OPPENHEIMER INTERNATIONAL BOND FUND
485BPOS, 1997-01-27
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                            Registration No. 33-58383
                               File No. 811-07255

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

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933               / X /

         PRE-EFFECTIVE AMENDMENT NO. ___                              /   /

   
         POST-EFFECTIVE AMENDMENT NO. 2                               / X /
    

                                                      and/or

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

   
         Amendment No. 4                                             / X /
    

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

   
                6803 South Tucson Way, Englewood, Colorado 80112
    ------------------------------------------------------------------------
                    (Address of Principal Executive Offices)
    

                                  303-671-3200
    ------------------------------------------------------------------------
                         (Registrant's Telephone Number)

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

It is proposed that this filing will become effective:

       /   /  Immediately upon filing pursuant to paragraph (b)

   
       / X /  On January 27, 1997, pursuant to paragraph (b)
    

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

       /   /  On _______, pursuant to paragraph (a)(1)

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

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

   
- -------------------------------------------------------------------
The  Registrant  has  registered  an  indefinite  number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2  promulgated  under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's  fiscal year ended
September 30, 1996 was filed on November 27, 1996.
    



<PAGE>


                                    FORM N-1A

                       OPPENHEIMER INTERNATIONAL BOND FUND


   
                              Cross Reference Sheet
                            -------------------------
Part A of
Form N-1A
Item No.               Prospectus Heading
- ----------             ------------------
      1                Cover Page
      2                Expenses; A Brief Overview of the Fund
      3                Financial Highlights; Performance of the Fund
      4                Front Cover Page; Investment Objectives and Policies
      5                Expenses; How the Fund is Managed; Back Cover
      5A               Performance of the Fund
      6                Dividends, Capital Gains and Taxes; How the Fund is
                       Managed -- Organization and History; The Transfer Agent
      7              How to Exchange Shares; Special Investor Services; Service
                       Plan for Class A shares;  Distribution and Service Plans
                       for Class B nd Class C Shares; How to Buy Shares;
                       How to Sell  Shares;
                       Shareholder Account Rules and Policies
      8                How to Sell Shares; How to Exchange Shares; Special
                       Investor Services
      9                *

Part B of
Form N-1A
Item No.               Heading in Statement of Additional Information or
- ----------             ----------------------------------------------------
                       Prospectus
                       ----------
      10               Cover Page
      11               Cover Page
      12               *
      13               Investment Objectives and Policies; Other Investment
                       Techniques and Strategies; Other Investment
                       Restrictions
      14               How the Fund is Managed -- Trustees and Officers of the
                       Fund
      15               How the Fund is Managed -- Major Shareholders
      16               How the Fund is Managed; Additional Information about the
                       Fund; Distribution and Service Plans; Back Cover
      17               How the Fund is Managed
      18               Additional Information about the Fund
      19               About Your Account -- How to Buy Shares, How to Sell
                       Shares, How to Exchange Shares
      20               Dividends, Capital Gains and Taxes
      21               How the Fund is Managed; Additional Information about the
                       Fund - The Distributor; Distribution and Service Plans
      22               Performance of the Fund
      23               Financial Statements
    

- ---------------
*Not applicable or negative answer.


<PAGE>



OPPENHEIMER
International Bond Fund

   
Prospectus dated February 1, 1997
    

Oppenheimer International Bond Fund is a mutual fund with the primary investment
objective of seeking  total  return.  As a secondary  objective,  the Fund seeks
income  when  consistent  with  total  return.  The Fund  seeks to  achieve  its
objectives by investing  primarily in foreign debt securities,  with an emphasis
on debt  securities  issued by governments  of developed  countries and emerging
market countries in Latin America,  Europe and the Pacific Rim, and by companies
located in those countries.

         The Fund's foreign investments are subject to certain additional risks,
including  foreign  currency  fluctuations,  that do not affect  investments  in
domestic  issuers.  The Fund may invest without limit in foreign  non-investment
grade debt  securities,  which  entail  greater  risks of untimely  interest and
principal payments,  default, and price volatility than higher rated securities,
and may present  problems of liquidity  and  valuation.  See  "Special  Risks of
Lower-Grade  Securities" on page ___.  Investors should carefully consider these
risks before  investing.  The Fund may also use certain hedging  instruments and
derivative  investments in an effort to reduce the risks of market  fluctuations
that affect the value of the securities the Fund holds,  or to seek total return
or income.  The Fund may borrow money from banks to buy  securities,  which is a
speculative investment method known as "leverage."

   
         This  Prospectus   explains  concisely  what  you  should  know  before
investing in the Fund.  Please read this  Prospectus  carefully  and keep it for
future reference.  You can find more detailed  information about the Fund in the
February 1, 1997  Statement of  Additional  Information.  For a free copy,  call
OppenheimerFunds  Services,  the Fund's Transfer Agent,  at  1-800-525-7048,  or
write to the Transfer  Agent at the address on the back cover.  The Statement of
Additional   Information  has  been  filed  with  the  Securities  and  Exchange
Commission and is incorporated  into this  Prospectus by reference  (which means
that it is legally part of this Prospectus).
    

                                                    [logo] OppenheimerFunds

Shares of the Fund are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the F.D.I.C. or any

                                                        -1-

<PAGE>



other agency, and involve investment risks, including the possible
loss of the principal amount invested.

THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED  BY THE SECURITIES AND
EXCHANGE  COMMISSION OR ANY STATE  SECURITIES  COMMISSION NOR HAS THE SECURITIES
AND  EXCHANGE  COMMISSION  OR ANY STATE  SECURITIES  COMMISSION  PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.


                                                        -2-

<PAGE>



Contents


                  A B O U T  T H E  F U N D

                  Expenses
                  A Brief Overview of the Fund
                  Financial Highlights
                  Investment Objectives and Policies
                  How the Fund is Managed
                  Performance of the Fund

                  A B O U T  Y O U R  A C C O U N T

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

                  Special Investor Services
                  AccountLink
                  Automatic Withdrawal and Exchange Plans
                  Reinvestment Privilege
                  Retirement Plans

                  How to Sell Shares
                  By Mail
                  By Telephone
                  By Checkwriting

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

   
                  Appendix A:  Description of Securities Ratings
                  Appendix B:  Special Sales Charge Arrangements
    



                                                        -3-

<PAGE>



A B O U T  T H E  F U N D

Expenses

   
The Fund pays a variety of  expenses  directly  for  management  of its  assets,
administration,  distribution  of its  shares  and  other  services,  and  those
expenses are subtracted from the Fund's assets to calculate the Fund's net asset
values per share.  All  shareholders  therefore pay those  expenses  indirectly.
Shareholders  pay other  expenses  directly,  such as sales  charges and account
transaction  charges.  The following  tables are provided to help you understand
your  direct  expenses  of  investing  in the Fund and your  share of the Fund's
business operating expenses that you will bear indirectly. The numbers below are
based on the Fund's  expenses  during its last fiscal year ended  September  30,
1996.

         o Shareholder  Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account,"  starting on page
___ for an explanation of how and when these charges apply.
    
<TABLE>
<CAPTION>
   
                                                 Class A                   Class B                        Class C
                                                 Shares                    Shares                         Shares
<S>                                               <C>                      <C>                             <C>
- -----------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge                             4.75%                     None                           None
on Purchases (as a % of
offering price)
- -----------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales                           None(1)                   5% in the first                1% if shares
Charge (as a % of the                                                      year, declining                are redeemed
lower of the original                                                      to 1% in the                   within 12
offering price or                                                          sixth year and                 months of
redemption proceeds)                                                       eliminated                     purchase(2)
                                                                           thereafter(2)
- -----------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on                          None                      None                           None
Reinvested Dividends
- -----------------------------------------------------------------------------------------------------------------------
Exchange Fee                                     None                      None                           None
- -----------------------------------------------------------------------------------------------------------------------
Redemption Fee                                   None                      None                           None
<FN>
(1) If you  invest  $1  million  or more  ($500,000  or more  for  purchases  by
"Retirement  Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page___) in Class A shares, you may have

                                                        -4-

<PAGE>



to pay a sales  charge of up to 1% if you sell your  shares  within 18  calendar
months from the end of the  calendar  month  during  which you  purchased  those
shares.  See "How to Buy  Shares - Class A Shares,"  below.  (2) See "How to Buy
Shares - Buying Class B Shares" and "How to Buy Shares - Buying Class C Shares,"
below, for more information on the contingent deferred sales charges.
</FN>
    
</TABLE>

   
         o Annual Fund Operating  Expenses are paid out of the Fund's assets and
represent the Fund's expenses in operating its business.  For example,  the Fund
pays management fees to its investment advisor, OppenheimerFunds, Inc. (which is
referred to in this  Prospectus  as the  "Manager").  The rates of the Manager's
fees  are set  forth in "How the Fund is  Managed,"  below.  The Fund has  other
regular expenses for services,  such as transfer agent fees, custodial fees paid
to the bank that holds its portfolio securities,  audit fees and legal expenses.
Those expenses are detailed in the Fund's Financial  Statements in the Statement
of Additional Information.
    
       

<TABLE>
<CAPTION>
   
                         Annual Fund Operating Expenses
                as a Percentage of Average Net Assets (Restated)

                                                              Class A               Class B               Class C
                                                              Shares                Shares                Shares
<S>                                                           <C>                   <C>                   <C>
- -------------------------------------------------------------------------------------------------------------------
Management Fees                                               0.75%                  0.75%                 0.75%
- -------------------------------------------------------------------------------------------------------------------
12b-1 Distribution Plan Fees                                  0.22%                  1.00%                 1.00%
- -------------------------------------------------------------------------------------------------------------------
Other Expenses                                                0.62                   0.61%                 0.61%
- -------------------------------------------------------------------------------------------------------------------
Total Fund                                                    1.59%                  2.36%                 2.36%
Operating Expenses
    
</TABLE>

   
         The numbers in the table above are based on the Fund's  expenses in its
last  fiscal  year  ended  September  30,  1996.  These  amounts  are shown as a
percentage of the average net assets of each class of the Fund's shares for that
period,  and have been  restated  to  reflect  termination  by the  Manager of a
voluntary expense assumption on September 20, 1996. With the Manager's voluntary
expense  assumption  through September 19, 1996, annual fund operating  expenses
for the fiscal year ended  September 30, 1996,  would have been as follows:  the
Management  Fees payable by the Fund's Class A, Class B and Class C shares would
have been 0.65%;
    

                                                        -5-

<PAGE>



   
the 12b-1  Distribution  Plan Fees  would  have been  0.22%,  1.00% and 1.00% of
average  annual net  assets for the Fund's  Class A, Class B and Class C shares,
respectively;   Other  Expenses   would  have  been  0.62%,   0.61%  and  0.60%,
respectively  for the Fund's Class A, Class B and Class C shares,  respectively;
and Total Fund Operating Expenses would have been 1.49%, 2.26% and 2.25% for the
Fund's Class A, Class B and Class C shares, respectively.

         The 12b-1  Distribution  Plan Fees for Class A shares are service  fees
(the maximum fee is 0.25% of average  annual net assets of that class),  and for
Class B and Class C shares,  are the  service  fee (the  maximum  service fee is
0.25% of average  annual net  assets of the  class)  and the  asset-based  sales
charge of 0.75%.  These  Plans are  discussed  in greater  detail in "How to Buy
Shares."

         The actual  expenses  for each  class of shares in future  years may be
more or less than the  figures in the table,  depending  on a number of factors,
including  the actual value of the Fund's  assets  represented  by each class of
shares.
    

         o  Examples.  To try  to  show  the  effect  of  these  expenses  on an
investment  over time, we have created the  hypothetical  examples  shown below.
Assume  that you make a $1,000  investment  in each class of shares of the Fund,
and that the Fund's  annual  return is 5%, and that its  operating  expenses for
each class are the ones shown in the Annual Fund Operating Expenses table above.
If you were to redeem your shares at the end of each period  shown  below,  your
investment  would  incur  the  following  expenses  by the end of 1, 3, 5 and 10
years:
<TABLE>
<CAPTION>
   
                                        1 year                3 years               5 years               10 years*
<S>                                     <C>                   <C>                   <C>                   <C>
- --------------------------------------------------------------------------------------------------------------------
Class A Shares                          $63                   $ 95                  $130                  $227
- --------------------------------------------------------------------------------------------------------------------
Class B Shares                          $74                   $104                  $146                  $233
- --------------------------------------------------------------------------------------------------------------------
Class C Shares                          $34                   $ 74                  $126                  $270
    
</TABLE>

If you did not redeem your investment, it would incur the following expenses:
<TABLE>
<CAPTION>
   
<S>                                     <C>                   <C>                   <C>                   <C>
Class A Shares                          $63                   $95                   $130                  $227
- --------------------------------------------------------------------------------------------------------------------
Class B Shares                          $24                   $74                   $126                  $233
- --------------------------------------------------------------------------------------------------------------------

                                                                -6-

<PAGE>



Class C Shares                          $24                   $74                   $126                  $270
    
</TABLE>

   
         *In the first  example,  expenses  include the initial sales charge and
the  applicable  Class B or class C contingent  deferred  sales  charge.  In the
second example,  Class A expenses include the initial sales charge,  but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses  shown above,
because the Fund automatically converts Class B shares into Class A shares after
6 years.  Because of the  asset-based  sales charge and the contingent  deferred
sales  charge  on Class B and  Class C  shares,  long-term  Class B and  Class C
shareholders  could  pay the  economic  equivalent  of  more  than  the  maximum
front-end  sales  charge  allowed  under  applicable  regulations.  For  Class B
shareholders,  the  automatic  conversion of Class B shares to Class A shares is
designed to minimize the likelihood  that this will occur.  Please refer to "How
to Buy Shares - Buying Class B Shares" for more information.

         These  examples show the effect of expenses on an  investment,  but are
not meant to state or predict actual or expected costs or investment  returns of
the Fund, all of which will be more or less than those shown.
    

A Brief Overview of the Fund

Some of the important facts about the Fund are summarized below, with references
to the section of this Prospectus where more complete  information can be found.
You should carefully read the entire  Prospectus  before making a decision about
investing  in the Fund.  Keep the  Prospectus  for  reference  after you invest,
particularly for information about your account, such as how to sell or exchange
shares.

   
         o What  Are  the  Fund's  Investment  Objectives?  The  Fund's  primary
investment objective is to seek total return. As a secondary objective, the Fund
seeks income when consistent with total return.

         o What Does the Fund Invest In?  Under normal  circumstances,  the Fund
will invest at least 65% of its total assets in debt  securities  (also known as
"fixed income"  securities).  Debt securities,  in general,  represent a loan of
money to the issuer,  who promises to pay back the amount loaned (the "principal
amount") plus interest, which may be at a fixed rate or a variable rate.
    

                                                        -7-

<PAGE>



   
The Fund  intends  to invest  primarily  in  foreign  debt  securities,  with an
emphasis on debt  securities  issued by governments  of developed  countries and
emerging market countries located in Latin America,  Europe and the Pacific Rim,
and by companies located in those countries.  Many of the Fund's investments are
lower-grade debt securities,  which are subject to increased risk of default and
market fluctuations, and may at times be illiquid.

         Under normal circumstances,  the Fund may invest up to 35% of its total
assets in certain other  securities,  including  common stocks and other "equity
securities"  that  represent  an  ownership  interest in the domestic or foreign
company issuing the security. The Fund may also use hedging instruments and some
derivative investments in an effort to protect against market risks.  Derivative
investments  may  also  be  used  to  enhance  total  return  or  income.  These
investments  are more fully  explained in "Investment  Objectives and Policies,"
starting on page ___.

         o Who Manages the Fund? The Fund's  investment  advisor (the "Manager")
is   OppenheimerFunds,   Inc.  The  Manager  (including  a  subsidiary)  manages
investment  company portfolios having over $62 billion in assets at December 31,
1996. The Manager is paid an advisory fee by the Fund,  based on its net assets.
The Fund's portfolio  manager,  Mr. Ashwin K. Vasan, is employed by the Manager.
He is primarily  responsible  for the  selection of the Fund's  securities.  The
Fund's  Board of Trustees,  elected by  shareholders,  oversees  the  investment
advisor and the  portfolio  manager.  Please refer to "How the Fund is Managed,"
starting on page ___ for more information about the Manager and its fees.

         o How Risky is the Fund?  While  different  types of  investments  have
risks that  differ in type and  magnitude,  all  investments  carry risk to some
degree.  Changes in overall  market  movements  or  interest  rates,  or factors
affecting a  particular  industry or issuer,  can affect the value of the Fund's
investments  and the Fund's net asset values per share.  Equity  investments are
generally  subject to a number of risks,  including  the risk that  values  will
fluctuate  as  a  result  of  fluctuations  in  equity  markets,   and  changing
expectations for the economy and individual  issuers.  Fixed-income  investments
are  generally  subject to the risk that values will  fluctuate  with changes in
interest rates and inflation; lower-rated,  fixed-income investments are subject
to a greater  risk that the issuer will  default in its  interest  or  principal
payment obligations. For both equity and income investments, foreign investments
are subject to the risk of adverse
    

                                                        -8-

<PAGE>



   
currency fluctuation and additional risks and expenses in comparison to domestic
investments.  Hedging  instruments  and derivative  investments  involve certain
risks, as discussed under "Hedging" and  "Derivative  Investments,"  below.  The
Fund may borrow money from banks to buy securities, a practice known as leverage
that is subject to certain risks discussed below under "Borrowing for Leverage."
    

         In the Oppenheimer funds spectrum,  the Fund is generally considered to
be the most  aggressive  fixed-income  fund.  The Fund has a higher  risk/return
profile than the other Oppenheimer  fixed-income funds. This is because the Fund
invests  primarily  in foreign  debt  securities,  which are  subject to special
risks.

         While the Manager  tries to reduce  risks by  diversifying  investments
(particularly geographic  diversification among developed countries and emerging
market  countries),  and by  carefully  researching  securities  before they are
purchased  for the  portfolio,  and in some cases by using  hedging  techniques,
there is no  guarantee of success in achieving  the Fund's  objectives  and your
shares may be worth more or less than their  original cost when you redeem them.
Please refer to "Investment  Objectives and Policies" starting on page ___ for a
more complete discussion of the Fund's investment risks.

   
         o How Can I Buy  Shares?  You can buy  shares  through  your  dealer or
financial  institution,   or  you  can  purchase  shares  directly  through  the
Distributor  by completing an  Application  or by using an Automatic  Investment
Plan under AccountLink. Please refer to "How to Buy Shares" on page ___ for more
details.
    

         o Will I Pay a  Sales  Charge  to  Buy  Shares?  The  Fund  offers  the
individual  investor  three  classes  of  shares.  All  classes  have  the  same
investment  portfolio but different expenses.  Class A shares are offered with a
front-end  sales charge,  starting at 4.75%,  and reduced for larger  purchases.
Class B and Class C shares are offered without a front-end sales charge, but may
be subject to a contingent  deferred sales charge if redeemed  within 6 years or
12 months,  respectively,  of buying them.  There is also an annual  asset-based
sales  charge on Class B and Class C shares.  Please  review "How To Buy Shares"
starting on page ___ for more details,  including a discussion about which class
may be appropriate for you.

         o  How Can I Sell My Shares?  Shares can be redeemed by mail,

                                                        -9-

<PAGE>



by checkwriting, or by telephone call to the Transfer Agent on any business day,
or through  your  dealer.  Please refer to "How To Sell Shares" on page ___. The
Fund also offers exchange  privileges to other Oppenheimer  funds,  described in
"How to Exchange Shares" on page ___.

   
         o How Has the Fund  Performed?  The Fund  measures its  performance  by
quoting its average  annual total returns and cumulative  total  returns,  which
measure  historical  performance.  Those  returns can be compared to the returns
(over similar periods) of other mutual funds. Of course,  other mutual funds may
have  different   objectives,   investments  and  levels  of  risk.  The  Fund's
performance can also be compared to one or more securities market indices, which
we have done on pages 22 and 23. Please remember that past  performance does not
guarantee future results.
    

Financial Highlights

   
The table on the following page presents  selected  financial  information about
the Fund,  including per share data,  expense ratios and other data based on the
Fund's  average  net assets.  This  information  has been  audited by Deloitte &
Touche  LLP,  the  Fund's  independent  auditors,  whose  report  on the  Fund's
financial statements for the fiscal year ended September 30, 1996 is included in
the Statement of Additional Information.
    
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

                                         CLASS A                       CLASS B                     CLASS C
                                         ---------------------------   --------------------------  ---------------------------
                                         YEAR ENDED SEPTEMBER 30,      YEAR ENDED SEPTEMBER 30,    YEAR ENDED SEPTEMBER 30,
                                             1996         1995(1)       1996         1995(1)        1996         1995(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>              <C>          <C>           <C>          <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period      $  5.10      $  5.00          $  5.10      $  5.00       $  5.09      $  5.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income                         .52          .15              .48          .14           .48          .14
Net realized and unrealized gain              .40          .10              .39          .10           .39          .09
- ------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations       .92          .25              .87          .24           .87          .23
- ------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income                            (.53)        (.15)            (.49)        (.14)         (.48)        (.14)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period            $  5.49      $  5.10          $  5.48      $  5.10       $  5.48      $  5.09
                                         =====================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2)         18.82%        5.13%           17.71%        4.92%        17.92%        4.73%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)  $52,128      $ 3,984          $45,207      $ 3,238       $10,282      $   201
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)         $19,817      $ 2,566          $17,891      $ 1,125       $ 4,039      $    97
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income                        9.60%        9.94%(3)         8.81%        9.20%(3)      8.76%        9.36%(3)
Expenses, before voluntary reimbursement
by the Manager                               1.59%        1.59%(3)         2.36%        2.21%(3)      2.36%        2.26%(3)
Expenses, net of voluntary reimbursement
by the Manager                               1.49%        0.41%(3)         2.26%        0.89%(3)      2.25%        0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4)                  273.3%       122.0%           273.3%       122.0%        273.3%       122.0%
<FN>
1.       For the period from June 15, 1995 (commencement of operations) to
         September 30, 1995.

2.       Assumes a  hypothetical  initial  investment on the business day before
         the first day of the fiscal period (or inception of offering), 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.

3.       Annualized.

4.       The lesser of purchases or sales of portfolio  securities for a period,
         divided  by the  monthly  average  of the  market  value  of  portfolio
         securities  owned  during the  period.  Securities  with a maturity  or
         expiration  date at the  time of  acquisition  of one  year or less are
         excluded  from the  calculation.  Purchases  and  sales  of  investment
         securities  (excluding  short-term  securities)  for the  period  ended
         September 30, 1996 were $161,923,766 and $93,759,294, respectively.
</FN>
</TABLE>

                                     -10-

<PAGE>



Investment Objectives and Policies

   
Objectives.  The Fund's primary investment objective is to seek
total return.  As a secondary objective, the Fund seeks income when
consistent with total return.
    

Investment Policies and Strategies.  Set forth below are the investment policies
and  strategies  the Fund may use in  seeking  its  investment  objectives.  The
Manager  might  not use all of  these  instruments  or all of  these  investment
strategies to the full extent  permitted  unless it believes  doing so will help
the Fund achieve its investment objectives.

         Under normal market conditions,  the Fund will invest in at least three
countries  other than the  United  States,  and will  invest at least 65% of its
total  assets in "bonds." The Fund  considers  debt  securities  to be bonds for
purposes of its policy  that it will invest at least 65% of its total  assets in
"bonds." "Debt securities," in general, represent a loan of money to the issuer,
who  promises  to pay back the  amount  loaned  (the  "principal  amount")  plus
interest, which may be at a fixed rate or a variable rate.

   
         The Fund  anticipates  that it will emphasize  foreign debt securities,
particularly  debt securities  issued by governments of developed  countries and
emerging market  countries in Latin America,  Europe and the Pacific Rim, and by
companies  located  in those  countries.  Emerging  market  countries  and their
markets  generally have the following  characteristics:  (1) virtually no market
for longer-term debt securities  denominated in its local currency, (2) borrowed
monies are generally denominated in currencies other than its local currency and
(3) a lack of a developed yield curve for its local currency.  See "Foreign Debt
Securities," below.

         The Fund may  invest  without  limitation  in  high-yield,  high  risk,
"lower-grade" bonds (including both rated and unrated high-yield bonds), because
they  generally  offer higher  income  potential  than  investment  grade bonds.
"Lower-grade"  bonds,  often  referred to as "junk bonds," are those rated below
"investment grade" by nationally-recognized  rating organizations.  See "Special
Risks of Lower-Grade Securities," below.
    

         Under normal  market  conditions,  the Fund may invest up to 35% of its
total assets in certain securities other than debt securities,  including common
stocks,  convertible  securities,  warrants  and other  equity  securities  that
generally represent an

                                                       -11-

<PAGE>



ownership interest in the company issuing the security.

   
         o Can the Fund's  Investment  Objectives and Policies Change?  The Fund
has primary and secondary  investment  objectives,  described  above, as well as
investment  policies it follows to try to achieve its objectives.  Additionally,
the Fund uses certain investment techniques and strategies in carrying out those
investment  policies.  The Fund's  investment  policies and  techniques  are not
"fundamental" unless this Prospectus or the Statement of Additional  Information
says that a particular policy is "fundamental." The Fund's primary and secondary
investment objectives are fundamental policies.
    

         Fundamental  policies  are those  that  cannot be changed  without  the
approval of a  "majority"  of the Fund's  outstanding  voting  shares.  The term
"majority"  is  defined  in  the  Investment  Company  Act  to  be a  particular
percentage  of  outstanding  voting  shares (and this term is  explained  in the
Statement of  Additional  Information).  The Fund's Board of Trustees may change
non-fundamental  policies without  shareholder  approval,  although  significant
changes will be described in amendments to this Prospectus.

   
         o Foreign Debt Securities.  Under normal circumstances,  as a matter of
fundamental policy, the Fund will invest in the United States and at least three
foreign  countries.  The Fund will normally  invest a substantial  amount of its
assets in foreign securities.  The Fund may invest in any country, whether it is
developed  or   underdeveloped.   Investments   in   securities  of  issuers  in
non-industrialized  countries  generally involve more risk and may be considered
to be highly  speculative.  The Fund's  selection of foreign  securities must be
consistent with its investment objectives.
    

         The   Fund   may   invest   in   foreign   securities   that  are  U.S.
dollar-denominated  debt obligations  known as "Brady Bonds." They are issued to
exchange existing  commercial bank loans to foreign entities for new obligations
that are generally collateralized by zero coupon U.S. Treasury securities having
the same maturity.  The Fund may also buy foreign debt obligations such as bonds
(including  sinking fund and callable  bonds),  debentures and notes  (including
variable and floating rate  instruments),  and preferred  stocks and zero coupon
securities. The Fund may purchase foreign securities denominated in U.S. dollars
or in foreign currencies. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.

                                                       -12-

<PAGE>



         The Fund  shall  not  invest  25% or more of its  total  assets  in (1)
government  securities  of any  one  foreign  country  or (2)  debt  and  equity
securities  issued by  companies  organized  under  the laws of any one  foreign
country.

         o  Foreign Securities Have Special Risks. There are special
risks in investing in foreign securities.  Because the Fund may buy
securities denominated in foreign currencies or traded primarily in
foreign markets, a change in the value of a foreign currency
against the U.S. dollar will result in a change in the U.S. dollar
value of securities denominated in that foreign currency.

   
         Currency  rate  changes  will  also  affect  the  income  available  to
distribute to shareholders of the Fund.  Although the Fund's  investment  income
from foreign securities will be received in foreign currencies, the Fund will be
required to distribute its income to  shareholders in U.S.  dollars.  Therefore,
the Fund will absorb the cost of currency  fluctuations.  While the Fund may use
hedging  techniques to try to reduce the risk of currency  fluctuations,  if the
Fund suffers losses on foreign  currencies  after it has  distributed its income
during  the  year,  it may find that it has  distributed  more  income  than was
available  from  net  investment   income.   That  could  result  in  previously
distributed income being re-classified as a return of capital to shareholders.
Please refer to "Taxes - Returns of Capital."
    

         Foreign  issuers are not subject to the same  accounting and disclosure
requirements  that  U.S.   companies  are  subject  to.  The  value  of  foreign
investments  may be  affected  by  other  factors,  including  exchange  control
regulations,  expropriation or  nationalization  of a company's assets,  foreign
taxes, delays in settlement of transactions, changes in governmental economic or
monetary policy in the U.S. or abroad,  or other political and economic factors.
Issuers of foreign  securities  that are not  registered for sale in the U.S. do
not have to comply with disclosure  requirements that U.S. companies are subject
to.

         In addition,  it is generally more difficult to obtain court  judgments
outside the U.S. if the Fund were to sue a foreign issuer or broker.  Additional
costs may be incurred because foreign brokerage commissions are generally higher
than U.S.  rates,  and there are  additional  custodial  costs  associated  with
holding  securities  abroad.  More  information  about the  risks and  potential
rewards of investing  in foreign  securities  is  contained in the  Statement of
Additional Information.

                                                       -13-

<PAGE>



         o Special Risks of Emerging Market  Countries.  Investments in emerging
market countries may involve further risks in addition to those identified above
for  investments in foreign  securities.  Securities  issued by emerging  market
countries and by companies located in those countries may be subject to extended
settlement  periods,  whereby the Fund might not receive principal and/or income
on a timely basis and its net asset values  could be affected.  Emerging  market
countries may have smaller, less well-developed markets and exchanges; there may
be a lack of  liquidity  for  emerging  market  securities;  interest  rates and
foreign currency exchange rates may be more volatile;  sovereign  limitations on
foreign  investments may be more likely to be imposed;  there may be significant
balance of payment  deficits;  and their  economies and markets may respond in a
more volatile manner to economic changes than those of developed countries.  The
Manager  expects the Fund's  investments to be  geographically  well-diversified
among developed country debt and emerging market country debt.

         o  Temporary  Defensive  Investment   Strategy.   Under  normal  market
conditions,  the Fund  will  invest  at least  65% of its  total  assets in debt
securities.  During periods of unusual market volatility, or unusual economic or
business activity,  the Fund may invest up to 100% of its assets in shorter-term
debt securities,  primarily domestic shorter-term debt securities, for defensive
reasons.  Securities  selected  for  defensive  reasons  may  include:  (1) U.S.
Treasury  bills  and  other  obligations   issued  or  guaranteed  by  the  U.S.
government,  its  agencies or  instrumentalities,  (2)  highly-rated  commercial
paper, or (3)  certificates of deposit,  bankers  acceptances or other U.S. bank
obligations.

         o  U.S. Debt Securities.  The Fund's investments in U.S. debt
securities may include, but are not limited to, the following:

         o  U.S. Government Obligations.  U.S. Treasury notes, bills
and bonds are backed by the full faith and credit of the U.S.
government.  Some U.S. government agency securities are backed by
the full faith and credit of the U.S. government (for example,
"Ginnie Mae's"). Others are supported by the right of the agency to
borrow an amount from the U.S. government limited to a specific
line of credit (for example, "Fannie Mae's").  Others are supported
only by the credit of the agency that issued the security (for
example, "Freddie Mac's").

         o  Commercial Paper.  Commercial paper is short-term corporate
debt.  The Fund's commercial paper investments may include variable

                                                       -14-

<PAGE>



amount master  demand notes and floating rate or variable rate notes,  described
in the Statement of Additional Information.

         o  Mortgage-Backed   Securities  and  CMOs.  The  Fund  may  invest  in
securities  that represent an interest in a pool of residential  mortgage loans.
These include collateralized mortgage-backed obligations (referred to as "CMOs")
issued by the U.S. government, its agencies or instrumentalities,  or by private
issuers.  The issuer's  obligation to make interest and principal  payments on a
mortgage-backed  security is secured by the underlying portfolio of mortgages or
mortgage-backed  securities.  Prepayments on the underlying mortgages may reduce
the yield on mortgage-backed securities or CMOs.

   
         The Fund may also enter into "forward roll"  transactions with banks or
other buyers that provide for future delivery of the mortgage-backed  securities
in which the Fund may invest.  The Fund would be  required to identify  with its
custodian bank certain  assets,  which may consist of liquid assets of any type,
including equity securities and debt securities of any grade, in an amount equal
to its purchase payment obligation under the roll.
    

         o Asset-Backed Securities.  Asset-backed securities represent interests
in pools of consumer loans (such as credit card loans and automobile  loans) and
in other trade receivables. Asset-backed securities may be supported by a credit
enhancement,  such as a letter of credit , a guarantee  or a  preference  right.
However,  the extent of the credit  enhancement  may be different  for different
securities  and generally  applies to only a fraction of the  security's  value.
Prepayments on the underlying  receivables  may reduce the yield on asset-backed
securities.

         o Zero Coupon Securities.  These securities, which may be issued by the
U.S.  government,  its agencies or  instrumentalities or by private issuers, are
purchased at a substantial  discount from their face value.  They are subject to
greater  fluctuations  in  market  value as  interest  rates  change  than  debt
securities that pay interest periodically. Interest accrues on zero coupon bonds
even though cash is not actually received.

         o  Participation Interests.  Participation interests are
interests in loans made to U.S. or foreign companies or to foreign
governments.  These interests are acquired from banks or brokers
that have made the loan or are members of the lending syndicate.
No more than 5% of the Fund's net assets may be invested in

                                                       -15-

<PAGE>



participation interests of the same borrower.

         o  Bank Obligations.  These include time deposits,
certificates of deposit and bankers acceptances of a domestic or
foreign bank with total assets of at least U.S. $1 billion.

   
         |X| Risks of Debt  Securities.  In addition to credit risks,  described
below,  debt  securities are subject to changes in their value due to changes in
prevailing  interest rates.  When  prevailing  interest rates fall, the value of
already-issued debt securities generally rises and their value will decline when
interest rates rise. The magnitude of these  fluctuations  will often be greater
for longer-term debt securities than  shorter-term  debt securities.  Changes in
the value of  securities  held by the Fund mean that the Fund's share prices can
go up or down when interest  rates change because of the effect of the change on
the value of the Fund's portfolio of debt securities. Credit risk relates to the
ability of the issuer to meet  interest or  principal  payments on a security as
they become due. Generally,  higher yielding lower-grade bonds, described below,
are  subject  to  credit  risks  to  a  greater  extent  than  lower   yielding,
investment-grade bonds.

         |X| Special Risks of Lower-Grade  Securities.  High yield,  lower-grade
securities,  whether rated or unrated,  often have speculative  characteristics.
Lower-grade  securities,  often  referred to as "junk bonds," have special risks
that make them riskier investments than investment grade securities. They may be
subject to greater market  fluctuations and risk of loss of income and principal
than lower yielding,  investment-grade securities. There may be less of a market
for them and therefore they may be harder to sell at an acceptable price.  There
is  a  relatively  greater   possibility  that  the  issuer's  earnings  may  be
insufficient to make the payments of interest due on the bonds. The issuer's low
creditworthiness may increase the potential for its insolvency.
    

         These risks mean that the Fund may not achieve the expected income from
lower-grade  securities,  and that the Fund's  net asset  value per share may be
affected by declines in value of these securities.  The Fund is not obligated to
dispose  of  securities  when  issuers  are in  default  or if the rating of the
security is  reduced.  For foreign  lower-grade  securities,  these risks are in
addition to the risks described in "Foreign Securities."  Convertible securities
may be less  subject to some of these risks than other debt  securities,  to the
extent  they can be  converted  into  stock,  which may be more  liquid and less
affected by these

                                                       -16-

<PAGE>



other risk factors.

   
         As of  September  30,  1996,  the  Fund's  portfolio  included  foreign
government  debt  obligations  and  corporate  bonds  in  the  following  rating
categories of Standard & Poor's Corporation ("S&P") or if unrated, determined by
the Manager to be  comparable to the category  indicated  (the amounts shown are
the  dollar-weighted  average values of the bonds in each category measured as a
percentage of the Fund's total assets):  AAA, 24.13%;  AA, 4.04%; A, 2.58%; BBB,
3.81%; BB, 15.83%; B, 22.43%; and CCC, 0.06%. If a bond was not rated by S&P but
was rated by Moody's Investors  Service,  Inc., it is included in the comparable
S&P category. The allocation of the Fund's assets in securities in the different
rating  categories  will vary over time, and the proportion  listed above should
not be  viewed as  representing  the  Fund's  current  or  future  proportionate
ownership of  securities  in particular  rating  categories.  Appendix A to this
Prospectus describes the rating categories.
    

         o Equity  Securities.  The Fund may invest in common stocks,  preferred
stock, convertible securities,  warrants and other equity securities of domestic
or foreign  companies of any size.  At times,  the stock markets can be volatile
and stock  prices can change  substantially.  This  market  risk will affect the
Fund's net asset values per share.  Not all stock prices change  uniformly or at
the same time,  and other  factors can affect a  particular  stock's  price (for
example,  poor earnings  reports by an issuer,  loss of major  customers,  major
litigation  against an issuer,  changes in government  regulations  affecting an
industry). Not all of these factors can be predicted.

         The Fund may invest up to 5% of its net assets in  warrants,  which are
options to purchase  stock at set prices that are valid for a limited  period of
time.  No more than 2% of the Fund's net assets may be invested in warrants  not
listed on the New York or American Stock Exchanges. These limits do not apply to
warrants attached to other securities.  Additional risks of investing in foreign
equity securities are discussed under "Foreign Securities."

         o Stock  Investment  Risks.  Because the Fund may invest a  substantial
portion  of its  assets in stocks,  the value of the  Fund's  portfolio  will be
affected by changes in the stock  markets.  At times,  the stock  markets can be
volatile and stock prices can change substantially. This market risk will affect
the Fund's net asset values per share, which will fluctuate as the values of the

                                                       -17-

<PAGE>



Fund's portfolio  securities change. Not all stock prices change uniformly or at
the same time,  not all stock  markets  move in the same  direction  at the same
time,  and other  factors can affect a particular  stock's  prices (for example,
poor earnings reports by an issuer,  loss of major  customers,  major litigation
against an issuer, and changes in government regulations affecting an industry).
Not all of these factors can be predicted.

   
         The  Fund   attempts  to  limit  market  risks  by   diversifying   its
investments,  that is, by not holding a substantial  amount of the securities of
any one company and by not investing too great a percentage of the Fund's assets
in any one company.  Also, the Fund does not  concentrate its investments in any
one industry or group of  industries.  Because  changes in stock and bond market
prices can occur at any time, and because yields on debt securities available at
different times will vary,  there is no assurance that the Fund will achieve its
investment  objectives,  and when you redeem your shares, they may be worth more
or less than what you paid for them.
    

         |X|   Board-Approved   Instruments.   The  Fund  may  invest  in  other
investments (including new investments that may be developed in the future) that
the Fund's Board of Trustees (or the Manager,  under  guidelines  established by
the Board) determines are consistent with the Fund's  investment  objectives and
investment policies.

         o Portfolio  Turnover.  A change in the securities  held by the Fund is
known as "portfolio  turnover." The Fund will actively use portfolio  trading to
try to benefit from  differences in short-term  yields among different issues of
debt securities,  to try to increase its income.  The Fund's portfolio  turnover
rate is not expected to exceed 300% per year. High portfolio turnover of 100% or
more may  affect  the Fund's  ability  to  qualify  as a  "regulated  investment
company"  under the Internal  Revenue Code for tax  deductions for dividends and
capital gains  distributions the Fund pays to shareholders.  Portfolio  turnover
affects brokerage costs, dealer markups and other transaction costs, and results
in the Fund's realization of capital gains or losses for tax purposes.

Other Investment Techniques and Strategies. The Fund may also use the investment
techniques and strategies  described  below.  These  techniques  involve certain
risks. The Statement of Additional  Information  contains more information about
these practices, including limitations on their use that may help to reduce some
of the risks.


                                                       -18-

<PAGE>



   
         o Borrowing for Leverage.  The Fund may borrow money in an amount up to
one-third of its total assets from banks to buy securities. The Fund will borrow
only if it can do so without putting up assets as security for a loan. This is a
speculative  investment  method known as "leverage."  Leveraging may subject the
Fund to greater  risks and costs than funds that do not borrow.  These risks may
include  the  possible  reduction  of income  since the Fund  pays  interest  on
borrowings  and increased  fluctuation in the Fund's net asset values per share.
Borrowing  is subject  to  regulatory  limits  described  in more  detail in the
Statement of Additional Information.  Under the Investment Company Act, the Fund
can borrow only if it maintains at least a 300% ratio of assets to borrowings at
all times.
    

         |X|  When-Issued  and  Delayed  Delivery  Transactions.  The  Fund  may
purchase  securities  on a  "when-issued"  basis,  and may purchase or sell such
securities on a "delayed  delivery" basis. These terms refer to securities whose
terms and indenture are available and for which a market  exists,  but which are
not  available  for  immediate  delivery.  The Fund does not intend to make such
purchases for speculative  purposes.  During the period between the purchase and
settlement,  no payment is made for the security and no interest  accrues to the
buyer  from  the  investment.  There  may be a risk of loss if the  value of the
security changes prior to the settlement date.

   
         |X|  Repurchase   Agreements.   The  Fund  may  enter  into  repurchase
agreements.  They are  primarily  used for liquidity  purposes.  In a repurchase
transaction,  the Fund buys a security and simultaneously sells it to the vendor
for  delivery  at  a  future   date.   Repurchase   agreements   must  be  fully
collateralized.  However,  if the vendor  fails to pay the  resale  price on the
delivery  date,  the Fund may incur costs in disposing of the collateral and may
experience  losses if there is any delay in its  ability to do so. The Fund will
not enter  into a  repurchase  agreement  that  causes  more than 10% of its net
assets to be subject to  repurchase  agreements  having a maturity  beyond seven
days because they may be illiquid  (See  "Illiquid  and  Restricted  Securities"
below.)  There is no limit on the amount of the  Fund's  net assets  that may be
subject to repurchase agreements of seven days or less.

         o  Illiquid and Restricted Securities.  Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments.
Investments may be illiquid because of the absence of an active
    

                                                       -19-

<PAGE>



   
trading market, making it difficult to value them or dispose of them promptly at
an  acceptable  price.  A  restricted  security  is one that  has a  contractual
restriction  on its  resale  or  which  cannot  be  sold  publicly  until  it is
registered  under the Securities Act of 1933. The Fund will not invest more than
10% of its net  assets in  illiquid  or  restricted  securities  (the  Board may
increase  that  limit  to  15%).  The  Fund's  percentage  limitation  on  these
investments  does not apply to certain  restricted  securities that are eligible
for resale to qualified institutional purchasers.  The Manager monitors holdings
of illiquid securities on an ongoing basis and at times the Fund may be required
to sell some holdings to maintain adequate liquidity.
    

         |X| Loans of Portfolio  Securities.  To attempt to increase its income,
the Fund may lend  its  portfolio  securities  to  brokers,  dealers  and  other
financial institutions. The Fund must receive collateral for a loan. These loans
are  limited to not more than 25% of the  Fund's  net assets and are  subject to
other conditions described in the Statement of Additional Information.  The Fund
presently does not intend to lend its portfolio securities,  but if it does, the
value of  securities  loaned  is not  expected  to exceed 5% of the value of its
total assets in the coming year.

   
         o Derivative  Investments.  In general, a "derivative  investment" is a
specially designed  investment.  Its performance is linked to the performance of
another investment or security,  such as an option,  future,  index, currency or
commodity. The Fund may not purchase or sell physical commodities; however, this
does not prevent the Fund from buying or selling  options and futures  contracts
or from  investing  in  securities  or  other  instruments  backed  by  physical
commodities.
    

         Derivative  investments  used by the Fund are  used in some  cases  for
hedging  purposes and in other cases for  "non-hedging"  investment  purposes to
seek income or total return. In the broadest sense,  exchange-traded options and
futures contracts (discussed in "Hedging," below) may be considered  "derivative
investments." Any derivative instrument that is a debt security will be included
for purposes of the Fund's investment policy that it will invest at least 65% of
its total assets in debt securities.

         The Fund may invest in different types of  derivatives.  "Index-linked"
or  "commodity-linked"  notes are debt  securities  of  companies  that call for
interest  payments and/or payment on the maturity of the note in different terms
than the typical note where

                                                       -20-

<PAGE>



the borrower  agrees to make fixed  interest  payments and to pay a fixed sum on
the maturity of the note.  Principal and/or interest payments on an index-linked
note depend on the performance of one or more market indices,  such as the S & P
500 Index or a weighted index of commodity futures,  such as crude oil, gasoline
and natural gas. The Fund may invest in "debt  exchangeable for common stock" of
an issuer or  "equity-linked"  debt  securities of an issuer.  At maturity,  the
principal  amount of the debt  security  is  exchanged  for common  stock of the
issuer or is payable in an amount  based on the  issuer's  common stock price at
the time of maturity.  In either case there is a risk that the amount payable at
maturity will be less than the expected principal amount of the debt.

         The Fund may also  invest in  currency-indexed  securities.  Typically,
these are  short-term or  intermediate-term  debt  securities  having a value at
maturity,  and/or an  interest  rate,  determined  by  reference  to one or more
foreign currencies.  The  currency-indexed  securities purchased by the Fund may
make payments based on a formula.  The payment of principal or periodic interest
may be calculated as a multiple of the movement of one currency  against another
currency,  or against an index.  These  investments may entail increased risk to
principal and increased price volatility.

   
         o  Derivatives  May Entail  Special  Risks.  The  company  issuing  the
instrument  may fail to pay the amount due on the  maturity  of the  instrument.
Also,  the  underlying  investment  or  security  might not  perform the way the
Manager expected it to perform.  Markets,  underlying securities and indices may
move in a direction not  anticipated  by the Manager.  Performance of derivative
investments  may also be influenced by interest rate and stock market changes in
the U.S.  and  abroad.  All of this can mean  that the Fund  will  realize  less
principal  or income  from the  investment  than  expected.  Certain  derivative
investments  held by the Fund may be illiquid.  Please  refer to  "Illiquid  and
Restricted Securities."

         o Hedging.  As described  below, the Fund may purchase and sell certain
kinds of futures contracts, put and call options, forward contracts, and options
on  futures,  broadly-based  stock or bond  indices and  foreign  currency,  and
options and futures thereon, 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,
described  below.  The hedging  instruments  the Fund may use are  described  in
greater detail in "Other Investment Techniques
    

                                                       -21-

<PAGE>



and Strategies" in the Statement of Additional Information.

   
         The Fund may buy and sell options,  futures and forward contracts for a
number  of  purposes.  It  may  do so to  try  to  manage  its  exposure  to the
possibility  that the prices of its  portfolio  securities  may  decline,  or to
establish a position in the  securities  market as a  temporary  substitute  for
purchasing  individual  securities.  The Fund  may  purchase  and  sell  foreign
currency  in  hedging  transactions.  It may also use  certain  kinds of hedging
instruments to try to manage its exposure to changing interest rates.
    

         o Futures.  The Fund may buy and sell futures  contracts that relate to
(1) foreign  currencies (these are Forward  Contracts),  (2) financial  indices,
such as U.S. or foreign government securities indices, corporate debt securities
indices  or equity  securities  indices  (these  are  referred  to as  Financial
Futures),  and (3)  interest  rates  (these are  referred  to as  Interest  Rate
Futures).  These types of Futures are described in "Hedging" in the Statement of
Additional Information.

         o  Put and Call Options.  The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).

   
         The Fund may buy calls on securities,  foreign currencies,  or Futures,
or to terminate its obligation on a call the Fund previously wrote. The Fund may
write (that is, sell) call options on securities, foreign currencies or Futures,
but only if they are  "covered."  That  means  the  Fund  must own the  security
subject to the call  while the call is  outstanding.  Calls on  Futures  must be
covered by  securities  or other liquid  assets the Fund owns and  segregates to
enable it to satisfy its obligations if the call is exercised.  Up to 50% of the
Fund's total assets may be subject to calls.
    

         The Fund may buy puts that relate to  securities,  Futures,  or foreign
currencies.  The Fund may buy a put on a  security  whether or not the Fund owns
the particular security in its portfolio.  The Fund may sell a put on securities
or Futures,  but only if the puts are covered by segregated  liquid assets.  The
Fund will not write puts if more than 50% of the Fund's net assets would have to
be segregated to cover put obligations.

         A call or put may be purchased  only if, after the purchase,  the value
of all call and put options held by the Fund will not

                                                       -22-

<PAGE>



exceed 5% of the Fund's total assets.

         o Forward  Contracts.  Forward  Contracts are foreign currency exchange
contracts.  They are used to buy or sell foreign currency for future delivery at
a fixed price. The Fund uses them to try to "lock in" the U.S. dollar price of a
security  denominated in a foreign currency that the Fund has purchased or sold,
or to protect against  possible losses from changes in the relative value of the
U.S. dollar and a foreign currency. The Fund may also use "cross hedging," where
the Fund hedges against changes in currencies other than the currency in which a
security it holds is  denominated.  The use of Forward  Contracts may reduce the
gain that would otherwise result from a change in the  relationship  between the
U.S. dollar and a foreign currency.

         o Hedging  instruments  can be  volatile  instruments  and may  involve
special  risks.  The use of  hedging  instruments  requires  special  skills and
knowledge of investment  techniques that are different from 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 return. The Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other investments
or if it could not close out a position  because of an  illiquid  market for the
future or option.

         Options  trading  involves  the payment of premiums and has special tax
effects  on the  Fund.  There  are  also  special  risks in  particular  hedging
strategies.  For example,  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 and will not be able to realize  any profit if the
investment has increased in value above the call price.  In writing a put, there
is a risk that the Fund may be  required  to buy the  underlying  security  at a
disadvantageous  price.  These risks and the hedging strategies the Fund may use
are described in greater detail in the Statement of Additional Information.

         o Short Sales "Against-the-Box". The Fund may not sell securities short
except   in   collateralized   transactions   referred   to   as   short   sales
"against-the-box."  No more than 15% of the Fund's  net  assets  will be held as
collateral for such short sales at any one time.


                                                       -23-

<PAGE>



         o Non-Concentration. The Fund shall not invest 25% or more of its total
assets  in  any  industry;  however,  for  the  purposes  of  this  restriction,
obligations of the U.S. Government,  its agencies or  instrumentalities  are not
considered to be part of any single industry.

Investment Restrictions.  The Fund has other investment
restrictions which are fundamental policies.  Under these
fundamental policies, the Fund cannot:

         o with  respect to 75% of its  assets,  purchase  securities  issued or
guaranteed by any one issuer (other than the U.S.  Government or its agencies or
instrumentalities), if more than 5% of the Fund's total assets would be invested
in  securities  of that  issuer or the Fund would then own more than 10% of that
issuer's voting securities;

         o make loans,  except that the Fund may purchase  debt  securities  and
enter into repurchase agreements or when-issued,  delayed delivery, forward roll
or similar securities transactions, and may lend its portfolio securities; or

         o pledge, mortgage or otherwise encumber, transfer or assign any of its
assets to secure a debt;  segregation  of assets  arrangements  for  premium and
margin  payments in connection  with hedging  instruments are not deemed to be a
pledge of assets.

   
         Unless the prospectus states that a percentage  restriction  applies on
an ongoing basis,  it applies only at the time that Fund makes an investment and
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. Other investment
restrictions  are  listed  in  "Investment  Restrictions"  in the  Statement  of
Additional Information.
    

How the Fund is Managed

Organization  and  History.  The  Fund  was  organized  in  February,  1995 as a
Massachusetts  business trust. The Fund is an open-end,  diversified  management
investment company,  with an unlimited number of authorized shares of beneficial
interest.

   
         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
    

                                                       -24-

<PAGE>



   
year to oversee the Fund's  activities,  review its performance,  and review the
actions of the Manager.  "Trustees and Officers of the Fund" in the Statement of
Additional  Information names the Trustees and officers of the Fund and provides
more  information  about them.  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 the power, without shareholder  approval,  to
divide  unissued  shares of the Fund into three or more  classes.  The Board has
done so, and the Fund  currently has three  classes of shares,  Class A, Class B
and Class C. All classes invest in the same investment portfolio. Each class has
its own  dividends  and  distributions  and pays certain  expenses  which may be
different for the different  classes.  Each class may have a different net asset
value. Each share has one vote at shareholder  meetings,  with fractional shares
voting  proportionally.  Only  shares of a  particular  class vote as a class on
matters that affect that class alone. Shares are freely transferrable.

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

         The  Manager has  operated as an  investment  advisor  since 1959.  The
Manager  (including  a  subsidiary)   currently  manages  investment  companies,
including other  Oppenheimer  funds,  with assets of more than $62 billion as of
December  31,  1996,  and with  more than 3 million  shareholder  accounts.  The
Manager is owned by Oppenheimer  Acquisition  Corp.,  a holding  company that is
owned in part by senior officers of the Manager and controlled by  Massachusetts
Mutual Life Insurance Company.

         o  Portfolio Manager.  The Portfolio Manager of the Fund is
Mr. Ashwin K. Vasan.  He is a Vice President of the Fund and the
Manager and has been the person principally responsible for the
day-to-day management of the Fund's portfolio since June, 1995.
    

                                                       -25-

<PAGE>



   
Mr. Vasan joined the Manager in January, 1992 as a securities analyst.  Prior to
that, he was a securities  analyst for Citibank,  N.A. Since June,  1993, he has
been an officer and  co-portfolio  manager of two other  Oppenheimer  funds with
particular  responsibility  for  managing  the foreign  debt  component of those
portfolios.

         o Fees and Expenses.  Under the Investment Advisory Agreement, the Fund
pays the Manager the following annual fees, which are higher than the rates paid
by most other investment  companies,  and which decline on additional  assets as
the Fund grows:  0.75% of the first $200  million of average  annual net assets,
0.72% of the next $200  million,  0.69% of the next $200  million,  0.66% of the
next $200 million,  0.60% of the next $200 million,  and 0.50% of average annual
net assets in excess of $1  billion.  The Fund's  management  fee for its fiscal
year ended September 30, 1996, as restated to reflect the Manager's  termination
of its voluntary expense assumption,  was 0.75% of average annual net assets for
its Class A, Class B and Class C shares. Please refer to "Expenses."
    

         The  Fund  pays  expenses  related  to its  daily  operations,  such as
custodian fees,  Trustees' fees,  transfer agency fees,  legal fees and auditing
costs.  Those  expenses  are  paid  out of the  Fund's  assets  and are not paid
directly by shareholders.  However, those expenses reduce the net asset value of
shares,  and  therefore  are  indirectly  borne by  shareholders  through  their
investment.  More information  about the Investment  Advisory  Agreement and the
other  expenses  paid by the Fund is  contained in the  Statement of  Additional
Information.

         There is also  information  about the  Fund's  brokerage  policies  and
practices in  "Brokerage  Policies of the Fund" in the  Statement of  Additional
Information. That section discusses how brokers and dealers are selected for the
Fund's portfolio  transactions.  When deciding which brokers to use, the Manager
is permitted by the Investment  Advisory  Agreement to consider  whether brokers
have sold shares of the Fund or any other funds for which the Manager  serves as
investment advisor.

   
         o 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.
    

                                                       -26-

<PAGE>



   
         o The Transfer  Agent.  The Fund's  transfer agent is  OppenheimerFunds
Services,  a division of the Manager,  which acts as the  shareholder  servicing
agent  for the  Fund on an "at  cost"  basis.  It also  acts as the  shareholder
servicing  agent  for  other  Oppenheimer  funds.   Shareholders  should  direct
inquiries  about  their  accounts  to the  Transfer  Agent  at the  address  and
toll-free number shown below in this Prospectus and on the back cover.
    

Performance of the Fund

   
Explanation of Performance Terminology.  The Fund uses the terms "total return,"
"average  annual total return" and "yield" to illustrate  its  performance.  The
performance of each class of shares is shown separately, because the performance
of each class of shares will usually be  different as a result of the  different
kinds of expenses each class bears.  These 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  (which will vary if dividends  are
received  in cash or  shares  are sold or  purchased).  The  Fund's  performance
information  may help  you see how well  your  Fund  has done  over  time and to
compare it to other mutual funds or market indices.
    

         It is important to  understand  that the Fund's total returns and yield
represent  past  performance  and should not be considered to be  predictions of
future returns or performance. More detailed information about how total returns
are  calculated is contained in the Statement of Additional  Information,  which
also  contains  information  about  other ways to measure and compare the Fund's
performance. The Fund's investment performance will vary over time, depending on
market conditions, the composition of the portfolio, expenses and which class of
shares you purchase.

         o Total  Returns.  There are  different  types of total returns used 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.
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
the Fund's actual year-by-year performance.


                                                       -27-

<PAGE>



   
         When total returns are quoted for Class A shares,  normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B shares,  normally the  contingent  deferred sales charge that applies to
the period for which total return is shown has been deducted. When total returns
are shown for a one-year  period (or less) for Class C shares,  they reflect the
effect of the contingent deferred sales charge.  However, total returns may also
be quoted at net asset  value,  without  considering  the  effect of either  the
front-end or the appropriate  contingent  deferred sales charge,  as applicable,
and those returns would be less if sales charges were deducted.
    

         o Yield.  Each class of shares  calculates  its yield by  dividing  the
annualized  net investment  income per share from the portfolio  during a 30-day
period by the maximum offering price on the last day of the period. The yield of
each  class  will  differ  because of the  different  expenses  of each class of
shares.  The yield  data  represents  a  hypothetical  investment  return on the
portfolio, and does not measure an investment return based on dividends actually
paid to  shareholders.  To show that return, a dividend yield may be calculated.
Dividend  yield is  calculated by dividing the dividends of a class derived from
net  investment  income during a stated period by the maximum  offering price on
the last day of the  period.  Yields  and  dividend  yields  for  Class A shares
reflect the deduction of the maximum initial sales charge, but may also be shown
based on the  Fund's net asset  value per share.  Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales charge.

   
How Has the Fund  Performed?  Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended September 30, 1996,  followed by a
graphical  comparison of the Fund's  performance to an  appropriate  broad-based
market index and a secondary index.

         o Managements' Discussion of Performance. During the Fund's fiscal year
ended September 30, 1996, the Fund's performance was affected  positively by its
limited  exposure to the  Japanese  government  bond market and its  emphasis on
positions in select emerging markets and Europe's higher yielding markets, which
both  performed  well in the third and  fourth  quarters.  While  continuing  to
maintain an overweighted  allocation in select emerging  markets,  the portfolio
manager began to restructure that exposure during the fourth quarter somewhat by
gradually  reducing the amount of foreign bonds that are U.S. dollar denominated
in the portfolio. In the
    

                                                       -28-

<PAGE>



   
fourth quarter the portfolio manager also began to reduce the Funds' exposure to
the higher yielding  European markets,  specifically  Italy,  Spain,  Sweden and
Portugal,  taking profits in those  investments  which had increased in value as
the high yield markets rallied. The Fund's portfolio and its portfolio manager's
strategies are subject to change.

         o Comparing the Fund's Performance to the Market. The charts below show
the  performance  of a hypothetical  $10,000  investment in Class A, Class B and
Class C shares of the Fund held from the  inception of the Fund on June 15, 1995
until September 30, 1996.

         The  performance  of each class of the Fund's shares is compared to two
indices  because the Fund invests in debt  securities  issued by  governments in
both developed  countries and emerging  market  countries and in debt securities
issued by companies  located in those  countries.  In the Manager's view, no one
index adequately combines both types of investments.

         Performance  is compared to the Salomon  Brothers  Non-US  Dollar World
Government  Bond Index, a subset of the Salomon  Brothers World  Government Bond
Index.  The Salomon  Brothers  Non-Us  Dollar World  Government  Bond Index is a
market  capitalization  weighted  benchmark  that tracks the  performance  of 13
government  bond  markets  including  Australia,  Canada,  Japan and 10 European
countries.  Thus, the Salomon Brothers Non-US Dollar World Government Bond Index
does not  reflect  the  performance  of the fixed  income  markets in either the
United States or in any emerging market countries.  In addition, it is comprised
of only  government  bonds and does not reflect  the  performance  of  corporate
bonds.

         Performance is also compared to the performance of the Salomon Brothers
Brady Bond Index which  provides a total return  benchmark  for emerging  market
country  bonds.  It is designed to be  consistent  with other  Salomon  Brothers
fixed-income  indices to allow direct comparison of the developing  country debt
market with other markets.  A Brady Bond is a bond that is exchanged for debt or
new money within the context of the debt-restructuring program initiated in 1990
by the United States Department of the Treasury.

         Index performance  reflects the reinvestment of dividends' but does not
consider the effect of capital gains or transaction costs, and none of that data
below shows the effect of taxes.  Moreover,  the index performance data does not
reflect any assessment of the risk of the investments included in the index. The
Fund's
    

                                                       -29-

<PAGE>



   
performance  reflects the effect of the Fund's business and operating  expenses.
While  index  comparisons  may be useful to provide a  benchmark  for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in the indices shown.

Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class A), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index

[graph]

Average Annual Total Return of Class A Shares of the Fund at
9/30/96(1)
1 Year                                  Life of Class
- -------------------------------------------------------------------
13.18%                                  14.40%

Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class B), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index

[graph]

Average Annual Total Return of Class B Shares of the Fund at
9/30/96(2)
1 Year                                  Life of Class
- -------------------------------------------------------------------
12.71%                                  14.79%

Total  returns and the ending  account  values in the graphs  reflect  change in
share  value  and  include  reinvestment  of all  dividends  and  capital  gains
distributions.  The  performance  information  for the Salomon  Brothers  Non-US
Dollar World  Government Index and the Salomon Brothers Brady bond Index in each
of the graphs begins on
June 30, 1995.
(1) The inception date of the Fund (Class A shares) was 6/15/95. Class A returns
and the ending account value in the graph are shown net of the applicable  4.75%
maximum initial sales charge. (2) Class B shares of the Fund were first publicly
offered on
    
                                                       -30-

<PAGE>


   
6/15/95.  Returns are shown net of the applicable 5% and 4% contingent  deferred
sales charge,  respectively,  for the one-year period and for the life-of-class.
The ending  account  value in the graph is net of the  applicable  4% contingent
deferred  sales  charge.   Past   performance  is  not   predicative  of  future
performance.

Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class C), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index

[graph]

Average Annual Total Return of Class C Shares of the Fund at
9/30/96(3)
1 Year                                  Life of Class
- -------------------------------------------------------------------
16.92%                                  17.75%

Total  returns and the ending  account  values in the graphs  reflect  change in
share  value  and  include  reinvestment  of all  dividends  and  capital  gains
distributions.  The  performance  information  for the Salomon  Brothers  Non-US
Dollar World  Government Index and the Salomon Brothers Brady bond Index in each
of the graphs begins on
June 30, 1995.
(3) Class C shares of the Fund were  first  publicly  offered  on  6/15/95.  The
return  for the one year  result is shown net of the  applicable  1%  contingent
deferred sales charge.

Past  performance is not  predicative of future  performance.  Graphs may not be
drawn to same scale.
    
A B O U T  Y O U R  A C C O U N T

How to Buy Shares

Classes of Shares.  The Fund offers investors three different classes of shares.
The different  classes of shares represent  investments in the same portfolio of
securities but are subject to different  expenses and will likely have different
share prices.

   
         o  Class A Shares.  If you buy Class A shares, you pay an
initial sales charge on investments up to $1 million (up to
    

                                                       -31-

<PAGE>



   
$500,000 for purchases by "Retirement  Plans," as defined in "Class A Contingent
Deferred Sales Charge" on page ____).  If you purchase Class A shares as part of
an investment of at least $1 million  ($500,000 for Retirement  Plans) in shares
of one or more Oppenheimer  funds, you will not pay an initial sales charge, but
if you sell any of those shares  within 18 months of buying them,  you may pay a
contingent  deferred  sales  charge.  The amount of that sales  charge will vary
depending  on the amount you  invested.  Sales  charge  rates are  described  in
"Buying Class A Shares," below.

         o Class B Shares. If you buy Class B shares, you pay no sales charge at
the time of  purchase,  but if you sell your  shares  within six years of buying
them,  you will  normally  pay a  contingent  deferred  sales charge that varies
depending  on how long you own your  shares,  as  described  in "Buying  Class B
Shares," below.

         o Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of  purchase,  but if you sell your  shares  within 12 months of buying
them,  you will  normally  pay a  contingent  deferred  sales  charge  of 1%, as
described in "Buying 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
better  suited to your needs  depends  on a number of  factors  which you should
discuss with your financial advisor.  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 most  important
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.

         In the  following  discussion,  to help provide you and your  financial
advisor  with a  framework  in  which  to  choose a  class,  we have  made  some
assumptions  using a  hypothetical  investment  in the  Fund.  We used the sales
charge  rates  that  apply to each  class,  considered  the effect of the annual
asset-based  sales  charge  on Class B and  Class C  expenses  (which,  like all
expenses,  will affect your investment return).  For the sake of comparison,  we
have assumed that there is a 10% rate of  appreciation  in the  investment  each
year. Of course,  the actual  performance of your investment cannot be predicted
and will vary, based on the Fund's actual

                                                       -32-

<PAGE>



investment returns and the operating expenses borne by each class of shares, and
which class of shares you invest in.

         The factors discussed below are not intended to be investment advice or
recommendations, because each investor's financial considerations are different.
The discussion below of the factors to consider in purchasing a particular class
of shares  assumes  that you will  purchase  only one class of shares  and not a
combination of shares of different classes.

         o How  Long  Do You  Expect  to  Hold  Your  Investment?  While  future
financial needs cannot be predicted with certainty,  knowing how long you expect
to hold your investment  will assist you in selecting the  appropriate  class of
shares.  Because of the effect of  class-based  expenses,  your choice will also
depend on how much you plan to invest.  For example,  the reduced  sales charges
available  for larger  purchases  of Class A shares may,  over time,  offset the
effect of paying an initial sales charge on your  investment  (which reduces the
amount of your investment dollars used to buy shares for your account), compared
to the effect  over time of higher  class-based  expenses  on Class B or Class C
shares for which no initial sales charge is paid.

         o Investing  for the Short Term.  If you have a  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,  because of the effect of the Class B contingent deferred sales charge
if you  redeem  in less  than 7  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 the more you invest and the more 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.  For example,
Class A might  be more  advantageous  than  Class  C (as  well as  Class  B) for
investments of more than $100,000 expected to be

                                                       -33-

<PAGE>



held for 5 or 6 years (or more).  For investments  over $250,000  expected to be
held 4 to 6 years (or more),  Class A shares may become more  advantageous  than
Class C (and B). If investing $500,000 or more, Class A may be more advantageous
as your investment horizon approaches 3 years or more.

   
         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 $1 million or more of Class B or Class C shares,
respectively, from a single investor.
    

         o Investing  for the Longer Term.  If you are  investing for the longer
term,  for  example,  for  retirement,  and do not expect to need access to your
money  for  seven  years  or  more,   Class  B  shares  may  be  an  appropriate
consideration,  if you plan to invest less than $100,000.  If you plan to invest
more  than  $100,000  over the long  term,  Class A shares  will  likely be more
advantageous than Class B shares or C shares, as discussed above, because of the
effect of the expected lower expenses for Class A shares and the reduced initial
sales  charges  available  for larger  investments  in Class A shares  under the
Fund's Right of Accumulation.

   
         Of course,  these examples are based on approximations of the effect of
current sales charges and expenses on a hypothetical investment over time, using
the assumed  annual  performance  return stated above,  and therefore you should
analyze your options carefully.

         o Are There Differences in Account Features That Matter to You? Because
some account features such as checkwriting are not available to Class B or Class
C shareholders, or other features (such as Automatic Withdrawal Plans) might not
be advisable (because of the effect of the contingent  deferred sales charge) in
non-retirement  accounts  for  Class  B or  Class  C  shareholders,  you  should
carefully  review how you plan to use your  investment  account before  deciding
which class of shares to buy. Share  certificates  are not available for Class B
and Class C shares,  and if you are considering  using your shares as collateral
for a loan, that may be a factor to consider.
    

         o  How Does It Affect Payments to My Broker?  A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares may receive different

                                                       -34-

<PAGE>



compensation  for selling one class of shares than for selling another class. It
is important that investors understand that the purpose of the Class B and Class
C contingent deferred sales charges and asset-based sales charges is the same as
the purpose of the front-end  sales charge on sales of Class A shares:  that is,
to compensate the  Distributor  for commissions it pays to dealers and financial
institutions for selling shares.

How Much Must You Invest?  You can open a Fund  account  with a minimum  initial
investment of $1,000 and make additional  investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.

         With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7) custodial
plans  and  military  allotment  plans,  you can  make  initial  and  subsequent
investments  of as little as $25.  Subsequent  purchases  of at least $25 can be
made by telephone through AccountLink.

   
         Under   pension,   profit-sharing   and  401(k)  plans  and  Individual
Retirement  Accounts (IRAs),  you can make an initial investment of as little as
$250 (if your IRA is  established  under an Asset Builder Plan,  the $25 minimum
applies), and subsequent investments may be as little as $25.
    

         There is no minimum investment  requirement if you are buying shares by
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  by  reinvesting  distributions  from  unit
investment trusts that have made arrangements with the Distributor.

   
         o How Are Shares Purchased?  You can buy shares several ways -- through
any dealer,  broker or financial institution that has a sales agreement with the
Distributor,  or directly  through the Distributor,  or automatically  from your
bank  account   through  an  Asset  Builder  Plan  under  the   OppenheimerFunds
AccountLink service. The Distributor may appoint certain servicing agents as the
Distributor's  agent to accept purchase (and  redemption)  orders.  When you buy
shares,  be sure to specify  Class A,  Class B or Class C shares.  If you do not
choose, your investment will be made in Class A shares.
    

         o  Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.

                                                       -35-

<PAGE>



   
         o Buying Shares Through the Distributor.  Complete an  OppenheimerFunds
New Account Application and return it with a check payable to  "OppenheimerFunds
Distributor,  Inc." Mail it to P.O. Box 5270,  Denver,  Colorado  80217.  If you
don't list a dealer on the  application,  the Distributor will act as your agent
in  buying  the  shares.  However,  it is  recommended  that  you  discuss  your
investment first with a financial advisor, to be sure that it is appropriate for
you.
    

         o  Buying  Shares  Through  OppenheimerFunds  AccountLink.  You can use
AccountLink  to link your Fund account  with an account at a U.S.  bank or other
financial  institution that is an Automated Clearing House (ACH) member. You can
then transmit funds  electronically  to purchase shares, or to have the Transfer
Agent send redemption  proceeds or to transmit  dividends and  distributions  to
your bank account.

         Shares are  purchased  for your account on  AccountLink  on the regular
business day the  Distributor  is instructed by you to initiate the ACH transfer
to buy shares. You can provide those instructions automatically,  under an Asset
Builder   Plan,   described   below,   or  by   telephone   instructions   using
OppenheimerFunds PhoneLink, also described below. You should request AccountLink
privileges  on  the  application  or  dealer  settlement  instructions  used  to
establish your account. Please refer to "AccountLink" below for more details.

   
         o Asset Builder Plans.  You may purchase  shares of the Fund (and up to
four other Oppenheimer  funds)  automatically  each month from your account at a
bank  or  other  financial   institution   under  an  Asset  Builder  Plan  with
AccountLink. Details are in the Statement of Additional Information.

         o At What Price Are Shares Sold? Shares are sold at the public offering
price based on the net asset value (and any initial  sales charge that  applies)
that is next  determined  after the  Distributor  receives the purchase order in
Denver,  Colorado.  In most cases,  to enable you to receive that day's offering
price,  the  Distributor or its designated  agent must receive your order by the
time of day The New York Stock Exchange closes, which is normally 4:00 P.M., New
York  time,  but may be  earlier  on some days (all  references  to time in this
Prospectus mean "New York time"). The net asset value of each class of shares is
determined  as of that  time on each day The New  York  Stock  Exchange  is open
(which is a "regular business day").
    

                                                       -36-

<PAGE>



         If you buy shares through a dealer,  the dealer must receive your order
by the  close of The New York  Stock  Exchange  on a  regular  business  day and
transmit it to the Distributor so that it is received  before the  Distributor's
close of business  that day,  which is normally  5:00 P.M. The  Distributor  may
reject any purchase order for the Fund's shares, in its sole discretion.

Buying 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 some cases, reduced sales charges
may be available,  as described  below.  Out of the amount you invest,  the Fund
receives the net asset value to invest for your account. The sales charge varies
depending on the amount of your  purchase.  A portion of the sales charge may be
retained by the  Distributor  and  allocated to your dealer.  The current  sales
charge rates and commissions paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
   
                                        Front-End Sales                Front-end Sales
                                        Charge as a                    Charge as a                    Commissions as
                                        Percentage of                  Percentage of                  Percentage of
Amount of Purchase                      Offering Price                 Amount Invested                Offering Price
<S>                                     <C>                            <C>                            <C>
- ---------------------------------------------------------------------------------------------------------------------
Less than $50,000                       4.75%                          4.98%                          4.00%
- ---------------------------------------------------------------------------------------------------------------------
$50,000 or more but
less than $100,000                      4.50%                          4.71%                          3.75%
- ---------------------------------------------------------------------------------------------------------------------
$100,000 or more but
less than $250,000                      3.50%                          3.63%                          2.75%
- ---------------------------------------------------------------------------------------------------------------------
$250,000 or more but
less than $500,000                      2.50%                          2.56%                          2.00%
- ---------------------------------------------------------------------------------------------------------------------
$500,000 or more but
less than $1 million                    2.00%                          2.04%                          1.60%
- ---------------------------------------------------------------------------------------------------------------------
    
</TABLE>

The Distributor  reserves the right to reallow the entire commission to dealers.
If that occurs,  the dealer may be  considered  an  "underwriter"  under Federal
securities laws.

         o Class A Contingent Deferred Sales Charge.  There is no

                                                       -37-

<PAGE>



initial  sales  charge on  purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:

         o  Purchases aggregating $1 million or more.

   
         o Purchases by a retirement  plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more.

         o Purchases by a retirement  plan qualified  under  sections  401(a) or
401(k) of the Internal  Revenue Code, by a non-qualified  deferred  compensation
plan (not including Section 457 plans),  employee benefit plan, group retirement
plan (see "How to Buy Shares - Retirement  Plans" in the Statement of Additional
Information  for further  details),  and  employee's  403(b)(7)  custodial  plan
account,  SEP IRA,  SARSEP,  or SIMPLE plan (all of these plans are collectively
referred to as "Retirement  Plans");  that (1) buys shares  costing  $500,000 or
more, or (2) has, at the time of purchase, 100 or more eligible participants, or
(3)  certifies  that it projects to have  annual plan  purchases  of $200,000 or
more.

         o Purchases by an  OppenheimerFunds  Rollover IRA if the  purchases are
made (1) through a broker,  dealer,  bank or registered  investment advisor that
has made special  arrangements with the Distributor for these 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.

         The Distributor  pays dealers of record  commissions on those purchases
in an amount equal to (i) 1.0% for  non-Retirement  Plan accounts,  and (ii) for
Retirement Plan accounts, 1.0% of the first $2.5 million, plus 0.50% of the next
$2.5 million,  plus 0.25% of purchases over $5 million.  That commission will be
paid only on the amount of those purchases that were not previously subject to a
front-end sales charge and dealer  commission.  No sales commission will be paid
to the  dealer,  broker  or  financial  institution  on  sales of Class A shares
purchased with the redemption  proceeds of shares of a mutual fund offered as an
investment  option  in a  Retirement  Plan in which  Oppenheimer  funds are also
offered as an investment option under a special arrangement with the Distributor
if the purchase  occurs more that 30 days after the addition of the  Oppenheimer
funds as an investment option to the Retirement Plan.
    

                                                       -38-

<PAGE>



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

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

         No Class A contingent  deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege  (described below).  However,  if the
shares  acquired by  exchange  are  redeemed  within 18 months of the end of the
calendar  month of the purchase of the exchanged  shares,  the sales charge will
apply.

   
         o Special  Arrangements With Dealers. The Distributor may advance up to
13 months'  commissions to dealers that have  established  special  arrangements
with the Distributor for Asset Builder Plans for their clients.
    

Reduced  Sales Charges for Class A Share  Purchases.  You may be eligible to buy
Class A shares at reduced  sales  charge  rates in one or more of the  following
ways:

         o Right of  Accumulation.  To qualify for the lower sales  charge rates
that apply to larger  purchases  of Class A shares,  you and your spouse can add
together Class A and Class B shares you purchase for your  individual  accounts,
or jointly,  or for trust or custodial  accounts on behalf of your  children who
are minors.  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.

                                                       -39-

<PAGE>



         Additionally,  you can add  together  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.  You can also
include 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. The value of those shares
will be based on the  greater  of the  amount  you paid for the  shares or their
current value (at offering price).  The Oppenheimer funds are listed in "Reduced
Sales  Charges" in the  Statement of  Additional  Information,  or a list can be
obtained  from the  Distributor.  The  reduced  sales  charge will apply only to
current purchases and must be requested when you buy your shares.

         o Letter 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. This can include purchases made
up to 90 days before the date of the Letter.  More  information  is contained in
the  Application  and in "Reduced  Sales Charges" in the Statement of Additional
Information.

         o Waivers of Class A Sales  Charges.  The Class A sales charges are not
imposed in the  circumstances  described below.  There is an explanation of this
policy in "Reduced Sales Charges" in the Statement of Additional Information.

         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:

         o  the Manager or its affiliates;

         o present or former  officers,  directors,  trustees and employees (and
their  "immediate  families"  as  defined  in  "Reduced  Sales  Charges"  in the
Statement  of  Additional   Information)  of  the  Fund,  the  Manager  and  its
affiliates, and retirement plans established by them for their employees;

         o  registered management investment companies, or separate

                                                       -40-

<PAGE>



accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;

         o 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;

         o  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 are identified 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);

         o dealers,  brokers 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
or advisor for the purchase or sale of Fund shares);

   
         o  (1)  investment  advisors  and  financial  planners  who  charge  an
advisory,  consulting  or other fee for their  services and buy shares for their
own accounts or the accounts of their clients, (2) Retirement Plans and deferred
compensation plans and trusts used to fund those Plans (including,  for example,
plans qualified or created under sections 401(a),  403(b) or 457 of the Internal
Revenue  Code),  and "rabbi  trusts" that buy shares for their own accounts,  in
each  case if those  purchases  are  made  through  a  broker  or agent or other
financial  intermediary that has made special  arrangements with the Distributor
for those  purchases;  and (3) clients of such investment  advisors or financial
planners 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 of 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).

         o  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
    

                                                       -41-

<PAGE>



   
owns shares for those persons;

         o accounts for which Oppenheimer Capital 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;

         o  any unit investment trust that has entered into an
appropriate agreement with the Distributor;

         o 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; or

         o qualified  retirement plans 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,   provided  that  such   arrangements  are
consummated and share purchases commence by December 31, 1996.
    

         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 Class A sales charges:

         o shares  issued in plans of  reorganization,  such as  mergers,  asset
acquisitions and exchange offers, to which the Fund is a party;

         o  shares  purchased  by  the  reinvestment  of  loan  repayments  by a
participant in a retirement plan for which the Manager or its affiliates acts as
sponsor;

         o  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;

         o shares purchased and paid for with the proceeds of shares redeemed in
the past 12 months 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 sales
charge was paid (this

                                                       -42-

<PAGE>



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 your shares of
the Fund, and the Distributor  may require  evidence of your  qualification  for
this waiver; or

   
         o shares purchased with the proceeds of maturing  principal of units of
any Qualified Unit Investment Liquid Trust Series.
    

         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:
       

         o to make Automatic  Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;

         o involuntary  redemptions of shares by operation of law or involuntary
redemptions  of small  accounts (see  "Shareholder  Account Rules and Policies,"
below);

         o if, at the time a purchase  order is placed  for Class A shares  that
would otherwise be subject to the Class A contingent  deferred sales charge, the
dealer  agrees in  writing  to accept the  dealer's  portion  of the  commission
payable on the sale in  installments  of 1/18th of the commission per month (and
no further  commission  will be payable  if the  shares are  redeemed  within 18
months of purchase);

   
         o for  distributions  form  TRAC-2000  401(k)  plan  sponsored  by  the
Distributor due to the termination of the TRAC-2000 program.

         o 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;(5)  under a  Qualified  Domestic  Relations  Order,  as
defined in the  Internal  Revenue  Code:  (6) to meet the  minimum  distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
    

                                                       -43-

<PAGE>



   
periodic  payments" as described in Section 72(t) of the Internal  Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries;  (9)
separation  from  service;  (10)  participant-directed  redemptions  to purchase
shares  of  mutual  fund  (other  than  a fund  managed  by  the  Manger  or its
subsidiary)  offered  as an  investment  option  in a  Retirement  Plan in which
Oppenheimer  funds  are also  offered  as  investment  options  under a  special
arrangement  with the  Distributor;  or (11) plan  termination  or "in-  service
distributions",  if the  redemption  proceeds  are rolled  over  directly  to an
OppenheimerFunds IRA.
    

         o Service Plan for Class A Shares.  The Fund has adopted a Service Plan
for Class A shares  to  reimburse  the  Distributor  for a portion  of its costs
incurred in connection  with the personal  service and  maintenance  of accounts
that hold Class A shares. Reimbursement is made quarterly at an annual rate that
may not exceed  0.25% of the average  annual net assets of Class A shares of the
Fund. The  Distributor  uses all of those fees to compensate  dealers,  brokers,
banks and other financial  institutions quarterly for providing personal service
and  maintenance of accounts of their  customers that hold Class A shares and to
reimburse   itself   (if  the  Fund's   Board  of   Trustees   authorizes   such
reimbursements,  which it has not yet done) for its other expenditures under the
Plan.

   
         Services to be  provided  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. Payments are made by the
Distributor  quarterly  at an  annual  rate not to exceed  0.25% of the  average
annual net assets of Class A shares held in accounts of the service providers or
their  customers.  The payments  under the Plan increase the annual  expenses of
Class A shares.  For more  details,  please refer to  "Distribution  and Service
Plans" in the Statement of Additional Information.

Buying  Class B Shares.  Class B shares  are sold at net  asset  value per share
without an initial sales charge.  However, if Class B shares are redeemed within
6 years of their purchase,  a contingent  deferred sales charge will be deducted
from the  redemption  proceeds.  That  sales  charge  will not  apply to  shares
purchased by the reinvestment of dividends or capital gains  distributions.  The
contingent  deferred  sales  charge will be based on the lesser of the net asset
value of the shares at the time of  redemption  or the original  offering  price
(which is the original net asset value).
    

                                                       -44-

<PAGE>



The  contingent  deferred  sales  charge is not  imposed  on the  amount of your
account  value  represented  by the increase in net asset value over the initial
purchase price  (including  increases due to the  reinvestment  of dividends and
capital gains  distributions).  The Class B contingent  deferred sales charge is
paid   to   the   Distributor   to   reimburse   its   expenses   of   providing
distribution-related services to the Fund in connection with the sale of Class B
shares.

         To determine whether the contingent  deferred sales charge applies to a
redemption,  the Fund redeems shares in the following order: (1) shares acquired
by  reinvestment of dividends and capital gains  distributions,  (2) shares held
for over 6 years, and (3) shares held the longest during the 6-year period.  The
contingent  deferred sales charge is not imposed in the circumstances  described
in "Waivers of Class B and Class C Sales Charges," below.

         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:
<TABLE>
<CAPTION>
   
                                                                 Contingent Deferred Sales Charge
Years Since Beginning of Month in                                On Redemptions in That Year
which Purchase Order Was Accepted                                (As % of Amount Subject to Charge)
<S>                                                               <C>
- ----------------------------------------------------------------------------------------------------
0-1                                                              5.0%
- ----------------------------------------------------------------------------------------------------
1-2                                                              4.0%
- ----------------------------------------------------------------------------------------------------
2-3                                                              3.0%
- ----------------------------------------------------------------------------------------------------
3-4                                                              3.0%
- ----------------------------------------------------------------------------------------------------
4-5                                                              2.0%
- ----------------------------------------------------------------------------------------------------
5-6                                                              1.0%
- ----------------------------------------------------------------------------------------------------
6 and following                                                  None
    
</TABLE>

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

         o  Automatic Conversion of Class B Shares.  72 months after
you purchase Class B shares, those shares will automatically
convert to Class A shares.  This conversion feature relieves Class

                                                       -45-

<PAGE>



   
B  shareholders  at that time of the  asset-based  sales  charge that applies to
Class B shares under the Class B Distribution and Service Plan, described below.
The conversion is based on the relative net asset value of the two classes,  and
no sales load or other charge is imposed. When Class B shares convert, any other
Class  B  shares  that  were  acquired  by the  reinvestment  of  dividends  and
distributions on the converted  shares will also convert to Class A shares.  The
conversion  feature  is subject to the  continued  availability  of a tax ruling
described  in  "Alternative  Sales  Arrangements  - Class A, Class B and Class C
Shares" in the Statement of Additional Information.

         o  Distribution  and  Service  Plan for  Class B  Shares.  The Fund has
adopted a  Distribution  and Service Plan for Class B shares to  compensate  the
Distributor for distributing Class B shares and servicing accounts. This Plan is
described  below under  "Distribution  and Service Plans for Class B and Class C
Shares."

         o Waivers  of Class B Sales  Charge.  The Class B  contingent  deferred
sales charge will not apply to share purchases in certain types of transactions,
nor will it apply to shares  redeemed  in certain  circumstances,  as  described
below under "Waivers of Class B and Class C Sales Charges."

Buying  Class C Shares.  Class C shares  are sold at net  asset  value per share
without an initial sales charge.  However, if Class C shares are redeemed within
12 months of their purchase,  a contingent deferred sales charge of 1.0% will be
deducted  from the  redemption  proceeds.  That sales  charge  will not apply to
shares   purchased  by  the   reinvestment   of   dividends  or  capital   gains
distributions.  The contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed  shares at the time of  redemption or the
original offering price (which is the original net asset value).  The contingent
deferred  sales  charge  is not  imposed  on the  amount of your  account  value
represented by the increase in net asset value over the initial  purchase price.
The Class C  contingent  deferred  sales  charge is paid to the  Distributor  to
reimburse its expenses of providing distribution-related services to the Fund in
connection with the sale of Class C shares.
    

         To determine whether the contingent  deferred sales charge applies to a
redemption,  the Fund redeems shares in the following order: (1) shares acquired
by  reinvestment of dividends and capital gains  distributions,  (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.

                                                       -46-

<PAGE>


   
Distribution  and  Service  Plans for  Class B and Class C Shares.  The Fund has
adopted  Distribution  and  Service  Plans  for  Class B and  Class C shares  to
compensate  the  Distributor  for  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  that are
outstanding  for 6 years or less and on Class C  shares.  The  Distributor  also
receives a service fee of 0.25% per year under each plan.

         Under each Plan, both 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 asset-based sales charge and service
fees increase  Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.

         The  Distributor  uses  the  service  fees to  compensate  dealers  for
providing  personal  services for accounts  that hold Class B or Class C shares.
Those  services are similar to those  provided  under the Class A Service  Plan,
described  above.  The  Distributor  pays the 0.25%  service  fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer and  retains  the  service  fee paid by the Fund in that year.  After the
shares  have been held for a year,  the  Distributor  pays the  service  fees to
dealers on a quarterly basis.

         The  Distributor  currently  pays  sales  commissions  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 4.00% of the
purchase price.  The Fund pays the  asset-based  sales charge to the Distributor
for its services rendered in connection with the distribution of Class B shares.
Those payments,  retained by the  Distributor,  are at a fixed rate which is not
related to the Distributor's  expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class B shares.

         The Distributor currently pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of
sale of Class C shares.  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 1.00% of the purchase price.  The
    
                                                       -47-

<PAGE>


   
Distributor  retains the asset-based  sales charge during the first year Class C
shares are outstanding to recoup sales  commissions it has paid, the advances of
service fee payments it has made,  and its financing  costs and other  expenses.
The  Distributor  plans  to pay  the  asset-based  sales  charge  as an  ongoing
commission to the dealer on Class C shares that have been outstanding for a year
or more.

         Because 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
Distribution  and Service Plans for Class B and Class C shares,  those  expenses
may be carried over and paid in future  years.  If the 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 certain  expenses it incurred
before the plan was terminated.

         At  September  30,  1996,  the  end  of the  Class  B  Plan  year,  the
Distributor  had incurred  unreimbursed  expenses  under the Plan of  $1,331,917
(equal to 2.95% of the Fund's net assets  represented  by Class B shares on that
date) which have been carried over into the present Plan year.  At September 30,
1996,  the  end  of  the  Class  C  Plan  year,  the  Distributor  had  incurred
unreimbursed  expenses under the Plan of $119,763  (equal to 1.16% of the Fund's
net assets  represented  by Class C shares on that date) which have been carried
over into the present Plan year.

Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent
deferred sales charges will not be applied to shares  purchased in certain types
of  transactions  nor will it apply to Class B and  Class C shares  redeemed  in
certain  circumstances  as  described  below.  The  reasons  for this policy are
described in "Reduced Sales Charges" in the Statement of Additional Information.

         Waivers  for  Redemptions  in  Certain  Cases.  The Class B and Class C
contingent  deferred  sales charges will be waived for  redemptions of shares in
the  following  cases if the Transfer  Agent is notified  that these  conditions
apply to the redemption:
    
         o distributions to participants or beneficiaries from Retirement Plans,
if the distributions  are made (a) under an Automatic  Withdrawal Plan after the
participant  reaches age 59-1/2, as long as the payments are no more than 10% of
the account value  annually  (measured from the date the Transfer Agent receives
the

                                                       -48-

<PAGE>



request),  or (b) following the death or disability  (as defined in the Internal
Revenue Code) of the  participant or beneficiary  (the death or disability  must
have occurred after the account was established);

   
         o redemptions  from accounts other than Retirement  Plans following the
death or disability of the last surviving shareholder,  including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary  (the death or disability  must have occurred  after the account was
established,  and for disability you must provide evidence of a determination of
disability by the Social Security Administration);
    

         o  returns of excess contributions to Retirement Plans;

   
         o distributions  from  Retirement  Plans to make  "substantially  equal
periodic  payments" as permitted in Section  72(t) of the Internal  Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request); or

         o distributions  from  OppenheimerFunds  prototype 401(k) plans (1) for
hardship withdrawals; (2) under a Qualified Domestic Relations Order, as defined
in the Internal Revenue Code; (3) to meet minimum  distribution  requirements as
defined in the Internal Revenue Code; (4) to make "substantially  equal periodic
payments" as described in Section 72(t) of the Internal Revenue Code; or (5) for
separation from service.

         Waivers  for  Shares  Sold  or  Issued  in  Certain  Transactions.  The
contingent deferred sales charge is also waived on Class B and Class C shares in
the following cases:
    

         o  shares sold to the Manager or its affiliates;

         o 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;

         o  shares issued in plans of reorganization to which the Fund
is a party; and
       

   
         o  shares redeemed in involuntary redemptions as described
below.
    


                                                       -49-

<PAGE>



Special Investor Services

   
AccountLink.  OppenheimerFunds  AccountLink  links  your  Fund  account  to your
account at your bank or other financial  institution to enable you to send money
electronically  between  those  accounts to perform a number of types of account
transactions.  These include  purchases of shares by telephone (either through a
service representative or by PhoneLink,  described below), automatic investments
under Asset Builder Plans, and sending  dividends and distributions or Automatic
Withdrawal Plan payments directly to your bank account. Please call the Transfer
Agent for more information.
    

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

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

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

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


                                                       -50-

<PAGE>



         o Exchanging  Shares.  With the  OppenheimerFunds  Exchange  Privilege,
described below,  you can exchange shares  automatically by phone from your Fund
account to another  Oppenheimer  funds account you have already  established  by
calling the special PhoneLink number.  Please refer to "How to Exchange Shares,"
below, for details.

         o 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.

Automatic  Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares  automatically or exchange them to another  Oppenheimer funds
account on a regular basis:

   
         o Automatic  Withdrawal  Plans. If your Fund account is worth $5,000 or
more, you can establish an Automatic  Withdrawal Plan to receive  payments of at
least $50 on a monthly,  quarterly,  semi-annual or annual basis. The checks may
be sent to you or sent  automatically  to your bank account on AccountLink.  You
may even set up  certain  types of  withdrawals  of up to  $1,500  per  month by
telephone.  You should consult the Statement of Additional  Information for more
details.
    

         o Automatic  Exchange  Plans.  You can  authorize  the  Transfer  Agent
automatically to exchange an amount you establish in advance for shares of up to
five other  Oppenheimer  funds on a monthly,  quarterly,  semi-annual  or annual
basis  under  an  Automatic   Exchange  Plan.  The  minimum  purchase  for  each
Oppenheimer  funds account is $25.  These  exchanges are subject to the terms of
the Exchange Privilege, described below.

Reinvestment  Privilege.  If you  redeem  some or all of your Class A or Class B
shares  of the  Fund,  you have up to 6 months  to  reinvest  all or part of the
redemption  proceeds  in Class A shares of the Fund or other  Oppenheimer  funds
without paying a sales charge. This privilege applies 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.  Please consult the
Statement of Additional Information for more details.


                                                       -51-

<PAGE>



Retirement Plans. Fund shares are available as an investment for your retirement
plans. If you participate in a plan sponsored by your employer, the plan trustee
or  administrator  must make the  purchase  of shares for your  retirement  plan
account.  The Distributor offers a number of different retirement plans that can
be used by individuals and employers:

         o  Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
         o  403(b)(7)  Custodial  Plans for  employees  of  eligible  tax-exempt
organizations, such as schools, hospitals and charitable organizations
         o SEP-IRAs  (Simplified  Employee  Pension  Plans)  for small  business
owners or people with income from self-employment, including SARSEP-IRAs
         o  Pension and Profit-Sharing Plans for self-employed persons
and other employers
         o  401(k) Prototype Retirement Plans for businesses

         Please call the  Distributor for the  OppenheimerFunds  plan documents,
which contain important information and applications.

How to Sell Shares

You can arrange to take money out of your account by selling (redeeming) some or
all of your shares on any regular  business day. Your shares will be sold at the
next net asset value calculated after your order is received and accepted by the
Transfer  Agent.  The Fund  offers  you a number of ways to sell your  shares in
writing  or by  telephone.  You can also set up  Automatic  Withdrawal  Plans to
redeem shares on a regular  basis,  as described  above.  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 or from a  retirement
plan, please call the Transfer Agent first, at 1-800-525-7048, for assistance.

         o  Retirement  Accounts.   To  sell  shares  in  an  Oppenheimer  funds
retirement  account in your name,  call the  Transfer  Agent for a  distribution
request  form.  There  are  special  income  tax  withholding  requirements  for
distributions  from retirement plans and you must submit a withholding form with
your request to avoid delay.  If your retirement plan account is held for you by
your employer,  you must arrange for the distribution  request to be sent by the
plan administrator or trustee.  There are additional details in the Statement of
Additional Information.

                                                       -52-

<PAGE>



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

         o  You wish to redeem more than $50,000 worth of shares 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 redeemed by someone other than the owners (such
as an Executor)

         o  Where Can I Have My Signature Guaranteed?  The Transfer
Agent will accept a guarantee of your signature by a number of
financial institutions, including: a U.S. bank, trust company,
credit union or savings association, or by a foreign bank that has
a U.S. correspondent bank, or by a U.S. registered dealer or broker
in securities, municipal securities or government securities, or by
a U.S. national securities exchange, a registered securities
association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business, or as a fiduciary,
you must also include your title in the signature.

Selling Shares by Mail.  Write a "letter of instructions" 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 requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.

Use the following address for              Send courier or Express Mail
requests to:                               requests by mail:

                                                       -53-

<PAGE>



   
OppenheimerFunds Services                   OppenheimerFunds Services
P.O. Box 5270                               10200 E. Girard Avenue, Building D
Denver, Colorado 80217                      Denver, Colorado 80231
    

Selling Shares by Telephone.  You and your dealer  representative  of record may
also sell your shares by telephone. To receive the redemption price on a regular
business day,  your call must be received by the Transfer  Agent by the close of
The New York Stock Exchange that day, which is normally 4:00 P.M., but which may
be earlier on some days.  You may not redeem shares held in an  OppenheimerFunds
retirement plan or under a share certificate by telephone.

         o  To redeem shares through a service representative, call
1-800-852-8457
         o  To redeem shares automatically on PhoneLink, call 1-800-
533-3310

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

         o Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone  once in any 7-day period.  The check must be payable to all owners of
record of the shares and must be sent to the address on the  account  statement.
This  service is not  available  within 30 days of  changing  the  address on an
account.

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

Checkwriting.  To be able to write  checks  against your Fund  account,  you may
request  that  privilege  on your  account  Application  or you can  contact the
Transfer  Agent for  signature  cards,  which 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.

         o  Checks can be written to the order of whomever you wish,

                                                       -54-

<PAGE>



but may not be cashed at the Fund's bank or custodian.
         o Checkwriting  privileges are not available for accounts holding Class
B or Class C shares, or Class A shares that are subject to a contingent deferred
sales charge.
         o  Checks must be written for at least $100.
         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 15 days.
         o  Don't use your checks if you changed your Fund account
number.

   
Selling 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. Please call your dealer for more
information  about this  procedure.  Please refer to "Special  Arrangements  for
Repurchase  of Shares from Dealers and Brokers" in the  Statement of  Additional
Information for more details.
    

How to Exchange Shares

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

         o  Shares of the fund selected for exchange must be available
for sale in your state of residence
         o  The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
         o You must hold the shares you buy when you establish  your account for
at least 7 days before you can exchange them;  after the account is open 7 days,
you can exchange shares every regular business day
         o  You must meet the minimum purchase requirements for the
fund you purchase by exchange
         o  Before exchanging into a fund, you should obtain and read
its prospectus

   
         Shares  of a  particular  class of the Fund may be  exchanged  only for
shares of the same class in the other  Oppenheimer  funds. For example,  you can
exchange Class A shares of this Fund only for
    

                                                       -55-

<PAGE>



   
Class A shares of another fund. At present,  Oppenheimer Money Market Fund, Inc.
offers only one class of shares,  which are considered "Class A" shares for this
purpose.  In some cases, sales charges may be imposed on exchange  transactions.
Please  refer  to  "How to  Exchange  Shares"  in the  Statement  of  Additional
Information for more details.
    

         Exchanges may be requested in writing or by telephone:

         o  Written Exchange Requests. Submit an OppenheimerFunds
Exchange Request form, signed by all owners of the account.  Send
it to the Transfer Agent at the addresses listed in "How to Sell
Shares."

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

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

         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 is in proper form by the
close of The New York Stock  Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days.  However,  either  fund may delay the  purchase  of
shares  of the fund you are  exchanging  into up to 7 days if it  determines  it
would be disadvantaged by a same-day transfer of the proceeds to buy shares. For
example,  the  receipt  of  multiple  exchange  requests  from  a  dealer  in  a
"market-timing"  strategy  might  require the sale of portfolio  securities at a
time or price disadvantageous to the Fund.

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

                                                       -56-

<PAGE>



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

         o For tax  purposes,  exchanges of shares  involve a redemption  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. For more information about taxes affecting
exchanges,  please  refer  to "How  to  Exchange  Shares"  in the  Statement  of
Additional Information.

         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

         o Net Asset Value Per Share is  determined  for each class of shares as
of the close of The New York Stock  Exchange on each day the Exchange is open 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  Fund's  Board of
Trustees has established  procedures to value the Fund's securities to determine
net asset value. In general,  securities values are based on market value. There
are special  procedures  for valuing  illiquid  and  restricted  securities  and
obligations for which market values cannot be readily obtained. These procedures
are described more completely in the Statement of Additional Information.

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

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

         o  The Transfer Agent will record any telephone calls to

                                                       -57-

<PAGE>



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.  If the Transfer  Agent does not use
reasonable   procedures  it  may  be  liable  for  losses  due  to  unauthorized
transactions,  but  otherwise  neither the  Transfer  Agent nor the Fund will be
liable for losses or expenses arising out of telephone  instructions  reasonably
believed to be genuine.  If you are unable to reach the  Transfer  Agent  during
periods of unusual market activity,  you may not be able to complete a telephone
transaction and should consider placing your order by mail.

         o  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.

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

         o The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio  fluctuates,  and the redemption
price,  which is the net asset value per share,  will  normally be different for
Class A, Class B and Class C shares.  Therefore,  the  redemption  value of your
shares may be more or less than their original cost.

         o Payment for redeemed  shares is made ordinarily in cash and forwarded
by check or  through  AccountLink  (as  elected  by the  shareholder  under  the
redemption  procedures  described  above) within 7 days after the Transfer Agent
receives   redemption   instructions  in  proper  form,   except  under  unusual
circumstances  determined by the Securities and Exchange  Commission delaying or
suspending   such   payments.   For  accounts   registered  in  the  name  of  a
broker-dealer,  payment will be forwarded  within 3 business  days. The Transfer
Agent may delay  forwarding a check or processing a payment via  AccountLink for
recently purchased shares, but only until the purchase payment has cleared. That
delay may be as much as 10 days from the date the shares  were  purchased.  That
delay may be avoided

                                                       -58-

<PAGE>



if you purchase  shares by certified  check or arrange with your bank to provide
telephone or written  assurance to the Transfer Agent that your purchase payment
has cleared.

         o 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,  and in some cases  involuntary  redemptions
may be made to repay the Distributor  for losses from the  cancellation of share
purchase orders.

         o Under unusual  circumstances,  shares of the Fund may be redeemed "in
kind," which means that the  redemption  proceeds  will be paid with  securities
from the Fund's portfolio. Please refer to "How to Sell Shares" in the Statement
of Additional Information for more details.

         o "Backup Withholding" of Federal income tax may be applied at the rate
of 31% from taxable dividends,  distributions and redemption proceeds (including
exchanges)  if you fail to  furnish  the Fund a  certified  Social  Security  or
Employer Identification Number when you sign your application, or if you violate
Internal Revenue Service regulations on tax reporting of income.

         o The Fund does not  charge a  redemption  fee,  but if your  dealer or
broker handles your  redemption,  they may charge a fee. That fee can be avoided
by redeeming your Fund shares  directly  through the Transfer  Agent.  Under the
circumstances  described  in  "How  To Buy  Shares,"  you  may be  subject  to a
contingent  deferred  sales charge when  redeeming  certain Class A, Class B and
Class C shares.

         o To avoid sending  duplicate  copies of materials to  households,  the
Fund  will  mail  only  one  copy of  each  annual  and  semi-annual  report  to
shareholders  having  the same  last name and  address  on the  Fund's  records.
However,  each shareholder may call the Transfer Agent at  1-800-525-7048 to ask
that copies of those materials be sent personally to that shareholder.

Dividends, Capital Gains and Taxes

Dividends. The Fund declares dividends separately for Class A, Class B and Class
C shares from net  investment  income each  regular  business  day and pays such
dividends to shareholders monthly. Normally,  dividends are paid on or about the
last business day of

                                                       -59-

<PAGE>



each month,  but the Board of Trustees can change that date. It is expected that
distributions  paid with respect to Class A shares will generally be higher than
for Class B or Class C shares because expenses  allocable to Class B and Class C
shares  will  generally  be higher.  Dividends  paid on each class of shares may
generally be less than  dividends  paid by a  conventional  bond fund that seeks
income, because the Fund seeks total return as its primary objective.

   
         The Fund has adopted the practice,  to the extent  consistent  with the
amount of the Fund's net investment  income and other  distributable  income, of
attempting to pay dividends on Class A shares at a constant level,  although the
amount of such dividends may be subject to change 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 that Class.  The practice of attempting to pay
dividends on Class A shares at a constant level requires the Manager, consistent
with the Fund's investment objective and investment restrictions, to monitor the
Fund's portfolio and select higher yielding  securities when deemed  appropriate
to maintain  necessary net investment income levels. The Fund anticipates paying
dividends at the targeted  dividend level from net  investment  income and other
distributable income without any impact on the Fund's net asset value per share.
During  the Fund's  fiscal  year ended June 30,  1996,  the Fund's  practice  of
attempting to pay  dividends on Class A shares at a constant  level did not have
any impact on the Fund's investment strategies or its net asset value per share.
The Board of Trustees may change the Fund's targeted dividend level at any time,
without prior notice to  shareholders;  the Fund does not otherwise have a fixed
dividend  rate and there can be no assurance as to the payment of any  dividends
or the realization of any capital gains.
    

Capital Gains. The Fund may make  distributions  annually in December out of any
net short or long-term capital gains, and may make supplemental distributions of
dividends  and capital  gains  following  the end of its fiscal year (which ends
September  30).  Short-term  capital  gains are  treated  as  dividends  for tax
purposes.  Long-term  capital  gains will be  separately  identified  in the tax
information the Fund sends you after the end of the calendar year.  There can be
no  assurance  that  the Fund  will pay any  capital  gains  distributions  in a
particular year.

Distribution Options.  When you open your account, specify on your
application how you want to receive your distributions. For

                                                       -60-

<PAGE>



OppenheimerFunds  retirement  accounts,  all distributions  are reinvested.  For
other accounts, you have four options:

         o Reinvest all distributions in the Fund. You can elect to reinvest all
dividends and long-term capital gains  distributions in additional shares of the
Fund.
         o Reinvest  long-term  capital  gains  only.  You can elect to reinvest
long-term  capital gains in the Fund while receiving  dividends by check or sent
to your bank account on AccountLink.
         o Receive all  distributions  in cash. You can elect to receive a check
for all dividends and long-term capital gains distributions or have them sent to
your bank on AccountLink.
         o Reinvest your distributions in another Oppenheimer Funds account. You
can reinvest all  distributions  in another  Oppenheimer  funds account you have
established.

Taxes. If your account is not a tax-deferred  retirement account,  you should be
aware of the  following  tax  implications  of investing in the Fund.  Long-term
capital  gains are  taxable  as  long-term  capital  gains when  distributed  to
shareholders.  It does not matter how long you held your shares.  Dividends paid
from short-term  capital gains and net investment income are taxable as ordinary
income.  Distributions  are subject to federal  income tax and may be subject to
state or local taxes.  Your  distributions  are taxable  when paid,  whether you
reinvest  them in  additional  shares or take them in cash.  Every year the Fund
will  send  you and the IRS a  statement  showing  the  amount  of each  taxable
distribution you received in the previous year.

         o "Buying a Dividend". When a fund goes ex-dividend, its share price is
reduced by the amount of the  distribution.  If you buy shares on or just before
the  ex-dividend  date,  or just  before  the  Fund  declares  a  capital  gains
distribution,  you will pay the full  price for the  shares  and then  receive a
portion of the price back as a taxable dividend or capital gain.

         o Taxes on Transactions.  Share redemptions,  including redemptions for
exchanges,  are subject to capital gains tax. Generally speaking, a capital gain
or loss is the  difference  between  the price you paid for the  shares  and the
price you receive when you sell them.

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

                                                       -61-

<PAGE>



shareholders.  A non-taxable return of capital may reduce your tax
basis in your Fund shares.

         This  information is only a summary of certain  Federal tax information
about your  investment.  More  information  is  contained  in the  Statement  of
Additional Information, and in addition you should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.


                                                       -62-

<PAGE>

   

                            APPENDIX TO PROSPECTUS OF
                       OPPENHEIMER INTERNATIONAL BOND FUND


         Graphic material included in Prospectus of Oppenheimer
International Bond Fund: "Comparison of Total Return of Oppenheimer
International Bond Fund, the Salomon Brothers Non-US Dollar World
Government Bond Inde and the Salomon Brothers Brady Bond Index - Change in 
Value of a $10,000 Hypothetical Investment"

         Linear  graphs  will  be  included  in the  Prospectus  of  Oppenheimer
International  Bond Fund (the "Fund")  depicting  the initial  account value and
subsequent  account  value  of a  hypothetical  $10,000  in the  Fund.  In  each
respective  case of the Fund's  Class A, Class B and Class C shares,  the graphs
will  cover the period  since the  Fund's  inception  on June 15,  1995  through
September  30,  1996.  The  graphs  will  compare  such  values  with  the  same
investments over the time periods which are similar but not identical with the 
Salomon  Brothers  Non-US Dollar World Government  Bond Index and the Salomon
Brothers Brady Bond Index.  In each instance the index comparison begins on 
June 30, 1995.  Set forth below are the relevant  data points that will appear  
on  the  linear  graphs.  Additional  information with  respect  to the 
foregoing,  including  a  description  of  the  Salomon Brothers  Non-US  
Dollar World Government Bond Index, is set forth in the Prospectus under  
"Performance of the Fund -- Comparing the Fund's Performance to the Market"
<TABLE>
<CAPTION>

                           Oppenheimer                        Salomon Brothers                       Salomon Brothers
Fiscal Year                International Bond                 Non-US Dollar World                    Brady Bond
(Period) Ended             Fund A                             Government Bond Index                  Index
<S>                        <C>                                <C>                                    <C>
- ---------------            -------------------                ------------------------               -------------------
06/15/95                    9,525                             10,000                                 10,000
09/30/95                   10,014                              9,758                                 10,666
09/30/96                    11,898                             10,152                                 14,676

                           Oppenheimer                        Salomon Brothers                       Salomon Brothers
Fiscal Year                International Bond                 Non-US Dollar World                    Brady Bond
(Period) Ended             Fund B                             Government Bond Index                  Index
- ---------------            -------------------                ------------------------               -------------------
06/15/95                   10,000                             10,000                                 10,000
09/30/95                   10,492                              9,758                                 10,666
09/30/96                   11,950                             10,152                                 14,676

                           Oppenheimer                        Salomon Brothers                       Salomon Brothers
Fiscal Year                International Bond                 Non-US Dollar World                    Brady Bond
(Period) Ended             Fund C                             Government Bond Index                  Index
- ---------------            -------------------                ------------------------               --------------------
06/15/95                   10,000                             10,000                                 10,000
09/15/95                   10,473                              9,758                                 10,666
09/30/96                   12,350                             10,152                                 14,676
</TABLE>

    
                                                                -63-

<PAGE>



   
                                   Appendix A
    

              Description of Ratings Categories of Rating Services

Description of Moody's Investors Service, Inc. Bond Ratings

             Aaa:  Bonds  rated  "Aaa" are judged to be the best  quality and to
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  risks appear  somewhat  larger than those 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 sometime 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 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 desirable
investment. Assurance of interest and principal payments or of

                                                        A-1

<PAGE>



maintenance of other terms of the contract over any long period of
time may be small.
             Caa: Bonds rated "Caa" are of poor standing and 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 and are often in default or have other marked
shortcomings.

             C:  Bonds rated "C" can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

Description of Standard & Poor's Bond Ratings

             AAA: "AAA" is the highest rating assigned to a debt obligation
and indicates an extremely strong capacity to pay principal and
interest.

             AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay  principal  and interest is very strong,  and in the majority of
instances they differ from "AAA" issues only in small degree.

             A: Bonds  rated "A" have a strong  capacity  to pay  principal  and
interest,  although they are somewhat  more  susceptible  to adverse  effects of
change in circumstances and economic conditions.

             BBB: Bonds rated "BBB" are regarded as having an adequate  capacity
to  pay  principal  and  interest.  Whereas  they  normally  exhibit  protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the "A" category.

             BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance,  as predominantly  speculative with respect to the issuer's capacity
to pay  interest  and  repay  principal  in  accordance  with  the  terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC" the highest
degree.   While  such  bonds  will  likely  have  some  quality  and  protective
characteristics,  these are  outweighed  by large  uncertainties  or major  risk
exposures to adverse conditions.

             C, D:  Bonds on which no interest is being paid are rated "C."

                                                        A-2

<PAGE>



Bonds  rated "D" are in default  and payment of  interest  and/or  repayment  of
principal is in arrears.


                                                        A-3

<PAGE>



   

                                   APPENDIX B

         Special Sales Charge Arrangements for Shareholders of the Fund
            Who Were Shareholders of the Former Quest for Value Funds


The initial and contingent  deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund  described  elsewhere in this  Prospectus
are modified as described  below for those  shareholders  of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value  Opportunity
Fund,  Quest  for Value  Small  Capitalization  Fund and Quest for Value  Global
Equity Fund, Inc. on November 24, 1995, when  OppenheimerFunds,  Inc. became the
investment  advisor to those  funds,  and (ii)  Quest for Value U.S.  Government
Income Fund,  Quest for Value  Investment  Quality Income Fund,  Quest for Value
Global Income Fund,  Quest for Value New York Tax-Exempt  Fund,  Quest for Value
National  Tax-Exempt  Fund and Quest for Value  California Tax- Exempt Fund when
those funds merged into  various  Oppenheimer  funds on November  24, 1995.  The
funds listed above are referred to in this  Prospectus  as the "Former Quest for
Value  Funds." The  waivers of initial and  contingent  deferred  sales  charges
described  in this  Appendix  apply to shares of the Fund (i)  acquired  by such
shareholder  pursuant to an exchange of shares of one of the  Oppenheimer  funds
that was one of the  Former  Quest  for  Value  Funds or (ii)  received  by such
shareholder  pursuant  to the merger of any of the Former  Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.

Class A Sales Charges

         o  Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders

         o Purchases by Groups,  Associations and Certain  Qualified  Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares  purchased  by a "Qualified  Retirement  Plan"  through a single  broker,
dealer or financial institution,  or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified  Retirement Plan
or that Association  purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase  such shares from OCC  Distributors  prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k)
    
                                                        B-1

<PAGE>


   
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
<TABLE>
<CAPTION>
                                        Front-End                 Front-End
                                        Sales                     Sales                   Commission
                                        Charge                    Charge                  as
                                        as a                      as a                    Percentage
Number of                               Percentage                Percentage              of
Eligible Employees                      of Offering               of Amount               Offering
or Members                              Price                     Invested                Price
<S>                                     <C>                       <C>                     <C>
- -------------------------------------------------------------------------------------------------------
9 or fewer                              2.50%                     2.56%                   2.00%
- -------------------------------------------------------------------------------------------------------
At least 10 but not
 more than 49                           2.00%                     2.04%                   1.60%
- --------------------------------------------------------------------------------------------------------
</TABLE>

         For purchases by Qualified  Retirement plans and 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  on  pages  ___ to  ___  of  this
Prospectus.

         Purchases  made under  this  arrangement  qualify  for the lower of the
sales  charge rate in the table based on the number of eligible  employees  in a
Qualified  Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In  addition,  purchases  by 401(k) plans that are  Qualified  Retirement  Plans
qualify for the waiver of the Class A initial sales charge if they  qualified to
purchase  shares  of any of the  Former  Quest  For  Value  Funds by  virtue  of
projected  contributions  or  investments  of $1  million  or  more  each  year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations,  or as eligible employees in Qualified Retirement Plans
also may purchase  shares for their  individual  or custodial  accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.

         o  Special Class A Contingent Deferred Sales Charge Rates

Class A shares of the Fund issued in the reorganization on November 24, 1995 for
shares of Quest For Value Investment  Quality Income Fund that were subject to a
contingent deferred sales charge, will be subject to a contingent deferred sales
charge at the following  rates: if they are redeemed within 18 months of the end
of the
    
                                                        B-2

<PAGE>


   
calendar  month in which  they were  purchased,  at a rate  equal to 1.0% if the
redemption  occurs within 12 months of their  initial  purchase and at a rate of
0.50 of  1.0% if the  redemption  occurs  in the  subsequent  six  months.  This
contingent  deferred  sales  charge  rate  also  applies  to  shares of the Fund
purchased by exchange of shares of other Oppenheimer funds that were acquired as
a result of the merger of Former  Quest for Value  Funds into those  Oppenheimer
funds,  and which  shares were subject to a Class A  contingent  deferred  sales
charge prior to November 24, 1995. Class A shares of any of the Former Quest for
Value Funds purchased  without an initial sales charge on or before November 22,
1995 will continue to be subject to the  applicable  contingent  deferred  sales
charge in effect as of that date as set forth in the then-current prospectus for
such fund.

         o  Waiver of Class A Sales Charges for Certain Shareholders

Class A shares of the Fund purchased by the following  investors are not subject
to any Class A initial or contingent deferred sales charges:

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

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

         o  Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions

The Class A contingent  deferred  sales charge will not apply to  redemptions of
Class A  shares  of the  Fund  purchased  by the  following  investors  who were
shareholders of any Former Quest for Value Fund:

         o 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.

         o  Participants in Qualified Retirement Plans that purchased

                                                            B-3

<PAGE>


   
shares  of any of the  Former  Quest  For  Value  Funds  pursuant  to a  special
"strategic alliance" with the distributor of those funds. The Fund's Distributor
will pay a  commission  to the dealer for  purchases of Fund shares as described
above in "Class A Contingent Deferred Sales Charge."

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

         o  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, B or C shares of the Fund acquired by 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,  if those
shares  were  purchased   prior  to  March  6,  1995:  in  connection  with  (i)
distributions  to participants or beneficiaries of plans qualified under Section
401(a) of the Internal  Revenue Code or from  custodial  accounts  under Section
403(b)(7) of the Code,  Individual  Retirement Accounts,  deferred  compensation
plans under  Section 457 of the Code,  and other  employee  benefit  plans,  and
returns  of excess  contributions  made to each type of plan,  (ii)  withdrawals
under an  automatic  withdrawal  plan holding only either Class B or C shares if
the annual  withdrawal  does not exceed 10% of the initial value of the account,
and (iii)  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.

         o  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, B or C shares of the Fund acquired by 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,  if those
shares were purchased on or after March 6, 1995, but prior to November 24, 1995:
(1)  distributions to participants or beneficiaries  from Individual  Retirement
Accounts under Section 408(a) of the Internal  Revenue Code or retirement  plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions
are made either (a) to an individual participant as a result of separation from
    
                                                        B-4

<PAGE>


   
service or (b) following the death or disability (as defined in the Code) of the
participant  or  beneficiary;  (2)  returns  of  excess  contributions  to  such
retirement plans; (3) redemptions other than from retirement plans following the
death or disability of the  shareholder(s)  (as evidenced by a determination  of
total  disability by the U.S. Social Security  Administration);  (4) withdrawals
under an automatic  withdrawal plan (but only for Class B or C shares) where the
annual  withdrawals  do not exceed 10% of the initial value of the account;  and
(5) 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, B or C shares of
the Fund described in this section if within 90 days after that redemption,  the
proceeds  are  invested  in the same  Class of shares  in this  Fund or  another
Oppenheimer fund.

Special Dealer Arrangements

Dealers  who sold  Class B shares of a Former  Quest for Value Fund to Quest for
Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping
system and that were  transferred to an  OppenheimerFunds  prototype 401(k) plan
shall be eligible for an additional one-time payment by the Distributor of 1% of
the value of the plan assets transferred, but that payment may not exceed $5,000
as to any one plan.

         Dealers  who sold  Class C shares of a Former  Quest for Value  Fund to
Quest for Value  prototype  401(k) plans that were  maintained  on the TRAC-2000
recordkeeping  system and (i) the shares held by those plans were  exchanged for
Class A shares, or (ii) the plan assets were transferred to an  OppenheimerFunds
prototype 401(k) plan,  shall be eligible for an additional  one-time payment by
the  Distributor  of 1% of the value of the plan  assets  transferred,  but that
payment may not exceed $5,000.
    


                                                        B-5

<PAGE>

   
Oppenheimer International Bond Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048

Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203

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

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
    
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015

Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202

Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado  80202

   
No dealer,  broker,  salesperson or any other person has been authorized to give
any  information or to make any  representations  other than those  contained in
this  Prospectus  or the Statement of  Additional  Information  and, if given or
made,  such  information and  representations  must not be relied upon as having
been   authorized  by  the  Fund,   OppenheimerFunds,   Inc.,   OppenheimerFunds
Distributor,  Inc. or any affiliate thereof. This Prospectus does not constitute
an offer  to sell or a  solicitation  of an  offer to buy any of the  securities
offered hereby in any state to any person to whom it is unlawful to make such an
offer in such state.
    

PR0880.001.0197  *Printed on Recycled Paper

<PAGE>

Oppenheimer International Bond Fund

   
6803 South Tucson Way, Englewood, Colorado  80112
1-800-525-7048

Statement of Additional Information dated February 1, 1997

         This  Statement of Additional  Information  is not a  Prospectus.  This
document  contains  additional   information  about  the  Fund  and  supplements
information in the Prospectus dated February 1, 1997. 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.
    


CONTENTS                                                                  Page

About the Fund
Investment Objectives and Policies............................................2
     Investment Policies and Strategies.......................................2
     Other Investment Techniques and Strategies..............................11
     Other Investment Restrictions...........................................24
How the Fund is Managed......................................................26
     Organization and History................................................26
     Trustees and Officers of the Fund.......................................26
     The Manager and Its Affiliates..........................................31
Brokerage Policies of the Fund...............................................32
Performance of the Fund......................................................34
Distribution and Service Plans...............................................39

About Your Account
How To Buy Shares............................................................42
How To Sell Shares...........................................................50
How To Exchange Shares.......................................................54
Dividends, Capital Gains and Taxes...........................................57
Additional Information About the Fund........................................58

Financial Information About the Fund
Independent Auditors' Report.................................................60
Financial Statements.........................................................61

Appendix A:  Corporate Industry Classifications.............................A-1


                                                        

<PAGE>



ABOUT THE FUND

Investment Objectives and Policies

Investment  Policies and Strategies.  The investment  objectives and policies of
the Fund are  discussed  in the  Prospectus.  Set  forth  below is  supplemental
information  about those  policies and the types of securities in which the Fund
invests,  as well as  strategies  the Fund  may use to  achieve  its  investment
objectives.  Certain  capitalized  terms used in this  Statement  of  Additional
Information have the same meaning as those terms have in the Prospectus.

   
         In selecting securities for the Fund's portfolio, the Fund's investment
adviser,  OppenheimerFunds,  Inc. (referred to as the "Manager"),  evaluates the
investment merits of debt and equity  securities  primarily through the exercise
of  its  own  investment  analysis.   This  may  include,  among  other  things,
consideration of the financial strength of an issuer, including its historic and
current financial condition, the trading activity in its securities, present and
anticipated  cash flow,  estimated  current  value of its assets in  relation to
their  historical  cost,  the  issuer's  experience  and  managerial  expertise,
responsiveness  to changes  in  interest  rates and  business  conditions,  debt
maturity schedules, current and future borrowing requirements, and any change in
the financial condition of an issuer and the issuer's continuing ability to meet
its future  obligations.  The Manager also may consider  anticipated  changes in
business conditions, levels of interest rates of bonds as contrasted with levels
of cash  dividends,  industry and regional  prospects,  the  availability of new
investment  opportunities  and the general  economic,  legislative  and monetary
outlook for specific  industries,  the nation and the world.  Additional factors
considered  by the  Manager  with  respect  to  the  Fund's  foreign  securities
investments are discussed below under "Foreign Securities."
    

         o Foreign Securities.  As noted in the Prospectus,  the Fund may invest
in securities (which may be denominated in U.S. dollars or non-U.S.  currencies)
issued or guaranteed by foreign  corporations,  certain  supranational  entities
(described    below)   and   foreign    governments   or   their   agencies   or
instrumentalities,  and in securities issued by U.S. corporations denominated in
non-U.S.  currencies. The types of foreign debt obligations and other securities
in which the Fund may invest  are the same  types of debt and equity  securities
identified above.  Foreign securities are subject,  however, to additional risks
not associated with domestic  securities,  as discussed below.  These additional
risks may be more pronounced as to investments in securities  issued by emerging
market countries or by companies located in emerging market countries.

   
         Securities  of  foreign   issuers  that  are  represented  by  American
depository receipts,  or that are listed only on a U.S. securities exchange,  or
are traded only in the U.S.  over-the-counter market are not considered "foreign
securities"  because they are not subject to many of the special  considerations
and risks  (discussed  below) that apply to foreign  securities  traded and held
abroad.  If the Fund's  securities are held abroad,  the countries in which such
securities  may be held and the  sub-custodians  holding must be, in most cases,
approved by the Fund's Board of Trustees  where  required  under  applicable SEC
rules.
    

         The Fund may invest in U.S.  dollar-denominated,  collateralized "Brady
Bonds." These debt  obligations of foreign  entities may be fixed-rate par bonds
or floating- rate discount bonds and are

                                                        -2-

<PAGE>



generally  collateralized  in  full  as to  principal  due at  maturity  by U.S.
Treasury zero coupon obligations that have the same maturity as the Brady Bonds.
Brady Bonds are often viewed as having three or four valuation  components:  (i)
the  collateralized   repayment  of  principal  at  final  maturity;   (ii)  the
collateralized interest payments; (iii) the uncollateralized  interest payments;
and  (iv)  any  uncollateralized  repayment  of  principal  at  maturity  (these
uncollateralized  amounts  constitute  the "residual  risk").  In the event of a
default  with  respect to  collateralized  Brady  Bonds as a result of which the
payment  obligations  of the issuer are  accelerated,  the zero coupon  Treasury
securities  held  as  collateral  for  the  payment  of  principal  will  not be
distributed  to investors,  nor will such  obligations  be sold and the proceeds
distributed.  The  collateral  will  be  held  by the  collateral  agent  to the
scheduled  maturity of the  defaulted  Brady  Bonds,  which will  continue to be
outstanding,  at which  time the face  amount of the  collateral  will equal the
principal  payments  which  would  have then been due on the Brady  Bonds in the
normal  course.  In addition,  in light of the residual risk of Brady Bonds and,
among other  factors,  the history of defaults with respect to  commercial  bank
loans  to  public  and  private  entities  of  countries  issuing  Brady  Bonds,
investments in Brady Bonds are to be viewed as speculative.

         The  obligations  of foreign  governmental  entities  may or may not be
supported by the full faith and credit of a foreign  government.  Obligations of
supranational entities include those of international  organizations  designated
or supported by  governmental  entities to promote  economic  reconstruction  or
development and of international  banking  institutions  and related  government
agencies.  Examples  include  the  International  Bank  for  Reconstruction  and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development  Bank and the  Inter-American  Development  Bank.  The  governmental
members,  or  "stockholders,"  of these  entities  usually make initial  capital
contributions  to the  supranational  entity and in many cases are  committed to
make additional capital  contributions if the supranational  entity is unable to
repay its borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including  "callable capital"  contributed
by members at the entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their commitments.

         Investing in foreign  securities  involves  considerations and possible
risks not  typically  associated  with  investing in  securities in the U.S. The
values of foreign  securities  will be affected by changes in currency  rates or
exchange control  regulations or currency  blockage,  application of foreign tax
laws,  including  withholding taxes,  changes in governmental  administration or
economic or monetary policy (in the U.S. or abroad) or changed  circumstances in
dealings between nations.  Costs will be incurred in connection with conversions
between various currencies.  Foreign brokerage  commissions are generally higher
than commissions in the U.S., and foreign securities markets may be less liquid,
more  volatile  and less  subject to  governmental  regulation  than in the U.S.
Investments  in  foreign  countries  could  be  affected  by other  factors  not
generally  thought  to be  present  in  the  U.S.,  including  expropriation  or
nationalization,  confiscatory taxation and potential  difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods.

         Because  the  Fund  may  purchase  securities  denominated  in  foreign
currencies,  a change in the value of any such currency  against the U.S. dollar
will result in a change in the U.S.  dollar  value of the Fund's  assets and its
income available for distribution. In addition, although a portion of the Fund's
investment  income may be received or realized in foreign  currencies,  the Fund
will be

                                                        -3-

<PAGE>



required to compute and distribute its income in U.S. dollars, and absorb the 
cost of currency fluctuations.  The Fund may engage in foreign currency 
exchange transactions for hedging purposes to protect against changes in 
future exchange rates.  See "Other Investment Techniques and Strategies - 
Hedging," below.

         The values of foreign  investments  and the  investment  income derived
from them may also be  affected  unfavorably  by  changes in  currency  exchange
control   regulations.   Although  the  Fund  will  invest  only  in  securities
denominated  in foreign  currencies  that at the time of  investment do not have
significant  government-imposed  restrictions on conversion  into U.S.  dollars,
there can be no assurance against subsequent imposition of currency controls. In
addition,  the values of foreign  securities  will  fluctuate  in  response to a
variety of factors, including changes in U.S. and foreign interest rates.

         Investments  in  foreign   securities  offer  potential   benefits  not
available from investing solely in securities of domestic  issuers,  by offering
the  opportunity  to invest  in  foreign  issuers  that  appear to offer  growth
potential,  or in foreign  countries with economic  policies or business  cycles
different from those of the U.S., or to reduce  fluctuations  in portfolio value
by taking  advantage  of  foreign  bond or other  markets  that do not move in a
manner parallel to U.S.  markets.  From time to time, U.S.  government  policies
have discouraged certain investments abroad by U.S. investors,  through taxation
or other  restrictions,  and it is  possible  that  such  restrictions  could be
reimposed.

         o  Debt Securities.  All debt securities are subject to two types of 
risks:  credit risk and interest rate risk (these are in addition to other
investment risks that may affect a particular security).

         o Credit Risk. Credit risk relates to the ability of the issuer to meet
interest or  principal  payments or both as they become due.  Generally,  higher
yielding  bonds are  subject  to credit  risk to a greater  extent  than  higher
quality bonds.

         o Interest Rate Risk.  Interest rate risk refers to the fluctuations in
value of fixed-income  securities resulting solely from the inverse relationship
between the market value of outstanding  fixed-income  securities and changes in
interest rates.  An increase in interest rates will generally  reduce the market
value of fixed-income investments,  and a decline in interest rates will tend to
increase their value. In addition, debt securities with longer maturities, which
tend to produce  higher  yields,  are  subject to  potentially  greater  capital
appreciation  and  depreciation   than  obligations  with  shorter   maturities.
Fluctuations in the market value of fixed-income  securities subsequent to their
acquisition will not affect the interest payable on those  securities,  and thus
the cash income from such securities, but will be reflected in the valuations of
those securities used to compute the Fund's net asset values.

         o  Government Obligations.  The Fund seeks to achieve its objectives 
by investing primarily in foreign debt securities, with an emphasis on foreign 
government bonds.  Foreign securities are discussed below.

         o  U.S. Treasury Obligations.  These include Treasury Bills (which 
have maturities of one year or less when issued), Treasury Notes (which have 
maturities of one to ten years when issued)

                                                        -4-

<PAGE>



and Treasury Bonds (which have maturities generally greater than ten years when 
issued).  U.S. Treasury obligations are backed by the full faith and credit of 
the United States.

         o U.S.  Government and Agency Obligations.  U.S. government  securities
are debt obligations  issued by or guaranteed by the United States government or
any of its agencies or instrumentalities.  Some of these obligations,  including
U.S. Treasury notes and bonds, and  mortgage-backed  securities  (referred to as
"Ginnie Maes") guaranteed by the Government National Mortgage  Association,  are
supported  by the full faith and credit of the United  States,  which means that
the  government  pledges to use its taxing  power to repay the debt.  Other U.S.
government   securities   issued  or   guaranteed   by   Federal   agencies   or
government-sponsored  enterprises are not supported by the full faith and credit
of the United States. They may include  obligations  supported by the ability of
the issuer to borrow from the U.S. Treasury.  However, the Treasury is not under
a legal obligation to make a loan.  Examples of these are obligations of Federal
Home Loan  Mortgage  Corporation  (these  securities  are often called  "Freddie
Macs").  Other  obligations are supported by the credit of the  instrumentality,
such as Federal National Mortgage  Association bonds (these securities are often
called "Fannie Maes").

         (1) GNMA  Certificates.  Certificates of Government  National  Mortgage
Association  ("GNMA") are  mortgage-backed  securities  of GNMA that evidence an
undivided  interest in a pool or pools of mortgages ("GNMA  Certificates").  The
GNMA Certificates that the Fund may purchase are of the "modified  pass-through"
type,  which  entitle the holder to receive  timely  payment of all interest and
principal  payments due on the mortgage  pool,  net of fees paid to the "issuer"
and GNMA, regardless of whether the mortgagor actually makes the payments.

         The  National  Housing  Act  authorizes  GNMA to  guarantee  the timely
payment of principal  and interest on  securities  backed by a pool of mortgages
insured by the  Federal  Housing  Administration  ("FHA") or  guaranteed  by the
Veterans  Administration  ("VA"). The GNMA guarantee is backed by the full faith
and credit of the U.S.  Government.  GNMA is also  empowered  to borrow  without
limitation  from the U.S.  Treasury if necessary  to make any payments  required
under its guarantee.

         The average life of a GNMA  Certificate  is likely to be  substantially
shorter than the original  maturity of the mortgages  underlying the securities.
Prepayments  of principal by mortgagors and mortgage  foreclosures  will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool.  Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.

         (2) FNMA Securities. The Federal National Mortgage Association ("FNMA")
was  established to create a secondary  market in mortgages  insured by the FHA.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA Certificates").
FNMA  Certificates  resemble  GNMA  Certificates  in that each FNMA  Certificate
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FNMA guarantees timely payment of

                                                        -5-

<PAGE>



interest and principal on FNMA Certificates.  The FNMA guarantee is not backed 
by the full faith and credit of the U.S. Government.

   
         (3)  FHLMC  Securities.  The  Federal  Home Loan  Mortgage  Corporation
("FHLMC") was created to promote  development of a nationwide  secondary  market
for  conventional  residential  mortgages.  FHLMC  issues two types of  mortgage
pass-through   certificates  ("FHLMC   Certificates"):   mortgage  participation
certificates ("PCS") and guaranteed mortgage certificates ("GMCs"). PCS resemble
GNMA  Certificates  in that each PC  represents a pro rata share of all interest
and principal  payments made and owed on the underlying  pool.  FHLMC guarantees
timely monthly payment of interest on PCS and the ultimate payment of principal.
The  FHLMC  guarantee  is not  backed by the full  faith and  credit of the U.S.
Government.
    

         GMCs  also  represent  a pro  rata  interest  in a pool  of  mortgages.
However,  these instruments pay interest semi-annually and return principal once
a year in  guaranteed  minimum  payments.  The  expected  average  life of these
securities is approximately  ten years. The FHLMC guarantee is not backed by the
full faith and credit of the U.S. Government.

   
         (4)  Mortgage-Backed  Security Rolls.  The Fund may enter into "forward
roll"  transactions with respect to  mortgage-backed  securities issued by GNMA,
FNMA or FHLMC.  In a  forward  roll  transaction,  which is  considered  to be a
borrowing by the Fund, the Fund will sell a mortgage security to a bank or other
permitted entity and simultaneously  agree to repurchase a similar security from
the institution at a later date at an agreed upon price. The mortgage securities
that are  repurchased  will  bear  the same  interest  rate as those  sold,  but
generally will be  collateralized by different pools of mortgages with different
prepayment  histories than those sold. Risks of  mortgage-backed  security rolls
include: (i) the risk of prepayment prior to maturity, (ii) the possibility that
the  proceeds of the sale may have to be invested  in money  market  instruments
(typically repurchase  agreements) maturing not later than the expiration of the
roll, and (iii) the possibility  that the market value of the securities sold by
the Fund may decline  below the price at which the Fund is obligated to purchase
the  securities.  Upon entering into a  mortgage-backed  security roll, the Fund
will be required to identify with its Custodian certain assets which may consist
of  liquid  securities  of  any  type,  including  equity  securities  and  debt
securities of any grade
    

         o Commercial Paper.  The Fund's commercial paper investments include 
the following:

         (1)  Variable  Amount  Master  Demand  Notes.  Master  demand notes are
corporate  obligations which permit the investment of fluctuating amounts by the
Fund at varying rates of interest  pursuant to direct  arrangements  between the
Fund,  as lender,  and the  borrower.  They permit daily  changes in the amounts
borrowed.  The Fund has the right to increase  the amount  under the note at any
time up to the full amount  provided by the note  agreement,  or to decrease the
amount,  and the  borrower  may prepay up to the full amount of the note without
penalty. These notes may or may not be backed by bank letters of credit. Because
these notes are direct lending arrangements between the lender and borrower,  it
is not generally  contemplated  that they will be traded.  There is no secondary
market for these  notes,  although  they are  redeemable  (and thus  immediately
repayable by the borrower) at principal amount,  plus accrued  interest,  at any
time.  Accordingly,  the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on

                                                        -6-

<PAGE>



demand.  The Fund has no limitations on the type of issuer from whom these notes
will be purchased;  however, in connection with such purchases and on an ongoing
basis,  the  Manager  will  consider  the  earning  power,  cash  flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand,  including  a  situation  in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities, described in the Prospectus.

         (2) Floating  Rate/Variable  Rate Notes. Some of the notes the Fund may
purchase  may have  variable  or floating  interest  rates.  Variable  rates are
adjustable  at stated  periodic  intervals;  floating  rates  are  automatically
adjusted according to a specified market rate for such investments,  such as the
percentage of the prime rate of a bank,  or the 91-day U.S.  Treasury Bill rate.
Such  obligations  may be  secured  by bank  letters  of credit or other  credit
support arrangements.

         o  Mortgage-Backed  Securities and CMO's.  These  securities  represent
participation interests in pools of residential mortgage loans.  Mortgage-backed
securities include  collateralized  mortgage-backed  obligations (referred to as
"CMOs") issued by the U.S. government, its agencies or instrumentalities,  or by
private  issuers.  Mortgage-backed  securities and CMOs  securities  differ from
conventional  debt securities  which generally  provide for periodic  payment of
interest in fixed or determinable amounts (usually semi-annually) with principal
payments at maturity or specified call dates.

         (1) Mortgage-Backed Securities. The yield on mortgage-backed securities
is based on the average  expected life of the underlying pool of mortgage loans.
The actual life of any particular  pool will be shortened by any  unscheduled or
early payments of principal and interest. Principal prepayments generally result
from the sale of the  underlying  property or the  refinancing or foreclosure of
underlying mortgages.  The occurrence of prepayments is affected by a wide range
of economic, demographic and social factors and, accordingly, it is not possible
to predict accurately the average life of a particular pool. Yield on such pools
is usually computed by using the historical record of prepayments for that pool,
or, in the case of  newly-issued  mortgages,  the prepayment  history of similar
pools.  The actual  prepayment  experience of a pool of mortgage loans may cause
the yield realized by the Fund to differ from the yield  calculated on the basis
of the expected average life of the pool.

         Prepayments  tend to increase during periods of falling interest rates,
while  during  periods of rising  interest  rates  prepayments  will most likely
decline.  When  prevailing  interest  rates  rise,  the value of a  pass-through
security may  decrease,  as do the values of other debt  securities,  but,  when
prevailing interest rates decline,  the value of a pass-through  security is not
likely to rise to the  extent  that the  value of other  debt  securities  rise,
because  of the  prepayment  feature  of  pass-through  securities.  The  Fund's
reinvestment  of scheduled  principal  payments and  unscheduled  prepayments it
receives  may occur at times when  available  investments  offer higher or lower
rates  than the  original  investment,  thus  affecting  the  yield of the Fund.
Monthly interest payments  received by the Fund have a compounding  effect which
may increase the yield to the Fund more than debt  obligations that pay interest
semi-annually.  Because of those factors, mortgage-backed securities may be less
effective than Treasury bonds of similar  maturity at maintaining  yields during
periods of  declining  interest  rates.  The Fund may  purchase  mortgage-backed
securities at par or at a

                                                        -7-

<PAGE>



premium or at a discount.  Accelerated  prepayments  adversely affect yields for
pass-through  securities  purchased at a premium (i.e.,  at a price in excess of
their  principal  amount) and may involve  additional  risk of loss of principal
because the premium may not have been fully amortized at the time the obligation
is repaid.  The  opposite is true for  pass-through  securities  purchased  at a
discount.

         The Fund may invest in "stripped" mortgage-backed  securities, in which
the  principal  and interest  portions of the security are  separated  and sold.
Stripped  mortgage-backed  securities  usually have at least two classes each of
which receives different proportions of interest and principal  distributions on
the  underlying  pool  of  mortgage  assets.  One  common  variety  of  stripped
mortgage-backed  security has one class that  receives  some of the interest and
most of the  principal,  while the other class receives most of the interest and
remainder  of the  principal.  In some cases,  one class will receive all of the
interest  (the  "interest-only"  or "I/O"  class),  while the other  class  will
receive all of the principal (the "principal-only" or "P/O" class).

         The yield to  maturity  on the class that  receives  only  interest  is
extremely  sensitive to the rate of payment of the  principal on the  underlying
mortgages. Principal prepayments increase that sensitivity.  Stripped securities
that pay "interest only" are therefore  subject to greater price volatility when
interest rates change,  and they have the additional risk that if the underlying
mortgages  are prepaid,  the Fund will lose the  anticipated  cash flow from the
interest on the prepaid mortgages.  That risk is increased when general interest
rates  fall,  and in times of rapidly  falling  interest  rates,  the Fund might
receive back less than its investment.

         The  value  of  "principal  only"  securities  generally  increases  as
interest rates decline and prepayment  rates rise. The price of these securities
is  typically  more  volatile  than that of  coupon-  bearing  bonds of the same
maturity.

         (2) CMOs.  CMOs are  fully-collateralized  bonds  that are the  general
obligations  of the issuer  thereof.  Such  bonds  generally  are  secured by an
assignment  to a trustee  (under the  indenture  pursuant to which the bonds are
issued) of collateral  consisting of a pool of mortgages.  Payments with respect
to the  underlying  mortgages  generally  are  made  to the  trustee  under  the
indenture.  Payments of principal and interest on the  underlying  mortgages are
not passed  through to the holders of the CMOs as such (i.e.,  the  character of
payments of principal and interest is not passed through, and therefore payments
to holders of CMOs  attributable  to interest paid and  principal  repaid on the
underlying mortgages do not necessarily constitute income and return of capital,
respectively,  to such  holders),  but such payments are dedicated to payment of
interest on and repayment of principal of the CMOs. CMOs often are issued in two
or more classes with different  characteristics  such as varying  maturities and
stated  rates of  interest.  Because  interest  and  principal  payments  on the
underlying  mortgages are not passed through to holders of CMOs, CMOs of varying
maturities  may be secured by the same pool of mortgages,  the payments on which
are used to pay  interest  on each  class  and to retire  successive  maturities
(known as  "tranches")  in  sequence.  Unlike other  mortgage-backed  securities
(discussed above),  CMOs are designed to be retired as the underlying  mortgages
are repaid. In the event of prepayment on such mortgages, the class of CMO first
to mature  generally  will be paid down.  Therefore,  although in most cases the
issuer  of CMOs  will not  supply  additional  collateral  in the  event of such
prepayment, there will be sufficient collateral to secure

                                                        -8-

<PAGE>



CMOs that remain outstanding.  The value of certain classes or "tranches" may be
more  volatile  than the value of the pool as a whole,  and  losses  may be more
severe than on other classes.

         Mortgage-backed  securities may be less effective than debt obligations
of similar maturity at maintaining  yields during periods of declining  interest
rates. As new types of mortgage-related  securities are developed and offered to
investors,  the Manager will,  subject to the direction of the Board of Trustees
and consistent  with the Fund's  investment  objectives  and policies,  consider
making investments in such new types of mortgage-related securities.

         o Asset-Backed  Securities.  The value of an  asset-backed  security is
affected  by  changes  in the  market's  perception  of the  asset  backing  the
security,  the  creditworthiness  of the servicing  agent for the loan pool, the
originator  of the loans,  or the  financial  institution  providing  any credit
enhancement,  and is also affected if any credit enhancement has been exhausted.
The risks of investing in asset-backed  securities are ultimately dependent upon
payment of consumer  loans by the  individual  borrowers.  As a purchaser  of an
asset-backed  security,  the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower.  The underlying
loans are subject to prepayments, which may shorten the weighted average life of
asset-  backed  securities  and may lower  their  return,  in the same manner as
described in the Prospectus and in "Mortgage-Backed Securities and CMOs", above,
for  prepayments  of  a  pool  of  mortgage  loans  underlying   mortgage-backed
securities.

         o Zero Coupon Securities. The Fund may invest in zero coupon securities
issued by the U.S.  Treasury or by private  issuers  such as domestic or foreign
corporations.  Zero coupon U.S. Treasury securities  include:  (1) U.S. Treasury
bills without interest coupons, (2) U.S. Treasury notes and bonds that have been
stripped of their  unmatured  interest  coupons and (3) receipts or certificates
representing  interests in such  stripped  debt  obligations  or coupons.  These
securities  usually  trade at a deep  discount  from their face or par value and
will be subject to greater  fluctuations in market value in response to changing
interest rates than debt obligations of comparable  maturities that make current
payments of interest. However, the lack of periodic interest payments means that
the interest  rate is "locked in" and the investor  avoids the risk of having to
reinvest  periodic  interest  payments in  securities  having  lower  rates.  An
additional risk of private-issuer zero coupon securities is the credit risk that
the issuer will be unable to make payment at maturity of the obligation.

         Because the Fund  accrues  taxable  income from zero coupon  securities
without receiving cash, the Fund may be required to sell portfolio securities in
order to pay dividends or redemption proceeds for its shares,  which require the
payment  of cash.  This will  depend  on  several  factors:  the  proportion  of
shareholders  who elect to receive  dividends  in cash rather  than  reinvesting
dividends in  additional  shares of the Fund,  and the amount of cash income the
Fund receives  from other  investments  and the sale of shares.  In either case,
cash  distributed  or held by the Fund that is not  reinvested  by  investors in
additional Fund shares will hinder the Fund from seeking current income.

         o  Participation  Interests.  The  Fund  may  invest  in  participation
interests,  subject to the  limitation,  described in "Illiquid  and  Restricted
Securities"   in  the   Prospectus  on  investments  by  the  Fund  in  illiquid
investments. Participation interests provide the Fund an undivided interest in a
loan made by the issuing financial institution in the proportion that the Fund's
participation interest bears

                                                        -9-

<PAGE>



to the total  principal  amount of the loan.  No more than 5% of the  Fund's net
assets can be invested in  participation  interests  of the same  borrower.  The
issuing  financial  institution may have no obligation to the Fund other than to
pay the Fund the proportionate  amount of the principal and interest payments it
receives.   Participation   interests   are   primarily   dependent   upon   the
creditworthiness  of the  borrowing  corporation,  which  is  obligated  to make
payments of principal  and  interest on the loan,  and there is a risk that such
borrowers may have difficulty  making payments.  In the event the borrower fails
to pay scheduled  interest or principal  payments,  the Fund could  experience a
reduction  in its  income  and might  experience  a decline in the value of that
participation interest and in the net asset value of its shares. In the event of
a failure by the financial  institution  to perform its obligation in connection
with the participation  agreement, the Fund might incur certain costs and delays
in realizing payment or may suffer a loss of principal and/or interest.

         o  Bank  Obligations  and  Instruments   Secured   Thereby.   The  bank
obligations  the Fund may  invest in  include  time  deposits,  certificates  of
deposit,  and bankers'  acceptances  if they are: (i)  obligations of a domestic
bank with total assets of at least $1 billion or (ii)  obligations  of a foreign
bank with total assets of at least U.S. $1 billion.  The Fund may also invest in
instruments  secured by such obligations  (e.g., debt which is guaranteed by the
bank). For purposes of this section,  the term "bank" includes commercial banks,
savings banks, and savings and loan associations which may or may not be members
of the Federal Deposit Insurance Corporation.

         Time  deposits  are  non-negotiable  deposits in a bank for a specified
period of time at a stated  interest rate,  whether or not subject to withdrawal
penalties.  However,  time deposits  that are subject to  withdrawal  penalties,
other than those  maturing in seven days or less,  are subject to the limitation
on investments by the Fund in illiquid investments,  set forth in the Prospectus
under "Illiquid and Restricted Securities."

         Banker's acceptances are marketable  short-term credit instruments used
to finance the  import,  export,  transfer or storage of goods.  They are deemed
"accepted" when a bank guarantees their payment at maturity.

         o  Equity Securities.  Additional information about some of the types 
of equity securities the Fund may invest in is provided below.

         o Convertible  Securities.  While convertible  securities are a form of
debt security in many cases, their conversion feature (allowing  conversion into
equity securities) causes them to be regarded more as "equity equivalents." As a
result,  any rating  assigned to the security  has less impact on the  Manager's
investment  decision with respect to convertible  securities than in the case of
non-convertible  debt securities.  To determine whether  convertible  securities
should be regarded as "equity  equivalents,"  the Manager examines the following
factors:  (1) whether, at the option of the investor,  the convertible  security
can be exchanged for a fixed number of shares of common stock of the issuer, (2)
whether the issuer of the  convertible  securities has restated its earnings per
share of  common  stock on a fully  diluted  basis  (considering  the  effect of
converting  the  convertible  securities),  and  (3) the  extent  to  which  the
convertible  security  may be a defensive  "equity  substitute,"  providing  the
ability to participate in any  appreciation  in the price of the issuer's common
stock.

                                                       -10-

<PAGE>



         o  Warrants  and  Rights.  Warrants  are  options  to  purchase  equity
securities  at set prices  valid for a specified  period of time.  The prices of
warrants  do not  necessarily  move in a manner  parallel  to the  prices of the
underlying securities. The price the Fund pays for a warrant will be lost unless
the  warrant  is  exercised  prior to its  expiration.  Rights  are  similar  to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders.  Rights and warrants have no voting rights,  receive
no dividends and have no rights with respect to the assets of the issuer.

         o Portfolio  Turnover.  To the extent that increased portfolio turnover
results in gains  from sales of  securities  held less than  three  months,  the
Fund's ability to qualify as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Internal  Revenue Code") may be affected.
Although changes in the value of the Fund's portfolio  securities  subsequent to
their  acquisition  are  reflected in the net asset value of the Fund's  shares,
such  changes  will  not  affect  the  income  received  by the Fund  from  such
securities. The dividends paid by the Fund will increase or decrease in relation
to the income received by the Fund from its investments,  which will in any case
be  reduced  by the  Fund's  expenses  before  being  distributed  to the Fund's
shareholders.

Other Investment Techniques and Strategies

         o Borrowing.  From time to time, the Fund may increase its ownership of
securities  by  borrowing  from banks on a  unsecured  basis and  investing  the
borrowed funds,  subject to the restrictions stated in the Prospectus.  Any such
borrowing will be made only from banks,  and pursuant to the requirements of the
Investment  Company Act,  will be made only to the extent that the value of that
Fund's assets, less its liabilities other than borrowings,  is equal to at least
300% of all borrowings including the proposed borrowing and amounts covering the
Fund's obligations under "forward roll" transactions. If the value of the Fund's
assets so computed should fail to meet the 300% asset coverage requirement,  the
Fund is  required  within  three  days to  reduce  its bank  debt to the  extent
necessary  to meet  such  requirement  and may  have  to sell a  portion  of its
investments  at a time when  independent  investment  judgment would not dictate
such sale.  Borrowing for investment  increases both investment  opportunity and
risk.  Since  substantially  all of the Fund's  assets  fluctuate in value,  but
borrowing obligations are fixed, when the Fund has outstanding  borrowings,  its
net asset value per share  correspondingly  will tend to increase  and  decrease
more when portfolio assets fluctuate in value than otherwise would be the case.

         o When-Issued and Delayed Delivery Transactions.  The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed delivery" basis.  Although the Fund will enter into such transactions
for the  purpose of  acquiring  securities  for its  portfolio  or for  delivery
pursuant to options  contracts  it has entered  into,  the Fund may dispose of a
commitment prior to settlement.  "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,  or to securities to
be delivered at a later date. When such  transactions are negotiated,  the price
(which  is  generally  expressed  in  yield  terms)  is  fixed  at the  time the
commitment is made, but delivery and payment for the securities  take place at a
later  date.  The Fund does not intend to make such  purchases  for  speculative
purposes.  The  commitment to purchase a security for which payment will be made
on a future date may be deemed a separate  security  and involve risk of loss if
the value of the security declines prior to the settlement date. During the

                                                       -11-

<PAGE>



   
period  between  commitment  by the Fund and  settlement  (generally  within two
months  but not to exceed  120  days),  no  payment  is made for the  securities
purchased by the  purchaser,  and no interest  accrues to the purchaser from the
transaction.  Such  securities are subject to market  fluctuation;  the value at
delivery  may be less  than  the  purchase  price.  The Fund  identify  with its
Custodian  certain  assets,  which may  consist  of  liquid  assets of any type,
including  equity  securities and debt  securities of any grade, in an amount at
least equal to the value of purchase commitments until payment is made.
    

         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
consummate the  transaction.  Failure of the buyer or seller to do so may result
in the Fund losing the opportunity to obtain a price and yield  considered to be
advantageous.  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 and reflects the value of the security purchased,  or if a sale, the
proceeds to be received, in determining its net asset value. If the Fund chooses
to (i)  dispose  of the right to  acquire a  when-issued  security  prior to its
acquisition or (ii) dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss.

         To the extent the Fund  engages in  when-issued  and  delayed  delivery
transactions,  it will do so for the purpose of acquiring or selling  securities
consistent with its investment  objectives and policies and not for the purposes
of investment  leverage.  The Fund enters into such  transactions  only with the
intention of actually receiving or delivering the securities,  although as noted
above,  when-issued  securities  and  forward  commitments  may be sold prior to
settlement date. In addition,  changes in interest rates before  settlement in a
direction  other than that expected by the Manager will affect the value of such
securities and may cause a loss to the Fund.

         When-issued  transactions  and  forward  commitments  allow  the Fund a
technique to use 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,
thereby obtaining the benefit of currently higher cash yields.

         o Repurchase Agreements. In a repurchase transaction, the Fund acquires
a security from, and  simultaneously  resells it to, an approved  vendor (a U.S.
commercial bank, the U.S. branch of a foreign bank or a broker-dealer  which has
been designated a primary dealer in U.S. government securities,  which must meet
the credit  requirements set by the Fund's Board of Trustees from time to time),
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. The majority
of these  transactions  run from day to day,  and  delivery  pursuant  to resale
typically  will  occur  within  one to  five  days of the  purchase.  Repurchase
agreements   are   considered   "loans"  under  the   Investment   Company  Act,
collateralized  by the underlying  security.  The Fund's  repurchase  agreements
require that at all times while the repurchase

                                                       -12-

<PAGE>



agreement  is in  effect,  the  collateral's  value  must  equal or  exceed  the
repurchase price to fully collateralize the repayment obligation.  Additionally,
the Manager will impose creditworthiness requirements to confirm that the vendor
is financially sound and will continuously monitor the collateral's value.

         o  Illiquid  and  Restricted  Securities.  To  enable  the Fund to sell
restricted  securities not registered under the Securities Act of 1933, the Fund
may  have  to  cause  those  securities  to  be  registered.   The  expenses  of
registration  of  restricted  securities  may be negotiated by the Fund with the
issuer  at the  time  such  securities  are  purchased  by  the  Fund,  if  such
registration  is required  before such  securities  may be sold  publicly.  When
registration  must be arranged  because the Fund wishes to sell the security,  a
considerable period may elapse between the time the decision is made to sell the
securities and the time the Fund would be permitted to sell them. The Fund would
bear the risks of any downward price  fluctuation  during that period.  The Fund
may also acquire,  through private  placements,  securities  having  contractual
restrictions on their resale, which might limit the Fund's ability to dispose of
such  securities  and might  lower the amount  realizable  upon the sale of such
securities.

         The  Fund  has  percentage  limitations  that  apply  to  purchases  of
restricted  and  illiquid  securities,  as  stated  in  the  Prospectus.   Those
percentage restrictions do not limit purchases of restricted securities that are
eligible for sale to qualified  institutional  purchasers  pursuant to Rule 144A
under the  Securities  Act of 1933,  provided  that those  securities  have been
determined  to be liquid by the Board of  Trustees of the Fund or by the Manager
under Board-approved guidelines.  Those guidelines take into account the trading
activity  for  such  securities  and  the   availability  of  reliable   pricing
information,  among other factors.  If there is a lack of trading  interest in a
particular Rule 144A security, the Fund's holding of that security may be deemed
to be illiquid.

         o Loans of  Portfolio  Securities.  The  Fund  may  lend its  portfolio
securities  subject  to  the  restrictions  stated  in  the  Prospectus.   Under
applicable  regulatory  requirements  (which are  subject to  change),  the loan
collateral  must,  on each  business day, at least equal the market value of the
loaned  securities  and must  consist of cash,  bank  letters  of  credit,  U.S.
government securities,  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.  Such terms and the issuing bank must be  satisfactory to the Fund. In a
portfolio securities lending transaction, the Fund receives from the borrower an
amount  equal to the  interest  paid or the  dividends  declared  on the  loaned
securities during the term of the loan as well as the interest on the collateral
securities,  less any finders' or administrative fees the Fund pays in arranging
the  loan.  The Fund may  share  the  interest  it  receives  on the  collateral
securities with the borrower as long as it realizes at least a minimum amount of
interest  required  by  the  lending  guidelines  established  by its  Board  of
Trustees.  The  Fund  will not lend its  portfolio  securities  to any  officer,
trustee,  employee or  affiliate  of the Fund or its  Manager.  The terms of the
Fund's loans must meet certain tests under the Internal  Revenue Code and permit
the Fund to reacquire loaned securities on five business days' notice or in time
to vote on any important matter.

         o  Hedging.  As described in the Prospectus, the Fund may employ one 
or more types of hedging instruments.  When hedging to attempt to protect 
against declines in the market value of the

                                                       -13-

<PAGE>



Fund's portfolio,  to permit the Fund to retain unrealized gains in the value of
portfolio securities which have appreciated, or to facilitate selling securities
for investment  reasons,  the Fund may: (i) sell Futures,  (ii) buy puts on such
Futures or  securities,  or (iii)  write  calls on  securities  held by it or on
Futures.  When  hedging  to  attempt to protect  against  the  possibility  that
portfolio  securities  are not  fully  included  in a rise in  value of the debt
securities  market,  the Fund may: (i) buy  Futures,  or (ii) buy calls or write
puts on such  Futures  or on  securities.  Covered  calls  and  puts may also be
written on debt  securities  to  attempt to  increase  the Fund's  income.  When
hedging  to  protect  against   declines  in  the  dollar  value  of  a  foreign
currency-denominated  security,  the  Fund  may:  (a) buy  puts on that  foreign
currency and on foreign currency Futures, (b) write calls on that currency or on
such Futures, or (c) enter into Forward Contracts at a higher or lower rate than
the spot ("cash") rate.

   
         The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's activities in the underlying cash market. Additional
Information about the hedging instruments the Fund may use is provided below. In
the future, the Fund may employ hedging  instruments and strategies that are not
presently contemplated but which may be developed, to the extent such investment
methods  are  consistent  with  the  Fund's   investment   objectives,   legally
permissible and adequately disclosed.
    

         o  Writing  Covered  Call  Options.  When the  Fund  writes a call on a
security,  it receives a premium and agrees to sell the callable investment to a
purchaser of a  corresponding  call on the same security  during the call period
(usually  not more than 9 months) at a fixed  exercise  price  (which may differ
from the market price of the  underlying  security),  regardless of market price
changes  during the call  period.  The Fund has retained the risk of loss should
the price of the underlying  security decline during the call period,  which may
be offset to some extent by the premium.

         To terminate  its  obligation  on a call it has  written,  the Fund may
purchase a corresponding  call in a "closing purchase  transaction." A profit or
loss will be  realized,  depending  upon  whether  the net of the  amount of the
option transaction costs and the premium received on the call written is more or
less than the price of the call  subsequently  purchased.  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 income tax purposes,  and when distributed by the Fund
are taxable as ordinary  income.  An option position may be closed out only on a
market that provides  secondary trading for option of the same series, and 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 lack
of a  market,  it would  have to hold the  callable  investments  until the call
lapsed or was exercised.

         The Fund may also  write  calls on  Futures  without  owning a  futures
contract  or a  deliverable  security,  provided  that at the  time  the call is
written,  the Fund covers the call by segregating in escrow an equivalent dollar
amount of liquid assets. The Fund will segregate additional liquid assets if the
value of the  escrowed  assets  drops  below  100% of the  obligation  under the
Future. In no circumstances would an exercise notice require the Fund to deliver
a futures  contract;  it would simply put the Fund in a short futures  position,
which is permitted by the Fund's hedging policies.

         o  Writing Put Options.  A put option on securities gives the 
purchaser the right to sell, and

                                                       -14-

<PAGE>



the writer the  obligation  to buy, the  underlying  investment  at the exercise
price  during the option  period.  Writing a put  covered by  segregated  liquid
assets equal to the exercise  price of the put has the same  economic  effect to
the Fund as writing a covered call. The premium the Fund receives from writing a
put  option  represents  a  profit,  as  long  as the  price  of the  underlying
investment remains above the exercise price.  However, the Fund has also assumed
the obligation  during the option period to buy the underlying  investment  from
the  buyer  of the put at the  exercise  price,  even  though  the  value of the
investment may fall below the exercise price. If the put lapses unexercised, the
Fund (as the writer of the put) realizes a gain in the amount of the premium. If
the put is  exercised,  the Fund must  fulfill its  obligation  to purchase  the
underlying  investment  at the exercise  price,  which will  usually  exceed the
market value of the  investment at that time. In that case, the Fund may incur a
loss, equal to the sum of the current market value of the underlying  investment
and the premium received minus the sum of the exercise price and any transaction
costs incurred.

         When writing put options on securities, to secure its obligation to pay
for the underlying security,  the Fund will deposit in escrow liquid assets with
a value equal to or greater than the exercise price of the put option.  The Fund
therefore  forgoes the opportunity of investing the segregated assets or writing
calls  against those  assets.  As long as the  obligation of the Fund as the put
writer  continues,  it may be assigned an exercise  notice by the  broker-dealer
through whom such option was sold,  requiring  the Fund to take  delivery of the
underlying  security  against  payment of the  exercise  price.  The Fund has no
control over when it may be required to purchase the underlying security,  since
it may be assigned an exercise  notice at any time prior to the  termination  of
its  obligation  as the  writer  of the put.  This  obligation  terminates  upon
expiration  of the put, or such earlier time at which the Fund effects a closing
purchase  transaction by purchasing a put of the same series as that  previously
sold. Once the Fund has been assigned an exercise  notice,  it is thereafter not
allowed to effect a closing purchase transaction.

         The Fund may effect a closing purchase  transaction to realize a profit
on an outstanding put option it has written or to prevent an underlying security
from being put. Furthermore,  effecting such a closing purchase transaction will
permit the Fund to write  another  put option to the  extent  that the  exercise
price  thereof is secured by the  deposited  assets,  or to utilize the proceeds
from the sale of such assets for other  investments  by the Fund.  The Fund will
realize a profit or loss from a closing purchase  transaction if the cost of the
transaction  is less or more than the premium  received from writing the option.
As above for writing covered calls,  any and all such profits  described  herein
from writing puts are considered short-term gains for Federal tax purposes,  and
when distributed by the Fund, are taxable as ordinary income.

         o Purchasing Calls and Puts. When the Fund purchases a call (other than
in a closing purchase transaction), it pays a premium and, except as to calls on
indices or Futures, 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.  When the Fund purchases a call on an index or Future, it pays a
premium,  but  settlement  is in cash rather than by delivery of the  underlying
investment to the Fund. In purchasing a call, the Fund benefits only if the call
is sold at a profit or if,  during  the call  period,  the  market  price of the
underlying  investment  is  above  the  sum  of  the  exercise  price  plus  the
transaction costs and the premium paid and the call is exercised. If the call is
not exercised or sold (whether or not at a profit),  it will become worthless at
its expiration date and the Fund will lose its

                                                       -15-

<PAGE>



premium payment and the right to purchase the underlying investment.

         When the Fund purchases a put, it pays a premium and, except as to puts
on indices,  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.  Buying a put on an investment the Fund owns enables the Fund to
protect  itself  during  the put  period  against a decline  in the value of the
underlying  investment  below the  exercise  price by  selling  such  underlying
investment  at the  exercise  price to a seller of a  corresponding  put. 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, and the Fund will lose its premium payment and
the right to sell the underlying investment. The put may, however, be sold prior
to expiration (whether or not at a profit.)

         Buying a put on an investment it does not own, either a put on an index
or a put on a Future not held by the Fund, permits the Fund either to resell the
put or buy the  underlying  investment  and sell it at the exercise  price.  The
resale  price of the put will vary  inversely  with 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. When the Fund purchases a put on an index, or
on a Future not held by it,  the put  protects  the Fund to the extent  that the
index moves in a similar pattern to the securities held. In the case of a put on
an index or Future, settlement is in cash rather than by delivery by the Fund of
the underlying investment.

         Puts and calls on broadly-based  indices or Futures are similar to puts
and calls on securities except that all settlements are in cash and gain or loss
depends  on  changes  in the  index or  Future  in  question  (and thus on price
movements in the securities markets generally) rather than on price movements in
individual  securities  or futures  contracts.  When the Fund buys a calls on an
index or Future, it pays a premium.  During the call period,  upon exercise of a
call by the Fund, a seller of a  corresponding  call on the same investment will
pay the Fund an amount of cash to settle  the call if the  closing  level of the
index or Future upon which the call is based is greater than the exercise  price
of the call.  That cash payment is equal to the  difference  between the closing
price of the  index  or  Future  and the  exercise  price  of the  call  times a
specified multiple (the  "multiplier"),  which determines the total dollar value
for each point of difference. When the Fund buys a put on an index or Future, it
pays a premium and has the right  during the put period to require a seller of a
corresponding  put, upon the Fund's  exercise of its put, to deliver to the Fund
an amount of cash to settle the put if the closing  level of the index or Future
upon  which the put is based is less than the  exercise  price of the put.  That
cash payment is  determined by the  multiplier,  in the same manner as described
above as to calls.

         An option  position may be closed out only on a market  which  provides
secondary  trading for options of the same series and there is no assurance that
a liquid  secondary  market  will exist for any  particular  option.  The Fund's
option  activities may affect its turnover rate and brokerage  commissions.  The
exercise  by the Fund of puts on  securities  will  cause  the  sale of  related
investments, increasing portfolio turnover. Although such exercise is within the
Fund's  control,  holding  a put  might  cause  the  Fund  to sell  the  related
investments  for reasons  which  would not exist in the absence of the put.  The
Fund will pay a brokerage  commission  each time it buys a put or call,  sells a
put or call,  or buys or sells an underlying  investment in connection  with the
exercise of a put

                                                       -16-

<PAGE>



or call.  Such  commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for options are
small  in  relation  to  the  market  value  of  the  related  investments,  and
consequently,  put or 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 investments.

         o Options on Foreign Currencies. The Fund intends to write and purchase
calls and puts on foreign  currencies.  The Fund may purchase and write puts and
calls on foreign  currencies  that are  traded on a  securities  or  commodities
exchange or  over-the-counter  markets or are quoted by major recognized dealers
in such options.  It does so to protect against  declines in the dollar value of
foreign  securities  and  against  increases  in  the  dollar  cost  of  foreign
securities to be acquired. If the Manager anticipates a rise in the dollar value
of a foreign currency in which  securities to be acquired are  denominated,  the
increased cost of such securities may be partially offset by purchasing calls or
writing  puts on that  foreign  currency.  If a decline in the dollar value of a
foreign  currency is anticipated,  the decline in value of portfolio  securities
denominated  in that  currency  may be  partially  offset  by  writing  calls or
purchasing puts on that foreign currency. However, in the event of currency rate
fluctuations  adverse to the Fund's position,  it would lose the premium it paid
and transaction costs.

   
         A call written on a foreign currency by the Fund is covered if the Fund
owns the underlying  foreign currency covered by the call or has an absolute and
immediate  right to  acquire  that  foreign  currency  without  additional  cash
consideration (or for additional cash consideration held in a segregated account
by its Custodian) upon conversion or exchange of other foreign  currency held in
its  portfolio.  A call may be  written  by the Fund on a  foreign  currency  to
provide a hedge against a decline in the U.S.  dollar value of a security  which
the Fund  owns or has the  right to  acquire  and  which is  denominated  in the
currency underlying the option due to an expected adverse change in the exchange
rate. This is a cross-hedging  strategy. In such circumstances,  the Fund covers
the option by identifying  with its Custodian,  certain assets which may consist
of liquid securities of any type including equity securities and debt securities
of any grade in an amount equal to the exercise price of the option.
    

         o Interest Rate Futures. No price is paid or received upon the purchase
or sale of an Interest Rate Future.  Interest Rate Futures obligate one party to
deliver  and the  other  party to take a  specific  debt  security  or amount of
foreign currency,  respectively,  at a specified price on a specified date. Upon
entering  into a Futures  transaction,  the Fund will be  required to deposit an
initial  margin  payment  with the futures  commission  merchant  (the  "futures
broker").  The initial margin will be deposited with the Fund's  Custodian in an
account  registered in the futures broker's name; however the futures broker can
gain access to that account only under  specified  conditions.  As the Future is
marked to market to  reflect  changes  in its market  value,  subsequent  margin
payments,  called variation margin,  will be made to and from the futures broker
on a daily basis. Prior to expiration of the Future, if the Fund elects to close
out its  position  by taking an  opposite  position,  a final  determination  of
variation margin is made,  additional cash is required to be paid by or released
to the  Fund,  and  any  loss or gain is  realized  for tax  purposes.  Although
Interest  Rate  Futures  by their  terms  call for  settlement  by  delivery  or
acquisition  of debt  securities,  in most cases the  obligation is fulfilled by
entering  into an offsetting  position.  All futures  transactions  are effected
through a

                                                       -17-

<PAGE>



clearinghouse associated with the exchange on which the contracts are traded.

         o Financial  Futures.  Financial  Futures are similar to Interest  Rate
Futures except that  settlement is made in cash, and net gain or loss on options
on Financial  Futures depends on price  movements of the securities  included in
the index. The strategies which the Fund employs regarding Financial Futures are
similar to those described above with regard to Interest Rate Futures.

         o Forward Contracts.  A Forward Contract involves bilateral obligations
of one party to purchase,  and another  party to sell, a specific  currency at a
future date (which may be any fixed number of days from the date of the contract
agreed upon by the parties),  at a price set at the time the contract is entered
into.  These  contracts are traded in the interbank  market  conducted  directly
between currency  traders (usually large commercial  banks) and their customers.
The Fund may enter into a Forward Contract to "lock in" the U.S. dollar price of
a security  denominated in a foreign currency which it has purchased or sold but
which has not yet settled,  or to protect against a possible loss resulting from
an adverse  change in the  relationship  between  the U.S.  dollar and a foreign
currency.

         The Fund may use Forward  Contracts to protect  against  uncertainty in
the  level of future  exchange  rates.  The use of  Forward  Contracts  does not
eliminate  fluctuations in the prices of the underlying securities the Fund owns
or  intends  to  acquire,  but it does fix a rate of  exchange  in  advance.  In
addition,  although Forward Contracts limit the risk of loss due to a decline in
the value of the hedged  currencies,  at the same time they limit any  potential
gain that might result should the value of the currencies increase.

         The Fund may also  enter  into a  forward  contract  to sell a  foreign
currency other than that in which the underlying  security is denominated.  This
technique  is  referred  to as "cross  hedging,"  and is done  when the  foreign
currency  sold  through the  forward  contract  is  correlated  with the foreign
currency  or  currencies  in  which  the  underlying   security   positions  are
denominated.  The foreign currency sold through the forward contract may be sold
for a fixed  U.S.  dollar  amount  or for a fixed  amount  of  another  currency
correlated with the U.S. dollar.

         The success of cross  hedging is dependent on many  factors,  including
the ability of the Manager to  correctly  identify  and monitor the  correlation
among foreign  currencies and between foreign currencies and the U.S. dollar. To
the extent that these  correlations  are not identical,  the Fund may experience
losses or gains on both the underlying  security and the cross  currency  hedge.
However,  the Manager shall  determine that any cross hedge is a bona fide hedge
in that it is expected to reduce the volatility of the Fund's total return.

         The Fund may enter into  Forward  Contracts  with  respect to  specific
transactions. For example, when the Fund enters into a contract for the purchase
or sale of a  security  denominated  in a  foreign  currency,  or when  the Fund
anticipates  receipt of dividend  payments in a foreign  currency,  the Fund may
desire to "lock in" the U.S.  dollar  price of the  security or the U.S.  dollar
equivalent of such payment.  To do so, the Fund enters into a Forward  Contract,
for a fixed  amount  of U.S.  dollars  per  unit of  foreign  currency,  for the
purchase or sale of the amount of foreign  currency  involved in the  underlying
transaction ("transaction hedge"). The Fund will thereby be able to

                                                       -18-

<PAGE>



protect  itself  against a possible loss resulting from an adverse change in the
relationship  between the currency  exchange rates during the period between the
date on which the  security  is  purchased  or sold,  or on which the payment is
declared, and the date on which such payments are made or received.

         The  Fund  may  also  use  Forward  Contracts  to lock in the  value of
portfolio positions ("position hedges").  In a position hedge, for example, when
the  Fund  believes  that a  foreign  currency  in which  the Fund has  security
holdings may suffer a substantial  decline against the U.S. dollar, the Fund may
enter into a forward sale  contract to sell an amount of that  foreign  currency
for a fixed U.S.  dollar amount.  Additionally,  when the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency,  it may
enter into a forward purchase  contract to buy that foreign currency for a fixed
U.S. dollar amount.

         The Fund may also cross hedge its portfolio  positions by entering into
a forward  contract to buy or sell a foreign currency other than the currency in
which its  underlying  securities  are  denominated  for a fixed  amount in U.S.
dollars or a fixed amount in another  currency which is correlated with the U.S.
dollar.  If the  Fund  does  not own  portfolio  securities  denominated  in the
currency on the long side of the cross  hedge,  the Fund will not be required to
later purchase portfolio securities  denominated in that currency.  Instead, the
Fund may unwind the cross hedge by reversing the original transaction,  that is,
by  transacting  in a forward  contract  that is opposite to the original  cross
hedge or it may extend the hedge by "rolling" the hedge forward.

   
         The Fund's  Custodian will identify with its Custodian  certain assets,
which may consist of liquid assets of any type,  including equity securities and
debt  securities of any grade,  having a value equal to the aggregate  amount of
the Fund's commitment under Forward Contracts to cover its short positions.  The
Fund will not enter into such  Forward  Contracts  or maintain a net exposure to
such contracts  where the  consummation of the contracts would obligate the Fund
to deliver an amount of  foreign  currency  in excess of the value of the Fund's
portfolio  securities  or other assets  denominated  in that currency or another
currency that is also the subject of the hedge. The Fund,  however,  in order to
avoid excess  transactions and transaction costs, may maintain a net exposure to
Forward  Contracts in excess of the value of the Fund's portfolio  securities or
other assets  denominated  in these  currencies  provided  the excess  amount is
"covered" by liquid securities,  denominated in any currency,  at least equal at
all times to the amount of such excess. As an alternative, the Fund may purchase
a call option  permitting  the Fund to purchase  the amount of foreign  currency
being  hedged by a forward  sale  contract at a price no higher than the forward
contract price or the Fund may purchase a put option permitting the Fund to sell
the amount of foreign currency subject to a forward purchase contract at a price
as high or higher  than the forward  contract  price.  Unanticipated  changes in
currency prices may result in poorer overall performance for the Fund than if it
had not entered into such contracts.
    

         The precise  matching of the Forward  Contract amounts and the value of
the securities  involved will not generally be possible because the future value
of such securities in foreign  currencies will change as a consequence of market
movements in the value of these securities between the date the Forward Contract
is entered into and the date it is sold.  Accordingly,  it may be necessary  for
the Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and

                                                       -19-

<PAGE>



bear the expense of such purchase),  if the market value of the security is less
than the amount of foreign  currency  the Fund is  obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely,  it may be  necessary to sell on the spot market some of the foreign
currency  received upon the sale of the  portfolio  security if its market value
exceeds the amount of foreign  currency the Fund is  obligated  to deliver.  The
projection of short-term currency market movements is extremely  difficult,  and
the successful  execution of a short-term  hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated  currency movements will not
be accurately  predicted,  causing the Fund to sustain losses on these contracts
and transactions costs.

         At or before the maturity of a Forward  Contract  requiring the Fund to
sell a currency,  the Fund may either sell a portfolio security and use the sale
proceeds to make  delivery of the currency or retain the security and offset its
contractual  obligation to deliver the currency by purchasing a second  contract
pursuant to which the Fund will  obtain,  on the same  maturity  date,  the same
amount of the currency that it is obligated to deliver.  Similarly, the Fund may
close out a Forward  Contract  requiring it to purchase a specified  currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity  date of the first  contract.  The Fund would realize a
gain or loss as a result of entering  into such an offsetting  Forward  Contract
under either  circumstance  to the extent the exchange rate or rates between the
currencies  involved moved between the execution dates of the first contract and
offsetting contract.

         The cost to the Fund of  engaging  in  Forward  Contracts  varies  with
factors such as the currencies  involved,  the length of the contract period and
the market  conditions then  prevailing.  Because Forward  Contracts are usually
entered into on a principal  basis,  no fees or commissions  are involved.  Such
contracts are not traded on an exchange.  Therefore,  the Fund must evaluate the
credit and  performance  risk of each  particular  counterparty  under a Forward
Contract.

         Although the Fund values its assets daily in terms of U.S. dollars,  it
does not intend to convert its holdings of foreign  currencies into U.S. dollars
on a daily basis.  The Fund may convert foreign  currency from time to time, and
investors should be aware of the costs of currency conversion.  Foreign exchange
dealers do not charge a fee for conversion, but they do seek to realize a profit
based on the  difference  between the prices at which they buy and sell  various
currencies.  Thus, a dealer may offer to sell a foreign  currency to the Fund at
one rate,  while  offering a lesser rate of  exchange  should the Fund desire to
resell that currency to the dealer.

   
         o 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 interest 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.  The Fund will identify with its custodian certain
assets,  which may  consist  of liquid  assets  of any  type,  including  equity
securities and debt  securities of any grade,  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.  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
    

                                                       -20-

<PAGE>



   
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  in the same
currency in respect of one or more swap transactions,  the net amount payable on
that date in that  currency  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 such agreements,  if
there is a default resulting in a loss to one party, the measure of that party's
damages is  calculated  by reference to the average cost of a  replacement  swap
with  respect to each swap (i.e.,  the  mark-to-market  value at the time of the
termination  of 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."

         o Additional  Information About Hedging  Instruments and Their Use. 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 options
traded on  exchanges or as to other  acceptable  escrow  securities,  so that no
margin will be required for such  transactions.  OCC will release the securities
on the  expiration  of the  option or upon the  Fund's  entering  into a closing
transaction.  An  option  position  may be  closed  out only on a  market  which
provides  secondary  trading  for  options of the same  series,  and there is no
assurance that a liquid secondary market will exist for any particular option.

         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
would  establish a formula price at which the Fund would have the absolute right
to repurchase that OTC option.  That 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 extent to which the option is  "in-the-money").  When the Fund writes an
OTC option,  it will treat as illiquid  (for purposes of the limit on its assets
that may be invested  in  illiquid  securities,  stated in the  Prospectus)  the
mark-to-market  value of any OTC option held by it. The  Securities and Exchange
Commission  is  evaluating  whether  OTC  options  should be  considered  liquid
securities,  and the procedure  described above could be affected by the outcome
of that evaluation.

         The Fund's option activities may affect its 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 in a manner
beyond the Fund's  control.  The exercise by the Fund of puts on  securities  or
Futures may cause the sale of related  investments,  also  increasing  portfolio
turnover.  Although  such exercise is within the Fund's  control,  holding a put
might cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage  commission  each
time it buys or sells a put, a call, or an underlying investment in

                                                       -21-

<PAGE>



connection  with the exercise of a put or call.  Such  commissions may be higher
than those  which  would apply to direct  purchases  or sales of the  underlying
investments. Premiums paid for options are small in relation to the market value
of the related investments,  and 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 investments.

   
         o Regulatory  Aspects of Hedging  Instruments.  The Fund is required to
operate within certain  guidelines and  restrictions  with respect to its use of
Futures and options on Futures  established  by the  Commodity  Futures  Trading
Commission ("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 a Rule  adopted  by the  CFTC.  The  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 option exchanges governing the maximum number of options that may
be written or held by a single investor or group of investors acting in concert,
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
which 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  which apply to
Futures.  An exchange  may order the  liquidation  of  positions  found to be in
violation of those limits and may impose certain other sanctions.

   
         Due to  requirements  under the  Investment  Company Act, when the Fund
buys or sells a  Future,  the Fund  will  identify  with its  Custodian  certain
assets,  which may  consist  of liquid  assets  of any  type,  including  equity
securities  and debt  securities  of any  grade,  in an amount  equal to the net
exposure between the market value and the contract price of the Future, less the
margin deposit applicable to it.
    

         o Tax  Aspects  of  Covered  Calls and  Hedging  Instruments.  The Fund
intends  to qualify  as a  "regulated  investment  company"  under the  Internal
Revenue Code (although it reserves the right not to qualify). That qualification
enables the Fund to "pass  through"  its income and  realized  capital  gains to
shareholders  without  having to pay tax on them.  This avoids a "double tax" on
that income and capital gains, since shareholders  normally will be taxed on the
dividends and capital gains they receive from the Fund (unless the Fund's shares
are held in a retirement  account or the  shareholder  is otherwise  exempt from
tax). One of the tests for the Fund's  qualification  as a regulated  investment
company is that less than 30% of its gross  income  must be  derived  from gains
realized on the sale of securities  held for less than three  months.  To comply
with this 30% cap,  the Fund will  limit the  extent to which it  engages in the
following activities, but will not be precluded from them: (i) selling

                                                       -22-

<PAGE>



investments,  including Futures, held for less than three months, whether or not
they were purchased on the exercise of a call held by the Fund;  (ii) purchasing
calls or puts which expire in less than three months;  (iii)  effecting  closing
transactions  with  respect to calls or puts  purchased  less than three  months
previously;  (iv)  exercising puts or calls held by the Fund for less than three
months; or (v) writing calls on investments held for less than three months.

         Certain foreign currency exchange  contracts  ("Forward  Contracts") in
which the Fund may invest are  treated as  "section  1256  contracts."  Gains or
losses relating to section 1256 contracts  generally are characterized under the
Internal  Revenue Code as 60%  long-term  and 40%  short-term  capital  gains or
losses.  However,  foreign currency gains or losses arising from certain section
1256 contracts  (including Forward Contracts)  generally are treated as ordinary
income or loss. In addition,  section 1256 contracts held by the Fund at the end
of each taxable  year are  "marked-to-  market" with the result that  unrealized
gains or losses are treated as though they were realized.  These  contracts also
may be marked-to-market  for purposes of the excise tax applicable to investment
company  distributions and for other purposes under rules prescribed pursuant to
the Internal  Revenue  Code. An election can be made by the Fund to exempt these
transactions from this marked-to-market treatment.

   
         Certain  Forward  Contracts  entered  into by the  Fund may  result  in
"straddles"  for Federal income tax purposes.  The straddle rules may affect the
character  and timing of gains (or  losses)  recognized  by the Fund on straddle
positions.  Generally,  a loss sustained on the disposition of a position making
up a straddle is allowed only to the extent such loss  exceeds any  unrecognized
gain in the  offsetting  positions  making up the straddle.  Disallowed  loss is
generally  allowed  at the  point  where  there is no  unrecognized  gain in the
offsetting  positions  making up the  straddle,  or the  offsetting  position is
disposed of.
    

         Under  the  Internal  Revenue  Code,  gains or losses  attributable  to
fluctuations  in exchange  rates that occur  between  the time the Fund  accrues
interest  or  other   receivables  or  accrues  expenses  or  other  liabilities
denominated in a foreign  currency and the time the Fund actually  collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss.  Similarly,  on disposition of debt  securities  denominated in a
foreign currency and on disposition of foreign currency forward contracts, gains
or losses  attributable  to  fluctuations  in the  value of a  foreign  currency
between the date of  acquisition  of the  security  or contract  and the date of
disposition also are treated as ordinary gain or loss. Currency gains and losses
are offset  against  market gains and losses on each trade before  determining a
net "Section  988" gain or loss under the Internal  Revenue Code for that trade,
which may  increase  or  decrease  the amount of the Fund's  investment  company
income available for distribution to its shareholders.

         o Risks of Hedging With Options and Futures.  An option position may be
closed out only on a market that provides  secondary  trading for options of the
same series, and there is no assurance that a liquid secondary market will exist
for any particular option. In addition to the risks associated with hedging that
are  discussed  in the  Prospectus  and  above,  there is a risk in using  short
hedging by selling Futures to attempt to protect against decline in value of the
Fund's portfolio securities (due, for example, to an increase in interest rates)
that the prices of such Futures will correlate  imperfectly with the behavior of
the cash (i.e., market value) prices of the Fund's securities. The

                                                       -23-

<PAGE>



ordinary  spreads  between prices in the cash and futures markets are subject to
distortions  due to  differences  in the natures of those  markets.  First,  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.  Second,  the  liquidity  of the  futures  markets  depend  on
participants entering into offsetting  transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,  liquidity
in the futures markets could be reduced, thus producing distortion.  Third, 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 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 the
equity  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 equity  securities  being  hedged if the  historical
volatility of the prices of the equity  securities being hedged is more than the
historical  volatility of the applicable  index. It is also possible that if the
Fund has used hedging  instruments in a short hedge,  the market may advance and
the value of equity 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 in its portfolio securities.  However,  while this
could  occur for a very brief  period or to a very small  degree,  over time the
value of a diversified  portfolio of equity  securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.

         If the Fund uses  hedging  instruments  to  establish a position in the
debt securities markets as a temporary substitute for the purchase of individual
debt securities (long hedging) by buying Futures and/or calls on such Futures or
on debt securities, it is possible that the market may decline; if the Fund then
concludes  not to invest in such  securities at that time because of concerns as
to possible 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 price
of the debt securities purchased.

         o Short Sales  "Against-the-Box."  In a short sale, the seller does not
own the security that is sold, but normally  borrows the security to fulfill the
delivery  obligation.  The seller later buys the security to repay the loan,  in
the  expectation  that the price of the security will be lower when the purchase
is made, resulting in a gain. In these transactions, the Fund owns an equivalent
amount of the  securities  sold short.  This technique is primarily used for tax
purposes.

Other Investment Restrictions

The  Fund's  most  significant  investment  restrictions  are set  forth  in the
Prospectus.  There are  additional  investment  restrictions  that the Fund must
follow that are also fundamental  policies.  Fundamental policies and the Fund's
investment  objectives cannot be changed without 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: (1) 67%
or more of the shares

                                                       -24-

<PAGE>



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 (2)
more than 50% of the outstanding shares.

         Under these additional restrictions, the Fund cannot:

         o buy or sell  real  estate;  however,  the  Fund  may  invest  in debt
securities  secured by real estate or interests  therein or issued by companies,
including  real  estate  investment  trusts,  which  invest  in real  estate  or
interests therein;

         o buy  securities  on  margin,  except  that the  Fund may make  margin
deposits in connection with any of the Hedging Instruments which it may use;

         o underwrite  securities  issued by other persons  except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter for purposes of the Securities Act of 1933;

         o buy and retain  securities of any issuer if those officers,  Trustees
or Directors of the Fund or the Manager who  beneficially  own more than 0.5% of
the  securities  of such issuer  together own more than 5% of the  securities of
such issuer;

         o  invest in oil, gas, or other mineral exploration or development 
programs or leases; or

         o buy the  securities  of any  company  for the  purpose of  exercising
management  control,   except  in  connection  with  a  merger,   consolidation,
reorganization or acquisition of assets.

         For  purposes  of the Fund's  policy not to  concentrate  its assets as
described  in the  Prospectus,  the  Fund has  adopted  the  corporate  industry
classifications  set  forth  in  Appendix  A to  this  Statement  of  Additional
Information.

         In connection  with the  registration  of its shares in certain states,
the Fund has made the following undertakings. These undertakings shall terminate
if the Fund  ceases  to  qualify  its  shares  for sale in that  state or if the
state's  applicable  rules or regulations  are amended.  The Fund has undertaken
that:  (1) it will  not  invest  more  than 5% of its  total  assets  in  equity
securities  of issuers that are not readily  marketable,  (2) it will not invest
more than 5% of its total assets in  securities  of issuers  that have  operated
less than three years (including  operations of  predecessors),  (3) it will not
invest in securities of other  investment  companies,  except by purchase in the
open market where no  commission  or profit to a sponsor or dealer  results from
the  purchase  other than the  customary  broker's  commission,  (4) it will not
invest  more than 15% of its total  assets in  securities  of issuers  that have
operated  less than three  years  (including  operations  of  predecessors)  and
securities which are restricted as to disposition, including securities eligible
for resale  under Rule 144A of the  Securities  Act of 1933,  or (5) it will not
invest in real estate limited partnerships.




                                                       -25-

<PAGE>



How the Fund Is Managed

Organization  and History.  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, or 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. In addition,  if
the  Trustees  receive a request  from at least 10  shareholders  (who have been
shareholders  for at least six  months)  holding  shares  of the Fund  valued at
$25,000  or more or  holding  at  least  1% of the  Fund's  outstanding  shares,
whichever is less, 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,  or the Trustees may take
such other action as set forth under  Section  16(c) of the  Investment  Company
Act.

         The Fund's  Declaration  of Trust  contains  an express  disclaimer  of
shareholder or Trustee  liability for the Fund's  obligations,  and provides for
indemnification  and  reimbursement  of  expenses  out of its  property  for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any  shareholder  for any act or obligation of the Fund and satisfy
any judgment thereon.  Thus, while  Massachusetts law permits a shareholder of a
business  trust (such as the Fund) to be held  personally  liable as a "partner"
under certain circumstances,  the risk of a Fund shareholder incurring financial
loss on account of  shareholder  liability is limited to the  relatively  remote
circumstances  in  which  the  Fund  would be  unable  to meet  its  obligations
described  above.  Any person doing business with the Trust, and any shareholder
of the Trust,  agrees under the Trust's  Declaration  of Trust to look solely to
the assets of the Trust for  satisfaction of any claim or demand which may arise
out of any  dealings  with the Trust,  and the  Trustees  shall have no personal
liability to any such person, to the extent permitted by law.

   
Trustees  and Officers of the Fund.  The Fund's  Trustees and officers and their
principal  occupations and business  affiliations during the past five years are
set forth below.  All of the Trustees are also  Trustees,  Directors or Managing
General  Partners of Centennial  America Fund, L.P.,  Centennial  California Tax
Exempt  Trust,  Centennial  Government  Trust,  Centennial  Money Market  Trust,
Centennial New York Tax Exempt Trust,  Centennial  Tax Exempt Trust,  Daily Cash
Accumulation Fund, Inc., Oppenheimer Cash Reserves,  Oppenheimer Champion Income
Fund, Oppenheimer Equity Income Fund, Oppenheimer  Limited-Term Government Fund,
Oppenheimer  Integrity  Funds,  Oppenheimer  High Yield Fund,  Oppenheimer  Main
Street Funds, Inc.,  Oppenheimer  Strategic Income Fund,  Oppenheimer  Strategic
Income & Growth Fund, Oppenheimer Municipal Fund, Oppenheimer Total Return Fund,
Inc., Oppenheimer Variable Account Funds, Panorama Series Fund, Inc. and The New
York Tax-Exempt  Income Fund,  Inc.,  (the  "Denver-based  Oppenheimer  funds"),
except for Mr.  Fossel and Ms.  Macaskill  who are not  Trustees or Directors of
Oppenheimer  Integrity Funds,  Oppenheimer  Strategic  Income Fund,  Oppenheimer
Variable  Account Funds and Panorama  Series Fund, Inc. Mr. Fossel also is not a
trustee of Centennial New
    

                                                       -26-

<PAGE>


   
York Tax Exempt  Trust and he is not a Managing  General  Partner of  Centennial
America Fund,  L.P. Ms.  Macaskill is President and Mr. Swain is Chairman of the
Denver-based  Oppenheimer funds. Messrs. Bishop, Bowen, Donohue, Farrar and Zack
hold similar  positions as officers of all such funds.  As of December 31, 1996,
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 held of record by an employee  benefit plan for
employees of the Manager (for which plan two of the officers  listed below,  Ms.
Macaskill and Mr.  Donohue,  are trustees),  other than the shares  beneficially
owned under that plan by the officers of the Fund listed below.

ROBERT G. AVIS, Trustee*; Age 65
One North Jefferson Avenue, St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G. Edwards,
Inc. (its parent holding company); Chairman of A.G.E. Asset Management and A.G. 
Edwards Trust Company (its affiliated investment advisor and trust company, 
respectively).

WILLIAM A. BAKER, Trustee; Age 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.

CHARLES CONRAD, JR., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines, Inc. (A space 
services management company); formerly, Vice President of McDonnell Douglas 
Space Systems Co. and associated with National Aeronautics and Space 
Administration.

JON S. FOSSEL, Trustee*; Age 54
Box 44 Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment  companies),  Chairman of the Investment Company
Institute Education Foundation; Formerly Chairman and a director of the Manager;
formerly President and a director of Oppenheimer Acquisition Corp.("OAC"), OFI's
parent  holding  company;  formerly a director  of  Shareholder  Services,  Inc.
("SSI") and  Shareholder  Financial  Services,  Inc.  ("SFSI"),  transfer  agent
subsidiaries of OFI.

SAM FREEDMAN, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly,  Chairman and Chief Executive Officer of OppenheimerFunds  Services (a
transfer  agent);  Chairman,  Chief  Executive  Officer  and a director  of SSI;
Chairman,  Chief  Executive  Officer and director of SFSI;  Vice President and a
director of OAC and a director of the Manager.
    

                                                       -27-

<PAGE>


   
RAYMOND J. KALINOWSKI, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.(a computer products training 
company), formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was
a Senior Vice President.

C. HOWARD KAST, Trustee; Age 75
2552 E. Alameda, Denver, Colorado 80209
Formerly Managing Partner of  Deloitte, Haskins & Sells (an accounting firm).

ROBERT M. KIRCHNER, Trustee; Age 75
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).

BRIDGET A. MACASKILL, President and Trustee*; Age 48
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a director of the Manager and HarbourView
Asset  Management  Corporation  ("HarbourView"),  a  subsidiary  of the Manager;
Chairman  and a director  of SSI and SFSI;  President  and a director of OAC and
Oppenheimer  Partnership  Holdings  Inc., a holding  company  subsidiary  of the
Manager;  a director of Oppenheimer Real Asset Management,  Inc. ("Real Asset");
formerly an Executive Vice President of the Manager.

NED M. STEEL, Trustee; Age 81
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse 
Corporation of Colorado; formerly Senior Vice President and a director of the 
Van Gilder Insurance Corp. (insurance brokers).

JAMES C. SWAIN,  Chairman,  Chief  Executive  Officer and Trustee*;  Age 63 6803
South  Tucson Way,  Englewood,  Colorado  80112 Vice  Chairman  of the  Manager;
formerly  President  and a director of  Centennial  Management  Corporation,  an
investment  advisor  subsidiary  of  the  Manager  ("Centennial")  and  formerly
Chairman of the Board of SSI.

ANDREW J. DONOHUE, Vice President and Secretary; Age 46
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and OppenheimerFunds
Distributor,  Inc. (the "Distributor");  President and a director of Centennial;
Executive Vice President,  General Counsel and a director of HarbourView,  SFSI,
SSI and Oppenheimer  Partnership Holdings Inc.; President and a director of Real
Asset; General Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (A broker-dealer);  an officer of other
Oppenheimer funds;  formerly Senior Vice President and Associate General Counsel
of the Manager and the  Distributor;  Partner in Kraft & McManimon (a law firm);
an officer of First Investors  Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and
    
                                                       -28-

<PAGE>


   
investment advisor);  director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.

GEORGE C. BOWEN, Vice President, Treasurer and Assistant Secretary; Age 60
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer of the Manager; Vice President and Treasurer
of the Distributor and HarbourView;  Senior Vice President,  Treasurer Assistant
Secretary and a director of Centennial; Vice President,  Treasurer and Secretary
of SSI and SFSI;  Treasurer of OAC; Vice  President and Treasurer of Real Asset;
Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc.;
an officer of other Oppenheimer funds.

ASHWIN VASAN, Vice President and Portfolio Manager; Age 34
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other Oppenheimer funds; formerly a
Securities  Analyst for the Manager,  prior to which he was a Securities Analyst
for Citibank, N.A.

ROBERT G. ZACK, Assistant Secretary; Age 48
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate  General  Counsel of the Manager;  Assistant
Secretary of SSI and SFSI; an officer of other Oppenheimer funds.

ROBERT J. BISHOP, Assistant Treasurer; Age 38
6803 South Tucson Way, Englewood, Colorado 80112
Vice  President  of the  Manager/Mutual  Fund  Accounting;  an  officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager, prior to which he
was an Accountant for Yale & Seffinger, P.C., an accounting firm, and previously
an Accountant  and  Commissions  Supervisor  for Stuart James  Company,  Inc., a
broker-dealer.

SCOTT T. FARRAR, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice  President  of the  Manager/Mutual  Fund  Accounting;  an  officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager.
- ---------------------
*A Trustee who is an "interested person" of the Fund as defined in the 
Investment Company Act.

         o  Remuneration  of  Trustees.  The  officers  of the Fund and  certain
Trustees of the Fund (Ms.  Macaskill and Mr. Swain) who are affiliated  with the
Manager  receive no salary or fees from the Fund. Mr. Fossel did not receive any
salary or fees from the Fund prior to January 1, 1997. The remaining Trustees of
the Fund  received  the  compensation  shown below from the Fund.  Mr.  Freedman
became a Trustee  June 27,  1996,  and  received no  compensation  from the Fund
before that date. The compensation from the Fund was paid during its fiscal year
ended  September  30,  1996.  The  compensation  from  all of  the  Denver-based
Oppenheimer funds includes the Fund and is compensation  received as a director,
trustee, managing general partner or member of a committee
    
                                                       -29-

<PAGE>



   
of the Board of those funds during the calendar year 1996.
    
<TABLE>
<CAPTION>
   
                                            Total
                                            Aggregate                  Compensation
                                            Compensation               From All
                                            From the                   Denver-based
Name and Position                           Fund                       OppenheimerFunds1
- ------------------------                    --------------             ------------------
<S>                                         <C>                        <C>
Robert G. Avis, Trustee                     $217                       $58,003

William A. Baker, Audit                     $297                       $79,715
and Review Committee
Chairman and Trustee

Charles Conrad, Jr., Audit                  $280                       $74,717
and Review Committee
Member and Trustee

Sam Freedman,
Trustee                                     $110                       $29,502

Raymond J. Kalinowski,
Risk Management Oversight
Committee Member
and Trustee                                 $278                       $74,173

C. Howard Kast, Risk
Management Oversight
Committee Member
and Trustee                                 $278                       $74,173

Robert M. Kirchner, Audit                   $280                       $74,717
and Review Committee
Member and Trustee

Ned M. Steel, Trustee                       $217                       $58,003
- ----------------
1 For the 1996 calendar year.
    
</TABLE>

   
         o  Major Shareholders.  As of December 31, 1996, no person owned of 
record or was known by the Fund to own beneficially 5% or more of the Fund's 
Class A, Class B or Class C shares, except:  (1) Merrill Lynch Pierce Fenner & 
Smith Inc., 4800 Deer Lake Drive East, 3rd
    

                                                       -30-

<PAGE>



   
Floor,  Jacksonville,   Florida  32246-6483,  which  was  the  record  owner  of
674,758,000  class  B  shares  (equal  to  5.15%  of the  Class  B  shares  then
outstanding)  and  644,347,000  Class C shares  (equal  to 21.65% of the Class C
shares then outstanding) and (ii) Bank of Boston Trust IRA FBO Blaise P. Aluise,
50 Greenock Road,  Delmar,  New York  12054-3527,  which was the record owner of
173,327.218  Class  C  shares  (equal  to  5.95%  of the  Class  C  shares  then
outstanding).

The Manager and Its Affiliates.  The Manager is wholly-owned by Oppenheimer 
Acquisition Corp. ("OAC"), a holding company controlled by Massachusetts Mutual 
Life Insurance Company.  OAC is also owned in part by certain of the Manager's 
directors and officers, some of whom also serve as officers of the Fund, and 
one of whom Mr. Swain serves as a Trustee of the Fund.
    

         The  Manager  and the Fund have a Code of  Ethics.  It is  designed  to
detect and prevent  improper  personal trading by certain  employees,  including
portfolio  managers,  that would  compete  with or take  advantage of the Fund's
portfolio  transactions.  Compliance  with  the  Code  of  Ethics  is  carefully
monitored and strictly enforced by the Manager.

         o The Investment Advisory Agreement.  The investment advisory agreement
between  the Manager and the Fund  requires  the  Manager,  at its  expense,  to
provide the Fund with adequate  office space,  facilities and equipment,  and to
provide  and  supervise  the  activities  of  all  administrative  and  clerical
personnel required to provide effective  corporate  administration for the Fund,
including  the  compilation  and  maintenance  of  records  with  respect to its
operations,  the preparation and filing of specified reports, and 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 or by the Distributor  under the General  Distributor's  Agreement are
paid by the Fund. The advisory  agreement lists examples of expenses paid by the
Fund,  the major  categories  of which  relate  to  interest,  taxes,  brokerage
commissions,  fees to certain Trustees, legal and audit expenses,  custodian and
transfer agent and custodian  expenses,  share issuance costs,  certain printing
and registration costs and non-recurring  expenses,  including litigation costs.
For the Fund's fiscal year ended September 30, 1996, the management fees paid by
the Fund to the Manager totaled  $311,128.  For the fiscal period from inception
(June 13, 1995) through September 30, 1995, the management fees paid by the Fund
to the Manager totaled $8,252.  As a result of voluntary  expense  assumption by
the Manager,  independent  of the advisory  agreement,  which remained in effect
from the inception of the Fund (June 15, 1995) through  September 19, 1996,  the
management fees payable to the Manager were reduced during the following periods
in the following  amounts:  during the period from  inception of the Fund ( June
15, 1995) through September 30, 1995, $13,764;  and during the fiscal year ended
September 30, 1996, $41,927.

         The  Investment  Advisory  Agreement  contains  no expense  limitation.
However,  because of state  regulations  limiting fund expenses that  previously
applied,  the Manager had voluntarily  undertaken that the Fund's total expenses
in any fiscal year  (including  the  investment  advisory  fee but  exclusive of
taxes, interest, brokerage commissions, distribution plan payments and any
    

                                                       -31-

<PAGE>



   
extraordinary non-recurring expenses, including litigation) would not exceed the
most  stringent  state  regulatory  limitation  applicable  to the Fund.  Due to
changes in federal  securities laws, such state  regulations no longer apply and
the Manager's  undertaking  is therefore  inapplicable  and has been  withdrawn.
During the Fund's last fiscal year, the Fund's  expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.

         The  advisory  agreement  provides  that  in  the  absence  of  willful
misfeasance,  bad faith or gross negligence in the performance of its duties, or
reckless disregard for its obligations and duties under the advisory  agreement,
the  Manager  is not liable for any loss  resulting  from a good faith  error or
omission on its part with respect to any of its duties thereunder.  The advisory
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 right of the Fund to use the name  "Oppenheimer"  as part of its name
may be withdrawn.

         o The Distributor.  Under its General Distributor's  Agreement with the
Fund, the Distributor acts as the Fund's principal underwriter in the continuous
public  offering of the Fund's  Class A, Class B and Class C shares,  but is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales (excluding payments under the Distribution and Service Plans but including
advertising and the cost of printing and mailing  prospectuses  other than those
furnished to existing  shareholders),  are borne by the Distributor.  During the
Fund's  fiscal  period  ended  September  30,  1995 and its  fiscal  year  ended
September 30, 1996, the aggregate  amount of sales charge on sales of the Fund's
Class A shares was $38,181 and $455,830  respectively,  of which the Distributor
and  an  affiliated  broker-dealer  retained  $11,736  and  $126,085,  in  those
respective periods.  During the Fund's fiscal year ended September 30, 1996, the
contingent  deferred sales charge collected on the Fund's Class B shares totaled
$32,060,  all of which the  Distributor  retained.  During the fiscal year ended
September 30, 1996, sales charges advanced to  broker/dealers by the Distributor
on sales of the Fund's Class B shares totaled  $1,115,490,  of which $26,260 was
paid to an affiliated broker/dealer.  During the fiscal year ended September 30,
1996, the contingent  deferred sales charge  collected on Class C shares totaled
$3,260,  all of which the  Distributor  retained.  During the fiscal  year ended
September 30, 1996, sales charge advanced to  broker/dealers  by the Distributor
on sales of the Fund's Class C shares totaled $77, 326, of which $1,600 was paid
to an affiliated broker/dealer. For additional information about distribution of
the Fund's shares and the expenses connected with such activities,  please refer
to "Distribution and Service Plans," below.

         o  The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer 
Agent, is responsible for maintaining the Fund's shareholder registry and 
shareholder accounting records, and for shareholder servicing and 
administrative functions.
    

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement.  One of the duties 
of the Manager

                                                       -32-

<PAGE>



under the advisory  agreement is to arrange the portfolio  transactions  for the
Fund. The advisory agreement contains  provisions  relating to the employment of
broker-dealers ("brokers") to effect the Fund's portfolio transactions. In doing
so,  the  Manager  is   authorized   by  the   advisory   agreement   to  employ
broker-dealers,  including  "affiliated" brokers, as that term is defined in the
Investment  Company  Act, as may,  in its best  judgment  based on all  relevant
factors,  implement the policy of the Fund to obtain, at reasonable expense, the
"best  execution"  (prompt and reliable  execution at the most  favorable  price
obtainable)  of  such  transactions.  The  Manager  need  not  seek  competitive
commission  bidding  but 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.  Purchases of  securities  from  underwriters  include a
commission or concession  paid by the issuer to the  underwriter,  and purchases
from dealers include a spread between the bid and asked price.

         Under the  advisory  agreement,  the  Manager is  authorized  to 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 have charged if a good faith determination is made by the
Manager that the  commission is fair and  reasonable in relation to the services
provided. Subject to the foregoing considerations, the Manager may also consider
sales of  shares  of the Fund and  other  investment  companies  managed  by the
Manager or its affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions.

Description  of  Brokerage  Practices  Followed by the  Manager.  Subject to the
provisions of the advisory  agreement,  and the procedures  and rules  described
above,  allocations of brokerage are generally  made by the Manager's  portfolio
traders based upon  recommendations  from the Manager's portfolio  managers.  In
certain  instances,  portfolio  managers may directly  place trades and allocate
brokerage,  also subject to the  provisions  of the advisory  agreement  and the
procedures and rules  described  above.  In either case,  brokerage is allocated
under the  supervision  of the Manager's  executive  officers.  Transactions  in
securities  other than those for which an  exchange  is the  primary  market are
generally done with principals or market makers.  Brokerage commissions are paid
primarily  for  effecting  transactions  in  listed  securities  or for  certain
fixed-income  agency transactions in the secondary market and are otherwise paid
only if it appears likely that a better price or execution can be obtained. When
the Fund engages in an option  transaction,  ordinarily  the same broker will be
used  for the  purchase  or  sale  of the  option  and  any  transaction  in the
securities to which the option  relates.  When  possible,  concurrent  orders to
purchase or sell the same  security by more than one of the accounts  managed by
the Manager or its affiliates are combined.  The transactions  effected pursuant
to such  combined  orders are averaged as to price and  allocated in  accordance
with the purchase or sale orders actually placed for each account.

         Most purchases of money market  instruments  and debt  obligations  are
principal  transactions  at net  prices.  Instead  of using a broker  for  those
transactions,  the Fund normally  deals  directly with the selling or purchasing
principal or market maker unless it determines  that a better price or execution
can  be  obtained  by  using  a  broker.  Purchases  of  these  securities  from
underwriters  include  a  commission  or  concession  paid by the  issuer to the
underwriter. Purchases from dealers include

                                                       -33-

<PAGE>



a spread  between  the bid and asked  prices.  The Fund  seeks to obtain  prompt
execution of these orders at the most favorable net price.  Options  commissions
may be  relatively  higher than those which would apply to direct  purchases and
sales of portfolio securities.

   
         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,
and investment research received for the commissions of those other accounts may
be  useful  both to the  Fund  and one or more  of  such  other  accounts.  Such
research,  which may be supplied  by a third party at the  instance of a broker,
includes information and analyses on particular companies and industries as well
as  market  or  economic  trends  and  portfolio  strategy,  receipt  of  market
quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Manager in
a non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment  decision-making  process may be paid in commission dollars.  The
Board of Trustees has permitted the Manager to use  concessions  on  fixed-price
offerings  to obtain  research,  in the same manner as is  permitted  for agency
transactions.  The Board also permits the Manager to use stated  commissions  on
secondary  fixed-income  agency trades to obtain  research  where the broker has
represented  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  broadens  the scope and
supplements  the  research  activities  of  the  Manager,  by  making  available
additional views for consideration and comparisons,  and by enabling the Manager
to obtain market  information for the valuation of securities held in the Fund's
portfolio or being considered for purchase.  The Manager provides information to
the Board of Trustees on an annual  basis  relating to the  commissions  paid to
brokers  for such  services,  together  with  the  Manager's  assessment  of the
reasonableness  of such  commissions in relation to the value or benefit of such
services.

During the Fund's fiscal  period ended  September 30, 1995 and the Fund's fiscal
year ended September 30, 1996, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net trade basis)
were $63 and $976, respectively.
    

Performance of the Fund

Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized  yield," "dividend yield," "average annual total return,"
"cumulative  total return," "average annual total return at net asset value" and
"cumulative  total  return at net asset  value" of an  investment  in a class of
shares of the Fund may be advertised.  An explanation of how these total returns
are calculated for each class and the  components of those  calculations  is set
forth below.

         The  Fund's   advertisements   of  its  performance  data  must,  under
applicable rules of the Securities and Exchange Commission,  include the average
annual total returns for each class of

                                                       -34-

<PAGE>



shares of the Fund 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. This 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 such information as a basis
for comparison with other investments. An investment in the Fund is not insured;
its returns and share prices are not guaranteed and normally will fluctuate on a
daily basis. When redeemed,  an investor's shares may be worth more or less than
their original  cost.  Returns for any given past period are not a prediction or
representation  by the Fund of future  returns.  The returns of Class A, Class B
and Class C shares of the Fund are  affected by portfolio  quality,  the type of
investments  the  Fund  holds  and  its  operating  expenses  allocated  to  the
particular class.

         o  Standardized Yields.

         o Yield. The Fund's "yield" (referred to as "standardized yield") for a
given  30-day  period for a class of shares is  calculated  using the  following
formula set forth in rules  adopted by the  Securities  and Exchange  Commission
that apply to all funds (other than money market funds) that quote yields:

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

         The symbols above represent the following factors:

         a    =   dividends and interest earned during the 30-day period.
         b    =   expenses accrued for the period (net of any expense 
reimbursements).
         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 of a class of shares  for a 30-day  period may
differ from its yield for any other  period.  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.  This standardized
yield 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  calculated for that period.  The
standardized yield may differ from the "dividend yield" of that class, described
below.  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 the 30-day  period  ended  September  30,  1996,  the
standardized  yields  for the Fund's  Class A,  Class B and Class C shares  were
8.27%, 7.89% and 7.90%, respectively.
    

         o  Dividend Yield and Distribution Return.  From time to time the Fund 
may quote a "dividend yield" or a "distribution return" for each class.  
Dividend yield is based on the dividends

                                                       -35-

<PAGE>



paid on shares of a class from  dividends  derived  from net  investment  income
during a stated period.  Distribution return includes dividends derived from net
investment  income and from  realized  capital  gains  declared  during a stated
period.  Under those calculations,  the dividends and/or  distributions for that
class declared during a stated period of one year or less (for example, 30 days)
are added  together,  and the sum is divided by the maximum  offering  price per
share of that class on the last day of the period. When the result is annualized
for a period of less than one  year,  the  "dividend  yield"  is  calculated  as
follows: 

Dividend Yield of the Class =

            Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)

Divided by number of days (accrual period) x 365


         The  maximum  offering  price for Class A shares  includes  the maximum
front-end  sales  charge.  For Class B or Class C shares,  the maximum  offering
price is the net  asset  value  per  share  without  considering  the  effect of
contingent deferred sales charges.

   
         From time to time similar yield or distribution return calculations may
also be made  using the  Class A net  asset  value  (instead  of its  respective
maximum offering price) at the end of the period. The dividend yields on Class A
shares for the 30-day period ended September 30, 1996 were 9.67% and 10.14% when
calculated at maximum offering price and at net asset value,  respectively.  The
dividend  yields  on Class B and  Class C shares  for the  30-day  period  ended
September 30, 1996 were 9.41% and 9.43%,  respectively,  when  calculated at net
asset value.
    

         o  Total Return Information.

         o Average  Annual Total Returns.  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") of
that investment, according to the following formula:

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

         o Cumulative Total Returns.  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

         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

                                                       -36-

<PAGE>



is shown at net asset value, as described below). For Class B shares, payment of
a contingent deferred sales charge (5.0% for the first year, 4.0% for the second
year, 3.0% for the third and fourth years, 2.0% for the fifth year, and 1.0% for
the sixth year, and none thereafter) is applied to the investment result for the
period shown (unless the total return is shown at net asset value,  as described
below).  For Class C shares, a 1.0% contingent  deferred sales charge is applied
to the investment  result for the one-year period (or less).  Total returns also
assume that all dividends and capital gains distributions  during the period are
reinvested to buy additional  shares, at net asset value per share, and that the
investment is redeemed at the end of the period.

   
         The average "annual total return" on an investment in Class A shares of
the Fund  (using  the method  described  above)  for the one year  period  ended
September  30,  1996,  and for the period  from June 15, 1996  (commencement  of
operations)  through  September 30, 1996, were 13.18% and 14.40%,  respectively.
The average "annual total return" on an investment in Class B shares of the Fund
(using the method  described  above) for the one year period ended September 30,
1996, and for the period from June 15, 1996 (commencement of operations) through
September 30, 1996,  were 12.71% and 14.79%,  respectively.  The average "annual
total  return" on an  investment in Class C shares of the Fund (using the method
described  above) for the one year period ended  September 30, 1996, and for the
period from June 15, 1996  (commencement  of operations)  through  September 30,
1996, were 16.92% and 17.75%,  respectively.  The cumulative  total return on an
investment  in Class A, Class B and Class C shares of the Fund (using the method
described  above) for the period  June 15,  1995  (commencement  of  operations)
through September 30, 1996, were 18.98%, 19.50% and 23.50%, respectively.

         o Total Returns At Net Asset Value. From time to time the Fund may also
quote an average  annual total  return at net asset value or a cumulative  total
return at net asset value 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
average  annual total  returns at net asset value on an  investment  in Class A,
Class B and Class C shares of the Fund for the fiscal year ended  September  30,
1996,  were 18.82%,  17.71% and 17.92%,  respectively.  The average annual total
returns  at net asset  value on an  investment  in Class A,  Class B and Class C
shares  of the  Fund  for  the  period  from  June  15,  1996  (commencement  of
operations)  through  September  30,  1996,  were  18.80%,  17.75%  and  17.75%,
respectively.  The  cumulative  total  return at net asset  value for the Fund's
Class A shares for the period from June 15, 1995 (commencement of operations) to
September 30, 1996 was 24.92%.  The cumulative  total returns at net asset value
for the  Fund's  Class B and Class C shares for the  period  from June 15,  1995
(commencement  of  operations)  to  September  30,  1996 were 23.50% and 23.50%,
respectively.
    

Other  Performance  Comparisons.  From  time to time the Fund  may  publish  the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc.  ("Lipper"),  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

                                                       -37-

<PAGE>



based on categories  relating to investment  objectives.  The performance of the
Fund is ranked against (i) all other funds, (ii) all other  "international bond"
funds, and (iii) all other fixed-income funds, excluding money market funds. The
Lipper  performance  rankings  are  based  on total  returns  that  include  the
reinvestment of capital gains distributions and income dividends but do not take
sales charges or taxes into consideration.

         From time to time, the Fund may include in its advertisements and sales
literature performance  information about the Fund cited in other newspapers and
periodicals,  such  as  The  New  York  Times,  which  may  include  performance
quotations from other sources, including Lipper.

   
         From time to time the Fund may publish  the ranking of the  performance
of its Class A, Class B or Class C shares by  Morningstar,  Inc., an independent
mutual  fund  monitoring  service.  Morningstar  ranks  mutual  funds  in  broad
investment categories:  domestic stock funds, international stock funds, taxable
bond funds and municipal bond funds,  based on  risk-adjusted  total  investment
returns.  The Fund is ranked among international stock funds.  Investment return
measures a fund's or class's one, three,  five and ten-year average annual total
returns  (depending  on the  inception of the fund or class) in excess of 90-day
U.S.  Treasury  bill returns  after  considering  the fund's  sales  charges and
expenses.  Risk measures fund's or class' performance below 90-day U.S. Treasury
bill returns.  Risk and investment  return are combined to produce star rankings
reflecting performance relative to the average fund in the fund's category. Five
stars is the "highest"  ranking (top 10%),  four stars is "above  average" (next
22.5%),  three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest"  (bottom  10%).  The current star ranking is the
fund's or class's 3-year ranking or its combined 3- and 5-year ranking (weighted
60%/40%, respectively, or its combined 3-, 5- and 10-year ranking (weighted 40%,
30% and 30% ,  respectively),  depending on the  inception of the fund or class.
Rankings are subject to change monthly.

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

         The total  return on an  investment  in the Fund's  Class A, Class B or
Class C shares may be compared with the  performance  for the same period of one
or more of the following  indices,  among others:  the Consumer Price Index, the
Salomon Brothers Non-U.S. World Government Bond Index, and the Standard & Poor's
500 Index.  The Consumer Price Index is generally  considered to be a measure of
inflation.  The Salomon Brothers Non-U.S.  World Government Bond Index generally
represents the  performance  of government  debt  securities of various  markets
throughout  the world,  excluding the United  States.  The Standard & Poor's 500
Index is  widely  recognized  as a general  measure  of stock  performance.  The
performance of each index includes a factor for the reinvestment

                                                       -38-

<PAGE>



of income dividends but does not reflect reinvestment of capital gains, expenses
or taxes.  The  performance of the Fund's Class A, Class B or Class C shares may
also be  compared  in  publications  to (i) the  performance  of various  market
indices  or  to  other  investments  for  which  reliable  performance  data  is
available,  and (ii) to  averages,  performance  rankings  or  other  benchmarks
prepared by recognized mutual fund statistical services.

         Total return  information  may be useful to investors in reviewing  the
performance  of the  Fund's  Class A, Class B or Class C shares.  However,  when
comparing total return of an investment in Class A, Class B or Class C shares of
the Fund, a number of factors should be considered before using such information
as a basis for comparison  with other  investments.  For example,  investors may
also  wish to  compare  the  Fund's  Class A,  Class B or Class C return  to the
returns  on  fixed   income   investments   available   from  banks  and  thrift
institutions, such as 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  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,  and Treasury  bills are guaranteed as to
principal and interest by the U.S. government.

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

Distribution and Service Plans

   
The Fund has  adopted a Service  Plan for Class A shares  and  Distribution  and
Service Plans for Class B and Class C shares under Rule 12b-1 of the  Investment
Company Act  pursuant to which the Fund makes  payments  to the  Distributor  in
connection with the  distribution  and/or servicing of the shares of that class.
Each Plan has been  approved by a vote of (i) the Board of Trustees of the Fund,
including a majority of the  Independent  Trustees,  cast in person at a meeting
called  for the  purpose  of  voting on that  Plan,  and (ii) the  holders  of a
"majority"  (as  defined in the  Investment  Company  Act) of the shares of each
class.
    

         In addition, under the Plans, the Manager and the Distributor, in their
sole discretion,  from time to time, may use their own resources  (which, in the
case of the Manager,  may include profits from the advisory fee it receives from
the Fund), to make payments to brokers,  dealers or other financial institutions
(each is  referred to as a  "Recipient"  under the Plans) for  distribution  and
administrative  services they perform.  The  Distributor and the Manager may, in
their sole  discretion,  increase or decrease  the amount of payments  they make
from their own resources to Recipients.


                                                       -39-

<PAGE>



   
         Unless  terminated as described  below,  each Plan  continues in effect
from year to year but only as long as such continuance is specifically  approved
at least annually by the Fund's Board of Trustees and its  Independent  Trustees
by a vote cast in person at a meeting  called for the  purpose of voting on such
continuance. Any 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.
None of the Plans may be amended to increase  materially  the amount of payments
to be made  unless such  amendment  is  approved  by  shareholders  of the class
affected by the  amendment.  In addition,  because Class B shares  automatically
convert  into  Class A  shares  after  six  years,  the  Fund is  required  by a
Securities  and  Exchange  Commission  rule to obtain the approval of Class B as
well as Class A shareholders  for a proposed  amendment to the Class A Plan that
would  materially  increase the amount to be paid by Class A shareholders  under
the Class A Plan. Such approval must be by a "majority" of the Class A and Class
B shares (as defined in the Investment Company Act), voting separately by class.
All material amendments must be approved by the Independent Trustees.
    

         While the Plans are in effect,  the Treasurer of the Fund shall provide
separate  written  reports to the Fund's Board of Trustees at least quarterly on
the amount of all  payments  made  pursuant to each Plan,  the purpose for which
each payment was made and the identity of each  Recipient that received any such
payment.  The report for the Class B and Class C Plan  shall  also  include  the
distribution costs for that quarter and such costs for previous fiscal years are
carried  forward,  as  explained in the  Prospectus  and below.  Those  reports,
including the allocations on which they are based, will be subject to the review
and  approval of the  Independent  Trustees in the  exercise of their  fiduciary
duty. Each Plan further  provides that while it is in effect,  the selection and
nomination of those Trustees of the Fund who are not "interested persons" of the
Fund is committed to the discretion of the Independent  Trustees.  This does not
prevent the  involvement of others in such selection and nomination if the final
decision on any such  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  if the  aggregate  net  asset  value  of all  Fund  shares  held by the
Recipient for itself and its customers did not exceed a minimum amount,  if any,
that may be determined 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
and set no minimum amount.

   
         For the fiscal  period  ended  September  30,  1995 and the fiscal year
ended September 30, 1996,  payments under the Class A Plan totaled  $1,750,  and
$43,913,  respectively,  all of which was paid by the Distributor to Recipients,
including $32 and $2,532 paid to an affiliate in those respective  periods.  Any
unreimbursed expenses incurred by the Distributor with respect to Class A shares
for any fiscal year may not be recovered in subsequent  fiscal  years.  Payments
received by the  Distributor  under the Plan for Class A shares will not be used
to pay any interest  expense,  carrying  charges,  or other financial  costs, or
allocation of overhead by the Distributor.
    

         The Class B and Class C Plans allow the service fee payments to be 
paid by the Distributor

                                                       -40-

<PAGE>



to  Recipients  in advance for the first year such shares are  outstanding,  and
thereafter on a quarterly  basis,  as described in the  Prospectus.  The advance
payment  is based on the net asset  value of the shares  sold.  An  exchange  of
shares does not entitle the Recipient to an advance service fee payment.  In the
event  shares are  redeemed  during the first year shares are  outstanding,  the
Recipient  will be obligated to repay a pro rata portion of the advance  payment
to the Distributor.

   
         Payments  made under the Class B Plan  during the fiscal  period  ended
September 30, 1995 and the fiscal year ended  September 30, 1996 totaled  $3,267
and  $178,039,  respectively,  of which $3,202 and $168,499,  respectively,  was
retained  by the  Distributor.  Payments  made under the Class C Plan during the
fiscal period ended  September 30, 1995 and the fiscal year ended  September 30,
1996  totaled  $282  and  $40,141,  respectively,  of which  $277  and  $36,849,
respectively, was retained by the Distributor. At fiscal year end, September 30,
1996, the Distributor had incurred  unreimbursed  expenses under the Class B and
Class C Plans of $1,331,917 and $119,763, respectively (equal to 2.95% and 1.16%
of the Fund's net assets represented by Class B and Class C shares, respectively
on that date) which,  in the case of Class B shares,  has been carried over into
the present Plan year.

         Although  the Class B and the Class C Plans permit the  Distributor  to
retain  both the  asset-based  sales  charges  and the  service  fee,  or to pay
Recipients the service fee on a quarterly basis, without payment in advance, the
Distributor presently intends to pay the service fee to Recipients in the manner
described  above. A minimum holding period may be established  from time to time
under the Class B Plan and the Class C Plan by the Board.  Initially,  the Board
has set no minimum holding  period.  All payments under the Class B Plan and the
Class C Plan are subject to the limitations  imposed by the Conduct Rules of the
National  Association of Securities  Dealers,  Inc. The Distributor  anticipates
that it will take a number of years for it to recoup  (from the Fund's  payments
to the  Distributor  under  the  Class B or  Class C Plan  and  from  contingent
deferred  sales  charges  collected  on redeemed  Class B or Class C shares) the
sales commissions paid to authorized brokers or dealers.

         Asset-based sales charge payments are designed to permit an investor to
purchase  shares of the Fund  without  paying a front-end  sales load and at the
same time permit the Distributor to compensate Recipients in connection with the
sale of Class B and Class C shares  of the Fund.  The  Distributor  retains  the
asset-based sales charge on Class B shares outstanding for less than six years.
 As to Class C shares,  the  Distributor  retains the  asset-based  sales charge
during the first year shares are  outstanding,  and pays the  asset-based  sales
charge as an ongoing  commission to the dealer on Class C shares outstanding for
a year or more.  Under  the  Class B and Class C Plans,  the  asset-based  sales
charge is paid to compensate the Distributor for its services,  described below,
to the Fund.
    

         Under the Class B and Class C Plans,  the  distribution  assistance and
administrative  support services  rendered by the Distributor in connection with
the  distribution of Class B and Class C shares may include:  (i) paying service
fees and sales commissions to any broker, dealer, bank or other person or entity
that  sells and  services  the  Fund's  Class B or Class C shares,  (ii)  paying
compensation  to and  expenses  of  personnel  of the  Distributor  who  support
distribution of Class B

                                                       -41-

<PAGE>



or Class C shares by  Recipients,  (iii)  obtaining  financing or providing such
financing from its own resources,  or from an affiliate,  for interest and other
borrowing costs of the Distributor's unreimbursed expenses incurred in rendering
distribution  assistance for Class B or Class C shares,  and (iv) paying certain
other distribution expenses.

ABOUT YOUR ACCOUNT

How To Buy Shares

Alternative  Sales  Arrangements  - Class A,  Class B and  Class C  Shares.  The
availability  of three  classes of shares  permits  the  individual  investor to
choose the method of purchasing  shares that is more  beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant  circumstances.  Investors  should  understand
that the purpose and function of the deferred sales charge and asset-based sales
charge  with  respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares.  Any  salesperson  or other
person  entitled to receive  compensation  for  selling  Fund shares may receive
different  compensation  with respect to one class of shares than the other. The
Distributor  will not  accept  any order for  $500,000  or $1 million or more of
Class B or Class C shares,  respectively,  on behalf of a single  investor  (not
including dealer "street name" or omnibus accounts) because generally it will be
more  advantageous  for that  investor  to  purchase  Class A shares of the Fund
instead.

         The three  classes of shares  each  represent  an  interest in the same
portfolio investments of the Fund. However, each class has different shareholder
privileges  and  features.  The net income  attributable  to Class B and Class C
shares and the  dividends  payable on Class B and Class C shares will be reduced
by incremental  expenses borne solely by that class,  including the  asset-based
sales charge to which Class B and Class C shares are subject.

         The  conversion  of Class B shares to Class A shares after six years is
subject to the  continuing  availability  of a private  letter  ruling  from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the  conversion  of Class B shares does not  constitute a taxable event for
the holder under Federal  income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect.  Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes,  without the
imposition of a sales charge or fee, such  exchange  could  constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.

         The  methodology  for  calculating  the net asset value,  dividends and
distributions  of the Fund's Class A, Class B and Class C shares  recognizes two
types of expenses.  General expenses that do not pertain specifically to a class
are allocated pro rata to the shares of each class,  based on the  percentage of
the net assets of such class to the Fund's  total  assets,  and then  equally to
each

                                                       -42-

<PAGE>



outstanding  share  within a given  class.  Such  general  expenses  include (i)
management  fees,  (ii) legal,  bookkeeping  and audit fees,  (iii) printing and
mailing costs of  shareholder  reports,  Prospectuses,  Statements of Additional
Information  and  other  materials  for  current  shareholders,   (iv)  fees  to
Independent Trustees,  (v) custodian expenses,  (vi) share issuance costs, (vii)
organization  and  start-up  costs,   (viii)   interest,   taxes  and  brokerage
commissions,  and (ix) non-recurring  expenses,  such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding  share within that class. Such expenses include (a) Distribution and
Service Plan fees, (b) incremental transfer and shareholder servicing agent fees
and expenses, (c) registration fees and (d) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the Fund as
a whole.

Determination  of Net Asset Value Per Share.  The net asset  values per share of
Class A, Class B and Class C 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, by dividing 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.,  New York  time,  but may close  earlier on some days (for
example,  in case of weather  emergencies  or on days falling before a holiday).
The Exchange's most recent annual holiday  schedule (which is subject to change)
states  that it will close on New Year's  Day,  Presidents'  Day,  Good  Friday,
Memorial Day,  Independence Day, Labor Day,  Thanksgiving Day and Christmas Day.
It may also close on other days.  The Fund may invest a  substantial  portion of
its assets in foreign  securities  primarily  listed on foreign  exchanges or in
foreign  over-the-counter  markets that may trade on Saturdays or customary U.S.
business holidays on which the Exchange is closed.  Because the Fund's net asset
values will not be  calculated  on those days,  the Fund's net asset  values per
share of Class A, Class B and Class C shares may be  significantly  affected  on
such days when shareholders may not purchase or redeem shares.

   
         The  Fund's  Board  of  Trustees  has  established  procedures  for the
valuation of the Fund's securities,  generally as follows: (i) equity securities
traded  on a U.S.  securities  exchange  or on the  Automated  Quotation  System
("NASDAQ") of the Nasdaq Stock Market,  Inc. for which last sale  information is
regularly  reported are valued at the last  reported sale price on their primary
exchange  or NASDAQ  that day (or,  in the  absence of sales that day, at values
based on the last sale price of the preceding trading day, or closing bid prices
that day); (ii) securities  traded on a foreign  securities  exchange are valued
generally at the last sales price available to the pricing  service  approved by
the Fund's  Board of Trustees  or to the  Manager as  reported by the  principal
exchange  on which the  security  is traded at its last  trading  session  on or
immediately  preceding  the  valuation  date,  or at the mean between  "bid" and
"asked" prices obtained from the principal  exchange or two active market makers
in the  security  on the  basis of  reasonable  inquiry;  (iii)  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;
(iv) debt instruments  having a maturity of more than 397 days when issued,  and
non-money  market  type  instruments  having a maturity of 397 days or less when
issued,  which have a  remaining  maturity  of 60 days or less are valued at the
mean between "bid" and "asked" prices determined by
    

                                                       -43-

<PAGE>



   
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;  (v) money market debt  securities that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts; and (vi)
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 (see
(ii), (iii) and (iv) above),  the 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  U.S.   Government   Securities  and  mortgage-backed
securities, where last sale information is not generally available, such pricing
procedures  may  include  "matrix"  comparisons  to the  prices  for  comparable
instruments on the basis of quality,  yield,  maturity and other special factors
involved. The Manager may use pricing services approved by the Board of Trustees
to price any of the types of securities described above to price U.S. Government
Securities,   mortgage-backed  securities,  foreign  government  securities  and
corporate bonds. The Manager will monitor the accuracy of such pricing services,
which may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.

         Trading  in   securities   on   European   and  Asian   exchanges   and
over-the-counter  markets is normally completed before the close of the New York
Stock  Exchange.  Events  affecting the values of foreign  securities  traded in
securities  markets that occur between the time their prices are  determined and
the close of the New York Stock  Exchange  will not be  reflected  in the Fund's
calculation  of net asset value  unless the Board of  Trustees  or the  Manager,
under  procedures  established  by the Board of  Trustees,  determines  that the
particular  event is  likely to  effect a  material  change in the value of such
security.  Foreign currency,  including forward contracts, will be valued at the
closing price in the London  foreign  exchange  market that day as provided by a
reliable bank, dealer or pricing service.  The values of securities  denominated
in foreign  currency  will be converted to U.S.  dollars at the closing price in
the London  foreign  exchange  market that day as  provided by a reliable  bank,
dealer or pricing service.

         Puts,  calls and  Futures  are  valued at the last  sales  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, value shall be 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, or,
if not,  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 at the mean  between  bid and asked
prices  obtained by the Manager from two active  market makers (which in certain
cases may be 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,  and
an equivalent credit is included in the
    

                                                       -44-

<PAGE>



   
liability section.  The credit is adjusted  ("marked-to-market")  to reflect the
current  market  value of the call or put.  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.
    

AccountLink.  When shares are purchased through AccountLink,  each purchase must
be at least  $25.00.  Shares will be purchased  on the regular  business day the
Distributor  is  instructed  to initiate the  Automated  Clearing  House ("ACH")
transfer to buy shares.  Dividends  will begin to accrue on shares  purchased by
the proceeds of ACH  transfers on the  business  day the Fund  receives  Federal
Funds for the purchase  through the ACH system  before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular  business  day. The proceeds of ACH  transfers  are normally
received by the Fund 3 days after the transfers are initiated.  The  Distributor
and the Fund are not responsible for any delays in purchasing  shares  resulting
from delays in ACH transmissions.

   
Reduced Sales Charges.  As discussed in the  Prospectus,  a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation  and Letters
of Intent  because of the  economies of sales  efforts and reduction in expenses
realized by the  Distributor,  dealers and brokers  making such sales.  No sales
charge is imposed in certain  other  circumstances  described in the  Prospectus
because  the  Distributor  incurs  little  or  no  selling  expenses.  The  term
"immediate   family"   refers   to  one's   spouse,   children,   grandchildren,
grandparents, parents, parents-in-law,  aunts, uncles, nieces and nephews, sons-
and daughters-in-law, siblings, a sibling's spouse and a spouse's siblings.
    

         o  The Oppenheimer Funds.  The Oppenheimer funds are those mutual 
funds for which the Distributor acts as the distributor or the sub-distributor 
and include the following:
   
Limited Term New York Municipal Fund*  
Oppenheimer Bond Fund  
Oppenheimer Bond Fund for  Growth  
Oppenheimer California  Municipal  Fund  
Oppenheimer Capital Appreciation  Fund  
Oppenheimer Champion  Income  Fund  
Oppenheimer Developing Markets Fund 
Oppenheimer Disciplined  Allocation Fund  
Oppenheimer Disciplined Value Fund 
Oppenheimer Discovery Fund  
Oppenheimer Enterprise Fund 
Oppenheimer Equity Income Fund
    
                                                       -45-

<PAGE>


   
Oppenheimer Florida Municipal Fund 
Oppenheimer Fund 
Oppenheimer Global Emerging Growth Fund  
Oppenheimer Global Fund  
Oppenheimer Global  Growth & Income Fund
Oppenheimer Gold & Special  Minerals Fund  
Oppenheimer Growth Fund 
Oppenheimer High Yield Fund 
Oppenheimer Insured  Municipal Fund  
Oppenheimer Intermediate Municipal Fund 
Oppenheimer International  Bond Fund 
Oppenheimer International Growth Fund 
Oppenheimer LifeSpan Balanced Fund 
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan  Income  Fund  
Oppenheimer Limited-Term  Government  Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main  Street California Municipal  Fund  
Oppenheimer Multiple Strategies Fund 
Oppenheimer Municipal Bond Fund 
Oppenheimer New Jersey Municipal Fund 
Oppenheimer New York Municipal Fund 
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Global  Value Fund,  Inc.  
Oppenheimer Quest Growth & Income Value Fund 
Oppenheimer Quest Officers Value Fund 
Oppenheimer Quest Opportunity Value Fund 
Oppenheimer Quest Small Cap Value Fund 
Oppenheimer Quest Value Fund, Inc.  
Oppenheimer Strategic Income & Growth Fund  
Oppenheimer Strategic Income Fund  
Oppenheimer Total Return Fund, Inc.  
Oppenheimer U.S. Government  Trust
Oppenheimer Value Stock Fund  
Oppenheimer World  Bond  Fund  
Rochester Fund Municipals* 
The New York Tax Exempt Income Fund, Inc.

the following "Money Market Funds":
    

Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust

                                                       -46-

<PAGE>



Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
- -------------------
   
*Shares of the Fund are not presently exchangeable for shares of these funds.
    

         There is an initial  sales  charge on the purchase of Class A shares of
each  of  the  Oppenheimer  funds  except  Money  Market  Funds  (under  certain
circumstances described herein,  redemption proceeds of Money Market Fund shares
may be subject to a contingent deferred sales charge).

         o Letters of Intent.  A Letter of Intent  ("Letter") is the  investor's
statement  of  intention  to  purchase  Class A and Class B shares (or shares of
either  class) of the Fund (and other  eligible  Oppenheimer  funds) sold with a
front-end  sales charge  during the 13-month  period from the  investor's  first
purchase  pursuant to the Letter (the "Letter of Intent period"),  which may, at
the investor's  request,  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  (excluding any purchases made by  reinvestment of dividends
or  distributions  or purchases  made at net asset value without sales  charge),
which together with the investor's  holdings of such funds  (calculated at their
respective  public  offering  prices  calculated on the date of the Letter) will
equal or exceed the amount specified in the Letter. This enables the investor to
count  the  shares to be  purchased  under  the  Letter of Intent to obtain  the
reduced  sales charge rate (as set forth in the  Prospectus)  that applies under
the Right of Accumulation to current purchases of Class A shares.  Each purchase
of Class A shares  under the Letter  will be made at the public  offering  price
(including  the sales  charge)  that  applies to a single  lump-sum  purchase of
shares in the amount intended to be purchased under the Letter.

         In  submitting a Letter,  the investor  makes no commitment to purchase
shares,  but 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,  as set forth in "Terms of Escrow," below
(as those  terms may be amended  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 such  Letter of Intent,  and if such
terms are  amended,  as they may be from time to time by the  Fund,  that  those
amendments will apply automatically to existing Letters of Intent.

         For  purchases  of shares of the Fund and  other  Oppenheimer  funds by
OppenheimerFunds  prototype 401(k) plans under a Letter of Intent,  the Transfer
Agent will not hold shares in escrow.  If the intended purchase amount under the
Letter entered into by an OppenheimerFunds prototype

                                                       -47-

<PAGE>



401(k)  plan is not  purchased  by the plan by the end of the  Letter  of Intent
period,  there will be no adjustment of commissions paid to the broker-dealer or
financial institution of record for accounts held in the name of that plan.

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

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

         o  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 to 5% of the
intended  purchase amount specified in the Letter shall be held in escrow by the
Transfer Agent.  For example,  if the intended  purchase amount is $50,000,  the
escrow  shall be shares  valued in the amount of $2,500  (computed at the public
offering price adjusted for a $50,000 purchase). Any dividends and capital gains
distributions on the escrowed shares will be credited to the investor's account.

         (2) If the  intended  purchase  amount  specified  under the  Letter is
completed within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.

         (3) If, at the end of the  thirteen-month  Letter of Intent  period the
total  purchases  pursuant  to the  Letter are less than the  intended  purchase
amount  specified in the Letter,  the investor must remit to the  Distributor an
amount  equal to the  difference  between  the  dollar  amount of sales  charges
actually  paid and the amount of sales charges which would have been paid if the
total  amount  purchased  had been  made at a single  time.  Such  sales  charge
adjustment  will apply to any shares  redeemed  prior to the  completion  of the
Letter. If such 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

                                                       -48-

<PAGE>



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  acquired  subject to a  contingent
deferred  sales  charge,  and (c) Class A shares or Class B shares  acquired  in
exchange  for  either (i) 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 (ii)  Class B shares of one of the other  Oppenheimer  funds that were
acquired subject to a contingent deferred sales charge.

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

Asset Builder Plans.  To establish an Asset Builder Plan from a bank account,  a
check  (minimum $25) for the initial  purchase must  accompany the  application.
Shares  purchased by Asset  Builder Plan payments from bank accounts are subject
to the redemption  restrictions for recent  purchases  described in "How To Sell
Shares," in the  Prospectus.  Asset  Builder Plans also enable  shareholders  of
Oppenheimer Cash Reserves to use those accounts for monthly automatic  purchases
of shares of up to four other Oppenheimer funds.

         There  is  a  front-end   sales  charge  on  the  purchase  of  certain
Oppenheimer  funds,  or a contingent  deferred  sales charge may apply to shares
purchased by Asset Builder payments.  An application should be obtained from the
Distributor,  completed and returned,  and a prospectus of the selected  fund(s)
should  be  obtained  from the  Distributor  or your  financial  advisor  before
initiating Asset Builder  payments.  The amount of the Asset Builder  investment
may be changed or the  automatic  investments  may be  terminated at any time by
writing to the Transfer Agent. A reasonable  period  (approximately  15 days) is
required after the Transfer  Agent's  receipt of such  instructions to implement
them. The Fund reserves the right to amend,  suspend,  or  discontinue  offering
such plans at any time without prior notice.

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

                                                       -49-

<PAGE>



   
Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent differed
sales charge,  the term "employee  benefit plan" means any plan or  arrangement,
whether or not "qualified" under the Internal Revenue Code,  including,  medical
savings  accounts,  payroll  deduction  plans or similar  plans in which Class A
shares  are  purchased  by a  fiduciary  or  other  person  for the  account  of
participants who are employees of a single employer or of affiliated  employers,
if the Fund account is  registered  in the name of the fiduciary or other person
for the benefit of participants in the plan.

         The term "group  retirement  plan" means any qualified or non-qualified
retirement plan (including 457 plans,  SEPs,  SARSEPs,  403(b) plans, and SIMPLE
plans) for  employees of a  corporation  or a 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
the plan purchase Class A shares of the Fund through a single investment dealer,
broker or other financial institution designated by the group.
    

How To Sell Shares

Information on how to sell shares of the Fund is stated in the  Prospectus.  The
information below supplements the terms and conditions for redemptions set forth
in the Prospectus.

         o 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 the shares has fallen below the stated  minimum  solely as a result of market
fluctuations. Should the Board elect to exercise this right, it may also fix, in
accordance with the Investment  Company Act, the  requirements for any notice to
be given to the  shareholders  in question (not less than 30 days), or the Board
may set requirements for granting  permission to the shareholder to increase the
investment,  and set other terms and  conditions so that the shares would not be
involuntarily redeemed.

         o Payments  "In Kind".  The  Prospectus  states that payment for shares
tendered  for  redemption  is  ordinarily  made in cash.  However,  the Board of
Trustees  of the Fund may  determine  that it would be  detrimental  to the best
interests  of the  remaining  shareholders  of the  Fund  to make  payment  of a
redemption  order  wholly or  partly in cash.  In that case the Fund may pay the
redemption  proceeds  in  whole  or in  part  by a  distribution  "in  kind"  of
securities  from the portfolio of the Fund, in lieu of cash, in conformity  with
applicable rules of the Securities and Exchange Commission. The Fund has elected
to be governed by Rule 18f-1 under the Investment Company Act, pursuant to which
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 method of
valuing securities used to make redemptions in kind

                                                       -50-

<PAGE>



will be the same as the method the Fund uses to value its  portfolio  securities
described  above under  "Determination  of Net Asset  Values Per Share" and that
valuation will be made as of the time the redemption price is determined.

Reinvestment  Privilege.  Within six months of a redemption,  a shareholder  may
reinvest all or part of the redemption  proceeds of (i) Class A shares,  or (ii)
Class B shares that were subject to the Class B contingent deferred sales charge
when redeemed. This privilege does not apply to Class C shares. The reinvestment
may be made  without  sales  charge only in Class A shares of the Fund or any of
the other  OppenheimerFunds  into which shares of the Fund are  exchangeable  as
described  below,  at the net asset value next computed after the Transfer Agent
receives the  reinvestment  order.  The shareholder must ask the Distributor for
that privilege at the time of  reinvestment.  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.  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.

Transfers  of Shares.  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  (whether the transfer  occurs by absolute  assignment,
gift or bequest,  not  involving,  directly or indirectly,  a public sale).  The
transferred shares will remain subject to the contingent  deferred sales charge,
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 and  Class C
contingent  deferred sales charge will be followed in  determining  the order in
which shares are transferred.

Distributions   From  Retirement   Plans.   Requests  for   distributions   from
OppenheimerFunds-  sponsored IRAs,  403(b)(7)  custodial plans, 401(k) plans, or
pension   or   profit-sharing   plans   should   be   addressed   to   "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of  Additional  Information.  The  request  must:  (i) state the  reason for the
distribution;  (ii)  state  the  owner's  awareness  of  tax  penalties  if  the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements.  Participants other than self-employed
persons    maintaining    a   plan    account    in    their    own    name   in
OppenheimerFunds-sponsored  prototype  pension or profit-sharing or 401(k) plans
may not directly redeem or exchange shares held

                                                       -51-

<PAGE>



for their account  under those plans.  The employer or plan  administrator  must
sign the  request.  Distributions  from  pension  and profit  sharing  plans are
subject to special  requirements  under the  Internal  Revenue  Code and certain
documents  (available  from the  Transfer  Agent) must be  completed  before the
distribution  may be made.  Distributions  from retirement  plans are subject to
withholding  requirements  under the Internal  Revenue  Code,  and IRS Form W-4P
(available from the Transfer Agent) must be submitted to the Transfer Agent with
the  distribution  request,  or the  distribution  may be  delayed.  Unless  the
shareholder has provided the Transfer Agent with a certified tax  identification
number,  the  Internal  Revenue  Code  requires  that tax be  withheld  from any
distribution even if the shareholder elects not to have tax withheld.  The Fund,
the  Manager,  the  Distributor,  the Trustee and the  Transfer  Agent assume no
responsibility to determine  whether a distribution  satisfies the conditions of
applicable tax laws and will not be responsible  for any tax penalties  assessed
in connection with a distribution.

   
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.  The  shareholder  should  contact the
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
the  order  placed by the  dealer  or  broker,  except  that if the  Distributor
receives a  repurchase  order from a dealer or broker after the close of The New
York Stock  Exchange on a regular  business  day, it will be  processed  at that
day's net asset value if the order was received by the dealer or broker from its
customers  prior to the time the Exchange closes  (normally,  that is 4:00 P.M.,
but may be earlier on some days) and the order was  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 days after the shares have been  redeemed upon
the Distributor's  receipt of the required redemption  documents in proper form,
with the  signature(s)  of the  registered  owners  guaranteed on the redemption
document 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
(minimum $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 and sent
to the  address  of record  for the  account  (and if the  address  has not been
changed  within  the  prior  30  days).   Required  minimum  distributions  from
OppenheimerFunds-sponsored  retirement  plans may not be arranged on this basis.
Payments  are  normally  made by  check,  but  shareholders  having  AccountLink
privileges  (see "How To Buy Shares") may arrange to have  Automatic  Withdrawal
Plan payments transferred to the bank account designated on the OppenheimerFunds
New Account Application or  signature-guaranteed  instructions.  The Fund cannot
guarantee  receipt of a payment on the date  requested and reserves the right to
amend,  suspend or  discontinue  offering  such 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

                                                       -52-

<PAGE>



Withdrawal  Plan.  Class  B  and  Class  C  shareholders  should  not  establish
withdrawal  plans,  because of the imposition of the  contingent  deferred sales
charges on such  withdrawals  (except  where the Class B and Class C  contingent
deferred sales charges are waived as described in the Prospectus  under "Waivers
of Class B and Class C Sales Charges".

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

         o Automatic  Exchange  Plans.  Shareholders  can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed instructions)
to  exchange  a  pre-determined  amount of shares of the Fund for shares (of the
same class) of other  Oppenheimer funds  automatically on a monthly,  quarterly,
semi-annual or annual basis under an Automatic Exchange Plan. The minimum amount
that may be exchanged to each other fund  account is $25.  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.

         o Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet  withdrawal  payments.  Shares  acquired  without a sales charge will be
redeemed first and 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
withdrawal  plans  should  not be  considered  as a  yield  or  income  on  your
investment.  It may not be desirable to purchase additional Class A shares while
making  automatic  withdrawals  because  of the  sales  charges  that  apply  to
purchases  when made.  Accordingly,  a shareholder  normally may not maintain an
Automatic Withdrawal Plan while simultaneously making regular purchases of Class
A shares.

         The Transfer Agent will administer the investor's  Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the  "Planholder") who executed the
Plan authorization and application submitted to the Transfer Agent. The Transfer
Agent shall incur no liability to the Planholder for any action taken or omitted
by the Transfer  Agent in good faith to administer the Plan.  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.


                                                       -53-

<PAGE>



         Redemptions of shares needed to make  withdrawal  payments will be made
at the net asset value per share  determined on the redemption  date.  Checks or
ACH  transfer  payments of the  proceeds of Plan  withdrawals  will  normally be
transmitted  three  business  days prior to the date selected for receipt of the
payment  (receipt  of  payment  on the  date  selected  cannot  be  guaranteed),
according to the choice specified in writing by the Planholder.

         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 in 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 (in proper form in accordance with
the requirements of the  then-current  Prospectus of the Fund) to redeem all, or
any part of, the shares held under the Plan.  In that case,  the Transfer  Agent
will redeem the number of shares  requested  at the net asset value per share in
effect in accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.

         The Plan may be terminated at any time by the  Planholder by writing to
the Transfer  Agent.  A Plan may also be  terminated at any time by the Transfer
Agent upon receiving directions to that effect from the Fund. The Transfer Agent
will also  terminate a Plan upon receipt of evidence  satisfactory  to it of the
death or legal  incapacity of the Planholder.  Upon termination of a Plan by the
Transfer Agent or the Fund,  shares that have not been redeemed from the account
will be held in  uncertificated  form  in the  name of the  Planholder,  and the
account will continue as a dividend- reinvestment, uncertificated account unless
and until proper  instructions  are received  from the  Planholder or his or her
executor or guardian, or other 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 because of exhaustion of uncertificated  shares needed
to  continue  payments.   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 the Oppenheimer funds that have
a single class without a class  designation are deemed "Class A" shares for this
purpose.  All Oppenheimer  funds offer Class A Class B and Class C shares except
Centennial  America  Fund,  L.P.,   Centennial   California  Tax  Exempt  Trust,
Centennial Government Trust,  Centennial Money Market Trust, Centennial New York
Tax Exempt Trust,
    

                                                       -54-

<PAGE>



   
Centennial Tax Exempt Trust,  Daily Cash Accumulation Fund, Inc. and Oppenheimer
Money Market Fund,  Inc.,  which only offer Class A shares and Oppenheimer  Main
Street  California  Municipal Fund, which only offers Class A and Class B shares
(Class B and Class C shares of Oppenheimer Cash Reserves are generally available
only by  exchange  from the same class of shares of other  Oppenheimer  funds or
through  OppenheimerFunds  sponsored 401(k) plans). A current list showing which
funds  offer  which  classes  can be  obtained  by calling  the  Distributor  at
1-800-525- 7048.

         For accounts  established  on or before  March 8, 1996 holding  Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for  Class A  shares  of  other  Oppenheimer  funds,  including  Rochester  fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares  of that  fund.  For  accounts  of  Oppenheimer  Bond  Fund for  Growth
established  after March 8, 1996,  Class M shares may be  exchanged  for Class A
shares of other  Oppenheimer  funds except Rochester Fund Municipals and Limited
Term New York  Municipals.  Exchanges to Class M shares of Oppenheimer Bond Fund
for Growth are permitted from Class A shares of  Oppenheimer  Money Market Fund,
Inc. or  Oppenheimer  Cash  Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into Class M
shares are permitted.
    

         Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any Money Market Fund.  Shares of any Money Market Fund  purchased
without a sales charge may be exchanged for shares of Oppenheimer  funds offered
with a sales charge upon payment of the sales charge (or, if applicable,  may be
used to purchase  shares of  OppenheimerFunds  subject to a contingent  deferred
sales charge). However, 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 12 months prior
to that purchase may  subsequently be exchanged for shares of other  Oppenheimer
funds without being subject to an initial or contingent  deferred  sales charge,
whichever  is  applicable.  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, and
if requested, must supply proof of entitlement to this privilege. Shares of this
Fund acquired by  reinvestment of dividends or  distributions  from any other of
the 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.

         No contingent  deferred  sales charge is imposed on exchanges of shares
of any class purchased subject to a contingent  deferred sales charge.  However,
when Class A shares acquired by exchange of Class A shares of other  Oppenheimer
funds  purchased  subject  to a Class A  contingent  deferred  sales  charge are
redeemed  within  18  months  of the end of the  calendar  month of the  initial
purchase of the exchanged Class A shares, the Class A contingent  deferred sales
charge is imposed on the redeemed shares. The Class B contingent  deferred sales
charge is imposed on

                                                       -55-

<PAGE>



Class B shares  acquired by exchange if they are redeemed  within 6 years of the
initial  purchase  of the  exchanged  Class B  shares.  The  Class C  contingent
deferred sales charge is imposed on Class C shares  acquired by exchange if they
are redeemed  within 12 months of the initial  purchase of the exchanged Class C
shares.

         When Class B or Class C shares are redeemed to effect an exchange,  the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B and Class C contingent deferred sales charges will be followed in
determining  the order in which the shares are  exchanged.  Shareholders  should
take into  account the effect of any exchange on the  applicability  and rate of
any  contingent  deferred  sales charge that might be imposed in the  subsequent
redemption  of remaining  shares.  Shareholders  owning  shares of more than one
class must specify  whether they intend to exchange  Class A, Class B or Class C
shares.

   
         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.  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.
    

         When exchanging shares by telephone,  a shareholder must either have an
existing  account in, or obtain and acknowledge  receipt of a prospectus of, the
fund to which the  exchange is to be made.  For full or partial  exchanges of an
account made by telephone,  any special  account  features such as Asset Builder
Plans,  Automatic  Withdrawal  Plans and retirement plan  contributions  will be
switched to the new account unless the Transfer  Agent is instructed  otherwise.
If all telephone lines are busy (which might occur, for example,  during periods
of substantial market  fluctuations),  shareholders might not be able to request
exchanges by telephone and would have to submit written exchange requests.

         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 different  Oppenheimer  funds available for exchange have different
investment objectives,  policies and risks, and 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

                                                       -56-

<PAGE>



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. Daily dividends on
newly  purchased  shares will not be declared or paid 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.  Dividends  will be declared on shares  repurchased by a dealer or
broker for four business days  following the trade date (i.e.,  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.

         Dividends,  distributions  and the proceeds of the  redemption  of Fund
shares  represented  by checks  returned  to the  Transfer  Agent by the  Postal
Service as undeliverable  will be invested in shares of Oppenheimer Money Market
Fund,  Inc.,  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.

         The  amount  of a  class's  distributions  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,  as  described  in
"Alternative  Sales Arrangements -- Class A, Class B and Class C Shares," above.
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 as a result of the
asset-based sales charges on Class B and Class C shares, and Class B and Class C
dividends  will also differ in amount as a consequence  of any difference in net
asset value between the classes.

Tax Status of the Fund's Dividends and Distributions.  The Federal tax treatment
of the Fund's  dividends  and capital  gains  distributions  is explained in the
Prospectus  under the caption  "Dividends,  Capital  Gains and  Taxes."  Special
provisions  of the Internal  Revenue Code govern the  eligibility  of the Fund's
dividends  for the  dividends-received  deduction  for  corporate  shareholders.
Long-term  capital gains  distributions  are not eligible for the deduction.  In
addition,  the amount of  dividends  paid by the Fund which may  qualify for the
deduction is limited to the aggregate  amount of qualifying  dividends  that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period,  usually 46 days. A corporate  shareholder  will not be eligible for the
deduction  on  dividends  paid on Fund shares  held for 45 days or less.  To the
extent the Fund's  dividends are derived from gross income from option premiums,
interest  income or  short-term  gains from the sale of  securities or dividends
from foreign corporations, those dividends will not qualify for the

                                                       -57-

<PAGE>



deduction.

         If the Fund  qualifies as a "regulated  investment  company"  under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and  distributions.  The Fund qualified  during its last
fiscal period,  and intends to qualify in current and future years, but reserves
the right not to qualify. The Internal Revenue Code contains a number of complex
tests to determine  whether the Fund will  qualify,  and the Fund might not meet
those tests in a particular  year. For example,  if the Fund derives 30% or more
of its gross income from the sale of securities held less than three months,  it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging Instruments,"
above). If it does not qualify,  the Fund will be treated for tax purposes as an
ordinary corporation and will receive no tax deduction for payments of dividends
and distributions made to shareholders.

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

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

Additional Information About the Fund

The Custodian.  The Bank of New York 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. The Manager has represented to the Fund that the banking relationships
between  the  Manager  with the  Custodian  have  been and will  continue  to be
unrelated  to and  unaffected  by the  relationship  between  the  Fund  and the
Custodian.  It will be the practice of the Fund to deal with the  Custodian in a
manner uninfluenced by any banking  relationship the Custodian may have with the
Manager and its  affiliates.  The Fund's cash  balances  with the  Custodian  in
excess of $100,000 are not protected by Federal deposit insurance. Such

                                                       -58-

<PAGE>



uninsured balances at times may be substantial.

Independent  Auditors.  The  independent  auditors  of the Fund audit the Fund's
financial statements and perform other related audit services.  They also act as
auditors for the Manager and certain  other funds advised by the Manager and its
affiliates.


                                                       -59-

<PAGE>

INDEPENDENT AUDITORS' REPORT

=====================================================================
        The Board of Trustees and Shareholders of Oppenheimer International
        Bond Fund:

        We have audited the  accompanying  statement of assets and  liabilities,
        including the statement of  investments,  of  Oppenheimer  International
        Bond Fund as of September 30, 1996, the related  statement of operations
        for the year then ended, and the statements of changes in net assets and
        the  financial  highlights  for  each of the  periods  indicated.  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  generally
        accepted  auditing  standards.  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 at September 30,
        1996 by  correspondence  with the custodian  and brokers;  where replies
        were not received from brokers, we performed other auditing  procedures.
        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,  such financial  statements and financial
        highlights  present  fairly,  in all material  respects,  the  financial
        position of Oppenheimer  International  Bond Fund at September 30, 1996,
        the results of its  operations,  the changes in its net assets,  and the
        financial  highlights for the respective  stated periods,  in conformity
        with generally accepted accounting principles.


        /s/ Deloitte & Touche LLP
       ---------------------------------------
        DELOITTE & TOUCHE LLP

        Denver, Colorado
        October 21, 1996



<PAGE>



STATEMENT OF INVESTMENTS   September 30, 1996

<TABLE>
<CAPTION>
                                                                                                 FACE                MARKET VALUE
                                                                                                 AMOUNT(1)           SEE NOTE 1
===============================================================================================================================
<S>                                                                                              <C>                 <C>
MORTGAGE-BACKED OBLIGATIONS--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
       Federal National Mortgage Assn., Interest-Only
       Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
       12.405%--14.552%, 9/1/23 (Cost $452,041)(2)                                               $    1,631,521      $  563,640

===============================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--60.6%
- -------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--7.8% Argentina (Republic of):
       New Money Bonds, 6.50%, 10/25/99(3)                                                              583,333         565,834
       Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG                                                    2,350,000       1,387,241
       Treasury Bills, Zero Coupon, 12.117%, 1/17/97(4) ARP                                           1,000,000         979,375
       Treasury Bills, Zero Coupon, 10.156%, 11/15/96(4) ARP                                          1,000,000         992,189
       Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP                                                       1,710,000       2,691,792
       Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
       10.625%, 8/7/06(5)                                                                               600,000         607,500
       ------------------------------------------------------------------------------------------------------------------------
       Buenos Aires (Province of):
       Bonds, 10%, 3/5/01 DEM                                                                         1,680,000       1,148,810
       Sr. Unsec. Unsub. Medium-Term Nts., 11.50%, 10/19/98                                              50,000          51,906
                                                                                                                     ----------
                                                                                                                      8,424,647

- -------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.8%
       New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD                                    3,230,000       3,042,878
- -------------------------------------------------------------------------------------------------------------------------------
BRAZIL--6.2%
       Banco Estado Minas Gerais, 8.25%, 2/10/00                                                        650,000         612,625
       ------------------------------------------------------------------------------------------------------------------------
       Banco Nacional de Desenvolvimento Economico e Social Bonds,
       9%, 3/12/01 DEM                                                                                2,130,000       1,422,313
       ------------------------------------------------------------------------------------------------------------------------
       Brazil (Federal Republic of) Nts., Banco Estado Minas Gerais,
       7.875%, 2/10/99                                                                                  850,000         809,625
       ------------------------------------------------------------------------------------------------------------------------
       Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM                              1,754,000       1,179,576
       ------------------------------------------------------------------------------------------------------------------------
       Comtel Brasileira Ltd. Nts., 10.75%, 9/26/04(6)                                                  100,000         102,375
       ------------------------------------------------------------------------------------------------------------------------
       Telecomunicacoes Brasileiras SA:
       Bonds, 13%, 2/5/99 ITL                                                                     3,340,000,000       2,297,272
       Medium-Term Nts., 11.30%, 12/9/99(3)                                                             200,000         205,750
                                                                                                                     ----------
                                                                                                                      6,629,536

- -------------------------------------------------------------------------------------------------------------------------------
BULGARIA--4.1% Bulgaria (Republic of):
       Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(5)                     3,590,000       1,181,334
       Interest Arrears Bonds, 6.688%, 7/28/11(5)                                                     7,110,000       3,270,600
                                                                                                                     ----------
                                                                                                                      4,451,934

- -------------------------------------------------------------------------------------------------------------------------------
CANADA--5.5%
       Canada (Government of) Real Return Debs., 4.517%, 12/1/21(3)(7) CAD                            7,810,000       5,919,042
- -------------------------------------------------------------------------------------------------------------------------------
COSTA RICA--0.5%
       Central Bank of Costa Rica Interest Claim Bonds:
       Series A, 6.344%, 5/21/05(3)                                                                     386,773         373,237
       Series B, 6.344%, 5/21/05(3)                                                                     187,452         180,891
                                                                                                                     ----------
                                                                                                                        554,128

- -------------------------------------------------------------------------------------------------------------------------------
DENMARK--2.2%
       Denmark (Kingdom of) Bonds:
       8%, 11/15/01 DKK                                                                               3,085,000         576,489
       8%, 3/15/06 DKK                                                                                9,810,000       1,793,982
                                                                                                                     ----------
                                                                                                                      2,370,471

- -------------------------------------------------------------------------------------------------------------------------------
FINLAND--0.9%
       Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM                                                4,000,000         909,942
- -------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--4.5%
       United Kingdom Treasury Nts., 13%, 7/14/00 GBP                                                 2,565,000       4,807,129
</TABLE>


Oppenheimer International Bond Fund
<PAGE>   
STATEMENT OF INVESTMENTS   (Continued)

<TABLE>
<CAPTION>
                                                                                                 FACE              MARKET VALUE
                                                                                                 AMOUNT(1)         SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>               <C>
INDONESIA--0.7%
       PT Hutama Karya, Zero Coupon Medium-Term Nts.:
       17.514%, 3/19/97(4) IDR                                                                   1,000,000,000     $    399,005
       17.668%, 3/26/97(4) IDR                                                                   1,000,000,000          398,019
                                                                                                                     ----------
                                                                                                                        797,024

- -------------------------------------------------------------------------------------------------------------------------------
IRELAND--2.5%
       Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP                                             1,445,000        2,649,750
- -------------------------------------------------------------------------------------------------------------------------------
ITALY--2.8% Italy (Republic of):
       Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(3) JPY                                      165,000,000        1,489,259
       Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL                          2,100,000,000        1,497,684
                                                                                                                     ----------
                                                                                                                      2,986,943

- -------------------------------------------------------------------------------------------------------------------------------
JORDAN--2.3%
       Hashemite Kingdom of Jordan:
       Disc. Bonds, 6.625%, 12/23/23(3)                                                                500,000          386,250
       Interest Arrears Bonds, 6.625%, 12/23/05(3)                                                   2,335,000        2,072,313
                                                                                                                     ----------
                                                                                                                      2,458,563

- -------------------------------------------------------------------------------------------------------------------------------
MEXICO--5.3%
       Banco Nacional de Comercio Exterior SNC
       International Finance BV Gtd. Nts., 8%, 8/5/03                                                  900,000          805,500
       ------------------------------------------------------------------------------------------------------------------------
       Mexican Williams Bonds, 6.631%, 11/15/08(3)                                                     500,000          435,000
       ------------------------------------------------------------------------------------------------------------------------
       United Mexican States Bonds, 10.375%, 1/29/03 DEM                                             6,460,000        4,472,508
                                                                                                                     ----------
                                                                                                                      5,713,008

- -------------------------------------------------------------------------------------------------------------------------------
NORWAY--1.7%
       Norwegian Government Bonds, 9.50%, 10/31/02(8) NOK                                           10,405,000        1,842,210
- -------------------------------------------------------------------------------------------------------------------------------
PANAMA--1.7% Panama (Republic of):
       Debs., 6.629%, 5/10/02(3)                                                                       886,154          850,709
       Interest Reduction Bonds, 3.50%, 7/17/14(9)                                                   1,500,000          943,125
                                                                                                                     ----------
                                                                                                                      1,793,834

- -------------------------------------------------------------------------------------------------------------------------------
POLAND--1.3%
       Poland (Republic of) Treasury Bills, Zero Coupon:
       21.464%, 10/16/96(4) PLZ                                                                      1,000,000          353,419
       21.655%, 10/2/96(4) PLZ                                                                         570,000          202,620
       21.417%, 11/6/96(4) PLZ                                                                       1,100,000          384,600
       21.294%, 12/18/96(4) PLZ                                                                        180,000           61,592
       20.376%, 3/19/97(4) PLZ                                                                       1,250,000          408,878
                                                                                                                     ----------
                                                                                                                      1,411,109

- -------------------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.5%
       Portugal (Republic of) Gtd. Bonds,
       Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE                                         224,000,000        1,636,403
- -------------------------------------------------------------------------------------------------------------------------------
RUSSIA--1.0%
       Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(10)                                 1,600,000        1,029,500
- -------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--0.9%
       European Bank for Reconstruction & Development
       Sr. Unsec. Medium-Term Nts., 10%, 12/20/96 CZK                                               27,050,000          997,238
- -------------------------------------------------------------------------------------------------------------------------------
SWEDEN--2.6%
       Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK                                     15,100,000        2,842,326
- -------------------------------------------------------------------------------------------------------------------------------
VENEZUELA--1.8% Venezuela (Republic of):
       Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20                                            790,000          550,038
       Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(3)                             960,000          809,400
       New Money Bonds, Series A, 6.75%, 12/18/05(3)                                                   750,000          625,313
                                                                                                                     ----------
                                                                                                                      1,984,751
                                                                                                                     ----------
       Total Foreign Government Obligations (Cost $63,963,544)                                                       65,252,366
</TABLE>

Oppenheimer International Bond Fund
<PAGE>  

<TABLE>
<CAPTION>
                                                                                                 FACE              MARKET VALUE
                                                                                                 AMOUNT(1)         SEE NOTE 1
===============================================================================================================================
<S>                                                                                              <C>               <C>
LOAN PARTICIPATIONS--5.9%
- -------------------------------------------------------------------------------------------------------------------------------
       Algeria (Republic of) Reprofiled Debt Loan Participation, Tranche A:
       1.375%, 9/4/06(3)(11) JPY                                                                   104,400,000     $    529,616
       6.625%, 9/4/06(3)(11)                                                                         2,500,000        1,740,625
       ------------------------------------------------------------------------------------------------------------------------
       Colombia (Republic of) Concorde Loan Participation, 8.625%, 1/31/98(3)(11)                       84,000           83,160
       ------------------------------------------------------------------------------------------------------------------------
       Jamaica (Government of) 1990 Refinancing Agreement Nts.:
       Tranche A, 6.50%, 10/16/00(3)(11)                                                               219,999          212,300
       Tranche B, 6.312%, 11/15/04(3)(11)                                                            1,500,000        1,252,500
       ------------------------------------------------------------------------------------------------------------------------
       Morocco (Kingdom of) Loan Participation Agreement,
       Tranche A, 6.437%, 1/1/09(3)                                                                  2,025,000        1,592,789
       ------------------------------------------------------------------------------------------------------------------------
       Trinidad & Tobago Loan Participation Agreement:
       Tranche A, 1.772%, 9/30/00(3)(11) JPY                                                        21,600,000          172,606
       Tranche B, 1.772%, 9/30/00(3)(11) JPY                                                        89,183,523          712,667
                                                                                                                     ----------
       Total Loan Participations (Cost $5,766,456)                                                                    6,296,263

===============================================================================================================================
CORPORATE BONDS AND NOTES--12.0%
- -------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY--4.6%
- -------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--0.2%
       Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(6)                                            200,000          207,000
- -------------------------------------------------------------------------------------------------------------------------------
PAPER--4.4%
       Asia Pulp & Paper International Finance Co.,
       Zero Coupon Asian Currency Nts.:
       16.559%, 5/1/97(4) IDR                                                                    1,000,000,000          390,078
       16.551%, 5/15/97(4) IDR                                                                     550,000,000          213,175
       ------------------------------------------------------------------------------------------------------------------------
       Grupo Industrial Durango SA de CV, 12.625% Nts., 8/1/03                                       1,000,000        1,066,250
       ------------------------------------------------------------------------------------------------------------------------
       Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts.,
       Series C, 6/15/06                                                                             1,300,000        1,410,500
       ------------------------------------------------------------------------------------------------------------------------
       PT Inti Indorayon Utama, Zero Coupon Promissory Nts.,
       17.234%, 2/12/97(4) IDR                                                                     800,000,000          324,419
       ------------------------------------------------------------------------------------------------------------------------
       Tjiwi Kimia International Finance Co. BV, 13.25% Sr. Gtd. Nts., 8/1/01                        1,160,000        1,302,100
                                                                                                                     ----------
                                                                                                                      4,706,522

- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--0.1%
       TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6)                                      150,000          169,875
- -------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--0.2%
       Unilever CR spol. s.r.o., guaranteed by Unilever NV,
       Rotterdam, The Netherlands, Zero Coupon Promissory Nts.,
       11.184%, 10/11/96(4) CZK                                                                      5,600,000          207,241
- -------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--0.2%
       PT Polysindo Eka Perkasa:
       13% Sr. Nts., 6/15/01                                                                           185,000          203,962
       Zero Coupon Promissory Nts., 19.111%, 2/28/97(4) IDR                                         50,000,000           20,054
                                                                                                                     ----------
                                                                                                                        224,016

- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--3.3%
- -------------------------------------------------------------------------------------------------------------------------------
BANKS  & THRIFTS--3.3% Banco Bamerindus do Brasil SA:
       10.50% Debs., 6/23/97                                                                           105,000          103,688
       9% Unsec. Unsub. Bonds, 10/29/98                                                                240,000          223,200
       9.258% Unsub. Nts., 12/22/97(3)                                                                 700,000          687,313
       ------------------------------------------------------------------------------------------------------------------------
       Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99                                     1,150,000        1,069,500
       ------------------------------------------------------------------------------------------------------------------------
       Banco Itamarati SA:
       10.50% Medium-Term Nts., 11/29/96                                                                50,000           50,125
       11.625% Sr. Unsec. Debs., 11/23/97                                                              350,000          360,500
</TABLE>

Oppenheimer International Bond Fund
<PAGE>  


STATEMENT OF INVESTMENTS   (Continued)

<TABLE>
<CAPTION>
                                                                                                   FACE            MARKET VALUE
                                                                                                   AMOUNT(1)       SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>             <C>
BANKS & THRIFTS
(CONTINUED)
       Banco Mexicano SA, 8% Sr. Unsec. Unsub.
       Exchangeable Medium-Term Nts., 11/4/98                                                      $    60,000     $     58,425
       ------------------------------------------------------------------------------------------------------------------------
       Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(4)(10) THB                      5,000,000          194,952
       ------------------------------------------------------------------------------------------------------------------------
       Siam Commercial Bank Public Ltd.,
       Zero Coupon Debs., 10.581%, 11/18/96(4)(10) THB                                              20,500,000          795,031
                                                                                                                    -----------
                                                                                                                      3,542,734
- -------------------------------------------------------------------------------------------------------------------------------
MEDIA--0.2%
- -------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--0.2%
       Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07                           150,000          150,750
       ------------------------------------------------------------------------------------------------------------------------
       United International Holdings, Inc.,
       Zero Coupon Sr. Sec. Disc. Nts., 12.495%, 11/15/99(4)                                            75,000           52,500
                                                                                                                     ----------
                                                                                                                        203,250

- -------------------------------------------------------------------------------------------------------------------------------
OTHER--2.4%
- -------------------------------------------------------------------------------------------------------------------------------
SERVICES--2.4%
       CE Casecnan Water & Energy, Inc.:
       11.45% Sr. Nts., Series A, 11/15/05                                                             500,000          538,750
       11.95% Sr. Nts., Series B, 11/15/10                                                             200,000          217,000
       ------------------------------------------------------------------------------------------------------------------------
       Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(6)                                           1,000,000        1,050,000
       ------------------------------------------------------------------------------------------------------------------------
       Sociedad Comercial del Plata SA:
       11.50% Medium-Term Nts., 5/9/00                                                                 560,000          568,750
       11.50% Medium-Term Nts., 5/9/00(11)                                                             200,000          203,000
                                                                                                                     ----------
                                                                                                                      2,577,500

- -------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.1%
- -------------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.1%
       Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04                                                 150,000          161,250
- -------------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.9%
- -------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
       Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(6)                    579,160          613,730
       ------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.3%
       Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(11)(12)                                           75,000           60,563
       ------------------------------------------------------------------------------------------------------------------------
       Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12)                     400,000          248,000
                                                                                                                     ----------
                                                                                                                        308,563
                                                                                                                     ----------
       Total Corporate Bonds and Notes (Cost $12,744,033)                                                            12,921,681
</TABLE>
<TABLE>
<CAPTION>
                                                                                                   UNITS
===============================================================================================================================
<S>                                                                                                      <C>              <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------------------------------------------------------
       Comunicacion Celular SA Wts., Exp. 11/03(11)                                                        400            2,000
       ------------------------------------------------------------------------------------------------------------------------
       Venezuela Government Wts., Exp. 4/20                                                              3,950               --
                                                                                                                     ----------
       Total Rights, Warrants and Certificates (Cost $0)                                                                  2,000
</TABLE>

<TABLE>
<CAPTION>
                                                                                                   FACE
                                                                                                   AMOUNT(1)
===============================================================================================================================
<S>                                                                                                   <C>               <C>
STRUCTURED INSTRUMENTS--17.2%
- -------------------------------------------------------------------------------------------------------------------------------
       Bayerische Landesbank Girozentrale, New York Branch:
       6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97                              $   300,000          294,075
       14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates
       of Greek Drachma and European Currency Unit)                                                    450,000          442,980
</TABLE>

Oppenheimer International Bond Fund
<PAGE> 

<TABLE>
<CAPTION>
                                                                                                     FACE           MARKET VALUE
                                                                                                     AMOUNT(1)      SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>            <C>
STRUCTURED INSTRUMENTS
(CONTINUED)
       Canadian Imperial Bank of Commerce, New York Branch:
       14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates
       of Greek Drachma and European Currency Unit)                                                 $  800,000     $    789,920
       16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
       Zero Coupon, 4/9/97)                                                                          3,000,000        2,982,000
       17% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
       Zero Coupon, 2/19/97)                                                                           750,000          747,000
       17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO,
       Zero Coupon, 3/26/97)                                                                           500,000          497,000
       17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
       Zero Coupon, 2/19/97)                                                                         1,200,000        1,195,200
       ------------------------------------------------------------------------------------------------------------------------
       Internationale Nederlanden Bank NV, Prague Branch,
       Zero Coupon Promissory Nts., 10.516%, 4/28/97(4) CZK                                          6,150,000          214,896
       ------------------------------------------------------------------------------------------------------------------------
       Internationale Nederlanden (U.S.) Capital Holdings Corp.:
       Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(4)                                      980,000          952,756
       Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(4)                                       600,000          544,860
       Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(4)                                       600,000          544,680
       Zero Coupon Czech Crown Linked Nts., 11.911%, 6/26/97(4)                                        600,000          563,220
       Zero Coupon Indian Rupee Linked Nts., 15.675%, 12/20/96(4)                                    1,000,000          965,100
       ------------------------------------------------------------------------------------------------------------------------
       Morgan Guaranty Trust Co. of New York, Nassau Branch,
       Zero Coupon Indian Rupee Currency Linked Nts., 17.392%, 11/27/96(4)                             900,000          881,479
       ------------------------------------------------------------------------------------------------------------------------
       Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.:
       12.384%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
       Zero Coupon, 1/2/97)(4)                                                                         200,000          194,420
       12.38%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
       Zero Coupon, 1/2/97)(4)                                                                         200,000          194,420
       12.638%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
       Zero Coupon, 1/2/97)(4)                                                                         120,000          116,652
       12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
       Zero Coupon, 1/2/97)(4)                                                                         100,000           97,210
       9.896%, 5/2/97 (indexed to the Brazilian National Treasury Nts.,
       Zero Coupon, 5/3/97)(4)                                                                         450,000          421,515
       ------------------------------------------------------------------------------------------------------------------------
       Salomon Brothers, Inc., Zero Coupon Chilean Peso
       Indexed Enhanced Access Nts.:
       11.792%, 12/11/96(4)                                                                          1,000,000          974,200
       12.145%, 12/11/96(4)                                                                          1,000,000          974,000
       11.406%, 12/13/96(4)                                                                          1,000,000          969,800
       11.381%, 12/20/96(4)                                                                          1,000,000          972,000
       ------------------------------------------------------------------------------------------------------------------------
       Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97 (indexed
       to the closing Nikkei 225 Index on 1/23/97,
       5 yr. & 3 mos. Japanese Yen Swap rate & New Zealand Dollar)                                     400,000          395,940
       ------------------------------------------------------------------------------------------------------------------------
       United Mexican States Linked Nts., 11/27/96 (indexed to the greater
       of Cetes Option Amount or USD LIBOR Option Amount, 11/27/96)                                  1,300,000        1,583,292
                                                                                                                    -----------
       Total Structured Instruments (Cost $18,469,070)                                                               18,508,615
</TABLE>

Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS   (Continued)

<TABLE>
<CAPTION>
                                                                                                                  MARKET VALUE
                                                                        DATE        STRIKE          CONTRACTS     SEE NOTE 1
==============================================================================================================================
<S>                                                                     <C>         <C>              <C>          <C>
PUT OPTIONS PURCHASED--0.2%
- ------------------------------------------------------------------------------------------------------------------------------
       Bulgaria (Republic of):
       Front-Loaded Interest Reduction Bearer Bonds,
       Tranche A, 2.25%, 7/28/12 Put Opt.                               10/96       $28.125            1,750       $    5,250
       Front-Loaded Interest Reduction Bearer Bonds,
       Tranche A, 2.25%, 7/28/12 Put Opt.                               10/96       $28.75             1,750            4,375
       Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt.                 10/96       $40.875            3,400                1
       Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt.                 10/96       $41.375            3,400               13
       -----------------------------------------------------------------------------------------------------------------------
       Italy (Republic of) Treasury Bonds, Buoni del Tesoro
       Poliennali, 9.50%, 5/1/01 Put Opt.                               7/97         99.96 ITL         1,842           12,714
       -----------------------------------------------------------------------------------------------------------------------
       Swiss Franc Put Opt.                                             10/96         1.22 CHF     7,639,344          203,902
                                                                                                                  -----------
       Total Put Options Purchased (Cost $351,770)                                                                    226,255
</TABLE>


<TABLE>
<CAPTION>
                                                                                                    FACE
                                                                                                    AMOUNT(1)
===============================================================================================================================
<S>                                                                                                 <C>            <C>
REPURCHASE AGREEMENT--3.3%

- -------------------------------------------------------------------------------------------------------------------------------
       Repurchase agreement with Goldman,  Sachs & Co., 5.62%, dated 9/30/96, to
       be repurchased at $3,500,546 on 10/1/96,  collateralized by U.S. Treasury
       Bonds, 8.875%--11.125%, 8/15/03--8/15/17, with a value
       of $3,574,041 (Cost $3,500,000)                                                              $3,500,000        3,500,000

- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $105,246,914)                                                           99.7%     107,270,820
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES                                                                            0.3          347,051
                                                                                                    ----------     ------------
NET ASSETS                                                                                               100.0%    $107,617,871
                                                                                                    ==========     ============
</TABLE>


       1. Face amount is reported in U.S. Dollars, except for those denoted in
          the following currencies:
       ARP --Argentine Peso                         IEP--Irish Punt
       AUD --Australian Dollar                      ITL--Italian Lira
       CAD --Canadian Dollar                        JPY--Japanese Yen
       CHF --Swiss Franc                            NLG--Netherlands Guilder
       CZK --Czech Koruna                           NOK--Norwegian Krone
       DEM--German Deutsche Mark                    PLZ--Polish Zloty
       DKK --Danish Krone                           PTE--Portuguese Escudo
       FIM --Finnish Markka                         SEK--Swedish Krona
       GBP --British Pound Sterling                 THB--Thai Baht
       IDR --Indonesian Rupiah

       2.  Interest-Only  Strips  represent  the right to  receive  the  monthly
       interest  payments  on  an  underlying  pool  of  mortgage  loans.  These
       securities  typically  decline in price as interest rates  decline.  Most
       other  fixed-income  securities  increase  in price when  interest  rates
       decline.  The principal  amount of the  underlying  pool  represents  the
       notional  amount on which current  interest is  calculated.  The price of
       these  securities  is typically  more  sensitive to changes in prepayment
       rates than  traditional  mortgage-backed  securities  (for example,  GNMA
       pass-throughs).  Interest rates disclosed  represent current yields based
       upon the  current  cost basis and  estimated  timing and amount of future
       cash flows. 3.  Represents the current  interest rate for a variable rate
       security.  4. For zero  coupon  bonds,  the  interest  rate  shown is the
       effective yield on the date of purchase.

Oppenheimer International Bond Fund
<PAGE>  

       5. A sufficient amount of securities has been designated to cover
       outstanding written call options, as follows:

<TABLE>
<CAPTION>
                                                   FACE SUBJECT         EXPIRATION     EXERCISE         PREMIUM     MARKET VALUE
                                                   TO CALL              DATE           PRICE            RECEIVED      SEE NOTE 1
        ------------------------------------------------------------------------------------------------------------------------
        <S>                                        <C>                  <C>            <C>              <C>             <C>
        Call Option on Banco Hipotecario Nacional
        (Argentina) Medium-Term Nts.,
        10.625%, 8/7/06                              600,000            8/00           $100.00          $ 5,520         $  9,600
        ------------------------------------------------------------------------------------------------------------------------
        Call Option on Bulgaria (Republic of)
        Front-Loaded Interest Reduction
        Bearer Bonds, Tranche A, 2.25%, 7/28/12    1,750,000            12/96            32.75           13,125           44,625
        ------------------------------------------------------------------------------------------------------------------------
        Call Option on Bulgaria (Republic of)
        Front-Loaded Interest Reduction
        Bearer Bonds, Tranche A, 2.25%, 7/28/12    1,750,000            12/96           32.125            9,975           47,250
        ------------------------------------------------------------------------------------------------------------------------
        Call Option on Bulgaria (Republic of)
        Interest Arrears Bonds, 6.688%, 7/28/11    3,400,000            11/96           45.375           22,100           39,100
        ------------------------------------------------------------------------------------------------------------------------
        Call Option on Bulgaria (Republic of)
        Interest Arrears Bonds, 6.688%, 7/28/11    3,400,000            11/96           45.188           22,100           42,500
                                                                                                        -------         --------
                                                                                                        $72,820         $183,075
                                                                                                        =======         ========
</TABLE>


        6. Represents a security sold under Rule 144A, which is exempt from
        registration under the Securities Act of 1933, as amended. This
        security has been determined to be liquid under guidelines established
        by the Board of Trustees. These securities amount to $2,142,980 or
        1.99% of the Fund's net assets, at September 30, 1996.
        7. Indexed instrument for which the principal amount and/or interest
        due at maturity is affected by the relative value of a foreign index.
        8. A sufficient amount of securities has been designated to cover
        outstanding forward foreign currency exchange contracts.  See Note 5 of
        Notes to Financial Statements.
        9. Represents the current interest rate for an increasing rate
        security.
        10. When-issued security to be delivered and settled after September
        30, 1996.
        11. Identifies issues considered to be illiquid--See Note 7 of Notes to
        Financial Statements.
        12. Denotes a step bond: a zero coupon bond that converts to a fixed
        rate of interest at a designated future date.

        See accompanying Notes to Financial Statements.


Oppenheimer International Bond Fund
<PAGE>  
STATEMENT OF ASSETS AND LIABILITIES   September 30, 1996



<TABLE>
================================================================================================================================
<S>                                                                                                                 <C>
ASSETS
        Investments, at value (cost $105,246,914)--see accompanying statement                                       $107,270,820
        ------------------------------------------------------------------------------------------------------------------------

        Cash                                                                                                             615,444
        ------------------------------------------------------------------------------------------------------------------------
        Unrealized appreciation on forward foreign currency
        exchange contracts--Note 5                                                                                        27,610
        ------------------------------------------------------------------------------------------------------------------------
        Receivables:
        Investments sold                                                                                               3,236,083
        Interest                                                                                                       2,585,546
        Shares of beneficial interest sold                                                                             1,312,326
        Closed forward foreign currency exchange contracts                                                               112,082
        ------------------------------------------------------------------------------------------------------------------------
        Deferred organization costs--Note 1                                                                               11,338
        ------------------------------------------------------------------------------------------------------------------------
        Other                                                                                                              1,862
                                                                                                                    ------------
        Total assets                                                                                                 115,173,111

================================================================================================================================
LIABILITIES
        Unrealized depreciation on forward foreign currency
        exchange contracts--Note 5                                                                                         8,744
        ------------------------------------------------------------------------------------------------------------------------
        Options written, at value (premiums received $72,820)--
        see accompanying statement--Note 6                                                                               183,075
        ------------------------------------------------------------------------------------------------------------------------
        Payables and other liabilities:
        Investments purchased                                                                                          6,611,001
        Dividends                                                                                                        267,700
        Shares of beneficial interest redeemed                                                                           245,867
        Closed forward foreign currency exchange contracts                                                                85,378
        Distribution and service plan fees                                                                                51,307
        Transfer and shareholder servicing agent fees                                                                     11,276
        Other                                                                                                             90,892
                                                                                                                    ------------
        Total liabilities                                                                                              7,555,240

================================================================================================================================
NET ASSETS                                                                                                          $107,617,871
                                                                                                                    ============

================================================================================================================================
COMPOSITION OF
NET ASSETS
        Paid-in capital                                                                                             $104,210,304
        ------------------------------------------------------------------------------------------------------------------------
        Accumulated net realized gain on investments and
        foreign currency transactions                                                                                  1,480,266
        ------------------------------------------------------------------------------------------------------------------------
        Net unrealized appreciation on investments and translation of
        assets and liabilities denominated in foreign currencies                                                       1,927,301
                                                                                                                    ------------
        Net assets                                                                                                  $107,617,871
                                                                                                                    ============

================================================================================================================================
NET ASSET VALUE
PER SHARE
        Class A Shares:
        Net asset value and redemption price per share (based on net assets
        of $52,128,047 and 9,494,568 shares of beneficial interest outstanding)                                            $5.49
        Maximum offering price per share (net asset value plus sales charge
        of 4.75% of offering price)                                                                                        $5.76

        ------------------------------------------------------------------------------------------------------------------------
        Class B Shares:
        Net asset value, redemption price and offering price per share (based on
        net assets of $45,207,455 and 8,246,151 shares of beneficial interest outstanding)                                 $5.48

        ------------------------------------------------------------------------------------------------------------------------
        Class C Shares:
        Net asset value, redemption price and offering price per share (based on
        net assets of $10,282,369 and 1,876,082 shares of beneficial interest outstanding)                                 $5.48
</TABLE>

        See accompanying Notes to Financial Statements.

Oppenheimer International Bond Fund
<PAGE>

STATEMENT OF OPERATIONS   For the Year Ended September 30, 1996

<TABLE>
================================================================================================================================
<S>                                                                                                                   <C>
INVESTMENT INCOME
        Interest (net of foreign withholding taxes of $5,130)                                                         $4,624,080


================================================================================================================================
EXPENSES
        Management fees--Note 4                                                                                          311,128
        ------------------------------------------------------------------------------------------------------------------------
        Distribution and service plan fees--Note 4:
        Class A                                                                                                           43,913
        Class B                                                                                                          178,039
        Class C                                                                                                           40,141
        ------------------------------------------------------------------------------------------------------------------------
        Transfer and shareholder servicing agent fees--Note 4                                                             78,316
        ------------------------------------------------------------------------------------------------------------------------
        Shareholder reports                                                                                               61,884
        ------------------------------------------------------------------------------------------------------------------------
        Custodian fees and expenses                                                                                       57,326
        ------------------------------------------------------------------------------------------------------------------------
        Registration and filing fees:
        Class A                                                                                                           15,821
        Class B                                                                                                           14,817
        Class C                                                                                                            3,412
        ------------------------------------------------------------------------------------------------------------------------
        Legal and auditing fees                                                                                           15,402
        ------------------------------------------------------------------------------------------------------------------------
        Trustees' fees and expenses                                                                                        1,957
        ------------------------------------------------------------------------------------------------------------------------
        Other                                                                                                             11,068
                                                                                                                      ----------
        Total expenses                                                                                                   833,224
        Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4                                                 (41,927)
                                                                                                                      ----------
        Net expenses                                                                                                     791,297

================================================================================================================================
NET INVESTMENT INCOME                                                                                                  3,832,783


================================================================================================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
        Net realized gain (loss) on:
        Investments and options written (including premiums on options exercised)                                      1,466,199
        Closing and expiration of options written                                                                        102,322
        Foreign currency transactions                                                                                    (18,625)
                                                                                                                      ----------
        Net realized gain                                                                                              1,549,896

        ------------------------------------------------------------------------------------------------------------------------
        Net change in unrealized appreciation or depreciation on:
        Investments                                                                                                    2,138,504
        Translation of assets and liabilities denominated in foreign currencies                                         (299,254)
                                                                                                                      ----------
        Net change                                                                                                     1,839,250
                                                                                                                      ----------
        Net realized and unrealized gain                                                                               3,389,146

================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                                                                  $7,221,929
                                                                                                                      ==========
</TABLE>


        See accompanying Notes to Financial Statements.


Oppenheimer International Bond Fund
<PAGE> 

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
                                                                                                   YEAR ENDED        PERIOD ENDED
                                                                                                   SEPTEMBER 30,     SEPTEMBER 30,
                                                                                                   1996              1995(1)
===============================================================================================================================
<S>                                                                                                <C>               <C>
OPERATIONS
       Net investment income                                                                       $  3,832,783      $  108,803
       ------------------------------------------------------------------------------------------------------------------------
       Net realized gain (loss)                                                                       1,549,896            (189)
       ------------------------------------------------------------------------------------------------------------------------
       Net change in unrealized appreciation or depreciation                                          1,839,250          88,051
                                                                                                   ------------      ----------
       Net increase in net assets resulting from operations                                           7,221,929         196,665

===============================================================================================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
       Dividends from net investment income:
       Class A                                                                                       (1,931,780)        (76,404)
       Class B                                                                                       (1,609,969)        (29,790)
       Class C                                                                                         (360,475)         (2,609)

===============================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
       Net  increase  in  net  assets   resulting   from   beneficial   interest
       transactions--Note 2:
       Class A                                                                                       46,551,563       3,923,812
       Class B                                                                                       40,565,844       3,212,495
       Class C                                                                                        9,758,157         198,433

===============================================================================================================================
NET ASSETS
       Total increase                                                                               100,195,269       7,422,602
       ------------------------------------------------------------------------------------------------------------------------
       Beginning of period                                                                            7,422,602              --
                                                                                                   ------------      ----------
       End of period                                                                               $107,617,871      $7,422,602
                                                                                                   ============      ==========
</TABLE>


       1. For the period from June 15, 1995 (commencement of operations) to
          September 30, 1995.

       See accompanying Notes to Financial Statements.


Oppenheimer International Bond Fund
<PAGE>   
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                CLASS A                     CLASS B                     CLASS C
                                                ------------------------    ------------------------    ------------------------
                                                YEAR ENDED SEPTEMBER 30,    YEAR ENDED SEPTEMBER 30,    YEAR ENDED SEPTEMBER 30,
                                                1996          1995(1)       1996        1995(1)         1996        1995(1)
================================================================================================================================
<S>                                             <C>           <C>           <C>         <C>             <C>         <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period                                         $5.10         $5.00         $5.10       $5.00           $5.09       $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income                               .52           .15           .48         .14             .48         .14
Net realized and unrealized gain                    .40           .10           .39         .10             .39         .09
                                                -------       -------       -------     -------         -------     -------
Total income from
investment operations                               .92           .25           .87         .24             .87         .23
- -----------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from
net investment income                              (.53)         (.15)         (.49)       (.14)           (.48)       (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $5.49         $5.10         $5.48       $5.10           $5.48       $5.09
                                                =======       =======       =======     =======         =======     =======

=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)               18.82%         5.13%        17.71%       4.92%          17.92%       4.73%

=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands)                                  $52,128        $3,984       $45,207      $3,238         $10,282       $201
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands)                                  $19,817        $2,566       $17,891      $1,125          $4,039       $ 97
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income                              9.60%         9.94%(3)      8.81%       9.20%(3)        8.76%      9.36%(3)
Expenses, before voluntary
reimbursement by the Manager                       1.59%         1.59%(3)      2.36%       2.21%(3)        2.36%      2.26%(3)
Expenses, net of voluntary
reimbursement by the Manager                       1.49%         0.41%(3)      2.26%       0.89%(3)        2.25%      0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4)                        273.3%        122.0%        273.3%      122.0%          273.3%     122.0%
</TABLE>

       1. For the period from June 15, 1995 (commencement of operations) to
       September 30, 1995.
       2. Assumes a hypothetical initial investment on the business day before
       the first day of the fiscal period (or commencement of operations), 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.
       3. Annualized.
       4. The lesser of purchases or sales of portfolio securities for a period,
       divided  by  the  monthly  average  of  the  market  value  of  portfolio
       securities  owned  during  the  period.  Securities  with a  maturity  or
       expiration  date  at the  time of  acquisition  of one  year or less  are
       excluded  from  the  calculation.   Purchases  and  sales  of  investment
       securities  (excluding  short-term   securities)  for  the  period  ended
       September 30, 1996 were $161,923,766 and $93,759,294, respectively.

       See accompanying Notes to Financial Statements.

Oppenheimer International Bond Fund
<PAGE> 
NOTES TO FINANCIAL STATEMENTS

==============================================================================
1. SIGNIFICANT
   ACCOUNTING POLICIES

        Oppenheimer   International   Bond  Fund  (the  Fund)  is  a  registered
        investment  company  organized as a Massachusetts  Business Trust with a
        single series of the same name. The Fund is registered as a diversified,
        open-end management  investment company under the Investment Company Act
        of 1940,  as amended.  The Fund's  investment  objective is to seek high
        total return (which includes current income and capital  appreciation in
        the value of its shares)  primarily  from foreign debt  securities.  The
        Fund's investment adviser is OppenheimerFunds,  Inc. (the Manager).  The
        Fund  offers  Class A,  Class B and Class C shares.  Class B and Class C
        shares may be subject to a contingent  deferred sales charge.  All three
        classes of shares have identical  rights to earnings,  assets and voting
        privileges,  except  that  each  class has its own  distribution  and/or
        service plan,  expenses directly  attributable to a particular class and
        exclusive  voting  rights  with  respect to matters  affecting  a single
        class. 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.

        -----------------------------------------------------------------------
        INVESTMENT  VALUATION.  Portfolio  securities are valued at the close of
        the New York Stock  Exchange on each  trading  day.  Listed and unlisted
        securities for which such  information is regularly  reported are valued
        at the last sale price of the day or, in the absence of sales, at values
        based on the  closing  bid or the last sale  price on the prior  trading
        day.  Long-term and short-term  "non-money  market" debt  securities are
        valued by a portfolio pricing service approved by the Board of Trustees.
        Such securities which cannot be valued by the approved portfolio pricing
        service are valued using dealer-supplied valuations provided the Manager
        is satisfied that the firm rendering the quotes is reliable and that the
        quotes reflect  current market value,  or are valued under  consistently
        applied  procedures  established  by the Board of Trustees to  determine
        fair value in good faith. Short-term "money market type" debt securities
        having a  remaining  maturity  of 60 days or less are valued at cost (or
        last determined  market value) adjusted for  amortization to maturity of
        any premium or discount. Forward foreign currency exchange contracts are
        valued  based on the  closing  prices of the forward  currency  contract
        rates  in the  London  foreign  exchange  markets  on a daily  basis  as
        provided by a reliable bank or dealer. Options are valued based upon the
        last sale price on the principal  exchange on which the option is traded
        or, in the absence of any transactions that day, the value is based upon
        the last sale price on the prior trading date if it is within the spread
        between  the  closing  bid and asked  prices.  If the last sale price is
        outside the spread, the closing bid is used.

        -----------------------------------------------------------------------
        FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
        maintained in U.S. dollars. Prices of securities denominated in foreign
        currencies are translated into U.S. dollars at the closing rates of
        exchange. Amounts related to the purchase and sale of securities and
        investment income are translated at the rates of exchange prevailing on
        the respective dates of such transactions.

                        The effect of changes in foreign currency exchange rates
        on investments is separately  identified from the  fluctuations  arising
        from changes in market values of  securities  held and reported with all
        other  foreign  currency  gains and  losses in the Fund's  Statement  of
        Operations.

        -----------------------------------------------------------------------
        REPURCHASE   AGREEMENTS.   The  Fund  requires  the  custodian  to  take
        possession, to have legally segregated in the Federal Reserve Book Entry
        System  or  to  have  segregated  within  the  custodian's   vault,  all
        securities  held as collateral  for  repurchase  agreements.  The market
        value of the  underlying  securities  is required to be at least 102% of
        the resale price at the time of purchase. If the seller of the agreement
        defaults  and the value of the  collateral  declines,  or if the  seller
        enters into an insolvency  proceeding,  realization  of the value of the
        collateral by the Fund may be delayed or limited.

        -----------------------------------------------------------------------
        ALLOCATION OF INCOME,  EXPENSES, AND GAINS AND LOSSES. Income,  expenses
        (other than those attributable to a specific class) and 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 loss  carryovers,  to  shareholders.
        Therefore, no federal income or excise tax provision is required.

        -----------------------------------------------------------------------
        DISTRIBUTIONS  TO  SHAREHOLDERS.  The Fund intends to declare  dividends
        separately  for Class A, Class B and Class C shares from net  investment
        income each day the New York Stock Exchange is open for business and pay
        such  dividends  monthly.  Distributions  from  net  realized  gains  on
        investments, if any, will be declared at least once each year.

Oppenheimer International Bond Fund
<PAGE>  

==============================================================================
1. SIGNIFICANT
   ACCOUNTING POLICIES
   (CONTINUED)

        ORGANIZATION  COSTS.  The Manager  advanced $14,488 for organization and
        start-up  costs of the Fund.  Such expenses are being  amortized  over a
        five-year period from the date operations  commenced.  In the event that
        all or part of the Manager's initial investment in shares of the Fund is
        withdrawn during the amortization  period, the redemption  proceeds will
        be reduced to reimburse the Fund for any  unamortized  expenses,  in the
        same  ratio as the  number of  shares  redeemed  bears to the  number of
        initial shares outstanding at the time of such redemption.

        -----------------------------------------------------------------------
        CLASSIFICATION  OF DISTRIBUTIONS TO SHAREHOLDERS.  Net investment income
        (loss) and net realized gain (loss) may differ for  financial  statement
        and tax  purposes.  The character of the  distributions  made during the
        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  dividend  distributions,  the  fiscal  year in which
        amounts  are  distributed  may  differ  from the year that the income or
        realized gain (loss) was recorded by the Fund.

                        During  the year  ended  September  30,  1996,  the Fund
        adjusted the  classification of distributions to shareholders to reflect
        the differences  between  financial  statement amounts and distributions
        determined  in  accordance  with  income tax  regulations.  Accordingly,
        during the year ended September 30, 1996, amounts have been reclassified
        to  reflect a  decrease  in  overdistributed  net  investment  income of
        $13,482.  Accumulated  net realized gain on investments was decreased by
        the same amount. In addition,  to properly reflect foreign currency gain
        in  the  components  of  capital,   $55,959  of  foreign  exchange  gain
        determined  accord-  ing to U.S.  federal  income  tax  rules  has  been
        reclassified from net realized gain to net investment income.

        -----------------------------------------------------------------------
        OTHER.  Investment  transactions  are  accounted  for  on the  date  the
        investments  are  purchased or sold (trade date) and dividend  income is
        recorded on the ex-dividend  date.  Discount on securities  purchased is
        amortized over the life of the respective securities, in accordance with
        federal   income  tax   requirements.   Realized  gains  and  losses  on
        investments  and  options  written  and  unrealized   appreciation   and
        depreciation  are determined on an identified  cost basis,  which is the
        same  basis  used  for  federal   income  tax   purposes.   Interest  on
        payment-in-kind debt instruments is accrued as income at the coupon rate
        and a market adjustment is made on the ex-date.

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

==============================================================================
2. SHARES OF
   BENEFICIAL INTEREST

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

<TABLE>
<CAPTION>
                                                       YEAR ENDED SEPTEMBER 30, 1996              PERIOD ENDED SEPTEMBER 30, 1995(1)
                                                       -----------------------------              ----------------------------------
                                                       SHARES               AMOUNT                SHARES             AMOUNT
       ----------------------------------------------------------------------------------------------------------------------------
       <S>                                             <C>                  <C>                    <C>               <C>
       Class A:
       Sold                                             9,721,751           $51,914,821             909,822          $4,576,888
       Dividends reinvested                               246,015             1,320,886               6,117              30,991
       Redeemed                                        (1,254,497)           (6,684,144)           (134,640)           (684,067)
                                                       ----------           -----------            --------          ----------
       Net increase                                     8,713,269           $46,551,563             781,299          $3,923,812
                                                       ==========           ===========            ========          ==========

       ----------------------------------------------------------------------------------------------------------------------------
       Class B:
       Sold                                             8,129,566           $43,322,204             633,620          $3,203,816
       Dividends reinvested                               172,750               925,063               4,019              20,381
       Redeemed                                          (691,490)           (3,681,423)             (2,314)            (11,702)
                                                       ----------           -----------            --------          ----------
       Net increase                                     7,610,826           $40,565,844             635,325          $3,212,495
                                                       ==========           ===========            ========          ==========

       ---------------------------------------------------------------------------------------------------------------------------
       Class C:
       Sold                                             1,915,475           $10,177,624              39,665          $  199,624
       Dividends reinvested                                35,740               192,431                 392               1,981
       Redeemed                                          (114,564)             (611,898)               (626)             (3,172)
                                                       ----------          ------------            --------          ----------
       Net increase                                     1,836,651          $  9,758,157              39,431          $  198,433
                                                       ==========          ============            ========          ==========
</TABLE>



       1. For the period from June 15, 1995 (commencement of operations) to
       September 30, 1995.

Oppenheimer International Bond Fund
<PAGE> 
NOTES TO FINANCIAL STATEMENTS   (Continued)


==============================================================================
3. UNREALIZED GAINS AND
   LOSSES ON INVESTMENTS

       At September 30, 1996, net  unrealized  appreciation  on investments  and
       options  written of  $1,913,651  was  composed of gross  appreciation  of
       $2,723,838, and gross depreciation of $810,187.

==============================================================================
4. MANAGEMENT FEES
   AND OTHER TRANSACTIONS
   WITH AFFILIATES

        Management  fees  paid  to the  Manager  were  in  accordance  with  the
        investment advisory agreement with the Fund which provides for an annual
        fee of 0.75% of the first $200  million of average net assets,  0.72% of
        the next $200 million, 0.69% of the next $200 million, 0.66% of the next
        $200 million,  0.60% of the next $200 million and 0.50% of net assets in
        excess of $1 billion.  The Manager has agreed to  reimburse  the Fund if
        aggregate expenses (with specified exceptions) exceed the most stringent
        applicable  regulatory limit on Fund expenses.  Effective  September 20,
        1996, the Manager  discontinued  its voluntary  undertaking to reimburse
        Fund expenses to the level needed to maintain a stable dividend.

                        For the  year  ended  September  30,  1996,  commissions
        (sales  charges paid by  investors)  on sales of Class A shares  totaled
        $455,830,   of  which   $126,085   was   retained  by   OppenheimerFunds
        Distributor,  Inc.  (OFDI),  a  subsidiary  of the  Manager,  as general
        distributor, and by an affiliated broker/dealer.  Sales charges advanced
        to  broker/dealers  by OFDI on sales of the  Fund's  Class B and Class C
        shares  totaled  $1,115,490  and $77,326,  of which  $26,260 and $1,600,
        respectively, was paid to an affiliated broker/dealer. During the period
        ended  September  30, 1996,  OFDI  received  contingent  deferred  sales
        charges of $32,060 and $3,260, respectively,  upon redemption of Class B
        and Class C shares as reimbursement  for sales  commissions  advanced by
        OFDI at the time of sale of such shares.

                        OppenheimerFunds  Services  (OFS),  a  division  of  the
        Manager,  is the transfer and shareholder  servicing agent for the Fund,
        and for other  registered  investment  companies.  OFS's  total costs of
        providing such services are allocated ratably to these companies.

                        The Fund has  adopted a Service  Plan for Class A shares
        to reimburse OFDI for a portion of its costs incurred in connection with
        the  personal  service and  maintenance  of  accounts  that hold Class A
        shares.  Reimbursement  is made quarterly at an annual rate that may not
        exceed  0.25% of the average  annual net assets of Class A shares of the
        Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and
        other financial  institutions  quarterly for providing  personal service
        and maintenance of accounts of their customers that hold Class A shares.
        During  the year  ended  September  30,  1996,  OFDI  paid  $2,532 to an
        affiliated  broker/dealer as reimbursement  for Class A personal service
        and maintenance expenses.

                        The Fund has adopted  compensation type Distribution and
        Service Plans for Class B and Class C shares to compensate  OFDI for its
        services  and  costs in  distributing  Class B and  Class C  shares  and
        servicing  accounts.  Under  the  Plans,  the Fund  pays  OFDI an annual
        asset-based  sales  charge  of 0.75%  per year on Class B shares  and on
        Class C shares, as compensation for sales commissions paid from its own
        resources at the time of sale and  associated  financing  costs.  If the
        Plans are  terminated  by the Fund,  the Board of Trustees may allow the
        Fund to continue  payments of the  asset-based  sales charge to OFDI for
        certain expenses it incurred before the Plans were terminated. OFDI also
        receives  a  service  fee of 0.25%  per year as  compensation  for costs
        incurred in  connection  with the personal  service and  maintenance  of
        accounts  that  hold  shares  of the  Fund,  including  amounts  paid to
        brokers, dealers, banks and other financial institutions.  Both fees are
        computed on the average annual net assets of Class B and Class C shares,
        determined as of the close of each regular business day. During the year
        ended   September  30,  1996,   OFDI  retained   $168,499  and  $36,849,
        respectively,  as compensation for Class B and Class C sales commissions
        and service fee advances,  as well as financing  costs. At September 30,
        1996, OFDI had incurred  unreimbursed expenses of $1,331,917 for Class B
        and $119,763 for Class C.

Oppenheimer International Bond Fund
<PAGE>   

==============================================================================
5. FORWARD CONTRACTS

        A forward foreign currency  exchange  contract  (forward  contract) is a
        commitment to purchase or sell a foreign currency at a future date, at a
        negotiated rate.

                        The  Fund  uses  forward  contracts  to seek  to  manage
        foreign  currency  risks.  They  may  also be used to  tactically  shift
        portfolio   currency  risk.  The  Fund  generally  enters  into  forward
        contracts as a hedge upon the purchase or sale of a security denominated
        in a  foreign  currency.  In  addition,  the Fund may  enter  into  such
        contracts as a hedge against changes in foreign currency  exchange rates
        on portfolio positions.

                        Forward contracts are valued based on the closing prices
        of the forward  currency  contract rates in the London foreign  exchange
        markets on a daily basis as provided by a reliable  bank or dealer.  The
        Fund will realize a gain or loss upon the closing or  settlement  of the
        forward transaction.

                        Securities  held in  designated  accounts  to cover  net
        exposure on outstanding  forward contracts are noted in the Statement of
        Investments where applicable. Unrealized appreciation or depreciation on
        forward   contracts   is  reported  in  the   Statement  of  Assets  and
        Liabilities.  Realized  gains and  losses  are  reported  with all other
        foreign currency gains and losses in the Fund's Statement of Operations.

                        Risks   include   the   potential   inability   of   the
        counterparty  to  meet  the  terms  of the  contract  and  unanticipated
        movements in the value of a foreign currency relative to the U.S.
        dollar.

        At September 30, 1996,  the Fund had  outstanding  forward  contracts to
        purchase and sell foreign currencies as follows:

<TABLE>
<CAPTION>
                                                            CONTRACT AMOUNT       VALUATION AS OF      UNREALIZED      UNREALIZED
        CONTRACTS TO PURCHASE          EXPIRATION DATE      (000S)                SEPTEMBER 30, 1996   APPRECIATION    DEPRECIATION
        ---------------------------------------------------------------------------------------------------------------------------
        <S>                            <C>                  <C>                 <C>                   <C>                <C>
        Danish Krone (DKK)             10/2/96                 5,511 DKK          $  941,077            $    --              $1,212
        Italian Lira (ITL)             10/1/96                 3,854 ITL               2,532                  6                  --
        Japanese Yen (JPY)             10/2/96                60,030 JPY             538,990                 --               7,532
                                                                                  ----------            -------              ------
                                                                                  $1,482,599                  6               8,744
                                                                                  ==========            -------              ------

        Contracts to Sell
        ---------------------------------------------------------------------------------------------------------------------------
        Finnish Markka (FIM)           10/2/96--12/2/96       16,245 FIM          $3,562,197            $14,083              $   --
        Japanese Yen (JPY)             10/28/96               28,000 JPY             252,068              8,334                  --
        Swedish Krona (SEK)            11/1/96                 9,260 SEK           1,397,244              4,640                  --
        Swiss Franc (CHF)              1/3/97                  1,630 CHF           1,313,111                547                  --
                                                                                  ----------            -------              ------
                                                                                  $6,524,620             27,604                  --
                                                                                  ==========            -------              ------
        Total Unrealized Appreciation and Depreciation                                                  $27,610              $8,744
                                                                                                        =======              ======
</TABLE>



Oppenheimer International Bond Fund
<PAGE>   
NOTES TO FINANCIAL STATEMENTS   (Continued)

==============================================================================
6. OPTION ACTIVITY

        The Fund may buy and sell put and call options, or write put and covered
        call options on  portfolio  securities  in order to produce  incremental
        earnings  or  protect   against   changes  in  the  value  of  portfolio
        securities.

                        The Fund  generally  purchases  put  options  or  writes
        covered call options to hedge against adverse  movements in the value of
        portfolio  holdings.  When an option is  written,  the Fund  receives  a
        premium  and  becomes  obligated  to sell  or  purchase  the  underlying
        security at a fixed price, upon exercise of the option.

                        Options are valued  daily based upon the last sale price
        on the principal  exchange on which the option is traded and  unrealized
        appreciation or  depreciation is recorded.  The Fund will realize a gain
        or loss upon the expiration or closing of the option  transaction.  When
        an option is exercised, the proceeds on sales for a written call option,
        the purchase cost for a written put option,  or the cost of the security
        for a purchased  put or call option is adjusted by the amount of premium
        received or paid.

                        Securities  designated to cover outstanding call options
        are noted in the  Statement  of  Investments  where  applicable.  Shares
        subject to call,  expiration date, exercise price,  premium received and
        market value are detailed in a footnote to the Statement of Investments.
        Options  written are reported as a liability in the  Statement of Assets
        and  Liabilities.  Gains and losses are  reported  in the  Statement  of
        Operations.

                        The risk in writing a call option is that the Fund gives
        up the  opportunity  for  profit  if the  market  price of the  security
        increases and the option is exercised.  The risk in writing a put option
        is that the Fund may incur a loss if the  market  price of the  security
        decreases and the option is  exercised.  The risk in buying an option is
        that the Fund pays a premium whether or not the option is exercised. The
        Fund  also has the  additional  risk of not being  able to enter  into a
        closing transaction if a liquid secondary market does not exist.

        Written  option  activity for the year ended  September  30, 1996 was as
        follows:


<TABLE>
<CAPTION>
                                                 CALL OPTIONS                                 PUT OPTIONS
                                                 ---------------------------------            -------------------------
                                                 NUMBER OF               AMOUNT OF            NUMBER OF       AMOUNT OF
                                                 OPTIONS                 PREMIUMS             OPTIONS         PREMIUMS
        ---------------------------------------------------------------------------------------------------------------
        <S>                                        <C>                  <C>                    <C>            <C>

        Options outstanding at
        September 30, 1995                                 245          $    1,350                 --         $      --
        Options written                             13,149,735             200,591              1,575            54,483
        Options closed or expired                  (12,635,736)           (124,987)            (1,575)          (54,483)
        Options exercised                             (503,344)             (4,134)                --                --
                                                   -----------          ----------            -------         ---------
        Options outstanding at
        September 30, 1996                              10,900          $   72,820                 --         $      --
                                                   ===========          ==========            =======         =========
</TABLE>




==============================================================================
7. ILLIQUID AND RESTRICTED
   SECURITIES

        At September 30, 1996,  investments in securities  included  issues that
        are illiquid or restricted. Restricted securities are often purchased in
        private placement transactions,  are not registered under the Securities
        Act of 1933, may have contractual restrictions on resale, and are valued
        under  methods  approved  by the Board of Trustees  as  reflecting  fair
        value.   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 10% of
        its net assets  (determined  at the time of purchase and  reviewed  from
        time to time) in illiquid or restricted  securities.  Certain restricted
        securities,  eligible for resale to qualified  institutional  investors,
        are not  subject to that  limit.  The  aggregate  value of  illiquid  or
        restricted  securities  subject to this limitation at September 30, 1996
        was $4,969,037, which represents 4.62% of the Fund's net assets.

 Oppenheimer International Bond Fund
<PAGE>   
                                   Appendix A


                       Corporate Industry Classifications


Aerospace/Defense  
Air Transportation  
Auto Parts Distribution  
Automotive 
Bank Holding Companies 
Banks 
Beverages 
Broadcasting 
Broker-Dealers 
Building Materials
Cable Television   
Chemicals  
Commercial Finance  
Computer Hardware  
Computer Software 
Conglomerates 
Consumer Finance
Containers 
Convenience Stores
Department Stores  
Diversified  Financial  
Diversified  Media 
Drug Stores
Drug  Wholesalers
Durable  Household  Goods  
Education  
Electric  
Utilities  
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
<PAGE>

Food
Gas Transmission
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services 
Homebuilders/Real Estate 
Hotel/Gaming 
Industrial Services  
Insurance  
Leasing &  Factoring  
Leisure  
Manufacturing  
Metals/Mining
Nondurable Household Goods 
Oil - Integrated 
Paper 
Publishing/Printing  
Railroads
Restaurants  
Savings  &  Loans  
Shipping 
Special  Purpose  Financial  
Specialty Retailing 
Steel 
Supermarkets 
Telecommunications - Technology
Telephone - Utility
Textile/Apparel 
Tobacco 
Toys 
Trucking

                                                        A-1

<PAGE>

   
Investment Adviser
         OppenheimerFunds, Inc.
         Two World Trade Center
         New York, New York 10048-0203

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

Transfer and Shareholder Servicing  Agent
         OppenheimerFunds Services
         P.O. Box 5270
         Denver, Colorado 80217
         1-800-525-7048
    
Custodian of Portfolio Securities
         The Bank of New York
         One Wall Street
         New York, New York 10015

Independent Auditors
         Deloitte & Touche LLP
         555 Seventeenth Street
         Denver, Colorado 80202

Legal Counsel
         Myer, Swanson, Adams & Wolf, P.C.
         1600 Broadway
         Denver, Colorado 80202


<PAGE>






                       OPPENHEIMER INTERNATIONAL BOND FUND

                                    FORM N-1A

                                     PART C

                                OTHER INFORMATION


Item 24.          Financial Statements and Exhibits
- --------          ---------------------------------
         (a)      Financial Statements:

   
                  (1)      Financial Highlights (See Parts A and B): Filed
                           herewith.
    

                  (2)      Report of Independent Auditors (See Part B): Filed
                           herewith.

                  (3)      Statement of Investments (See Part B): Filed
                           herewith.

                  (4)      Statement of Assets and Liabilities (See Part B):
                           Filed herewith.

                  (5)      Statement of Operations (See Part B): Filed
                           herewith.

                  (6)      Statement of Changes in Net Assets (See Part B):
                           Filed herewith.

                  (7)      Notes to Financial Statements (See Part B): Filed
                           herewith.

         (b)      Exhibits:

                  (1)      (i)      Registrant's Declaration of Trust dated
                           2/28/95: Previously filed with Registrant's
                           Registration Statement, 3/3/95, and incorporated
                           herein by reference.

                           (ii) Amended and Restated  Declaration of Trust dated
                           5/16/95:  Previously  filed  with  Registrant's  Pre-
                           Effective Amendment No. 1, 5/16/95,  and incorporated
                           herein by reference.

                                                        C-1

<PAGE>



                  (2)      By-Laws dated 2/28/95: Previously filed with
                           Registrant's Pre-Effective Amendment No. 1, 5/16/95,
                           and incorporated herein by reference.

                  (3)      Not applicable.
   
                  (4)      (i)      Specimen Class A Share Certificate: Filed
                           herewith.

                           (ii)     Specimen Class B Share Certificate: Filed
                           herewith.

                           (iii)Specimen Class C Share Certificate: Filed
                           herewith.
    
                  (5)      Form of Investment Advisory Agreement: Previously
                           filed with Registrant's Pre-Effective Amendment No.
                           1, 5/16/95, and incorporated herein by reference.

                  (6)      (i)      Form of General Distributor's Agreement:
                           Previously filed with Registrant's Pre-Effective
                           Amendment No. 1, 5/16/95, and incorporated herein by
                           reference.

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

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

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

                           (v)      Broker Agreement between Oppenheimer Fund
                           Management, Inc. and Newbridge Securities, Inc.
                           dated October 1, 1986: Previously filed with Post-
                           Effective Amendment No. 25 to the Registration
                           Statement of Oppenheimer Growth Fund (Reg. No. 2-
                           45272), 11/1/86, and refiled with Post-Effective
                           Amendment No. 45 of Oppenheimer Growth Fund (Reg.
                           No. 2-45272), 8/22/94 pursuant to Item 102 of
                           Regulation S-T and incorporated herein by reference.

                  (7)      Not applicable.

                  (8)      Form of Custodian Agreement between Registrant and
                           The Bank of New York: Previously filed with
                           Registrant's Registration Statement, 3/3/95, and
                           incorporated herein by reference.

                  (9)      Not applicable.

                  (10)     Opinion and Consent of Counsel: Previously filed
                           with Registrant's Pre-Effective Amendment No. 2,
                           5/30/95, and incorporated herein by reference.

                  (11)     Independent Auditors' Consent: Filed herewith.

                  (12)     Not applicable.

                  (13)     Investment Letter from Oppenheimer Management
                           Corporation to Registrant: Previously filed with
                           Registrant's Pre-Effective Amendment No. 2, 5/30/95,
                           and incorporated herein by reference.

                  (14)     (i)      Form of prototype Standardized and Non-
                           Standardized Profit-Sharing Plans and Money Purchase
                           Plans for self-employed persons and corporations:
                           Filed with Post-Effective Amendment No. 3 to the
                           Registration Statement of Oppenheimer Global Growth
                           & Income Fund (Reg. No. 33-23799), 1/31/92, and
                           refiled with Post-Effective Amendment No. 7 to the
                           Registration Statement of Oppenheimer Global Growth
                           & Income Fund (Reg. No. 33-23799), 12/1/94, pursuant
                           to Item 102 of Regulation S-T, and incorporated
                           herein by reference.

                           (ii)     Form of Individual Retirement Account Trust
                           Agreement: Previously filed with Post-Effective
                           Amendment No. 21 to the Registration Statement of
                           Oppenheimer U.S. Government Trust (Reg. No. 2-
                           76645), 8/25/93 and incorporated herein by
                           reference.

                           (iii)Form of Tax Sheltered Retirement Plan and
                           Custody Agreement for employees of public schools
                           and tax-exempt organizations: Previously filed with
                           Post-Effective Amendment No. 47 to the Registration
                           Statement of Oppenheimer Growth Fund (Reg. No. 2-
                           45272), 10/21/94, and incorporated herein by
                           reference.

                           (iv)     Form of Simplified Employee Pension IRA:
                           Previously filed with Post-Effective Amendment No.
                           42 to the Registration Statement of Oppenheimer
                           Equity Income Fund (Reg. No. 2-33043), 10/28/94, and
                           incorporated herein by reference.

                           (v)      Form of Prototype 401(k) Plan:  Previously
                           filed with Post-Effective Amendment No. 7 to the
                           Registration Statement of Oppenheimer Strategic
                           Income & Growth Fund (Reg. No. 33-47378), 9/28/95,
                           and incorporated herein by reference.

                  (15)     (i) Form of Service  Plan and  Agreement  for Class A
                           shares  under  Rule  12b-1:   Previously  filed  with
                           Registrant's  Registration  Statement,   3/3/95,  and
                           incorporated herein by reference.

                           (ii)     Form of Distribution and Service Plan and
                           Agreement for Class B shares under Rule 12b-1:
                           Previously filed with Registrant's Pre-Effective
                           Amendment No. 1, 5/16/95, and incorporated herein by
                           reference.

                           (iii)Form of Distribution and Service Plan and
                           Agreement for Class C shares under Rule 12b-1:
                           Previously filed with Registrant's Pre-Effective
                           Amendment No. 1, 5/16/95, and incorporated herein by
                           reference.

                  (16)     Performance Data Computation Schedule: Filed
                           herewith.
   
                  (17)     (i)   Financial Data Schedule for Class A shares for
                           the six-month period ended 9/30/96:  Filed herwith.

                                                            
                                      C-2

<PAGE>

   

                           (ii)  Financial Data Schedule for Class B shares for
                           the six-month period ended 9/30/96:  Filed herwith.

                           (iii)Financial Data Schedule for Class C shares for
                           the six-month period ended 9/30/96:  Filed herewith.
    
                  (18)     Oppenheimer Funds Multiple Class Plan under Rule
                           18f-3 dated 10/24/95:  Previously filed with Post-
                           Effective Amendment No. 12 to the Registration
                           Statement of Oppenheimer California Tax-Exempt Fund
                           (Reg. No. 33-23566), 11/1/95, and incorporated
                           herein by reference.

   
                  ---      Powers of Attorney: For Sam Freeman, Trustee:
                           Filed Herewith.  For all other Trustees, their 
                           respective Powers of Attorney were previously filed 
                           with Registrant's Registration Statement, 3/3/95, 
                           and are incorporated herein by reference.
    

Item 25.          Persons Controlled by or Under Common Control with
- --------          --------------------------------------------------------
                  Registrant
                  ----------
                  None

Item 26.          Number of Holders of Securities
- --------          -------------------------------

   
                                                          Number of Record
                                                          Holders as of
         Title of Class                                   December 31, 1996
         --------------                                   --------------------

         Class A Shares of Beneficial Interest            3,703
         Class B Shares of Beneficial Interest            3,410
         Class C Shares of Beneficial Interest              574
    

Item 27.          Indemnification
- --------          ---------------

         Reference is made to the provisions of Article  Seventh of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration Statement.

         Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and

                                                        C-3

<PAGE>



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

Item 28.          Business and Other Connections of Investment Adviser
- --------          ----------------------------------------------------

   
        (a) OppenheimerFunds, Inc. is the investment adviser of the Registrant;
it and certain  subsidiaries  and  affiliates  act in the same capacity to other
registered  investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.

         (b)  There is set forth  below  information  as to any other  business,
profession, vocation or employment of a substantial nature in which each officer
and  director of  OppenheimerFunds,  Inc. is, or at any time during the past two
fiscal  years has been,  engaged for  his/her own account or in the  capacity of
director, officer, employee, partner or trustee.
    
<TABLE>
<CAPTION>
   
Name & Current Position                                           Other Business and Connections with
OppenheimerFunds, Inc.                                            During the Past Two Years
- ---------------------------                                       --------------------------------------
<S>                                                                <C>
Mark J.P. Anson,
Vice President                                                    Vice President of Oppenheimer Real
                                                                  Asset Management, Inc. ("ORAMI");
                                                                  formerly Vice President of Equity
                                                                  Derivatives at Salomon Brothers, Inc.

Peter M. Antos,
Senior Vice President                                             An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds; a Chartered
                                                                  Financial Analyst; Senior Vice

                                       C-4

<PAGE>



                                                                  President of HarbourView; prior to
                                                                  March, 1996 he was the senior equity
                                                                  portfolio manager for the Panorama
                                                                  Series Fund, Inc. (the "Company") and
                                                                  other mutual funds and pension funds
                                                                  managed by G.R. Phelps & Co. Inc.
                                                                  ("G.R. Phelps"), the Company's former
                                                                  investment adviser, which was a
                                                                  subsidiary of Connecticut Mutual Life
                                                                  Insurance Company; was also responsible
                                                                  for managing the common stock
                                                                  department and common stock investments
                                                                  of Connecticut Mutual Life Insurance
                                                                  Co.

Lawrence Apolito,
Vice President                                                    None.

Victor Babin,
Senior Vice President                                             None.

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

Ellen Batt,
Assistant Vice President                                          None

Kathleen Beichert,
Assistant Vice President                                          Formerly employed by Smith Barney, Inc.

David Bernard,
Vice President                                                    Previously a Regional Sales Director
                                                                  for Retirement Plan Services at Charles
                                                                  Schwab & Co., Inc.
Robert J. Bishop,
Vice President                                                    Assistant Treasurer of the Oppenheimer
                                                                  Funds (listed below); previously a Fund
                                                                  Controller for OppenheimerFunds, Inc.
                                                                  (the "Manager").


                                       C-5

<PAGE>



George Bowen,
Senior Vice President & Treasurer                                 Treasurer of the New York-based
                                                                  Oppenheimer Funds; Vice President,
                                                                  Assistant Secretary and Treasurer of
                                                                  the Denver-based Oppenheimer Funds.
                                                                  Vice President and Treasurer of
                                                                  OppenheimerFunds Distributor, Inc. (the
                                                                  "Distributor") and HarbourView Asset
                                                                  Management Corporation ("HarbourView"),
                                                                  an investment adviser subsidiary of the
                                                                  Manager; Senior Vice President,
                                                                  Treasurer, Assistant Secretary and a
                                                                  director of Centennial Asset Management
                                                                  Corporation ("Centennial"), an
                                                                  investment adviser subsidiary of the
                                                                  Manager; Vice President, Treasurer and
                                                                  Secretary of Shareholder Services, Inc.
                                                                  ("SSI") and Shareholder Financial
                                                                  Services, Inc. ("SFSI"), transfer agent
                                                                  subsidiaries of the Manager; Director,
                                                                  Treasurer and Chief Executive Officer
                                                                  of MultiSource Services, Inc.; Vice
                                                                  President and Treasurer of Oppenheimer
                                                                  Real Asset Management, Inc.; President,
                                                                  Treasurer and Director of Centennial
                                                                  Capital Corporation; Vice President and
                                                                  Treasurer of Main Street Advisers.

Scott Brooks,
Assistant Vice President                                          None.

Susan Burton,
Assistant Vice President                                          Previously a Director of Educational
                                                                  Services for H.D. Vest Investment
                                                                  Securities, Inc.

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

Ruxandra Chivu,
Assistant Vice President                                          None.


                                       C-6

<PAGE>



O. Leonard Darling,
Executive Vice President                                          Formerly Co-Director of Fixed Income
                                                                  for State Street Research & Management
                                       Co.

Robert A. Densen,
Senior Vice President                                             None.

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

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

Andrew J. Donohue,
Executive Vice President,
General Counsel and Director                                      Secretary of the New York-based
                                                                  Oppenheimer Funds; Vice President and
                                                                  Secretary of the Denver-based
                                                                  Oppenheimer Funds; Secretary of the
                                                                  Oppenheimer Quest and Oppenheimer
                                                                  Rochester Funds; Executive Vice
                                                                  President, Director and General Counsel
                                                                  of the Distributor; President and a
                                                                  Director of Centennial; Chief Legal
                                                                  Officer and a Director of MultiSource
                                                                  Services, Inc.; President and a
                                                                  Director of Oppenheimer Real Asset
                                                                  Management, Inc.; Executive Vice
                                                                  President, General Counsel and Director
                                                                  of SFSI and SSI; formerly Senior Vice
                                                                  President and Associate General Counsel
                                                                  of the Manager and the Distributor.

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

Scott Farrar,
Vice President                                                    Assistant Treasurer of the New York-
                                                                  based and Denver-based Oppenheimer
                                                                  funds.

                                       C-7

<PAGE>



Katherine P. Feld,
Vice President and Secretary                                      Vice President and Secretary of
                                                                  OppenheimerFunds Distributor, Inc.;
                                                                  Secretary of HarbourView Asset
                                                                  Management Corporation, MultiSource
                                                                  Services, Inc. and Centennial Asset
                                                                  Management Corporation; Secretary, Vice
                                                                  President and Director of Centennial
                                                                  Capital Corporation; Vice President and
                                                                  Secretary of ORAMI.

Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division                                                An officer, Director and/or portfolio
                                                                  manager of certain Oppenheimer funds.
                                                                  Formerly Chairman of the Board and
                                                                  Director of Rochester Fund
                                                                  Distributors, Inc. ("RFD"), President
                                                                  and Director of Fielding Management
                                                                  Company, Inc. ("FMC"), President and
                                                                  Director of Rochester Capital Advisors,
                                                                  Inc. ("RCAI"), Managing Partner of
                                                                  Rochester Capital Advisors, L.P.,
                                                                  President and Director of Rochester
                                                                  Fund Services, Inc. ("RFS"), President
                                                                  and Director of Rochester Tax Managed
                                                                  Fund, Inc.
John Fortuna,
Vice President                                                    None.

Jon S. Fossel,
Chairman of the Board                                             Director of OAC, the Manager's parent
                                                                  holding company; President, CEO and a
                                                                  director of HarbourView; a director of
                                                                  SSI and SFSI; President, Director,
                                                                  Trustee, and Managing General Partner
                                                                  of the Denver-based Oppenheimer Funds;
                                                                  President and Chairman of the Board of
                                                                  Main Street Advisers, Inc.; formerly
                                                                  Chief Executive Officer of the Manager.



                                       C-8

<PAGE>



Patricia Foster,
Vice President                                                    Formerly she held the following
                                                                  positions:  An officer of certain
                                                                  Oppenheimer funds; Secretary and
                                                                  General Counsel of Rochester Capital
                                                                  Advisors, L.P. and Secretary of
                                                                  Rochester Tax Managed Fund, Inc.

Robert G. Galli,
Vice Chairman                                                     Trustee of the New York-based
                                                                  Oppenheimer Funds; Vice President and
                                                                  Counsel of OAC; formerly he held the
                                                                  following positions: Vice President and
                                                                  a director of HarbourView and
                                                                  Centennial, a director of SFSI and SSI,
                                                                  an officer of other Oppenheimer Funds.

Linda Gardner,
Assistant Vice President                                          None.

Janelle Gellermann,
Assistant Vice President                                          None.

Jill Glazerman,
Assistant Vice President                                          None.

Ginger Gonzalez,
Vice President, Director of
Marketing Communications                                          Formerly 1st Vice President/Director of
                                                                  Graphic and Print Communications for
                                                                  Shearson Lehman Brothers.

Mildred Gottlieb,
Assistant Vice President                                          Formerly served as a Strategy
                                                                  Consultant for the Private Client
                                                                  Division of Merrill Lynch.

Caryn Halbrecht,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds;
                                                                  formerly  Vice
                                                                  President   of
                                                                  Fixed   Income
                                                                  Portfolio
                                                                  Management  at
                                                                  Bankers Trust.


                                       C-9

<PAGE>



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


Dorothy Hirshman,
Assistant Vice President                                          None.

Alan Hoden,
Vice President                                                    None.

Merryl Hoffman,
Vice President                                                    None.


Scott T. Huebl,
Assistant Vice President                                          None.

Richard Hymes,
Assistant Vice President                                          None.

Jane Ingalls,
Assistant Vice President                                          Formerly a Senior Associate with
                                                                  Robinson, Lake/Sawyer Miller.

Ronald Jamison,
Vice President                                                    Formerly Vice President and Associate
                                                                  General Counsel at
                                                                  Prudential Securities, Inc.

Frank Jennings,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.
                                                                  Formerly     a
                                                                  Managing
                                                                  Director    of
                                                                  Global
                                                                  Equities    at
                                                                  Paine Webber's
                                                                  Mitchell
                                                                  Hutchins
                                                                  division.

Heidi Kagan,
Assistant Vice President                                          None.

Thomas W. Keffer,

                                      C-10

<PAGE>



Vice President                                                    Formerly Senior Managing Director of
                                                                  Van Eck Global.

Avram Kornberg,
Vice President                                                    Formerly a Vice President with Bankers
                                                                  Trust.

Paul LaRocco,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds. Formerly a
                                                                  Securities Analyst for Columbus Circle
                                                                  Investors.

Michael Levine,
Assistant Vice President                                          None.

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

Mitchell J. Lindauer,
Vice President                                                    None.

Loretta McCarthy,
Executive Vice President                                          None.

Bridget Macaskill,
President, Chief Executive Officer
and Director                                                      President, Director and Trustee of the
                                                                  New York-based and the Denver-based
                                                                  Oppenheimer funds; President and a
                                                                  Director of OAC, HarbourView and
                                                                  Oppenheimer Partnership Holdings, Inc.;
                                                                  Director of ORAMI; Chairman and
                                                                  Director of SSI; a Director of
                                                                  Oppenheimer Real Asset Management, Inc.

                                      C-11

<PAGE>



Timothy Martin,
Assistant Vice President                                          Formerly Vice President, Mortgage
                                                                  Trading, at S.N. Phelps & Co.,Salomon
                                                                  Brothers, and Kidder Peabody.

Sally Marzouk,
Vice President                                                    None.

Lisa Migan,
Assistant Vice President,                                         None.

Robert J. Milnamow,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds. Formerly a
                                                                  Portfolio Manager with Phoenix
                                                                  Securities Group.

Denis R. Molleur,
Vice President                                                    None.

Kenneth Nadler,
Vice President                                                    None.

David Negri,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

Barbara Niederbrach,
Assistant Vice President                                          None.

Robert A. Nowaczyk,
Vice President                                                    None.

Robert E. Patterson,
Senior                                                            Vice President
                                                                  An     officer
                                                                  and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

John Pirie,
Assistant Vice President                                          Formerly a Vice President with Cohane
                                                                  Rafferty Securities, Inc.

Tilghman G. Pitts III,
Executive Vice President                                          Chairman and Director of the
                                                                  Distributor.

                                      C-12

<PAGE>




Jane Putnam,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.
                                                                  Formerly
                                                                  Senior
                                                                  Investment
                                                                  Officer    and
                                                                  Portfolio
                                                                  Manager   with
                                                                  Chemical Bank.

Russell Read,
Vice President                                                    Consultant for Prudential Insurance on
                                                                  behalf of the General Motors Pension
                                                                  Plan.

Thomas Reedy,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds. Formerly a
                                                                  Securities Analyst for the Manager.

David Robertson,
Vice President                                                    None.

Adam Rochlin,
Vice President                                                    Formerly a Product Manager for
                                                                  Metropolitan Life Insurance Company.

Michael S. Rosen
Vice President; President:
Rochester Division                                                An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds. Formerly
                                                                  Vice President of RFS, President and
                                                                  Director of RFD, Vice President and
                                                                  Director of FMC, Vice President and
                                                                  director of RCAI, General Partner of
                                                                  RCA, an officer and/or portfolio
                                                                  manager of certain Oppenheimer funds.

David Rosenberg,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

Richard H. Rubinstein,
Senior                                                            Vice President
                                                                  An     officer
                                                                  and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds;
                                                                  formerly  Vice
                                                                  President  and
                                                                  Portfolio
                                                                  Manager/Security
                                                                  Analyst    for
                                                                  Oppenheimer
                                                                  Capital Corp.,
                                                                  an

                                      C-13

<PAGE>



                                                                  investment adviser.

Lawrence Rudnick,
Assistant Vice President                                          Formerly Vice President of Dollar Dry
                                                                  Dock Bank.

James Ruff,
Executive Vice President                                          None.

Ellen Schoenfeld,
Assistant Vice President                                          None.

Stephanie Seminara,
Vice President                                                    Formerly Vice President of Citicorp
                                                                  Investment Services.

Diane Sobin,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds;
                                                                  formerly     a
                                                                  Vice President
                                                                  and     Senior
                                                                  Portfolio
                                                                  Manager    for
                                                                  Dean    Witter
                                                                  InterCapital,
                                      Inc.

Richard A. Soper,
Assistant Vice President                                          None.

Nancy Sperte,
Executive Vice President                                          None.

Donald W. Spiro,
Chairman                                                          Emeritus  Vice
                                                                  Chairman   and
                                                                  Trustee of the
                                                                  New York-based
                                                                  Oppenheimer
                                                                  Funds;
                                                                  formerly
                                                                  Chairman    of
                                                                  the    Manager
                                                                  and        the
                                                                  Distributor.

Arthur Steinmetz,
Senior                                                            Vice President
                                                                  An     officer
                                                                  and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

Ralph Stellmacher,
Senior                                                            Vice President
                                                                  An     officer
                                                                  and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.


                                      C-14

<PAGE>



John Stoma,
Senior Vice President,
Director Retirement Plans                                         Formerly Vice President of U.S. Group
                                                                  Pension Strategy and Marketing for
                                                                  Manulife Financial.

Michael C. Strathearn,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds; a Chartered
                                                                  Financial Analyst; a Vice President of
                                                                  HarbourView; prior to March, 1996 he
                                                                  was an equity portfolio manager for
                                                                  Panorama Series Fund, Inc. and other
                                                                  mutual funds and pension accounts
                                                                  managed by G.R. Phelps.

James C. Swain,
Vice Chairman of the Board                                        Chairman, CEO and Trustee, Director or
                                                                  Managing Partner of the Denver-based
                                                                  Oppenheimer Funds; President and a
                                                                  Director
                                                                  of Centennial; formerly President and
                                                                  Director of OAMC, and Chairman of the
                                                                  Board of SSI.

James Tobin,
Vice President                                                    None.

Jay Tracey,
Vice President                                                    Vice President of the Manager; Vice
                                                                  President and Portfolio Manager of
                                                                  Oppenheimer Discovery Fund, Oppenheimer
                                                                  Global Emerging Growth Fund and
                                                                  Oppenheimer Enterprise Fund.  Formerly
                                                                  Managing Director of Buckingham Capital
                                                                  Management.

Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer                                 Assistant Treasurer of the Distributor
                                                                  and SFSI.

Ashwin Vasan,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

                                      C-15

<PAGE>



Valerie Victorson,
Vice President                                                    None.

Dorothy Warmack,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds.

Jerry A. Webman,
Senior                                                            Vice President
                                                                  Director    of
                                                                  New York-based
                                                                  tax-exempt
                                                                  fixed   income
                                                                  Oppenheimer
                                                                  Funds;
                                                                  Formerly
                                                                  Managing
                                                                  Director   and
                                                                  Chief    Fixed
                                                                  Income
                                                                  Strategist  at
                                                                  Prudential
                                                                  Mutual Funds.

Christine Wells,
Vice President                                                    None.

Kenneth B. White,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds; a Chartered
                                                                  Financial Analyst; Vice President of
                                                                  HarbourView; prior to March, 1996 he
                                                                  was an equity portfolio manager for
                                                                  Panorama Series Fund, Inc. and other
                                                                  mutual funds and pension funds managed
                                                                  by G.R. Phelps.

William L. Wilby,
Senior                                                            Vice President
                                                                  An     officer
                                                                  and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds;    Vice
                                                                  President   of
                                                                  HarbourView.

Carol Wolf,
Vice President                                                    An officer and/or portfolio manager of
                                                                  certain Oppenheimer funds; Vice
                                                                  President of Centennial; Vice
                                                                  President, Finance and Accounting and
                                                                  member of the Board of Directors of the
                                                                  Junior League of Denver, Inc.


                                      C-16

<PAGE>



Robert G. Zack,
Senior Vice President and
Assistant                                                         Secretary
                                                                  Associate
                                                                  General
                                                                  Counsel of the
                                                                  Manager;
                                                                  Assistant
                                                                  Secretary   of
                                                                  the
                                                                  Oppenheimer
                                                                  Funds;
                                                                  Assistant
                                                                  Secretary   of
                                                                  SSI,  SFSI; an
                                                                  officer     of
                                                                  other
                                                                  Oppenheimer
                                                                  Funds.

Arthur J. Zimmer,
Vice                                                              President   An
                                                                  officer and/or
                                                                  portfolio
                                                                  manager     of
                                                                  certain
                                                                  Oppenheimer
                                                                  funds;    Vice
                                                                  President   of
                                                                  Centennial.
    
</TABLE>

   
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Quest/Rochester
Oppenheimer Funds, set forth below:


New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset  Allocation  Fund  
Oppenheimer California   Municipal  Fund
Oppenheimer Capital  Appreciation  Fund  
Oppenheimer Developing  Markets  Fund
Oppenheimer Discovery  Fund  
Oppenheimer Enterprise  Fund  
Oppenheimer Fund
Oppenheimer Global Emerging  Growth Fund  
Oppenheimer Global Fund 
Oppenheimer Global Growth & Income Fund 
Oppenheimer Gold & Special Minerals Fund 
Oppenheimer Growth Fund 
Oppenheimer International Growth Fund 
Oppenheimer Money Market Fund, Inc.  
Oppenheimer Multi-Sector Income Trust 
Oppenheimer Multi-State  Municipal Trust  
Oppenheimer Municipal  Bond Fund  
Oppenheimer New York  Municipal  Fund
Oppenheimer Series Fund, Inc.  
Oppenheimer U.S.  Government  Trust 
Oppenheimer World Bond Fund
    

Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust

                                                       C-17

<PAGE>



   
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.

Quest/Rochester Funds
- ---------------------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer Quest for Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals

    The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer funds, Quest funds, OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.

     The address of the Denver-based  Oppenheimer funds,  Shareholder  Financial
Services,   Inc.,  Shareholder  Services,   Inc.,   OppenheimerFunds   Services,
Centennial  Asset  Management   Corporation,   Centennial   Capital  Corp.,  and
Oppenheimer  Real Asset  Management,  Inc. is 6803 South Tucson Way,  Englewood,
Colorado 80112 .

     The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
    


                                                       C-18

<PAGE>



   
     The address of Limited Term New York Municipal Fund,  Oppenheimer Bond Fund
For Growth and Rochester Fund Municipals is 350 Linden Oaks, Rochester, New York
14625-2807.
    

Item 29.          Principal Underwriter
- --------          ---------------------

   
         (a)      OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares.  It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
28(b) above.
    

         (b)      The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
   
                                                                                                     Positions and
Name & Principal                              Positions & Offices                                    Offices with
Business Address                              with Underwriter                                       Registrant
- ----------------                              -------------------                                    -------------
<S>                                           <C>                                                    <C>
George Clarence Bowen+                        Vice President & Treasurer                             Vice President and
                                                                                                     Treasurer of the
                                                                                                     NY-based
                                                                                                     Oppenheimer funds/
                                                                                                     Vice President,
                                                                                                     Secretary and
                                                                                                     Treasurer of the
                                                                                                     Denver-based Oppen-
                                                                                                     heimer funds


Julie Bowers                                  Vice President                                         None
21 Dreamwold Road
Scituate, MA 02066

Peter W. Brennan                              Vice President                                         None
1940 Cotswold Drive
Orlando, FL 32825

Maryann Bruce*                                Senior Vice President -                                None
                                              Director - Financial
                                              Institution Div.


                                      C-19

<PAGE>



Robert Coli                                   Vice President                                         None
12 White Tail Lane
Bedminster, NJ 07921

Ronald T. Collins                             Vice President                                         None
710-3 E. Ponce DeLeon Ave.
Decatur, GA  30030

Bill Coughlin                                 Vice President                                         None
3425 1/2 Irving Avenue So.
Minneapolis, MN  55408

Mary Crooks+                                  Senior Vice President                                  None

E. Drew Devereaux ++                          Assistant Vice President                               None

Andrew John Donohue*                          Executive Vice                                         Secretary of
                                              President, General                                     the New York-
                                              Counsel and Director                                   based Oppenheimer
                                                                                                     funds/Vice
                                                                                                     President of the
                                                                                                     Denver-based Oppen-
                                                                                                     heimer funds

Wendy H. Ehrlich                              Vice President                                         None
4 Craig Street
Jericho, NY 11753

Kent Elwell                                   Vice President                                         None
41 Craig Place
Cranford, NJ  07016

John Ewalt                                    Vice President                                         None
2301 Overview Dr. NE
Tacoma, WA 98422

Katherine P. Feld*                            Vice President & Secretary                             None

Mark Ferro                                    Vice President                                         None
43 Market Street
Breezy Point, NY 11697


                                      C-20

<PAGE>




Ronald H. Fielding++                          Vice President; Chairman:
                                              Rochester Division                                     None

Reed F. Finley                                Vice President -                                       None
320 E. Maple, Ste. 254                        Financial Institution Div.
Birmingham, MI  48009

Wendy Fishler*                                Vice President -                                       None
                                              Financial Institution Div.

Ronald R. Foster                              Senior Vice President                                  None
139 Avant Lane
Cincinnati, OH  45249

Patricia Gadecki                              Vice President                                         None
3906 Americana Drive
Tampa, FL  3334

Luiggino Galletto                             Vice President                                         None
10239 Rougemont Lane
Charlotte, NC 28277

Mark Giles                                    Vice President -                                       None
5506 Bryn Mawr                                Financial Institution Div.
Dallas, TX 75209

Ralph Grant*                                  Vice President/National                                None
                                              Sales Manager - Financial
                                              Institution Div.

Sharon Hamilton                               Vice President                                         None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277

Mark D. Johnson                               Vice President                                         None
7512 Cromwell Dr. Apt 1
Clayton, MO  63105

Michael Keogh*                                Vice President                                         None

Richard Klein                                 Vice President                                         None
4820 Fremont Avenue So.
Minneapolis, MN 55409


                                      C-21

<PAGE>



Ilene Kutno*                                  Vice President -                                       None
                                              Director - Regional Sales

Wayne A. LeBlang                              Senior Vice President -                                None
23 Fox Trail                                  Director Eastern Div.
Lincolnshire, IL 60069

Dawn Lind                                     Vice President -                                       None
7 Maize Court                                 Financial Institution Div.
Melville, NY 11747

James Loehle                                  Vice President                                         None
30 John Street
Cranford, NJ  07016

John McDonough                                Vice President                                         None
P.O. Box 760
50 Riverview Road
New Castle, NH  03854

Laura Mulhall*                                Senior Vice President -                                None
                                              Director of Key Accounts

Timothy G. Mulligan ++                        Vice President                                         None

Charles Murray                                Vice President                                         None
50 Deerwood Drive
Littleton, CO 80127

Wendy Murray                                  Vice President                                         None
114-B Larchmont Acres West
Larchmont, NY  10538

Joseph Norton                                 Vice President                                         None
2518 Fillmore Street
Apt. 1
San Francisco, CA  94115

Patrick Palmer                                Vice President                                         None
958 Blue Mountain Cr.
West Lake Village, CA 91362

Randall Payne                                 Vice President -                                       None
1307 Wandering Way Dr.                        Financial Institution Div.
Charlotte, NC 28226

                                      C-22

<PAGE>



Gayle Pereira                                 Vice President                                         None
2707 Via Arboleda
San Clemente, CA 92672

Charles K. Pettit                             Vice President                                         None
22 Fall Meadow Dr.
Pittsford, NY  14534

Bill Presutti                                 Vice President                                         None
1777 Larimer St. #807
Denver, CO  80202

Tilghman G. Pitts, III*                       Chairman & Director                                    None

Elaine Puleo*                                 Vice President -                                       None
                                              Financial Institution Div.,
                                              Director -
                                              Key Accounts

Minnie Ra                                     Vice President -                                       None
0895 Thirty-First Ave.                        Financial Institution Div.
Apt. 4
San Francisco, CA 94121

Michael Raso                                  Vice President                                         None
30 Hommocks Road
Apt. 30
Larchmont, NY  10538

John C. Reinhardt ++                          Vice President                                         None

Ian Robertson                                 Vice President                                         None
4204 Summit Way
Marietta, GA 30066

Michael S. Rosen++                            Vice President, President:
                                              Rochester Division                                     None

Kenneth Rosenson                              Vice President                                         None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN  46240

James Ruff*                                   President                                              None


                                      C-23

<PAGE>



Timothy Schoeffler                            Vice President                                         None
1717 Fox Hall Road
Washington, DC  20007

Michael Sciortino                             Vice President                                         None
3114 Hickory Run
Sugarland, TX  77479

Robert Shore                                  Vice President -                                       None
26 Baroness Lane                              Financial Institution Div.
Laguna Niguel, CA 92677

Peggy Spilker ++                              Vice President                                         None

Michael Stenger                               Vice President                                         None
8572 Saint Ives Place
Cincinnati, OH  45255

George Sweeney                                Vice President                                         None
1855 O'Hara Lane
Middletown, PA 17057

Scott McGregor Tatum                          Vice President                                         None
7123 Cornelia Lane
Dallas, TX  75214

David G. Thomas                               Vice President -                                       None
111 South Joliet Circle                       Financial Institution Div.
#304
Aurora, CO  80112

Philip Trimble                                Vice President                                         None
2213 West Homer
Chicago, IL 60647

Gary Paul Tyc+                                Assistant Treasurer                                    None

Mark Stephen Vandehey+                        Vice President                                         None

*  Two World Trade Center, New York, NY 10048-0203
+  6803 South Tucson Way, Englewood, Colorado 80112
++ 350 Linden Oaks, Rochester, NY  14625-2807 (the "Rochester Division")
    
</TABLE>

                  (c)      Not applicable.



                                      C-24

<PAGE>



Item 30.          Location of Accounts and Records
- --------          ---------------------------------

   
         The accounts,  books and other  documents  required to be maintained by
Registrant  pursuant to Section 31(a) of the Investment  Company Act of 1940 and
rules promulgated thereunder are in the possession of OppenheimerFunds,  Inc. at
its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
    

Item 31.          Management Services
- --------          --------------------
                  Not applicable.

Item 32.          Undertakings
- --------          ------------

         (a)      Not applicable.

         (b) Registrant  undertakes to file a  post-effective  amendment,  using
financial statements which need not be certified, within four to six months from
the effective  date of its  registration  statement  under the Securities Act of
1933.

         (c)      Not applicable.


                                                       C-25

<PAGE>



                                   SIGNATURES

   
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration  Statement  pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this registration Statement to be
signed on its behalf by the undersigned,  thereunto duly authorized, in the City
of Denver and State of Colorado on the 27th day of January, 1997.
    

                                    OPPENHEIMER INTERNATIONAL BOND FUND

   
                                     By:   /s/ James C. Swain*
                                           -----------------------------
                                          James C. Swain, Chairman
    

Pursuant to the  requirements of the Securities Act of 1933,  this  Registration
Statement  has been signed below by the following  persons in the  capacities on
the dates indicated:
<TABLE>
<CAPTION>
   
Signatures:                                          Title                                      Date
- -----------                                          -----------------                          ----------------
<S>                                                  <C>                                         <C>
/s/ James C. Swain    *                              Chairman of                                 January 27, 1997
- ----------------------                               the Board of
James C. Swain                                       Trustees, Principal
                                                     Executive Officer

/s/ Sam Freedman      *                              Trustee                                     January 27, 1997
- ----------------------
Sam Freedman

/s/ Jon S. Fossel     *                              Trustee                                     January 27, 1997
- ----------------------
Jon S. Fossel

/s/ George Bowen      *                              Treasurer and                               January 27, 1997
- ----------------------                               Principal Financial
George Bowen                                         and Accounting Officer

/s/ Robert G. Avis    *                              Trustee                                     January 27, 1997
- ----------------------
Robert G. Avis

/s/ William A. Baker  *                              Trustee                                     January 27, 1997
- ----------------------
William A. Baker

/s/ Charles Conrad, Jr.*                             Trustee                                     January 27, 1997
- ----------------------
Charles Conrad, Jr.

/s/ Raymond J. Kalinowski*                           Trustee                                     January 27, 1997
- ----------------------
Raymond J. Kalinowski


                                      C-26

<PAGE>



/s/ C. Howard Kast   *                               Trustee                                     January 27, 1997
- ----------------------
C. Howard Kast

/s/ Robert M. Kirchner*                              Trustee                                     January 27, 1997
- ----------------------
Robert M. Kirchner

/s/ Ned M. Steel     *                               Trustee                                     January 27, 1997
- ----------------------
Ned M. Steel


*By:  /s/ Robert G. Zack
      ---------------------------------
      Robert G. Zack, Attorney-in-Fact

    
</TABLE>

                                      C-27

<PAGE>


                                        OPPENHEIMER INTERNATIONAL BOND FUND

                                                   EXHIBIT INDEX


Form N-1A
Item No.                            Description
- ----------                          ------------

   
24(b)(4)(i)                         Specimen Class A Share Certificate

24(b)(4)(ii)                        Specimen Class B Share Certificate

24(b)(4)(iii)                       Specimen Class C Share Certificate
    

24(b)(11)                           Independent Auditors' Consent

24(b)(16)                           Performance Data Computation Schedule

24(b)(17)(i)                        Financial Data Schedule for Class A Shares

24(b)(17)(ii)                       Financial Data Schedule for Class B Shares

24(b)(17)(iii)                      Financial Data Schedule for Class C Shares

   
                                 -- Power of Attorney for Sam Freedman, Trustee
    



                                                            Exhibit 24(b)(4)(i)

                       OPPENHEIMER INTERNATIONAL BOND FUND
                    Class A Share Certificate (8-1/2" x 11")

I.       FRONT OF CERTIFICATE (All text and other matter lies within
                                    decorative border)

(upper left) box with heading:          (upper right) box with heading:
NUMBER (OF SHARES)                      CLASS A SHARES
                           (certificate number above)

                             (centered below boxes)
                       Oppenheimer International Bond Fund
                         A MASSACHUSETTS BUSINESS TRUST

(at left)                                         (at right)
THIS IS TO CERTIFY THAT                           SEE REVERSE FOR
                                                  CERTAIN DEFINITIONS

                                                  (box with number)
                                                  CUSIP _____________
(at left)
is the owner of

                                   (centered)
               FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF
                       OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
         (hereinafter called the "Fund"),  transferable only on the books of the
         Fund by the  holder  hereof in person or by duly  authorized  attorney,
         upon surrender of this certificate properly endorsed.  This certificate
         and the shares  represented hereby are issued and shall be held subject
         to all of the provisions of the Declaration of Trust of the Fund to all
         of which the holder by acceptance  hereof assents.  This certificate is
         not valid  until  countersigned  by the  Transfer  Agent.  WITNESS  the
         facsimile  seal of the Fund and the  signatures of its duly  authorized
         officers.

(at left of seal)                      (at right of seal)

(signature)                            Dated:

- -------------------------              -------------------------
TREASURER                              PRESIDENT



<PAGE>



                              (centered at bottom)
                         1-1/2" diameter facsimile seal
                                   with legend
                       OPPENHEIMER INTERNATIONAL BOND FUND
                                      SEAL
                                      ----
                          COMMONWEALTH OF MASSACHUSETTS

                     (at lower right, printed vertically)
                     Countersigned
                     OPPENHEIMERFUNDS SERVICES
                     (A DIVISION OF OPPENHEIMERFUNDS, INC.)
                              Denver (Colo)         Transfer Agent

                     By
                                                Authorized Signature


<PAGE>



II.      BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)

         The following  abbreviations,  when used in the inscription on the face
of this certificate,  shall be construed as though they were written out in full
according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT                   TEN WROS NOT TC - as tenants  with  rights of  survivorship
                     and not as tenants in common

UNIF GIFT/TRANSFER MIN ACT - __________________  Custodian _______________
                            (Cust)                         (Minor)
                                           UNDER UGMA/UTMA ________________
                                                           (State)

                     Additional abbreviations may also be used though not
in the above list.

For Value Received __________________ hereby sell(s), and transfer(s) unto

(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
              IDENTIFYING NUMBER OF ASSIGNEE
           AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)

- -------------------------------------------------------------------------
               (Please print or type name and address of assignee)

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

- -----------------  Class A Shares  of  beneficial  interest  represented  by the
within Certificate, and do hereby irrevocably constitute and appoint.

- ---------------------  Attorney to transfer  the said shares on the books of the
within named Fund with full power of substitution in the premises.

Dated: ---------------------
                               Signed: 
                                      -----------------------------------
                                      (Both must sign if joint owners)

                               Signature(s) --------------------------
                               guaranteed    Name of Guarantor
                                   by       --------------------------
                                             Signature of Officer/Title

(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the


<PAGE>


name(s) as written upon the face of the certificate in every particular  without
alteration or enlargement or any change whatever.

(text  printed  in box to  left  of  signature  guarantee)  Signatures  must  be
guaranteed  by a  financial  institution  of the type  described  in the current
prospectus of the Fund.

(at left)                                          (at right)
PLEASE NOTE:  This document contains               OppenheimerFunds
a watermark when viewed at an angle.               logotype
It is invalid without this watermark.

- -------------------------------------------------------------------------
                    THIS SPACE MUST NOT BE COVERED IN ANY WAY



                                                           Exhibit 24(b)(4)(ii)

                       OPPENHEIMER INTERNATIONAL BOND FUND
                    Class B Share Certificate (8-1/2" x 11")

I.       FRONT OF CERTIFICATE (All text and other matter lies within
                                    decorative border)

(upper left) box with heading:          (upper right) box with heading:
NUMBER (OF SHARES)                      CLASS B SHARES
                           (certificate number above)

                             (centered below boxes)
                       Oppenheimer International Bond Fund
                         A MASSACHUSETTS BUSINESS TRUST

(at left)                                         (at right)
THIS IS TO CERTIFY THAT                           SEE REVERSE FOR
                                                  CERTAIN DEFINITIONS

                                                  (box with number)
                                                  CUSIP _____________
(at left)
is the owner of

                                   (centered)
               FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
                       OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
         (hereinafter called the "Fund"),  transferable only on the books of the
         Fund by the  holder  hereof in person or by duly  authorized  attorney,
         upon surrender of this certificate properly endorsed.  This certificate
         and the shares  represented hereby are issued and shall be held subject
         to all of the provisions of the Declaration of Trust of the Fund to all
         of which the holder by acceptance  hereof assents.  This certificate is
         not valid  until  countersigned  by the  Transfer  Agent.  WITNESS  the
         facsimile  seal of the Fund and the  signatures of its duly  authorized
         officers.

(at left of seal)                      (at right of seal)

(signature)                            Dated:

- -------------------------              -------------------------
TREASURER                              PRESIDENT



<PAGE>



                              (centered at bottom)
                         1-1/2" diameter facsimile seal
                                   with legend
                       OPPENHEIMER INTERNATIONAL BOND FUND
                                      SEAL
                                      ----
                          COMMONWEALTH OF MASSACHUSETTS

                     (at lower right, printed vertically)
                     Countersigned
                     OPPENHEIMERFUNDS SERVICES
                     (A DIVISION OF OPPENHEIMERFUNDS, INC.)
                              Denver (Colo)         Transfer Agent

                     By
                                                Authorized Signature


<PAGE>


II.      BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)

         The following  abbreviations,  when used in the inscription on the face
of this certificate,  shall be construed as though they were written out in full
according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT                   TEN WROS NOT TC - as tenants  with  rights of  survivorship
                     and not as tenants in common

UNIF GIFT/TRANSFER MIN ACT - __________________  Custodian _______________
                            (Cust)                         (Minor)
                                        UNDER UGMA/UTMA ________________
                                                        (State)

                       Additional abbreviations may also be used though not
in the above list.

For Value Received __________________ hereby sell(s), and transfer(s) unto

(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
              IDENTIFYING NUMBER OF ASSIGNEE
           AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)

- -------------------------------------------------------------------------
               (Please print or type name and address of assignee)

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

- -----------------  Class B Shares  of  beneficial  interest  represented  by the
within Certificate, and do hereby irrevocably constitute and appoint.

- ---------------------  Attorney to transfer  the said shares on the books of the
within named Fund with full power of substitution in the premises.

Dated: ---------------------
                               Signed: 
                                      -----------------------------------
                                      (Both must sign if joint owners)

                               Signature(s) --------------------------
                              guaranteed    Name of Guarantor

                                   by       --------------------------
                                            Signature of Officer/Title

(text printed  vertically to right of above paragraph)  NOTICE: The signature(s)
to this  assignment must correspond with the name(s) as written upon the face of
the  certificate in every  particular  without  alteration or enlargement or any
change whatever.

(text  printed  in box to  left  of  signature  guarantee)  Signatures  must  be
guaranteed  by a  financial  institution  of the type  described  in the current
prospectus of the Fund.

(at left)                                          (at right)
PLEASE NOTE:  This document contains               OppenheimerFunds
a watermark when viewed at an angle.               logotype
It is invalid without this watermark.

- -------------------------------------------------------------------------
                    THIS SPACE MUST NOT BE COVERED IN ANY WAY


                                                          Exhibit 24(b)(4)(iii)

                       OPPENHEIMER INTERNATIONAL BOND FUND
                    Class C Share Certificate (8-1/2" x 11")

I.       FRONT OF CERTIFICATE (All text and other matter lies within
                                    decorative border)

(upper left) box with heading:          (upper right) box with heading:
NUMBER (OF SHARES)                      CLASS C SHARES
                           (certificate number above)

                             (centered below boxes)
                       Oppenheimer International Bond Fund
                         A MASSACHUSETTS BUSINESS TRUST

(at left)                                         (at right)
THIS IS TO CERTIFY THAT                           SEE REVERSE FOR
                                                  CERTAIN DEFINITIONS

                                                  (box with number)
                                                  CUSIP _____________
(at left)
is the owner of

                                   (centered)
               FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
                       OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
         (hereinafter called the "Fund"),  transferable only on the books of the
         Fund by the  holder  hereof in person or by duly  authorized  attorney,
         upon surrender of this certificate properly endorsed.  This certificate
         and the shares  represented hereby are issued and shall be held subject
         to all of the provisions of the Declaration of Trust of the Fund to all
         of which the holder by acceptance  hereof assents.  This certificate is
         not valid  until  countersigned  by the  Transfer  Agent.  WITNESS  the
         facsimile  seal of the Fund and the  signatures of its duly  authorized
         officers.

(at left of seal)                      (at right of seal)

(signature)                            Dated:

- -------------------------              -------------------------
TREASURER                               PRESIDENT



<PAGE>



                              (centered at bottom)
                         1-1/2" diameter facsimile seal
                                   with legend
                       OPPENHEIMER INTERNATIONAL BOND FUND
                                      SEAL
                                      ----
                          COMMONWEALTH OF MASSACHUSETTS

                     (at lower right, printed vertically)
                     Countersigned
                     OPPENHEIMERFUNDS SERVICES
                     (A DIVISION OF OPPENHEIMERFUNDS, INC.)
                              Denver (Colo)         Transfer Agent

                     By
                            Authorized Signature


<PAGE>


II.      BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)

         The following  abbreviations,  when used in the inscription on the face
of this certificate,  shall be construed as though they were written out in full
according to applicable laws or regulations.

TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT                   TEN WROS NOT TC - as tenants  with  rights of  survivorship
                     and not as tenants in common

UNIF GIFT/TRANSFER MIN ACT - __________________  Custodian _______________
                             (Cust)                        (Minor)
                                   UNDER UGMA/UTMA ________________
                                                    (State)

                            Additional abbreviations may also be used though not
in the above list.

For Value Received __________________ hereby sell(s), and transfer(s) unto

(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
              IDENTIFYING NUMBER OF ASSIGNEE
           AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)

- -------------------------------------------------------------------------
               (Please print or type name and address of assignee)

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

- -----------------  Class C Shares  of  beneficial  interest  represented  by the
within Certificate, and do hereby irrevocably constitute and appoint.

- ---------------------  Attorney to transfer  the said shares on the books of the
within named Fund with full power of substitution in the premises.

Dated: ---------------------
                                     Signed: 
                                            -----------------------------------
                                            (Both must sign if joint owners)

                                Signature(s) --------------------------
                                guaranteed    Name of Guarantor

                                     by      --------------------------
                                             Signature of Officer/Title

(text printed  vertically to right of above paragraph)  NOTICE: The signature(s)
to this  assignment must correspond with the name(s) as written upon the face of
the  certificate in every  particular  without  alteration or enlargement or any
change whatever.

(text  printed  in box to  left  of  signature  guarantee)  Signatures  must  be
guaranteed  by a  financial  institution  of the type  described  in the current
prospectus of the Fund.

(at left)                                          (at right)
PLEASE NOTE:  This document contains               OppenheimerFunds
a watermark when viewed at an angle.               logotype
It is invalid without this watermark.

- -------------------------------------------------------------------------
                    THIS SPACE MUST NOT BE COVERED IN ANY WAY


                                                              Exhibit 24(b)(11)


INDEPENDENT AUDITORS' CONSENT

Oppenheimer International Bond Fund:

We  hereby  consent  to the  use  in  this  Post-Effective  Amendment  No.  2 to
Registration  Statement  No.  33-58383  of our report  dated  October  21,  1996
appearing in the  Statement of Additional  Information,  which is a part of such
Registration  Statement and to the reference to us under the caption  "Financial
Highlights"  appearing  in  the  Prospectus,  which  is  also  a  part  of  such
Registration Statement.



/s/Deloitte & Touche LLP
- --------------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
January 9, 1997


                       Oppenheimer International Bond Fund
                         Exhibit 24(b)(16) to Form N-1A
                      Performance Data Computation Schedule


The Fund's  average  annual total  returns and total  returns are  calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>

  Distribution                       Amount From              Amount From
  Reinvestment                       Investment               Long or Short-Term                  Reinvestment
  (Ex)Date                           Income                   Capital Gains                       Price
<S>                                  <C>                       <C>                                <C>
Class A Shares
  07/31/95                           0.0662330                 0.0000000                          5.060
  08/31/95                           0.0437500                 0.0000000                          5.020
  09/29/95                           0.0437500                 0.0000000                          5.100
  10/31/95                           0.0437500                 0.0000000                          5.120
  11/30/95                           0.0437500                 0.0000000                          5.120
  12/29/95                           0.0437500                 0.0000000                          5.200
  01/31/96                           0.0437500                 0.0000000                          5.270
  02/29/96                           0.0437500                 0.0000000                          5.240
  03/29/96                           0.0437500                 0.0000000                          5.260
  04/30/96                           0.0437500                 0.0000000                          5.310
  05/31/96                           0.0437500                 0.0000000                          5.340
  06/28/96                           0.0437500                 0.0000000                          5.370
  07/31/96                           0.0437500                 0.0000000                          5.390
  08/30/96                           0.0437500                 0.0000000                          5.440
  09/30/96                           0.0437500                 0.0000000                          5.490


Class B Shares
  07/31/95                           0.0606534                 0.0000000                          5.060
  08/31/95                           0.0417898                 0.0000000                          5.010
  09/29/95                           0.0407503                 0.0000000                          5.100
  10/31/95                           0.0401434                 0.0000000                          5.120
  11/30/95                           0.0400524                 0.0000000                          5.110
  12/29/95                           0.0401422                 0.0000000                          5.190
  01/31/96                           0.0399555                 0.0000000                          5.270
  02/29/96                           0.0406945                 0.0000000                          5.230
  03/29/96                           0.0406394                 0.0000000                          5.250
  04/30/96                           0.0404986                 0.0000000                          5.300
  05/31/96                           0.0402251                 0.0000000                          5.330
  06/28/96                           0.0408140                 0.0000000                          5.370
  07/31/96                           0.0404570                 0.0000000                          5.390
  08/30/96                           0.0399571                 0.0000000                          5.430
  09/30/96                           0.0405594                 0.0000000                          5.480


Class C Shares
  07/31/95                           0.0617192                 0.0000000                          5.060
  08/31/95                           0.0416818                 0.0000000                          5.010
  09/29/95                           0.0407938                 0.0000000                          5.090
  10/31/95                           0.0405258                 0.0000000                          5.110
  11/30/95                           0.0388509                 0.0000000                          5.110
  12/29/95                           0.0398061                 0.0000000                          5.190
  01/31/96                           0.0399993                 0.0000000                          5.260
  02/29/96                           0.0406137                 0.0000000                          5.230
  03/29/96                           0.0399852                 0.0000000                          5.250
  04/30/96                           0.0406175                 0.0000000                          5.300

</TABLE>

<PAGE>



Oppenheimer International Bond Fund
Page 2

<TABLE>
<CAPTION>

  Distribution                       Amount From               Amount From
  Reinvestment                       Investment                Long or Short-Term               Reinvestment
  (Ex)Date                           Income                    Capital Gains                    Price
<S>                                  <C>                       <C>                               <C>
Class C Shares (Continued)
  05/31/96                           0.0403599                 0.0000000                         5.330
  06/28/96                           0.0409153                 0.0000000                         5.360
  07/31/96                           0.0404267                 0.0000000                         5.380
  08/30/96                           0.0399232                 0.0000000                         5.430
  09/30/96                           0.0406559                 0.0000000                         5.480


</TABLE>


1. Average Annual Total Returns for the Periods Ended 09/30/96:

   The formula for calculating average annual total return is as follows:

             1                          ERV n
   --------------- = n                 (---) - 1 = average annual total return
   number of years                       P

   Where:  ERV = ending redeemable value of a hypothetical $1,000 payment
                 made at the beginning of the period
           P   = hypothetical initial investment of $1,000


Class A Shares

Examples, assuming a maximum sales charge of 4.75%:

  One Year                                   Inception

  $1,131.79 1                                $1,189.83 .7742
 (---------) - 1 = 13.18%                   (---------) - 1 = 14.40%
    $1,000                                     $1,000



Class B Shares

Example  assuming a maximum  contingent  deferred  sales charge of 5.00% for the
first year, and 4.00% for the inception year:

  One Year                                   Inception

  $1,127.14 1                                $1,195.00 .7742
 (---------) - 1 = 12.71%                   (---------) - 1 = 14.79%
    $1,000                                     $1,000








<PAGE>



Oppenheimer International Bond Fund
Page 3


1. Average Annual Total Returns for the Periods Ended 09/30/96 (continued):

Class C Shares

Example  assuming a maximum  contingent  deferred  sales charge of 1.00% for the
first year, and 0.00% for the inception year:

  One Year                                   Inception

  $1,169.19 1                                $1,234.99 .7742
 (---------) - 1 = 16.92%                   (---------) - 1 = 17.75%
    $1,000                                     $1,000



Examples at NAV:

Class A Shares

  One Year                                   Inception

  $1,188.22 1                                $1,249.17 .7742
 (---------) - 1 = 18.82%                   (---------) - 1 = 18.80%
    $1,000                                     $1,000



Class B Shares

  One Year                                   Inception

  $1,177.14 1                                $1,234.99 .7742
 (---------) - 1 = 17.71%                   (---------) - 1 = 17.75%
    $1,000                                     $1,000




Class C Shares

  One Year                                   Inception

  $1,179.19 1                                $1,234.99 .7742
 (---------) - 1 = 17.92%                   (--------) - 1 = 17.75%
    $1,000                                    $1,000












<PAGE>



Oppenheimer International Bond Fund
Page 4


2.  Cumulative Total Returns for the Periods Ended 09/30/96:

    The formula for calculating cumulative total return is as follows:

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

Class A Shares

Examples, assuming a maximum sales charge of 4.75%:

  One Year                                     Inception

  $1,131.79 - $1,000                          $1,189.83 - $1,000
  ------------------  = 13.18%                ------------------ = 18.98%
        $1,000                                       $1,000



Class B Shares

Example  assuming a maximum  contingent  deferred  sales charge of 5.00% for the
first year, and 4.00% for the inception year:

  One Year                                   Inception

  $1,127.14 - $1,000                         $1,195.00 - $1,000
  ------------------  = 12.71%               ------------------ = 19.50%
        $1,000                                     $1,000



Class C Shares

Example  assuming a maximum  contingent  deferred  sales charge of 1.00% for the
first year, and 0.00% for the inception year:


  One Year                                    Inception

  $1,169.19 - $1,000                          $1,234.99 - $1,000
  ------------------  = 16.92%                ------------------ = 23.50%
        $1,000                                       $1,000












<PAGE>



Oppenheimer International Bond Fund
Page 5


2.  Cumulative Total Returns for the Periods Ended 09/30/96(continued):

Examples at NAV:

Class A Shares

  One Year                                      Inception

  $1,188.22 - $1,000                            $1,249.17 - $1,000
  ------------------  = 18.82%                   ------------------ = 24.92%
        $1,000                                       $1,000



Class B Shares

  One Year                                      Inception

  $1,177.14 - $1,000                            $1,234.99 - $1,000
  ------------------  = 17.71%                  ------------------ = 23.50%
        $1,000                                         $1,000



Class C Shares

  One Year                                        Inception

  $1,179.19 - $1,000                             $1,234.99 - $1,000
  ------------------  = 17.92%                    ------------------ = 23.50%
        $1,000                                           $1,000


<PAGE>



Oppenheimer International Bond Fund
Page 6


3.  Standardized Yield for the 30-Day Period Ended 09/30/96:

    The Fund's  standardized  yields are calculated using the following  formula
    set forth in the SEC rules:

                                          a - b                  6
                     Yield =  2 { (--------  +  1 )  -  1 }
                                         cd or ce

          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
                    reimbursements).
            c = The average daily number of Fund shares outstanding during
                    the 30-day period that were entitled to receive dividends.
            d = The Fund's maximum offering price (including sales charge)
                    per share on the last day of the period.
            e = The Fund's net asset value (excluding  contingent deferred
                    sales charge) per share on the last day of the period.


Class A Shares

Example, assuming a maximum sales charge of 4.75%:


                $406,710.38 - $60,870.65            6
             2{(------------------------ +  1)  - 1}  = 8.27%
                   8,865,349  x  $5.76



Class B Shares

Example at NAV:


                $347,527.97 - $78,718.58             6
             2{(------------------------  +  1)  - 1}  = 7.89%
                   7,586,724  x  $5.48



Class C Shares

Example at NAV:


                $ 81,293.00 - $18,246.80             6
             2{(------------------------  +  1)  - 1}  = 7.90%
                   1,775,466  x  $5.48




<PAGE>



Oppenheimer International Bond Fund
Page 7


4.  DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/96:

    The Fund's dividend yields are calculated using the following formula:


                  Dividend Yield  =  ( a * 12 ) / b or c


         The symbols above represent the following factors:

          a = The dividend earned during the thirty day period.
          b = The Fund's maximum offering price (including sales charge)
              per share on the last day of the period.
          c = The Fund's net asset value (excluding sales charge) per share on
              the last day of the period.


         Examples :


         Class A Shares

         Dividend Yield        ($0.0464009    *  12 )  /  $5.76  =  9.67%
         at Maximum Offer:


         Dividend Yield        ($0.0464009    *  12 )  /  $5.49  = 10.14%
         at Net Asset Value:



         Class B Shares

         Dividend Yield        ($0.0429827    *  12 )  /  $5.48  =  9.41%
         at Net Asset Value:



         Class C Shares

         Dividend Yield        ($0.0430832     *  12 )  /  $5.48  =  9.43%
         at Net Asset Value:

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<TABLE> <S> <C>

<ARTICLE> 6
<CIK>                                                                939800
<NAME>          Oppenheimer International Bond Fund - A
<SERIES>
   <NUMBER>                                                               1
   <NAME>       Oppenheimer International Bond Fund
       
<S>                                                     <C>
<PERIOD-TYPE>                                           12-mos
<FISCAL-YEAR-END>                                       SEP-30-1996
<PERIOD-START>                                          OCT-01-1995
<PERIOD-END>                                            SEP-30-1996
<INVESTMENTS-AT-COST>                                           105,246,914
<INVESTMENTS-AT-VALUE>                                          107,270,820
<RECEIVABLES>                                                     7,246,037
<ASSETS-OTHER>                                                        1,862
<OTHER-ITEMS-ASSETS>                                                654,392
<TOTAL-ASSETS>                                                  115,173,111
<PAYABLE-FOR-SECURITIES>                                          6,611,001
<SENIOR-LONG-TERM-DEBT>                                                   0
<OTHER-ITEMS-LIABILITIES>                                           944,239
<TOTAL-LIABILITIES>                                               7,555,240
<SENIOR-EQUITY>                                                           0
<PAID-IN-CAPITAL-COMMON>                                        104,210,304
<SHARES-COMMON-STOCK>                                             9,494,568
<SHARES-COMMON-PRIOR>                                               781,299
<ACCUMULATED-NII-CURRENT>                                                 0
<OVERDISTRIBUTION-NII>                                                    0
<ACCUMULATED-NET-GAINS>                                           1,480,266
<OVERDISTRIBUTION-GAINS>                                                  0
<ACCUM-APPREC-OR-DEPREC>                                          1,927,301
<NET-ASSETS>                                                     52,128,047
<DIVIDEND-INCOME>                                                         0
<INTEREST-INCOME>                                                 4,624,080
<OTHER-INCOME>                                                            0
<EXPENSES-NET>                                                      791,297
<NET-INVESTMENT-INCOME>                                           3,832,783
<REALIZED-GAINS-CURRENT>                                          1,549,896
<APPREC-INCREASE-CURRENT>                                         1,839,250
<NET-CHANGE-FROM-OPS>                                             7,221,929
<EQUALIZATION>                                                            0
<DISTRIBUTIONS-OF-INCOME>                                         1,931,780
<DISTRIBUTIONS-OF-GAINS>                                                  0
<DISTRIBUTIONS-OTHER>                                                     0
<NUMBER-OF-SHARES-SOLD>                                           9,721,751
<NUMBER-OF-SHARES-REDEEMED>                                       1,254,497
<SHARES-REINVESTED>                                                 246,015
<NET-CHANGE-IN-ASSETS>                                          100,195,269
<ACCUMULATED-NII-PRIOR>                                                   0
<ACCUMULATED-GAINS-PRIOR>                                              (189)
<OVERDISTRIB-NII-PRIOR>                                                   0
<OVERDIST-NET-GAINS-PRIOR>                                                0
<GROSS-ADVISORY-FEES>                                               311,128
<INTEREST-EXPENSE>                                                        0
<GROSS-EXPENSE>                                                     833,224
<AVERAGE-NET-ASSETS>                                             19,817,115
<PER-SHARE-NAV-BEGIN>                                                     5.10
<PER-SHARE-NII>                                                           0.52
<PER-SHARE-GAIN-APPREC>                                                   0.40
<PER-SHARE-DIVIDEND>                                                      0.53
<PER-SHARE-DISTRIBUTIONS>                                                 0.00
<RETURNS-OF-CAPITAL>                                                      0.00
<PER-SHARE-NAV-END>                                                       5.49
<EXPENSE-RATIO>                                                           1.49
<AVG-DEBT-OUTSTANDING>                                                    0
<AVG-DEBT-PER-SHARE>                                                      0.00
        

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<TABLE> <S> <C>

<ARTICLE> 6
<CIK>                                                                939800
<NAME>          Oppenheimer International Bond Fund - B
<SERIES>
   <NUMBER>                                                               1
   <NAME>       Oppenheimer International Bond Fund
       
<S>                                                     <C>
<PERIOD-TYPE>                                           12-mos
<FISCAL-YEAR-END>                                       SEP-30-1996
<PERIOD-START>                                          OCT-01-1995
<PERIOD-END>                                            SEP-30-1996
<INVESTMENTS-AT-COST>                                           105,246,914
<INVESTMENTS-AT-VALUE>                                          107,270,820
<RECEIVABLES>                                                     7,246,037
<ASSETS-OTHER>                                                        1,862
<OTHER-ITEMS-ASSETS>                                                654,392
<TOTAL-ASSETS>                                                  115,173,111
<PAYABLE-FOR-SECURITIES>                                          6,611,001
<SENIOR-LONG-TERM-DEBT>                                                   0
<OTHER-ITEMS-LIABILITIES>                                           944,239
<TOTAL-LIABILITIES>                                               7,555,240
<SENIOR-EQUITY>                                                           0
<PAID-IN-CAPITAL-COMMON>                                        104,210,304
<SHARES-COMMON-STOCK>                                             8,246,151
<SHARES-COMMON-PRIOR>                                               635,325
<ACCUMULATED-NII-CURRENT>                                                 0
<OVERDISTRIBUTION-NII>                                                    0
<ACCUMULATED-NET-GAINS>                                           1,480,266
<OVERDISTRIBUTION-GAINS>                                                  0
<ACCUM-APPREC-OR-DEPREC>                                          1,927,301
<NET-ASSETS>                                                     45,207,455
<DIVIDEND-INCOME>                                                         0
<INTEREST-INCOME>                                                 4,624,080
<OTHER-INCOME>                                                            0
<EXPENSES-NET>                                                      791,297
<NET-INVESTMENT-INCOME>                                           3,832,783
<REALIZED-GAINS-CURRENT>                                          1,549,896
<APPREC-INCREASE-CURRENT>                                         1,839,250
<NET-CHANGE-FROM-OPS>                                             7,221,929
<EQUALIZATION>                                                            0
<DISTRIBUTIONS-OF-INCOME>                                         1,609,969
<DISTRIBUTIONS-OF-GAINS>                                                  0
<DISTRIBUTIONS-OTHER>                                                     0
<NUMBER-OF-SHARES-SOLD>                                           8,129,566
<NUMBER-OF-SHARES-REDEEMED>                                         691,490
<SHARES-REINVESTED>                                                 172,750
<NET-CHANGE-IN-ASSETS>                                          100,195,269
<ACCUMULATED-NII-PRIOR>                                                   0
<ACCUMULATED-GAINS-PRIOR>                                              (189)
<OVERDISTRIB-NII-PRIOR>                                                   0
<OVERDIST-NET-GAINS-PRIOR>                                                0
<GROSS-ADVISORY-FEES>                                               311,128
<INTEREST-EXPENSE>                                                        0
<GROSS-EXPENSE>                                                     833,224
<AVERAGE-NET-ASSETS>                                             17,890,990
<PER-SHARE-NAV-BEGIN>                                                     5.10
<PER-SHARE-NII>                                                           0.48
<PER-SHARE-GAIN-APPREC>                                                   0.39
<PER-SHARE-DIVIDEND>                                                      0.49
<PER-SHARE-DISTRIBUTIONS>                                                 0.00
<RETURNS-OF-CAPITAL>                                                      0.00
<PER-SHARE-NAV-END>                                                       5.48
<EXPENSE-RATIO>                                                           2.26
<AVG-DEBT-OUTSTANDING>                                                    0
<AVG-DEBT-PER-SHARE>                                                      0.00
        

</TABLE>

<TABLE> <S> <C>

<ARTICLE> 6
<CIK>                                                                939800
<NAME>          Oppenheimer International Bond Fund - C
<SERIES>
   <NUMBER>                                                               1
   <NAME>       Oppenheimer International Bond Fund
       
<S>                                                     <C>
<PERIOD-TYPE>                                           12-mos
<FISCAL-YEAR-END>                                       SEP-30-1996
<PERIOD-START>                                          OCT-01-1995
<PERIOD-END>                                            SEP-30-1996
<INVESTMENTS-AT-COST>                                           105,246,914
<INVESTMENTS-AT-VALUE>                                          107,270,820
<RECEIVABLES>                                                     7,246,037
<ASSETS-OTHER>                                                        1,862
<OTHER-ITEMS-ASSETS>                                                654,392
<TOTAL-ASSETS>                                                  115,173,111
<PAYABLE-FOR-SECURITIES>                                          6,611,001
<SENIOR-LONG-TERM-DEBT>                                                   0
<OTHER-ITEMS-LIABILITIES>                                           944,239
<TOTAL-LIABILITIES>                                               7,555,240
<SENIOR-EQUITY>                                                           0
<PAID-IN-CAPITAL-COMMON>                                        104,210,304
<SHARES-COMMON-STOCK>                                             1,876,082
<SHARES-COMMON-PRIOR>                                                39,431
<ACCUMULATED-NII-CURRENT>                                                 0
<OVERDISTRIBUTION-NII>                                                    0
<ACCUMULATED-NET-GAINS>                                           1,480,266
<OVERDISTRIBUTION-GAINS>                                                  0
<ACCUM-APPREC-OR-DEPREC>                                          1,927,301
<NET-ASSETS>                                                     10,282,369
<DIVIDEND-INCOME>                                                         0
<INTEREST-INCOME>                                                 4,624,080
<OTHER-INCOME>                                                            0
<EXPENSES-NET>                                                      791,297
<NET-INVESTMENT-INCOME>                                           3,832,783
<REALIZED-GAINS-CURRENT>                                          1,549,896
<APPREC-INCREASE-CURRENT>                                         1,839,250
<NET-CHANGE-FROM-OPS>                                             7,221,929
<EQUALIZATION>                                                            0
<DISTRIBUTIONS-OF-INCOME>                                           360,475
<DISTRIBUTIONS-OF-GAINS>                                                  0
<DISTRIBUTIONS-OTHER>                                                     0
<NUMBER-OF-SHARES-SOLD>                                           1,915,475
<NUMBER-OF-SHARES-REDEEMED>                                         114,564
<SHARES-REINVESTED>                                                  35,740
<NET-CHANGE-IN-ASSETS>                                          100,195,269
<ACCUMULATED-NII-PRIOR>                                                   0
<ACCUMULATED-GAINS-PRIOR>                                              (189)
<OVERDISTRIB-NII-PRIOR>                                                   0
<OVERDIST-NET-GAINS-PRIOR>                                                0
<GROSS-ADVISORY-FEES>                                               311,128
<INTEREST-EXPENSE>                                                        0
<GROSS-EXPENSE>                                                     833,224
<AVERAGE-NET-ASSETS>                                              4,039,270
<PER-SHARE-NAV-BEGIN>                                                     5.09
<PER-SHARE-NII>                                                           0.48
<PER-SHARE-GAIN-APPREC>                                                   0.39
<PER-SHARE-DIVIDEND>                                                      0.48
<PER-SHARE-DISTRIBUTIONS>                                                 0.00
<RETURNS-OF-CAPITAL>                                                      0.00
<PER-SHARE-NAV-END>                                                       5.48
<EXPENSE-RATIO>                                                           2.25
<AVG-DEBT-OUTSTANDING>                                                    0
<AVG-DEBT-PER-SHARE>                                                      0.00
        

</TABLE>

                                POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS,  that the  undersigned  constitutes and appoints
Andrew J.  Donohue  or Robert G.  Zack,  and each of them,  his true and  lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his capacity as a trustee of OPPENHEIMER INTERNATIONAL BOND FUND,
a Massachusetts  business trust (the "Fund"),  to sign on his behalf any and all
Registration Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act of 1940
and any amendments and  supplements  thereto,  and other documents in connection
thereunder, and to file the same, with all exhibits thereto, and other documents
in connection therewith,  with the Securities and Exchange Commission,  granting
unto  said  attorneys-in-fact  and  agents,  and each of them,  full  power  and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and purposes as
she might or could do in person,  hereby  ratifying and confirming all that said
attorneys-in-fact  and agents,  and each of them, may lawfully do or cause to be
done by virtue hereof.

Dated this 27th day of June, 1996.


/s/ Sam Freedman
- ------------------
Sam Freedman




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