired by exchange if they are
        redeemed within 12 months of the initial purchase of the exchanged Class
        C shares.

     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, 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 which class
of shares they wish to exchange.

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


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


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

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


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

Dividends, Capital Gains and Taxes

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


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

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

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


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

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


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

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

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

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

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

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

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

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

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

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

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


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


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


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


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


      The Fund will be required in certain cases to withhold 30% (29% for
payments after December 31, 2003) of ordinary income dividends (not including
"exempt-interest dividends"), capital gains distributions (including short-term
and long-term) and the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct taxpayer identification
number or to properly certify that number when required, (2) who is subject to
backup withholding for failure to report the receipt of interest or dividend
income properly, or (3) who has failed to certify to the Fund that the
shareholder is not subject to backup withholding or is an "exempt recipient"
(such as a corporation). All income and any tax withheld by the Fund is remitted
by the Fund to the U.S. Treasury and is identified in reports mailed to
shareholders in January of each year.


      |X| Tax Effects of Redemptions of Shares. If a shareholder redeems all or
a portion of his/her shares, the shareholder will recognize a gain or loss on
the redeemed shares in an amount equal to the difference between the proceeds of
the redeemed shares and the shareholder's adjusted tax basis in the shares. All
or a portion of any loss recognized in that manner may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
the redemption.

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


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


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

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

      If the foreign person fails to provide a certification of his/her foreign
status, the Fund will be required to withhold U.S. tax at a rate of 30% (29% for
payments after December 31, 2003) on ordinary income dividends (not including
"exempt-interest dividends"), capital gains distributions (including short-term
and long-term) and the proceeds of the redemption of shares, paid to any foreign
person. All income and any tax withheld (in this situation) by the Fund is
remitted by the Fund to the U.S. Treasury and is identified in reports mailed to
shareholders in January of each year.

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

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

Additional Information About the Fund

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


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

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

Independent Auditors. KPMG LLP 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.





INDEPENDENT AUDITORS' REPORT

================================================================================
 THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
 OPPENHEIMER MUNICIPAL BOND FUND:
 We have audited the accompanying statement of assets and liabilities of
 Oppenheimer Municipal Bond Fund, including the statement of investments, as of
 July 31, 2002, and the related statement of operations for the year then ended,
 the statements of changes in net assets for each of the two years in the period
 then ended, and the financial highlights for each of the five years in the
 period then ended. These financial statements and financial highlights are the
 responsibility of the Fund's management. Our responsibility is to express an
 opinion on these financial statements and financial highlights based on our
 audits.
    We conducted our audits in accordance with auditing standards generally
 accepted in the United States of America. Those standards require that we plan
 and perform the audit to obtain reasonable assurance about whether the
 financial statements and financial highlights are free of material
 misstatement. An audit includes examining, on a test basis, evidence supporting
 the amounts and disclosures in the financial statements. Our procedures
 included confirmation of securities owned as of July 31, 2002, by
 correspondence with the custodian and brokers or by other appropriate auditing
 procedures where replies from brokers were not received. An audit also includes
 assessing the accounting principles used and significant estimates made by
 management, as well as evaluating the overall financial statement presentation.
 We believe that our audits provide a reasonable basis for our opinion.
    In our opinion, the financial statements and financial highlights referred
 to above present fairly, in all material respects, the financial position of
 Oppenheimer Municipal Bond Fund as of July 31, 2002, the results of its
 operations for the year then ended, the changes in its net assets for each of
 the two years in the period then ended, and the financial highlights for each
 of the five years in the period then ended, in conformity with accounting
 principles generally accepted in the United States of America.



/s/ KPMG LLP
------------
 KPMG LLP

 Denver, Colorado
 August 21, 2002


36 OPPENHEIMER MUNICIPAL BOND FUND




STATEMENT OF INVESTMENTS  JULY 31, 2002




                                                            RATINGS:
                                                         MOODY'S/S&P         PRINCIPAL        MARKET VALUE
                                                         (UNAUDITED)            AMOUNT          SEE NOTE 1
 =========================================================================================================

 MUNICIPAL BONDS AND NOTES--102.7%
 ---------------------------------------------------------------------------------------------------------
 ALASKA--2.9%
 AK HFC RB, Housing Development, Series C, MBIA
 Insured, 5.25%, 6/1/32(1)                                   Aaa/AAA       $10,000,000         $ 9,947,000
 ---------------------------------------------------------------------------------------------------------
 AK IDV & Export Authority Power RB, Snettisham
 Power, Prerefunded, Series 1, AMBAC Insured,
 5.50%, 1/1/16                                               Aaa/AAA            80,000              88,652
 ---------------------------------------------------------------------------------------------------------
 AK IDV & Export Authority Power RB, Snettisham
 Power, Prerefunded, Series 1, AMBAC Insured,
 5.50%, 1/1/17                                               Aaa/AAA            90,000              99,733
 ---------------------------------------------------------------------------------------------------------
 AK Northern Tobacco Securitization Corp. TS RB,
 Asset-Backed, 6.50%, 6/1/31                                   Aa3/A         5,000,000           5,149,200
 ---------------------------------------------------------------------------------------------------------
 Anchorage, AK Water RRB, AMBAC Insured,
 5.625%, 9/1/13                                              Aaa/AAA         1,000,000           1,104,610
 ---------------------------------------------------------------------------------------------------------
 Anchorage, AK Water RRB, AMBAC Insured, 6%, 9/1/19          Aaa/AAA         1,000,000           1,104,090
 ---------------------------------------------------------------------------------------------------------
 Anchorage, AK Water RRB, AMBAC Insured, 6%, 9/1/24          Aaa/AAA         1,500,000           1,627,530
                                                                                               -----------
                                                                                                19,120,815
 ---------------------------------------------------------------------------------------------------------
 ARIZONA--1.5%
 AZ Educational LMC RRB, Series B, 7%, 3/1/05                 Aa2/NR         1,090,000           1,104,148
 ---------------------------------------------------------------------------------------------------------
 Central AZ Irrigation & Drainage District GORB,
 Series A, 6%, 6/1/13                                          NR/NR         1,080,950           1,029,994
 ---------------------------------------------------------------------------------------------------------
 Peoria, AZ IDAU RRB, Sierra Winds Life, Series A,
 6.375%, 8/15/29                                               NR/NR         5,000,000           4,738,550
 ---------------------------------------------------------------------------------------------------------
 Scottsdale, AZ IDAU Hospital RB, Scottsdale
 Healthcare, 5.80%, 12/1/31                                  A3/BBB+         2,000,000           2,029,000
 ---------------------------------------------------------------------------------------------------------
 University of AZ COP, University Parking & Student
 Housing, AMBAC Insured, 5.75%, 6/1/19                       Aaa/AAA         1,000,000           1,079,780
                                                                                               -----------
                                                                                                 9,981,472
 ---------------------------------------------------------------------------------------------------------
 CALIFORNIA--7.3%
 CA Foothill/Eastern Corridor Agency Toll Road RRB,
 5.75%, 1/15/40                                            Baa3/BBB-         5,000,000           5,070,800
 ---------------------------------------------------------------------------------------------------------
 CA Foothill/Eastern Corridor Agency Toll Road RRB,
 Sr. Lien, Prerefunded, Series A, 6.50%, 1/1/32              Aaa/AAA         3,000,000           3,504,930
 ---------------------------------------------------------------------------------------------------------
 CA HFA RB, Inverse Floater, 11.567%, 2/1/25(1,2,3)            NR/NR           869,000             925,320
 ---------------------------------------------------------------------------------------------------------
 CA HFA RB, Series C, 6.65%, 8/1/14                          Aa2/AA-         5,000,000           5,217,550
 ---------------------------------------------------------------------------------------------------------
 CA SCDAU REVREF COP, Cedars-Sinai Medical Center,
 Inverse Floater, 8.968%, 11/1/15(2)                           A3/NR         1,500,000           1,577,205
 ---------------------------------------------------------------------------------------------------------
 CA SCDAU REVREF COP, Cedars-Sinai Medical Center,
 MBIA-IBC Insured, 6.50%, 8/1/12                             Aaa/AAA         1,000,000           1,176,580
 ---------------------------------------------------------------------------------------------------------
 Industry, CA UDA TXAL REF Bonds, Transportation
 District Project No. 3, 6.90%, 11/1/07                        NR/A-           500,000             509,870
 ---------------------------------------------------------------------------------------------------------
 Los Angeles, CA Regional AIC Lease RB, Series C,
 7.50%, 12/1/24                                               B1/BB-         2,000,000           1,863,080
 ---------------------------------------------------------------------------------------------------------
 Perris, CA SFM RB, Escrowed to Maturity, Series A,
 8.30%, 6/1/13                                               Aaa/AAA         7,000,000           9,508,310


11 OPPENHEIMER MUNICIPAL BOND FUND






STATEMENT OF INVESTMENTS  CONTINUED




                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 CALIFORNIA Continued
 Pomona, CA SFM RRB, Escrowed to Maturity,
 Series A, 7.60%, 5/1/23                                              Aaa/AAA   $6,000,000    $ 7,936,740
----------------------------------------------------------------------------------------------------------
 Redding, CA Electric System Revenue COP,
 6.368%, 7/1/224                                                      Aaa/AAA    3,000,000      3,472,140
----------------------------------------------------------------------------------------------------------
 Redding, CA Electric System Revenue COP,
 FGIC Insured, Inverse Floater, 9.816%, 6/1/19(2)                     Aaa/AAA    6,000,000      6,418,440
----------------------------------------------------------------------------------------------------------
 Sacramento, CA MUD Electric RRB, Series G,
 MBIA Insured, 6.50%, 9/1/13                                          Aaa/AAA    1,000,000      1,206,650
                                                                                              ------------
                                                                                               48,387,615
----------------------------------------------------------------------------------------------------------
 COLORADO--2.0%
 CO HFA RRB, Single Family Program, Series B-2,
 7.10%, 4/1/17                                                         Aa2/AA    1,195,000      1,345,462
----------------------------------------------------------------------------------------------------------
 CO HFAU RRB, Unrefunded Balance, 6.625%, 2/1/22                    Baa2/BBB+    5,000,000      5,152,550
----------------------------------------------------------------------------------------------------------
 CO Housing FAU SFM RB, Sr. Lien, Series C-2,
 6.875%, 11/1/28                                                       Aa2/NR    1,090,000      1,125,970
----------------------------------------------------------------------------------------------------------
 CO Resource & Power DA Small Water Resource
 RB, Series A, FGIC Insured, 5.80%, 11/1/20                           Aaa/AAA    1,000,000      1,091,500
----------------------------------------------------------------------------------------------------------
 Denver, CO City & Cnty. Airport RB, 9.883%, 11/15/16(4,5)              NR/NR    1,500,000      1,807,140
----------------------------------------------------------------------------------------------------------
 Denver, CO City & Cnty. Airport RB, 9.883%, 11/15/18(4,5)              NR/NR    1,000,000      1,185,960
----------------------------------------------------------------------------------------------------------
 Douglas & Elbert Cntys., CO SDI No. RE-1 Improvement
 GOB, Series A, MBIA Insured, 8%, 12/15/09                            Aaa/AAA    1,000,000      1,292,760
                                                                                              ------------
                                                                                               13,001,342
----------------------------------------------------------------------------------------------------------
 CONNECTICUT--4.5%
 Mashantucket, CT Western Pequot Tribe Special RB,
 Prerefunded, Series A, 6.40%, 9/1/11(5)                              Aaa/AAA    7,435,000      8,761,255
----------------------------------------------------------------------------------------------------------
 Mashantucket, CT Western Pequot Tribe Special RB,
 Unrefunded Balance, Series A, 6.40%, 9/1/11(5)                      Baa2/BBB    7,565,000      8,124,508
----------------------------------------------------------------------------------------------------------
 Mashantucket, CT Western Pequot Tribe Special RRB,
 Sub. Lien, Series B, 5.75%, 9/1/279(5)                               Baa3/NR   11,900,000     11,908,211
----------------------------------------------------------------------------------------------------------
 Mashantucket, CT Western Pequot Tribe Special RRB,
 Subseries B, Zero Coupon, 6.11%, 9/1/16(5,6)                       Baa3/BBB-    2,000,000        865,120
                                                                                              ------------
                                                                                               29,659,094
----------------------------------------------------------------------------------------------------------
 DISTRICT OF COLUMBIA--0.5%
 DC GOUN, Escrowed to Maturity, Series A-1,
 MBIA Insured, 6%, 6/1/11                                             Aaa/AAA      100,000        116,903
----------------------------------------------------------------------------------------------------------
 DC GOUN, Unrefunded Balance, Series A-1,
 MBIA Insured, 6%, 6/1/11                                             Aaa/AAA    1,900,000      2,196,381
----------------------------------------------------------------------------------------------------------
 DC Hospital RRB, Medlantic Healthcare Group,
 Series A, MBIA Insured, 5.25%, 8/15/12                               Aaa/AAA    1,000,000      1,081,890
                                                                                              ------------
                                                                                                3,395,174
----------------------------------------------------------------------------------------------------------
 FLORIDA--2.1%
 Dade Cnty., FL IDAU RB, Miami Cerebral Palsy
 Services Project, 8%, 6/1/22                                           NR/NR    2,510,000      2,573,603




12 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED




                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 FLORIDA Continued
 FL BOE Capital Outlay GORB, 8.40%, 6/1/07                            Aa2/AA+  $   750,000    $   897,885
----------------------------------------------------------------------------------------------------------
 FL HFA MH RRB, Series C, 6%, 8/1/11                                   NR/AAA    1,000,000      1,077,010
----------------------------------------------------------------------------------------------------------
 Heritage Springs, FL CDD Capital Improvement RB,
 Series B, 6.25%, 5/1/05                                                NR/NR      475,000        477,822
----------------------------------------------------------------------------------------------------------
 Highlands Cnty., FL HFAU RB, Adventist/Sunbelt,
 Series A, 6%, 11/15/31                                               Baa1/A-    2,500,000      2,590,225
----------------------------------------------------------------------------------------------------------
 Lee Cnty., FL HFA SFM RB, Series A-2,
 6.85%, 3/1/29                                                         Aaa/NR    1,075,000      1,179,329
----------------------------------------------------------------------------------------------------------
 Renuion East CDD, FL SPAST Bonds, Series A,
 7.375%, 5/1/33(1)                                                      NR/NR    5,000,000      5,004,650
                                                                                              ------------
                                                                                               13,800,524
----------------------------------------------------------------------------------------------------------
 GEORGIA--3.8%
 GA MEAU RRB, Project One, Series X, MBIA Insured,
 6.50%, 1/1/12                                                        Aaa/AAA      500,000        590,285
----------------------------------------------------------------------------------------------------------
 GA MEAU SPO REF Bonds, Series Y, MBIA Insured,
 6.50%, 1/1/17                                                        Aaa/AAA   11,750,000     14,384,233
----------------------------------------------------------------------------------------------------------
 Rockdale Cnty., GA DAU SWD RB, Visy Paper, Inc.
 Project, 7.40%, 1/1/16                                                 NR/NR    4,070,000      4,129,056
----------------------------------------------------------------------------------------------------------
 Savannah, GA EDAU RB, College of Art & Design
 Project, 6.90%, 10/1/29                                              NR/BBB-    5,880,000      6,195,344
                                                                                              ------------
                                                                                               25,298,918
----------------------------------------------------------------------------------------------------------
 HAWAII--1.3%
 HI Airport System RB, 9.883%, 7/1/20(2,3)                              NR/NR    5,000,000      5,826,800
----------------------------------------------------------------------------------------------------------
 HI Airport System RRB, Series B, 6.625%, 7/1/18                      Aaa/AAA    1,500,000      1,704,150
----------------------------------------------------------------------------------------------------------
 HI Budget & Finance Department Special
 Purpose RRB, Hawaiian Electric Co., Inc., Series D,
 AMBAC Insured, 6.15%, 1/1/20                                         Aaa/AAA    1,000,000      1,081,700
                                                                                              ------------
                                                                                                8,612,650
----------------------------------------------------------------------------------------------------------
 ILLINOIS--4.6%
 Chicago, IL GOUN, Series A, FGIC Insured, 6.75%, 1/1/35              Aaa/AAA    2,000,000      2,443,300
----------------------------------------------------------------------------------------------------------
 Cook Cnty., IL Community College District No. 508
 Chicago COP, FGIC Insured, 8.75%, 1/1/05                             Aaa/AAA      500,000        573,970
----------------------------------------------------------------------------------------------------------
 Cook Cnty., IL GOUN, FGIC Insured, 5.50%, 11/15/22                   Aaa/AAA    4,000,000      4,052,360
----------------------------------------------------------------------------------------------------------
 IL Development FAU RB, Citgo Pete Corp. Project,
 8%, 6/1/32                                                           Baa2/NR    6,500,000      6,845,540
----------------------------------------------------------------------------------------------------------
 IL Regional Transportation Authority RB, AMBAC
 Insured, 7.20%, 11/1/20                                              Aaa/AAA    7,500,000      9,689,625
----------------------------------------------------------------------------------------------------------
 McHenry & Kane Cntys., IL Community Construction
 SDI No. 158 GOUN, FGIC Insured, Zero Coupon,
 5.62%, 1/1/19(6)                                                     Aaa/AAA    4,000,000      1,713,840
----------------------------------------------------------------------------------------------------------
 McHenry & Kane Cntys., IL Community Construction
 SDI No. 158 GOUN, FGIC Insured, Zero Coupon,
 5.66%, 1/1/20(6)                                                     Aaa/AAA    2,500,000      1,000,125




13 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 ILLINOIS Continued
 Metropolitan Pier & Exposition Authority RB, IL
 Hospitality Facilities, McCormick Plaza Convention
 Center, Escrowed to Maturity, 7%, 7/1/26                             Aaa/AAA  $ 3,000,000    $ 3,848,940
                                                                                              ------------
                                                                                               30,167,700
----------------------------------------------------------------------------------------------------------
 INDIANA--3.0%
 Evansville Vanderburgh, IN RB, PubLeasing Corp.,
 MBIA Insured, 5.125%, 1/15/24                                        Aaa/AAA    1,000,000      1,001,460
----------------------------------------------------------------------------------------------------------
 Indianapolis, IN AA RB, SPF Federal Express Corp.
 Project, 7.10%, 1/15/17                                             Baa2/BBB   15,500,000     16,572,290
----------------------------------------------------------------------------------------------------------
 Merrillville, IN Multi School Building Corp. RRB, First
 Meeting, MBIA Insured, 5%, 1/5/21                                    Aaa/AAA    2,000,000      2,014,360
                                                                                              ------------
                                                                                               19,588,110
----------------------------------------------------------------------------------------------------------
 KANSAS--0.2%
 KS Development FAU RRB, State Projects, 5.50%, 3/1/16                Aaa/AAA    1,185,000      1,290,998
----------------------------------------------------------------------------------------------------------
 KENTUCKY--0.6%
 Kenton Cnty., KY AB RB, SPF Delta Airlines, Inc.
 Project-A, 6.125%, 2/1/22                                             Ba3/BB    2,290,000      1,955,523
----------------------------------------------------------------------------------------------------------
 Kenton Cnty., KY AB RB, SPF Delta Airlines, Inc.
 Project-A, 7.50%, 2/1/20                                              Ba3/BB    2,200,000      2,103,310
                                                                                              ------------
                                                                                                4,058,833
----------------------------------------------------------------------------------------------------------
 LOUISIANA--3.6%
 Lake Charles, LA Harbor & Terminal Port Facilities RRB,
 Trunkline Louisiana National Guard Co. Project,
 7.75%, 8/15/22                                                         A3/NR    5,000,000      5,176,000
----------------------------------------------------------------------------------------------------------
 New Orleans, LA Home Mtg. Authority SPO REF Bonds,
 Escrowed to Maturity, 6.25%, 1/15/11                                  Aaa/NR    9,500,000     11,076,810
----------------------------------------------------------------------------------------------------------
 TS Financing Corp., LA RB, Asset-Backed, Series 2001B,
 5.875%, 5/15/39                                                         A1/A    8,000,000      7,256,720
                                                                                              ------------
                                                                                               23,509,530
----------------------------------------------------------------------------------------------------------
 MARYLAND--0.2%
 MD ED Corp. Student Housing RB, Sr. Lien, Morgan
 State University Project, Series A, 6%, 7/1/22                       Baa3/NR    1,535,000      1,530,487
----------------------------------------------------------------------------------------------------------
 MASSACHUSETTS--3.7%
 MA Health & Educational FA RB, Mt. Auburn Hospital
 Issue, Series B-1, MBIA Insured, 6.25%, 8/15/14                      Aaa/AAA    1,000,000      1,094,250
----------------------------------------------------------------------------------------------------------
 MA HFA RB, Series A, AMBAC Insured, 6.60%, 7/1/14                    Aaa/AAA    1,750,000      1,834,945
----------------------------------------------------------------------------------------------------------
 MA TUAU Metropolitan Highway System RRB, Sr. Lien,
 Series A, MBIA Insured, 5%, 1/1/37                                   Aaa/AAA    7,000,000      6,803,790
----------------------------------------------------------------------------------------------------------
 MA Water Resource Authority RB, Series A, 6.50%,
 7/15/19                                                               Aa3/AA   12,225,000     14,946,896
                                                                                              ------------
                                                                                               24,679,881
----------------------------------------------------------------------------------------------------------
 MICHIGAN--4.9%
 Anchor Bay, MI SDI REF GOUN, 5%, 5/1/30                              Aaa/AAA    3,000,000      2,957,670
----------------------------------------------------------------------------------------------------------
 Detroit, MI GOB, Series B, MBIA Insured, 6%, 4/1/17                  Aaa/AAA    3,035,000      3,417,106


14 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 MICHIGAN Continued
 Detroit, MI Sewage Disposal RB, Prerefunded,
 FGIC Insured, Inverse Floater, 9.798%, 7/1/23(2)                     Aaa/AAA  $10,100,000    $11,281,498
----------------------------------------------------------------------------------------------------------
 Detroit, MI Sewage Disposal RRB, Unrefunded Balance,
 FGIC Insured, Inverse Floater, 9.798%, 7/1/23(2)                     Aaa/AAA    3,100,000      3,455,136
----------------------------------------------------------------------------------------------------------
 Detroit, MI Water Supply System RB, Unrefunded
 Balance, FGIC Insured, Inverse Floater, 11.148%, 7/1/22(2)           Aaa/AAA    1,500,000      1,568,865
 ----------------------------------------------------------------------------------------------------------
 Howell, MI Public Schools GOUN, Prerefunded,
 MBIA Insured, 5.875%, 5/1/19                                         Aaa/AAA    1,850,000      2,125,780
----------------------------------------------------------------------------------------------------------
 MI Hospital FAU RRB, FSA Insured, Inverse Floater,
 11.049%, 2/15/22(2)                                                  Aaa/AAA    5,000,000      5,232,250
----------------------------------------------------------------------------------------------------------
 Wayne Cnty., MI SPF Airport RRB, Northwest Airlines,
 Inc., Series 1995, 6.75%, 12/1/15                                      NR/NR    3,000,000      2,639,700
                                                                                              ------------
                                                                                               32,678,005
----------------------------------------------------------------------------------------------------------
 MINNESOTA--0.4%
 Minneapolis/St. Paul, MN Metro Airports Commission
 RB, SPF Northwest Airlines, Series B, 6.50%, 4/1/25                    NR/NR    1,000,000        951,870
----------------------------------------------------------------------------------------------------------
 Minneapolis/St. Paul, MN Metro Airports Commission
 SPF RB, Northwest Airlines, Series C, FGIC Insured,
 5.125%, 1/1/20                                                       Aaa/AAA    2,000,000      2,043,940
                                                                                              ------------
                                                                                                2,995,810
----------------------------------------------------------------------------------------------------------
 MISSOURI--0.5%
 MO Development Finance Board Infrastructure
 Facilities RRB, Midtown Redevelopment Project,
 Series A, MBIA Insured, 5.75%, 4/1/22                                Aaa/AAA    1,000,000      1,069,860
----------------------------------------------------------------------------------------------------------
 St. Louis, MO IDAU RB, St. Louis Convention Center,
 Sr. Lien, Series A, 6.875%, 12/15/20                                 Baa3/NR    2,500,000      2,501,925
                                                                                              ------------
                                                                                                3,571,785
----------------------------------------------------------------------------------------------------------
 NEVADA--0.9%
 Clark Cnty., NV Passenger Facility Charge RB, Las Vegas
 McCarran International Airport Project, Series B,
 MBIA Insured, 6.50%, 7/1/12                                          Aaa/AAA    2,000,000      2,046,920
----------------------------------------------------------------------------------------------------------
 Washoe Cnty., NV SDI GOLB, FSA Insured, 5.875%,
 6/1/20                                                               Aaa/AAA    3,175,000      3,679,984
                                                                                              ------------
                                                                                                5,726,904
----------------------------------------------------------------------------------------------------------
 NEW HAMPSHIRE--0.1%
 NH Housing FAU SFM RB, Series C, 6.90%, 7/1/19                        Aa2/NR      395,000        407,913
----------------------------------------------------------------------------------------------------------
 NH Turnpike System RRB, Series A, FGIC Insured,
 6.75%, 11/1/11                                                       Aaa/AAA      500,000        583,010
                                                                                              ------------
                                                                                                  990,923
----------------------------------------------------------------------------------------------------------
 NEW JERSEY--4.5%
 NJ EDAU SPF RB, Continental Airlines, Inc. Project,
 6.25%, 9/15/19                                                         B3/B+    2,380,000      1,966,189
----------------------------------------------------------------------------------------------------------
 NJ EDAU SPF RB, Continental Airlines, Inc. Project,
 6.25%, 9/15/29                                                         B3/B+    3,000,000      2,366,910


15 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 NEW JERSEY Continued
 NJ Transportation COP, Series 15, AMBAC Insured,
 8.85%, 9/15/15(4)                                                     NR/AAA  $ 3,250,000    $ 4,371,120
----------------------------------------------------------------------------------------------------------
 NJ TUAU RRB, Series C, 6.50%, 1/1/16                                   A3/A-   16,150,000     19,585,913
----------------------------------------------------------------------------------------------------------
 NJ TUAU RRB, Series C, MBIA Insured, 6.50%, 1/1/16                   Aaa/AAA    1,100,000      1,351,702
                                                                                              ------------
                                                                                               29,641,834
----------------------------------------------------------------------------------------------------------
 NEW YORK--5.2%
 MTA NYC RRB, Series A, FSA Insured, 5%, 11/15/30                     Aaa/AAA    1,000,000        987,250
----------------------------------------------------------------------------------------------------------
 NYC GOB, Inverse Floater, 9.864%, 8/27/15(2)                            A2/A    3,050,000      3,271,430
----------------------------------------------------------------------------------------------------------
 NYC IDA SPF RB, JFK International Airport Project,
 Series B, 8.50%, 8/1/28(1)                                            B1/BB-   18,000,000     17,153,100
----------------------------------------------------------------------------------------------------------
 NYC MWFAU WSS RRB, 5.50%, 6/15/33                                     Aa2/AA    3,850,000      3,996,107
----------------------------------------------------------------------------------------------------------
 NYS DA RB, SUEFS, FGIC Insured, 5.25%, 5/15/18                       Aaa/AAA    1,000,000      1,054,810
----------------------------------------------------------------------------------------------------------
 NYS HFA RRB, NYC HF, Series A, 6%, 11/1/06                              A3/A    4,000,000      4,447,920
----------------------------------------------------------------------------------------------------------
 NYS HFA RRB, NYC HF, Series A, 6%, 5/1/08                               A3/A    2,000,000      2,186,800
----------------------------------------------------------------------------------------------------------
 NYS Tollway Authority Highway & Bridge Trust Fund RB,
 Series A, FSA Insured, 6%, 4/1/16                                    Aaa/AAA    1,000,000      1,177,030
                                                                                              ------------
                                                                                               34,274,447
----------------------------------------------------------------------------------------------------------
 OHIO--2.2%
 Cleveland, OH PPS RB, First Mtg., Prerefunded, Series A,
 MBIA Insured, 7%, 11/15/16                                           Aaa/AAA    1,100,000      1,250,062
----------------------------------------------------------------------------------------------------------
 Cleveland, OH PPS RB, First Mtg., Unrefunded Balance,
 Series A, MBIA Insured, 7%, 11/15/16                                 Aaa/AAA      900,000      1,022,778
----------------------------------------------------------------------------------------------------------
 Mahoning Valley, OH Sanitary Distilled Water RRB,
 FSA Insured, 5.75%, 11/15/16                                         Aaa/AAA    1,450,000      1,598,074
 ----------------------------------------------------------------------------------------------------------
 Montgomery Cnty., OH HCF RRB, Series B, 6.25%, 2/1/22                  NR/NR    2,500,000      1,856,925
 ----------------------------------------------------------------------------------------------------------
 OH Air Quality DAU RRB, Pollution Control-A, 6.10%, 8/1/20          Baa2/BBB    6,500,000      6,510,985
----------------------------------------------------------------------------------------------------------
 OH SW RB, Republic Engineered Steels, Inc., 9%, 6/1/21(3,7,8)          NR/NR    7,800,000         92,040
----------------------------------------------------------------------------------------------------------
 Streetsboro, OH SDI GOB, AMBAC Insured,
 7.125%, 12/1/10                                                      Aaa/AAA      500,000        593,500
----------------------------------------------------------------------------------------------------------
 Summit Cnty., OH GOLB, FGIC Insured, 6.25%, 12/1/21                  Aaa/AAA    1,270,000      1,518,285
                                                                                              ------------
                                                                                               14,442,649
----------------------------------------------------------------------------------------------------------
 OKLAHOMA--0.8%
 OK IDAU RB, Health Systems Baptist Medical Center,
 Escrowed to Maturity, Series C, AMBAC Insured,
 7%, 8/15/05                                                          Aaa/AAA    2,000,000      2,281,820
----------------------------------------------------------------------------------------------------------
 Tulsa, OK Municipal Airport Trust RRB, American
 Airlines, Inc. Project, 6.25%, 6/1/20                                 B1/BB-    3,260,000      2,736,835
                                                                                              ------------
                                                                                                5,018,655
----------------------------------------------------------------------------------------------------------
 PENNSYLVANIA--10.9%
 Allegheny Cnty., PA HDAU RB, Health System, Series B,
 9.25%, 11/15/30                                                        B1/B+   24,000,000     25,855,920
----------------------------------------------------------------------------------------------------------
 Allegheny Cnty., PA HDAU RRB, Villa St. Joseph HCF,
 6%, 8/15/28                                                            NR/NR    2,000,000      1,698,820


16 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 PENNSYLVANIA Continued
 Berks Cnty., PA GOB, Prerefunded, FGIC Insured,
 Inverse Floater, 10.94%, 11/10/20(2,3)                               Aaa/AAA  $ 1,000,000    $ 1,071,250
----------------------------------------------------------------------------------------------------------
 Chester Cnty., PA Education & HFAU Sr. Living RB,
 Jenners Pond, Inc. Project, 7.75%, 7/1/34(1)                           NR/NR    1,500,000      1,496,670
----------------------------------------------------------------------------------------------------------
 PA Convention Center RRB, Series A, MBIA-IBC Insured,
 6.75%, 9/1/19                                                        Aaa/AAA    1,150,000      1,278,052
----------------------------------------------------------------------------------------------------------
 PA EDFAU Facilities RB, National Gypsum Co., Series B,
 6.125%, 11/2/27                                                        NR/NR    4,000,000      3,244,360
----------------------------------------------------------------------------------------------------------
 PA HEAA Student Loan RB, AMBAC Insured, Inverse
 Floater, 10.723%, 3/1/22(2,3)                                        Aaa/AAA   18,750,000     19,546,875
----------------------------------------------------------------------------------------------------------
 Philadelphia, PA Airport RRB, FGIC Insured,
 5.375%, 6/15/12                                                      Aaa/AAA    3,130,000      3,350,728
----------------------------------------------------------------------------------------------------------
 Philadelphia, PA Hospital & HEFAU RB, Temple
 University Childrens Medical-A, 5.625%, 6/15/19                     Baa2/BBB    1,200,000      1,138,188
----------------------------------------------------------------------------------------------------------
 Philadelphia, PA Hospital & HEFAU RRB, The Philadelphia
 Protestant Home Project, Series A, 6.50%, 7/1/27                       NR/NR    3,380,000      3,092,970
----------------------------------------------------------------------------------------------------------
 Philadelphia, PA IDAU HCF RRB, Baptist Home of
 Philadelphia, Series A, 5.50%, 11/15/18                                NR/NR    1,670,000      1,443,197
----------------------------------------------------------------------------------------------------------
 Philadelphia, PA Regional POAU Lease RRB,
 MBIA Insured, Inverse Floater, 10.74%, 9/1/20(2)                     Aaa/AAA    1,900,000      2,024,089
----------------------------------------------------------------------------------------------------------
 Schuylkill Cnty., PA IDAU RR RRB, Schuylkill Energy
 Resources, Inc., 6.50%, 1/1/10                                         NR/NR    6,955,000      7,180,551
                                                                                              ------------
                                                                                               72,421,670
----------------------------------------------------------------------------------------------------------
 RHODE ISLAND--2.4%
 RI TS Financing Corp. RB, Asset-Backed, Series A,
 6.25%, 6/1/42                                                           A1/A   16,475,000     15,610,063
----------------------------------------------------------------------------------------------------------
 SOUTH CAROLINA--2.1%
 Greenville Cnty., SC SDI Installment Purpose RRB,
 Building Equity Sooner Tomorrow, 5.875%, 12/1/19                      A1/AA-    4,000,000      4,328,760
----------------------------------------------------------------------------------------------------------
 Piedmont, SC MPA RRB, Escrowed to Maturity, Series A,
 FGIC Insured, 6.50%, 1/1/16                                          Aaa/AAA      285,000        351,203
----------------------------------------------------------------------------------------------------------
 Piedmont, SC MPA RRB, Unrefunded Balance, Series A,
 FGIC Insured, 6.50%, 1/1/16                                          Aaa/AAA    1,715,000      2,066,266
----------------------------------------------------------------------------------------------------------
 SC Transportation Infrastructure Bank RB, Series A,
 AMBAC Insured, 5.50%, 10/1/19                                         Aaa/NR    4,940,000      5,305,461
----------------------------------------------------------------------------------------------------------
 SC TS Management Authority RB, Series B, 6.375%,
 5/15/28                                                                 A1/A    2,000,000      1,999,760
                                                                                              ------------
                                                                                               14,051,450
----------------------------------------------------------------------------------------------------------
 TEXAS--17.3%
 AAAU TX SPF RB, American Airlines, Inc. Project,
 7%, 12/1/11                                                           B1/BB-    3,000,000      2,631,120
----------------------------------------------------------------------------------------------------------
 Bexar Cnty., TX HFDC RRB, Army Retirement Residence
 Project, 6.30%, 7/1/32                                               NR/BBB-    1,000,000        997,130
----------------------------------------------------------------------------------------------------------
 Cedar Hill, TX ISD GOUN, Zero Coupon, 6.10%, 8/15/11(6)               Aaa/NR    1,585,000      1,038,207


17 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 TEXAS Continued
 Cypress-Fairbanks, TX ISD GORB, Series A, Zero Coupon,
 5.85%, 2/15/15(6)                                                    Aaa/AAA  $15,000,000    $ 8,285,550
----------------------------------------------------------------------------------------------------------
 Cypress-Fairbanks, TX ISD GORB, Series A, Zero Coupon,
 5.89%, 2/15/14(6)                                                    Aaa/AAA   15,710,000      9,232,767
----------------------------------------------------------------------------------------------------------
 Cypress-Fairbanks, TX ISD GORB, Series A, Zero Coupon,
 5.91%, 2/15/16(6)                                                    Aaa/AAA   16,240,000      8,432,295
----------------------------------------------------------------------------------------------------------
 Dallas-Fort Worth, TX International Airport Facilities
 Improvement Corp. RB, American Airlines, Inc.,
 7.25%, 11/1/30                                                        B1/BB-    4,000,000      3,162,280
----------------------------------------------------------------------------------------------------------
 Dallas-Fort Worth, TX International Airport Facilities
 Improvement Corp. RRB, American Airlines, Series B,
 6.05%, 5/1/29                                                         B1/BB-    3,500,000      3,189,270
----------------------------------------------------------------------------------------------------------
 Dallas/Fort Worth, TX International Airport RRB,
 Series A, FGIC Insured, 5.50%, 11/31/01                              Aaa/AAA    2,000,000      2,039,760
----------------------------------------------------------------------------------------------------------
 Harris Cnty., TX GORB, Toll Road, Sub. Lien, Prerefunded,
 6.50%, 8/15/15                                                       Aa1/AAA      215,000        219,730
----------------------------------------------------------------------------------------------------------
 Harris Cnty., TX GORB, Toll Road, Sub. Lien, Unrefunded
 Balance, 6.50%, 8/15/15                                              Aa1/AA+      785,000        803,620
----------------------------------------------------------------------------------------------------------
 Hays, TX ISD GOUN, Zero Coupon, 6.03%, 8/15/20(6)                    Aaa/AAA    5,370,000      1,955,539
----------------------------------------------------------------------------------------------------------
 Houston, TX Airport System RB, SPF Continental Airlines,
 Inc., Series E, 6.75%, 7/1/29                                          B3/B+    7,020,000      5,778,232
----------------------------------------------------------------------------------------------------------
 Houston, TX Airport System RRB, Sub. Lien, Series B,
 FSA Insured, 5.50%, 7/1/30                                           Aaa/AAA    5,000,000     5,146,750
----------------------------------------------------------------------------------------------------------
 Houston, TX WSS RB, Prior Lien, Unrefunded Balance,
 Series B, 6.40%, 12/1/09                                               A2/A+      995,000      1,030,402
----------------------------------------------------------------------------------------------------------
 Houston, TX WSS RRB, Jr. Lien, Series B, FGIC Insured,
 5.25%, 12/1/23                                                       Aaa/AAA    4,000,000      4,044,080
----------------------------------------------------------------------------------------------------------
 Lower Colorado River Authority, TX RRB, Series A,
 5.875%, 5/15/17                                                      Aaa/AAA    1,625,000      1,787,874
----------------------------------------------------------------------------------------------------------
 Lower Neches Valley, TX IDAU Corp. Sewer Facilities RB,
 Mobil Oil Refining Corp. Project, 6.40%, 3/1/30                      Aaa/AAA    1,000,000      1,050,220
----------------------------------------------------------------------------------------------------------
 North Central TX HFDC RB, Series A, 7.25%, 11/15/19                    NR/NR    2,000,000      2,001,020
----------------------------------------------------------------------------------------------------------
 North Central TX HFDC RB, Series A, 7.50%, 11/15/29                    NR/NR    3,000,000      3,021,390
----------------------------------------------------------------------------------------------------------
 Retama, TX Development Corp. SPF RRB, Retama
 Racetrack, Escrowed to Maturity, Series A, 10%, 12/15/19             Aaa/AAA    1,680,000      2,755,586
----------------------------------------------------------------------------------------------------------
 Rio Grande Valley, TX HFDC Retirement Facilities RB,
 Golden Palms, Series B, MBIA Insured, 6.40%, 8/1/12                  Aaa/AAA    2,000,000      2,047,860
----------------------------------------------------------------------------------------------------------
 TX MPA RRB, Escrowed to Maturity, Zero Coupon,
 5.81%, 9/1/15(6)                                                     Aaa/AAA      110,000         59,748
----------------------------------------------------------------------------------------------------------
 TX MPA RRB, MBIA Insured, Zero Coupon,
 5.93%, 9/1/14(6)                                                     Aaa/AAA   17,500,000     10,029,950
----------------------------------------------------------------------------------------------------------
 TX MPA RRB, MBIA Insured, Zero Coupon,
 5.98%, 9/1/13(6)                                                     Aaa/AAA    6,900,000      4,199,823
----------------------------------------------------------------------------------------------------------
 TX MPA RRB, MBIA Insured, Zero Coupon,
 5.98%, 9/1/16(6)                                                     Aaa/AAA   39,990,000     20,223,743


18 OPPENHEIMER MUNICIPAL BOND FUND


STATEMENT OF INVESTMENTS  CONTINUED



                                                                     RATINGS:
                                                                  MOODY'S/S&P    PRINCIPAL   MARKET VALUE
                                                                   (UNAUDITED)      AMOUNT     SEE NOTE 1
==========================================================================================================

 TEXAS Continued
 TX MPA RRB, Unrefunded Balance, Zero Coupon,
 5.85%, 9/1/15(6)                                                     Aaa/AAA  $ 9,890,000   $  5,323,985
----------------------------------------------------------------------------------------------------------
 TX United Independent SDI GOUN, 5.125%, 8/15/26                      Aaa/AAA    4,295,000      4,283,704
                                                                                              ------------
                                                                                              114,771,635
----------------------------------------------------------------------------------------------------------
 U.S. POSSESSIONS--0.3%
 PR Municipal FAU GOB, Inverse Floater, 9.682%, 8/1/15(2,3)             NR/NR    1,500,000      1,919,565
----------------------------------------------------------------------------------------------------------
 VIRGINIA--0.7%
 Pocahontas Parkway Assn., VA Toll Road RB, First Tier,
 Sub. Lien, Series C, Zero Coupon, 5.75%, 8/15/07(6)                   Ba1/NR    2,800,000      1,689,604
----------------------------------------------------------------------------------------------------------
 Pocahontas Parkway Assn., VA Toll Road RB, First Tier,
 Sub. Lien, Series C, Zero Coupon, 5.80%, 8/15/08(6)                   Ba1/NR    3,000,000      1,637,610
----------------------------------------------------------------------------------------------------------
 Pocahontas Parkway Assn., VA Toll Road RB, First Tier,
 Sub. Lien, Series C, Zero Coupon, 5.85%, 8/15/09(6)                   Ba1/NR    3,100,000      1,530,780
                                                                                              ------------
                                                                                                4,857,994
----------------------------------------------------------------------------------------------------------
 WASHINGTON--6.4%
 Clark Cnty., WA Public Utility District No. 001
 Generating System RRB, FSA Insured, 5.125%, 1/1/20                   Aaa/AAA    2,730,000      2,776,738
----------------------------------------------------------------------------------------------------------
 King Cnty., WA Sewer RRB, Series B, FSA Insured,
 5.125%, 1/1/24(1)                                                    Aaa/AAA   10,000,000      9,995,100
----------------------------------------------------------------------------------------------------------
 Mason Cnty., WA SDI No. 309 Shelton GOUN,
 FGIC Insured, 5.125%, 12/1/20                                         Aaa/NR    1,750,000      1,785,140
----------------------------------------------------------------------------------------------------------
 WA GOUN, Series S-5, FGIC Insured, Zero Coupon,
 5.34%, 1/1/18(6)                                                     Aaa/AAA    8,000,000      3,674,960
----------------------------------------------------------------------------------------------------------
 WA GOUN, Series S-5, FGIC Insured, Zero Coupon,
 5.40%, 1/1/19(6)                                                     Aaa/AAA    7,930,000      3,403,159
----------------------------------------------------------------------------------------------------------
 WA PP Supply System RRB, Nuclear Project No. 1,
 5.40%, 7/1/12                                                        Aa1/AA-   20,000,000     20,575,400
                                                                                              ------------
                                                                                               42,210,497
----------------------------------------------------------------------------------------------------------
 WEST VIRGINIA--0.6%
 WV Parkways ED & Tourism Authority RB, RIBS,
 Prerefunded, FGIC Insured, Inverse Floater, 9.958%,
 5/16/19(2,3)                                                         Aaa/AAA    1,270,000      1,403,426
----------------------------------------------------------------------------------------------------------
 WV Parkways ED & Tourism Authority RB, RIBS,
 Unrefunded Balance, FGIC Insured, 9.958%, 5/16/19(3,4)               Aaa/AAA    2,330,000      2,504,750
                                                                                              ------------
                                                                                                3,908,176
----------------------------------------------------------------------------------------------------------
 WISCONSIN--0.7%
 Badger, WI Tobacco Asset Securitization Corp. RB,
 Asset-Backed, 6.125%, 6/1/27                                            A1/A    3,000,000      2,950,830
----------------------------------------------------------------------------------------------------------
 WI Health & Educational FA RB, Aurora Medical Group,
 Inc. Project, FSA Insured, 6%, 11/15/11                              Aaa/AAA    1,370,000      1,592,872
                                                                                              ------------
                                                                                                4,543,702







19 OPPENHEIMER MUNICIPAL BOND FUND



STATEMENT OF INVESTMENTS  CONTINUED



                                                                                             MARKET VALUE
                                                                                               SEE NOTE 1
----------------------------------------------------------------------------------------------------------

 TOTAL INVESTMENTS, AT VALUE (COST $646,432,524)                                 102.7%      $679,718,907
----------------------------------------------------------------------------------------------------------
 LIABILITIES IN EXCESS OF OTHER ASSETS                                            (2.7)       (18,051,781)
                                                                               ---------------------------
 NET ASSETS                                                                      100.0%      $661,667,126
                                                                               ===========================


FOOTNOTES TO STATEMENT OF INVESTMENTS

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

AA       Airport Authority
AAAU     Alliance Airport Authority, Inc.
AB       Airport Board
BOE      Board of Education
CDD      Community Development District
COP      Certificates of Participation
DA       Dormitory Authority
DAU      Development Authority
ED       Economic Development
EDAU     Economic Development Authority
EDFAU    Economic Development Finance Authority
FA       Facilities Authority
FAU      Finance Authority
GOB      General Obligation Bonds
GOLB     General Obligation Ltd. Bonds
GORB     General Obligation Refunding Bonds
GOUN     General Obligation Unlimited Nts.
HCF      Health Care Facilities
HDAU     Hospital Development Authority
HEAA     Higher Education Assistance Agency
HEFAU    Higher Educational Facilities Authority
HF       Health Facilities
HFA      Housing Finance Agency/Authority
HFAU     Health Facilities Authority
HFC      Housing Finance Corp.
HFDC     Health Facilities Development Corp.
IDA      Industrial Development Agency
IDAU     Industrial Development Authority
IDV      Industrial Development
ISD      Independent School District
LMC      Loan Marketing Corp.
MEAU     Municipal Electric Authority
MH       Multifamily Housing
MPA      Municipal Power Agency
MUD      Municipal Utility District
MWFAU    Municipal Water Finance Authority
PC       Pollution Control
POAU     Port Authority
PP       Public Power
PPS      Public Power System
RB       Revenue Bonds
REF      Refunding
REVREF   Revenue Refunding
RIBS     Residual Interest Bonds
RRB      Revenue Refunding Bonds
SCDAU    Statewide Communities Development Authority
SDI      School District
SFM      Single Family Mtg.
SPAST    Special Assessment
SPF      Special Facilities
SPO      Special Obligations
SUEFS    State University Educational Facilities System
SW       Solid Waste
SWD      Solid Waste Disposal
TS       Tobacco Settlement
TUAU     Turnpike Authority
TXAL     Tax Allocation
UDA      Urban Development Agency
WSS      Water & Sewer System


1. When-issued security to be delivered and settled after July 31, 2002.
2. Represents the current interest rate for a variable rate bond known as an
"inverse floater". See Note 1 of Notes to Financial Statements.
3. Identifies issues considered to be illiquid--See Note 6 of Notes to Financial
Statements.
4. Represents the current interest rate for a variable or increasing rate
security.
5. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $32,652,194 or 4.93% of the Fund's net
assets as of July 31, 2002.
6. Zero coupon bond reflects effective yield on the date of purchase.
7. Issuer is in default.
8. Non-income producing security.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



20 OPPENHEIMER MUNICIPAL BOND FUND






STATEMENT OF ASSETS AND LIABILITIES  JULY 31, 2002


==============================================================================================
 ASSETS

 Investments, at value (cost $646,432,524)--see accompanying statement         $  679,718,907
----------------------------------------------------------------------------------------------
 Cash                                                                               8,026,959
----------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold (including $735,000 sold on a when-issued basis)                 15,613,491
 Interest                                                                           6,984,059
 Shares of beneficial interest sold                                                 2,369,289
 Other                                                                                  5,902
                                                                               ---------------
 Total assets                                                                     712,718,607

==============================================================================================
 LIABILITIES
 Payables and other liabilities:
 Investments purchased (including $43,617,805 purchased on a when-issued
 basis)                                                                            45,107,773
 Shares of beneficial interest redeemed                                             3,675,804
 Dividends                                                                          1,827,207
 Distribution and service plan fees                                                   130,645
 Trustees' compensation                                                               129,026
 Transfer and shareholder servicing agent fees                                         72,551
 Shareholder reports                                                                   66,889
 Other                                                                                 41,586
                                                                               ---------------
 Total liabilities                                                                 51,051,481

==============================================================================================
 NET ASSETS                                                                      $661,667,126
                                                                               ===============

==============================================================================================
 COMPOSITION OF NET ASSETS
 Paid-in capital                                                               $  659,470,069
----------------------------------------------------------------------------------------------
 Overdistributed net investment income                                               (912,189)
----------------------------------------------------------------------------------------------
 Accumulated net realized loss on investment transactions                         (30,177,137)
----------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments                                        33,286,383
                                                                               ---------------
 NET ASSETS                                                                      $661,667,126
                                                                               ===============

==============================================================================================
 NET ASSET VALUE PER SHARE
 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $568,934,803 and 60,019,535 shares of beneficial interest outstanding)                 $9.48
 Maximum offering price per share (net asset value plus sales charge of 4.75%
 of offering price)                                                                     $9.95
----------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $72,241,391
 and 7,643,218 shares of beneficial interest outstanding)                               $9.45
----------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $20,490,932
 and 2,168,211 shares of beneficial interest outstanding)                               $9.45



 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



21 OPPENHEIMER MUNICIPAL BOND FUND








STATEMENT OF OPERATIONS  For the Year Ended July 31, 2002

==============================================================================================
 INVESTMENT INCOME


 Interest                                                                         $40,937,319
==============================================================================================
 EXPENSES

 Management fees                                                                    3,471,570
----------------------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                            1,306,220
 Class B                                                                              735,837
 Class C                                                                              177,661
----------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees                                        568,876
----------------------------------------------------------------------------------------------
 Shareholder reports                                                                  166,174
----------------------------------------------------------------------------------------------
 Custodian fees and expenses                                                           77,981
----------------------------------------------------------------------------------------------
 Other                                                                                  4,053
                                                                                  ------------
 Total expenses                                                                     6,508,372
 Less reduction to custodian expenses                                                 (13,040)
 Less voluntary waiver of expenses                                                   (188,939)
                                                                                  ------------
 Net expenses                                                                        6,306,393

==============================================================================================
 NET INVESTMENT INCOME                                                             34,630,926
==============================================================================================
 REALIZED AND UNREALIZED GAIN (LOSS)
 Net realized loss on:
 Investments                                                                       (5,202,640)
 Closing of futures contracts                                                      (2,972,987)
                                                                                  ------------
 Net realized loss                                                                 (8,175,627)
----------------------------------------------------------------------------------------------
 Net change in unrealized appreciation on investments                                 517,270
                                                                                 ------------
 Net realized and unrealized loss                                                  (7,658,357)

==============================================================================================
 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                             $26,972,569
                                                                                 ============




 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.





22 OPPENHEIMER MUNICIPAL BOND FUND





STATEMENTS OF CHANGES IN NET ASSETS



 YEAR ENDED JULY 31,                                                          2002           2001
==================================================================================================
 OPERATIONS


 Net investment income                                                 $34,630,926    $32,240,888
--------------------------------------------------------------------------------------------------
 Net realized loss                                                      (8,175,627)   (17,579,250)
--------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation                                     517,270     39,353,436
                                                                      ----------------------------
 Net increase in net assets resulting from operations                   26,972,569     54,015,074

==================================================================================================
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
 Dividends from net investment income:
 Class A                                                               (29,884,001)   (28,787,828)
 Class B                                                                (3,307,464)    (3,048,431)
 Class C                                                                  (798,418)      (675,129)

==================================================================================================
 BENEFICIAL INTEREST TRANSACTIONS
 Net increase (decrease) in net assets resulting from beneficial interest
 transactions:
 Class A                                                                (9,406,413)    83,428,384
 Class B                                                                (3,773,660)    17,423,990
 Class C                                                                 3,525,693      4,454,324

==================================================================================================
 NET ASSETS
 Total increase (decrease)                                             (16,671,694)   126,810,384
--------------------------------------------------------------------------------------------------
 Beginning of period                                                   678,338,820    551,528,436
                                                                      ----------------------------
 End of period [including overdistributed net investment
 income of $912,189 and $1,553,232, respectively]                     $661,667,126   $678,338,820
                                                                      ============================
 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.




23 OPPENHEIMER MUNICIPAL BOND FUND




FINANCIAL HIGHLIGHTS


 CLASS A   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.57     $9.35    $10.02    $10.27    $10.24
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .50       .52       .52       .52       .51
 Net realized and unrealized gain (loss)                           (.10)      .22      (.61)     (.25)      .04
                                                                  -------------------------------------------------
 Total from investment operations                                   .40       .74      (.09)      .27       .55
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.49)     (.52)     (.52)     (.52)     (.52)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                  -------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.49)     (.52)     (.58)     (.52)     (.52)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.48     $9.57    $ 9.35    $10.02    $10.27
                                                                  =================================================
===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               4.39%     8.03%    (0.85)%    2.57%     5.55%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                      $568,935  $584,325  $482,152  $568,673  $579,570
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                             $568,951  $531,286  $515,007  $587,197  $581,630
-------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                                             5.35%     5.38%     5.54%     5.00%     5.00%
 Expenses                                                          0.88%     0.85%     0.90%     0.87%     0.87%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            0.85%     0.85%     0.90%     0.87%     0.87%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



24 OPPENHEIMER MUNICIPAL BOND FUND




 CLASS B   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.55     $9.33    $10.00    $10.25    $10.22
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .43       .45       .43       .44       .43
 Net realized and unrealized gain (loss)                           (.11)      .21      (.60)     (.25)      .04
                                                                ---------------------------------------------------
 Total from investment operations                                   .32       .66      (.17)      .19       .47
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.42)     (.44)     (.44)     (.44)     (.44)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                ---------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.42)     (.44)     (.50)     (.44)     (.44)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.45     $9.55     $9.33    $10.00    $10.25
                                                                ===================================================


===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               3.50%     7.23%   (1.62)%     1.78%     4.75%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                       $72,241   $76,880   $57,204   $90,022   $91,677
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $73,571   $65,563   $70,072   $96,352   $88,531
-------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                                             4.58%     4.60%     4.75%     4.22%     4.21%
 Expenses                                                          1.65%     1.62%     1.67%     1.65%     1.65%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            1.62%     1.62%     1.67%     1.65%     1.65%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



25 OPPENHEIMER MUNICIPAL BOND FUND




FINANCIAL HIGHLIGHTS  CONTINUED



 CLASS C   YEAR ENDED JULY 31,                                     2002      2001      2000      1999      1998
===================================================================================================================

 PER SHARE OPERATING DATA
 Net asset value, beginning of period                             $9.55     $9.33    $10.00    $10.25    $10.22
-------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .43       .44       .44       .44       .43
 Net realized and unrealized gain (loss)                           (.11)      .22      (.61)     (.25)      .04
                                                                ---------------------------------------------------
 Total from investment operations                                   .32       .66      (.17)      .19       .47
-------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.42)     (.44)     (.44)     (.44)     (.44)
 Distributions from net realized gain                                --        --      (.06)       --        --
                                                                ---------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.42)     (.44)     (.50)     (.44)     (.44)
-------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                   $9.45     $9.55     $9.33    $10.00    $10.25
                                                                ===================================================

===================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                               3.50%     7.23%    (1.62)%    1.78%     4.75%

===================================================================================================================
 RATIOS/SUPPLEMENTAL DATA
 Net assets, end of period (in thousands)                       $20,491   $17,134   $12,173   $18,621   $12,857
-------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                              $17,776   $14,506   $14,497   $16,868   $10,655
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(2)
 Net investment income                                             4.57%     4.60%     4.76%     4.22%     4.30%
 Expenses                                                          1.65%     1.62%     1.67%     1.65%     1.64%(3)
 Expenses, net of voluntary waiver of expenses
 and/or reduction to custodian expenses                            1.62%     1.62%     1.67%     1.65%     1.64%
-------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                             31%       20%       14%       18%       21%




1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



26 OPPENHEIMER MUNICIPAL BOND FUND



NOTES TO FINANCIAL STATEMENTS

================================================================================
 1. SIGNIFICANT ACCOUNTING POLICIES
 Oppenheimer Municipal Bond Fund (the Fund) is registered under the Investment
 Company Act of 1940, as amended, as an open-end management investment company.
 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. The Fund's
 investment advisor is OppenheimerFunds, Inc. (the Manager).
    The Fund offers Class A, Class B and Class C shares. Class A shares are sold
 at their offering price, which is normally net asset value plus a front-end
 sales charge. Class B and Class C shares are sold without a front-end sales
 charge but may be subject to a contingent deferred sales charge (CDSC). All
 classes of shares have identical rights and voting privileges. Earnings, net
 assets and net asset value per share may differ by minor amounts due to each
 class having its own expenses directly attributable to that class. Classes A, B
 and C have separate distribution and/or service plans. Class B shares will
 automatically convert to Class A shares six years after the date of purchase.
    The following is a summary of significant accounting policies consistently
followed by the Fund.
--------------------------------------------------------------------------------
 SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges
 or other domestic or foreign exchanges are valued based on the last sale price
 of the security traded on that exchange prior to the time when the Fund's
 assets are valued. In the absence of a sale, the security is valued at the last
 sale price on the prior trading day, if it is within the spread of the closing
 bid and asked prices, and if not, at the closing bid price. Securities
 (including restricted securities) for which quotations are not readily
 available are valued primarily using dealer-supplied valuations, a portfolio
 pricing service authorized by the Board of Trustees, or at their fair value.
 Fair value is determined in good faith under consistently applied procedures
 under the supervision of the Board of Trustees. Short-term "money market type"
 debt securities with remaining maturities of sixty days or less are valued at
 amortized cost (which approximates market value).
--------------------------------------------------------------------------------
 SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
 securities that have been purchased by the Fund on a when-issued basis can take
 place a month or more after the trade date. Normally the settlement date occurs
 within six months after the trade date; however, the Fund may, from time to
 time, purchase securities whose settlement date extends beyond six months or
 more beyond trade date. During this period, such securities do not earn
 interest, are subject to market fluctuation and may increase or decrease in
 value prior to their delivery. The Fund maintains segregated assets with a
 market value equal to or greater than the amount of its purchase commitments.
 The purchase of securities on a when-issued basis may increase the volatility
 of the Fund's net asset value to the extent the Fund makes such purchases while
 remaining substantially fully invested. As of July 31, 2002, the Fund had
 entered into when-issued purchase commitments of $43,617,805 and when-issued
 sale commitments of $735,000.



27 OPPENHEIMER MUNICIPAL BOND FUND



NOTES TO FINANCIAL STATEMENTS  CONTINUED



================================================================================
 1. SIGNIFICANT ACCOUNTING POLICIES Continued
 SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
 subject to a greater degree of credit risk, greater market fluctuations and
 risk of loss of income and principal, and may be more sensitive to economic
 conditions than lower-yielding, higher-rated fixed-income securities. The Fund
 may acquire securities in default, and is not obligated to dispose of
 securities whose issuers subsequently default. As of July 31, 2002, securities
 with an aggregate market value of $92,040, representing less than 0.01% of the
 Fund's net assets, were in default.
--------------------------------------------------------------------------------
 INVERSE FLOATING RATE SECURITIES. The Fund invests in inverse floating rate
 securities that pay interest at a rate that varies inversely with short-term
 interest rates. Certain of these securities may be leveraged, whereby the
 interest rate varies inversely at a multiple of the change in short-term rates.
 As interest rates rise, inverse floaters produce less current income. The price
 of such securities is more volatile than comparable fixed rate securities. The
 Fund intends to invest no more than 20% of its total assets in inverse
 floaters. Inverse floaters amount to $65,522,149 as of July 31, 2002. Including
 the effect of leverage, inverse floaters represent 9.19% of the Fund's total
 assets as of July 31, 2002.
--------------------------------------------------------------------------------
 ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
 those attributable to a specific class), gains and losses are allocated daily
 to each class of shares based upon the relative proportion of net assets
 represented by such class. Operating expenses directly attributable to a
 specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
 FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
 Internal Revenue Code applicable to regulated investment companies and to
 distribute all of its taxable income, including any net realized gain on
 investments not offset by capital loss carryforwards, if any, to shareholders.
 Therefore, no federal income or excise tax provision is required.




28 OPPENHEIMER MUNICIPAL BOND FUND




   As of July 31, 2002, the Fund had approximately $5,915,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2011.

As of July 31, 2002, the Fund had available for federal income tax purposes
unused capital loss carryforwards as follows:

                              EXPIRING
                              -----------------------
                              2008(1)      $3,000,399
                              2009(2)      12,394,299
                              2010         17,536,777
                              -----------------------
                              Total      $32,931,475
                              =======================

1. This capital loss carryforward was acquired in 2001 in connection with the
Oppenheimer Insured Municipal Fund merger.
2. $95,836 was acquired in 2001 in connection with the Oppenheimer Insured
Municipal Fund merger and $5,632,186 was acquired in 2002 in connection with the
Oppenheimer Insured Municipal Fund merger. These amounts are no longer subject
to limitation under IRC Sections 382 or 384.
--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended July 31,
2002, the Fund's projected benefit obligations were increased by $14,787 and
payments of $11,904 were made to retired trustees, resulting in an accumulated
liability of $126,454 as of July 31, 2002.
  The Board of Trustees has adopted a deferred compensation plan for independent
trustees that enables trustees to elect to defer receipt of all or a portion of
annual compensation they are entitled to receive from the Fund. Under the plan,
the compensation deferred is periodically adjusted as though an equivalent
amount had been invested for the Board of Trustees in shares of one or more
Oppenheimer funds selected by the trustee. The amount paid to the Board of
Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.
--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.







29 OPPENHEIMER MUNICIPAL BOND FUND




NOTES TO FINANCIAL STATEMENTS  CONTINUED
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued
CLASSIFICATION OF DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes. The character of dividends and distributions made during the
fiscal year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net realized
gain was recorded by the Fund.

The tax character of distributions paid during the years ended July 31, 2002
and July 31, 2001 was as follows:
                                           YEAR ENDED        YEAR ENDED
                                        JULY 31, 2002     JULY 31, 2001
            -----------------------------------------------------------
            Distributions paid from:
            Exempt-interest dividends     $33,989,883       $32,511,388
            Long-term capital gain                 --                --
            Return of capital                      --                --
                                          -----------------------------
            Total                         $33,989,883       $32,511,388
                                          =============================

As of July 31, 2002, the components of distributable earnings on a tax basis
were as follows:
            Overdistributed net investment income          $   (912,189)
            Accumulated net realized loss                   (30,177,137)
            Net unrealized appreciation                      33,286,383
                                                           -------------
             Total                                         $  2,197,057
                                                           =============
--------------------------------------------------------------------------------
INVESTMENT INCOME. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
--------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
--------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.


30 OPPENHEIMER MUNICIPAL BOND FUND






================================================================================
 2. SHARES OF BENEFICIAL INTEREST
 The Fund has authorized an unlimited number of no par value shares of
 beneficial interest of each class. Transactions in shares of beneficial
 interest were as follows:


                                 YEAR ENDED JULY 31, 2002      YEAR ENDED JULY 31, 2001
                                SHARES             AMOUNT         SHARES         AMOUNT
----------------------------------------------------------------------------------------

CLASS A
 Sold                            10,045,399  $ 94,964,074     13,223,009  $ 117,975,682
 Dividends and/or
 distributions reinvested         2,075,392    19,558,550      1,941,434     18,388,800
 Acquisition - Note 8                    --            --      9,659,347     92,246,765
 Redeemed                       (13,145,794) (123,929,037)   (15,333,330)  (145,182,863)
                                --------------------------------------------------------
 Net increase (decrease)         (1,025,003) $ (9,406,413)     9,490,460   $ 83,428,384
                                ========================================================
----------------------------------------------------------------------------------------
 CLASS B
 Sold                             1,491,331  $ 14,038,324      1,860,418 $   16,659,142
 Dividends and/or
 distributions reinvested           191,311     1,798,374        176,632      1,669,318
 Acquisition - Note 8                    --            --      2,018,542     19,216,517
 Redeemed                        (2,091,402)  (19,610,358)    (2,133,730)   (20,120,987)
                                --------------------------------------------------------
 Net increase (decrease)           (408,760) $ (3,773,660)     1,921,862   $ 17,423,990
                                ========================================================
----------------------------------------------------------------------------------------
 CLASS C
 Sold                               877,873  $  8,256,652        607,263   $  5,535,017
 Dividends and/or
 distributions reinvested            59,151       555,654         45,452        429,497
 Acquisition - Note 8                    --            --        394,023      3,751,103
 Redeemed                          (563,590)   (5,286,613)      (556,599)    (5,261,293)
                                --------------------------------------------------------
 Net increase                       373,434  $  3,525,693        490,139   $  4,454,324
                                ========================================================





================================================================================
 3. PURCHASES AND SALES OF SECURITIES
 The aggregate cost of purchases and proceeds from sales of securities, other
 than short-term obligations, for the year ended July 31, 2002, were
 $206,559,569 and $204,965,166, respectively.

 As of July 31, 2002, unrealized appreciation (depreciation) based on cost of
 securities for federal income tax purposes of $646,516,004 was composed of:

                     Gross unrealized appreciation   $47,560,006
                     Gross unrealized depreciation   (14,357,103)
                                                     ------------
                     Net unrealized appreciation     $33,202,903
                                                     ============


 The difference between book-basis and tax-basis unrealized appreciation and
 depreciation, if applicable, is attributable primarily to the tax deferral of
 losses on wash sales, or return of capital dividends, and the realization for
 tax purposes of unrealized gain (loss) on certain futures contracts,
 investments in passive foreign investment companies, and forward foreign
 currency exchange contracts.


 31 OPPENHEIMER MUNICIPAL BOND FUND
 




NOTES TO FINANCIAL STATEMENTS  CONTINUED


================================================================================
 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
 MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
 the investment advisory agreement with the Fund which provides for a fee of
 0.60% of the first $200 million of average annual net assets, 0.55% of the next
 $100 million, 0.50% of the next $200 million, 0.45% of the next $250 million,
 0.40% of the next $250 million, and 0.35% of average annual net assets over $1
 billion. Effective January 1, 2002, the Manager has voluntarily agreed to waive
 advisory fees at an annual rate equal to 0.05% of the Fund's average daily net
 assets until the Fund's trailing one year performance percentile at the end of
 the preceding quarter is in the third quintile or better of the Fund's Lipper
 peer group. The foregoing waiver is voluntary and may be terminated by the
 Manager at any time. The Fund's management fee for the year ended July 31, 2002
 was an annualized rate of 0.53%.
--------------------------------------------------------------------------------
 TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
 Manager, acts as the transfer and shareholder servicing agent for the Fund. The
 Fund pays OFS $22.50 per account fee.

 OFS has voluntarily agreed to limit transfer and shareholder servicing agent
 fees for all classes, up to an annual rate of 0.35% of average net assets per
 class. This undertaking may be amended or withdrawn at any time.
--------------------------------------------------------------------------------
 DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
 Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the
 Distributor) acts as the Fund's principal underwriter in the continuous public
 offering of the different classes of shares of the Fund.

 The compensation paid to (or retained by) the Distributor from the sale of
 shares or on the redemption of shares is shown in the table below for the
 period indicated.



                                      AGGREGATE         CLASS A       CONCESSIONS     CONCESSIONS     CONCESSIONS
                                      FRONT-END       FRONT-END        ON CLASS A      ON CLASS B      ON CLASS C
                                  SALES CHARGES   SALES CHARGES            SHARES          SHARES          SHARES
 YEAR                                ON CLASS A     RETAINED BY       ADVANCED BY     ADVANCED BY     ADVANCED BY
 ENDED                                   SHARES     DISTRIBUTOR    DISTRIBUTOR(1)  DISTRIBUTOR(1)  DISTRIBUTOR(1)
------------------------------------------------------------------------------------------------------------------

July 31, 2002                         $579,291        $139,453           $14,344        $316,517         $39,262


 1. The Distributor advances concession payments to dealers for certain sales of
 Class A shares and for sales of Class B and Class C shares from its own
 resources at the time of sale.



                                                                          CLASS A         CLASS B         CLASS C
                                                                       CONTINGENT      CONTINGENT      CONTINGENT
                                                                         DEFERRED        DEFERRED        DEFERRED
                                                                    SALES CHARGES   SALES CHARGES   SALES CHARGES
 YEAR                                                                 RETAINED BY     RETAINED BY     RETAINED BY
 ENDED                                                                DISTRIBUTOR     DISTRIBUTOR     DISTRIBUTOR
------------------------------------------------------------------------------------------------------------------

 July 31, 2002                                                             $2,654        $169,760          $3,721


 32 OPPENHEIMER MUNICIPAL BOND FUND






--------------------------------------------------------------------------------
 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. For the year ended July 31, 2002 , payments under
 the Class A Plan totaled $1,306,220, all of which were paid by the Distributor
 to recipients, and included $82,195 paid to an affiliate of the Manager. Any
 unreimbursed expenses the Distributor incurs with respect to Class A shares in
 any fiscal year cannot be recovered in subsequent years.
--------------------------------------------------------------------------------
 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. 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.

 Distribution fees paid to the Distributor for the year ended July 31, 2002,
 were as follows:


                                                                  DISTRIBUTOR'S
                                                  DISTRIBUTOR'S       AGGREGATE
                                                      AGGREGATE    UNREIMBURSED
                                                   UNREIMBURSED   EXPENSES AS %
               TOTAL PAYMENTS   AMOUNT RETAINED        EXPENSES   OF NET ASSETS
                   UNDER PLAN    BY DISTRIBUTOR      UNDER PLAN        OF CLASS
--------------------------------------------------------------------------------
 Class B Plan        $735,837          $577,565      $2,274,881            3.15%
 Class C Plan         177,661            43,166         392,826            1.92


================================================================================
 5. FUTURES CONTRACTS
 A futures contract is a commitment to buy or sell a specific amount of a
 commodity or financial instrument at a particular price on a stipulated future
 date at a negotiated price. Futures contracts are traded on a commodity
 exchange. The Fund may buy and sell futures contracts that relate to broadly
 based securities indices "financial futures" or debt securities "interest rate
 futures" in order to gain exposure to or to seek to protect against changes in
 market value of stock and bonds or interest rates. The Fund may also buy or
 write put or call options on these futures contracts.
    The Fund generally sells futures contracts to hedge against increases in
 interest rates and decreases in market value of portfolio securities. The Fund
 may also purchase futures contracts to gain exposure to market changes as it
 may be more efficient or cost effective than actually buying fixed income
 securities.



33 OPPENHEIMER MUNICIPAL BOND FUND





NOTES TO FINANCIAL STATEMENTS  CONTINUED



================================================================================
 5. FUTURES CONTRACTS Continued
 Upon entering into a futures contract, the Fund is required to deposit either
 cash or securities (initial margin) in an amount equal to a certain percentage
 of the contract value. Subsequent payments (variation margin) are made or
 received by the Fund each day. The variation margin payments are equal to the
 daily changes in the contract value and are recorded as unrealized gains and
 losses. The Fund recognizes a realized gain or loss when the contract is closed
 or expires.
    Securities held in collateralized accounts to cover initial margin
 requirements on open futures contracts are noted in the Statement of
 Investments. The Statement of Assets and Liabilities reflects a receivable
 and/or payable for the daily mark to market for variation margin. Realized
 gains and losses are reported on the Statement of Operations as closing and
 expiration of futures contracts.
    Risks of entering into futures contracts (and related options) include the
 possibility that there may be an illiquid market and that a change in the value
 of the contract or option may not correlate with changes in the value of the
 underlying securities.

================================================================================
 6. ILLIQUID SECURITIES
 As of July 31, 2002, investments in securities included issues that are
 illiquid. A security may be considered illiquid if it lacks a readily available
 market or if its valuation has not changed for a certain period of time. The
 Fund intends to invest no more than 15% of its net assets (determined at the
 time of purchase and reviewed periodically) in illiquid securities. The
 aggregate value of illiquid securities subject to this limitation as of July
 31, 2002 was $33,290,026, which represents 5.03% of the Fund's net assets.

================================================================================
 7. BANK BORROWINGS
 The Fund may borrow from a bank for temporary or emergency purposes including,
 without limitation, funding of shareholder redemptions provided asset coverage
 for borrowings exceeds 300%. The Fund has entered into an agreement which
 enables it to participate with other Oppenheimer funds in an unsecured line of
 credit with a bank, which permits borrowings up to $400 million, collectively.
 Interest is charged to each fund, based on its borrowings, at a rate equal to
 the Federal Funds Rate plus 0.45%. Borrowings are payable within 30 days after
 such loan is executed. The Fund also pays a commitment fee equal to its pro
 rata share of the average unutilized amount of the credit facility at a rate of
 0.08% per annum.
    The Fund had no borrowings outstanding during the year ended or at July 31,
 2002.

34 OPPENHEIMER MUNICIPAL BOND FUND




================================================================================
 8. ACQUISITION OF OPPENHEIMER INSURED MUNICIPAL FUND
 On January 26, 2001, the Fund acquired all of the net assets of Oppenheimer
 Insured Municipal Fund, pursuant to an Agreement and Plan of Reorganization
 approved by the Oppenheimer Insured Municipal Fund shareholders on February 29,
 2000. The Fund issued (at an exchange ratio of 1.775865 for Class A, 1.782453
 for Class B and 1.780957 for Class C of the Fund to one share of Oppenheimer
 Municipal Bond Fund) 9,659,347; 2,018,542 and 394,023 shares of beneficial
 interest for Class A, Class B and Class C, respectively, valued at $92,246,765;
 $19,216,517 and $3,751,103 in exchange for the net assets, resulting in
 combined Class A net assets of $577,703,446, Class B net assets of $74,499,856
 and Class C net assets of $16,501,075 on January 26, 2001. The net assets
 acquired included net unrealized appreciation of $8,201,459, undistributed
 realized losses of $8,728,421 and unused capital loss carryforward of
 $8,728,421. The exchange qualified as a tax free reorganization for federal
 income tax purposes.



                                   Appendix A

                       MUNICIPAL BOND RATINGS DEFINITIONS

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


Moody's Investors Service, Inc. ("Moody's")

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

Long-Term Bond Ratings

Aaa: Bonds rated "Aaa" are judged to be the best quality. They carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as with Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the of "Aaa" securities.

A: Bonds rated "A" possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.

Baa: Bonds rated "Baa" are considered medium-grade obligations; that is, 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.
Such 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 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 of 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 class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.

Con. (...): Bonds for which the security depends on the completion of some act
or the fulfillment of some condition are rated conditionally. These bonds are
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals that begin when facilities are
completed, or (d) payments to which some other limiting condition attaches. The
parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition. Moody's applies
numerical modifiers 1, 2, and 3 in each generic rating classification from "Aa"
through "Caa." The modifier "1" indicates that the obligation ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates a ranking in the lower end of
that generic rating category. Advanced refunded issues that are secured by
certain assets are identified with a # symbol.

Short-Term Ratings - U.S. Tax-Exempt Municipals

There are three ratings for short-term obligations that are investment grade.
Short-term speculative obligations are designated "SG." For variable rate demand
obligations, a two-component rating is assigned. The first (MIG) element
represents an evaluation by Moody's of the degree of risk associated with
scheduled principal and interest payments. The second element (VMIG) represents
an evaluation of the degree of risk associated with the demand feature.

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

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

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

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


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

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


Long-Term Credit Ratings

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

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

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

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

BB, B, CCC, CC, and C

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


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


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

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

CC:  Bonds rated "CC" are currently highly vulnerable to nonpayment.

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

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

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

c: The `c' subscript is used to provide additional information to investors that
the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level and/or
the issuer's bonds are deemed taxable.
p: The letter `p' indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project financed by the debt being
rated and indicates that payment of debt service requirements is largely or
entirely dependent upon the successful, timely completion of the project. This
rating, however, while addressing credit quality subsequent to completion of the
project, makes no comment on the likelihood of or the risk of default upon
failure of such completion. The investor should exercise his own judgment with
respect to such likelihood and risk.

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

Short-Term Issue Credit Ratings

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

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

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


Fitch, Inc.
------------------------------------------------------------------------------

International Long-Term Credit Ratings

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

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

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

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


Speculative Grade:

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

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

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

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

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories. Plus and minus signs are not
added to the "AAA" category or to categories below "CCC," nor to short-term
ratings other than "F1" (see below).

------------------------------------------------------------------------------
International Short-Term Credit Ratings
------------------------------------------------------------------------------

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.

A-2






                                   Appendix B

                   Municipal Bond Industry Classifications

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







                                   Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A
shares2 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.3 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.

Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
         1) plans qualified under Sections 401(a) or 401(k) of the Internal
            Revenue Code,
         2) non-qualified deferred compensation plans, 3) employee benefit
            plans4
         4) Group Retirement Plans5 5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional IRAs,
            Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

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





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

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

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





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

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

Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no concessions are paid by the Distributor on such
purchases):
|X| The Manager or its affiliates.
|X|   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.
|X|      Registered management investment companies, or separate accounts of
         insurance companies having an agreement with the Manager or the
         Distributor for that purpose.
|X|      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.
|X|   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).
|X|      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.
|X|      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.
|X|      "Rabbi trusts" that buy shares for their own accounts, if the purchases
         are made through a broker or agent or other financial intermediary that
         has made special arrangements with the Distributor for those purchases.
|X|   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.
|X|      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.
|X|      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.
|X|      A unit investment trust that has entered into an appropriate agreement
         with the Distributor.
|X|      Dealers, brokers, banks, or registered investment advisers that have
         entered into an agreement with the Distributor to sell shares to
         defined contribution employee retirement plans for which the dealer,
         broker or investment adviser provides administration services.
|X|




      Retirement Plans and deferred compensation plans and trusts used to fund
         those plans (including, for example, plans qualified or created under
         sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
         in each case if those purchases are made through a broker, agent or
         other financial intermediary that has made special arrangements with
         the Distributor for those purchases.
|X|      A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for Value
         Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|X|      A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for Value
         Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by December
         31, 1996.

B. 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 (and no concessions are paid by the Distributor on such
purchases):
|X|      Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|X|      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.
|X|   Shares purchased through a broker-dealer that has entered into a
         special agreement with the Distributor to allow the broker's
         customers to purchase and pay for shares of Oppenheimer funds using
         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.
|X|      Shares purchased with the proceeds of maturing principal units of any
         Qualified Unit Investment Liquid Trust Series.
|X|      Shares purchased by the reinvestment of loan repayments by a
         participant in a Retirement Plan for which the Manager or an affiliate
         acts as sponsor.

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

The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
|X|      To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|X|      Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|X|      For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes: 1)
         Following the death or disability (as defined in the Internal

            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.

         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact. 4) Hardship
         withdrawals, as defined in the plan.7 5) Under a Qualified Domestic
         Relations Order, as defined in the
            Internal Revenue Code, or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries. 9) Separation from
            service.8
         10)Participant-directed redemptions to purchase shares of a mutual
            fund (other than a fund managed by the Manager or a subsidiary of
            the Manager) if the plan has made special arrangements with the
            Distributor.
         11)Plan termination or "in-service distributions," if the redemption
            proceeds are rolled over directly to an OppenheimerFunds-sponsored
            IRA.
|X|      For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|X|      For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with the
         Distributor.
|X|      For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.

III.  Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer

      Funds
--------------------------------------------------------------------------------


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


A. Waivers for Redemptions in Certain Cases.


The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |X| Shares redeemed
involuntarily, as described in "Shareholder Account

         Rules and Policies," in the applicable Prospectus.
|X|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|X|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability by the Social Security
         Administration.
|X|      Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|X|      Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|X|      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into a
         special arrangement with the Distributor for this purpose.
|X|      Redemptions requested in writing by a Retirement Plan sponsor of Class
         C shares of an Oppenheimer fund in amounts of $500,000 or more and made
         more than 12 months after the Retirement Plan's first purchase of Class
         C shares, if the redemption proceeds are invested in Class N shares of
         one or more Oppenheimer funds.
|X|      Distributions9 from Retirement Plans or other employee benefit plans
         for any of the following purposes: 1) Following the death or disability
         (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account. 3)
         To return contributions made due to a mistake of fact. 4) To make
         hardship withdrawals, as defined in the plan.10 5) To make
         distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or separation
            agreement described in Section 71(b) of the Internal Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
         Revenue Code.
         7) To make "substantially equal periodic payments" as described in
         Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.11 9) On account of the
         participant's separation from service.12 10) Participant-directed
         redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with the
            Distributor.
         11)Distributions made on account of a plan termination or "in-service"
            distributions, if the redemption proceeds are rolled over directly
            to an OppenheimerFunds-sponsored IRA.
         12)For distributions from a participant's account under an Automatic
            Withdrawal Plan after the participant reaches age 59 1/2, as long as
            the aggregate value of the distributions does not exceed 10% of the
            account's value, adjusted annually.
         13)Redemptions of Class B shares under an Automatic Withdrawal Plan
            for an account other than a Retirement Plan, if the aggregate value
            of the redeemed shares does not exceed 10% of the account's value,
            adjusted annually.
         14)For distributions from 401(k) plans sponsored by broker-dealers
            that have entered into a special arrangement with the Distributor
            allowing this waiver.

|X|      Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.


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

The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases: |X| Shares sold to the Manager or
its affiliates.
|X|      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.
|X| Shares issued in plans of reorganization to which the Fund is a party. |X|




      Shares sold to present or former officers, directors, trustees or
         employees (and their "immediate families" as defined above in Section
         I.A.) of the Fund, the Manager and its affiliates and retirement plans
         established by them for their employees.
IV.   Special Sales Charge Arrangements for Shareholders of Certain
      Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
------------------------------------------------------------------------------

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995: o redemptions following the
death or disability of the shareholder(s) (as
            evidenced by a determination of total disability by the U.S.
            Social Security Administration);
o           withdrawals under an automatic withdrawal plan (but only for Class B
            or Class C shares) where the annual withdrawals do not exceed 10% of
            the initial value of the account value; adjusted annually, and

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


      A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V.    Special Sales Charge Arrangements for Shareholders of Certain
      Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
      Investment Accounts, Inc.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
   1) by the estate of a deceased shareholder;
   2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
      the Internal Revenue Code;
   3) for retirement distributions (or loans) to participants or beneficiaries
      from retirement plans qualified under Sections 401(a) or 403(b)(7)of the
      Code, or from IRAs, deferred compensation plans created under Section 457
      of the Code, or other employee benefit plans;
   4) as tax-free returns of excess contributions to such retirement or employee
      benefit plans;





   5) in whole or in part, in connection with shares sold to any state, county,
      or city, or any instrumentality, department, authority, or agency thereof,
      that is prohibited by applicable investment laws from paying a sales
      charge or concession in connection with the purchase of shares of any
      registered investment management company;
   6) in connection with the redemption of shares of the Fund due to a
      combination with another investment company by virtue of a merger,
      acquisition or similar reorganization transaction;
   7) in connection with the Fund's right to involuntarily redeem or liquidate
      the Fund;
   8) in connection with automatic redemptions of Class A shares and Class B
      shares in certain retirement plan accounts pursuant to an Automatic
      Withdrawal Plan but limited to no more than 12% of the original value
      annually; or

   9) as involuntary redemptions of shares by operation of law, or under
      procedures set forth in the Fund's Articles of Incorporation, or as
      adopted by the Board of Directors of the Fund.

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

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

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

|X|   dealers, brokers, or registered investment advisors that had entered
         into an agreement with the Distributor or the prior distributor of
         the Fund specifically providing for the use of Class M shares of the
         Fund in specific investment products made available to their
         clients, and dealers, brokers or registered investment advisors that
         had entered into an agreement with the Distributor or prior
         distributor of the Fund's shares to sell shares to defined
         contribution employee retirement plans for which the dealer, broker,
         or investment  advisor provides  administrative  services.Oppenheimer

Municipal Bond Fund
------------------------------------------------------------------------------
------------------------------------------------------------------------------


Internet Web Site:
     WWW.OPPENHEIMERFUNDS.COM

Investment Adviser
     OppenheimerFunds, Inc.
     498 Seventh Avenue
     New York, NY 10018

Distributor
     OppenheimerFunds Distributor, Inc.
     498 Seventh Avenue
     New York, NY 10018

Transfer Agent
     OppenheimerFunds Services
     P.O. Box 5270 Denver, Colorado 80217-5270 1.800.CALL.OPP (1.800.225.5677)

Custodian Bank
     Citibank, N.A.
     399 Park Avenue
     New York, New York 10043

Independent Auditors
     KPMG LLP
     707 Seventeenth Street
     Denver, Colorado 80202

Legal Counsel

     Mayer, Brown, Rowe & Maw
     1675 Broadway
     New York, New York 10019


1234


PX0310.1102


--------

1 Mr. Motley was elected as Trustee to the Board I Funds effective October 10,
2002.
2 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
3 In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the Fund's
Early Withdrawal Charges and references to "redemptions" mean "repurchases" of
shares.
4 An "employee benefit plan" means any plan or arrangement, whether or not it is
"qualified" under the Internal Revenue Code, under which Class N shares of an
Oppenheimer fund or funds are purchased by a fiduciary or other administrator
for the account of participants who are employees of a single employer or of
affiliated employers. These may include, for example, medical savings accounts,
payroll deduction plans or similar plans. The fund accounts must be registered
in the name of the fiduciary or administrator purchasing the shares for the
benefit of participants in the plan.
5 The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship, members
and employees of a partnership or association or other organized group of
persons (the members of which may include other groups), if the group has made
special arrangements with the Distributor and all members of the group
participating in (or who are eligible to participate in) the plan purchase
shares of an Oppenheimer fund or funds through a single investment dealer,
broker or other financial institution designated by the group. Such plans
include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than
plans for public school employees. The term "Group Retirement Plan" also
includes qualified retirement plans and non-qualified deferred compensation
plans and IRAs that purchase shares of an Oppenheimer fund or funds through a
single investment dealer, broker or other financial institution that has made
special arrangements with the Distributor.
6 However, that concession will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
7 This provision does not apply to IRAs.
8 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
9 The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
10 This provision does not apply to IRAs.
11 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
12 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.