Oppenheimer Management Corporation
2 World Trade Center - Suite 3400
New York, NY 10048-0203
October 21, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Oppenheimer Asset Allocation Fund - Reg. No. 2-86903,
File No. 811-3864
Oppenheimer California Tax-Exempt Fund - Reg. No. 33-23566
File No. 811-5586
Oppenheimer Discovery Fund - Reg. No. 33-371, File No. 811-4410
Oppenheimer Global Emerging Growth Fund - Reg. No. 33-18285,
File No. 811-5381
Oppenheimer Global Environment Fund - Reg. No. 33-32270,
File No. 811-5966
Oppenheimer Global Fund - Reg. No. 2-31661, File No. 811-1810
Oppenheimer Global Growth & Income Fund - Reg. No. 33-33799
File No. 811-6001
Oppenheimer Gold & Special Minerals Fund - Reg. No. 2-82590,
File No. 811-3694
Oppenheimer Growth Fund - Reg. No. 2-45272, File No. 811-2306
Oppenheimer Money Market Fund, Inc. - Reg. No. 2-49887,
File No. 811-2454
Oppenheimer Mortgage Income Fund - Reg. No. 33-6614,
File No. 811-4712
Oppenheimer Multi-Government Trust - Reg. No. 33-24885,
File No. 811-5670
Oppenheimer Multi-Sector Income Trust - Reg. No. 33-20191
File No. 811-5473
Oppenheimer Multi-State Tax-Exempt Trust - Reg. No. 33-30198
File No. 811-5867
Oppenheimer New York Tax-Exempt Fund - Reg. No. 2-91683,
File No. 811-4054
Oppenheimer Fund - Reg. No. 2-14586, File No. 811-847
Oppenheimer Target Fund - Reg. No. 2-69719, File No. 811-3105
Oppenheimer Time Fund - Reg. No. 2-39461, File No. 811-02171
Oppenheimer Tax-Free Bond Fund - Reg. No. 2-57116,
File No. 811-2668
Oppenheimer U.S. Government Trust - Reg. No. 2-76645,
File No. 811-3430
To the Securities and Exchange Commission:
Each of the above-captioned registered investment companies (the
"Registrants") hereby represents to the Securities and Exchange
Commission, pursuant to Rule 485(b)(2)(iv) under the Securities Act of
1933, as amended, and in connection with an amendment on Form N-1A to that
Registrant's Registration Statement under the Investment Company Act of
1940, that the resignation of Edmund T. Delaney as a Trustee of the
Registrants as of October 17, 1994, was not due to disagreement with any
Registrant as to any matter relating to any Registrant's operations,
policies or practices.
OPPENHEIMER ASSET ALLOCATION FUND
OPPENHEIMER CALIFORNIA TAX-EXEMPT FUND
OPPENHEIMER DISCOVERY FUND
OPPENHEIMER GLOBAL EMERGING GROWTH FUND
OPPENHEIMER GLOBAL ENVIRONMENT FUND
OPPENHEIMER GLOBAL FUND
OPPENHEIMER GLOBAL GROWTH & INCOME FUND
OPPENHEIMER GOLD & SPECIAL MINERALS FUND
OPPENHEIMER GROWTH FUND
OPPENHEIMER MONEY MARKET FUND, INC.
OPPENHEIMER MORTGAGE INCOME FUND
OPPENHEIMER MULTI-GOVERNMENT TRUST
OPPENHEIMER MULTI-SECTOR INCOME TRUST
OPPENHEIMER MULTI-STATE TAX-EXEMPT TRUST
OPPENHEIMER NEW YORK TAX-EXEMPT FUND
OPPENHEIMER FUND
OPPENHEIMER TARGET FUND
OPPENHEIMER TIME FUND
OPPENHEIMER TAX-FREE BOND FUND
OPPENHEIMER U.S. GOVERNMENT TRUST
By: /s/ Andrew J. Donohue
--------------------------------
Andrew J. Donohue, Secretary
Registration No. 2-76645
File No. 811-3430
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. 26 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 24 / X /
OPPENHEIMER U.S. GOVERNMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center
New York, New York 10048-0203
(Address of Principal Executive Offices)
(212) 323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Oppenheimer Management Corporation
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 (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On October 25, 1994, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(i)
/ / On ---------------, pursuant to paragraph (a)(i)
/ / 75 days after filing pursuant to paragraph (a)(i)
/ / On ---------------, pursuant to paragraph (a)(ii) of Rule
485(b)
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 June 30, 1994, was filed on August 30, 1994.
<PAGE>
FORM N-1A
OPPENHEIMER U.S. GOVERNMENT TRUST
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Front Cover Page
2 Expenses
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Buy Shares; Exchanges of Shares; Special
Investor Services; Service Plan for Class A Shares;
Distribution and Service Plan for Class C Shares; How
to Sell Shares
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
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Other Investment
Techniques and Strategies; Additional 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; Distribution and Service Plans
17 Brokerage Policies of the Fund
18 Additional Information About the Fund
19 Your Investment 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; Brokerage Policies of the Fund
22 Performance of the Fund
23 *
________________
* Not applicable or negative answer.
<PAGE>
Oppenheimer U.S. Government Trust
Prospectus dated October 25, 1994
Oppenheimer U.S. Government Trust is a mutual fund with the
investment objective of seeking high current income, preservation of
capital and maintenance of liquidity through investments in debt
instruments issued or guaranteed by the U.S. Government or its agencies
or instrumentalities.
The Fund offers two classes of shares: (1) Class A shares, which
are sold at a public offering price that includes a front-end sales
charge, and (2) Class C shares,which are sold without a front-end sales
charge, although you may pay a sales charge when you redeem your shares,
depending on how long you hold them. A contingent deferred sales charge
is imposed on most Class C shares redeemed within 12 months of purchase.
Class C shares are also subject to an annual "asset-based sales charge."
Each class of shares bears different expenses. In deciding which class of
shares to buy, you should consider how much you plan to purchase, how long
you plan to keep your shares, and other factors discussed in "How to Buy
Shares" starting on page ___.
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 October 25, 1994 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder 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).
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
principal.
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.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A 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
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
<PAGE>
ABOUT THE FUND
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 reflected in the Fund's net asset value per share.
As a shareholder, you pay those expenses indirectly. Shareholders pay
other expenses directly, such as sales 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 operating expenses that you might expect
to bear indirectly. The calculations are based on the Fund's expenses
during its fiscal year ended June 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you
buy or sell shares of the Fund. Please refer to pages _____ through _____
for an explanation of how and when these charges apply.
Class A Shares Class C Shares
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1)
1.0%(2)
Exchange Fee $5.00(3)
$5.00(3)
___________________
(1) If you invest more than $1 million in Class A shares, you may have
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," below.
(2) If you redeem Class C shares within 12 months of buying them, you may
have to pay a 1.0% contingent deferred sales charge. See "How to Buy
Shares," below.
(3) Fee is waived for automated exchanges, as described in "How to
Exchange Shares."
- 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 adviser, Oppenheimer
Management Corporation (the "Manager"), and other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds the Fund's portfolio securities, audit fees and legal and other
expenses. The following numbers are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal year. These
amounts are shown as a percentage of the average net assets of each class
of the Fund's shares for that year. The "12b-1 Distribution Plan Fees" for
Class A shares are the Service Plan Fees (which are a maximum of 0.25% of
average annual net assets of that class), and for Class C shares are the
Distribution and Service Plan Fees (maximum of 0.25% for the service fee)
and the asset-based sales charge of 0.75%. The actual expenses for each
class of shares in future years may be more or less, depending on a number
of factors, including the actual amount of the assets represented by each
class of shares. The Annual Fund Operating Expenses shown are net of a
voluntary reduction of the management fees paid by the Manager. Without
such reduction by the Manager, the management fees for Class A and Class
C shares would have been .73% of average annual net assets for each class
and "Total Fund Operating Expenses" for Class A shares and Class C shares
would have been 1.16% and 1.98%, respectively. The reduction of the
management fee is described herein and in the Statement of Additional
Information and may be modified or withdrawn by the Manager at any time.
Class C shares were not publicly sold before December 1, 1993. Therefore,
the Annual Fund Operating Expenses shown for Class C shares are based on
expenses for the period from December 1, 1993 through June 30, 1994.
Class A Shares Class C Shares
Management Fees (Restated) .63% .63%
12b-1 Distribution Plan Fees .24 %* 1.00%**
Other Expenses .19% .25%
Total Fund Operating ----- -----
Expenses (Restated) 1.06% 1.88%
_______________________________
*Service Plan fees only
**Includes Service Plan Fee and
asset-based sales charge
- 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 chart 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 each
period shown:
1 year 3 years 5 years 10 years(1)
Class A Shares $58 $80 $103 $171
Class C Shares $29 $59 $102 $220
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $58 $80 $103 $171
Class C Shares $19 $59 $102 $220
_________________
(1) Because of the asset-based sales charge imposed on Class C shares of
the Fund, long-term shareholders of Class C shares could bear
expenses that would be the economic equivalent of an amount greater
than the maximum front-end sales charges permitted under applicable
regulatory requirements.
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 vary.
<PAGE>
Financial Highlights
Effective August 16, 1985, the Fund became a long-term government
securities fund which has a fluctuating net asset value per share. Prior
to that date, the Fund invested only in short-term (maturing in one year
or less) U.S. Government securities and maintained a fixed net asset value
of $1.00 per share. The table on this page presents selected financial
information about the Fund, including per share data and expense ratios
and other data based on the Fund's average net assets. This information
has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report on the Fund's financial statements for the fiscal
year ended June 30, 1994, is included in the Statement of Additional
Information. Class C shares were publicly offered only during a portion
of that period, commencing December 1, 1993.
Financial Highlights
<TABLE>
<CAPTION>
Class A
Class C
- -----------------------------------------------------------------------
- ------------------------
Year
Period
Ended
Ended
June 30,
June 30,
1994 1993 1992 1991 1990
1989 1988 1987 1986(3) 1985(2) 1994(1)
- -----------------------------------------------------------------------
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $9.95 $9.73 $9.25 $9.24 $9.54
$9.59 $9.77 $10.17 $ 10.00 $10.00 $9.83
- -----------------------------------------------------------------------
- ------------------------------------------------------
Income from investment
operations:
Net investment income .67 .68 .69 .83 .90
.91 .90 .84 .94 .77 .33
Net realized and unrealized
gain (loss) on investments,
options written (.74) .22 .48 .02 (.32)
(.05) (.18) (.33) .38 -- (.64)
------- ------- ------- ------ ------
- ------- ------- ------- ------- ------ ----
Total income (loss) from
investment operations (.07) .90 1.17 .85 .58
.86 .72 .51 1.32 .77 (.31)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.64) (.68) (.69) (.84) (.88)
(.91) (.90) (.85) (.93) (.77) (.33)
Dividends in excess of net
investment income (.01) -- -- -- --
-- -- -- -- -- --
Distributions from net
realized gain on investments
and options written -- -- -- -- --
-- -- (.06) (.22) -- --
Tax return of capital
distribuiton (.03) -- -- -- --
-- -- -- -- -- --
------- ------- ------- ------ ------
- ------- ------- ------- ------- ------ ----
Total dividends and
distributions to shareholders (.68) (.68) (.69) (.84) (.88)
(.91) (.90) (.91) (1.15) (.77) (.33)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Net asset value, end
of period $9.20 $9.95 $9.73 $9.25 $9.24
$9.54 $9.59 $9.77 $ 10.17 $ 10.00 $9.19
======= ======= ======= ====== ======
======== ======= ======= ======= ======= =====
Total Return, at Net
Asset Value(4) (1.17)% 9.55% 13.05% 9.53% 6.34%
9.51% 7.78% 5.54% 14.95% -- (3.12)%
- -----------------------------------------------------------------------
- ------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $310,027 $380,916 $395,863 $342,220 $264,728
$232,593 $203,857 $216,306 $160,389 $7,798 $4,261
- -----------------------------------------------------------------------
- ------------------------------------------------------
Average net assets
(in thousands) $355,698 $401,789 $376,532 $299,144 $253,085
$210,060 $197,834 $207,557 $98,004 $7,724 $2,173
- -----------------------------------------------------------------------
- ------------------------------------------------------
Number of shares outstanding
at end of period
(in thousands) 33,685 38,279 40,697 36,987 28,650
24,393 21,252 22,146 15,767 780 464
- -----------------------------------------------------------------------
- ------------------------------------------------------
Ratios to average net assets:
Net investment income 6.61% 6.90% 7.23% 8.93% 9.60%
9.65% 9.36% 8.73% 9.77% 7.77% 5.97%(6)
Expenses 1.14% 1.17% 1.17% 1.19% 1.16%
1.19% 1.13% .99% .56% 1.47% 1.96%(6)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Portfolio turnover rate(5) 139.5% 96.8% 207.8% 133.9% 125.5%
76.9% 141.3% 263.0% 366.9% -- 139.5%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to June
30, 1994.
2. All number of shares and per share data have been restated to reflect
a 1 for 10 stock split effective August 16, 1985.
3. For the period from August 16, 1985 to June 30, 1986.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
5. 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 sale of investment securities (excluding
short-term securities) for the year ended June 30, 1994 were $495,481,969
and $550,946,645, respectively.
6. Annualized.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek high current
income, preservation of capital and maintenance of liquidity through
investments in debt instruments issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government
Securities").
Investment Policies and Strategies. In seeking its investment objective,
the Fund may invest only in U.S. Government Securities, and repurchase
agreements on such securities, and may write covered calls and use hedging
instruments as described below. U.S. Government Securities include the
following:
- U.S. Treasury Obligations. These include Treasury Bills
(which have maturities of one year or less), Treasury Notes
(which have maturities of two to ten years) and Treasury Bonds
(which have maturities generally greater than ten years). U.S.
Treasury obligations are backed by the full faith and credit of
the United States.
- Obligations Issued or Guaranteed by U.S. Government Agencies
or Instrumentalities. These are obligations that are supported by
any of the following: (a) the full faith and credit of the U.S.
Government, such as Government National Mortgage Association
("Ginnie Mae") modified pass-through certificates as described
below, (b) the right of the issuer to borrow an amount limited to
a specific line of credit from the U.S. Government such as bonds
issued by Federal National Mortgage Association ("Fannie Mae"),
(c) the discretionary authority of the U.S. Government to
purchase the obligations of the agency or instrumentality, or (d)
the credit of the instrumentality, such as obligations of Federal
Home Loan Mortgage Corporation ("Freddie Mac"). Agencies and
instrumentalities the securities of which are supported by the
discretionary authority of the U.S. Government to purchase such
securities and which the Fund may purchase under (c) above
include: Federal Land Banks, Farmers Home Administration, Central
Bank for Cooperatives, Federal Intermediate Credit Banks, Freddie
Mac and Fannie Mae.
- Mortgage-Backed Securities. Also known as pass-through
securities, the homeowner's principal and interest payments pass
from the originating bank or savings and loan through the
appropriate governmental agency to investors, net of service
charges. These pass-through securities include participation
certificates of Ginnie Mae, that are guaranteed as to timely
payment of interest and principal by the full faith and credit of
the U.S. Government, Freddie Mac and Fannie Mae, that are
guaranteed and issued, respectively, by these agencies and
instrumentalities of the U.S. Government.
The Statement of Additional Information contains additional
information on U.S. Government Securities. The effective maturity of a
mortgage-backed security may be shortened by unscheduled or early payment
of principal and interest on the underlying mortgages, which may affect
the effective yield of such securities. The principal that is returned
may be invested in instruments having a higher or lower yield than the
prepaid instruments. Such securities therefore may be less effective as
a means of "locking in" attractive long-term interest rates and may have
less potential for appreciation during periods of declining interest rates
than conventional bonds with comparable stated maturities.
The Fund may invest in collateralized mortgage obligations
("CMOs") that are issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, or that are collateralized by a portfolio
of mortgages or mortgage-related securities guaranteed by such an agency
or instrumentality. Payment of the interest and principal generated by
the pool of mortgages is passed through to the holders as the payments are
received by the issuer of the CMO. CMOs may be issued in a variety of
classes or series ("tranches") that have different maturities. The
principal value of certain CMO tranches may be more volatile than other
types of mortgage-related securities, because of the possibility that the
principal value of the CMO may be prepaid earlier than the maturity of the
CMO as a result of prepayments of the underlying mortgage loans by the
borrowers.
The Fund may invest in "stripped" mortgage-backed securities of
CMOs or other securities issued by agencies or instrumentalities of the
U.S. Government. Stripped mortgage-backed securities usually have two
classes. The classes receive different proportions of the interest and
principal distributions on the pool of mortgage assets that act as
collateral for the security. In certain cases, one class will receive all
of the interest payments, while the other class will receive all of the
principal value on maturity. 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.
As with other bond investments, the value of U.S. Government
Securities and mortgage-backed securities will tend to rise when interest
rates fall and to fall when interest rates rise. The value of mortgage-
backed securities may also be affected by changes in the market's
perception of the creditworthiness of the entity issuing or guaranteeing
them or by changes in government regulations and tax policies. Because
of these factors, the Fund's share value and yield are not guaranteed and
will fluctuate, and there can be no assurance that the Fund's objective
will be achieved. The magnitude of these fluctuations generally will be
greater when the average maturity of the Fund's portfolio securities is
longer. Because the yields on U.S. Government Securities are generally
lower than on corporate debt securities, the Fund may attempt to increase
the income it can earn from U.S. Government Securities by writing covered
call options against them, when market conditions are appropriate.
Writing covered call options is explained below, under "Other Investment
Techniques and Strategies."
- Portfolio Turnover. A change in the securities held by the
Fund is known as "portfolio turnover." U.S. Government Securities may be
purchased or sold without regard to the length of time they have been
held, to attempt to take advantage of short-term differentials in yields.
While short-term trading increases portfolio turnover, the Fund incurs
little or no brokerage costs for U.S. Government Securities. The
"Financial Highlights," above, show the Fund's portfolio turnover rate
during past fiscal years. High portfolio turnover may affect the ability
of the Fund to qualify for tax deductions for payments made to
shareholders as a "regulated investment company" under the Internal
Revenue Code. The Fund qualified in its last fiscal year and intends to
do so in the coming year, although it reserves the right not to qualify.
- Can the Fund's Investment Objective and Policies Change? The
Fund has an investment objective, which is described above, as well as
investment policies it follows to try to achieve its objective.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those policies. The Fund's investment policies and
practices are not "fundamental" unless the Prospectus or Statement of
Additional Information says that a particular policy is "fundamental."
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
investment objective is a fundamental policy. 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.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
information about these practices, including limitations designed to
reduce some of the risks.
- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities amounting to not more
than 25% of its total assets to brokers, dealers and other financial
institutions, subject to certain conditions described in the Statement of
Additional Information. There are some risks in connection with
securities lending. The Fund might experience a delay in receiving
additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Fund presently does not intend to engage in loans
of securities that will exceed 5% of the value of the Fund's total assets
in the coming year.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. 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. Repurchase
agreements must be fully collateralized. However, if the vendor of the
securities under a repurchase agreement 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 which causes more than
10% of its net assets to be subject to repurchase agreements having a
maturity beyond seven days.
- Writing Covered Calls. To earn additional income the Fund
may write (that is, sell) call options. The Fund receives cash (called
a premium) when it writes a call. The call gives the buyer the ability
to buy the security from the Fund at the call price during the period in
which the call may be exercised. If the value of the security does not
rise above the call price, it is likely that the call will lapse without
being exercised, while the Fund keeps the cash premium (and the security).
The Fund may write calls only if the call is "covered" while it is
outstanding; that means the Fund must own the securities on which the call
is written or it must own other securities that are acceptable for the
escrow arrangements required for calls. Calls on Interest Rate Futures
written by the Fund must be covered by deliverable securities or by liquid
assets segregated to satisfy the Futures contract. The Fund may write
calls on U.S. Government Securities on up to 10% of its total assets and
may write calls on up to 100% of its total assets if the calls are listed
on a domestic securities or commodities exchange or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc.
- Hedging With Options and Futures Contracts. The Fund may buy
and sell options and futures contracts (that relate to debt securities)
to try to manage its exposure to changing interest rates and securities
prices. Some of these strategies, such as selling futures, buying puts
and writing covered calls, hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and buying
calls, tend to increase the Fund's market exposure. The Fund does not use
hedging instruments for speculative purposes. The Fund may invest in
interest rate futures and call and put options on U.S. Government
Securities, and engage in interest rate swap transactions. All of these
are referred to as "hedging instruments."
Writing puts requires the segregation of liquid assets to cover
the put. Buying a put on an investment gives the Fund the right to sell
the investment to a seller of a put on that investment at a set price.
Not more than 50% of the Fund's assets may be subject to puts. The Fund
also may resell puts previously purchased by it. The Fund may purchase
calls in "closing purchase transactions" to terminate its obligations on
calls it has written, and on U.S. Government Securities and Interest Rate
Futures. A call or put may not be purchased if the value of all of the
Fund's put and call options would exceed 5% of the value of the Fund's
total assets. The Fund's option writing activities generally will not
exceed 100% of its assets, in the aggregate.
Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's 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. In
writing calls there are risks that the Fund may forgo profits on an
increase in the price of the underlying security if the call is exercised.
In addition, the Fund could experience capital losses that might cause
previously distributed income to be re-characterized for tax purposes as
a return of capital to shareholders. In writing puts there is the risk
that the Fund may be required to buy the underlying security at a
disadvantageous price. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks, because the Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes. These risks and the hedging strategies the Fund may use are
described in greater detail in the Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment restrictions
which are fundamental policies. Under these fundamental policies, the
Fund cannot do any of the following: (a) invest in any security other than
those discussed under "Investment Objectives and Policies" above; (b) make
loans; however, the purchase of debt securities which the Fund's
investment policies and restrictions permit it to purchase, whether or not
subject to repurchase agreements, is permitted; the Fund may also lend
securities as described under "Loans of Portfolio Securities"; (c) borrow
money in excess of 10% of the value of its assets (and then only as a
temporary measure for extraordinary or emergency purposes) or make any
investment at a time during which such borrowing exceeds 5% of the value
of its assets; no assets of the Fund may be pledged, mortgaged or
hypothecated to secure a debt; the escrow arrangements involved in options
trading are not considered to involve such a mortgage, hypothecation or
pledge; or (d) enter into repurchase agreements maturing in more than
seven days, or invest in securities which are restricted as to resale,
securities which are not readily convertible to cash ("illiquid
securities") or securities for which market quotations are not readily
available if more than 10% of the Fund's total assets would be invested
in such securities.
All of the percentage restrictions described above and elsewhere
in this Prospectus apply only at the time the Fund purchases a security,
and the Fund need not dispose of a security merely because the Fund's
assets have changed or the security has increased in value relative to the
size of the Fund. There are other fundamental policies discussed in the
Statement of Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in 1982 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 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 provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, 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 two or more classes. The Board
has done so, and the Fund currently has two classes of shares, Class A and
Class C. 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 together on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
chooses the Fund's investments and handles its day-to-day business. The
Manager carries out its duties, subject to the policies established by the
Board of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of June 30, 1994, and with more than 1.8 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, a mutual life insurance
company.
- Portfolio Manager. The Portfolio Manager of the Fund (who
is also a Vice President of the Fund) is David Rosenberg. He has been the
person principally responsible for the day-to-day management of the Fund's
portfolio since January 3, 1994. Mr. Rosenberg is a Vice President of the
Manager. He is also the portfolio manager of another OppenheimerFund.
During the past five years, Mr. Rosenberg was previously an officer and
portfolio manager for Delaware Investment Advisors and for one of its
mutual funds.
- Fees and Expenses. Under the investment advisory agreement,
the Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.75% of the first $200 million of
aggregate net assets, 0.70% of the next $200 million, 0.65% of the next
$400 million, and 0.60% of aggregate net assets over $800 million. The
Manager voluntarily reduced that management fee by reducing the rate at
each breakpoint by .05% effective January 1, 1994, and by an additional
.05% effective July 1, 1994.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal 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. As the Fund purchases
most of its portfolio securities directly from the sellers and not through
brokers, it incurs relatively little expense for brokerage. From time to
time it may use brokers when buying portfolio securities. 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 adviser.
- The Distributor. The Fund's shares are sold through dealers
and brokers that have a sales agreement with Oppenheimer Funds
Distributor, Inc., a subsidiary of the Manager that acts as the
Distributor. The Distributor also distributes the shares of other mutual
funds managed by the Manager (the "OppenheimerFunds") and is sub-
distributor for funds managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
account 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 certain terms to
illustrate its performance: "total return" and "yield." These terms are
used to show the performance of each class of shares 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. This
performance information may be useful to help you see how well your
investment has done and to compare it to other funds or market indices,
as we have done below.
It is important to understand that the fund's total returns and
yields represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields 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, depending on market conditions, the composition of the portfolio,
expenses and which class of shares you purchase.
- 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.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may also be
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for a one-year period for Class C shares,
they reflect the effect of the contingent deferred sales charge. They may
also be shown based on the change in net asset value, without considering
the effect of the contingent deferred sales charge.
- Yield. Each Class of shares calculates its yield by dividing
the annualized net investment income per share on 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 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 June 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the Fund's
fiscal year ended June 30, 1994, the Federal Reserve increased U.S. short-
term interest rates as a pre-emptive strike against inflation. In the
beginning of the Fund's fiscal year the Manager began to position the
Fund's portfolio in response to an expected rise in interest rates by
shortening the maturity of the U.S. Treasury portion of the portfolio and
reducing the Fund's mortgage holdings. During the latter part of the
fiscal year, with the expectation that interest rates would not rise
significantly from rates then in effect, the Manager added higher yielding
bonds to the Fund's portfolio, focusing on issues that could add yield at
attractive prices.
- Comparing the Fund's Performance to the Market. The chart
below shows the performance of a hypothetical $10,000 investment in each
Class of shares of the Fund held until June 30, 1994; in the case of Class
A shares, since August 16, 1985 (the date on which the Fund's investment
objective was changed), and in the case of Class C shares, from the
inception of the Class on December 1, 1993, with all dividends and capital
gains distributions reinvested in additional shares. The graph reflects
the deduction of the 4.75% maximum initial sales charge on Class A shares
and the 1.0% contingent deferred sales charge on Class C shares.
Oppenheimer U.S. Government Trust
Comparison of Change in Value
of $10,000 Hypothetical Investment to the
Lehman Brothers U.S. Government Bond Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer U.S. Government Trust
Average Annual Total Returns at 6/30/94
1-Year 5-Year Life
Class A: -5.87% 6.31% 7.64%
Class C:* -4.09% N/A N/A
_________________________________________
* Reflects Cumulative Total Return for period from inception of
the class (12/1/93) and is not annualized.
The Fund's performance is compared to the performance of the
Lehman Brothers U.S. Government Bond Index, an unmanaged index including
all U.S. Treasury issues, publicly-issued debt of U.S. Government agencies
and quasi-public corporations and U.S. Government guaranteed corporate
debt, and is widely regarded as a measure of the performance of the U.S.
Government bond market. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction
costs, and none of the data above shows the effect of taxes. Also, the
Fund's performance reflects the effect of Fund business and operating
expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it should be noted that the Fund's investments
are not limited to the securities in any one index and the index data does
not reflect any assessment of the risk of the investments included in the
index.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and may
likely have different share prices.
- Class A Shares. When you buy Class A shares, you pay an
initial sales charge (on investments up to $1 million). If you purchase
Class A shares as part of an investment of at least $1 million in shares
of one or more OppenheimerFunds you will not pay any initial sales charge,
but if you sell any of those shares within 18 months after your purchase,
you may pay a contingent deferred sales charge, which will vary depending
on the amount you invested.
- 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%.
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 advisors.
- How Much Do You Plan to Invest? If you plan to invest a
substantial amount over the long term, the reduced sales charges available
for larger purchases of Class A shares may be more beneficial to you than
purchasing Class C shares, because of the higher annual expenses Class C
shares will likely bear. For purchases over $1 million, the contingent
deferred sales charge on Class A shares may be more beneficial. The
Distributor will not accept any order for $1 million or more for Class C
shares on behalf of a single investor for that reason.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, investors who prefer
not to pay an initial sales charge and who plan to hold their shares for
more than one year might consider Class C shares. Investors who plan to
redeem shares within a year might consider whether the front-end sales
charge on Class A shares would result in higher net expenses after
redemption.
- Are There Differences in Account Features That Matter to You?
Because some account features may not be available for Class C
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares is better for
you. Additionally, the dividends payable to Class C shareholders will be
reduced by the additional expenses borne solely by that class, such as the
asset-based sales charge to which Class C shares are subject, as described
below and in the Statement of Additional Information.
- How Does It Affect Payments to My Broker? A salesperson or
any other person who is entitled to receive compensation for selling Fund
shares may receive different compensation for selling one class than for
selling another class. It is important that investors understand that the
purpose of the contingent deferred sales charge and asset-based sales
charge for Class C shares is the same as the purpose of the front-end
sales charge on sales of Class A 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; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing 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 OppenheimerFunds
(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.
- 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. When you buy shares, be sure to
specify Class A or Class C shares. If you do not choose, your investment
will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds 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.
- 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, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions. Shares
are purchased for your account 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 must request AccountLink privileges
on the application or dealer settlement instructions used to establish
your account. Please refer to "AccountLink" below for more details.
- Asset Builder Plans. You may purchase shares of the Fund (and
up to four other OppenheimerFunds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the Statement
of Additional Information.
- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value that is next determined after
the Distributor receives the purchase order in Denver. In most cases, to
enable you to receive that day's offering price, the Distributor must
receive your order by 4:00 P.M., New York time (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"). If you buy shares
through a dealer, the dealer must receive your order by 4:00 P.M., 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.
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, where purchases are not subject to an initial
sales charge, the offering price may be 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:
<PAGE>
_______________________________________________________________________
__________
Front-End Sales Charge Commission as
As a Percentage of: Percentage
of
Amount of Purchase Offering Price Amount Invested Offering
Price
_______________________________________________________________________
__________
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%
$1 million or more None* None* None*
_______________________________________________________________________
_________
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.
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of
the calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds 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.
- 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. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
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:
- Right of Accumulation. You and your spouse can cumulate Class
A shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate 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.
Additionally, you can cumulate current purchases of Class A shares
of the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds. 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 OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
Shareholders of the Fund who acquired (and still hold) Fund shares
as a result of a reorganization of the Fund with Advance America Funds,
Inc. on October 18, 1991, and who held shares of Advance America Funds,
Inc. on March 30, 1990, may purchase shares of the Fund at a maximum sales
charge of 4.50%.
- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the aggregate
amount of the intended purchases, including 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.
- Waivers of Class A Sales Charges. No sales charge is imposed
on sales of Class A shares to the following investors: (1) the Manager or
its affiliates; (2) 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; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) 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; (5)
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); (6) dealers, brokers or registered investment advisers
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; and (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administrative services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Oppenheimer Cash Reserves)
or unit investment trusts for which reinvestment arrangements have been
made with the Distributor. There is a further discussion of this policy
in "Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) returns of excess contributions made to
Retirement Plans, (3) Automatic Withdrawal Plan payments that are limited
to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees and (5) if, at the time an order is placed for Class A
shares that would otherwise be subject to the Class A contingent deferred
sales charge, the dealer agrees to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (with no further commission payable if the shares are redeemed
within 18 months of purchase).
- 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 dealer or its 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.
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 charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. 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 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.
- Waivers of Class C Sales Charge. The Class C contingent
deferred sales charge will be waived if the shareholder requests it for
any of the following redemptions: (1) 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 request),
or (b) following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary; (2) redemptions from
accounts other than Retirement Plans following the death or disability of
the shareholder (you must provide evidence of a determination of
disability by the Social Security Administration); (3) returns of excess
contributions to Retirement Plans; and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
59 1/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 59 1/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments over the life (or life
expectancy) of the participant or the joint lives (or joint life and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with other requirements for
such distributions under the Internal Revenue Code and may not exceed 10%
of the account value annually, measured from the date the Transfer Agent
receives the request).
The contingent deferred sales charge is also waived on Class C
shares in the following cases: (i) shares sold to the Manager or its
affiliates; (ii) 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; (iii) shares issued in plans
of reorganization to which the Fund is a party; and (iv) shares redeemed
in involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance
for the first year after Class C shares have been sold by the dealer.
After the shares have been held for a year, the Distributor pays the fee
on a quarterly basis. The Distributor pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of sale.
The Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. 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 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 Plan for Class C shares, those expenses may be
carried over and paid in future years. At June 30, 1994, the end of the
Plan year, the Distributor had not incurred unreimbursed expenses under
the Plan. 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.
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, including 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 refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must 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 on 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.
- 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.
- PhoneLink. PhoneLink is the OppenheimerFunds automated
telephone system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be used
on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number: 1-
800-533-3310.
- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
- Exchanging Shares. With the OppenheimerFunds Exchange
Privilege, described below, you can exchange shares automatically by phone
from your Fund account to another OppenheimerFunds account you have
already established by calling the special PhoneLink number. Please refer
to "How to Exchange Shares," below, for details.
- 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
OppenheimerFunds account on a regular basis:
- Automatic Withdrawal Plans. If your Fund account is $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 Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent
to exchange an amount you establish in advance automatically for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other OppenheimerFunds 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 Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge or on which you paid a contingent deferred
sales charge when you redeemed them. 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.
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:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-
exempt organizations, such as schools, hospitals and charitable
organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small
business owners or people with income from self-employment, including
SAR/SEP-IRAs.
- Pension and Profit-Sharing Plans for self-employed persons
and small business owners
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 on any regular
business day by selling (redeeming) some or all of your shares. 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, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, 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.
- Retirement Accounts. To sell shares in an OppenheimerFunds
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.
- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and
receive a check
- The check is not payable to all shareholders listed on the
account statement
- The check is not sent to the address of record on your
statement
- Shares are being transferred to a Fund account with a
different owner or name
- Shares are redeemed by someone other than the owners (such
as an Executor)
- 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 as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- 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 requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer Shareholder Services
10200 E. Girard Avenue, Building D
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 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-533-
3310
Whichever method you use, you may have a check sent to the address
on the account, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds wired to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, once in each 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. This service is not available within 30 days of
changing the address on an account.
- 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 wire 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 wired.
Check Writing. 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.
- Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding
Class B shares or Class A shares that are subject to a contingent
deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid
because (1) the owners of the account told the Fund not to pay the check,
or (2) the check was for more than the account balance, or (3) the check
did not have the proper signatures or (4) the check was written for less
than $100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available
for sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your
account for at least 7 days before you can exchange them; after the
account is open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund
you purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of
the same class in the other OppenheimerFunds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. At present, not all of the OppenheimerFunds offer the same classes
of shares. If a fund has only one class of shares that does not have a
class designation, they are "Class A" shares for exchange purposes. In
some cases, sales charges may be imposed on exchange transactions.
Certain OppenheimerFunds offer Class A shares and either Class B or Class
C shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. 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:
- 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."
- 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 OppenheimerFunds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative at 1-800-525-7048. Exchanges of shares involve a
redemption of the shares of the fund you own and a purchase of shares of
the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from
the other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request by 4:00 P.M.
that is in proper form, but either fund may delay the purchase of shares
of the fund you are exchanging into 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 disposition of securities at
a time or price disadvantageous to the Fund.
- 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.
- The Fund may amend, suspend or terminate the exchange
privilege at any time. Although the Fund will attempt to provide you
notice whenever it is reasonably able to do so, it may impose these
changes at any time.
- If the Transfer Agent cannot exchange all the shares you
request because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
The Distributor has entered into agreements with certain dealers
and investment advisers permitting them to exchange their clients' shares
by telephone. These privileges are limited under those agreements and the
Distributor has the right to reject or suspend those privileges. As a
result, those exchanges may be subject to notice requirements, delays and
other limitations that do not apply to shareholders who exchange their
shares directly by calling or writing to the Transfer Agent.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of
shares as of 4:00 P.M. each day The New York Stock 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, obligations for which market values cannot be
readily obtained, and call options and hedging instruments. These
procedures are described more completely in the Statement of Additional
Information.
- The offering of shares may be suspended during any period in
which the determination of net asset value is suspended, and the offering
may be suspended by the Board of Trustees at any time the Board believes
it is in the Fund's best interest to do so.
- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. 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.
- The Transfer Agent will record any telephone calls to verify
data concerning transactions and has adopted other procedures to confirm
that telephone instructions are genuine, by requiring callers to provide
tax identification numbers and other account data or by using PINs, and
by confirming such transactions in writing. If the Transfer Agent does
not use reasonable procedures it may be liable for losses due to
unauthorized transactions, but otherwise it will not 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.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that 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.
- 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 and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
- 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. 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 15 days from the date the shares
were purchased. That delay may be avoided 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.
- Involuntary redemptions in some cases may be made to repay the
Distributor for losses from the cancellation of share purchase orders.
- 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 the Statement of
Additional Information for more details.
- "Backup Withholding" of Federal income tax may be applied at
the rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- 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 charges when redeeming certain
Class A and Class C shares.
- To avoid sending duplicate copies of materials to households,
the Fund will mail only one copy of each annual and semi-annual report and
updated prospectus to shareholders having the same surname 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 and Class
C shares from net investment income each regular business day and pays
those dividends to shareholders monthly. Dividends are normally paid on
the last business day of each month, but the Board of Trustees can change
that date. The Board may also cause the Fund to declare dividends after
the close of the Fund's fiscal year (which ends June 30th). Also,
dividends paid on Class A shares generally are expected to be higher than
for Class C shares because expenses allocable to Class C shares will
generally be higher. The Fund does not 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-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends for tax purposes.
There can be no assurances 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
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- 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.
- Reinvest 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.
- 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.
- Reinvest Your Distributions in Another OppenheimerFunds
Account. You can reinvest all distributions in another OppenheimerFunds
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. 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.
- "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.
- Taxes on Transactions: Share redemptions, including
redemptions for exchanges, are subject to capital gains tax. A capital
gain or loss is the difference between the price you paid for the shares
and the price you received when you sold them.
- Returns of Capital: In certain cases distributions made by
the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal tax
information about your investment. More information is contained in the
Statement of Additional Information, and in addition you should consult
with your tax adviser about the effect of an investment in the Fund on
your particular tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER U.S. GOVERNMENT TRUST
Graphic material included in Prospectus of Oppenheimer U.S.
Government Trust: "Comparison of Total Return of Oppenheimer U.S.
Government Trust and the Lehman Brothers Government Bond Index - Change
in Value of a $10,000 Hypothetical Investment."
A linear graph will be included in the Prospectus of Oppenheimer
U.S. Government Trust (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 investment in each
Class of shares of the Funds held until June 30, 1994, in the case of
Class A shares, since August 16, 1985, and in the case of Class C shares,
from the inception of the Class on December 1, 1993, and comparing such
values with the same investments over the same time periods in the Lehman
Brothers Government Bond Index. Set forth below are the relevant data
points that will appear on the linear graph. Additional information with
respect to the foregoing, including a description of the Lehman Brothers
Government Bond Index, is set forth in the Prospectus under "Fund
Performance Information -- Management's Discussion of Performance."
Fiscal Year Oppenheimer Lehman Brothers
(Period) Ended U.S. Government Trust - A Government Bond Index
08/16/85 $9,525 $10,000
06/30/86 $10,803 $11,887
06/30/87 $11,371 $12,377
06/30/88 $12,268 $13,267
06/30/89 $13,430 $14,869
06/30/90 $14,282 $15,900
06/30/91 $15,645 $17,512
06/30/92 $17,688 $19,920
06/30/93 $19,403 $22,489
06/30/94 $19,218 $22,187
Fiscal Oppenheimer Lehman Brothers
Period Ended U.S. Government Trust - C Government Bond Index
12/1/93(1) $10,000 $10,000
06/30/94 $ 9,591 $9,625
- ----------------------
(1) Class C shares of the Fund were first publicly offered on December
1, 1993.
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Oppenheimer U.S. Government Trust
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
Investment Advisor
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47 Street
New York, New York 10036
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 Additional Statement, and if given or
made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds 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.
PR220 (10/94) * Printed on recycled paper
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Prospectus
Oppenheimer U.S. Government Trust
(OppenheimerFunds Logo)
<PAGE>
Prospectus and
New Account Application
Oppenheimer U.S. Government Trust
(OppenheimerFunds Logo)
<PAGE>
Oppenheimer U.S. Government Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated October 25, 1994
This Statement of Additional Information of Oppenheimer U.S.
Government Trust is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated October 25, 1994. It should be read together with the Prospectus,
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder 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 Objective and Policies 2
Other Investment Techniques and Strategies 2
Other Investment Restrictions 8
How the Fund is Managed 8
Organization and History 8
Trustees and Officers of the Fund 9
The Manager and Its Affiliates 12
Brokerage Policies of the Fund 14
Performance of the Fund 15
Distribution and Service Plans 18
About Your Account 20
How To Buy Shares 20
How To Sell Shares 25
How To Exchange Shares 29
Dividends, Capital Gains and Taxes 30
Additional Information About the Fund 32
Financial Information About the Fund 33
Independent Auditors' Report 33
Financial Statements 34
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ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described 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 the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
- U.S. Government Securities. Obligations of U.S. Government agencies
or instrumentalities may or may not be guaranteed or supported by the
"full faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full
faith and credit of the United States. If the securities are not backed
by the full faith and credit of the United States, the owner of the
securities must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United States
in the event that the agency or instrumentality does not meet its
commitment. The Fund will invest in U.S. Government Securities of such
agencies and instrumentalities only when the Manager is satisfied that the
credit risk with respect to such instrumentality is minimal.
General changes in prevailing interest rates will affect the values of
the Fund's portfolio securities. The value will vary inversely to changes
in such rates. For example, if such rates go up after a security is
purchased, the value of the security will generally decline. A decrease
in interest rates may affect the maturity and yield of mortgage-backed
securities by increasing unscheduled prepayments of the underlying
mortgages. With its objective of seeking interest income while conserving
capital, the Fund may purchase or sell securities without regard to the
length of time the security has been held, to take advantage of short-term
differentials in yields. While short-term trading increases the portfolio
turnover, the execution cost for U.S. Government Securities is
substantially less than for equivalent dollar values of equity securities.
Other Investment Techniques and Strategies
- Repurchase Agreements. In a repurchase transaction, at the time the
Fund acquires a U.S. Government Security, it simultaneously resells it to
an approved vendor (a commercial bank with assets of at least $1 billion
or a broker-dealer meeting Board established credit standards and which
has been designated a primary dealer in government securities) for
delivery on an agreed-upon future date. The repurchase 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 the resale typically will occur within one to five
days of the purchase. Repurchase agreements are considered "loans" under
the Investment Company Act of 1940 (the "Investment Company Act"),
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally,
Oppenheimer Management Corporation, the Fund's investment manager (the
"Manager"), will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
- 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 or
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. The terms of the letter 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 one or more of (a) negotiated loan fees,
(b) interest on securities used as collateral, or (c) interest on short-
term debt securities purchased with such loan collateral; either type of
interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees and 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
applicable 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.
- Writing Covered Calls. As described in the Prospectus, the Fund may
write covered calls. 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 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 investment), regardless of market price changes
during the call period. 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 related investments 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 options 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 a lack of a market, it would have to hold the
callable investments until the call lapsed or was exercised.
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. This 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 ("in-the-money"). For any OTC option the Fund
writes, it will treat as illiquid (for purposes of its restriction on
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 the general issue of whether or not OTC options should be
considered as liquid securities, and the procedure described above could
be affected by the outcome of that evaluation.
The Fund may also write calls on Interest Rate Futures without owning
a futures contract or deliverable bond, provided that at the time the call
is written, the Fund covers the call by segregating in escrow an
equivalent dollar value of liquid assets. The Fund will segregate
additional liquid assets if the value of the escrowed assets drops below
100% of the current value of the Future. In no circumstances would an
exercise notice as to a Future put the Fund in a short futures position.
- Hedging With Options and Futures Contracts. The Fund may use hedging
instruments for the purposes described in the Prospectus. When hedging
to attempt to protect against declines in the market value of the 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 Interest Rate
Futures, (ii) purchase puts on such Futures or on U.S. Government
Securities; or (iii) write covered calls on U.S. Government Securities or
on Interest Rate Futures. When hedging to attempt to protect against the
possibility that portfolio securities are not fully included in a rise in
value of the bond market, the Fund may: (i) purchase Interest Rate
Futures, or (ii) purchase calls on such Futures or on U.S. Government
Securities. Additional information about the Hedging Instruments the Fund
may use is provided below.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's investment activities in the underlying cash
market. 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 objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
- Interest Rate Futures. No price is paid or received upon the
purchase of an Interest Rate Future. Upon entering into a Futures
transaction, the Fund will be required to deposit an initial margin
payment, equal to a specified percentage of the contract value, with the
futures commission merchant (the "broker"). Initial margin payments will
be deposited with the Fund's custodian bank in an account registered in
the broker's name; however, the 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 payments, called variation
margin, will be made to and from the 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 the actual delivery or acquisition of the
specified debt security, in most cases the obligation is fulfilled by
closing out the position. All futures transactions are effected through
a clearing house associated with the exchange on which the contracts are
traded.
- Writing Put Options. The Fund may write put options on U.S.
Government Securities. A put option gives the purchaser the right to
sell, and 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 expires unexercised, the Fund (as
the writer) 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 sale price of the underlying investment
and the premium received minus the sum of the exercise price and any
transaction costs incurred.
When writing put options, 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 underlying
securities. The Fund therefore foregoes 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.
- Purchasing Puts and Calls. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and has the
right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. The Fund benefits only if 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 call price plus the transaction costs and the premium
paid for the call 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 premium payment and the right
to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and has the right to
sell the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price. Buying a put
on U.S. Government Securities or Futures the Fund owns enables the Fund
to attempt to protect itself during the put period against a decline in
the value of the underlying investment below the exercise price by selling
the 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).
Purchasing either a put on Interest Rate Futures or on U.S. Government
Securities it does not own permits the Fund either to resell the put or
to 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. In the event of a
decline in price of the underlying investment, the Fund could exercise or
sell the put at a profit to attempt to offset some or all of its loss on
its portfolio securities. When the Fund purchases a put on an Interest
Rate Future or U.S. Government Security not held by it, the put protects
the Fund to the extent that the prices of the underlying Future or U.S.
Government Securities move in a similar pattern to the prices of the U.S.
Government Securities in the Fund's portfolio.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. Subject to the limitations described
in the Prospectus, 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 that 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". The Fund may not subject more than 25% of its total
assets to interest rate swaps.
- 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 calls 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 calls or upon the
Fund entering into a closing purchase transaction. An option position may
be closed out 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 of calls written by the Fund may cause the Fund
to sell portfolio U.S. Government Securities, thus increasing the turnover
rate in a manner beyond the Fund's control. The exercise by the Fund of
puts on U.S. Government Securities or Futures 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 underlying investment for reasons which would not exist in the
absence of the put. The Fund will pay a brokerage commission every time
it buys or sells a call, a put or an underlying investment in connection
with the exercise of a put or call. Such commissions may be higher on a
relative basis than on general securities transactions. Premiums paid for
options are small in relation to the market value of the underlying
investments and consequently, put and call options offer large amounts of
leverage.
- Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its positions in Futures and options
thereon under a rule ("CFTC Rule") adopted by the Commodity Futures
Trading Commission ("CFTC") under the Commodity Exchange Act (the "CEA"),
which exempts the Fund from registration with the CFTC as a "commodity
pool operator" (as defined under the CEA) if it complies with the CFTC
Rule. Under these restrictions, the Fund will not, as to any positions,
whether short, long or a combination thereof, enter into Futures and
options thereon for which the aggregate initial margins and premiums
exceed 5% of the fair market value of its net assets, with certain
exclusions as defined in the CFTC Rule. Under the restrictions, the Fund
also must, as to its short positions, use Futures and options thereon
solely for bona fide hedging purposes within the meaning and intent of the
applicable provisions of the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which 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
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 or an affiliated investment adviser.
Position limits also 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.
- 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
investments, including Interest Rate 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 options which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
written or 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 less than three months.
- Risks of Hedging With Options and Futures. In addition to the risks
with respect to options and futures discussed in the Prospectus and above,
there is a risk in using short hedging by selling Interest Rate Futures
to attempt to protect against decline in value of the Fund's portfolio
securities that the prices of Interest Rate Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's securities. The 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 market
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures market depends 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market
may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
U.S. Government Securities markets as a temporary substitute for the
purchase of individual U.S. Government Securities by buying Interest Rate
Futures and/or calls on such Futures or on U.S. Government 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 U.S. Government Securities.
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 objective 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 present or
represented by proxy at a shareholder meeting, if the holders of more than
50% of the outstanding shares are present, or (2) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) invest in
commodities or commodity contracts or invest in interests in oil, gas, or
other mineral exploration or development programs; however, the Fund may
buy and sell any of the Hedging Instruments which it may use as permitted
by any of its other fundamental policies, whether or not any such Hedging
Instrument is considered to be a commodity or a commodity contract; (2)
invest in real estate; (3) purchase securities on margin or make short
sales of securities; however, the Fund may make margin deposits in
connection with any of the Hedging Instruments which it may use as
permitted by any of its other fundamental policies; (4) underwrite
securities of other companies; or (5) invest in securities of other
investment companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
How the Fund is Managed
Organization and History. The Fund was organized in 1982 as a
Massachusetts business trust. Effective August 16, 1985, the Fund changed
its investment objective and became a long-term government securities
fund.
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 listed below. The address of each Trustee and officer is Two
World Trade Center, New York, New York 10048-0203, unless another address
is listed below. All of the Trustees are also trustees of Oppenheimer
Fund, Oppenheimer Global Fund, Oppenheimer Time Fund, Oppenheimer Special
Fund, Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Bio-Tech Fund, Oppenheimer Global Environment Fund,
Oppenheimer Gold & Special Minerals Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset
Allocation Fund, Oppenheimer Mortgage Income Fund, Oppenheimer Target
Fund, Oppenheimer Multi-Sector Income Trust and Oppenheimer Multi-
Government Trust (the "New York-based OppenheimerFunds"). Messrs. Spiro,
Bishop, Bowen, Donohue, Farrar and Zack respectively hold the same offices
with the other New York-based OppenheimerFunds as with the Fund. As of
September 30, 1994, the Trustees and officers of the Fund as a group owned
less than 1% of the outstanding shares of the Fund.
Leon Levy, Chairman of the Board of Trustees
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Leo Cherne, Trustee
386 Park Avenue South, New York, New York 10016
Chairman Emeritus of the International Rescue Committee (philanthropic
organization); formerly Executive Director of The Research Institute
of America.
Robert G. Galli, Trustee*
Vice Chairman of the Manager and Vice President and Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company;
formerly he held the following positions: a director of the Manager
and Oppenheimer Funds Distributor, Inc. (the "Distributor"), Vice
President and a director of HarbourView Asset Management Corporation
("HarbourView") and Centennial Asset Management Corporation
("Centennial"), investment advisory subsidiaries of the Manager, a
director of Shareholder Financial Services, Inc. ("SFSI") and
Shareholder Services, Inc. ("SSI"), transfer agent subsidiaries of the
Manager, an officer of other OppenheimerFunds and Executive Vice
President and General Counsel of the Manager and the Distributor.
Benjamin Lipstein, Trustee
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Elizabeth B. Moynihan, Trustee
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the American Schools
of Oriental Research and of the Freer Gallery of Art, Smithsonian
Institution; a member of the Indo-U.S. Sub-Commission on Education and
Culture; a trustee of the Institute of Fine Arts, New York University;
and a trustee of the Preservation League of New York State.
Kenneth A. Randall, Trustee
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Northeast Bancorp, Inc. (bank holding company), Dominion
Resources, Inc. (electric utility holding company) and Kemper
Corporation (insurance and financial services company); formerly
Chairman of the Board of ICL, Inc. (information systems).
Edward V. Regan, Trustee
40 Park Avenue, New York, New York 10016
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc.
(healthcare provider); formerly New York State Comptroller and a
trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee
200 Park Avenue, New York, New York 10166
Founder and Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of
Finance, University of Hawaii; a director of The Korea Fund, Inc. and
The Malaysia Fund, Inc. (closed-end investment companies); a member of
the Board of Advisors, Olympus Private Placement Fund, L.P.; Professor
Emeritus of Finance, Adelphi University.
Donald W. Spiro, President and Trustee*
Chairman Emeritus and a director of the Manager; formerly Chairman of
the Manager and the Distributor.
Pauline Trigere, Trustee
550 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale
of women's fashions).
Clayton K. Yeutter, Trustee
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), FMC Corp.
(chemicals and machinery), Lindsay Manufacturing Co. (irrigation
equipment), Texas Instruments, Inc. (electronics) and The Virgo
Corporation (fertilizer manufacturer); formerly (in descending
chronological order) Deputy Chairman, Bush/Quayle Presidential
Campaign, Counsellor to the President (Bush) for Domestic Policy,
Chairman of the Republican National Committee, Secretary of the U.S.
Department of Agriculture, and U.S. Trade Representative.
Andrew J. Donohue, Secretary
Executive Vice President and General Counsel of the Manager and the
Distributor; an officer of other OppenheimerFunds; formerly Senior
Vice President and Associate General Counsel of the Manager and the
Distributor, prior to which he was a 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
investment adviser), and a director and an officer of First Investors
Family of Funds and First Investors Life Insurance Company.
David Rosenberg, Vice President and Portfolio Manager
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly, an Officer and Portfolio Manager for Delaware Investment
Advisors and for one of its mutual funds.
George C. Bowen, Treasurer
3410 South Galena Street, Denver, Colorado 80231
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; an officer of
other OppenheimerFunds.
Robert G. Zack, Assistant Secretary
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an Accountant for Resolution Trust
Corporation and previously an Accountant and Commissions Supervisor
for Stuart James Company Inc., a broker-dealer.
Scott Farrar, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company, before
which he was a sales representative for Central Colorado Planning.
[FN]
- -------------------------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Mr. Galli and Mr. Spiro, who is both an
officer and Trustee) receive no salary or fee from the Fund. During the
Fund's fiscal year ended June 30, 1994, the remuneration (including
expense reimbursements) paid to all Trustees of the Fund (excluding Mr.
Galli and Mr. Spiro) as a group for services as trustees and as members
of one or more committees of the Board, totalled $35,120. The Fund has
adopted a retirement plan that provides for payment to a retired Trustee
of up to 80% of the average compensation paid during that Trustee's five
years of service in which the highest compensation was received. A
Trustee must serve in that capacity for any of the New York-based
OppenheimerFunds for at least 15 years to be eligible for the maximum
payment. No Trustee has retired since the adoption of the plan and no
payments have been made by the Fund under the plan. The accumulated
liability for the Fund's projected benefit obligations under the plan was
$122,000 as of June 30, 1994.
- Major Shareholders. As of September 30, 1994, no person owned
of record or was known by the Fund to own beneficially 5% or more of the
Fund's outstanding shares.
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 two of whom (Messrs. Galli and Spiro)
serve as Trustees of the Fund.
- 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 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 independent Trustees, legal and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation. For the Fund's fiscal years ended June 30, 1992,
1993 and 1994, the management fees paid by the Fund to the Manager were
$2,735,353, $2,911,199 and $2,515,934, respectively.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that the total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to
the undertaking, the Manager's fee will be reduced at the end of a month
so that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. The Manager reserves
the right to terminate or amend the undertaking at any time. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
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 its other investment activities.
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 corporate
name may be withdrawn.
- The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A and Class C shares but is not
obligated to sell a specific number of shares. Expenses normally
attributable to sales, 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 years ended June
30, 1992, 1993 and 1994, the aggregate sales charges on sales of the
Fund's Class A shares were $1,881,944, $1,823,585 and $876,525,
respectively, of which the Distributor and an affiliated broker-dealer
retained in the aggregate $660,099, $594,110 and $282,424 in those
respective years. There were no contingent deferred sales charges
collected by the Distributor on the redemption of Class C shares during
the period from December 1, 1993 (the commencement of the offering of
those shares) through June 30, 1994. 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.
- The Transfer Agent. Oppenheimer Shareholder 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 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.
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 and 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, the procedures and rules
described above, allocations of brokerage are made by portfolio managers
of the Manager under the supervision of the Manager's executive officers.
As most purchases made by the Fund are principal transactions at net
prices, the Fund incurs little or no brokerage costs. The Fund usually
deals directly with the selling or purchasing principal or market maker
without incurring charges for the services of a broker on its behalf
unless it is determined that better price or execution may be obtained by
utilizing the services of a broker. Purchases of portfolio 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. The Fund seeks to obtain prompt execution of
orders at the most favorable net price.
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.
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 research services provided by brokers broadens the scope and
supplement 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 Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
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 "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 yields and 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 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 yields, total 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. Yields and total returns for any given past period are not
a prediction or representation by the Fund of future yields or rates of
return on its shares. The yields and total returns of Class A 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.
- Standardized Yields. 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 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 the class on the last
day of the period, using the current maximum sales charge rate
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 June 30, 1994, the standardized yields for the
Fund's Class A and Class C shares were 6.14% and 5.57%, respectively.
- 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 Class A or Class C share 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 current
maximum front-end sales charge. For 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 June 30, 1994, were
7.13% and 7.48% when calculated at maximum offering price and at net asset
value, respectively. The dividend yield on Class C shares for the 30-day
period ended June 30, 1994, was 6.63% when calculated at net asset
value.
- 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 )
- 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 is shown at net asset
value, as described below). For Class C shares, the 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 returns" on an
investment in Class A shares of the Fund for the one and five year periods
ended June 30, 1994 and for the period from August 16, 1985 to June 30,
1994, were (5.87)%, 6.31% and 7.64%, respectively. The cumulative "total
return" on Class A shares for the period from August 16, 1985 to June 30,
1994 was 92.18%. During a portion of the periods for which total returns
are shown for Class A shares, the Fund's maximum initial sales charge rate
was higher; as a result, performance returns on actual investments during
those periods may be lower than the results shown. The cumulative total
return on Class C shares for the period from December 1, 1993 (the
commencement of the offering of the shares) through June 30, 1994 was
(6.91)%.
- 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 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 cumulative total return at net asset
value of the Fund's Class A shares for the period from August 16, 1985 to
June 30, 1994 was 101.76%. The average annual total returns at net asset
value for the one and five year periods ended June 30, 1994 and for the
period from August 16, 1985 to June 30, 1994, for Class A shares were
(1.17)%, 7.35% and 8.23%, respectively.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent service. Lipper monitors
the performance of regulated investment companies, including the Fund, and
ranks their performance for various periods based on categories relating
to investment objectives. The performance of the Fund is ranked against
(i) all other funds (excluding money market funds), (ii) all other U.S.
Government funds and (iii) all other U.S. Government funds in a specific
size category. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income
dividends but do not take sales charges or taxes into consideration.
From time to time the Fund may publish the ranking of the
performance of its Class A or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day Treasury
bill returns after considering sales charges and expenses. Risk reflects
fund performance below 90-day U.S. Treasury bill monthly returns. Risk
and return are combined to produce star rankings reflecting performance
relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next is
22.5%), three stars is "average" next 35%), two stars is "below average"
(next 22.5%) and one star is "lowest" (bottom 10%). Morningstar ranks the
Fund in relation to other U.S. Government funds. Rankings are subject to
change.
The total return on an investment made in Class A or Class C shares of
the Fund may be compared with the performance for the same period of the
Lehman Brothers U.S. Government Bond Index, an unmanaged index including
all U.S. Treasury issues, publicly- issued debt of U.S. Government
agencies and quasi-public corporations and U.S. Government-guaranteed
corporate debt, and is widely regarded as a measure of the performance of
the U.S. Government bond market. The foregoing bond index includes a
factor for the reinvestment of interest but does not reflect expenses or
taxes. Other indices may be used from time to time.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New
York Times. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
When comparing yield, total return and investment risk of an investment
in Class A or Class C shares of the Fund with other investments, investors
should understand that certain other investments have different risk
characteristics than an investment in shares of the Fund. For example,
certificates of deposit may have fixed rates of return and may be insured
as to principal and interest by the FDIC, while the Fund's returns will
fluctuate and its share values and returns are not guaranteed. U.S.
Treasury securities are guaranteed as to principal and interest by the
full faith and credit of the U.S. government.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class C shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. 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. For the
Distribution and Service Plan for Class C shares, that vote was cast by
the Manager as the sole initial holder of Class C shares of the Fund.
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.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its 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. Either 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. Neither Plan 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. 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 payment. The report for the Class C Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been 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 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
fee at the maximum rate and set no minimum amount. For the fiscal year
ended June 30, 1994, payments under the Class A Plan totalled $863,331,
all of which was paid by the Distributor to Recipients, including $56,187
paid to MML Investor Services, Inc., an affiliate of the Distributor.
Payments made under the Class C Plan during that fiscal period totalled
$12,509.
Any unreimbursed expenses incurred by the Distributor with respect to
Class A shares for any fiscal year may not be recovered in subsequent
years. Payments received by the Distributor under the Plan for Class A
shares will not be used to pay any interest expense, carrying charge, or
other financial costs, or allocation of overhead by the Distributor.
The Class C Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class C 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
Class C shares sold. An exchange of shares does not entitle the Recipient
to an advance service fee payment. In the event Class C shares are
redeemed during the first year that the shares are outstanding, the
Recipient will be obligated to repay a pro rata portion of the advance
payment for those shares to the Distributor.
Although the Class C Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class C shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor 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 C Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class C
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees.
The Class C Plan allows for the carry-forward of distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal
periods, as described in the Prospectus. The asset-based sales charge
paid to the Distributor by the Fund under the Class C Plan is intended to
allow the Distributor to recoup the cost of sales commissions paid to
authorized brokers and dealers at the time of sale, plus financing costs,
as described in the Prospectus. Such payments may also be used to pay for
the following expenses in connection with the distribution of Class C
shares: (i) financing the advance of the service fee payment to Recipients
under the Class C Plan, (ii) compensation and expenses of personnel
employed by the Distributor to support distribution of Class C shares, and
(iii) costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky" registration
fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class C Shares. The
availability of two classes of shares permits an 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 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
$1 million or more of Class C shares 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 two 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
C shares and the dividends payable on Class C shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class C shares are subject.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either 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 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 (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) 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 and Class C shares of the Fund are determined each day the New
York Stock Exchange (the "NYSE") is open, as of 4:00 P.M., New York time,
that day, by dividing the value of the Fund's net assets attributable to
that class by the number of Fund shares of that class outstanding. The
NYSE'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. Dealers may conduct trading at
times when the NYSE is closed (including weekends and holidays) so that
debt securities of the same type held by the Fund may be traded. Because
the net asset values of the Fund will not be calculated at such times, if
debt securities held in the Fund's portfolio are traded at such times, the
net asset values per share of Class A and Class C shares of the Fund may
be significantly affected at times when shareholders do not have the
ability to 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 securities exchange or on NASDAQ are valued at the
last sales prices on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sale prices of the
preceding trading day or closing bid and asked prices); (ii) NASDAQ and
other unlisted equity securities for which last sale prices are not
regularly reported but for which over-the-counter market quotations are
readily available are valued at the highest closing bid price as of the
time of valuation, or, if no closing bid price is reported, on the basis
of a closing bid price obtained from a dealer who maintains an active
market in that security; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; (iv) long-term debt securities,
and short-term debt securities having a remaining maturity in excess of
60 days, are valued at the mean between the asked and bid prices
determined by a portfolio pricing service appointed by the Fund's Board
of Trustees or obtained from active market makers in the security; and (v)
short-term debt securities having a remaining maturity of 60 days or less
are valued at cost, adjusted for amortization of premiums and accretion
of discounts. In the case of U.S. Government Securities and all 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 Trustees will monitor the accuracy of
pricing services by comparing prices used for portfolio evaluation to
actual sales prices of selected securities.
Puts, calls and Futures are valued at the last sales prices on the
principal exchanges on which they are traded or on NASDAQ, as applicable,
or, if there are no sales that day, in accordance with (i) above. When
the Fund writes an option, an amount equal to the premium received by the
Fund is included in its Statement of Assets and Liabilities as an asset
and an equivalent deferred credit is included in the liability section.
The deferred credit is adjusted ("marked-to-market") to reflect the
current market value of the option.
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
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Rights of
Accumulation and Letters of Intent because of the economies of sales
efforts and expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain circumstances
described in the Prospectus because the Distributor or dealer or broker
incurs little or no selling expenses. The term "immediate family" refers
to one's spouse, children, grandchildren, parents, grandparents, parents-
in-law, brothers and sisters, sons- and daughters-in-law, siblings, and
a sibling's spouse and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the OppenheimerFunds 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).
- Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) 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 reinvestments 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 obtain the reduced sales charge rate (as set forth
in the Prospectus) applicable to purchases of shares in that amount (the
"intended purchase amount"). Each purchase under the Letter will be made
at the public offering price applicable to a single lump-sum purchase of
shares in the intended purchase amount, as described in the Prospectus.
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.
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.
- 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 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 the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a 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 "Exchange Privilege," 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
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, 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.
Check Writing. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
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.
- 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 will be the same as the method
the Fund uses to value it 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 C shares that were subject to the Class C contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
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 OppenheimerFunds 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 either 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 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, 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) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. 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. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required redemption documents, with signature(s) guaranteed
as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (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
Withdrawal Plan. Class C shareholders should not establish withdrawal
plans that would require the redemption of shares held less than 12
months, because of the imposition of the Class C contingent deferred sales
charge on such withdrawals (except where the Class C contingent deferred
sales charge is waived as described in the Prospectus under "Class C
Contingent Deferred Sales Charge").
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 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.
- 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 OppenheimerFunds 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.
- 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.
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.
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 AccountLink 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
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
OppenheimerFunds that have a single class designation are deemed "Class
A" shares for this purpose. All of the OppenheimerFunds offer Class A
shares (except for Oppenheimer Strategic Diversified Income Fund), but
only the following other OppenheimerFunds (referred to as "Advisors
Portfolio" funds) offer Class C shares:
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Target Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Cash Reserves (Class C and B shares are available only
by exchange)
Oppenheimer Strategic Diversified Income Fund
Class A shares of OppenheimerFunds 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
OppenheimerFunds 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). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds 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 OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds 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 (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). 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 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 C contingent deferred sales charge 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 both classes must specify whether they intend to exchange Class A or
Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. 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 OppenheimerFunds 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 income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends 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 and Class C,"
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 C
shares are expected to be lower as a result of the asset-based sales
charge on Class C shares, and Class C dividends will also differ in amount
as a consequence of any difference in net asset value between Class A and
Class C shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A and Class C shares will be
reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Any long-term capital gains distributions will be identified
separately when paid and when tax information is distributed by the Fund.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
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 as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund 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 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 funds listed in the
Prospectus as "Eligible Funds," at net asset value without sales charge.
Class C shareholders should be aware that as of the date of this
Additional Statement, not all Eligible Funds offer Class C shares. To
elect this option, the shareholder must notify the Distributor in writing,
and either must have an existing account in the fund selected for dividend
reinvestment or must obtain a prospectus for that fund and application
from the Transfer Agent to establish an account. The investment will be
made at net asset value per share in effect at the close of business on
the payable date of the dividend or distribution. Dividends and
distributions from other Eligible Funds may be invested in shares of the
Fund on the same basis.
Additional Information About the Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and 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.
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 certain other funds advised by the Manager
and its affiliates.
Independent Auditors' Report
The Board of Trustees and Shareholders of Oppenheimer U.S. Government
Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer U.S. Government Trust as of June 30, 1994, and
the related statement of operations for the year then ended, the
statements of changes in net assets for each of the years in the two-year
period then ended and the financial highlights for each of the years in
the ten-year period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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 and financial highlights. Our
procedures included confirmation of securities owned as of June 30, 1994,
by correspondence with the custodian and brokers; and where confirmations
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, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer U.S. Government Trust as of June 30, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended, and the
financial highlights for each of the years in the ten-year period then
ended, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
- ------------------------
Denver, Colorado
July 22, 1994
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- -----------------------------------------------------------------------
- -------------------------------------------
<S>
<C> <C>
Repurchase Agreements--1.0%
Repurchase agreement with First Chicago Capital Markets, 4.22%, dated
6/30/94,
to be repurchased at $3,300,387 on 7/1/94, collateralized by U.S. Treasury
Nts.,
5.125%, 11/30/98, with a value of $3,368,643 (Cost $3,300,000)
$3,300,000 $3,300,000
Long-Term U.S. Government Obligations--97.8%
Agency: Full Faith and
Credit--33.2%
Government National Mortgage Assn.:
10.50%, 2/15/13
9,046 9,891
10.50%, 6/15/13
102,908 112,521
10.50%, 7/15/13
80,309 87,811
10.50%, 8/15/13
554,934 606,771
10.50%, 8/15/15
89,296 97,654
10.50%, 9/15/15
92,884 101,580
10.50%, 10/15/15
27,315 29,872
10.50%, 11/15/15
48,711 53,272
10.50%, 12/15/15
35,629 38,965
10.50%, 1/15/16
278,625 304,748
10.50%, 2/15/16
1,693,843 1,852,626
10.50%, 3/15/16
281,765 308,178
10.50%, 4/15/16
44,168 48,309
10.50%, 5/15/16
44,899 49,108
10%, 6/15/16
417,477 449,861
10.50%, 6/15/16
24,636 26,946
10.50%, 8/15/16
81,006 88,601
10.50%, 10/15/16
147,640 161,480
10.50%, 11/15/16
283,844 310,452
10.50%, 6/15/17
194,543 212,819
10.50%, 7/15/17
75,029 82,078
10%, 8/15/17
2,912,386 3,139,378
10.50%, 10/15/17
360,966 394,877
10.50%, 11/15/17
87,691 95,929
10.50%, 12/15/17
2,965,155 3,243,705
10.50%, 1/15/18
200,795 219,711
10.50%, 3/15/18
212,550 232,570
10.50%, 6/15/18
80,783 88,392
10.50%, 8/15/18
14,313 15,661
10.50%, 9/15/18
566,970 620,374
10.50%, 10/15/18
177,428 194,140
10.50%, 12/15/18
45,303 49,571
10.50%, 1/15/19
126,098 138,014
10.50%, 3/15/19
75,645 82,794
10.50%, 4/15/19
1,942 2,126
10.50%, 5/15/19
1,944,123 2,127,827
10.50%, 6/15/19
2,597,478 2,828,723
10.50%, 7/15/19
87,231 95,474
10.50%, 8/15/19
1,025,399 1,122,291
10.50%, 5/15/20
100,206 109,713
11%, 7/20/20
223,450 245,068
10.50%, 10/15/20
24,367 26,679
10.50%, 5/15/21
146,043 159,961
8%, 4/15/22
847,696 836,049
</TABLE>
4 Oppenheimer U.S. Government Trust
<PAGE> 5
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- -----------------------------------------------------------------------
- --------------------------------------------
<S>
<C> <C>
Agency: Full Faith and Credit
(continued)
8%, 9/15/22
$ 3,949,604 $ 3,895,337
6.50%, 9/15/23
248,312 220,931
6.50%, 10/15/23
14,326,733 14,120,040
6.50%, 12/15/23
207,645 184,748
6.50%, 2/15/24
233,980 207,801
8%, 4/15/24
3,360,157 3,311,839
8%, 5/15/24
8,741,098 8,615,401
8%, 6/15/24
5,567,724 5,487,660
7.50%, 7/15/24(3)(5)
49,500,000 47,241,316
------------
104,387,643
Agency: Government
Sponsored--40.3%
Federal Home Loan Mortgage Corp., Collateralized Mortgage Obligations,
Guaranteed Multiclass Mortgage Participation Certificates:
14%, 1/11/11
785,150 892,394
6.80%, 3/15/16
15,000,000 14,981,250
8.50%, 10/15/19
3,100,000 3,191,481
- -----------------------------------------------------------------------
- -------------------------------------------
Federal National Mortgage Assn., Collateralized Mortgage Obligations,
Guaranteed Real Estate Mortgage Investment Conduit Pass-Through
Certificates:
8.50%, 1/25/00
29,617,000 26,180,536
8%, 3/25/01
11,700,000 11,852,918
13%, 11/1/12
330,156 371,462
8%, 7/25/19
18,000,000 18,286,738
8.75%, 12/25/20
22,500,000 23,284,329
9%, 7/1/21
2,030,600 2,105,002
9%, 7/15/21
4,000,000 4,127,079
8%, 12/1/22
3,602,262 3,562,169
7%, 9/25/23
34,296,980 12,630,934
Principal-Only Stripped Mtg-Backed Security, Trust 253, 0%, 11/25/23(1)
1,000,028 475,639
Interest-Only Stripped Mtg-Backed Security, Trust 257, Class 2, 7%,
2/25/24(2) 12,869,043 4,779,643
------------
126,721,574
Treasury--24.3%
U.S. Treasury Bonds:
12%, 8/15/20
22,500,000 30,839,064
11.625%, 11/15/20
7,850,000 9,967,042
- -----------------------------------------------------------------------
- -------------------------------------------
U.S. Treasury Nts.:
9.50%, 11/15/95
5,000,000 5,243,750
8.50%, 5/15/97(4)
28,750,000 30,232,404
------------
76,282,260
Total Long-Term U.S. Government Obligations (Cost $306,338,645)
307,391,477
------------
</TABLE>
5 Oppenheimer U.S. Government Trust
<PAGE> 6
Statement of Investments (Continued)
<TABLE>
<CAPTION>
Shares
Subject Market Value
Date/Price to Call See Note 1
- -----------------------------------------------------------------------
- ---------------------------------------------------------
<S>
<C> <C> <C>
Call Options Purchased--0.1%
- -----------------------------------------------------------------------
- ---------------------------------------------------------
U.S. Treasury Bonds, 7.25%, 5/15/04 (Cost $292,187)
Aug./$ 100.4375 22,000 $ 140,932
- -----------------------------------------------------------------------
- ---------------------------------------------------------
Total Investments, at Value (Cost $309,930,832)
98.9% 310,832,409
- -----------------------------------------------------------------------
- ---------------------------------------------------------
Other Assets Net of Liabilities
1.1 3,455,036
------ -------------
Net Assets
100.0 % $ 314,287,445
</TABLE>
1. Principal-Only Strips represent the right to receive the monthly
principal payments on an underlying pool of mortgage loans. The value of
these securities generally increases as prepayment rates rise.
2. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities are subject to the risk of accelerated principal paydowns as
interest rates decline. The principal amount represents the notional
amount on which current interest is calculated.
3. When-issued security to be delivered and settled after June 30, 1994.
4. Securities with an aggregate market value of $10,515,619 are held in
escrow to cover initial margin requirements on open interest rate futures
sales contracts, as follows:
<TABLE>
<CAPTION>
Type of Contract
Number of Contracts Face Amount
- -----------------------------------------------------------------------
- -----------------------------------------------------------
<S>
<C> <C>
U.S. Treasury Nts., 9/94
100 $10,000,000
</TABLE>
The market value of the open contracts was $10,342,188 at June 30, 1994,
with a net unrealized loss of $84,375.
5. Securities with an aggregate market value of $28,631,101 are held in
escrow to cover outstanding call options, as follows:
<TABLE>
<CAPTION>
Shares Subject
Expiration Exercise Premium Market Value
to Call
Date Price Received See Note 1
- -----------------------------------------------------------------------
- ------------------------------------------------------------
<S> <C>
<C> <C> <C> <C>
Government National Mortgage Assn. 30,000
8/94 $99.375 $290,625 $150,000
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer U.S. Government Trust
<PAGE> 7
Statement of Assets and Liabilities June 30, 1994
<TABLE>
<S>
<C>
Assets
Investments, at value (cost $309,930,832)--see accompanying statement
$310,832,409
- -----------------------------------------------------------------------
- ------------------------------------------------------
Cash
101,565
Receivables:
Investments sold
50,509,259
Shares of beneficial interest sold
4,039,457
Interest and principal paydowns
3,073,764
- -----------------------------------------------------------------------
- ------------------------------------------------------
Other
37,755
------------
Total assets
368,594,209
Liabilities
Options written, at value (premiums received $290,625)--see accompanying
statement--Note 5 150,000
Unrealized depreciation on forward contracts
84,375
Payables and other liabilities:
Investment purchased
47,631,172
Shares of beneficial interest redeemed
6,029,922
Distribution and service plan fees--Note 4
196,867
Other
214,428
------------
Total liabilities
54,306,764
Net Assets
$314,287,445
============
Composition of
Net Assets
Paid-in capital
$334,477,570
- -----------------------------------------------------------------------
- ------------------------------------------------------
Undistributed net investment income
149,269
- -----------------------------------------------------------------------
- ------------------------------------------------------
Accumulated net realized loss from investment transactions and written
option transactions (21,297,221)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Net unrealized appreciation of investments--Note 3
957,827
------------
Net assets
$314,287,445
============
Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$310,026,529 and 33,684,502 shares of beneficial interest outstanding)
$9.20
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price)
$9.66
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets
of $4,260,916 and 463,512 shares of beneficial interest outstanding)
$9.19
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer U.S. Government Trust
<PAGE> 8
Statement of Operations For the Year Ended June 30, 1994
<TABLE>
<S>
<C>
Investment Income
Interest
$27,701,376
Expenses
Management fees--Note 4
2,515,934
- -----------------------------------------------------------------------
- ------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4
863,331
Class C--Note 4
12,509
- -----------------------------------------------------------------------
- ------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
303,755
- -----------------------------------------------------------------------
- ------------------------------------------------------
Shareholder reports
156,383
- -----------------------------------------------------------------------
- ------------------------------------------------------
Custodian fees and expenses
61,792
- -----------------------------------------------------------------------
- ------------------------------------------------------
Trustees' fees and expenses
57,770
- -----------------------------------------------------------------------
- ------------------------------------------------------
Legal and auditing fees
32,424
- -----------------------------------------------------------------------
- ------------------------------------------------------
Registration and filing fees--Class C
1,542
- -----------------------------------------------------------------------
- ------------------------------------------------------
Other
77,714
-----------
Total expenses
4,083,154
Net Investment Income
23,618,222
Realized and Unrealized
Loss on Investments
Net realized loss on investments
(11,210,170)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Net change in unrealized depreciation on investments
(15,469,786)
Net realized and unrealized loss on investments
(26,679,956)
Net Decrease in Net Assets Resulting From Operations
$(3,061,734)
===========
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer U.S. Government Trust
<PAGE> 9
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30,
1994 1993
- -----------------------------------------------------------------------
- ----------------------------------------------------
<S>
<C> <C>
Operations
Net investment income
$ 23,618,222 $ 27,729,894
- -----------------------------------------------------------------------
- ----------------------------------------------------
Net realized gain (loss) on investments and options written
(11,210,170) 4,056,978
- -----------------------------------------------------------------------
- ----------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
(15,469,786) 5,024,826
------------ -------------
Net increase (decrease) in net assets resulting from operations
(3,061,734) 36,811,698
Dividends to
Shareholders
Dividends from net investment income:
Class A ($.634 and .678 per share, respectively)
(21,966,741) (27,733,632)
Class C ($.329 per share)
(76,280) --
Dividends in excess of net investment income:
Class A ($.012 per share)
(418,629) --
Tax return of capital distribution:
Class A ($.034 per share)
(1,145,537) --
Beneficial Interest
Transactions
Net decrease in net assets resulting from Class A
beneficial interest transactions--Note 2
(44,398,318) (24,025,195)
- -----------------------------------------------------------------------
- ----------------------------------------------------
Net increase in net assets resulting from Class C
beneficial interest transactions--Note 2
4,438,932 --
Net Assets
Total decrease
(66,628,307) (14,947,129)
- -----------------------------------------------------------------------
- ----------------------------------------------------
Beginning of year
380,915,752 395,862,881
------------ ------------
End of year (including undistributed net investment
income of $149,269 and $576,358, respectively)
$314,287,445 $380,915,752
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer U.S. Government Trust
<PAGE> 10
Financial Highlights
<TABLE>
<CAPTION>
Class A
Class C
- -----------------------------------------------------------------------
- ------------------------
Year
Period
Ended
Ended
June 30,
June 30,
1994 1993 1992 1991 1990
1989 1988 1987 1986(3) 1985(2) 1994(1)
- -----------------------------------------------------------------------
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $9.95 $9.73 $9.25 $9.24 $9.54
$9.59 $9.77 $10.17 $ 10.00 $10.00 $9.83
- -----------------------------------------------------------------------
- ------------------------------------------------------
Income from investment
operations:
Net investment income .67 .68 .69 .83 .90
.91 .90 .84 .94 .77 .33
Net realized and unrealized
gain (loss) on investments,
options written (.74) .22 .48 .02 (.32)
(.05) (.18) (.33) .38 -- (.64)
------- ------- ------- ------ ------
- ------- ------- ------- ------- ------ ----
Total income (loss) from
investment operations (.07) .90 1.17 .85 .58
.86 .72 .51 1.32 .77 (.31)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net
investment income (.64) (.68) (.69) (.84) (.88)
(.91) (.90) (.85) (.93) (.77) (.33)
Dividends in excess of net
investment income (.01) -- -- -- --
-- -- -- -- -- --
Distributions from net
realized gain on investments
and options written -- -- -- -- --
-- -- (.06) (.22) -- --
Tax return of capital
distribuiton (.03) -- -- -- --
-- -- -- -- -- --
------- ------- ------- ------ ------
- ------- ------- ------- ------- ------ ----
Total dividends and
distributions to shareholders (.68) (.68) (.69) (.84) (.88)
(.91) (.90) (.91) (1.15) (.77) (.33)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Net asset value, end
of period $9.20 $9.95 $9.73 $9.25 $9.24
$9.54 $9.59 $9.77 $ 10.17 $ 10.00 $9.19
======= ======= ======= ====== ======
======== ======= ======= ======= ======= =====
Total Return, at Net
Asset Value(4) (1.17)% 9.55% 13.05% 9.53% 6.34%
9.51% 7.78% 5.54% 14.95% -- (3.12)%
- -----------------------------------------------------------------------
- ------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $310,027 $380,916 $395,863 $342,220 $264,728
$232,593 $203,857 $216,306 $160,389 $7,798 $4,261
- -----------------------------------------------------------------------
- ------------------------------------------------------
Average net assets
(in thousands) $355,698 $401,789 $376,532 $299,144 $253,085
$210,060 $197,834 $207,557 $98,004 $7,724 $2,173
- -----------------------------------------------------------------------
- ------------------------------------------------------
Number of shares outstanding
at end of period
(in thousands) 33,685 38,279 40,697 36,987 28,650
24,393 21,252 22,146 15,767 780 464
- -----------------------------------------------------------------------
- ------------------------------------------------------
Ratios to average net assets:
Net investment income 6.61% 6.90% 7.23% 8.93% 9.60%
9.65% 9.36% 8.73% 9.77% 7.77% 5.97%(6)
Expenses 1.14% 1.17% 1.17% 1.19% 1.16%
1.19% 1.13% .99% .56% 1.47% 1.96%(6)
- -----------------------------------------------------------------------
- ------------------------------------------------------
Portfolio turnover rate(5) 139.5% 96.8% 207.8% 133.9% 125.5%
76.9% 141.3% 263.0% 366.9% -- 139.5%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to June
30,
1994.
2. All number of shares and per share data have been restated to reflect
a 1
for 10 stock split effective August 16, 1985.
3. For the period from August 16, 1985 to June 30, 1986.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
5. 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 sale of investment securities (excluding
short-term securities) for the year ended June 30, 1994 were $495,481,969
and $550,946,645, respectively.
6. Annualized.
See accompanying Notes to Financial Statements.
10 Oppenheimer U.S. Government Trust
<PAGE> 11
Notes to Financial Statements
1. Significant Accounting Policies
Oppenheimer U.S. Government Trust (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment advisor is
Oppenheimer Management Corporation (the Manager). The Fund offers both
Class A and Class C shares. Class A shares are sold with a front-end sales
charge. Class C shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution
plan, expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. The
following is a summary of significant accounting policies consistently
followed by the Fund.
Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New
York time) on each trading day. Long-term debt securities are valued by
a portfolio pricing service approved by the Board of Trustees. Long-term
debt securities which cannot be valued by the approved portfolio pricing
service are valued by averaging the mean between the bid and asked prices
obtained from two active market makers in such securities. Short-term 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. Securities for which market quotes
are not readily available are valued under procedures established by the
Board of Trustees to determine fair value in good faith. A call option is
valued based upon the last sales 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 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 or asked price closest
to the last reported sale price is used.
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. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller enters
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 Income 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 tax provision is required. At
June 30, 1994, the Fund had available for federal income tax purposes an
unused capital loss carryover of approximately $11,875,000, $3,330,000 of
which will expire in 1998, $7,358,000 in 1999 and $1,187,000 in 2002.
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service. During
the year ended June 30, 1994, a provision of $22,650 was made for the
Fund's projected benefit obligations, resulting in an accumulated
liability of $122,000 at June 30, 1994. No payments have been made under
the plan.
Distributions to Shareholders. The Fund intends to declare dividends
separately for Class A 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.
Change in Accounting for Distributions to Shareholders. Effective July 1,
1993, the Fund adopted Statement of Position 93-2: Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. As a result,
the Fund changed the classification of distributions to shareholders to
better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, subsequent to June 30, 1993, amounts have been reclassified
to reflect a decrease in paid-in capital of $171,227, a decrease in
undistributed net investment income of $391,297, and an increase in
undistributed capital gain on investments of $562,524. During the year
ended June 30, 1994, in accordance with Statement of Position 93-2,
undistributed net investment income has been decreased by $46,827, paid-in
capital has been decreased by $1,145,537 and undistributed capital gain
has been increased by $1,192,364.
11 Oppenheimer U.S. Government Trust
<PAGE> 12
Notes to Financial Statements (Continued)
1. Significant Accounting Policies (continued)
Other. Investment transactions are accounted for on the date the
investments are purchased or sold (trade 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 unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for
federal income tax purposes.
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 June 30, 1994(1)
Year Ended June 30, 1993
------------------------------
- ----------------------------------
Shares Amount
Shares Amount
- -----------------------------------------------------------------------
- -----------------------------------
<S> <C> <C>
<C> <C>
Class A:
Sold 6,237,904 $ 60,979,282
10,114,092 $ 99,121,952
Dividends reinvested 1,913,674 18,566,281
2,059,182 20,214,713
Redeemed (12,746,027) (123,943,881)
(14,590,989) (143,361,860)
----------- -------------
- ----------- -------------
Net decrease (4,594,449) $ (44,398,318)
(2,417,715) $ (24,025,195)
=========== ============= =========== =============
- -----------------------------------------------------------------------
- -----------------------------------
Class C:
Sold 531,550 $ 5,070,299
-- $ --
Dividends reinvested 5,284 49,363
-- --
Redeemed (73,322) (680,730)
-- --
----------- -------------
- ----------- -------------
Net increase 463,512 $ 4,438,932
-- $ --
=========== =============
=========== =============
</TABLE>
1. For the year ended June 30, 1994 for Class A shares and for the period
from December 1, 1993 (inception of offering) to June 30, 1994 for Class
C shares.
3. Unrealized Gains and Losses on Investments and Options Written
At June 30, 1994, net unrealized appreciation on investments and options
written of $957,827 was composed of gross appreciation of $5,714,596, and
gross depreciation of $4,756,769.
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 .75%
on the first $200 million of net assets, .70% on the next $200 million,
.65% on the next $400 million and .60% on net assets in excess of $800
million. Effective January 1, 1994, Oppenheimer Management Corporation
(the ``Manager'') voluntarily reduced the management fees to provide for
an annual fee of .70% on the first $200 million of net assets, .65% on the
next $200 million, .60% on the next $400 million and .55% on net assets
in excess of $800 million. Effective July 1, 1994, Oppenheimer Management
Corporation (the ``Manager'') will voluntarily reduce the management fees
to provide for an annual fee of .65% on the first $200 million of net
assets, .60% on the next $200 million, .55% on the next $400 million and
.50% on net assets in excess of $800 million. The Manager has agreed to
reimburse the Fund if aggregate expenses (with specified exceptions)
exceed the most stringent applicable regulatory limit on Fund expenses.
For the year ended June 30, 1994, commissions (sales charges paid
by investors) on sales of Class A shares totaled $876,525, of which
$282,424 was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor, and by an affiliated
broker/dealer. During the year ended June 30, 1994, OFDI received
contingent deferred sales charges of $3,250 upon redemption of Class C
shares.
Oppenheimer Shareholder Services (OSS), a division of the
Manager, is the transfer and shareholder servicing agent for the Fund, and
for other registered investment companies. OSS's total costs of providing
such services are allocated ratably to these companies.
12 Oppenheimer U.S. Government Trust
<PAGE> 13
Notes to Financial Statements (Continued)
4. Management Fees and Other Transactions With Affiliates (continued)
Under separate approved plans, each class may expend up to .25%
of its net assets annually to reimburse OFDI 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 institutions. In addition, Class C shares are subject to an
asset-based sales charge of .75% of net assets annually, to reimburse OFDI
for sales commissions paid from its own resources at the time of sale and
associated financing costs. In the event of termination or discontinuance
of the Class C plan, the Board of Trustees may allow the Fund to continue
payment of the asset-based sales charge to OFDI for distribution expenses
incurred on Class C shares sold prior to termination or discontinuance of
the plan. During the year ended June 30, 1994, OFDI paid $56,187 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses and retained $12,509 as reimbursement for Class C
sales commissions and service fee advances, as well as financing costs.
5. Call Option Activity
Call option activity for the year ended June 30, 1994 was as follows:
<TABLE>
<CAPTION>
Number Amount of
Call Option Activity
of Options Premiums
- -----------------------------------------------------------------------
- ----------------------------------------
<S>
<C> <C>
Options outstanding at June 30, 1993
-- $ --
- -----------------------------------------------------------------------
- ----------------------------------------
Options written
30,000 290,625
- -----------------------------------------------------------------------
- ----------------------------------------
Options expired prior to exercise
-- --
- -----------------------------------------------------------------------
- ----------------------------------------
Options exercised
-- --
------ ---------
Options outstanding at June 30, 1994
30,000 $ 290,625
====== =========
</TABLE>
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Condensed Financial Information (see Part A, Prospectus)
- Filed herewith.
(2) Report of Independent Auditors (see Part B, Statement of
Additional Information) - Filed herewith.
(3) Statement of Investments (see Part B, Statement of
Additional Information) - Filed herewith.
(4) Statement of Assets and Liabilities (see Part B,
Statement of Additional Information) - Filed
herewith.
(5) Statement of Operations (see Part B, Statement of
Additional Information) - Filed herewith.
(6) Statements of Changes in Net Assets (see Part B,
Statement of Additional Information) - Filed
herewith.
(7) Notes to Financial Statements (see Part B, Statement of
Additional Information) - Filed herewith.
(8) Independent Auditor's Consent - Filed herewith.
(b) Exhibits
(1) Amended and Restated Declaration of Trust of
Registrant dated June 1, 1992: Filed with
Registrant's Post-Effective Amendment No. 20,
10/16/92, refiled with Registrant's Post-Effective
Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by
reference.
(2) By-Laws as amended through 8/6/87: Filed with
Registrant's Form SE to its Form N-SAR for the fiscal
year ended 6/30/88, refiled with Registrant's Post-
Effective Amendment No. 24, 8/24/94, pursuant to Item
102 of Regulation S-T, and incorporated herein by
reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by
reference.
(ii) Specimen Class C Share Certificate; Filed with
Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by reference.
(5) Investment Advisory Agreement dated 10/22/90: Filed
with Registrant's Post-Effective Amendment No. 18,
11/1/90, refiled with Registrant's Post-Effective
Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by
reference.
(6) (i) General Distributor's Agreement dated 12/10/92:
Filed with Registrant's Post-Effective Amendment
No. 21, 8/20/93, 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 10/1/86:
Filed with Post-Effective Amendment No. 25 of
Oppenheimer Special Fund (Reg. No. 2-45272), 11/1/86,
refiled with Post-Effective Amendment No. 45 of
Oppenheimer Special Fund (Reg. No. 4-5272) 8/22/94,
pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(7) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant 6/7/90): Filed with Post-Effective
Amendment No. 97, 8/30/90, of Oppenheimer Fund (Reg. No. 2-
14586) and incorporated herein by reference.
(8) (i) Custody Agreement dated 11/12/92: Filed with Post-
Effective Amendment No. 21 of the Registrant's
Registration Statement, 8/20/93, and incorporated
herein by reference.
(9) (i) Agreement and Plan of Reorganization dated as of
2/28/91 between Registrant and MassMutual
Integrity Funds on behalf of its series MassMutual
U.S. Government Securities Fund: Filed with
Registrant's Post-Effective Amendment No. 19,
10/25/91, refiled with Registrant's Post-Effective
Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by
reference.
(ii) Agreement and Plan of Reorganization dated 8/5/91
between Registrant and Advance America Funds, Inc.:
Previously filed with Post-Effective Amendment No. 19
to Registrant's Registration Statement, 10/25/91,
refiled with Registrant's Post-Effective Amendment
No. 24, 8/24/94, pursuant to Item 102 of Regulation
S-T, and incorporated herein by reference.
(10) Opinion and Consent of Counsel dated 6/24/82: Filed with
Registrant's Post-Effective Amendment No. 5, 8/31/84,
refiled with Registrant's Post-Effective Amendment No.
24, 8/24/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) (i) Form of Individual Retirement Account Trust
Agreement: Filed with Post-Effective Amendment No. 21
of the Registrant's Registration Statement, 8/20/93,
and incorporated herein by reference.
(ii) 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 incorporated herein by reference.
(iii) Form of Tax-Sheltered Retirement Plan and Custody
Agreement for employees of public schools and tax-
exempt organizations: Filed with Post-Effective
Amendment No. 47 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 10/21/94, and incorporated herein by
reference.
(iv) Form of Simplified Employee Pension IRA: Filed with Post-
Effective Amendment No. 36 of Oppenheimer Equity Income
Fund (Reg. No. 2-33043), 10/23/91, and incorporated
herein by reference.
(v) Form of SAR-SEP Simplified Employee Pension IRA: Filed
with Post-Effective Amendment No. 19 to the Registration
Statement for Oppenheimer Integrity Funds (File No. 2-
76547), 3/1/94, and incorporated herein by reference.
(15) (a) Service Plan and Agreement for Class A shares
under Rule 12b-1 of the Investment Company Act of
1940 dated as of 6/10/93: Filed with Registrant's
Post-Effective Amendment No. 24, 8/24/94, and
incorporated herein by reference.
(b) Distribution and Service Plan and Agreement for Class
C shares under Rule 12b-1 of the Investment Company
Act dated December 1, 1993: Filed with Registrant's
Post-Effective Amendment No. 24, 8/24/94, and
incorporated herein by reference.
(16) Performance computation schedule: Filed herewith.
(17) (a) Financial Data Schedule for Class A shares: Filed
herewith.
(b) Financial Data Schedule for Class C shares: Filed
herewith.
- - Powers of Attorney: Filed with Post-Effective Amendment No.
21 of the Registrant's Registration Statement, 8/20/93, and
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
Title of Class as of September 30, 1994
Shares of Beneficial Interest, 18,703
Class A shares
Shares of Beneficial Interest, 348
Class C shares
ITEM 27. Indemnification
Reference is made to Subdivision (c) of Section 12 of Article
SEVENTH of Registrant's Declaration of Trust filed as Exhibit (b)(1) to
Registrant's Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
ITEM 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment adviser of
the Registrant; it and its affiliates act in the same capacity for other
registered investment companies as described in Parts A and B.
(b) For information as to the business, profession, vocation or
employment of a substantial nature of each of the directors and officers
of Oppenheimer Management Corporation, reference is made to Part B of this
Registration Statement and to the registration on Form ADV by Oppenheimer
Management Corporation under the Investment Advisers Act of 1940, which
is incorporated herein by reference.
ITEM 29. Principal Underwriter
(a) Oppenheimer Funds Distributor, Inc. is the General
Distributor of the Registrant's shares. It is also the distributor of the
shares of other open-end registered investment companies of which
Oppenheimer Management Corporation is the investment adviser.
(b) The information contained in the registration on Form BD of
Oppenheimer Funds Distributor, Inc., filed under the Securities Exchange
Act of 1934, is incorporated herein by reference.
(c) Inapplicable.
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 and
rules promulgated thereunder are in the possession of Oppenheimer
Management Corporation, at its offices at 3410 South Galena Street,
Denver, Colorado 80231.
ITEM 31. Management Services
Not applicable.
ITEM 32. Undertakings
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it 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 New York and State of New York
on the 21st day of October, 1994.
OPPENHEIMER U.S. GOVERNMENT TRUST
By: /s/ Donald W. Spiro*
----------------------------------------
Donald W. Spiro, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees October 21, 1994
Leon Levy
/s/ Donald W. Spiro* Chief Executive
- -------------------- Officer and
Donald W. Spiro Trustee October 21, 1994
/s/ George Bowen* Chief Financial
- ----------------- and Accounting
George Bowen Officer October 21, 1994
/s/ Leo Cherne* Trustee October 21, 1994
- ---------------
Leo Cherne
/s/ Robert G. Galli* Trustee October 21, 1994
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee October 21, 1994
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee October 21, 1994
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee October 21, 1994
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee October 21, 1994
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee October 21, 1994
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee October 21, 1994
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee October 21, 1994
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee October 21, 1994
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
Registration No. 2-76645
Post-Effective Amendment No. 26
Index to Exhibits
Exhibit No. Description
24(a)(8) Independent Auditor's Consent
24(b)(16) Performance Computation Schedule
24(b)(17)(a) Financial Data Schedule - Class A Shares
24(b)(17)(b) Financial Data Schedule - Class B Shares
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer U.S. Government Trust:
We consent to the use of our report dated July 22, 1994, included herein
and to the reference to our firm under the heading "Financial Highlights"
in the Prospectus.
KPMG Peat Marwick LLP
/s/ KPMG Peat Marwick LLP
--------------------------
Denver, Colorado
October 20, 1994
3Oppenheimer U.S. Government Trust
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:
Distribution Amount from Amount from
Reinvestment Ordinary Long and Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
Class A Shares
09/26/85 $0.1250 $0.0000 $ 9.960
10/23/85 0.0850 0.0000 10.000
11/26/85 0.1050 0.0000 10.160
12/24/85 0.0900 0.0900 10.110
01/22/86 0.0900 0.0000 10.050
02/26/86 0.0900 0.0000 10.320
03/26/86 0.0900 0.0000 10.390
04/23/86 0.0850 0.0000 10.390
05/21/86 0.0790 0.0000 10.170
06/25/86 0.0800 0.0370 10.150
07/23/86 0.0680 0.0000 10.200
08/27/86 0.0860 0.0000 10.300
09/25/86 0.0680 0.0100 10.180
10/23/86 0.0696 0.0000 10.200
11/26/86 0.0856 0.0000 10.270
12/24/86 0.0695 0.0480 10.240
01/22/87 0.0708 0.0000 10.260
02/19/87 0.0674 0.0000 10.210
03/19/87 0.0680 0.0000 10.200
04/15/87 0.0648 0.0000 9.850
05/14/87 0.0682 0.0000 9.710
06/11/87 0.0650 0.0000 9.700
07/09/87 0.0668 0.0000 9.790
08/06/87 0.0657 0.0000 9.710
09/03/87 0.0668 0.0000 9.570
10/01/87 0.0674 0.0000 9.420
10/28/87 0.0682 0.0000 9.560
11/24/87 0.0664 0.0000 9.600
12/31/87 0.0890 0.0000 9.620
01/28/88 0.0700 0.0000 9.780
02/25/88 0.0720 0.0000 9.840
03/24/88 0.0714 0.0000 9.710
04/21/88 0.0710 0.0000 9.620
05/19/88 0.0697 0.0000 9.470
06/16/88 0.0696 0.0000 9.580
07/14/88 0.0685 0.0000 9.490
08/11/88 0.0679 0.0000 9.390
09/08/88 0.0688 0.0000 9.510
10/06/88 0.0684 0.0000 9.570
11/03/88 0.0683 0.0000 9.530
12/01/88 0.0698 0.0000 9.390
12/29/88 0.0702 0.0000 9.350
Oppenheimer U.S. Government Trust
Page 2
Distribution Amount from Amount from
Reinvestment Ordinary Long and Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
Class A Shares
01/26/89 $0.0701 $0.0000 $ 9.380
02/23/89 0.0700 0.0000 9.260
03/23/89 0.0700 0.0000 9.190
04/20/89 0.0700 0.0000 9.240
05/18/89 0.0710 0.0000 9.340
06/15/89 0.0700 0.0000 9.480
07/13/89 0.0690 0.0000 9.570
08/10/89 0.0675 0.0000 9.530
09/07/89 0.0674 0.0000 9.480
10/05/89 0.0675 0.0000 9.470
11/02/89 0.0676 0.0000 9.550
11/30/89 0.0677 0.0000 9.560
12/28/89 0.0677 0.0000 9.510
01/25/90 0.0678 0.0000 9.340
02/22/90 0.0677 0.0000 9.270
03/22/90 0.0679 0.0000 9.260
04/19/90 0.0677 0.0000 9.160
05/17/90 0.0676 0.0000 9.200
06/14/90 0.0678 0.0000 9.260
07/12/90 0.0679 0.0000 9.220
08/09/90 0.0680 0.0000 9.190
09/06/90 0.0678 0.0000 9.170
10/04/90 0.0681 0.0000 9.190
11/01/90 0.0661 0.0000 9.190
11/29/90 0.0635 0.0000 9.240
12/31/90 0.0725 0.0000 9.320
01/24/91 0.0566 0.0000 9.370
02/21/91 0.0666 0.0000 9.430
03/21/91 0.0633 0.0000 9.280
04/18/91 0.0605 0.0000 9.350
05/16/91 0.0590 0.0000 9.330
06/13/91 0.0575 0.0000 9.200
07/11/91 0.0575 0.0000 9.280
08/08/91 0.0558 0.0000 9.420
09/05/91 0.0564 0.0000 9.460
10/03/91 0.0555 0.0000 9.580
10/31/91 0.0564 0.0000 9.610
11/27/91 0.0550 0.0000 9.610
12/31/91 0.0623 0.0000 9.910
01/23/92 0.0417 0.0000 9.710
02/20/92 0.0507 0.0000 9.600
03/19/92 0.0515 0.0000 9.520
04/16/92 0.0553 0.0000 9.620
05/14/92 0.0452 0.0000 9.680
06/11/92 0.0504 0.0000 9.670
07/09/92 0.0523 0.0000 9.820
08/06/92 0.0534 0.0000 9.790
09/03/92 0.0526 0.0000 9.820
Oppenheimer U.S. Government Trust
Page 3
Distribution Amount from Amount from
Reinvestment Ordinary Long and Short-Term Reinvestment
(Ex) Date Income Capital Gains Price
Class A Shares
10/01/92 $0.0532 $0.0000 $ 9.870
10/29/92 0.0527 0.0000 9.700
11/25/92 0.0529 0.0000 9.670
12/31/92 0.0651 0.0000 9.710
01/28/93 0.0504 0.0000 9.790
02/25/93 0.0542 0.0000 9.900
03/25/93 0.0507 0.0000 9.880
04/22/93 0.0518 0.0000 9.930
05/20/93 0.0508 0.0000 9.860
06/17/93 0.0509 0.0000 9.930
07/30/93 0.0787 0.0000 9.960
08/31/93 0.0522 0.0000 10.030
09/30/93 0.0531 0.0000 9.990
10/29/93 0.0484 0.0000 9.950
11/30/93 0.0501 0.0000 9.820
12/31/93 0.0501 0.0000 9.830
01/31/94 0.0531 0.0000 9.870
02/28/94 0.0551 0.0000 9.720
03/31/94 0.0618 0.0000 9.460
04/29/94 0.0520 0.0000 9.310
05/31/94 0.0562 0.0000 9.260
06/30/94 0.0566 0.0000 9.200
07/29/94 0.0555 0.0000 9.300
Class C Shares
12/31/93 0.0395 0.0000 9.830
01/31/94 0.0431 0.0000 9.860
02/28/94 0.0463 0.0000 9.710
03/31/94 0.0545 0.0000 9.440
04/29/94 0.0454 0.0000 9.300
05/31/94 0.0495 0.0000 9.250
06/30/94 0.0501 0.0000 9.190
07/29/94 0.0489 0.0000 9.290
Oppenheimer U.S. Government Trust
Page 4
1. AVERAGE ANNUAL TOTAL RETURNS FOR THE PERIODS ENDED 06/30/94:
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 $1,00
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Five Year Inception
$941.31 1 $1,357.68 0.2 $1,921.79 0.1127
(---------) -1=-5.87% (---------) -1=6.31% (---------) -1=7.64%
$1,000.00 $1,000.00 $1,000.00
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%:
Inception
$959.09 1.7136
(----------) -1 = -6.91%
$1,000.00
Examples at NAV:
Class A Shares
One Year Five Year Inception
$988.25 1 $1,425.39 0.2 $2,017.63 0.1127
(--------) -1=-1.18% (----------) -1=7.35% (----------) -1=8.23%
$1,000.00 $1,000.00 $1,000.00
Class C Shares
Inception
$968.77 1.7136
(-----------) -1 = -5.29%
$1,000.00
Oppenheimer U.S. Government Trust
Page 5
2. CUMULATIVE TOTAL RETURNS FOR THE PERIODS ENDED 06/30/94:
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 Five Year Inception
$941.31 - 1,000 $1,357.68 - 1,000 $1,921.79 - 1,000
- ----------------- = -5.87% --------------- = 35.77% ---------------- = 92.18%
$1,000 $1,000 $1,000
Class C Shares
Examples, assuming a maximum contingent deferred sales charge of 1.00%:
Inception
$959.09 - 1,000
- ------------------- = -4.09%
$1,000
Examples at NAV:
Class A Shares
One Year Five Year Inception
$988.25 - 1,000 $1,425.39 - 1,000 $2,017.63 - 1,000
- -------------- = -1.18% ----------------- = 42.54% ---------------- = 101.76%
$1,000 $1,000 $1,000
Class C Shares
Inception
$968.77 - 1,000
- ----------------- = -3.12%
$1,000
Oppenheimer U.S. Government Trust
Page 6
3. STANDARDIZED YIELDS FOR THE 30-DAY PERIOD ENDED 06/30/94:
The Funds's standardized yield is calculated using the following
formula set forth in tthe SEC rules:
a - b 6
Standardized Yield = 2(( --------------- + 1 ) - 1 )
cd or ce
The symbols above represent the follwing factors:
a = Dividends and interest earned during the 30 - day period.
b = Expenses accrued for the period (net of any expense
reimbursements).
c = 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%:
$1,945,287.32 - $294,236.68 6
2 ( ( -------------------------+ 1) - 1 ) = 6.14%
33,879,823 * $9.65
Class C Shares
Example at NAV:
$24,432.53 - $6,467.18 6
2 ( ( -------------------------+ 1) - 1 ) = 5.57%
426,355 * $9.19
Oppenheimer U.S. Government Trust
Page 7
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 06/30/94:
The Fund's dividend yields are calculated using the following
formula:
Dividend Yield = ( a / 30 * 365 ) / b or c
The symbols above represent the following factors:
a = The dividend earned during the 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 ($0.0565988 / 30 * 365)/ $9.66 = 7.13%
at Maximum Offer:
Dividend Yield ($0.0565988 / 30 * 365)/ $9.20 = 7.48%
at Net Asset Value:
Class C Shares
Dividend Yield ($0.0501038 / 30 * 365)/ $9.19 = 6.63%
at Net Asset Value:
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<PER-SHARE-NAV-BEGIN> 9.95
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<ARTICLE> 6
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<NAME> OPPENHEIMER U.S. GOVERNMENT TRUST
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> DEC-01-1993
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<DIVIDEND-INCOME> 0
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<DISTRIBUTIONS-OF-INCOME> 76280
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 531550
<NUMBER-OF-SHARES-REDEEMED> 73322
<SHARES-REINVESTED> 5284
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