As filed with the Securities and Exchange Commission on September 22,
1995
Registration No. 33-62221
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / 1 /
POST-EFFECTIVE AMENDMENT NO. / /
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.
Executive Vice President & General Counsel
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes
effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on September 29,
1995, pursuant to Rule 488.
No filing fee is due because the Registrant has previously registered
an indefinite number of shares under Rule 24f-2; a Rule 24f-2 notice
for the year ended June 30, 1995 was filed on August 28, 1995.
Pursuant to Rule 429, this Registration Statement relates to shares
previously registered by the Registrant on Form N-1A (Reg. No. 2-76645;
811-3430).
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for U.S. Government Income Fund,
a series of Quest for Value Family of Funds
and
Prospectus for Oppenheimer U.S. Government Trust
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER U.S. GOVERNMENT TRUST
Cross Reference Sheet
Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of
Document
--------- -------------------------------------------------------------
--
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Tables
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
USGT and the Fund; Miscellaneous
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Comparison Between USGT and the Fund
(b) *
(c) *
(d) *
(e) Miscellaneous
(f) Miscellaneous
6 (a) Prospectus of U.S. Government Income Fund; Annual Report of
U.S. Government Income Fund; Comparison Between USGT and the
Fund
(b) Miscellaneous
(c) *
(d) *
7 (a) Synopsis; Information Concerning the Meeting
(b) *
(c) Synopsis; Information Concerning the Meeting
8 (a) Proxy Statement
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
--------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Registrant's Statement of Additional Information
(b) *
(c) *
13 (a) Statement of Additional Information about U.S. Government
Income Fund
(b) *
(c) *
14 Registrant's Statement of Additional Information; Statement
of Additional Information about U.S. Government Income Fund;
Annual Report of U.S. Government Income Fund at 10/31/94;
Semi-Annual Report of U.S. Government Income Fund at 4/30/95;
Registrant's Annual Report at 6/30/95
Part C of
Form N-14
Item No. Other Information Heading
--------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant / x /
Filed by a party other than the registrant / /
Check the appropriate box:
/ X / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oppenheimer U.S. Government Trust
------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
U.S. Government Income Fund,
a series of Quest for Value Family of Funds
------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
------------------------------------------------------------------
(1) Amount previously paid:
------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------
(4) Date Filed:
-----------------------
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
October 1995
Dear Quest for Value U.S. Government Income Fund Shareholder:
On August 17, Oppenheimer Capital signed a definitive agreement
with Oppenheimer Management Corporation (OMC). The Agreement
contemplates that OMC would acquire, subject to certain conditions, all
of the investment advisory and other contracts and business
relationships and certain assets and liabilities of Quest for Value
Advisors, Quest for Value Distributors and Oppenheimer Capital relating
to twelve Quest for Value mutual funds.
One aspect of the acquisition involves the proposed reorganization
of your fund and Oppenheimer U.S. Government Trust. As discussed below
and in the accompanying proxy statement, your fund's Board of Trustees
believes that Quest for Value U.S. Government Income Fund shareholders
would benefit from a reorganization into Oppenheimer U.S. Government
Trust.
A shareholder meeting has been scheduled in November and all fund
shareholders of record on September 25, 1995 are being asked to vote
either in person or by proxy. Enclosed you will find a proxy statement
detailing the proposal, a ballot card, an Oppenheimer U.S. Government
Trust prospectus and a postage-paid return envelope for your
convenience.
What is being proposed?
As stated in the proxy statement, there is one proposal to be voted
on by fund shareholders -- approval of an:
Agreement and Plan of Reorganization for Quest for Value U.S.
Government Income Fund and the transactions contemplated by the
agreement. The proxy statement outlines the proposal to reorganize
your fund into Oppenheimer U.S. Government Trust, a fund that
shares a similar investment objective -- high current income and
preservation of capital -- as well as similar investment policies
and methods with your fund.
As an OppenheimerFunds shareholder, you will have the ability to
exchange into any of the more than thirty Oppenheimer funds at no
charge. You will also enjoy the other benefits available to
OppenheimerFunds shareholders such as AccountLink, which links your
mutual fund and bank accounts so that you can have your money
electronically transferred to or from your bank and fund account
with none of the delays involved in writing or cashing a check.
And Oppenheimer's PhoneLink gives you access to your account 24
hours a day to make purchasing, exchanging or redeeming shares more
convenient.
Please read the accompanying prospectus of Oppenheimer U.S.
Government Trust for conditions and details.
How do you vote?
No matter how large or small your investment, your vote is
important, so please review the proxy statement carefully. To cast
your vote, simply mark, sign and date the enclosed proxy ballot and
return it in the postage-paid envelope today.
If the reorganization is approved, you would receive shares of
Oppenheimer U.S. Government Trust of the same class as you presently
hold, equal in dollar value to your investment in Quest for Value U.S.
Government Income Fund (as a result, the number of shares you receive
will vary from the number of fund shares you previously held, even
though the value will be the same). Of course, no sales charge would
be paid on shares received in the reorganization. In addition, you
would receive a final dividend distribution from the Quest for Value
U.S. Government Income Fund before the reorganization took place.
Please contact your financial adviser or call us at 1-800-232-FUND
if you have any questions.
Thank you for your continuing trust in allowing us to manage your
investments.
Sincerely,
Joseph M. LaMotta
Chairman of the Board and President
Quest for Value Family of Funds
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held November 16, 1995
To the Shareholders of U.S. Government Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
U.S. Government Income Fund (the "Fund"), a series of Quest for Value
Family of Funds (the "Trust"), an open-end, management investment
company, will be held at One World Financial Center, New York, New York
10281 on the 40th Floor, at 10:00 A.M., New York time, on November 16,
1995, and any adjournments thereof (the "Meeting"), for the following
purposes:
1. To consider and vote upon approval of the Agreement and Plan of
Reorganization dated as of ____, 1995 (the "Reorganization
Agreement") by and among Oppenheimer U.S. Government Trust
("USGT"), the Trust, on behalf of the Fund, and Quest for Value
Advisors, investment adviser to the Fund, and the transactions
contemplated thereby (the "Reorganization"), including (i) the
transfer of substantially all the assets of the Fund to USGT in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, (ii) the
distribution of such shares of USGT to shareholders of the Fund in
liquidation of the Fund, and (iii) the cancellation of the
outstanding shares of the Fund (the "Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying Proxy
Statement and Prospectus and a copy of the Reorganization Agreement is
attached as Exhibit A thereto. Class A, Class B and Class C
shareholders of record at the close of business on September 25, 1995
are entitled to notice of, and to vote at, the Meeting. Please read
the Proxy Statement and Prospectus carefully before telling us, through
your proxy or in person, how you wish your shares to be voted. The
Board of Trustees of the Trust recommends a vote in favor of the
Reorganization. WE URGE YOU TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY.
By Order of the Board of Trustees,
Deborah Kaback, Secretary
_________, 1995
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign
and return it in the accompanying postage-paid envelope. To avoid
unnecessary duplicate mailings, we ask your cooperation in promptly
mailing your proxy no matter how large or small your holdings may be.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of all the
assets the Quest for Value U.S. Government Income Fund (the "Fund") to
the Oppenheimer U.S. Government Trust, the issuance of shares of the
Oppenheimer U.S. Government Trust to shareholders of the Fund and the
cancellation of the outstanding shares of the Fund. The number of
shares of the Oppenheimer U.S. Government Trust that will be issued to
shareholders of the Fund will be determined on the basis of the
relative net asset values of the Oppenheimer U.S. Government Trust and
the Fund. Although the number of shares of the Oppenheimer U.S.
Government Income Trust issued to a shareholder of the Fund may be more
or less than the shareholder's holdings of Fund shares, the value of
the shares of the Oppenheimer U.S. Government Trust issued in the
Reorganization will be equal to the value of the shares previously held
in the Fund.
The Reorganization has been proposed in connection with a proposed
acquisition by Oppenheimer Management Corporation ("OMC") of the assets
of Quest for Value Advisors, Quest for Value Distributors and
Oppenheimer Capital relating to twelve Quest for Value mutual funds
(including the Fund) and the assumption by OMC of certain liabilities.
2. What are the reasons for the Reorganization?
After an intensive examination of the mutual fund industry, Quest
for Value Advisors and Distributors concluded that smaller fund
distributors would find it increasingly difficult to compete with
larger distributors with greater resources. Based on that conclusion,
Quest for Value has chosen to sell certain of its mutual fund related
assets to OMC. OMC, the purchaser, is seeking to merge certain of the
Quest for Value funds into certain of its funds.
3. What benefits to shareholders may result from this transaction?
The Board of the Fund determined that, among other things, the
Reorganization would afford the shareholders of the Quest Fund: 1) the
capabilities and resources of OMC and its affiliates in the area of
fixed income investment management, distribution, shareholder services
and marketing; 2) the ability to exchange their shares for a wider
variety of portfolios within the OppenheimerFunds family than are
currently available to the shareholders of the Fund; and 3) an
investment in a fund which, on a pro-forma basis, will have lower
operating expenses as a percent of average net assets than is currently
the case.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Quest for Value
and Oppenheimer Management Corporation and not Quest Fund or
Oppenheimer Trust shareholders.
5. Who is Oppenheimer Management Corporation?
Oppenheimer Management Corporation and its subsidiaries are
engaged principally in the business of managing, distributing and
servicing registered investment companies. Oppenheimer Management
Corporation is indirectly controlled by Massachusetts Mutual Life
Insurance Company. As of August 31, 1995, Oppenheimer Management
Corporation and its affiliates had assets of more than $36 billion
under management in more than 45 mutual funds.
6. Do the OppenheimerFunds have a sales charge?
Yes, other than their money market funds. However, there will be
no commission or salesload of any kind charged in connection with this
Reorganization. The full value of your shares in the Quest Fund will
be exchanged for shares of the Oppenheimer Trust. Those shareholders
who, because they were shareholders of the AMA Family of Funds or the
Unified Funds who were eligible to purchase shares of any Quest for
Value fund without a sales charge, after the Reorganization will be
eligible to purchase shares of any OppenheimerFund without a sales
charge.
7. May I exchange between other OppenheimerFunds without a sales
charge or exchange fee?
Yes. As a shareholder of an OppenheimerFund, you will be able to
make exchanges into any of the other funds into any of the
OppenheimerFunds without payment of any sales charges or exchange fees.
The Quest Fund currently imposes a fee of $5 for every exchange into
another Quest for Value fund.
8. Where can I get prospectuses and other information on the
OppenheimerFunds?
Call OppenheimerFunds at 1-(800) 255-2755. They will be pleased
to supply you with all the information, including prospectuses which
you will need to make an investment decision.
9. After the Reorganization, who do I contact about my account or to
initiate a transaction in my account?
For information about your account or to initiate a transaction in
your account, you may continue to contact your registered
representative at your broker/dealer or, in the alternative,
Shareholder Services, Inc. at 1-(800) 525-7048 .
10. Will this Reorganization result in any tax liability to the Quest
Fund, Oppenheimer Trust or to me as a shareholder?
The Reorganization is intended to qualify for federal income tax
purposes as a tax-free reorganization. The aggregate tax basis of the
Oppenheimer Trust shares received by you will be the same as the
aggregate tax basis of your Quest Fund shares prior to the
Reorganization and the holding period of the shares of the Oppenheimer
Trust to be received by you will include the period during which the
Quest Fund shares surrendered in exchange, therefore, were held.
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND
One World Financial Center, New York, New York 10281
1-800-232-FUND
PROXY STATEMENT
--------------------------
OPPENHEIMER U.S. GOVERNMENT TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to
shareholders of U.S. Government Income Fund (the "Fund"), a series of
Quest for Value Family of Funds (the "Trust"), an open-end, management
investment company, in connection with the solicitation by the Board of
Trustees of the Trust (the "Board") of proxies to be used at the
Special Meeting of Shareholders of the Fund, to be held at One World
Financial Center, New York, New York 10281 on the 40th Floor at 10:00
A.M., New York time, on November 16, 1995, and any adjournments thereof
(the "Meeting"). It is expected that this Proxy Statement and
Prospectus will be mailed to shareholders on or about ____, 1995.
At the Meeting, shareholders of the Fund will be asked to consider
and vote upon approval of the Agreement and Plan of Reorganization,
dated as of _____, 1995 (the "Reorganization Agreement"), by and among
Oppenheimer U.S. Government Trust ("USGT"), an open-end management
investment company, the Trust, on behalf of the Fund, and Quest for
Value Advisors ("QVA"), investment adviser to the Fund, and the
transactions contemplated by the Reorganization Agreement (the
"Reorganization"). The Reorganization Agreement provides for the
transfer of substantially all the assets of the Fund to USGT in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, the distribution
of such shares of USGT to shareholders of the Fund in liquidation of
the Fund and the cancellation of the outstanding shares of the Fund. A
copy of the Reorganization Agreement is attached hereto as Exhibit A
and is incorporated by reference herein. As a result of the proposed
Reorganization, each Class A, Class B and Class C shareholder of the
Fund will receive that number of Class A, Class B and Class C shares,
respectively, of USGT having an aggregate net asset value equal to the
net asset value of such shareholder's shares of the Fund of that class.
This transaction is being structured as a tax-free reorganization. See
"Approval of the Reorganization."
USGT currently offers Class A, Class B and Class C shares. Class A
shares are sold with a sales charge imposed at the time of purchase
(certain purchases aggregating $1.0 million or more ($500,000 as to
purchases by OppenheimerFunds prototype 401(k) plans) are not subject
to a sales charge, but may be subject to a contingent deferred sales
charge ("CDSC") if redeemed within 18 months of the date of purchase);
Class B shares are sold without a front end sales charge but may be
subject to a CDSC if redeemed within six years of the date of purchase;
and Class C shares are sold without a front end sales charge but may be
subject to a CDSC if not held for one year. Holders of Class A shares
in the Fund will receive Class A shares of USGT and no sales charge
will be imposed on the Class A shares received by the Fund Class A
shareholders. Holders of Class B and Class C shares in the Fund will
receive Class B and Class C shares, respectively, of USGT; any CDSC
which is applicable to a shareholder's investment will continue to
apply, and, in calculating the applicable CDSC payable upon the
subsequent redemption of shares of USGT the period during which a Fund
shareholder held shares of the Fund will be counted.
USGT is a mutual fund that seeks high current income, preservation of
capital and maintenance of liquidity primarily through investments in
debt instruments issued or guaranteed by the U.S. Government or its
agencies or instrumentalities and repurchase agreements on such
securities. The Fund seeks to provide shareholders with a high level
of current income together with protection of capital by investing
exclusively in such securities, and in related futures, options and
repurchase agreements.
USGT has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form N-14 (the "Registration Statement")
relating to the registration of shares of USGT to be offered to the
shareholders of the Fund pursuant to the Reorganization Agreement.
This Proxy Statement and Prospectus relating to the Reorganization
also constitutes a Prospectus of USGT filed as part of such
Registration Statement. Information contained or incorporated by
reference herein relating to USGT has been prepared by and is the
responsibility of USGT.
Information contained or incorporated by reference herein relating to
the Fund has been prepared by and is the responsibility of the Fund.
This Proxy Statement and Prospectus sets forth concisely information
about USGT that a prospective investor should know before voting on the
Reorganization. The following documents have been filed with the SEC
and are available without charge upon written request to Quest for
Value Distributors ("QVD"), the general distributor for the Fund, at
P.O. Box 3567, Church Street Station, New York, New York 10277-1296, or
by calling the toll-free number for the Fund shown above: (i) a
Prospectus for the Fund, dated March 1, 1995, as revised June 30, 1995;
and (ii) a Statement of Additional Information about the Fund, dated
March 1, 1995 (the "Fund Additional Statement"). The following
documents have been filed with the SEC, are incorporated herein by
reference and are available without charge upon written request to the
transfer and shareholder servicing agent for USGT, Oppenheimer
Shareholder Services ("OSS"), P.O. Box 5270, Denver, Colorado 80217, or
by calling the toll-free number for USGT shown above: (i) a Prospectus
for USGT, dated May 30, 1995, as supplemented July 14, 1995; and (ii) a
Statement of Additional Information relating to the Reorganization
described in this Proxy Statement and Prospectus (the "Additional
Statement"), dated ____, 1995 and filed as part of the Registration
Statement, which Additional Statement includes, among other things, the
Prospectus for the Fund, the Fund Additional Statement and a Statement
of Additional Information about USGT, dated May 30, 1995, as
supplemented July 14, 1995 (the "USGT Additional Statement"), which
contains more detailed information about USGT and its management
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of USGT 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 the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated _______, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
SYNOPSIS
Parties to the Reorganization
The Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution Plan Fees
Purchases, Exchanges and Redemptions
PRINCIPAL RISK FACTORS
APPROVAL OF THE REORGANIZATION (The Proposal)
Reasons for the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
COMPARISON BETWEEN USGT AND THE FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
USGT Performance
Additional Comparative Information
INFORMATION CONCERNING THE MEETING
General
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
OTHER BUSINESS
EXHIBIT A -Agreement and Plan of Reorganization, dated as of _____,
1995, by and among Oppenheimer U.S. Government Trust, Quest for Value
Family of Funds, on behalf of U.S. Government Income Fund, and Quest
for Value Advisors A-1
EXHIBIT B - Purchase Price Formula Pursuant to the Acquisition
Agreement B-1
<PAGE>
COMPARATIVE FEE TABLES
Transaction Charges
Shareholders pay certain expenses directly, such as sales charges and
account transaction charges. The schedule of such charges for both
USGT and the Fund (collectively, the "funds") is substantially the
same, except as noted below.
Oppenheimer
U.S.Government Trust
Class A Class B Class C
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee None None None
U.S. Government Income Fund
Class A Class B Class C
Maximum Sales Charge on Purchases 4.75% None None
(as a % of offering price)
Sales Charge on Reinvested Dividends None None None
Deferred Sales Charge None(1) 5.0%(2) 1.0%(3)
(as a % of the lower of the original
purchase price or redemption proceeds)
Exchange Fee $5.00 $5.00 $5.00
(1)If you invest $1 million or more (as to USGT, $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans) in Class A shares, although
you will generally not pay an initial sales charge, you may have to pay
a sales charge of up to 1.0% if you sell your shares within 18 calendar
months (as to USGT) or 12 calendar months (as to the Fund, with a
charge of 0.50 of 1.0% assessed for redemptions in the subsequent 12-
month period), in each case from the end of the calendar month during
which you purchased those shares. After the Reorganization, the
duration of sales charges as to such Class A shares of the Fund will be
decreased from 24 months to 18 months, and the 0.50 of 1.0% charge will
be assessed for redemptions in the subsequent six-month period only.
(2)If you redeem Class B shares within six years of their purchase, you
may have to pay a contingent deferred sales charge starting at 5.0% in
the first year and declining thereafter.
(3)If you redeem Class C shares within 12 months of their purchase, you
may have to pay a 1.0% contingent deferred sales charge.
<PAGE>
Expenses of USGT and the Fund; Pro Forma Expenses
The funds each pay a variety of expenses directly for management of
their assets, administration, distribution of their shares and other
services, and those expenses are reflected in the net asset value per
share of each of USGT and the Fund. The following calculations are
based on the expenses of USGT and the Fund for the 12 months ended June
30, 1995. These amounts are shown as a percentage of the average net
assets of each class of shares of the Fund and of USGT for that 12
month period. The pro forma fees reflect what the fee schedule would
have been at June 30, 1995, if the Reorganization had occurred 12
months prior to that date.
<TABLE>
<CAPTION>
Oppenheimer U.S. Government Trust(1)U.S. Government Income Fund
Class A Class B(2) Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63% 0.60% 0.60% 0.60%
12b-1 Fees 0.24% 1.00% 1.00% 0.30% 1.00% 1.00%
Other Expenses 0.22% 0.26% 0.26% 0.36% 0.35% 0.56%
Total Fund Operating
Expenses 1.09% 1.89% 1.89% 1.26% 1.95% 2.16%
Pro Forma Combined Fund(1)
Class A Class B(2) Class C
Management Fees 0.62% 0.62% 0.62%
12b-1 Fees 0.24% 1.00% 1.00%
Other Expenses 0.22% 0.22% 0.25%
Total Fund Operating
Expenses 1.08% 1.84% 1.87%
</TABLE>
(1)Management fees for USGT have been restated in the fee table above
to reflect the reduced management fee rates paid by USGT to its
investment adviser, pursuant to a new investment advisory agreement
approved by shareholders of USGT at a meeting held May 25, 1995. Had
this management fee rate not changed, "Management Fees" would have been
0.73%, 0.73% and 0.73% of Class A, Class B and Class C average annual
net assets, and Total Fund Operating Expenses would have been 1.19%,
1.99% and 1.99% of Class A, Class B and Class C average annual net
assets. See "Investment Advisory and Distribution Plan Fees" below.
(2)Class B shares of USGT were first publicly offered on July 21, 1995.
"Other Expenses" shown for Class B shares of USGT are estimates based
on amounts that would have been payable if Class B shares of USGT had
been outstanding for the 12 months ended June 30, 1995.
Hypothetical Example
To attempt to show the effect of these expenses on an investment
over time, the example shown below has been created. Assume that you
make a $1,000 investment in either the Fund or USGT or the new combined
fund and that the annual return is 5% and that the operating expenses
for each fund 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
Oppenheimer U.S.
Government Trust
Class A Shares $58 $81 $105 $174
Class B Shares $69 $89 $122 $181(1)
Class C Shares $29 $59 $102 $221(2)
U.S. Government
Income Fund
Class A Shares $60 $86 $113 $193
Class B Shares $70 $91 $125 $210(1)
Class C Shares $32 $68 $116 $249(2)
Pro Forma Combined
Fund
Class A Shares $58 $80 $104 $173
Class B Shares $69 $88 $120 $178(1)
Class C Shares $29 $59 $101 $219(2)
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years
Oppenheimer U.S.
Government Trust
Class A Shares $58 $81 $105 $174
Class B Shares $19 $59 $102 $181(1)
Class C Shares $19 $59 $102 $221(2)
U.S. Government
Income Fund
Class A Shares $60 $86 $113 $193
Class B Shares $20 $61 $105 $210(1)
Class C Shares $22 $68 $116 $249(2)
Pro Forma Combined
Fund
Class A Shares $58 $80 $104 $173
Class B Shares $19 $58 $100 $178(1)
Class C Shares $19 $59 $101 $219(2)
(1)The Class B expenses in years seven through ten for USGT and year
nine and ten for the Fund are based on the Class A expenses shown
above, because USGT and the Fund automatically convert Class B shares
into Class A shares after six years and eight years, respectively.
Long-term Class B shareholders could pay the economic equivalent of
more than the maximum front-end sales charge allowed under applicable
regulatory requirements, because of the effect of the asset-based sales
charge and contingent deferred sales charge. The automatic conversion
of Class B shares to Class A shares is designed to minimize the
likelihood that this will occur.
(2)Because of the asset-based sales charge imposed on Class C shares of
USGT and 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.
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of the Fund to assist them
in determining whether to approve the Reorganization. This synopsis is
only a summary and is qualified in its entirety by the more detailed
information contained in or incorporated by reference in this Proxy
Statement and Prospectus and the Exhibits hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Exhibits
hereto in their entirety and, in particular, the current Prospectus of
USGT which accompanies this Proxy Statement and Prospectus and is
incorporated by reference herein.
Parties to the Reorganization
USGT is a diversified, open-end, management investment company which
was reorganized as a Massachusetts business trust in 1982. USGT is
located at Two World Trade Center, New York, New York 10048-0203.
Oppenheimer Management Corporation ("OMC") acts as investment adviser
to USGT. Oppenheimer Funds Distributor, Inc. ("OFDI"), a subsidiary of
OMC, acts as the distributor of USGT's shares. Additional information
about USGT is set forth below.
The Fund, a diversified fund, is a series of Quest for Value Family of
Funds (the "Trust"), an open-end, management investment company
organized as a Massachusetts business trust in 1987. The Fund is
located at One World Financial Center, New York, New York 10281. QVA
acts as investment adviser to the Fund. QVD acts as the distributor of
the Fund's shares. QVA and QVD are majority-owned subsidiaries of
Oppenheimer Capital, an institutional investment manager. OMC is not
related to Oppenheimer Capital nor its affiliate, the brokerage firm
Oppenheimer & Co., Inc. Additional information about the Fund is set
forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of
substantially all the assets of the Fund to USGT in exchange for Class
A, Class B and Class C shares of USGT and the assumption by USGT of
certain liabilities of the Fund. The Reorganization Agreement also
provides for the distribution of shares of USGT to the Fund
shareholders in liquidation of the Fund. As a result of the
Reorganization, each Fund shareholder will receive that number of full
and fractional USGT shares equal in value to such shareholder's pro
rata interest in the net assets transferred to USGT as of the Valuation
Date (as hereinafter defined). Holders of Class A, Class B and Class C
shares of the Fund will receive Class A, Class B and Class C shares,
respectively, of USGT. For further information about the
Reorganization see "Approval of the Reorganization" below.
For the reasons set forth below under "Approval of the Reorganization -
Reasons for the Reorganization," the Board, including the trustees who
are not "interested persons" of the Trust (the "Independent Trustees"),
as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), has concluded that the Reorganization is in
the best interests of the Fund and its shareholders and that the
interests of existing Fund shareholders will not be diluted as a result
of the Reorganization, and recommends approval of the Reorganization by
Fund shareholders. The Board of Trustees of USGT has also approved the
Reorganization and determined that the interests of existing USGT
shareholders will not be diluted as a result of the Reorganization. If
the Reorganization is not approved, the Fund will continue in existence
and the Board will determine whether to pursue alternative actions.
"Approval of the Reorganization" sets forth certain information with
respect to the background of the Reorganization, including other
transactions and agreements entered into, or contemplated to be entered
into, by OMC, QVA and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of a
majority of each of the Class A, Class B and Class C shares of the
Fund, voting separately as a class, represented in person or by proxy
at the Meeting and entitled to vote at the Meeting. See "Information
Concerning the Meeting - Record Date; Vote Required; Share
Information."
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, the Fund and USGT
will have received an opinion to the effect that the Reorganization
will qualify as a tax-free reorganization for Federal income tax
purposes. As a result of such tax-free reorganization, no gain or loss
would be recognized by the Fund, USGT, or the shareholders of either
fund for Federal income tax purposes. For further information about
the tax consequences of the Reorganization, see "Approval of the
Reorganization -Tax Aspects of the Reorganization" below.
Investment Objectives and Policies
The investment objectives of USGT and the Fund are similar. USGT seeks
high current income, preservation of capital and maintenance of
liquidity. The Fund seeks a high level of current income together with
protection of capital.
USGT seeks its investment objective by investing primarily in debt
instruments issued or guaranteed by the U.S. Government or its agencies
or instrumentalities ("U.S. Government Securities"), and repurchase
agreements on such securities. It is expected that investments by USGT
in debt securities other than U.S. Government Securities will be
limited to securities that are rated investment grade, or, if unrated,
judged by OMC to be of comparable quality to debt securities rated
within such grades. The Fund seeks its investment objective by
investing exclusively in U.S. Government Securities and in related
futures, options and repurchase agreements.
Each of the funds may also write covered calls (and, as to the Fund,
covered puts) to enhance income and USGT may use other derivative
investments for such purpose. The funds may use hedging instruments to
try to manage investment risks.
Although the respective investment objectives and policies of the Fund
and USGT are generally similar, shareholders of the Fund should
consider certain differences in such objectives and policies. See
"Comparison Between USGT and the Fund - Comparison of Investment
Objectives, Policies and Restrictions."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from their investment
advisers pursuant to the terms of their respective investment advisory
agreements. The management fee is payable to the investment advisers
monthly and is computed on the net asset value of each fund as of the
close of business each day. USGT pays a management fee which declines
on additional assets as USGT increases its asset base, at the annual
rate of 0.65% of the first $200 million of net assets, 0.60% of the
next $100 million, 0.57% of the next $100 million, 0.55% of the next
$400 million, and 0.50% of net assets over $800 million. The Fund pays
QVA a management fee at the annual rate of 0.60% of net assets. QVA
pays 20% of its fee to New Castle Advisers, Inc. for advice and
assistance in connection with options and financial futures investments
of the Fund.
Both USGT and the Fund have adopted separate service and/or
distribution plans pursuant to Rule 12b-1 under the 1940 Act for their
respective Class A, Class B and Class C shares. Pursuant to the plans,
Class A, Class B and Class C shares of USGT and the Fund are authorized
to pay OFDI and QVD, respectively, in connection with the distribution
of shares and the servicing of shareholder accounts that hold the
fund's shares. The plans for USGT and the Fund provide for payments at
a fixed rate to compensate OFDI and QVD, respectively, except for
USGT's Class A service plan, which provides for reimbursement of OFDI's
expenses. The current maximum annual fee payable by shares of USGT and
the Fund pursuant to their service and/or distribution plans is (i) as
to Class A shares, 0.25% (as a service fee), (ii) as to Class B shares,
1.00% (consisting of a 0.25% service fee and a 0.75% "asset-based sales
charge") and (iii) as to Class C shares, 1.00% (consisting of a 0.25%
service fee and a 0.75% "asset-based sales charge") respectively, of
average annual net assets. Class A shares of the Fund also pay QVD a
distribution fee at an annual rate of 0.05%. Class B shares of USGT
automatically convert to Class A shares of USGT six years after
purchase. Class B shares of the Fund automatically convert to Class A
shares of the Fund eight years after purchase. Accordingly, Class B
shareholders of the Fund pay the asset-based sales charge on their
shares for a longer period than USGT Class B shareholders.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of USGT and the Fund may be made
directly through the distributor for USGT or the transfer agent for the
Fund, respectively, or through any dealer, broker or financial
institution that has a sales agreement with the distributor for such
fund (initial purchases of Fund shares must be made through such
dealer, broker or institution). In addition, a shareholder of USGT may
purchase shares automatically from an account at a domestic bank or
other financial institution under the "OppenheimerFunds AccountLink"
service. Class A shares of both USGT and the Fund generally are sold
subject to an initial sales charge and Class B and Class C shares
generally are sold without a front-end sales charge but may be subject
to a CDSC upon redemption. See "Comparative Fee Tables -- Transaction
Charges" above for a complete description of such sales charges.
The Class A USGT shares to be issued under the Reorganization
Agreement will be issued by USGT at net asset value without a sales
charge. The sales charge on Class A shares of USGT will only affect
shareholders of the Fund to the extent that they desire to make
additional purchases of Class A shares of USGT in addition to the
shares which they will receive as a result of the Reorganization.
Future dividends and capital gain distributions of USGT, if any, may be
reinvested without sales charge. The Class B and Class C shares of USGT
to be issued under the Reorganization Agreement will be issued at net
asset value and, along with the Class A shares of USGT to be issued
under the Reorganization Agreement, will be deemed aged to the same
level as the shareholder's existing Fund Class A, Class B and Class C
shares. USGT has undertaken that any Fund shareholders entitled to a
waiver of or exemption from sales charges pursuant to the policy stated
in the Fund's prospectus dated March 1, 1995, as revised June 30, 1995,
shall continue to be entitled to such waiver or exemption as a
shareholder of USGT after the Reorganization so long as they continue
to meet the applicable eligibility criteria. Other Oppenheimer funds
shall also provide such waivers and exemptions upon implementation of
appropriate prospectus disclosure.
Exchanges. Shareholders of USGT and the Fund may exchange their shares
at net asset value for shares of the same class of mutual funds
distributed by OFDI and QVD, respectively, subject to certain
conditions. USGT offers an automatic exchange plan providing for
systematic exchanges from USGT of a specified amount for shares of the
same class of other funds within the OppenheimerFunds family.
Redemptions. Class A shares of the funds may be redeemed without
charge at their respective net asset values per share calculated after
the redemption order is received and accepted; however, certain large
investments in Class A shares that were exempt from the front-end sales
charge upon purchase may be subject to a CDSC upon redemption. See
"Comparative Fee Tables -- Transaction Charges" above. Class B shares
of the funds may be redeemed at their net asset value per share,
subject to a maximum CDSC of 5.0% for redemptions occurring within six
years of purchase. Class C shares of both funds may be redeemed at
their net asset value per share, subject to a CDSC of 1.00% if such
shares are redeemed during the first 12 months following their
purchase.
Shareholders of USGT may reinvest redemption proceeds of Class A shares
on which an initial sales charge was paid, or Class A or Class B shares
on which a CDSC was paid, within six months of a redemption at net
asset value in Class A shares of USGT or any of numerous mutual funds
within the OppenheimerFunds family. This privilege is not applicable
to Class C USGT shares. Shareholders of the Fund that reinvest
redemption proceeds of Class A, Class B or Class C shares in another
fund in the Quest Funds family within 60 days will be reinstated as a
shareholder with the same privileges regarding the non-payment of sales
charges that apply to exchanges. Shareholders of the funds may redeem
their shares by written request or by telephone request in certain
stated amounts, or they may arrange to have share redemption proceeds
wired, for a fee, to a pre-designated account at a U.S. bank or other
financial institution that is an automated clearing house ("ACH")
member. Checkwriting privileges on Class A shares are also available.
The funds offer automatic withdrawal plans providing for systematic
withdrawals of a specified amount from the fund account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
USGT, shareholders should carefully consider the following summary of
risk factors, relating to both USGT and the Fund, in addition to the
other information set forth in this Proxy Statement and Prospectus. A
complete description of risk factors for each fund is set forth in the
Prospectuses of the funds and their respective Statements of Additional
Information. As a general matter, USGT and the Fund are intended for
investors seeking high current income and not for investors seeking
capital appreciation. There is no assurance that either USGT or the
Fund will achieve its investment objective and investment in the funds
is subject to investment risks, including the possible loss of the
principal invested.
Investment in U.S. Government Securities and Other Debt Obligations
The funds both seek their investment objective through investments in
U.S. Government Securities and, as set forth below, in related futures,
options and repurchase agreements. The Fund invests exclusively in such
securities. As a matter of fundamental policy, USGT will invest at
least 80% of its total assets in U.S. Government Securities, under
normal market conditions. Although U.S. Government Securities involve
little credit risk, their values will fluctuate depending on prevailing
interest rates. When prevailing interest rates fall, the values of
already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally decline.
The magnitude of these fluctuations will often be greater for longer-
term debt securities than shorter-term securities. While each fund's
respective investment adviser seeks to reduce risks by diversifying
investments, by carefully researching securities before they are
purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the fund's
objective.
USGT expects that as a non-fundamental policy any investments in debt
securities other than U.S. Government Securities will be limited to
debt securities rated within the four highest rating categories of
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("S&P") or, if unrated, judged by OMC to be of comparable
quality to debt securities rated within such grades. Such ratings are
known as "investment grade" ratings. USGT is not obligated to dispose
of securities if the rating is reduced below investment grade. There
is a credit risk that issuers, particularly those other than the U.S.
Government or its agencies or instrumentalities, may not be able to
make interest or principal payments as they become due.
Both funds may invest in mortgage-backed securities, which are
guaranteed as to timely payment of interest and principal by the full
faith and credit of the U.S. Government or agencies and
instrumentalities of the U.S. Government. The effective maturity of a
mortgage-backed security may be shortened by unscheduled or early
payment of principal and interest on the underlying mortgages. This
may result in greater price and yield volatility than traditional
fixed-income securities that have a fixed maturity and interest rate.
The principal that is returned may be invested in instruments having a
higher or lower yield than the prepaid instruments depending on then-
current market conditions. 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. If the funds buy mortgage-backed securities at a premium,
prepayments of principal and foreclosures of mortgages may result in
some loss of the fund's principal investment to the extent of the
premium paid. 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.
Each fund may invest (although the Fund currently does not) in
collateralized mortgage obligations ("CMOs") that may be issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
and USGT may also invest in CMOs that are collateralized by a portfolio
of mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality. In the latter case, USGT looks only to the
issuer of the CMO for payments of principal and interest. 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 and less liquid than other types of mortgage-related
securities, because of the possibility that the principal value of the
CMOs may be prepaid earlier than the maturity of the CMOs as a result
of prepayments of the underlying mortgage loans by the borrowers.
USGT 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 (and is known as an "I/O"), while the
other class will receive all of the principal payments (and is known as
a "P/O"). 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 in
such I/Os. The value of "principal only" securities generally
increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of
coupon-bearing bonds of the same maturity.
Mortgage-Backed Security Rolls
USGT may enter into "forward roll" transactions with respect to
mortgage-backed securities in which it can invest. The Fund may enter
into forward roll transactions with respect to any eligible portfolio
security although it currently does not engage in such transactions.
In a forward roll transaction, the fund will sell a security to
selected banks or other entities and simultaneously agree to repurchase
a similar security (same type, coupon and maturity) from the
institution at a specified later date at an agreed upon price. The
securities that are repurchased will bear the same interest rate as
those sold, but as to mortgage securities generally will be
collateralized by different pools of mortgages with different
prepayment histories than those sold. Forward roll transactions
require the funds to secure their obligations in the transaction by
segregating assets with a custodian bank equal in amount to obligations
under the roll. The principal risk of forward rolls is the possibility
that the market value of the securities sold by the fund may decline
below the price at which the fund is obligated to purchase the
securities. In addition, mortgage-backed security rolls present the
risks typically associated with mortgage-backed securities, including
the risk of early prepayments. Prior to repurchase of portfolio
securities, the fund may not be entitled to receive interest and
principal payments on the securities sold and that the proceeds of the
sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the
roll.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or less
without limit and may cause up to 10% of their respective net assets to
be subject to repurchase agreements having a maturity beyond seven
days. Repurchase agreements must be fully collateralized. However, if
the vendor fails to pay the resale price on the delivery date, the
funds may experience costs or delays in disposing of the collateral and
may experience losses to the extent that the proceeds from the sale of
the collateral is less than the repurchase price.
Options, Futures and Interest Rate Swaps; Derivatives
The funds may purchase and sell certain kinds of futures contracts, put
and call options, and options on interest rate futures for hedging
purposes. In addition, USGT may utilize options on broadly-based
securities indices and enter into interest rate swap agreements. The
foregoing instruments, referred to as "hedging instruments," may be
considered derivative investments. USGT may also invest in certain
derivative investments to enhance income. The Fund may write covered
put and call options on U.S. Government Securities to generate
additional income. Hedging instruments and derivative investments and
their special risks are described below in "Comparison Between USGT and
the Fund."
<PAGE>
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
Oppenheimer Capital, in the course of a review of its business,
recently concluded that it should concentrate on its core investment
management business and not continue in the retail distribution of
mutual funds. Oppenheimer Capital is the parent of QVA. The retail
mutual fund market requires significant assets per fund and in the
aggregate for a mutual fund family to cover normal costs, significant
capital investment in new products and services, financing for Class B
and Class C shares and sales support. Consequently, it has become
increasingly difficult for a relatively small mutual fund operation
with assets under $10 billion, to compete. Sometime after this
determination was made, representatives of OMC approached Oppenheimer
Capital about acquiring certain of its mutual fund assets.
Representatives of OMC, Oppenheimer Capital, QVD and QVA held meetings
beginning in April 1995. Following the negotiation of the terms of an
acquisition agreement and related agreements, an acquisition agreement
(the "Acquisition Agreement") was executed by OMC, Oppenheimer Capital,
QVD and QVA on August 17, 1995.
The Reorganization described in this Proxy Statement and Prospectus is
one aspect of the overall Acquisition (as hereinafter defined)
contemplated by the Acquisition Agreement described below. The
consummation of the Acquisition is one condition, among others, to the
closing of the Reorganization. Accordingly, unless the parties
otherwise agree, the Reorganization may not be effected, despite
shareholder approval, if the Acquisition does not close. In such case,
the Fund will continue in existence and the Board will take such
further action as it, in its discretion, deems necessary or advisable.
The description of the Acquisition Agreement set forth below is a
summary only.
Acquisition Agreement
The Acquisition Agreement contemplates the sale to OMC of substantially
all the assets (the "Purchased Assets") of QVA, QVD and Oppenheimer
Capital (collectively, the "Companies") relating to twelve Quest For
Value mutual funds (the "Acquired Funds") and the assumption by OMC of
certain liabilities of the Companies with respect to the Acquired Funds
(the "Assumed Liabilities") (the foregoing, the "Acquisition"). The
Acquisition Agreement contemplates that six of the Acquired Funds
(including the Fund) will be reorganized with certain mutual funds
currently advised by OMC (the "Reorganized Funds") and the remaining
six Acquired Funds will enter into investment advisory agreements with
OMC (or its designee) and OMC (or its designee) will thereupon enter
into subadvisory agreements with QVA for the benefit of each such fund
(the "Continuing Funds").
The purchase price for the Purchased Assets will be calculated
pursuant to the formula set forth on Exhibit B hereto. If the
Acquisition had been consummated on July 31, 1995, QVA estimates that
the purchase price (which includes the initial purchase payment payable
at closing, the amount of certain assumed liabilities, certain
commissions and a deferred cash payment) would have been approximately
$50 million. The actual purchase price may be lower depending upon
changes in the net asset value of the Acquired Funds.
A condition to the obligation of OMC to close under the Acquisition
Agreement (the "Acquisition Closing") is the approval of the
reorganizations of the Reorganized Funds (including the Reorganization
described in this Proxy Statement and Prospectus) and the approval of
the investment advisory agreements and subadvisory agreements with the
Continuing Funds by shareholders that have in the aggregate at least
75% of the closing net assets of all Acquired Funds. A condition to
the obligation of the Companies to close under the Acquisition
Agreement (which condition has been satisfied) is that the directors or
trustees of the Continuing Funds and the Reorganized Funds have adopted
a resolution that for a period of three years after the Acquisition
Closing, at least 75% of the members of the board of each such fund
will not be "interested persons" (as defined in the 1940 Act) of the
investment adviser or subadviser for such fund or "interested persons"
(as defined in the 1940 Act) of QVA, the predecessor investment adviser
as to the Continuing Funds. The Acquisition Agreement sets forth
certain other conditions to each party's obligation to close.
The Companies have each agreed pursuant to an Agreement Not To
Compete not to sponsor, manage or distribute any open end or closed end
management investment company registered under the 1940 Act or any
similar law in Canada (except for certain identified investment
companies or types of investment companies) and not to sell, underwrite
or assist in the distribution of shares of any such funds for a period
to end on the earlier of (i) the third anniversary of the date on which
there is no effective sub-advisory agreement between OMC and QVA or
(ii) the eighth anniversary of the Acquisition Closing. OMC and the
Companies have agreed to indemnify the other for certain
liabilities.
Board Approval of the Reorganization
At its meeting on June 22, 1995 the Board, including the Independent
Trustees, unanimously approved the Reorganization and the
Reorganization Agreement, determined that the Reorganization is in the
best interests of the Fund and its shareholders and resolved to
recommend that Fund shareholders vote for approval of the
Reorganization. The Board further determined that the Reorganization
would not result in dilution of the Fund's shareholders' interests.
In evaluating the Reorganization, the Board requested and reviewed,
with the assistance of independent legal counsel, materials furnished
by OMC and QVA. These materials included financial statements as well
as other written information regarding OMC and its personnel,
operations and financial condition. The Board also reviewed the same
type of information about QVA. Consideration was given to comparative
information concerning other mutual funds with similar investment
objectives to the Fund and USGT, including information prepared by
Lipper Analytical Services, Inc. and Management Practice Inc. The
Board also considered information with respect to the relative
historical performance of the funds. The Board also reviewed and
discussed the terms and provisions of the investment advisory agreement
pursuant to which OMC provides investment management services to USGT
and compared them to the existing management arrangements for the Fund
as well as the management arrangements of other mutual funds,
particularly with respect to the allocation of various types of
expenses, levels of fees and resulting expense ratios.
In reaching its determination, the Board gave careful consideration to
the following factors, among others: the Reorganization would afford
the shareholders of the Fund the capabilities and resources of OMC and
its affiliates in the area of investment management, distribution,
shareholder servicing and marketing; the ability of the shareholders of
the Fund to exchange their shares for a wider variety of portfolios
within the OppenheimerFunds family with differing investment objectives
than are currently available to shareholders of the Fund; the terms and
conditions of the Reorganization (including that there would be no
sales charge imposed in effecting the Reorganization, the
Reorganization was intended to qualify as a tax-free exchange and all
expenses of the Reorganization would be paid by QVA and OMC in the
amounts incurred by them and the respective fund); and the substantial
similarity of the investment objectives, policies and methods of the
Fund and USGT.
The Board also considered that the annual operating expenses of USGT
are lower, as a percentage of assets, and would be lower on a pro forma
basis after giving effect to the Reorganization, than the operating
expenses of the Fund, resulting in a savings to Fund shareholders. For
operating expenses and other expense information relating to USGT and
the Fund, see "Comparative Fee Tables - Expenses of USGT and the Fund;
Pro Forma Expenses." Further, since Class B shares of USGT
automatically convert to Class A shares after six years, as compared to
a conversion of Class B shares of the Fund after eight years, Class B
Fund shareholders would benefit from the earlier conversion to a Class
that does not bear an annual asset-based sales charge. In addition, the
Board determined that the purchase, exchange and redemption procedures
and privileges provided by USGT are comparable to those of the Fund and
that Fund shareholders currently exempt from payment of certain
transaction-based sales charges will continue to be so exempt as
shareholders of USGT.
The USGT Board of Trustees, including the trustees who are not
"interested persons" of USGT, unanimously approved the Reorganization
and the Reorganization Agreement and determined that the Reorganization
is in the best interests of USGT and its shareholders. The USGT Board
further determined that the Reorganization would not result in dilution
of the USGT shareholders' interests. The USGT Board considered, among
other things, that an increase in USGT's asset base as a result of the
Reorganization could benefit USGT shareholders due to the economies of
scale available to a larger fund. These economies of scale should
result in slightly lower costs per account for each USGT shareholder
through lower operating expenses and transfer agency expenses.
The Reorganization
The following summary of the Reorganization Agreement is qualified
in its entirety by reference to the Reorganization Agreement (a copy of
which is set forth in full as Exhibit A to this Proxy Statement and
Prospectus). The Reorganization Agreement contemplates a
reorganization under which (i) substantially all of the assets of the
Fund would be transferred to USGT in exchange for Class A, Class B and
Class C shares of USGT and the assumption by USGT of certain
liabilities of the Fund, (ii) the Class A, Class B and Class C shares
would be distributed among the respective Class A, Class B and Class C
shareholders of the Fund in liquidation of the Fund and (iii) the
outstanding shares of the Fund would be cancelled. Prior to the
Closing Date (as hereinafter defined), the Fund will endeavor to
discharge all of its liabilities and obligations when and as due prior
to such date. USGT will not assume any liabilities or obligations of
the Fund other than those reflected on an unaudited statement of assets
and liabilities of the Fund prepared as of the Valuation Date and that
are agreed to by USGT. In this regard, the Fund will retain a cash
reserve (the "Cash Reserve") in an amount which is deemed sufficient in
the discretion of the Board for the payment of (a) the Fund's expenses
of liquidation and (b) the Fund's liabilities, other than those assumed
by USGT. The number of full and fractional Class A, Class B and Class
C shares of USGT to be issued to the Fund will be determined on the
basis of USGT's and the Fund's relative net asset values per Class A,
Class B and Class C shares, respectively, computed as of the close of
business of the New York Stock Exchange, Inc. on the business day
preceding the Closing Date (the "Valuation Date"). The Closing Date
for the Reorganization will be the date of the closing of the
Acquisition under the Acquisition Agreement (or such other day and time
as may be mutually agreed upon in writing).
OMC will utilize the valuation procedures set forth in the Prospectus
and Statement of Additional Information of USGT to determine the value
of the Fund's assets to be transferred to USGT pursuant to the
Reorganization, the value of USGT's assets and the net asset value of
each class of shares of USGT. Such values will be computed by OMC as
of the Valuation Date in a manner consistent with its regular practice
in pricing USGT.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, on and after the
Closing Date, USGT will be in compliance with all of its investment
policies and restrictions. The Fund will recognize capital gain or
loss on any sales made pursuant to this condition. As noted in "Tax
Aspects of the Reorganization" below, if the Fund realizes net gain
from the sale of securities, such gain, to the extent not offset by
capital loss carry-forwards, will be distributed to shareholders prior
to the Closing Date and will be taxable to shareholders as capital
gain.
Contemporaneously with the closing, the Fund will be liquidated
(except for the Cash Reserve) and the Fund will distribute or cause to
be distributed pro rata to Fund shareholders of record as of the close
of business on the Valuation Date the full and fractional USGT shares
of each class received by the Fund. Upon such liquidation, all issued
and outstanding shares of the Fund will be cancelled on the Fund's
books and Fund shareholders will have no further rights as shareholders
of the Fund. To assist the Fund in the distribution of USGT shares,
USGT will, in accordance with a shareholder list supplied by the Fund,
cause USGT's transfer agent to credit and confirm an appropriate number
of shares of USGT to each shareholder of the Fund. Certificates for
shares of USGT will be issued upon written request of a former
shareholder of the Fund but only for whole shares with fractional
shares credited to the name of the shareholder on the books of USGT.
Former shareholders of the Fund who wish certificates representing
their shares of USGT must, after receipt of their confirmations, make a
written request to Oppenheimer Shareholder Services, P.O. Box 5270,
Denver, Colorado 80217. Shareholders of the Fund holding certificates
representing their shares will not be required to surrender their
certificates to anyone in connection with the Reorganization. After
the Reorganization, however, it will be necessary for such shareholders
to surrender such certificates in order to redeem, transfer, pledge or
exchange any shares of USGT. After the closing of the Reorganization,
the Fund will not conduct any business except in connection with the
winding up of its affairs. Under the Reorganization Agreement, within
one year after the Closing Date, the Fund shall: either (i) transfer
any remaining amount of the Cash Reserve to USGT, if such remaining
amount is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of the Fund who were such on
the Valuation Date. Such remaining amount shall be deemed to be
material if the amount to be distributed, after deducting the estimated
expenses of the distribution, equals or exceeds one cent per share of
the number of Fund shares outstanding on the Valuation Date.
The consummation of the Reorganization is subject to the conditions
set forth in the Reorganization Agreement, including, without
limitation, approval of the Reorganization by the Fund's shareholders.
Notwithstanding approval of the Fund's shareholders, the Reorganization
may be terminated at any time at or prior to the Closing Date (i) by
mutual written consent of the Trust, on behalf of the Fund, and USGT,
(ii) by the Trust, on behalf of the Fund, or USGT if the closing shall
not have occurred on or before February 29, 1996 or (iii) by the Trust,
on behalf of the Fund, or USGT upon a material breach by the other
(and, with respect to USGT, a material breach by QVA) of any
representation, warranty, covenant or agreement contained therein to be
performed on or prior to the Closing Date, if a condition therein
expressed to be precedent to the obligations of the terminating party
has not been met and it reasonably appears that it will not or cannot
be met prior to the Closing Date, or the Acquisition is not
consummated. Termination of the Reorganization Agreement will
terminate all obligations of the parties thereto (other than a
confidentiality obligation of USGT with respect to information relating
to the Fund and the obligation of USGT to return certain books and
records to the Fund) without liability except, in the event of a
termination pursuant to (iii) above, any party in breach (other than a
breach due to the Fund shareholders not approving the Reorganization)
of the Reorganization Agreement (or the Acquisition Agreement, if
applicable) will, upon demand, reimburse the non-breaching party for
all reasonable out-of-pocket fees and expenses incurred in connection
with the transactions contemplated by the Reorganization Agreement.
Approval of the Reorganization will require the vote specified below in
"Information Concerning the Meeting - Record Date; Vote Required; Share
Information." If the Reorganization is not approved by the
shareholders of the Fund, the trustees of the Trust will consider other
possible courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, the Fund will declare a dividend in an
amount large enough so that it will have declared a dividend of all of
its investment company taxable income and net capital gain, if any, for
the taxable period ending with its dissolution (determined without
regard to any deduction for dividends paid). Such dividends will be
included in the taxable income of the Fund's shareholders as ordinary
income and capital gain, respectively.
The exchange of the assets of the Fund for Class A, Class B and Class C
shares of USGT and the assumption by USGT of certain liabilities of the
Fund is intended to qualify for Federal income tax purposes as a tax-
free reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Fund has represented to
Price Waterhouse LLP, tax adviser to the Fund, that, to the Fund's best
knowledge, there is no plan or intention by any Fund shareholder who
owns 5% or more of the Fund's outstanding shares, and, to the Fund's
best knowledge, there is no plan or intention on the part of the
remaining Fund shareholders, to redeem, sell, exchange or otherwise
dispose of a number of USGT shares received in the transaction that
would reduce the Fund shareholders' ownership of USGT Class A, Class B
and Class C shares to a number of shares having a value, as of the
Closing Date, of less than 50% of the value of all the formerly
outstanding Fund shares as of the same date. The Fund and USGT have
each further represented to Price Waterhouse LLP the fact that, as of
the Closing Date, the Fund and USGT will qualify as regulated
investment companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, USGT and the
Fund will receive the opinion of Price Waterhouse LLP to the effect
that, based on the Reorganization Agreement, the above representations
and other representations as such firm shall reasonably request,
existing provisions of the Code, Treasury Regulations issued
thereunder, current Revenue Rulings, Revenue Procedures and court
decisions, for Federal income tax purposes:
1. The transfer of substantially all of the Fund's assets in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain identified liabilities of the Fund
followed by the distribution by the Fund of Class A, Class B and
Class C shares of USGT to the Fund shareholders in exchange for
their Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code and the Fund and USGT
will each be a "party to the reorganization" within the meaning of
Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by USGT upon the receipt of the assets of the Fund
solely in exchange for Class A, Class B and Class C shares of USGT
and the assumption by USGT of the identified liabilities of the
Fund.
3. Pursuant to Section 361(a) of the Code, no gain or loss will
be recognized by the Fund upon the transfer of the assets of the
Fund to USGT in exchange for Class A, Class B and Class C shares
of USGT and the assumption by USGT of the identified liabilities
of the Fund or upon the distribution of Class A, Class B and Class
C shares of USGT to the Fund shareholders in exchange for the Fund
shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss will
be recognized by the Fund shareholders upon the exchange of the
Fund shares for the Class A, Class B and Class C shares of USGT.
5. Pursuant to Section 358 of the Code, the aggregate tax basis
for Class A, Class B and Class C shares of USGT received by
each Fund shareholder pursuant to the Reorganization will be
the same as the aggregate tax basis of the Fund shares held by
each such Fund shareholder immediately prior to the
Reorganization.
6. Pursuant to Section 1223 of the Code, the holding period of
Class A, Class B and Class C shares of USGT to be received by each
Fund shareholder will include the period during which the Fund
shares surrendered in exchange therefor were held (provided such
Fund shares were held as capital assets on the date of the
Reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of the
assets of the Fund acquired by USGT will be the same as the tax
basis of such assets of the Fund immediately prior to the
Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period of
the assets of the Fund in the hands of USGT will include the
period during which those assets were held by the Fund; and
9. USGT will succeed to and take into account the items of the
Fund described in Section 381(c) of the Code, including the
earnings and profits, or deficit in earnings and profits, of the
Fund as of the date of the transaction. USGT will take these
items into account subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384 of the Code and
applicable regulations thereunder.
Shareholders of the Fund should consult their tax advisors regarding
the effect, if any, of the Reorganization in light of their individual
circumstances. Since the foregoing discussion only relates to the
Federal income tax consequences of the Reorganization, shareholders of
the Fund should also consult their tax advisers as to state and local
tax consequences, if any, of the Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of USGT and the Fund and
indicates the pro forma combined capitalization as of June 30, 1995 as
if the Reorganization had occurred on that date.
Net Asset
Shares Value
Net Assets Outstanding Per Share
Oppenheimer U.S.
Government Trust*
Class A Shares $312,606,704 32,870,814 $9.51
Class C Shares 11,018,821 1,159,733 9.50
U.S. Government
Income Fund
Class A Shares 114,475,587 10,197,943 11.23
Class B Shares 9,817,999 874,786 11.22
Class C Shares 2,023,185 180,268 11.22
Pro Forma Combined
Fund**
Class A Shares 427,082,291 44,908,205 9.51
Class B Shares 9,817,999 1,032,387 9.51
Class C Shares 13,042,006 1,372,700 9.50
------------------
* Class B shares of USGT were first publicly offered on July 21, 1995.
Accordingly, information with respect to Class B shares of USGT is
not reflected in this part of the table above.
** Reflects issuance of 12,037,391 Class A shares, 1,032,387 Class B
shares and 212,967 Class C shares of USGT in a tax-free exchange for
the net assets of the Fund, aggregating $114,475,587, $9,817,999 and
$2,023,185 for Class A, Class B and Class C shares, respectively, of
the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at June 30, 1995 would have been 1.08% with respect to
Class A shares, 1.84% with respect to Class B shares and 1.87% with
respect to Class C shares.
COMPARISON BETWEEN USGT AND THE FUND
Comparative information about USGT and the Fund is presented below.
More complete information about USGT and the Fund is set forth in their
respective Prospectuses (which, as to USGT, accompanies this Proxy
Statement and Prospectus and is incorporated herein by reference) and
Statements of Additional Information. To obtain copies, see
"Miscellaneous - Public Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, USGT seeks high current income,
preservation of capital and maintenance of liquidity. As its
investment objective, the Fund seeks a high level of current income
together with protection of capital. In seeking their investment
objectives, which are fundamental policies, USGT and the Fund employ
similar investment policies as described in detail below.
USGT seeks its investment objective primarily through investments in
U.S. Government Securities and repurchase agreements on such
securities. As a matter of fundamental policy, at least 80% of USGT's
total assets will be invested under normal conditions in U.S.
Government Securities. USGT expects that any investments in debt
securities other than U.S. Government Securities will be limited to
debt securities rated within the four highest rating categories
("investment grade") of Moody's or S&P or, if unrated, judged by OMC to
be of comparable quality to debt securities rated within such grades,
although it is not a fundamental policy that it do so. USGT is not
obligated to dispose of securities if the rating is reduced below
investment grade. The Fund seeks its investment objective by investing
exclusively in U.S. Government Securities and in related futures,
options and repurchase agreements. U.S. Government Securities include
(i) U.S. Treasury obligations and (ii) obligations issued or guaranteed
by U.S. Government agencies or instrumentalities, including mortgage-
backed securities. The current estimated average dollar weighted
maturity of USGT is approximately five years and that of the Fund
between five and ten years. The funds' respective portfolio holdings
will vary based on market conditions which, in turn, could change such
average maturity amounts.
U.S. Treasury obligations include Treasury bills (which have maturities
of one year or less when issued), Treasury notes (which have maturities
of two to ten years when issued) and Treasury bonds (which have
maturities generally greater than ten years when issued). U.S.
Treasury obligations are backed by the full faith and credit of the
United States.
Obligations issued or guaranteed by U.S. Government agencies or
instrumentalities are obligations 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, (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"). The agencies and instrumentalities under
(c) above include Federal Land Banks, Farmers Home Administration,
Central Bank for Cooperatives and Federal Intermediate Credit Banks.
Mortgage-backed securities, also known as pass-through securities, are
characterized by the homeowner's principal and interest payments
passing 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, and
Freddie Mac and Fannie Mae, that are guaranteed and issued,
respectively, by these agencies and instrumentalities of the U.S.
Government.
In addition to securities issued by Ginnie Mae, Fannie Mae and Freddie
Mac, another type of mortgage-backed security the funds may invest in
(although the Fund currently does not) are collateralized mortgage
obligations ("CMOs") that are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and USGT may also
invest in CMOs 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.
USGT 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 (and is known as an "I/O"), while the
other class will receive all of the principal value (and is known as a
"P/O").
The funds may also enter into "forward roll" transactions with banks
and dealers with respect to the mortgage-related securities (as to
USGT) or portfolio securities (as to the Fund) in which it can invest.
The Fund currently does not engage in such transactions. These require
the funds to secure their obligations in the transaction by segregating
assets with a custodian bank equal in amount to obligations under the
roll.
Special Investment Methods
USGT and the Fund may use the special investment methods summarized
below.
Loans of Portfolio Securities. Both USGT and the Fund may lend their
portfolio securities to brokers, dealers and other financial
institutions, subject to certain conditions. As to USGT, these loans
are limited to not more than 25% of USGT's total assets although it is
not expected that such loans will exceed 5% of the value of the total
assets of USGT in the coming year. The Fund may commit up to 33 1/3 %
of the value of its total assets to such loans, but has not entered
into any to date.
Repurchase Agreements. Both USGT and the Fund may enter into repurchase
agreements. There is no limit on the amount of either fund's net assets
that may be subject to repurchase agreements of seven days or less.
Neither fund will enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days.
Hedging. As described below, both USGT and the Fund may purchase and
sell certain kinds of futures contracts, put and call options, and
options on interest rate futures. USGT may (but the Fund cannot) also
utilize options on broadly-based securities indices and enter into
interest rate swap agreements. These are all referred to as "hedging
instruments." The funds do not use hedging instruments for speculative
purposes. USGT may only purchase a call or put if, after such
purchase, the value of all call and put options held by USGT would not
exceed 5% of USGT's total assets. Other limits on the use of hedging
instruments are described in the funds' Prospectuses and Statements of
Additional Information.
Both funds may buy and sell options and futures to try to manage their
exposure to the possibility that the prices of their portfolio
securities may decline, or to establish a position in the market as a
temporary substitute for purchasing individual securities, or to try to
manage their exposure to changing interest rates. Some of these
strategies, such as selling futures, buying puts and writing covered
calls, hedge the funds' portfolio against price fluctuations. Other
hedging strategies, such as buying futures and call options and writing
put options, tend to increase the funds' exposure to the securities
market. USGT may purchase interest rate swaps where USGT and another
party exchange their right to receive or their obligation to pay
interest on a security. USGT may not enter into swaps with respect to
more than 25% of its total assets.
The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than those required for normal
portfolio management. If the investment adviser to the fund uses a
hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the fund's return. The fund
could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could
not close out a position because of an illiquid market for the future
or option. Options trading involves the payment of premiums and has
special tax effects on the fund. There are also special risks in
particular hedging strategies. If a covered call written by the fund
is exercised on an investment that has increased in value, the fund
will be required to sell the investment at the call price and will not
be able to realize any profit if the investment has increased in value
above the call price. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks. USGT could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes.
Derivative Investments. USGT can invest in a number of different kinds
of "derivative investments." Some types of derivatives may be used for
hedging purposes, as described above. USGT may invest in others
because they offer the potential for increased income and principal
value. The Fund may write covered put and call options on U.S.
Government Securities to generate additional income. In general, a
"derivative investment" is a specially-designed investment the
performance of which is linked to the performance of another investment
or security, such as an option future or index. In the broadest sense,
derivative investments include the hedging instruments in which the
funds may invest, such as options and futures contracts.
One risk of investing in derivative investments is that the company
issuing the instrument might not pay the amount due on the maturity of
the instrument. There is also the risk that the underlying investment
or security might not perform the way the investment adviser expected
it to perform. The performance of derivative investments may also be
influenced by interest rate changes in the U.S. and abroad. All of
these risks can mean that the fund will realize less income than
expected from its investments, or that it can lose part of the value of
its investments, which will affect the fund's share price.
Investment Restrictions
Both USGT and Fund have certain investment restrictions that, together
with their respective investment objectives, are fundamental policies
changeable only by shareholder approval. The investment restrictions
of USGT and the Fund are substantially the same except as set forth
below.
USGT cannot invest in securities (except those of the U.S. Government
or any of its agencies or instrumentalities) of any issuer if
immediately thereafter, either (a) more than 5% of USGT's total assets
would be invested in securities of that issuer, or (b) USGT would then
own more than 10% of that issuer's voting securities.
The Fund cannot: (1) purchase more than 10% of the voting securities of
any one issuer; (2) purchase more than 10% of any class of security of
any issuer, with all outstanding debt securities and all preferred
stock of an issuer each being considered as one class; (3) invest more
than 5% of the Fund's total assets in securities of issuers having a
record, together with predecessors, of less than three years of
continuous operation; (4) invest in physical commodities or physical
commodity contracts or speculate in financial commodity contracts, but
the Fund is authorized to purchase and sell financial futures contracts
and options on such futures contracts exclusively for hedging and other
non-speculative purposes to the extent specified in its Prospectus; (5)
purchase warrants if as a result the Fund would then have either more
than 5% of its total assets (determined at the time of investment)
invested in warrants or more than 2% of its total assets invested in
warrants not listed on the New York or American Stock Exchange; (6)
invest in securities of any issuer if to the knowledge of the Trust,
any officer or trustee of the Trust or any or any officer or director
of QVA owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers, trustees and directors who own more than 1/2
of 1% own in the aggregate more than 5% of the outstanding securities
of such issuer; (7) invest for the purpose of exercising control or
management of another company (except that the Fund may in the future
invest all of its investable assets in an open-end management
investment company with substantially the same investment objective and
restrictions as the Fund); (8) issue senior securities as defined in
the 1940 Act except insofar as the Fund may be deemed to have issued a
senior security by reason of: (a) entering into any repurchase
agreement; (b) borrowing money in accordance with restrictions
described above; or (c) lending portfolio securities; and (9) with
respect to 75% of its assets, invest more than 5% of the value of its
total assets in the securities of any one issuer (except that the Fund
may in the future invest all of its investable assets in an open-end
management investment company with substantially the same investment
objective and restrictions as the Fund).
USGT Performance
USGT does not maintain a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
During USGT's fiscal year ended June 30, 1995, as a result of periodic
U.S. short-term interest rate increases by the Federal Reserve, the
economy slowed to a moderate growth rate. In anticipation of a decline
in interest rates, OMC attempted to increase short-term yields by
including adjustable rate mortgages in USGT's portfolio. Due to what
OMC perceived as an uncertain interest rate environment, OMC included a
combination of short-term and long-term Treasury securities in USGT's
portfolio and reduced its position in fixed-rate mortgage-backed
securities.
The chart below shows the performance of a hypothetical $10,000
investment in each Class of shares of USGT held until June 30, 1995; in
the case of Class A shares, since August 16, 1985 (the date on which
USGT'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. Class B shares were not offered during
USGT's fiscal year ended June 30, 1995. Accordingly, no information on
Class B shares is reflected below.
Comparison of Change in Value
of a $10,000 Hypothetical Investment in
Oppenheimer U.S. Government Trust
and the Lehman Brothers U.S. Government Bond Index
(Graph With Class A Shares Of USGT)
(Graph With Class C Shares Of USGT)
Past performance is not predictive of future performance.
Average Annual Total Returns of Class A Shares Of USGT at 6/30/95(1)
1-Year 5-Year Life
5.94% 7.27% 8.00%
Average Annual Total Return of Class C Shares Of USGT at 6/30/95(2)
1-Year Life
9.31% 4.22%
-------------------
(1) The inception date of USGT (Class A shares) was 8/16/85. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions
and are shown net of the applicable 4.75% maximum initial sales charge.
(2) Class C shares of USGT were first publicly offered on 12/1/93.
USGT'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, USGT's performance reflects the effect of USGT
business and operating expenses. While index comparisons may be
useful to provide a benchmark for USGT's performance, it should be
noted that USGT'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.
Information on Fund performance is set forth in the Fund's Annual
Report as of October 31, 1994 which is incorporated herein by reference
and may be obtained without charge as set forth in "Miscellaneous -
Public Information."
Additional Comparative Information
General
For a discussion of the organization and operation of USGT,
including brokerage practices, see "Investment Objective and Policies"
and "How the Fund is Managed" in USGT's current Prospectus and
"Brokerage Policies of the Fund" in the USGT Additional Statement. For
a discussion of the organization and operation of the Fund, including
brokerage practices, see "Investment Objectives of the Fund,"
"Investment Restrictions and Techniques," "Investment Management
Agreement" and "Additional Information" in the Fund's current
Prospectus.
Financial Information
For certain financial information about USGT and the Fund, see (as to
USGT) "Financial Highlights" and "Performance of the Fund" in the USGT
current Prospectus and (as to the Fund) "Financial Highlights," in the
Fund current Prospectus.
Management of USGT and the Fund
For information about the management of USGT and the Fund, including
their respective Boards of Trustees, investment advisers, portfolio
managers and distributors, see (as to USGT) "Expenses" and "How the
Fund is Managed" in the USGT current Prospectus and USGT Additional
Statement and (as to the Fund) "Investment Management Agreement,"
Distribution Plan," "Portfolio Transactions and Turnover" and
"Additional Information" in the Fund current Prospectus.
Description of Shares of USGT and the Fund
Each share of USGT represents an interest in USGT proportionately
equal to the interest of each other share of the same class and
entitles the holder to one vote per share (and a fractional vote for a
fractional share) on matters submitted to a vote at shareholder
meetings. Shares of USGT vote together in the aggregate on certain
matters at shareholder meetings, such as the election of Trustees and
ratification of appointment of auditors. Shareholders of a particular
series or class vote separately on proposals which affect that series
or class, and shareholders of a series or class which are not affected
by that matter are not entitled to vote on the proposal. USGT is not
required to hold, and does not plan to hold, regular annual meetings of
shareholders. Shareholders of USGT have the right, under certain
circumstances, to remove a Trustee and will be assisted in
communicating with other shareholders for such purpose.
USGT is authorized to issue an unlimited number of shares of
beneficial interest. Shares are freely transferrable and do not have
cumulative voting rights or preemptive or subscription rights. USGT is
governed by a Board of Trustees that has the power, without shareholder
approval, to establish and designate one or more series and to divide
unissued shares into two or more classes. The Board of Trustees of
USGT has established three classes of shares, Class A, Class B and
Class C. Each class invests in the same investment portfolio. Each
class has its own dividends and distributions, and pays certain
expenses which may be different for the different classes. Under
certain circumstances, a shareholder of USGT may be held personally
liable as a partner for the obligations of USGT, and under the
Declaration of Trust for USGT, such a shareholder is entitled to
indemnification rights by USGT; the risk of a shareholder incurring any
such loss is limited to the remote circumstances in which USGT is
unable to meet its obligations.
For further information about the shares of USGT, and for a
description of the classes of shares of the Fund, including voting
rights, restrictions on disposition and potential liability associated
with their ownership, see (as to USGT) "How the Fund is Managed" in the
USGT current Prospectus and USGT Additional Information and (as to the
Fund) "Additional Information" in the Fund current Prospectus.
Dividends, Distributions and Taxes
Both funds declare dividends from net investment income each regular
business day, distribute dividends monthly and distribute net long-term
capital gains annually. USGT distributes net short-term capital gains
annually and the Fund distributes such gains quarterly. For a
discussion of the policies of USGT and the Fund with respect to
dividends and distributions, and a discussion of the tax consequences
of an investment in USGT and the Fund, see (as to USGT) "Dividends,
Capital Gains and Taxes" in the USGT current Prospectus and (as to the
Fund) "Dividends and Distributions" and "Tax Status" in the Fund
current Prospectus.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of USGT and the Fund may be purchased,
redeemed and exchanged, see (as to USGT) "How to Buy Shares," "How to
Sell Shares," "Exchanges of Shares," "Special Investor Services,"
"Service Plan for Class A Shares," "Distribution and Service Plan for
Class B Shares" and "Distribution and Service Plan for Class C Shares"
in the USGT current Prospectus; and see "How to Buy Shares," "How to
Redeem Shares," "Exchanging Shares" and "Additional Information" in the
Fund current Prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see (as
to USGT) "How the Fund is Managed" in the USGT current Prospectus and
(as to the Fund) "Additional Information" in the Fund current
Prospectus.
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting will be held at One World Financial Center, New York, New
York 10281 on the 40th Floor at 10:00 A.M., New York time, on November
16, 1995 and any adjournments thereof. At the Meeting, shareholders of
the Fund will be asked to consider and vote upon approval of the
Reorganization Agreement, and the transactions contemplated thereby,
including the transfer of substantially all the assets of the Fund in
exchange for Class A, Class B and Class C shares of USGT and the
assumption by USGT of certain liabilities of the Fund, the distribution
of such shares to the shareholders of the Fund in liquidation of the
Fund and the cancellation of the outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on September 25, 1995 as the
record date (the "Record Date") for the determination of shareholders
entitled to notice of, and to vote at, the Meeting. The affirmative
vote of a majority of each of the Class A, Class B and Class C shares
of the Fund, voting separately as a class, represented in person or by
proxy at the Meeting and entitled to vote at the Meeting is required
for approval of the Proposal. Each shareholder will be entitled to one
vote for each share and a fractional vote for each fractional share
held of record at the close of business on the Record Date. Only
shareholders of the Fund will vote on the Reorganization. The vote of
shareholders of USGT is not being solicited to approve the
Reorganization Agreement.
At the close of business on the Record Date, there were approximately
_____________ Class A, ___________ Class B and _____________ Class C
shares of the Fund issued and outstanding. The presence in person or
by proxy of the holders of a majority of each of Class A, Class B and
Class C shares constitutes a quorum for the transaction of business at
the Meeting. As of the close of business on the Record Date, there
were approximately _____________ Class A, _______________ Class B and
______________ Class C shares of USGT issued and outstanding. (To the
knowledge of the Fund, as of the Record Date, no person owned of record
or beneficially 5% or more of the outstanding Class A, Class B or Class
C Fund shares or 5% or more of the outstanding shares of the Fund.) To
the knowledge of USGT, as of the Record Date, no person owned of record
or beneficially 5% or more of the outstanding Class A, Class B or Class
C USGT shares or 5% or more of the outstanding shares of USGT. (As of
the Record Date, the officers and Trustees of USGT, and the officers
and Trustees of the Trust, beneficially owned as a group less than 1%
of the outstanding shares of each class of USGT and the Fund,
respectively, and of USGT and the Fund, respectively.)
In the event a quorum does not exist as to one or more classes of
shares of the Fund on the date originally scheduled for the Meeting,
or, subject to approval of the Board, for other reasons, one or more
adjournments of the Meeting may be sought by the Board. Any adjournment
would require a vote in favor of the adjournment by the holders of a
majority of the shares present at the Meeting (or any adjournment
thereof) in person or by proxy. The persons named as proxies will vote
all shares represented by proxies which they are required to vote in
favor of the Proposal, in favor of an adjournment, and will vote all
shares which they are required to vote against the Proposal, against an
adjournment. In the event that a quorum of each class is present at
the Meeting but one or more classes does not approve the
Reorganization, the Reorganization will be deemed to have not been
approved and the Board will consider what further action, if any, to
take.
Proxies
The enclosed form of proxy, if properly executed and returned, will
be voted (or counted as an abstention or withheld from voting) in
accordance with the choices specified thereon, and will be included in
determining whether there is quorum to conduct the Meeting. If a
shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions
are received, the broker-dealer may (if permitted under applicable
stock exchange rules), as record holder, vote such shares on the
Proposal in the same proportion as that broker-dealer votes street
account shares for which voting instructions were received in time to
be voted ("broken non-votes"). Abstentions and broker non-votes will
be counted as present for purposes of determining a quorum and will
have the same effect as a vote against the Proposal. The proxy may be
revoked at any time prior to the voting thereof by: (i) writing to the
Secretary of the Trust at One World Financial Center, New York, New
York 10281; (ii) attending the Meeting and voting in person; or (iii)
signing and returning a new proxy (if returned and received in time to
be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing
and mailing this Proxy Statement and Prospectus, will be evenly
apportioned between QVA and OMC. Any documents such as existing
prospectuses or annual reports that are included in that mailing will
be a cost of the fund issuing the document. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers
and employees of QVA, the Trust's investment adviser, or QVA's
affiliates, personally or by telephone or telegraph. In addition, QVA
has retained D.F. King & Co., Inc., 77 Water Street, New York, New York
10005 to assist in the solicitation of proxies primarily by contacting
shareholders by telephone and telegram for a fee not to exceed $____,
plus reasonable out-of-pocket expenses. The cost for such proxy
solicitor will be shared by QVA and OMC. D.F. King & Co., Inc. may
call shareholders to ask if they would be willing to have their votes
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been recorded
properly. The Trust has been advised by counsel that these procedures
are consistent with the requirements of applicable law. Shareholders
voting by telephone would be asked for their social security number or
other identifying information and would be given an opportunity to
authorize proxies to vote their shares in accordance with their
instructions. To ensure that the shareholders' instructions have been
recorded correctly they will receive a confirmation of their
instructions in the mail. A special toll-free number will be available
in case the information contained in the confirmation is incorrect.
Although a shareholder's vote may be taken by telephone, each
shareholder will receive a copy of this Proxy Statement and Prospectus
and may vote by mail using the enclosed proxy cared. Brokerage houses,
banks and other fiduciaries may be requested to forward soliciting
material to the beneficial owners of shares of the Fund and to obtain
authorization for the execution of proxies. For those services, if
any, they will be reimbursed by the Trust for their reasonable out-of-
pocket expenses.
With respect to the Reorganization, OMC and QVA will share the cost of
the tax opinion. Any other out-of-pocket expenses of USGT and the Fund
associated with the Reorganization, including fund, accounting and
transfer agent expenses, will be borne by OMC and QVA, respectively, in
the amounts so incurred by the respective fund.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by USGT in its financial
statements similar to a pooling without restatement. Further financial
information as to the Fund is contained in its current Prospectus,
which is available without charge upon written request to Quest for
Value Distributors, at P.O. Box 3567, Church Street Station, New York,
New York 10277-1296, and is incorporated herein, and in its audited
financial statements as of October 31, 1994 and unaudited financial
statements as of April 30, 1995, which are included in the Additional
Statement. Financial information for USGT is contained in its current
Prospectus accompanying this Proxy Statement and Prospectus and
incorporated herein, and in its audited financial statements as of June
30, 1995 which are included in the Additional Statement.
Public Information
Additional information about USGT and the Fund is available, as
applicable, in the following documents: (i) USGT's Prospectus dated
May 30, 1995, supplemented July 14, 1995, accompanying this Proxy
Statement and Prospectus and incorporated herein by reference; (ii) the
Fund's Prospectus dated March 1, 1995, revised June 30, 1995, which may
be obtained without charge by writing to QVD at the address indicated
above; (iii) USGT's Annual Report as of June 30, 1995, which may be
obtained without charge by writing to OSS at the address indicated on
the cover of this Proxy Statement and Prospectus; and (iv) the Fund's
Annual Report as of October 31, 1994, and Semi-Annual Report as of
April 30, 1995 which may be obtained without charge by writing to QVD.
All of the foregoing documents and the Statements of Additional
Information referred to below may be obtained by calling the toll-free
number for USGT or the Fund, as applicable, on the cover of this Proxy
Statement and Prospectus.
Additional information about the following matters is contained in
the Additional Statement, which is incorporated herein by reference and
includes the USGT Additional Statement, the Fund's Prospectus dated
March 1, 1995, revised June 30, 1995, the Fund Additional Statement and
the Annual and Semi-Annual Reports described in the preceding
paragraph: the organization and operation of USGT and the Fund; more
information on investment policies, practices and risks; information
about USGT's and the Fund's respective Boards of Trustees and their
responsibilities; a further description of the services provided by
USGT's and the Fund's investment adviser, distributor, and transfer and
shareholder servicing agent; dividend policies; tax matters; an
explanation of the method of determining the offering price of the
shares of USGT and the Fund; purchase, redemption and exchange
programs; and distribution arrangements.
USGT and the Fund are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith, file reports and other information with the SEC. Proxy
material, reports and other information about USGT and the Fund which
are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its
regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters
not known at the time of the solicitation may come before the Meeting,
the proxy as solicited confers discretionary authority with respect to
such matters as properly come before the Meeting, including any
adjournment or adjournments thereof, and it is the intention of the
persons named as attorneys-in-fact in the proxy to vote this proxy in
accordance with their judgment on such matters.
By Order of the Board of Trustees
Deborah Kaback, Secretary
_______, 1995220
MERGE/220PROXY.7
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made
as of this ____ day of September, 1995, by and among Oppenheimer U.S.
Government Trust, a Massachusetts business trust ("Oppenheimer Fund"),
Quest for Value Family of Funds, a Massachusetts business trust ("Quest
For Value"), on behalf of U.S. Government Income Fund ("Quest
Portfolio"), a series of Quest For Value, and Quest for Value Advisors
("Quest Advisors"), a Delaware general partnership which serves as
investment adviser to the Quest Portfolio.
This Agreement is intended to be and is adopted as a "plan of
reorganization", within the meaning of Treas. Reg. Section 1.368-2(g),
for a reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended ("Code"). The reorganization
("Reorganization") will consist of the transfer to the Oppenheimer Fund
of substantially all of the assets of the Quest Portfolio in exchange
for the assumption by the Oppenheimer Fund of such stated liabilities
of the Quest Portfolio as shall be agreed to by the Oppenheimer Fund
and the issuance by the Oppenheimer Fund of shares of beneficial
interest of the Oppenheimer Fund ("shares") of Class A, Class B and
Class C to be distributed contemporaneously with the Closing Date (as
hereinafter defined), to the shareholders of the Quest Portfolio in
liquidation of the Quest Portfolio as provided herein, all upon the
terms and conditions hereinafter set forth in this Agreement. To the
extent necessary to effectuate the transactions contemplated by this
Agreement, or as the context of representations, warranties, covenants
and other agreements set forth in this Agreement may require, all
references in this Agreement to the Quest Portfolio shall include Quest
For Value.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as
follows:
1. THE REORGANIZATION AND LIQUIDATION OF THE QUEST PORTFOLIO
1.1 Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, on the
Closing Date, the Quest Portfolio will assign, deliver and otherwise
transfer its assets as set forth in paragraph 1.2 ("Quest Portfolio
Assets") to the Oppenheimer Fund, and the Oppenheimer Fund will in
exchange therefor assume Quest Portfolio's stated liabilities on the
Closing Date as set forth in paragraph 1.3 and deliver to the Quest
Portfolio the number of each class of shares of the Oppenheimer Fund,
including fractional Oppenheimer Fund shares, determined by dividing
the value of the Quest Portfolio Assets, net of such stated
liabilities, represented by shares of each class of the Quest Portfolio
computed in the manner and as of the time and date set forth in
paragraph 2.1, by the net asset value of each class of shares of the
Oppenheimer Fund, computed in the manner and as of the time and date
set forth in paragraph 2.2. Such transactions shall take place at the
closing provided for in paragraph 3.1 ("Closing").
1.2 (a) The Quest Portfolio Assets shall consist of all property
and rights, including without limitation all cash, cash equivalents,
securities and dividend and interest receivables owned by the Quest
Portfolio, and any deferred or prepaid expenses shown as an asset on
the Quest Portfolio's books on the Closing Date. Notwithstanding the
foregoing, the Quest Portfolio Assets shall exclude a cash reserve (the
"Cash Reserve") to be retained by the Quest Portfolio sufficient in its
discretion for the payment of the expenses of the Quest Portfolio's
dissolution and its liabilities, but not in excess of the amount
contemplated by paragraph 7.11.
(b) Promptly following the signing of this Agreement, the
Quest Portfolio will provide the Oppenheimer Fund with a list of its
assets as of the most reasonably practical date. On the Closing Date,
the Quest Portfolio will provide the Oppenheimer Fund with a list of
the Quest Portfolio Assets to be assigned, delivered and otherwise
transferred to the Oppenheimer Fund and of the stated liabilities to be
assumed by the Oppenheimer Fund pursuant to this Agreement.
1.3 The Quest Portfolio will endeavor to discharge all of its
liabilities and obligations when and as due prior to the Closing Date.
An unaudited Statement of Assets and Liabilities of the Quest Portfolio
will be prepared by the Treasurer of the Quest Portfolio, as of the
Valuation Date, which Statement shall be prepared in conformity with
generally accepted accounting principles consistently applied from the
prior audited period. On the Closing Date, the Oppenheimer Fund shall
assume such stated liabilities, expenses, costs, charges and reserves
set forth on such Statement as shall be agreed to by the Oppenheimer
Fund.
1.4 In order for the Quest Portfolio to comply with Section
852(a)(1) of the Code and to avoid having any investment company
taxable income or net capital gain (as defined in Section 852(b)(2) and
1222(11) of the Code, respectively) in the short taxable year ending
with its dissolution, the Quest Portfolio will on or before the Closing
Date (a) declare a dividend in an amount large enough so that it will
have declared dividends of all of its investment company taxable income
and net capital gain, if any, for such taxable year (determined without
regard to any deduction for dividends paid) and (b) distribute such
dividend.
1.5 Contemporaneously with the Closing, the Quest Portfolio will be
liquidated (except for the Cash Reserve) and the Quest Portfolio will
distribute or cause to be distributed the Oppenheimer Fund shares of
each class received by the Quest Portfolio pursuant to paragraph 1.1
pro rata to the appropriate shareholders of record of each class
determined as of the close of business on the Valuation Date as defined
in paragraph 2.1. Upon such liquidation all issued and outstanding
shares of the Quest Portfolio will be cancelled on the Quest
Portfolio's books and the Quest Portfolio Shareholders will have no
further rights as such Shareholders. The Oppenheimer Fund will not
issue certificates representing the shares of the Oppenheimer Fund in
connection with such exchange.
1.6 After the Closing, the Quest Portfolio shall not conduct any
business except in connection with the winding up of its affairs and
shall file, or make provision for filing of, all reports it is required
by law to file. After the Closing, Quest For Value may be dissolved
and deregistered as an investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). Within one year after the
Closing, the Quest Portfolio shall (a) either pay or make provision for
payment of all of its liabilities and taxes, and (b) either (i)
transfer any remaining amount of the Cash Reserve to the Oppenheimer
Fund, if such remaining amount (as reduced by the estimated cost of
distributing it to shareholders) is not material (as defined below) or
(ii) distribute such remaining amount to the shareholders of the Quest
Portfolio on the Valuation Date. Such remaining amount shall be deemed
to be material if the amount to be distributed, after deduction of the
estimated expenses of the distribution, equals or exceeds one cent per
share of the Quest Portfolio outstanding on the Valuation Date.
1.7 Copies of all books and records of or pertaining to the Quest
Portfolio, including those in connection with its obligations under the
1940 Act, the Code, State blue sky laws or otherwise in connection with
this Agreement, will promptly after the Closing be delivered to
officers of the Oppenheimer Fund or their designee. Quest For Value
and Quest Advisors shall have access to such books and records upon
reasonable request during normal business hours.
2. THE CALCULATION
2.1 The value of the Quest Portfolio Assets shall be the value
of such assets computed as of the close of business of the New York
Stock Exchange on the business day preceding the Closing Date (such
time and date being hereinafter called the "Valuation Date"), using the
valuation procedures set forth in the Oppenheimer Fund's then current
prospectus and statement of additional information.
2.2 The net asset value of each class of shares of the Oppenheimer
Fund shall be the net asset value per share computed on the Valuation
Date, using the valuation procedures set forth in the Oppenheimer
Fund's then current prospectus and statement of additional information.
2.3 The number of each class of Oppenheimer Fund shares (including
fractional shares, if any) to be issued hereunder shall be determined
by dividing the value of the Quest Portfolio Assets, net of the
liabilities assumed by the Oppenheimer Fund pursuant to paragraph 1.1
attributable to that class, determined in accordance with paragraph
2.1, by the net asset value of an Oppenheimer Fund share of a similar
class determined in accordance with paragraph 2.2.
2.4 All computations of value shall be made by Oppenheimer
Management Corporation in accordance with its regular practice in
pricing the Oppenheimer Fund. The Oppenheimer Fund shall cause
Oppenheimer Management Corporation to deliver to the Quest Portfolio a
copy of its valuation report at the Closing.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date hereunder (the "Closing Date") shall be
the date of the closing of the acquisition contemplated by that certain
Acquisition Agreement (the "Acquisition Agreement") dated August 17,
1995 between Oppenheimer Management Corporation, Quest Advisors, Quest
for Value Distributors and Oppenheimer Capital (or such other day and
time as may be mutually agreed upon in writing). The Closing shall be
held in a location mutually agreeable to all the parties hereto. All
acts taking place at the Closing shall be deemed to take place
simultaneously as of 9:00 a.m. Eastern time on the Closing Date unless
otherwise agreed by the parties.
3.2 Portfolio securities held by the Quest Portfolio and
represented by a certificate or written instrument shall be presented
by it or on its behalf to Citibank, N.A. (the "Custodian"), custodian
for the Oppenheimer Fund, for examination no later than five business
days preceding the Valuation Date. Such portfolio securities
(together with any cash or other assets) shall be delivered by the
Quest Portfolio to the Custodian for the account of the Oppenheimer
Fund on or before the Closing Date in conformity with applicable
custody provisions under the 1940 Act and duly endorsed in proper form
for transfer in such condition as to constitute good delivery thereof
in accordance with the custom of brokers. The portfolio securities
shall be accompanied by all necessary federal and state stock transfer
stamps or a check for the appropriate purchase price of such stamps.
Portfolio securities and instruments deposited with a securities
depository, as defined in Rule 17f-4 under the 1940 Act, or with a
qualified foreign custodian under Rule 17f-5 of the 1940 Act shall be
delivered on or before the Closing Date by book entry in accordance
with customary practices of such depositories and the Custodian. The
cash delivered shall be in the form of a Federal Funds wire, payable to
the order of "Citibank, N.A., Custodian for Oppenheimer U.S. Government
Trust."
3.3 In the event that on the Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be
restricted or (b) trading or the reporting of trading on such Exchange
or elsewhere shall be disrupted so that, in the judgment of both the
Oppenheimer Fund and the Quest Portfolio, accurate appraisal of the
value of the net assets of the Oppenheimer Fund or the Quest Portfolio
Assets is impracticable, the Valuation Date shall be postponed until
the first business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall have been
restored.
3.4 The Quest Portfolio shall deliver to the Oppenheimer Fund or
its designee (a) at the Closing a list, certified by its Secretary, of
the names, addresses and taxpayer identification numbers of the Quest
Portfolio Shareholders (as hereinafter defined) and the number of each
class of outstanding Quest Portfolio shares owned by each such
shareholder, all as of the Valuation Date (the "Quest Portfolio
Shareholders"), and (b) as soon as practicable after the Closing all
original documentation (including Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the Quest
Portfolio Shareholders' taxpayer identification numbers and their
liability for or exemption from back-up withholding. The Oppenheimer
Fund shall issue and deliver to Quest Portfolio a confirmation
evidencing delivery of each class of Oppenheimer Fund shares to be
credited on the Closing Date to the Quest Portfolio or provide evidence
reasonably satisfactory to the Quest Portfolio that such Oppenheimer
Fund shares have been credited to Quest Portfolio's account on the
books of the Oppenheimer Fund. At the Closing each party shall deliver
to the other such bills of sale, assignments, assumption agreements,
receipts or other documents as such other party or its counsel may
reasonably request to effect the consummation of the transactions
contemplated by the Agreement.
4. COVENANTS OF THE OPPENHEIMER FUND AND THE QUEST PORTFOLIO
4.1 The Oppenheimer Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions and such changes that have been
approved by shareholders of the Oppenheimer Fund at a shareholders
meeting prior to the Closing of which Quest Portfolio has been advised.
4.2 The Oppenheimer Fund will prepare and file with the Securities
and Exchange Commission ("Commission") a registration statement on Form
N-14 under the Securities Act of 1933, as amended ("1933 Act"),
relating to the Oppenheimer Fund shares to be issued to the Quest
Portfolio Shareholders pursuant to the Reorganization ("Registration
Statement"). The Quest Portfolio will provide the Oppenheimer Fund
with the Proxy Materials as described in paragraph 4.3 below, for
inclusion in the Registration Statement. The Quest Portfolio will
further provide the Oppenheimer Fund with such other information and
documents relating to the Quest Portfolio as are reasonably necessary
for the preparation of the Registration Statement.
4.3 The Quest Portfolio will call a meeting of its shareholders to
consider and act upon the Reorganization, including this Agreement, and
take all other action necessary to obtain approval of the transactions
contemplated herein. The Quest Portfolio will prepare, with such
assistance from the Oppenheimer Fund as may be mutually agreed to, the
notice of meeting, form of proxy and proxy statement and prospectus
(collectively "Proxy Materials") to be used in connection with such
meeting provided that the Oppenheimer Fund will furnish the Quest
Portfolio with a current effective prospectus relating to the
Oppenheimer Fund shares for inclusion in the Proxy Materials and with
such other information relating to the Oppenheimer Fund as is
reasonably necessary for the preparation of the Proxy Materials.
4.4 Prior to the Closing Date, the Quest Portfolio will assist the
Oppenheimer Fund in obtaining such information as the Oppenheimer Fund
reasonably requests concerning the beneficial ownership of the shares
of the Quest Portfolio.
4.5 Subject to the provisions of this Agreement, the Oppenheimer
Fund and the Quest Portfolio will each take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
4.6 As promptly as practicable, but in any case within 60 days
after the Closing Date, the Quest Portfolio shall furnish or cause to
be furnished to the Oppenheimer Fund, such information as the
Oppenheimer Fund reasonably requests to enable the Oppenheimer Fund to
determine the Quest Portfolio's earnings and profits for federal income
tax purposes that will be carried over to the Oppenheimer Fund pursuant
to Section 381 of the Code.
4.7 As soon after the Closing Date as is reasonably
practicable, Quest for Value shall prepare and file all federal and
other tax returns and reports of the Quest Portfolio required by law to
be filed with respect to all periods ending through and after the
Closing Date but not theretofore filed.
4.8 The Oppenheimer Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the 1933 Act, the
1940 Act and such of the state Blue Sky and securities laws as it may
deem appropriate in order to continue its operations after the Closing
Date.
4.9 Until the third anniversary of the Closing Date, the
Oppenheimer Fund will use its best efforts to assure that at least 75%
of the Trustees of the Oppenheimer Fund will not be "interested
persons" of the investment adviser for the Oppenheimer Fund or Quest
Advisors, as the term "interested person" is defined by the 1940 Act.
5. REPRESENTATIONS AND WARRANTIES
5.1 Oppenheimer Fund represents and warrants to the Quest Portfolio
as follows:
(a) The Oppenheimer Fund is an unincorporated voluntary
association validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, and has the power and authority to own
its properties and to carry on its business as it is now conducted;
(b) Oppenheimer Fund is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its
shares under the 1933 Act are in full force and effect;
(c) All of the issued and outstanding shares of each class of the
Oppenheimer Fund have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws. Shares of each class of the Oppenheimer
Fund are registered in all jurisdictions in which they are required to
be registered under state securities laws and other laws, and said
registrations, including any periodic reports or supplemental filings,
are complete and current, all fees required to be paid have been paid,
and the Oppenheimer Fund is not subject to any stop order and is fully
qualified to sell its shares in each state in which its shares have
been registered;
(d) The current prospectus and statement of additional information
of the Oppenheimer Fund conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the
regulations thereunder and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(e) At the Closing Date, the Oppenheimer Fund will have title to
the Oppenheimer Fund's assets, subject to no liens, security interests
or other encumbrances except those incurred in the ordinary course of
business.
(f) The Oppenheimer Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a material violation
of any provision of the Oppenheimer Fund's Declaration of Trust or By-
Laws or of any material agreement, indenture, instrument, contract,
lease or other undertakings to which the Oppenheimer Fund is a party or
by which it is bound;
(g) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against the Oppenheimer Fund
or any of its properties or assets, except as previously disclosed in
writing to the Quest Portfolio. The Oppenheimer Fund knows of no facts
that might form the basis for the institution of such proceedings and
is not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and
adversely affects, or is reasonably likely to materially and adversely
affect, its business or its ability to consummate the transactions
contemplated herein;
(h) The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets as of June 30, 1995
of the Oppenheimer Fund examined by KPMG Peat Marwick LLP (a copy of
which has been furnished to the Quest Portfolio), fairly present, in
all material respects, the financial condition of the Oppenheimer Fund
as of such date in conformity with generally accepted accounting
principles consistently applied, and as of such date there were no
known liabilities of the Oppenheimer Fund (contingent or otherwise) not
disclosed therein that would be required in conformity with generally
accepted accounting principles to be disclosed therein;
(i) All issued and outstanding Oppenheimer Fund shares of each
class are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History;"
(j) Oppenheimer Fund has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Oppenheimer Fund, and this
Agreement constitutes a valid and binding obligation of the Oppenheimer
Fund enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general
equity principles;
(k) The Oppenheimer Fund shares of each class to be issued and
delivered to the Quest Portfolio, for the account of the Quest
Portfolio Shareholders, pursuant to the terms of this Agreement will at
the Closing Date have been duly authorized and, when so issued and
delivered, will be duly and validly issued Oppenheimer Fund shares, and
will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History," and no
shareholder of Oppenheimer Fund will have any preemptive right or right
of subscription or purchase in respect thereof;
(l) Since June 30, 1995, there has not been (i) any material
adverse change in the Oppenheimer Fund's financial condition, assets,
liabilities or business other than changes occurring in the ordinary
course of business, or that have been approved by shareholders of the
Oppenheimer Fund or (ii) any incurrence by the Oppenheimer Fund of any
indebtedness except indebtedness incurred in the ordinary course of
business. For the purposes of this subparagraph, neither a decline in
net asset value per share of any class of the Oppenheimer Fund nor the
redemption of Oppenheimer Fund shares by Oppenheimer Fund shareholders,
shall constitute a material adverse change;
(m) All material Federal and other tax returns and reports of the
Oppenheimer Fund required by law to have been filed, have been filed,
and all Federal and other taxes shown as due or required to be shown as
due on said returns and reports have been paid or provision has been
made for the payment thereof, and to the best of the Oppenheimer Fund's
knowledge no such return is currently under audit and no assessment has
been asserted with respect to such returns;
(n) For each taxable year of its operation, the Oppenheimer Fund
has met the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company and neither the
execution or delivery of nor the performance of its obligations under
this Agreement will adversely affect, and no other events are
reasonably likely to occur which will adversely affect the ability of
the Oppenheimer Fund to continue to meet the requirements of Subchapter
M of the Code;
(o) Since June 30, 1995, there has been no change by the
Oppenheimer Fund in accounting methods, principles, or practices,
including those required by generally accepted accounting principles,
except as disclosed in writing to the Quest Portfolio or as set forth
in the financial statements of the Oppenheimer Fund covering such
period;
(p) The information furnished or to be furnished by the Oppenheimer
Fund for use in registration statements, proxy materials and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in all material
respects and shall comply in all material respects with Federal
securities and other laws and regulations applicable thereto; and
(q) The Proxy Statement and Prospectus to be included in the
Registration Statement (only insofar as it relates to the Oppenheimer
Fund) will, on the effective date of the Registration Statement and on
the Closing Date, not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which such statements were made, not materially misleading.
5.2 Quest for Value, on behalf of the Quest Portfolio, represents
and warrants to the Oppenheimer Fund as follows:
(a) The Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association validly existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(b) Quest For Value is a duly registered, open-end, management
investment company, its registration with the Commission as an
investment company under the 1940 Act is in full force and effect and
its current Prospectus and Statement of Additional Information conform
in all material respects to the requirements of the 1933 Act and the
1940 Act and the regulations thereunder and do not include any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(c) All of the issued and outstanding shares of each class of the
Quest Portfolio have been offered and sold in compliance in all
material respects with applicable registration requirements of the 1933
Act and state securities laws. Shares of each class of the Quest
Portfolio are registered in all jurisdictions in which they are
required to be registered under state securities laws and other laws,
and said registrations, including any periodic reports or supplemental
filings, are complete and current, all fees required to be paid have
been paid, and the Quest Portfolio is not subject to any stop order and
is fully qualified to sell its shares in each state in which its shares
have been registered;
(d) The Quest Portfolio is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of (i)
any provision of Quest For Value's Declaration of Trust or By-Laws or
(ii) of any agreement, indenture, instrument, contract, lease or other
undertaking to which the Quest Portfolio is a party or by which it is
bound (other than any violations that individually or in the aggregate
would not have a material adverse effect on the Quest Portfolio);
(e) The Quest Portfolio has no material contracts or other
commitments (other than this Agreement) that will be terminated with
liability to it prior to or as of the Closing Date;
(f) Except as otherwise disclosed in writing to and acknowledged by
the Oppenheimer Fund prior to the date of this Agreement, no
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body is presently
pending, or to its knowledge, threatened relating to the Quest
Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect its financial
condition or the conduct of its business. The Quest Portfolio knows of
no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body that
materially and adversely affects, or is likely to materially and
adversely affect, its business or its ability to consummate the
transactions herein contemplated;
(g) The Statements of Assets and Liabilities, Statements of
Operations and Statements of Changes in Net Assets of the Quest
Portfolio as of October 31, 1994 (audited), examined by Price
Waterhouse LLP, and April 30, 1995 (unaudited) (copies of each of which
have been furnished to the Oppenheimer Fund) fairly present, in all
material respects, the Quest Portfolio's financial condition as of such
dates, its results of operations for such periods and changes in its
net assets for such periods in conformity with generally accepted
accounting principles consistently applied, and as of such dates there
were no known liabilities of the Quest Portfolio (contingent or
otherwise) not disclosed therein that would be required in conformity
with generally accepted accounting principles to be disclosed therein.
All liabilities (contingent and otherwise) as of the Closing Date known
to the Quest Portfolio will be set forth on the unaudited Statement of
Assets and Liabilities referred to in paragraph 1.3.
(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in the Quest Portfolio's
financial condition, assets, liabilities or business, other than
changes occurring in the ordinary course of business, or any incurrence
by the Quest Portfolio of indebtedness maturing more than one year from
the date such indebtedness was incurred, except as otherwise disclosed
in writing to and acknowledged by the Oppenheimer Fund prior to the
date of this Agreement and prior to the Closing Date. All liabilities
of the Quest Portfolio (contingent and otherwise) are reflected in the
unaudited statement described in paragraph 1.3 above. For the purpose
of this subparagraph (h), neither a decline in the Quest Portfolio's
net asset value per share nor a decrease in the Quest Portfolio's size
due to redemptions by Quest Portfolio shareholders shall constitute a
material adverse change;
(i) All federal and other tax returns and reports of the Quest
Portfolio required by law to be filed shall have been filed, there are
no claims, levies, liabilities or amounts due for corporate, excise,
income or other federal, state or local taxes outstanding or threatened
against Quest Portfolio (other than those reflected on its most recent
financial statements) and to the best of Quest For Value's knowledge
there are no facts that might form the basis for such proceedings, no
such return is currently under audit and no assessment has been
asserted with respect to any such return and to the extent such tax
returns with respect to the taxable year of the Quest Portfolio ended
October 31, 1994 have not been filed, such returns will be filed when
required and the amount of tax shown as due thereon shall be paid when
due;
(j) For each taxable year since its inception, the Quest Portfolio
has met all the requirements of Subchapter M of the Code for
qualification and treatment as a "regulated investment company" as
defined therein and will be in compliance with said requirements at and
as of the Closing Date;
(k) All issued and outstanding shares of each class of the Quest
Portfolio are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable with no personal
liability attaching to the ownership thereof. All such shares of each
class will, at the time of Closing, be held by the persons and in the
amounts set forth in the list of shareholders submitted to the
Oppenheimer Fund pursuant to paragraph 3.4. The Quest Portfolio does
not have outstanding any options, warrants or other rights to subscribe
for or purchase any of its shares of any class, nor is there
outstanding any security convertible into any of its shares of any
class except for class B shares of the Quest Portfolio which convert
into class A shares of the Quest Portfolio as described in the current
prospectus of the Quest Portfolio.
(l) At the Closing Date, the Quest Portfolio will have title to the
Quest Portfolio Assets, subject to no liens, security interests or
other encumbrances, and full right, power and authority to assign,
deliver and otherwise transfer the Quest Portfolio Assets hereunder,
and upon delivery and payment for the Quest Portfolio Assets, the
Oppenheimer Fund will acquire title thereto, subject to no restrictions
on the full transfer thereof, including such restrictions as might
arise under the 1933 Act;
(m) Quest For Value has the power to enter into this Agreement and
carry out its obligations hereunder. The execution, delivery and
performance of this Agreement will have been duly authorized prior to
the Closing Date by all necessary action on the part of Quest For
Value, and subject to the approval of Quest Portfolio's shareholders,
this Agreement constitutes a valid and binding obligation of Quest For
Value, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors rights and to general
equity principles. No other consents, authorizations or approvals are
necessary in connection with the performance of this Agreement.
(n) On the effective date of the Registration Statement, at the
time of the meeting of Quest Portfolio's shareholders and on the
Closing Date, the Proxy Materials (exclusive of the currently effective
Oppenheimer Fund prospectus and statement of additional information
incorporated therein) will (i) comply in all material respects with the
provisions of the 1933 Act, the Securities Exchange Act of 1934 ("1934
Act") and the 1940 Act and the regulations thereunder and (ii) not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statement therein, in light of the circumstances under which such
statements were made, not misleading. Any other information furnished
or to be furnished by Quest Portfolio for use in the Registration
Statement or in any other manner that may be necessary in connection
with the transactions contemplated hereby shall be accurate and
complete and shall comply in all material respects with applicable
federal securities and other laws and all regulations thereunder;
(o) Quest Portfolio will, on or prior to the Closing Date, declare
one or more dividends or other distributions to shareholders that,
together with all previous dividends and other distributions to
shareholders, shall have the effect of distributing to the shareholders
all of its investment company taxable income and net capital gain, if
any, through the Closing Date (computed without regard to any deduction
for dividends paid);
(p) Quest Portfolio has maintained or has caused to be maintained
on its behalf all books and accounts as required of a registered
investment company in compliance with the requirements of Section 31 of
the 1940 Act and the Rules thereunder;
(q) Quest Portfolio is not acquiring Oppenheimer Fund shares to be
issued hereunder for the purpose of making any distribution thereof
other than in accordance with the terms of this Agreement;
(r) As of the Closing Date no violation of applicable federal,
state and local statute, law or regulation, exists that individually,
or in the aggregate, would have a material adverse effect on the
business or operations of Quest Portfolio;
(s) As of the Closing Date the Quest Portfolio is in compliance
with its investment objective(s), policies and restrictions as
described in its current prospectus and statement of additional
information;
(t) There are no unresolved or outstanding shareholder claims or
complaints related to Quest Portfolio and there will be no such claims
or complaints as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date;
(u) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the provisions of Rule
2a-4 under the 1940 Act.
5.3 Quest Advisors represents and warrants to the Oppenheimer Fund
as follows:
(a) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date no violation of applicable federal, state and local
statute, law or regulation, exists that individually, or in the
aggregate, would have a material adverse effect on the business or
operations of Quest Portfolio.
(b) To the best knowledge of Quest Advisors after due inquiry,
assuming fulfillment of the conditions precedent to the consummation of
the Reorganization, Quest Portfolio has the right, power, legal
capacity and authority to enter into the Reorganization contemplated by
this Agreement.
(c) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date Quest Portfolio is in compliance with its
investment objective(s), policies and restrictions as described in its
current prospectus and statement of additional information.
(d) To the best knowledge of Quest Advisors after due inquiry, as
of the Closing Date there are no outstanding breaches by Quest
Portfolio of any agreement, indenture, instrument, contract, lease or
other undertaking to which it is a party, or by which it is bound
(other than any breaches that individually or in the aggregate would
not have a material adverse effect on the Quest Portfolio).
(e) To the best knowledge of Quest Advisors upon due inquiry, there
are no unresolved or outstanding shareholder claims or inquiries
related to Quest Portfolio and there will be no such claims or
inquiries as of the Closing Date other than as disclosed by Quest
Advisors in writing to Oppenheimer Fund prior to the Closing Date.
(f) Quest Advisors is not aware of any threatened or pending
litigation, administrative proceeding, investigation, examination or
inquiry of or before any court or governmental body relating to the
Quest Portfolio or any of its properties or assets which, if adversely
determined, would materially and adversely affect the Quest Portfolio's
business or its ability to consummate the transactions herein
contemplated.
(g) Quest Advisors is not aware of any outstanding or threatened
private claims or litigation relating to Quest Portfolio. Quest
Advisors knows of no facts that might form the basis for such
proceedings.
(h) Except as previously disclosed to Oppenheimer Fund in writing,
and except as have been fully corrected, there have been no
miscalculations of the net asset value of Quest Portfolio during the
twelve-month period preceding the Closing Date and all such
calculations have been done in accordance with the provisions of Rule
2a-4 under the 1940 Act.
(i) There are no claims, levies or liabilities for corporate,
excise, income or other federal, state or local taxes outstanding or
threatened against Quest Portfolio, other than those reflected in its
most recent audited financial statements. Quest Advisors knows of no
facts that might form the basis for such proceedings.
(j) To the best knowledge of Quest Advisors after due inquiry,
there have been no material adverse changes in Quest Portfolio's
financial condition, assets, liabilities or business, other than those
reflected in its most recent audited financial statements and all
liabilities of Quest Portfolio (contingent and otherwise) known to
Quest Advisors have been reported in writing to the Oppenheimer Fund
prior to the date of this Agreement and prior to the Closing Date. A
reduction in net assets due to shareowner redemptions will not be
deemed to be a material adverse change.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE QUEST PORTFOLIO
The obligations of Quest Portfolio to consummate the transactions
provided for herein shall be subject, at its election, to the
performance by Oppenheimer Fund of all the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto,
the following conditions:
6.1 All representations and warranties of Oppenheimer Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing
Date.
6.2 Oppenheimer Fund shall have delivered to Quest Portfolio a
certificate executed in Oppenheimer Fund's name by Oppenheimer Fund's
President, Vice President or Secretary and, Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to Quest Portfolio and
dated as of the Closing Date, to the effect that the representations
and warranties of Oppenheimer Fund made in this Agreement are true and
correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such
other matters as Quest Portfolio shall reasonably request;
6.3 Quest Portfolio shall have received a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to the
Oppenheimer Fund, dated as of the Closing Date, in a form reasonably
satisfactory to Gordon Altman Butowsky Weitzen Shalov & Wein, counsel
to Quest Portfolio, covering the following points:
That (a) Oppenheimer Fund is an unincorporated voluntary association
duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts, and has the power to own all
of its properties and assets and to carry on its business as
presently conducted (Massachusetts counsel may be relied upon in
delivering such opinion); (b) Oppenheimer Fund is a duly registered,
open-end, management investment company and its registration with
the Commission as an investment company under the 1940 Act is in
full force and effect; (c) this Agreement has been duly authorized,
executed and delivered by the Oppenheimer Fund, and assuming due
authorization, execution and delivery of this Agreement by Quest
Portfolio, is a valid and binding obligation of Oppenheimer Fund
enforceable against Oppenheimer Fund in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) Oppenheimer
Fund shares to be issued to Quest Portfolio shareholders as provided
by this Agreement are duly authorized and upon delivery of such
shares to Quest Portfolio will be validly issued and outstanding and
fully paid and non-assessable (except as otherwise set forth in the
current statement of additional information for the Oppenheimer Fund
under "How the Fund is Managed - Organization and History") and no
shareholder of Oppenheimer Fund has any preemptive rights to
subscription or purchase in respect thereof (Massachusetts counsel
may be relied upon in delivering such opinion); (e) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Oppenheimer
Fund's Declaration of Trust and By-Laws or any provision of any
material agreement (known to such counsel) to which Oppenheimer Fund
is a party or by which it is bound or, to the knowledge of such
counsel, result in the acceleration of any material obligation or
the imposition of any material penalty under any agreement, judgment
or decree to which Oppenheimer Fund is a party or by which it is
bound; (f) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or any state is required for the consummation by
Oppenheimer Fund of the transactions contemplated herein, except
such as have been obtained under the 1933 Act , the 1934 Act and the
1940 Act and such as may be required under state securities laws;
(g) only insofar as they relate to Oppenheimer Fund, the
descriptions in the Proxy Materials of statutes, legal and
governmental proceedings and contracts and other documents, if any,
are accurate and fairly present the information required to be
shown; (h) such counsel does not know of any legal or governmental
proceedings, only insofar as they relate to Oppenheimer Fund,
existing on or before the date of mailing of the Proxy Materials or
the Closing Date that are required to be described in the
Registration Statement or in any documents that are required to be
filed as exhibits to the Registration Statement that are not
described as required; and (i) to the best knowledge of such
counsel, no material litigation or administrative proceedings or
investigation of or before any court or governmental body is
presently pending or overtly threatened as to Oppenheimer Fund or
any of its properties or assets and Oppenheimer Fund is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body that materially and adversely affects
its business, other than as previously disclosed in the Registration
Statement.
6.4 All proceedings taken by Oppenheimer Fund in connection with
the transactions contemplated by this Agreement and all documents
incidental thereto shall be satisfactory in form and substance to Quest
Portfolio and its counsel, Gordon Altman Butowsky Weitzen Shalov &
Wein.
6.5 As of the Closing Date, there shall be no material change in
the investment objective, policies and restrictions nor any increase in
the investment management fees, fees payable pursuant to Oppenheimer
Fund's 12b-1 plans of distribution or sales loads of Oppenheimer Fund
from those described in the Prospectus and Statement of Additional
Information of Oppenheimer Fund dated May 30, 1995 as supplemented July
14, 1995, except as may have been approved by shareholders of the
Oppenheimer Fund.
6.6 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND
The obligations of Oppenheimer Fund to complete the transactions
provided for herein shall be subject, at its election, to the
performance by Quest Portfolio of all the obligations to be performed
by it hereunder on or before the Closing Date and, in addition thereto,
the following conditions:
7.1 All representations and warranties of Quest For Value, on
behalf of Quest Portfolio, and Quest Advisors contained in this
Agreement shall be true and correct in all material respects as of the
date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same
force and effect as if made on and as of the Closing Date;
7.2 Quest Portfolio shall have delivered to Oppenheimer Fund a
statement of Quest Portfolio Assets and its liabilities, together with
a list of Quest Portfolio's securities and other assets showing the
respective adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by the Treasurer of Quest
Portfolio;
7.3 Quest Portfolio shall have delivered to Oppenheimer Fund
at the Closing a certificate executed in Quest For Value's name by the
President, Vice President or Secretary and the Treasurer or Assistant
Treasurer of Quest For Value, in form and substance satisfactory to
Oppenheimer Fund and dated as of the Closing Date, to the effect that
the representations and warranties of Quest for Value, on behalf of
Quest Portfolio, made in this Agreement are true and correct at and as
of the Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as
Oppenheimer Fund shall reasonably request. Such a certificate shall
also be delivered to Oppenheimer Fund as executed by Quest Advisors
with respect to its representations and warranties made in paragraph
5.3.
7.4 Oppenheimer Fund shall have received at the Closing a favorable
opinion dated as of the Closing Date of Gordon Altman Butowsky Weitzen
Shalov & Wein, counsel to Quest For Value, in a form satisfactory to
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Oppenheimer
Fund covering the following points:
That (a) Quest Portfolio is a series of Quest For Value, an
unincorporated voluntary association duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the power to own all of its properties and
assets and to carry on its business as presently conducted
(Massachusetts counsel may be relied upon in delivering such
opinion); (b) Quest For Value is registered as an investment company
under the 1940 Act, and its registration with the Commission as an
investment company under the 1940 Act is in full force and effect;
(c) this Agreement has been duly authorized, executed and delivered
by Quest For Value on behalf of Quest Portfolio and, assuming due
authorization, execution and delivery of this Agreement by
Oppenheimer Fund, is a valid and binding obligation of Quest For
Value enforceable against Quest For Value in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors rights and to general equity principles; (d) the execution
and delivery of this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate Quest For Value's
Declaration of Trust or By-Laws or any provision of any material
agreement (known to such counsel) to which Quest For Value is a
party or by which it is bound or, to the knowledge of such counsel,
result in the acceleration of any material obligation or the
imposition of any material penalty under any agreement, judgment or
decree to which Quest For Value is a party or by which it is bound;
(e) to the knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority of the
United States or any state is required for the consummation by Quest
For Value of the transactions contemplated herein, except such as
have been obtained under the 1933 Act, the 1934 Act and the 1940 Act
and such as may be required under state securities laws; (f) only
insofar as they relate to Quest For Value, the descriptions in the
Proxy Materials of statutes, legal and governmental proceedings and
contracts and other documents, if any, are accurate and fairly
present the information required to be shown; (g) such counsel does
not know of any legal or governmental proceedings, only insofar as
they relate to Quest For Value, existing on or before the date of
mailing the Proxy Materials or the Closing Date that are required to
be described in the Registration Statement or in any documents that
are required to be filed as exhibits to the Registration Statement
that are not described as required; and (h) to the best knowledge of
such counsel, no material litigation or administrative proceedings
or investigation of or before any court or governmental body is
presently pending or overtly threatened as to Quest For Value or any
of its properties or assets and Quest Portfolio is not a party to or
subject to the provisions of any order, decree or judgment of any
court or governmental body that materially and adversely affects its
business, other than as previously disclosed in the Registration
Statement.
7.5 Between the date hereof and the Closing Date, Quest For Value
shall provide Oppenheimer Fund and its representatives reasonable
access during regular business hours and upon reasonable notice to the
books and records of or relating to Quest Portfolio, including without
limitation the books and records of Quest For Value, as Oppenheimer
Fund may reasonably request. All such information obtained by
Oppenheimer Fund and its representatives shall be held in confidence
and may not be used for any purpose other than in connection with the
transaction contemplated hereby. In the event that the transaction
contemplated by this Agreement is not consummated, Oppenheimer Fund
and its representatives will promptly return to Quest For Value all
documents and copies thereof with respect to Quest Portfolio obtained
from Quest For Value during the course of such investigation.
7.6 Quest For Value, on behalf of Quest Portfolio shall have
delivered to Oppenheimer Fund, pursuant to paragraph 5.2(g), copies of
the most recent financial statements of Quest Portfolio certified by
Price Waterhouse LLP.
7.7 On the Closing Date, the Quest Portfolio Assets shall include
no assets that Oppenheimer Fund, by reason of charter limitations or
otherwise, may not properly acquire.
7.8 All proceedings taken by Quest For Value and Quest Portfolio in
connection with the transactions contemplated by the Agreement and all
documents incidental thereto shall be reasonably satisfactory in form
and substance to Oppenheimer Fund and its counsel, Gordon Altman
Butowsky Weitzen Shalov & Wein.
7.9 The stated liabilities, expenses, costs, charges and reserves
reflected on the unaudited Statement of Assets and Liabilities of the
Quest Portfolio referred to in paragraph 1.3 shall have been agreed to
by the Oppenheimer Fund.
7.10 The Registration Statement, including the Proxy Materials, but
only insofar as it relates to the Oppenheimer Fund, filed as a part
thereof, shall have been approved by the Board of Trustees of the
Oppenheimer Fund.
7.11 The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Quest Portfolio at
the close of business on the Valuation Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF OPPENHEIMER FUND AND
QUEST PORTFOLIO
The obligations of Quest Portfolio and Oppenheimer Fund hereunder
are each subject to the further conditions that on or before the
Closing Date:
8.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the
outstanding shares of Quest Portfolio and certified copies of the
resolutions evidencing such approval shall have been delivered to
Oppenheimer Fund;
8.2 On the Closing Date, no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
herein;
8.3 All consents of other parties and all other consents, orders
and permits of federal, state and local regulatory authorities
(including those of the Commission and of state Blue Sky and securities
authorities, including "no-action" positions or any exemptive orders
from such federal and state authorities) deemed necessary by
Oppenheimer Fund or Quest For Value on behalf of Quest Portfolio to
permit consummation, in all material respects, of the transactions
contemplated herein shall have been obtained, except where failure to
obtain any such consent, order or permit would not involve risk of a
material adverse effect on the assets or properties of Oppenheimer Fund
or Quest Portfolio.
8.4 The Registration Statement on Form N-14 shall have become
effective under the 1933 Act, no stop orders suspending the
effectiveness thereof shall have been issued and, to the best knowledge
of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated
under the 1933 Act;
8.5 Quest Portfolio shall have declared and paid a dividend or
dividends and/or other distributions that, together with all previous
such dividends or distributions, shall have the effect of distributing
to the Quest Portfolio Shareholders all of Quest Portfolio's investment
company taxable income (computed without regard to any deduction for
dividends paid) and all of its net capital gain (after reduction for
any capital loss carry-forward and computed without regard to any
deduction for dividends paid) for all taxable years ending on or before
the Closing Date; and
8.6 The parties shall have received a favorable opinion from Price
Waterhouse LLP (based on such representations as such firm shall
reasonably request), addressed to Oppenheimer Fund and Quest Portfolio,
which opinion may be relied upon by the shareholders of Oppenheimer
Fund and Quest Portfolio, substantially to the effect that, for federal
income tax purposes:
(a) The transfer of substantially all of Quest Portfolio's assets in
exchange for Oppenheimer Fund shares and the assumption by
Oppenheimer Fund of certain identified liabilities of Quest
Portfolio followed by the distribution by Quest Portfolio of
Oppenheimer Fund shares to the Quest Portfolio Shareholders in
exchange for their Quest Portfolio shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code
and Quest Portfolio and Oppenheimer Fund will each be a "party to
the reorganization" within the meaning of Section 368(b) of the
Code;
(b) Pursuant to Section 1032 of the Code, no gain or loss will be
recognized by Oppenheimer Fund upon the receipt of the assets of
Quest Portfolio solely in exchange for Oppenheimer Fund shares and
the assumption by Oppenheimer Fund of the identified liabilities of
Quest Portfolio;
(c) Pursuant to Section 361(a) of the Code, no gain or loss will be
recognized by Quest Portfolio upon the transfer of the assets of
Quest Portfolio to Oppenheimer Fund in exchange for Oppenheimer Fund
shares and the assumption by Oppenheimer Fund of the identified
liabilities of Quest Portfolio, or upon the distribution of
Oppenheimer Fund shares to the Quest Portfolio Shareholders in
exchange for the Quest Portfolio shares;
(d) Pursuant to Section 354(a) of the Code, no gain or loss will be
recognized by the Quest Portfolio Shareholders upon the exchange of
the Quest Portfolio shares for the Oppenheimer Fund shares;
(e) Pursuant to Section 358 of the Code, the aggregate tax basis for
Oppenheimer Fund shares received by each Quest Portfolio Shareholder
pursuant to the Reorganization will be the same as the aggregate tax
basis of the Quest Portfolio shares held by each such Quest
Portfolio Shareholder immediately prior to the Reorganization;
(f) Pursuant to Section 1223 of the Code, the holding period of
Oppenheimer Fund shares to be received by each Quest Portfolio
Shareholder will include the period during which the Quest Portfolio
shares surrendered in exchange therefor were held (provided such
Quest Portfolio shares were held as capital assets on the date of
the Reorganization);
(g) Pursuant to Section 362(b) of the Code, the tax basis of the
assets of Quest Portfolio acquired by Oppenheimer Fund will be the
same as the tax basis of such assets to Quest Portfolio immediately
prior to the Reorganization;
(h) Pursuant to Section 1223 of the Code, the holding period of the
assets of Quest Portfolio in the hands of Oppenheimer Fund will
include the period during which those assets were held by Quest
Portfolio; and
(i) Oppenheimer Fund will succeed to and take into account the items
of Quest Portfolio described in Section 381(c) of the Code,
including the earnings and profits, or deficit in earnings and
profits, of Quest Portfolio as of the date of the transaction.
Oppenheimer Fund will take those items into account subject to the
conditions and limitations specified in Sections 381, 382, 383 and
384 of the Code and applicable regulations thereunder.
Notwithstanding anything herein to the contrary, neither Oppenheimer
Fund nor Quest Portfolio may waive the material conditions set forth in
this paragraph 8.6 although the actual wording of such opinion may
differ to the extent agreed to by Oppenheimer Fund and Quest Portfolio.
9. BROKERAGE FEES AND EXPENSES
9.1 Oppenheimer Fund and Quest For Value on behalf of Quest
Portfolio each represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
9.2 (a) Oppenheimer Management Corporation shall bear the
expenses of Oppenheimer Fund incurred in connection with entering into
and carrying out the provisions of this Agreement, including legal,
accounting and Commission registration fees and Blue Sky expenses.
Quest Advisors (or a party other than Oppenheimer Fund) shall bear
Quest Portfolio's expenses incurred in connection with entering into
and carrying out the provisions of this Agreement, including legal and
accounting fees, and portfolio transfer taxes (if any) incurred in
connection with the consummation of the transactions contemplated
herein. Notwithstanding the foregoing, expenses incurred with respect
to the tax opinion referenced in paragraph 8.6 and expenses of the
proxy solicitation, including the cost of printing and mailing the
Proxy Materials, will be evenly apportioned between Quest Advisors and
Oppenheimer Management Corporation.
(b) In the event the transactions contemplated herein are not
consummated by reason of Quest Portfolio's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Quest Portfolio's obligations specified in
this Agreement), Quest Advisors' (or a party other than Oppenheimer
Fund) only obligation hereunder shall be to reimburse Oppenheimer Fund
(or Oppenheimer Management Corporation) for all reasonable out-of-
pocket fees and expenses incurred by Oppenheimer Fund (or Oppenheimer
Management Corporation) in connection with those transactions,
including legal, accounting and filing fees.
(c) In the event the transactions contemplated herein are not
consummated by reason of Oppenheimer Fund's being either unwilling or
unable to go forward (other than by reason of the nonfulfillment or
failure of any condition to Oppenheimer Fund's obligations specified in
the Agreement), Oppenheimer Fund's only obligations hereunder shall be
to reimburse Quest Portfolio (or Quest Advisors) for all reasonable
out-of-pocket fees and expenses incurred by Quest Portfolio (or Quest
Advisors) in connection with those transactions, including legal,
accounting and filing fees, and to comply with the provisions of
paragraph 7.5 hereof.
10. ENTIRE AGREEMENT: SURVIVAL OF WARRANTIES
10.1 Oppenheimer Fund, Quest For Value, on behalf of Quest Portfolio
and Quest Advisors agree that no party has made any representation,
warranty or covenant not set forth herein and that this Agreement
constitutes the entire agreement between the parties.
10.2 The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the transactions
contemplated herein.
11. TERMINATION
11.1 This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:
(a) by the mutual written consent of Quest For Value, on behalf of
Quest Portfolio, and Oppenheimer Fund;
(b) by either Oppenheimer Fund or Quest For Value, on behalf
of Quest Portfolio, by notice to the other, without liability to the
terminating party on account of such termination (providing the
termination party is not otherwise in default or in breach of this
Agreement) if the Closing shall not have occurred on or before February
29, 1996; or
(c) by either Oppenheimer Fund or Quest For Value, on behalf of
Quest Portfolio, in writing without liability of the terminating party
on account of such termination (provided the terminating party is not
otherwise in material default or breach of the Agreement), if (i) the
other party shall fail to perform in any material respect its
agreements contained herein required to be performed on or prior to the
Closing Date, (ii) Quest Advisors, Quest For Value or the Quest
Portfolio, or the Oppenheimer Fund, respectively, materially breaches
or shall have breached any of its representations, warranties or
covenants contained herein, (iii) the Quest Portfolio Shareholders fail
to approve the Agreement, (iv) any other condition herein expressed to
be precedent to the obligations of the terminating party has not been
met and it reasonably appears that it will not or cannot be met or (v)
the acquisition contemplated by the Acquisition Agreement is not
consummated.
11.2 (a) Termination of this Agreement pursuant to paragraphs
11.1(a) or (b) shall terminate all obligations of the parties hereunder
(other than Oppenheimer Fund's obligations under paragraph 7.5) and
there shall be no liability for damages on the part of the Oppenheimer
Fund, Quest Portfolio or Quest Advisors or the trustees, directors or
officers of Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any
other party or its trustees, directors or officers.
(b) Termination of this Agreement pursuant to paragraph 11.1(c)
shall terminate all obligations of the parties hereunder (other than
Oppenheimer Fund's obligations under paragraph 7.5) and there shall be
no liability for damages on the part of Oppenheimer Fund, Quest
Portfolio or Quest Advisors or the trustees, directors or officers of
Oppenheimer Fund, Quest Portfolio or Quest Advisors, to any other party
or its trustees, directors or officers, except that any party in breach
of this Agreement (or, as to a termination pursuant to paragraph
11.1(c)(v), in breach of the Acquisition Agreement) shall, upon demand,
reimburse the non-breaching party or parties for all reasonable out-of-
pocket fees and expenses incurred in connection with the transactions
contemplated by this Agreement, including legal, accounting and filing
fees. For the purposes of this paragraph 11.2(b), the non-fulfillment
of the condition set forth in paragraph 8.1 shall not be deemed a
breach entitling a party to reimbursement of expenses and fees.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized
officers of Quest For Value, Oppenheimer Fund and Quest Advisors;
provided, however, that following the meeting of Quest Portfolio's
shareholders called by Quest Portfolio pursuant to paragraph 4.2, no
such amendment may have the effect of changing the provisions for
determining the number of Oppenheimer Fund Shares to be issued to the
Quest Portfolio Shareholders under this Agreement to the detriment of
such Shareholders without their further approval.
13. INDEMNIFICATION
13.1 Oppenheimer Fund will indemnify and hold harmless, Quest For
Value, Quest Portfolio and Quest Advisors, and their respective
trustees, directors, officers and shareholders against any and all
claims to the extent such claims are based upon, arise out of or relate
to any untruthful or inaccurate representations made by Oppenheimer
Fund on behalf of Oppenheimer Fund in this Agreement or any breach by
Oppenheimer Fund of any warranty or any failure to perform or comply
with any of its obligations, covenants, conditions or agreements set
forth in this Agreement, including those set forth in paragraph 1.3.
13.2 Quest Advisors will indemnify and hold harmless Quest For
Value, Oppenheimer Fund, and their respective trustees, officers and
shareholders against any and all claims to the extent such claims are
based upon, arise out of or relate to any untruthful or inaccurate
representation made by Quest For Value on behalf of Quest Portfolio or
Quest Advisors in this Agreement or any breach by Quest Portfolio or
Quest Advisors of any warranty or any failure by Quest Portfolio to
perform or comply with any of its obligations, covenants, conditions or
agreements set forth in this Agreement.
13.3 As used in this section 13, the word "claim" means any and all
liabilities, obligations, losses, damages, deficiencies, demands,
claims, penalties, assessments, judgments, actions, proceedings and
suits of whatever kind and nature and all costs and expenses
(including, without limitation, reasonable attorneys' fees).
13.4 Promptly after the receipt by any party (the "Indemnified
Party"), of notice of any claim by a third party which may give rise to
indemnification hereunder, the Indemnified Party shall notify the party
against whom a claim for indemnification may be made hereunder (the
"Indemnifying Party"), in reasonable detail of the nature and amount of
the claim. The Indemnifying Party shall be entitled to assume, at its
sole cost and expense (unless it is subsequently determined that the
Indemnifying Party did not have the obligation to indemnify the
Indemnified Party under such circumstances), and shall have sole
control of the defense and settlement of such action or claim;
provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and, in connection therewith, to employ counsel
at its own expense; and
(b) without the prior written consent of the Indemnified Party which
shall not be unreasonably withheld, the Indemnifying Party shall not
consent to the entry of any judgment or enter into any settlement that
requires any action other than the payment of money.
In the event the Indemnifying Party elects to assume control of the
defense of any such action in accordance with the foregoing provisions,
(i) the Indemnifying Party shall not be liable to Indemnified Party
for any legal fees, costs and expenses incurred by the Indemnified
Party in connection with the defense thereof arising after the date the
Indemnifying Party elects to assume control of such defense and (ii)
Indemnified Party shall fully cooperate with the Indemnifying Party in
such defense. If the Indemnifying Party does not assume control of
the defense of such claim in accordance with the foregoing provisions,
the Indemnified Party shall have the right to defend such claim, in
which case the Indemnifying Party shall pay all reasonable costs and
expenses of such defense plus interest on the cost of defense from the
date paid at a rate equal to the prime commercial rate of interest as
in effect from time to time at Citibank, N.A. The Indemnified Party
shall conduct such defense in good faith and shall have the right to
settle the matter with the prior written consent of the Indemnifying
Party which shall not be reasonably withheld.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express
courier addressed to Oppenheimer Management Corporation at Two World
Trade Center, 34th Floor, New York, New York 10048-0203 Attention:
Andrew J. Donohue with a copy to Ronald Feiman, Esq. at Gordon Altman
Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New
York 10036; to Quest For Value at One World Financial Center, New York,
New York 10281 Attention: Thomas Duggan, with a copy to Stuart Strauss,
Esq. at Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th
Street, New York, New York 10036.
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
15.1 The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
15.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
15.4 This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder
shall be made by any party without the written consent of the other
parties. Except as provided in the following sentence, nothing herein
expressed or implied is intended or shall be construed to confer upon
or give any person, firm or corporation, other than the parties hereto
and their respective successors and assigns, any rights or remedies
under or by reason of this Agreement. A shareholder of Quest Portfolio
who becomes a shareholder of Oppenheimer Fund on the Closing Date and
continues to be a shareholder of Oppenheimer Fund, shall be entitled to
the benefits and may enforce the provisions of paragraph 4.9 hereof
except insofar as paragraph 4.9 relates to the election of trustees;
and the persons designated in paragraphs 13.1 and 13.2 hereof shall be
entitled to the benefits and may enforce the provisions of section 13
hereof.
15.5 The obligations and liabilities of Oppenheimer Fund
hereunder are solely those of Oppenheimer Fund. It is expressly agreed
that shareholders, trustees, nominees, officers, agents or employees of
Oppenheimer Fund shall not be personally liable hereunder. Quest For
Value and Quest Advisors acknowledge that each has notice of the
provisions of Oppenheimer Fund's Declaration of Trust disclaiming
shareholder and trustee liability for acts and obligations of the
Oppenheimer Fund. The execution and delivery of this Agreement have
been authorized by the trustees of Oppenheimer Fund and signed by the
officers of Oppenheimer Fund acting as such, and neither such
authorization by such trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of the, individually
or to impose any liability on any of them personally.
15.6 The obligations and liabilities of the Quest For Value on
behalf of Quest Portfolio hereunder are solely those of the Quest
Portfolio and not of any other series of Quest For Value. It is
expressly agreed that shareholders, trustees, nominees, officers,
agents, or employees of Quest For Value and Quest Portfolio shall not
be personally liable hereunder. Oppenheimer Fund acknowledges that it
has notice of the provisions of Quest For Value's Declaration of Trust
disclaiming shareholder and trustee liability for acts and obligations
of Quest For Value. The execution and delivery of this Agreement have
been authorized by the trustees of Quest For Value and signed by
officers of Quest For Value acting as such, and neither such
authorization by such trustees nor such execution and delivery by such
officers shall be deemed to have been made by any of them individually
or to impose any liability on any of them personally.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer.
OPPENHEIMER U.S. GOVERNMENT TRUST
By: ________________________________
QUEST FOR VALUE FAMILY OF FUNDS
By: ____________________________
QUEST FOR VALUE ADVISORS
By: ____________________________
LEGAG/QUEST.USG
<PAGE>
EXHIBIT B
The aggregate purchase price for the Purchased Assets and Assumed
Liabilities will be an amount equal to the sum of (i) the Initial
Purchase Payment (as hereinafter defined) payable in cash at the
Acquisition Closing, (ii) the aggregate amount of all unamortized
prepaid commissions as of the business day immediately preceding the
Acquisition Closing which relate to the Acquired Funds (excluding those
with respect to Citibank, N.A.) payable in cash at the Acquisition
Closing, (iii) the amount payable by OMC in respect of the right, title
and interest of Citibank, N.A. to certain commissions, (iv) the
Deferred Purchase Payment (as hereinafter defined) and (v) the
aggregate amount of the Assumed Liabilities.
The "Initial Purchase Payment" shall be an amount equal to the sum of
(x) 225% of the Annualized Fee Amount (as hereinafter defined) of each
Reorganized Fund and (y) 270% of the Annualized Fee Amount of each
Continuing Fund (excluding the Quest for Value Officers Fund). The
"Annualized Fee Amount" of an Acquired Fund shall equal the product of
(i) such Acquired Fund's Closing Net Assets (as hereinafter defined)
and (ii) the annual advisory fee payable to QVA by such Acquired Fund
at the rate indicated in the most recent prospectus for such Acquired
Fund at the Acquisition Closing (plus any applicable annual
administrative fee) "Closing Net Assets" for an Acquired Fund shall
mean the aggregate net asset value of such Acquired Fund as of the
close of business on the last business date preceding the Acquisition
Closing.
The "Deferred Purchase Payment" shall be an amount equal to the
aggregate amounts determined for all Reorganized Funds pursuant to the
following formula: the Closing Payment (as hereinafter defined) times
the Applicable Percentage (as hereinafter defined). The "Closing
Payment" shall be the aggregate amount calculated for all Reorganized
Funds pursuant to clause (x) of the Initial Purchase Payment formula.
The "Applicable Percentage" shall be 100% if the Continuing Net Asset
Percentage (as hereinafter defined) is 75% or more, 0% if the
Continuing Net Asset Percentage is 50% or less and the percentage
determined in accordance with the following formula if the Continuing
Net Asset Percentage is between 75% and 50%: 100% - (4) (75% -
Continuing Net Asset Percentage). The "Continuing Net Asset
Percentage" shall equal the percentage obtained by dividing the
Anniversary Net Assets (as hereinafter defined) by the Closing Net
Assets. The "Anniversary Net Assets" shall mean the most recently
determined aggregate net asset values of all Reorganized Funds as of
8:00 p.m. on the first anniversary of the Acquisition Closing of each
account of the Reorganized Funds which are eligible to be included in
Anniversary Net Assets in accordance with the principles set forth in
the Acquisition Agreement.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS A SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho and each of
them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to attend the Special Meeting of Shareholders of
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 10:00 A.M., New
York time, and at all adjournments thereof, and to vote the shares held
in the name of the undersigned on the record date for said meeting on
the Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A
VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
_______________, 1995 by and among Oppenheimer U.S. Government
Trust, the Trust, on behalf of the Fund, and Quest for Value
Advisors, and the transactions contemplated thereby, including
the transfer of substantially all the assets of the Fund in
exchange for Class A, Class B and Class C shares of Oppenheimer
U.S. Government Trust and the assumption by Oppenheimer U.S.
Government Trust of certain liabilities of the Fund, the
distribution of such shares to the shareholders of the Fund in
liquidation of the Fund and the cancellation of the outstanding
shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership
or other entity, a duly authorized individual must sign on its behalf
and give his or her title.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS B SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho, and each of
them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to attend the Special Meeting of Shareholders of
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 10:00 A.M., New
York time, and at all adjournments thereof, and to vote the shares held
in the name of the undersigned on the record date for said meeting on
the Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A
VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
_______________, 1995 by and among Oppenheimer U.S. Government
Trust, the Trust, on behalf of the Fund, and Quest for Value
Advisors, and the transactions contemplated thereby, including
the transfer of substantially all the assets of the Fund in
exchange for Class A, Class B and Class C shares of Oppenheimer
U.S. Government Trust and the assumption by Oppenheimer U.S.
Government Trust of certain liabilities of the Fund, the
distribution of such shares to the shareholders of the Fund in
liquidation of the Fund and the cancellation of the outstanding
shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership
or other entity, a duly authorized individual must sign on its behalf
and give his or her title.
<PAGE>
Preliminary Copy
QUEST FOR VALUE FAMILY OF FUNDS
U.S. GOVERNMENT INCOME FUND- CLASS C SHARES
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD November 16, 1995
The undersigned shareholder of U.S. Government Income Fund (the
"Fund"), a series of Quest for Value Family of Funds (the "Trust"),
does hereby appoint Thomas E. Duggan and Maria Camacho and each of
them, as attorneys-in-fact and proxies of the undersigned, with full
power of substitution, to attend the Special Meeting of Shareholders of
the Fund to be held on November 16, 1995, at One World Financial
Center, New York, New York 10281 on the 40th Floor at 10:00 A.M., New
York time, and at all adjournments thereof, and to vote the shares held
in the name of the undersigned on the record date for said meeting on
the Proposal specified on the reverse side. Said attorneys-in-fact
shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A
VOTE FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
_______________, 1995 by and among Oppenheimer U.S. Government
Trust, the Trust, on behalf of the Fund, and Quest for Value
Advisors, and the transactions contemplated thereby, including
the transfer of substantially all the assets of the Fund in
exchange for Class A, Class B and Class C shares of Oppenheimer
U.S. Government Trust and the assumption by Oppenheimer U.S.
Government Trust of certain liabilities of the Fund, the
distribution of such shares to the shareholders of the Fund in
liquidation of the Fund and the cancellation of the outstanding
shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1995
(Month) (Day)
______________________________
Signature(s)
______________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership
or other entity, a duly authorized individual must sign on its behalf
and give his or her title.
<PAGE>
APPENDIX TO PROXY STATEMENT AND PROSPECTUS OF
OPPENHEIMER U.S. GOVERNMENT TRUST
Graphic material included in Proxy Statement and 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 Proxy Statement and 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,
1995, 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. No
performance information is set forth on the Fund's Class B shares
because they were not publicly offered during the fiscal year ended
June 30, 1995. 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 Proxy Statement and Prospectus.
Oppenheimer Lehman Brothers
Fiscal Year U.S. Government Government
(Period) Ended Trust - A Bond Index
08/16/85 $ 9,525 $10,000
06/30/86 $10,824 $11,887
06/30/87 $11,371 $12,376
06/30/88 $12,267 $13,266
06/30/89 $13,431 $14,869
06/30/90 $14,282 $15,899
06/30/91 $15,645 $17,510
06/30/92 $17,688 $19,920
06/30/93 $19,403 $22,487
06/30/94 $19,218 $22,187
06/30/95 $21,375 $24,862
Oppenheimer Lehman Brothers
Fiscal U.S. Government Government
Period Ended Trust - C Bond Index
12/1/93(1) $10,000 $10,000
06/30/94 $ 9,678 $ 9,625
06/30/95 $10,675 $10,786
-----------
(1)Class C shares of the Fund were first publicly offered on December
1, 1993.
<PAGE>
Oppenheimer
U.S. Government Trust
Prospectus dated May 30, 1995
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 primarily through investments in debt
instruments issued or guaranteed by the U.S. Government or its agencies
or instrumentalities. The securities the Fund invests in are described
more completely in "Investment Objective and Policies," 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 May 30, 1995 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).
(OppenheimerFunds logo)
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of
the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
ABOUT THE FUND
Expenses
Brief Overview of the Fund
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 B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and
Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and
Policies
Dividends, Capital Gains and
Taxes
<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 subtracted from the Fund's assets to calculate
the Fund's net asset value per share. All shareholders therefore pay
those expenses indirectly. Shareholders pay other expenses directly,
such as sales charges and account transaction charges. The following
tables are provided to help you understand your direct expenses of
investing in the Fund and your share of the Fund's business operating
expenses that you will bear indirectly. The calculations are based on
the Fund's expenses during its last 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 "About
Your Account" from pages _____ through _____ for an explanation of how
and when these charges apply.
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None
----------------------------------------------------------------------
Sales Charge on
Reinvested Dividends None None None
----------------------------------------------------------------------
Deferred Sales Charge
(as a % of the lower of
the original
purchase price or
redemption proceeds) None(1) 5% in the 1.0%(2)
first year,
declining to
1% in the sixth
year, and elim-
inated there-
after(2)
----------------------------------------------------------------------
Exchange Fee None None None
(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 - Class A
Shares," below.
(2) See "How to Buy Shares," below, for more information on the
contingent deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal
Funds wire, but not for redemption proceeds paid by check, or ACH
wire through AccountLink, or, with respect to Class A shares only,
for which checkwriting privileges are used (see "How to Sell
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 (which is referred to in this
Prospectus as the "Manager"). The rates of the Manager's fees are set
forth in "How the Fund is Managed," below. The Fund has other regular
expenses for services, such as transfer agent fees, custodial fees paid
to the bank that holds the Fund's portfolio securities, audit fees and
legal expenses. Those expenses are detailed in the Fund's Financial
Statements in the Statement of Additional Information.
The numbers in the table below 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 can be
up to a maximum of 0.25% of average annual net assets of that class),
and for Class B and Class C shares, are the Service Plan Fees (which
can be up to maximum of 0.25%) and the asset-based sales charges of
0.75%. These plans are described in greater detail in "How to Buy
Shares."
The actual expenses for each class of shares in future years may
be more or less than the figures in the table, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. The Annual Fund Operating Expenses shown are net
of a voluntary reduction of the management fees paid by the Fund to
rates that are reflected in the current investment advisory agreement.
Without such reduction, "Management Fees" for each class would have
been 0.71% and "Total Fund Operating Expenses" would have been 1.14%,
1.96% and 1.96% for Class A, Class B and Class C shares, respectively.
Class B shares were not publicly offered during the fiscal year ended
June 30, 1994. Therefore, the Annual Fund Operating Expenses shown for
Class B shares are estimates based on amounts that would have been
payable in that period assuming that Class B shares were outstanding
during such fiscal year. 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 Class B Class C
Shares Shares Shares
----------------------------------------------------------------------
Management Fees
(restated) 0.62% 0.62%% 0.62%
----------------------------------------------------------------------
12b-1 Distribution
and/or 0.24%(1) 1.00%(2) 1.00%(2)
Service Plan Fees
----------------------------------------------------------------------
Other Expenses 0.19% 0.25% 0.25%
----------------------------------------------------------------------
Total Fund
Operating Expenses 1.05% 1.87% 1.87%
(restated)
(1) Includes Service Plan Fees only.
(2) Includes Service Plan Fees 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 Annual Fund
Operating Expenses table above (as restated). If you were to redeem
your shares at the end of each period shown below, your investment
would incur the following expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years(1)
----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
Class B Shares $69 $89 $121 $178
Class C Shares $29 $59 $101 $219
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years(1)
----------------------------------------------------------------------
Class A Shares $58 $79 $103 $170
Class B Shares $19 $59 $101 $178
Class C Shares $19 $59 $101 $219
(1) The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your
Class B shares into Class A shares after 6 years. Because of the effect
of the asset-based sales charge and the contingent deferred sales
charge on Class B and Class C shares, long-term Class B and Class C
shareholders could pay the economic equivalent of an amount greater
than the maximum front-end sales charge allowed under applicable
regulations. The automatic conversion of Class B shares is designed to
minimize the likelihood that this will occur. Please refer to "How to
Buy Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire
Prospectus before making a decision about investing in the Fund. Keep
the Prospectus for reference after you invest, particularly for
information about your account, such as how to sell or exchange shares.
- What is The Fund's Investment Objective? The Fund's investment
objective is to seek high current income, preservation of capital and
maintenance of liquidity.
- What Does the Fund Invest In? The Fund primarily invests in U.S.
Government Securities, and repurchase agreements on such securities.
The Fund may write covered calls and use certain hedging instruments
approved by its Board of Trustees to try to manage investment risks.
U.S. Government Securities that the Fund invests include:
collateralized mortgage obligations ("CMO's") whose payment of
principal and interest generated by the pool of mortgages is passed
through to the Fund. CMO's may be issued in a variety of classes or
series ("tranches") that have different maturities and levels of
volatility. The Fund may also invest in "stripped" CMO's or mortgage-
backed securities. Stripped mortgage-backed securities usually have
two classes that receive different proportions of the interest and
principal payments. 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. These investments are more fully
explained in "Investment Objective and Policies," starting on page ___.
- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation. The Manager
(including a subsidiary) manages investment company portfolios having
over $30 billion in assets at March 31, 1995. The Fund's portfolio
manager, David A. Rosenberg, is primarily responsible for the selection
of the Fund's securities. The Manager is paid an advisory fee by the
Fund, based on its net assets. The Fund's Board of Trustees, elected
by shareholders, oversees the investment adviser and the portfolio
manager. Please refer to "How the Fund is Managed," starting on page
___ for more information about the Manager and its fees.
- How Risky is the Fund? Although U.S. Government Securities involve
little credit risk, their values will fluctuate depending on prevailing
interest rates. When prevailing interest rates fall, the values of
already-issued debt securities generally rise. When interest rates
rise, the values of already-issued debt securities generally decline.
The magnitude of these fluctuations will often be greater for longer-
term debt securities than shorter-term securities. While the Manager
tries to reduce risks by diversifying investments, by carefully
researching securities before they are purchased for the portfolio, and
in some cases by using hedging techniques, there is no guarantee of
success in achieving the Fund's objective and your shares may be worth
more or less than their original cost when you redeem them. Please
refer to "Investment Objective and Policies" starting on page ___ for a
more complete discussion of the Fund's investment risks.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Each class has the same investment portfolio, but
different expenses. Class A shares are offered with a front-end sales
charge, starting at 4.75% and reduced for larger purchases. Class B
shares and Class C shares are offered without a front-end sales charge,
but may be subject to a contingent deferred sales charge if redeemed
within 6 years or 12 months, respectively, of purchase. There is also
an annual asset-based sales charge on Class B and Class shares. Please
review "How To Buy Shares" starting on page ___ for more details,
including a discussion about factors you and your financial advisor
should consider in determining which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through
your dealer. Please refer to "How To Sell Shares" on page ___. The
Fund also offers exchange privileges to other OppenheimerFunds,
described in "How to Exchange Shares" on page ____.
- How Has the Fund Performed? The Fund measures its performance by
quoting a yield, dividend yield, average annual total return and
cumulative total return, which measure historical performance. Those
returns can be compared to the yields and total returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance
can also be compared to U.S. Government bond indices, which we have
done on page___. Please remember that past performance does not
guarantee future results.
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 the following pages
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, together with the
Fund's unaudited financial statements for the six months ended December
31, 1994. Class C shares were publicly offered only during a portion
of that period, commencing December 1, 1993. Class B shares were not
offered during the periods shown. Accordingly, no information on Class
B shares is reflected in the tables below or in the Fund's other
financial statements.
<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>
<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. The Fund seeks its investment
objective by investing primarily in U.S. Government Securities, and
repurchase agreements on such securities. U.S. Government Securities
include the following:
- U.S. Treasury Obligations. These include Treasury Bills
(which have maturities of one year or less when issued),
Treasury Notes (which have maturities of two to ten years when
issued) and Treasury Bonds (which have maturities generally
greater than ten years when issued). U.S. Treasury obligations
are backed by the full faith and credit of the United States.
- Obligations Issued or Guaranteed by U.S. Government Agencies
or Instrumentalities. These are obligations 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").
Securities of agencies and instrumentalities the securities
that 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 depending on then-current market
conditions. 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. If the Fund
buys mortgage-backed securities at a premium, prepayments of principal
and foreclosures of mortgages may result in some loss of the Fund's
principal investment to the extent of the premium paid.
As a matter of fundamental policy, the Fund will invest at
least 80% of its total assets in U.S. Government Securities, under
normal market conditions. The Fund expects that any investments in
debt securities other than U.S. Government Securities will be limited
to debt securities rated within the four highest rating categories of
Moody's Investors Service, Inc. or Standard & Poor's Corporation, or,
if unrated, judged by the Manager to be of comparable quality to debt
securities rated within such grades, although it is not a fundamental
policy that it do so. Such ratings are known as "investment grade"
ratings. The Fund is not obligated to dispose of securities if the
rating is reduced below investment grade. There is the increased
credit risk potential that issuers other than the U.S. Government or
its agencies or instrumentalities may not be able to make interest or
principal payments as they become due.
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 (and is known as an "I/O"), while the
other class will receive all of the principal value (and is known as a
"P/O").
The yield to maturity on the class that receives only interest
is extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change, and they have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall,
and in times of rapidly falling interest rates, the Fund might receive
back less than its investment.
The Fund may also enter into "forward roll" transactions with
banks and dealers with respect to the mortgage-related securities in
which it can invest. These require the Fund to secure its obligation
in the transaction by segregating assets with its custodian bank equal
in amount to its obligation under the roll.
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. High portfolio turnover may affect the ability of the Fund
to qualify as a "regulated investment company" under the Internal
Revenue Code to obtain tax deductions for dividends and distributions
paid to shareholders. 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, 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 investment policies. The Fund's
investment policies and practices are not "fundamental" unless this
Prospectus or the Statement of Additional Information says that a
particular policy is "fundamental." The Fund's investment objective is
a fundamental policy.
Fundamental policies are those that cannot be changed without
the approval of a "majority" of the Fund's outstanding voting shares.
The term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments
to this Prospectus.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more detailed information about these practices, including limitations
on their use that may help to reduce some of the risks.
- Loans of Portfolio Securities. To raise cash for liquidity
purposes, the Fund may lend its portfolio securities to brokers,
dealers and other financial institutions. These loans are limited to
not more than 25% of the Fund's total assets and are subject to certain
conditions described in the Statement of Additional Information. The
Fund presently does not intend to lend its portfolio securities, but if
it does, the value of securities loaned is not expected to exceed 5% of
the value of 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.
The Fund will not enter into a repurchase agreement that will cause
more than 10% of its net assets to be subject to repurchase agreements
having a maturity beyond seven days. Repurchase agreements must be
fully collateralized. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may experience costs in disposing
of the collateral and may experience losses if there is any delay in
doing so.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options
on futures, or enter into interest rate swap agreements. These are all
referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of
them, described below. The hedging instruments the Fund may use are
described below and in greater detail in "Other Investment Techniques
and Strategies" in the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary
substitute for purchasing individual securities. It may do so to try
to manage its exposure to changing interest rates. Some of these
strategies, 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 call
options and writing put options, tend to increase the Fund's exposure
to the securities market. Writing put options or covered call options
may also provide income to the Fund for liquidity purposes or raise
cash for the Fund to distribute to shareholders.
- Futures. The Fund may buy and sell futures contracts that
relate to interest rates (these are referred to as Interest Rate
Futures). Interest Rate Futures are described in "Hedging With Options
and Futures Contracts" in the Statement of Additional Information.
- Put and Call Options. The Fund may buy and sell certain
kinds of put options (puts) and call options (calls).
The Fund may buy calls only on securities or Interest Rate
Futures, or to terminate its obligation on a call the Fund previously
wrote. The Fund may write (that is, sell) covered call options. When
the Fund writes a call, it receives cash (called a premium). The call
gives the buyer the ability to buy the investment on which the call was
written from the Fund at the call price during the period in which the
call may be exercised. If the value of the investment 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
investment).
The Fund may purchase put options. Buying a put on an
investment gives the Fund the right to sell the investment at a set
price to a seller of a put on that investment. The Fund can buy only
those puts that relate to (1) securities that the Fund owns, or (2)
Interest Rate Futures. The Fund can buy a put on an Interest Rate
Future whether or not the Fund owns the particular Future in its
portfolio. The Fund may write puts on securities or Interest Rate
Futures in an amount up to 50% of its total assets only if such puts
are covered by segregated liquid assets. In writing puts, there is a
risk that the Fund may be required to buy the underlying security at a
disadvantageous price.
The Fund may buy and sell puts and calls only if certain
conditions are met: (1) after the Fund writes a call, the Fund 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. (NASDAQ); the limit is 10% of the Fund's total assets for
calls that are not listed or quoted; (2) calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on
NASDAQ or in the case of debt securities, traded in the over-the-
counter market; (3) each call the Fund writes must be "covered" while
it is outstanding: that means the Fund must own the investment on which
the call was written or it must own other securities that are
acceptable for the escrow arrangements required for calls; (4) the Fund
may write calls on Futures contracts it owns, but these calls must be
covered by securities or other liquid assets the Fund owns and
segregates to enable it to satisfy its obligations if the call is
exercised; (5) a call or put option may not be purchased if the value
of all of the Fund's put and call options would exceed 5% of the Fund's
total assets.
- Interest Rate Swaps. In an interest rate swap, the Fund
and another party exchange their right to receive or their obligation
to pay interest on a security. For example, they may swap a right to
receive floating rate payments for fixed rate payments. The Fund
enters into swaps only on securities it owns. The Fund may not enter
into swaps with respect to more than 25% of its total assets. Also,
the Fund will segregate liquid assets (such as cash or U.S. Government
securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount
daily, as needed. Income from interest rate swaps may be taxable.
- Hedging instruments can be volatile investments and may
involve special risks. In the broadest sense, exchange-traded options
and futures contracts and other hedging instruments the Fund can use
may be defined as "derivative" investments. In general, a derivative
investment is a specially-designed investment whose performance is
linked to the performance of another investment or security. 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.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. If a covered call written by the Fund
is exercised on an investment that has increased in value, the Fund
will be required to sell the investment at the call price and will not
be able to realize any profit if the investment has increased in value
above the call price. Interest rate swaps are subject to credit risks
(if the other party fails to meet its obligations) and also to interest
rate risks. The Fund could be obligated to pay more under its swap
agreements than it receives under them, as a result of interest rate
changes. These risks are described in greater detail in the Statement
of Additional Information.
- Derivative Investments. The Fund can invest in a number
of different kinds of "derivative investments." The Fund may use some
types of derivatives for hedging purposes, and may invest in others
because they offer the potential for increased income and principal
value. In general, a "derivative investment" is a specially-designed
investment whose performance is linked to the performance of another
investment or security, such as an option future or index. In the
broadest sense, derivative investments include exchange-traded options
and futures contracts (please refer to "Hedging," above).
One risk of investing in derivative investments is that
the company issuing the instrument might not pay the amount due on the
maturity of the instrument. There is also the risk that the underlying
investment or security might not perform the way the Manager expected
it to perform. The performance of derivative investments may also be
influenced by interest rate changes in the U.S. and abroad. All of
these risks can mean that the Fund will realize less income than
expected from its investments, or that it can lose part of the value of
its investments, which will affect the Fund's share price. Certain
derivative investments held by the Fund may trade in the over-the-
counter markets and may be illiquid. If that is the case, the Fund's
investment in them will be limited as discussed in the following
paragraph.
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) 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"; (b)
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 (c) 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 under Massachusetts law for protecting the interests of
shareholders. 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 three
classes of shares, Class A, Class B 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,
Oppenheimer Management Corporation, 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. The agreement sets forth the fees paid by
the Fund to the Manager and describes the expenses that the Fund pays
to conduct its business.
The Manager has operated as an investment adviser since 1959.
The Manager (including an affiliate) currently manage investment
companies, including other OppenheimerFunds, with assets of more than
$30 billion as of March 31, 1995, and with more than 2.4 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.
- Portfolio Manager. The Portfolio Manager of the Fund (who
is also a Vice President of the Fund) is David A. Rosenberg, a Vice
President of the Manager. He has been responsible for the day-to-day
management of the Fund's portfolio since January 3, 1994. Mr.
Rosenberg also serves as a portfolio manager of other OppenheimerFunds.
Previously he was 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: 0.65% of the first
$200 million of aggregate net assets, 0.60% of the next $100 million;
0.57% of the next $100 million, 0.55% of the next $400 million, and
0.50% of aggregate net assets over $800 million.
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. Because the Fund
purchases most of its portfolio securities directly from the sellers
and not through brokers, it therefore incurs relatively little expenses
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 accounts to the Transfer Agent at the address and
toll-free number shown below in this Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return" and "yield" to illustrate its performance. The performance of
each class of shares is shown separately because each class of shares
will usually have different performance as a result of the different
kinds of expenses each class bears. These returns measure the
performance of a hypothetical account in the Fund over various periods,
and do not show the performance of each shareholder's account (which
will vary if dividends are received in cash, or shares are sold or
purchased). The Fund's performance data may help you see how well your
investment has done over time and to compare it to other funds or
market indices.
It is important to understand that the Fund's yields and total
returns 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. When total returns
are shown for Class B shares, they reflect the effect of the contingent
deferred sales charge that applies to the period for which total return
is shown. When total returns are shown for a one-year period for Class
C shares, they reflect the effect of the contingent deferred sales
charge. Total returns may also be shown based on the change in net
asset value, without considering the effect of either the front-end or
the contingent deferred sales charge, as applicable, and those returns
would be reduced if sales charges were deducted.
- 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 B and Class C shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended 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. Class B shares were not offered during the Fund's
fiscal year ended June 30, 1994. Accordingly, no information on Class
B shares is reflected below.
Comparison of Change in Value
of a $10,000 Hypothetical Investment in
Oppenheimer U.S. Government Trust
and the Lehman Brothers U.S. Government Bond Index
(Graph With Class A Shares Of The Fund)
(Graph With Class C Shares Of The Fund)
Past performance is not predictive of future performance.
Average Annual Total Returns of Class A Shares Of The Fund at
6/30/94(1)
1-Year 5-Year Life
-5.87% 6.31% 7.64%
Cumulative Total Return of Class C Shares Of The Fund at 6/30/94(2)
Life
-4.09%
_________________________________________
(1) The inception date of the Fund (Class A shares) was 8/16/85. The
average annual total returns and the ending account value in the graph
reflect reinvestment of all dividends and capital gains distributions
and are shown net of the applicable 4.75% maximum initial sales charge.
(2) Reflects cumulative total return from the date that Class C shares
of the Fund were first publicly offered (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 three different classes of
shares. The different classes of shares represent investments in the
same portfolio of securities but are subject to different expenses and
will likely have different share prices.
- 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 an 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. Sales charges
are described below.
- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years of buying them, you will normally pay a contingent deferred sales
charge that varies depending on how long you owned your shares.
- 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 best suited to your needs depends on a number of factors
which you should discuss with your financial advisor. The Fund's
operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your
investment results over time. The most important factors are how much
you plan to invest, how long you plan to hold your investment, and
whether you anticipate exchanging your shares for shares of other
OppenheimerFunds (not all of which offer Class B or Class C shares). If
your goals and objectives change over time and you plan to purchase
additional shares, you should re-evaluate those factors to see if you
should consider another class of shares.
In the following discussion, to help provide you and your
financial advisor with a framework in which to choose a class, we have
made some assumptions using a hypothetical investment in the Fund. We
used the sales charge rates that apply to each class, and considered
the effect of the asset-based sales charges on Class B and Class C
expenses (which will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
your investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's
actual investment returns, and the operating expenses borne by each
class of shares, and which class of shares you invest in. The factors
discussed below are not intended to be investment advice, guidelines or
recommendations, because each investor's financial considerations are
different. The assumptions we have made in assessing the factors to
consider in purchasing a particular class of shares assume that you
will purchase only one class of shares, and not a combination of shares
of different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long
you expect to hold your investment will assist you in selecting the
appropriate class of shares. The effect of the sales charge over time,
using our assumptions, will generally depend on the amount invested.
The effect of class-based expenses will also depend on how much you
invest.
Investing for the Short Term. If you have a short term
investment horizon (that is, you plan to hold your shares less than six
years), you should probably consider purchasing Class C shares rather
than Class A or Class B shares. This is because there is no initial
sales charge on Class C shares, and the contingent deferred sales
charge does not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $250,000 for a period
of less than six years, Class C shares might not be as advantageous as
Class A shares. This is because the annual asset-based sales charge on
Class C shares (and the contingent deferred sales charge that applies
if you redeem Class C shares within a year of purchase) might have a
greater economic impact on your account during that period than the
initial sales charge that would apply if Class A shares were purchased
instead at the applicable reduced Class A sales charge rate.
And for most investors who invest $500,000 or more, in most
cases Class A shares will be the more advantageous choice than Class B
shares, no matter how long you intend to hold your shares. For that
reason, the Distributor normally will not accept purchase orders of
$500,000 or more of Class B shares from a single investor. For the same
reason, the Distributor will not accept purchase orders of $1 million
or more of Class C shares from a single investor.
Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need
access to your money for six years or more, Class A shares will likely
be more advantageous than Class B or Class C shares. This is because
of the effect of expected lower expenses for Class A shares and the
reduced initial sales charges available for larger investments in Class
A shares under the Fund's Right of Accumulation. Class B shares may be
appropriate for smaller investments held for the longer term because
there is no initial sales charge on Class B shares, and Class B shares
held six years following their purchase convert into Class A shares.
Of course all of these examples are based on approximations of
the effect of current sales charges and expenses on a hypothetical
investment over time, using the assumed annual performance return
stated above, and you should analyze your options carefully.
- Are There Differences in Account Features That Matter To You?
Because some features (such as checkwriting) may not be available to
Class B or C shareholders, or other features (such as Automatic
Withdrawal Plans) may not be advisable (because of the effect of the
contingent deferred sales charge in non-retirement accounts) for Class
B or Class C shareholders, you should carefully review how you plan to
use your investment account before deciding which class of shares to
buy. Additionally, dividends payable to Class B and Class C
shareholders will be reduced by the additional expenses borne by those
classes that are not borne by Class A, such as the Class B and Class C
asset-based sales charges described below and in the Statement of
Additional Information.
Also, because not all of the OppenheimerFunds currently offer
Class B and Class C shares, and because exchanges are permitted only to
the same class of shares in another of the OppenheimerFunds, you should
consider how important the exchange privilege is likely to be for you.
- How Does It Affect Payments to My Broker? A salesperson,
such as a broker, or any other person who is entitled to receive
compensation for selling Fund shares, may receive different
compensation for selling one class than for selling another class. It
is important that investors understand that the purpose of the Class B
and Class C contingent deferred sales charges is the same as the
purpose of the front-end sales charge on Class A shares: to reimburse
the Distributor for commissions it pays to dealers and financial
institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any
time with as little as $25. There are reduced minimum investments under
special investment plans:
With Asset Builder Plans, Automatic Exchange Plans,
403(b)(7) custodial plans and military allotment plans, you can make
initial and subsequent investments for 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, Class B 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. However, we recommend that you discuss your investment first
with a financial advisor, to be sure it is appropriate for you.
- 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
have the transfer agent send redemption proceeds, or 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 should
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 (and any initial
sales charge that applies) 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 the time of day The New York Stock Exchange
closes, which is normally 4:00 P.M., New York time, but may be earlier
on some days (all references to time in this Prospectus mean "New York
time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is
a "regular business day").
If you buy shares through a dealer, the dealer must receive
your order by the close of The New York Stock Exchange on a regular
business day, and transmit it to the Distributor so that it is received
before the Distributor's close of business that day, which is normally
5:00 P.M. The Distributor may reject any purchase order for the Fund's
shares, in its sole discretion.
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:
_______________________________________________________________________
Front-End Sales Front-End Sales
Charge as a Charge as a Commission as
Percentage of 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 (shares of any
OppenheimerFunds that offer only one class of shares that has no class
designation are considered "Class A" shares for this purpose). 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. To qualify for the lower sales
charge rates that apply to larger purchases of Class A shares, you and
your spouse can add together Class A shares you purchase for your
individual 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 add together current purchases of Class A
shares of the Fund and other OppenheimerFunds. To reduce the sales
charge rate for current purchases of Class A shares, you can also
include 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 the 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, (c) purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other OppenheimerFunds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor, or (d)
purchased and paid for with the proceeds of shares redeemed in the
prior 12 months from a mutual fund on which an initial sales charge or
contingent deferred sales charge was paid (other than a fund managed by
the Manager or any of its affiliates); this waiver must be requested
when the purchase order is placed for your shares of the Fund, and the
Distributor may require evidence of your qualification for this waiver.
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 as 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 B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of
dividends or capital gains distributions. The 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 B contingent
deferred sales charge is paid to the Distributor to reimburse its
expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge
applies to a redemption, the Fund redeems shares in the following
order: (1) shares acquired by reinvestment of dividends and capital
gains distributions, (2) shares held for over 6 years, and (3) shares
held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend
on the number of years since you invested and the dollar amount being
redeemed, according to the following schedule:
Contingent Deferred
Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which Purchase Order Was Accepted (As % of Amount Subject to
Charge)
0 - 1 5.0%
1 - 2 4.0%
2 - 3 3.0%
3 - 4 3.0%
4 - 5 2.0%
5 - 6 1.0%
6 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B 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 (the disability must have
occurred after the account was established, and 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 591/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 591/2 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 B
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 below.
Further details about this policy are contained in "Reduced Sales
Charges" in the Statement of Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to
Class A shares. This conversion feature relieves Class B shareholders
of the asset-based sales charge that applies to Class B shares under
the Class B Distribution and Service Plan, described below. The
conversion is based on the relative net asset value of the two classes,
and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the
reinvestment of dividends and distributions on the converted shares
will also convert to Class A shares. The conversion feature is subject
to the continued availability of a tax ruling described in "Alternative
Sales Arrangements - Class A and Class B Shares" in the Statement of
Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund
has adopted a Distribution and Service Plan for Class B shares to
compensate the Distributor for distributing Class B shares and
servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares
that are outstanding for 6 years or less. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on
the average annual net assets of Class B shares, determined as of the
close of each regular business day. The asset-based sales charge allows
investors to buy Class B shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class B
shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B 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 B expenses by 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 B 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 3.75% of the purchase price to dealers from its own
resources at the time of sale. The total up-front commission paid by
the Distributor to the dealer at the time of sales of Class C shares is
1.00% of the purchase price. The Distributor plans to pay the asset-
based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
The Fund pays the asset-based sales charge to the Distributor
for its services rendered in connection with the distribution of Class
B shares. Those payments are at a fixed rate which is not related to
the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service
fees, and other costs of distributing and selling Class B shares. 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 distributing Class B shares before the Plan was
terminated.
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 redemptions or circumstances described above under "Waivers
of Class B Sales Charge."
- 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 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 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 total up-front commission paid by
the Distributor to the dealer at the time of sale of Class C shares is
1.00% of the purchase price. The Distributor plans to pay the asset-
based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
The Fund pays the asset-based sales charge to the Distributor
for its services rendered in connection with the distribution of Class
C shares. Those payments are at a fixed rate which is not related to
the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service
fees, and other costs of distributing and selling Class C shares,
including compensating personnel of the Distributor who support
distribution of Class C shares. 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 distributing Class C
shares 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. These include purchases of shares by
telephone (either through a service representative or by PhoneLink,
described below), automatic investments under Asset Builder Plans, and
sending dividends and distributions or Automatic Withdrawal Plan
payments directly to your bank account. Please 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 Class A 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 a sales charge. This privilege applies
only to redemptions of Class A shares or Class B shares that you
purchased by reinvesting dividends or distributions 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, or 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
account 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 account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the
account is registered, and
- Any special 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: Send courier or Express
Mail requests to:
Oppenheimer Shareholder Services Oppenheimer Shareholder
P.O. Box 5270, Services
Denver, Colorado 80217 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 the
close of The New York Stock Exchange that day, which is normally 4:00
P.M., but may be earlier on some days. Shares held in an
OppenheimerFunds retirement plan or under a share certificate may not
be redeemed by telephone.
- To redeem shares through a service representative, call 1-
800-852-8457
- To redeem shares automatically on PhoneLink, call 1-800-
533-3310
Whichever method you use, you may have a check sent to the
address on the account statement, or, if you have linked your Fund
account to your bank account on AccountLink, you may have the proceeds
wired to that bank account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be
redeemed by telephone, in any 7-day period. The check must be payable
to all owners of record of the shares and must be sent to the address
on the account. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink or By Wire. There
are no dollar limits on telephone redemption proceeds sent to a bank
account designated when you establish AccountLink. Normally the ACH
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.
Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank account. The bank must be a member of the Federal
Reserve wire system. There is a $10 fee for each Federal Funds wire.
To place a wire redemption request, call the Transfer Agent at 1-800-
852-8457. The wire will normally be transmitted on the next bank
business day after the shares are redeemed. There is a possibility that
the wire may be delayed up to seven days to enable the Fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire. To establish wire redemption privileges on an
account that is already established, please contact the Transfer Agent
for instructions.
- Checkwriting. To be able to write checks against your Fund
account, you may request that privilege on your account Application or
you can contact the Transfer Agent for signature cards, which must be
signed (with a signature guarantee) by all owners of the account and
returned to the Transfer Agent so that checks can be sent to you to
use. Shareholders with joint accounts can elect in writing to have
checks paid over the signature of one owner.
- Checks can be written to the order of whomever you wish, but
may not be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts
holding Class B shares or Class C shares, or Class A shares that are
subject to a contingent deferred sales charge.
- Checks must be written for at least $100.
- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
- You may not write a check that would require the Fund to
redeem shares that were purchased by check or Asset Builder Plan
payments within the prior 10 days.
- Don't use your checks if you changed your Fund account
number.
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. 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
in proper form by the close of The New York Stock Exchange that day,
which is normally 4:00 P.M. but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are
exchanging into 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 the close of The New York Stock Exchange, which is
normally 4:00 P.M. but may be earlier on some days, on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The Fund's Board of Trustees has established procedures
to value the Fund's securities to determine net asset value. In
general, securities values are based on market value. There are
special procedures for valuing illiquid and restricted securities,
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 neither the
Transfer Agent nor the Fund will be liable for losses or expenses
arising out of telephone instructions reasonably believed to be
genuine. If you are unable to reach the Transfer Agent during periods
of unusual market activity, you may not be able to complete a telephone
transaction and should consider placing your order by mail.
- 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, Class B 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. Effective June 7, 1995, for accounts registered in the name
of a broker-dealer, payment will be forwarded within 3 business days.
The Transfer Agent may delay forwarding a check or processing a payment
via AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days
from the date the shares were purchased. That delay may be avoided 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, Class B 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
last name and address on the Fund's records. However, each shareholder
may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B
and Class C shares from net investment income each regular business day
and pays 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). Normally, distributions paid on Class A shares generally
are expected to be higher than for Class B and Class C shares because
expenses allocable to Class B and Class C shares will generally be
higher. There is no fixed dividend rate and there can be no assurance
as to the payment of any dividends. The amount of a class's dividends
or distributions may vary from time to time depending on market
conditions, the composition of the Fund's portfolio and expenses borne
by that class.
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 assurance that the Fund will pay any capital
gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
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. It does not matter how long you held
your shares. Dividends paid from short-term capital gains and net
investment income are taxable as ordinary income. Distributions are
subject to Federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund
will send you and the IRS a statement showing the amount of each
taxable distribution you received in the previous year.
- "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 if 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. A non-taxable return of capital may reduce your tax
basis in your Fund shares.
This information is only a summary of certain federal tax
information about your investment. More information is contained in
the Statement of Additional Information, and in addition you should
consult with your tax 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. No
performance information is set forth on the Fund's Class B shares
because they were not publicly offered during the fiscal year ended
June 30, 1994. 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 "Comparing the Fund's
Performance to the Market."
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.
<PAGE>
Oppenheimer U.S. Government Trust
Two World Trade Center
New York, New York 10048-0203
Telephone: 1-800-525-7048
Investment Adviser
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 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
No dealer, broker, salesperson or any other person has been authorized
to give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional
Information, and if given or made, such information and representations
must not be relied upon as having been authorized by the Fund,
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.
PR0220.001.0595 Printed on recycled paper
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
September 29, 1995
___________________________________
This Statement of Additional Information of Oppenheimer U.S.
Government Trust consists of this cover page and the following
documents:
1. Statement of Additional Information of Oppenheimer U.S. Government
Trust dated May 30, 1995, supplemented July 14, 1995, previously filed
and incorporated herein by reference.
2. Oppenheimer U.S. Government Trust's Annual Report as of June 30,
1995, previously filed and incorporated herein by reference.
3. Prospectus of U.S. Government Income Fund dated March 1, 1995, as
revised June 30, 1995, previously filed and incorporated herein by
reference.
4. Statement of Additional Information of U.S. Government Income Fund
dated March 1, 1995, previously filed and incorporated herein by
reference.
5. U.S. Government Income Fund's Annual Report as of October 31, 1994
and its Semi-Annual Report as of April 30, 1995, previously filed and
incorporated herein by reference.
6. Pro Forma Financial Statements, filed herewith and incorporated
herein by reference.
This Statement of Additional Information (the "Additional
Statement") is not a Prospectus. This Additional Statement should be
read in conjunction with the Proxy Statement and Prospectus, which may
be obtained by written request to Oppenheimer Shareholder Services
("OSS"), P.O. Box 5270, Denver, Colorado 80217, or by calling OSS at
the toll-free number shown above.
<PAGE>
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, 1995, 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. Our procedures included confirmation of securities owned as
of June 30, 1995, 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, 1995, 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.
KMPG Peat Marwick LLP
/S/ Peat Marwick LLP
New York, New York
July 27, 1995
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------------
To the Shareholders and Trustees of
Quest for Value Family of Funds:
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
Opportunity Fund, the Small Capitalization Fund, the Growth and
Income Fund, the U.S. Government Income Fund, and the Investment
Quality Income Fund (constituting part of Quest for Value Family of
Funds, hereafter referred to as the "Fund") at October 31, 1994, the
results of each of their operations for the year then ended, the changes
in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated,
in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at October 31, 1994 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 16, 1994
<PAGE>
APPENDIX TO 1994 ANNUAL REPORT OF
U.S. GOVERNMENT INCOME FUND
Graphic material included in 1994 Annual Report of U.S. Government
Income Fund: "Comparison of Change in Value of $10,000 Investment* in
Quest for Value U.S. Government Income Fund (Class A) from 5/31/88 through
10/31/94 and Total Return on Lehman Intermediate Government Bond Index."
A linear graph is included in the 1994 Annual Report of U.S.
Government Income Fund (the "Fund") depicting the initial account value
and subsequent account value of a hypothetical $10,000 investment in Class
A shares of the Fund held from 5/31/88 until 10/31/94, and comparing such
values with the same investments over the same time periods in the Lehman
Intermediate Government Bond Index. Set forth below are the relevant data
points that appear on the linear graph.
Lehman
Intermediate
Fiscal Year U.S. GovernmentGovernment
(Period) Ended Income Fund (Class A)Bond Index
05/31/88 $9,525$10,000
10/31/88 $9,978$10,464
10/31/89 $10,918$11,552
10/31/90 $11,789$12,456
10/31/91 $13,368$14,115
10/31/92 $14,435$15,505
10/31/93 $15,670$16,933
10/31/94 $15,023$16,645
----------------------
* After taking into account maximum sales charge.
<PAGE>
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
Oppenheimer U.S. Government Trust and
Quest for Value U.S. Government Income Fund
<TABLE>
<CAPTION>
Combined
Quest for ValueOppenheimer U.S.
Oppenheimer U.S.U.S. Government Government
Government Trust Income Fund Trust
<S> <C> <C> <C>
Assets
Investments, at value* $406,327,134 $126,123,769 $532,450,903
Receivables:
Interest and principal paydowns 3,403,235 730,883 4,134,118
Shares of beneficial interest sold 178,525 733,992 912,517
Investments sold 346,867 -- 346,867
Other 26,571 40,797 67,368
Total assets 410,282,332 127,629,441 537,911,773
Liabilities
Bank overdraft 511,740 (62,316) 449,424
Options written, at value (premiums received
$169,531) -- 196,875 196,875
Payables and other liabilities:
Investments purchased on a when-issued basis84,306,946 -- 84,306,946
Dividends 480,932 99,968 580,900
Shares of beneficial interest redeemed 985,255 952,094 1,937,349
Distribution and service plan fees 192,504 12,283 204,787
Transfer and shareholder servicing agent fees23,977 -- 23,977
Trustees' fees 120,007 -- 120,007
Other 35,446 113,766 149,212
Total liabilities 86,656,807 1,312,670 87,969,477
Net Assets $323,625,525 $126,316,771 $449,942,296
Net Asset Value and Redemption Price Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $312,606,704, $114,475,587,
and $427,082,291 and 32,870,814, 10,197,943, and
44,908,205 shares of beneficial interest outstanding
for Oppenheimer U.S. Government Trust, Quest for
Value U.S. Government Income Fund and Combined
Oppenheimer U.S. Government Trust, respectively).$ 9.51 $11.23 $ 9.51
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price)$ 9.98 $11.79 $ 9.98
Class B Shares:
Net asset value and redemption price per share
(based on net assets of $9,817,999 and $9,817,999,
and 874,786 and 1,032,387 shares of beneficial interest
outstanding for Quest for Value U.S. Government
Income Fund and Combined Oppenheimer U.S. Government
Trust, respectively). $ -- $11.22 $ 9.51
</TABLE>
<PAGE>
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES June 30, 1995
(Unaudited) Oppenheimer U.S. Government Trust
and Quest for Value U.S. Government Income Fund
<TABLE>
<CAPTION>
Combined
Quest for ValueOppenheimer U.S.
Oppenheimer U.S.U.S. Government Government
Government Trust Income Fund(1) Trust
<S> <C> <C> <C>
Class C Shares:
Net asset value and redemption price per share
(based on net assets of $11,018,821, $2,023,185
and $13,042,006 and 1,159,733, 180,268, and
1,372,700 shares of beneficial interest outstanding
for Oppenheimer U.S. Government Trust, Quest for
Value U.S. Government Income Fund and Combined
Oppenheimer U.S. Government Trust, respectively).$ 9.50 $11.22 $ 9.50
*Cost $397,253,863 $126,502,368 $523,756,231
</TABLE>
(1) Quest for Value U.S. Government Income Fund
Class A shares, Class B shares, and Class C shares
will be exchanged for Oppenheimer U.S. Government
Trust Class A shares, Class B shares
(based on Class A shares net asset value),
and Class C shares, respectively.
PRO FORMA COMBINING STATEMENT OF OPERATIONS For The Year
Ended June 30, 1995 (Unaudited)
Oppenheimer U.S. Government Trust and
Quest for Value U.S. Government Income Fund
<TABLE>
<CAPTION>
Combined
Quest for Value Oppenheimer
Oppenheimer U.S.U.S. Government Pro Forma U.S. Government
Government Trust Income Fund Adjustments Trust
<S> <C> <C> <C>
Investment Income:
Interest$26,384,907 $9,354,711 $35,739,618
Expenses:
Management fees 1,980,189 789,629 (20,039)(1) 2,749,779
Distribution and service plan fees:
Class A 737,801 366,311 (61,052)(2) 1,043,060
Class B 80,705 80,705
Class C 65,084 14,307 79,391
Transfer agency 347,882 121,777 469,659
Shareholder reports 144,824 35,534 180,358
Legal and audit 53,814 41,705 (19,201)(3) 76,318
Trustees' fees 40,121 17,108 (1,448)(3) 55,781
Custodian fees 47,249 70,276 (72,985)(3) 44,540
Registration and filing fees:
Class A 1,587 50,106 51,693
Class C 2,309 -- 2,309
Other 58,846 140,374 (110,137)(3) 89,083
Total expenses 3,479,706 1,727,832 (284,862) 4,922,676
Net Investment Income 22,905,201 7,626,879 284,862 30,816,942
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gain (loss) on:
Investments 1,903,530 (8,261,234) (6,357,704)
Closing and expiration of option
contracts written 276,563 579,727 856,290
Net realized gain (loss) 2,180,093 (7,681,507) (5,501,414)
Net change in unrealized
appreciation or depreciation on
investments and options written8,115,44410,518,680 18,634,124
Net realized and unrealized gain
on investments and options
written 10,295,537 2,837,173 13,132,710
Net Increase in Net Assets Resulting
from Operations $33,200,738 $10,464,052 $ 284,862 $43,949,652
</TABLE>
(1) Calculated in accordance with the existing
investment advisory agreement of Oppenheimer
U.S. Government Trust (.65% on the first $200 million
of net assets, .60% on the next $100 million,
.57% on the next $100 million, .55% on the next
$400 million and .50% on net assets in excess of $800 million).
(2) Calculated in accordance with existing
Distribution and Service Plan Agreement for
Oppenheimer U.S. Government Trust.
(3) Estimated fee for similar size Funds.
Adjustments reflect expected savings when the two funds merge.
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article VIII of Registrant's Agreement and
Declaration of Trust filed as Exhibit 24(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 16. Exhibits
(1) Amended and Restated Declaration of Trust dated 6/1/92;
Filed with Post-Effective Amendment No. 20, 10/16/92,
refiled with Registrants 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 Registrants 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) Agreement and Plan of Reorganization: See Annex A to
Part A of this Registration Statement.
(5) (i) Specimen Class A Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by reference.
(ii) Specimen Class B Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 28,
5/26/95, and incorporated herein by reference.
(iii) Specimen Class C Share Certificate: Previously
filed with Registrant's Post-Effective Amendment No. 24,
8/24/94, and incorporated herein by reference.
(6) Investment Advisory Agreement dated 5/25/95: Previously
filed with Post-Effective Amendment No. 28, 5/26/95, and
incorporated herein by reference.
(7) (i) General Distributor's Agreement dated 12/10/92:
Previously 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: Previously filed with Post-Effective
Amendment No. 14 to the Registration Statement 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: Previously 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: Previously 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, dated
10/1/86: Previously filed with Post-Effective
Amendment No. 25 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 11/1/86, refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by
reference.
(8) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant - 6/7/90): Previously filed with
Post-Effective Amendment No. 97 of Oppenheimer Fund (Reg.
No. 2-14586), 8/30/90, refiled with Post-Effective
Amendment No 45 of Oppenheimer Growth Fund (Reg. No. 2-
45272), 8/22/94, pursuant to Item 102 of Regulation S-T,
and incorporated herein by reference.
(9) Custody Agreement dated November 12, 1992 between
Registrant and The Bank of New York: Previously filed
with Registrant's Post-Effective Amendment No. 21,
8/20/93, and incorporated herein by reference.
(10) (i) Service Plan and Agreement dated 6/10/93 under Rule
12b-1 of the Investment Company Act of 1940 for Class A
shares: Previously filed with Registrant's Post-Effective
Amendment No. 24, 8/24/94, and incorporated herein by
reference.
(ii)Distribution and Service Plan and Agreement for Class
B Shares under Rule 12b-1 of the Investment Company Act
dated 5/30/95: Previously filed with Registrant's Post-
Effective Amendment No. 28, 5/26/95, and incorporated
herein by reference.
(iii)Distribution and Service Plan and Agreement for
Class C shares under Rule 12b-1 of the Investment Company
Act of 1940 dated 5/30/95: Previously filed with
Registrant's Post-Effective Amendment No. 28, 5/26/95,
and incorporated herein by reference.
(11) Opinion and Consent of Counsel dated 6/24/82: Previously
filed with Registrant's Pre-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.
(12) Tax Opinion Relating to the Reorganization: Previously
filed with this Registration Statement.
(13) Not applicable.
(14) (i)Consent of KPMG Peat Marwick LLP: Filed herewith.
(ii)Consent of Price Waterhouse LLP: Filed herewith.
(15) Not applicable.
(16) Not applicable
(17) (i)Declaration of Registrant under Rule 24f-2:
Previously filed with this Registration Statement.
(ii)Financial Data Schedules: Previously filed with this
Registration Statement.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant 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 20th day of September, 1995.
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 September 20, 1995
-------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro Chief Executive September 20, 1995
-------------------- Officer and
Donald W. Spiro Trustee
/s/ George Bowen Chief Financial September 20, 1995
----------------- and Accounting
George Bowen Officer
/s/ Leo Cherne Trustee September 20, 1995
---------------
Leo Cherne
/s/ Robert G. Galli Trustee September 20, 1995
-------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee September 20, 1995
----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan Trustee September 20, 1995
--------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee September 20, 1995
-----------------------
Kenneth A. Randall
/s/ Edward V. Regan Trustee September 20, 1995
--------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee September 20, 1995
-----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins Trustee September 20, 1995
----------------------
Sidney M. Robbins
/s/ Pauline Trigere Trustee September 20, 1995
--------------------
Pauline Trigere
Trustee September __, 1995
-----------------------
Clayton K. Yeutter
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
EXHIBIT INDEX
Form N-14
Item No. Description
-------- _______________________________
16(14)(i) Consent of KPMG Peat Marwick LLP
16(14)(ii) Consent of Price Waterhouse LLP
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer U.S. Government Trust:
We consent to the incorporation by reference in the Registration Statement
on Form N-14 of Oppenheimer U.S. Government Trust of our report dated July
27, 1995, appearing in the 1995 Annual Report of Oppenheimer U.S.
Government Trust and to the reference to our firm under the heading
"Financial Highlights" in Part A of the Registration Statement.
KPMG PEAT MARWICK LLP
/s/ KPMG Peat Marwick LLP
Denver, Colorado
September 20, 1995
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this registration statement on Form N-14 (the "N-14
Registration Statement") of our report dated December 16, 1994, relating
to the financial statements and financial highlights of Quest For Value
Family of Funds - U.S. Government Income Fund (the "Fund"), which appears
in such Statement of Additional Information and to the incorporation by
reference of our report into the Proxy Statement and Prospectus which
constitutes part of this N-14 Registration Statement. We also consent to
the use of our report and to the reference to us under the heading
"Additional Information-Independent Accountants" in the Statement of
Additional Information constituting part of Post-Effective Amendment No.
33 to the registration statement on Form N-1A of the Fund (the "N-1A
Registration Statement"), which is included in the Statement of Additional
Information of such N-14 Registration Statement and incorporated by
reference in the Proxy Statement and Prospectus constituting part of such
N-14 Registration Statement. We also consent to the reference to us under
the heading "Financial Highlights" in the Prospectus of such N-1A
Registration Statement, which is incorporated by reference in the Proxy
Statement and Prospectus of the N-14 Registration Statement.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 6, 1995
merge\220pw.con
