As filed with the Securities and Exchange Commission on May 5, 1995
Registration No. 2-76645
811-3430
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
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 June 5, 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, 1994 was filed on August 30, 1994.
<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 Oppenheimer Mortgage Income Fund
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) Table of Fees
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between
the Fund and U.S. Government Trust; Method of Carrying Out
the Reorganization; Miscellaneous Information
(b) Approval of the Reorganization - Capitalization Table
5 (a) Registrant's Prospectus; Additional Information
(b) *
(c) *
(d) *
(e) Comparison between the Fund and USGT
(f) Comparison between the Fund and USGT
6 (a) Prospectus of Oppenheimer Mortgage Income Fund; Front Cover
Page
(b) Comparison between the Fund and USGT
(c) *
(d) *
7 (a) Introduction; Synopsis
(b) *
(c) Introduction; Approval of the Reorganization
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) *
13 (a) Statement of Additional Information about Oppenheimer
Mortgage Income Fund
(b) *
14 Registrant's Statement of Additional Information; Statement
of Additional Information about Oppenheimer Mortgage Income
Fund; Annual Report of Oppenheimer Mortgage Income Fund at
9/30/94; Registrant's Annual Report at 6/30/94; Semi-Annual
Report of Registrant at 12/31/94
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)
Oppenheimer Mortgage Income Fund
- ------------------------------------------------------------------
(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>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER MORTGAGE INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 12, 1995
To the Shareholders of Oppenheimer Mortgage Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
Oppenheimer Mortgage Income Fund (the "Fund"), a registered management
investment company, will be held at 3410 South Galena Street, Denver,
Colorado 80231, at 10:00 A.M., Denver time, on July 12, 1995, or any
adjournments thereof (the "Meeting"), for the following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization
between the Fund and Oppenheimer U.S. Government Trust ("USGT")
and the transactions contemplated thereby, including the transfer
of substantially all the assets of the Fund, in exchange for Class
A and Class B shares of U.S. Government Trust, the distribution of
such Class A and Class B shares to the shareholders of the Fund in
complete liquidation of the Fund, the de-registration of the Fund
as an investment company under the Investment Company Act of 1940,
as amended, and 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.
Shareholders of record at the close of business on May 19, 1995 are
entitled to notice of, and to vote at, the Meeting. The Proposal is
more fully discussed in the Proxy Statement and Prospectus. Please
read it carefully before telling us, through your proxy or in person,
how you wish your shares to be voted. The Fund's Board of Trustees
recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Andrew J. Donohue, Secretary
June 13, 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.
320
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER U.S. GOVERNMENT TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Oppenheimer U.S. Government Trust ("USGT") has filed with the
Securities and Exchange Commission (the "SEC") a Registration Statement
on Form N-14 relating to the registration of shares of USGT to be
offered to the shareholders of Oppenheimer Mortgage Income Fund (the
"Fund"), located at Two World Trade Center, New York, New York 10048-
0203 (telephone 1-800-525-7048), pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement") between USGT and the
Fund. This Proxy Statement of the Fund relating to the Reorganization
Agreement and the transactions contemplated thereby (the
"Reorganization") also constitutes a Prospectus of USGT filed as part
of such Registration Statement. USGT is a mutual fund that seeks 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.
This Proxy Statement and Prospectus sets forth concisely information
about USGT that shareholders of the Fund should know before voting on
the Reorganization. A copy of the Prospectus for USGT, dated May 30,
1995, is enclosed, and is incorporated herein by reference. The
following documents have been filed with the SEC and are available
without charge upon written request to Oppenheimer Shareholder Services
("OSS"), the transfer and shareholder servicing agent for USGT and the
Fund, at P.O. Box 5270, Denver, Colorado 80217, or by calling the toll-
free number shown above: (i) a Prospectus for the Fund, dated January
24, 1995; (ii) a Statement of Additional Information about the Fund,
dated January 24, 1995; and (iii) a Statement of Additional Information
about USGT, dated May 30, 1995, (the "USGT Additional Statement"). The
USGT Additional Statement, which is incorporated herein by reference,
contains more detailed information about USGT and its management. A
Statement of Additional Information relating to the Reorganization,
dated June 13, 1995, has been filed with the SEC as part of the USGT
Registration Statement on Form N-14 and is incorporated by reference
herein, and is available by written request to OSS at the same address
immediately above or by calling the toll-free number shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
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 June 13, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
INTRODUCTION-1-
General-1-
Record Date; Vote Required; Share Information-1-
Proxies-2-
Costs of the Solicitation and the Reorganization-2-
COMPARATIVE FEE TABLE-3-
SYNOPSIS-5-
Parties to the Reorganization-5-
The Reorganization-6-
Reasons for the Reorganization-6-
Tax Consequences of the Reorganization-7-
Investment Objectives and Policies-7-
Investment Advisory and Distribution Plan Fees-8-
Purchases, Exchanges and Redemptions-8-
PRINCIPAL RISK FACTORS-9-
APPROVAL OF THE REORGANIZATION (The Proposal)-11-
Reasons for the Reorganization-11-
The Reorganization-12-
Tax Aspects of the Reorganization-12-
Capitalization Table (Unaudited)-14-
COMPARISON BETWEEN THE FUND AND USGT-14-
Investment Objectives and Policies-14-
Special Investment Methods-16-
Investment Restrictions-17-
Portfolio Turnover-18-
Description of Brokerage Practices-18-
Expense Ratios and Performance-19-
Shareholder Services-19-
Rights of Shareholders-20-
Management and Distribution Arrangements-20-
USGT Performance-22-
Purchase of Additional Shares-23-
METHOD OF CARRYING OUT THE REORGANIZATION-23-
MISCELLANEOUS-25-
Financial Information-25-
Public Information-25-
OTHER BUSINESS-26-
ANNEX A-27-
ANNEX B-36-
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER U.S. GOVERNMENT TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Special Meeting of Shareholders
to be held July 12, 1995
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the
shareholders of Oppenheimer Mortgage Income Fund (the "Fund"), a
registered management investment company, in connection with the
solicitation by the Fund's Board of Trustees (the "Board") of proxies
to be used at the Special Meeting of Shareholders of the Fund to be
held at 3410 South Galena Street, Denver, Colorado 80231, at 10:00
A.M., Denver time, on July 12, 1995, or any adjournments thereof (the
"Meeting"). It is expected that the mailing of this Proxy Statement
and Prospectus will commence on or about June 19, 1995.
At the Meeting, shareholders of the Fund will be asked to approve an
Agreement and Plan of Reorganization (the "Reorganization Agreement")
between the Fund and Oppenheimer U.S. Government Trust, ("USGT"), and
the transactions contemplated thereby (the "Reorganization"), including
the transfer of substantially all the assets of the Fund (consisting of
Class A and Class B shares) in exchange for Class A and Class B shares
of USGT, the distribution of such Class A and Class B shares to the
shareholders of the Fund in complete liquidation of the Fund, the
deregistration of the Fund as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), and the cancellation of the outstanding shares of the Fund.
USGT currently offers Class A sold with a sales charge imposed at the
time of purchase (certain purchases aggregating $1.0 million or more
are not subject to a sales charge, but may be subject to a contingent
deferred sales charge); Class B shares sold without a front end sales
charge but may be subject to a contingent deferred sales charge if
redeemed within six years of the date of purchase, and Class C shares
sold without a front end sales charge but may be subject to a
contingent deferred sales charge depending on how long they are held.
The Class A and Class B shares to be issued by USGT pursuant to the
Reorganization will be issued at net asset value without a sales
charge. Class B Shares of USGT will be aged to the same level as Class
B shares of the Fund that the investor currently owns. Additional
information with respect to USGT is set forth herein, in the Prospectus
of USGT accompanying this Proxy Statement and Prospectus and in the
USGT Statement of Additional Information, all of which are incorporated
herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on May 19, 1995 as the record
date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Meeting. An affirmative vote of the
holders of a majority of the outstanding shares of the Fund 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 and __________Class B shares of the Fund issued and
outstanding. The presence in person or by proxy of the holders of a
majority of such shares constitutes a quorum for the transaction of
business at the Meeting. To the knowledge of the Fund, as of the
Record Date, no person owned of record or beneficially 5% or more of
its outstanding shares of either class of shares except
for_________________________________, which owned of record ___________
Class shares of the Fund (___% of the outstanding Class
shares of the Fund as of such date). As of the Record Date, to
the knowledge of USGT, no person owned of record or beneficially 5% or
more of any class of its outstanding shares except for _____________,
which owned of record ___________ Class shares of USGT (___% of the
outstanding shares of USGT as of such date).
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. The proxy
will be voted in favor of the Proposal unless a choice is indicated to
vote against or to abstain from voting on 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. 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. The proxy may be revoked at any time prior to the
voting thereof by: (i) writing to the Secretary of the Fund at Two
World Trade Center, 34th Floor, New York, New York 10048-0203; (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 borne by the Fund.
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 of the Fund or officers and employees of
OSS, personally or by telephone or telegraph. Any expenses so incurred
will be borne by OSS. 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 Fund for their reasonable out-of-pocket expenses.
With respect to the Reorganization, the Fund and USGT will bear the
cost of their respective tax opinions. Any other out-of-pocket
expenses of the Fund and USGT associated with the Reorganization,
including legal, accounting and transfer agent expenses, will be borne
by the Fund and USGT, respectively, in the amounts so incurred by each.
<PAGE>
COMPARATIVE FEE TABLE
The Fund and USGT each pay a variety of expenses directly for
management of their assets, administration, distribution of their
shares and other services, and those expenses reflected in each fund's
net asset value per share. Shareholders pay other expenses directly,
such as sales charges.
<TABLE>
<CAPTION>
Oppenheimer U.S. Government Trust
Class A Class B Class C
<S> <C> <C> <C>
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 None(1) 5.0%(2) 1.0%(3)
purchase price or redemption proceeds) None None None
Oppenheimer Mortgage Income Fund
Class A Class B
Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original None(1) 5.0%(2)
purchase price or redemption proceeds) None None
<FN>
- -------------------
(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.
(2) If you redeem Class B shares within six years of the end of the month in which you purchase them, you may have to pay
a contingent deferred sales charge starting at 5% in the first year and declining thereafter.
(3) If you redeem Class C shares within 12 months of the end of the calendar month of buying them you may have to pay a
1.0% contingent deferred sales charge.
</TABLE>
The sales charge on purchases of the Fund, and the sales charge on
purchases of USGT, are identical for the respective class of shares,
and are not expected to change as a result of the reorganization.
The following numbers are projections of each fund's business expenses
for the period ended December 31, 1994. These amounts are shown as a
percentage of the average net assets of each class of a fund's shares
for that year. The pro forma fees reflect the combined funds at
December 31, 1994, as if the Reorganization had occurred on that date.
<TABLE>
<CAPTION>
Oppenheimer Oppenheimer
USGT(1) Mortgage Income Fund
Class A Class B(2) Class C Class A Class B
<S> <C> <C> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63% 0.65% 0.65%
12b-1 Service Plan Fees 0.24% 1.00% 1.00% 0.23% 1.00%
Other Expenses 0.21% 0.21% 0.21% 0.19% 0.23%
Total Fund Operating
Expenses 1.08% 1.84% 1.84% 1.07% 1.88%
Pro Forma
Combined Fund
Class A Class B Class C
Management Fees 0.62% 0.62% 0.62%
12b-1 Service Plan Fees 0.23% 1.00% 1.00%
Other Expenses 0.21% 0.24% 0.22%
Total Fund Operating
Expenses 1.06% 1.86% 1.84%
<FN>
- ------------------
(1) Management fees for USGT have been restated in the fee table because the investment advisory rates disclosed below
under "Investment Advisory and Distribution Plan Fees" were not in effect prior to January 3, 1995.
(2) Class B Fees and expenses are estimates based on amounts that would have been payable in the 12 month period ended
December 31, 1994 assuming that Class B shares were outstanding during that period.
To attempt to show the effect of these expenses on an investment over
time, the hypotheticals shown below have 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:
</TABLE>
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years (1)(2)
<S> <C> <C> <C> <C>
Oppenheimer USGT
Class A Shares $58 $80 $104 $173
Class B Shares $69 $88 $120 $178(1)
Class C Shares $29 $58 $100 $216(2)
Oppenheimer Mortgage Income Fund
Class A Shares $58 $80 $104 $172
Class B Shares $69 $89 $122 $180(1)
Pro Forma Combined Fund
Class A Shares $58 $80 $103 $171
Class B Shares $69 $88 $121 $178(1)
Class C Shares $29 $58 $100 $216(2)
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years (1)(2)
Oppenheimer USGT
Class A Shares $58 $80 $104 $173
Class B Shares $19 $58 $100 $178(1)
Class C Shares $19 $58 $100 $216(2)
Oppenheimer Mortgage Income Fund
Class A Shares $58 $80 $104 $172
Class B Shares $19 $59 $102 $180(1)
Pro Forma Combined Fund
Class A Shares $58 $80 $103 $171
Class B Shares $19 $58 $101 $178(1)
Class C Shares $19 $58 $100 $216(2)
<FN>
- -----------------
(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 six years. Long-term Class B shareholders could
pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations,
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, 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.
</TABLE>
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 Annex hereto. Shareholders should
carefully review this Proxy Statement and Prospectus and the Annex
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
The Fund is a diversified, open-end, management investment company.
USGT is a diversified, open-end, management investment company which
was reorganized as a Massachusetts business trust in 1982. The Fund
and USGT are each located at Two World Trade Center, New York, New York
10048-0203. The members of the Board of the Fund and the Board of
Trustees of USGT are the same. Oppenheimer Management Corporation (the
"Manager") acts as investment adviser to the Fund and USGT
(collectively referred to herein as the "funds"). Additional
information about the parties is set forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of the Fund, consisting of Class A and Class B shares,
to USGT in exchange for Class A and Class B shares of USGT. The net
asset value of USGT's Class A and Class B shares issued in the exchange
will equal the value of the assets of the Fund received by USGT.
Following the Closing Date (as hereafter defined) scheduled for the
Reorganization, the Fund will distribute the Class A and Class B shares
of USGT received by the Fund on the Closing Date to holders of Fund
shares issued and outstanding as of the Valuation Date (as hereinafter
defined) in complete liquidation of the Fund and the Fund will
thereafter be dissolved and deregistered under the Investment Company
Act. As a result of the Reorganization, each Fund shareholder will
receive that number of full and fractional USGT, Class A and Class B
shares respectively equal in value to such shareholder's pro rata
interest in the assets transferred to USGT as of the Valuation Date.
The Board has determined that the interests of existing Fund
shareholders will not be diluted as a result of the Reorganization.
For the reasons set forth below under "The Reorganization - Reasons for
the Reorganization," the Board, including the trustees who are not
"interested persons" of the Fund (the "Independent Trustees"), as that
term is defined in the Investment Company Act, has concluded that the
Reorganization is in the best interests of the Fund and its
shareholders and recommends approval of the Reorganization by Fund
shareholders. If the Reorganization is not approved, the Fund will
continue in existence and the Board will determine whether to pursue
alternative actions.
Reasons for the Reorganization
The Board of Trustees of the Fund (the "Board"), including the
Independent Trustees, at a meeting held on March 16, 1995, unanimously
approved and recommended to the shareholders of the Fund that they
approve the Reorganization and Reorganization Agreement. In
considering the Reorganization, the Board compared the Fund to USGT
with respect to size, investment objectives, management fees and
performance. Both the Fund and USGT are income funds sharing similar
investment objectives of seeking high current income, preservation of
capital and maintenance of liquidity. The Fund invests in mortgage-
backed securities, whether or not issued or guaranteed by the U.S.
government. USGT invests primarily in debt instruments issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
Both funds may invest in certain hedging instruments approved by their
respective Boards of Trustees. The funds do not invest to seek capital
appreciation. Among other factors, the Board took into consideration
that the schedule of management fee rates are slightly lower for USGT
and USGT is larger than the Fund, which will result in a savings to
Fund shareholders. The Board also considered pro forma financial
information which indicated that the average management fee rate paid
by shareholders in a combined fund would likely be lower and that the
expense ratio would be lower for Class A and Class B shareholders of
the combined fund. For the fiscal period ended September 30, 1994, the
expense ratio for Mortgage Income Fund was 1.22% of average annual net
assets for Class A shares, and 1.93% (annualized) of average annual net
assets for Class B shares. For the fiscal period ended June 30, 1994,
the expense ratio for USGT was 1.14% of the average annual net assets
for Class A shares, and 1.96% (annualized) of the average annual net
assets for Class C shares. For the fiscal year ended
December 31, 1994, on a pro forma basis, giving effect to the
Reorganization, the expense ratio for USGT as the surviving fund, would
be 1.06% of the average annual net assets for Class A shares, 1.86% of
average annual net assets for Class B shares and 1.84% of the average
annual net assets for Class C shares. No performance figures are shown
in this proxy statement for USGT Class B shares as USGT Class B shares
are not currently offered.
The Board also considered that the Fund consists solely of Class A and
Class B shares, while USGT offers Class A shares, Class B and Class C
shares. Class A and Class B shares of the Fund could easily be
exchanged for Class A and Class B shares respectively of USGT. Class B
shares of USGT are not currently publicly offered, but will be offered
at the time of the reorganization. The Board compared the size of each
fund. As of December 31, 1994, the net assets of the Fund were
approximately $81 million and the net assets of USGT were approximately
$307 million. It is expected that shareholders of the Fund would
benefit from the economies of scale available to a larger fund. These
economies of scale should result in lower costs per account for each
shareholder through lower operating expenses and transfer agency
expenses.
The Board also considered that there would be no sales charge imposed
in effecting the Reorganization, and that the Reorganization would be
effected as a tax-free exchange. The Board determined that it would be
in the best interests of the Fund and its shareholders to combine with
USGT. The Board also determined that combining the funds would not
result in a dilution of the interests of Fund shareholders.
In determining to recommend approval of the reorganization to
shareholders, the Board also considered information on the historical
performance of both funds. Both the Fund and USGT have enjoyed
substantially similar performance over the past one and five year
periods ended December 31, 1994, however, USGT has experienced better
performance since inception. Although past performance is not
predictive of future results, the Board determined that the
shareholders of the Fund would have the opportunity to be shareholders
in a similar fund with more favorable past performance.
Tax Consequences of the Reorganization
In the opinion of KPMG Peat Marwick LLP, the tax adviser to the Fund,
the Reorganization will qualify as a tax-free reorganization for
Federal income tax purposes. As a result, no gain or loss will be
recognized by the Fund, USGT, or the shareholders of the combined fund
for Federal income tax purposes as a result of the Reorganization. For
further information about the tax consequences of the Reorganization,
see "Approval of the Reorganization - Tax Aspects" below.
Investment Objectives and Policies
As its investment objective, both the Fund and USGT seek high current
income, preservation of capital and maintenance of liquidity.
The Fund seeks its investment objective of high current income,
preservation of capital and maintenance of liquidity primarily through
investments in mortgage-backed securities, whether or not issued by the
U.S. government, its agencies or instrumentalities. The Fund can also
invest in income producing securities not secured by mortgages on real
estate, including asset-backed securities and participation interests
and government debt obligations. USGT seeks the same investment
objective of high current income, preservation of capital and
maintenance of liquidity primarily by investing in U.S. government
securities, and repurchase agreements on such securities.
Both Funds invest in collateralized mortgage obligations (CMOs)
whose payment of principal and interest generated by the pool of
mortgages is passed through to the Fund. CMOs may be issued in a
variety of classes or series (tranches) that have different
maturities and levels of volatility. The funds may also invest in
stripped CMOs 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 payments. Each of the funds may
also write covered calls and use derivative investments to enhance
income, and may use hedging instruments, including derivative
investments, to try to manage investment risks.
The Manager considers many identical factors when investing the assets
of the Fund and USGT, including general economic conditions in the U.S.
relative to foreign economies and trends in the bond markets and
interest rates. The Manager also considers the effect of inflation and
the general economic health of the economy.
Investment Advisory and Distribution Plan Fees
The funds both obtain investment management services from Oppenheimer
Management Corporation (the "Manager"). The management fee is payable
monthly and computed on the net asset value of each fund as of the
close of business each day. The Fund pays a management fee at the rate
of 0.65% of the first $200 million of net assets, 0.60% of the next
$200 million, 0.55% of the next $400 million, and 0.50% of aggregate
assets over $800 million. USGT pays a slightly lower management fee
(effective 1/3/95) at the 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 aggregate assets
over $800 million.
Both the Fund and USGT have service plans pursuant to Rule 12b-1 under
the Investment Company Act. Specifically, USGT has adopted a service
plan for its Class A shares and a Distribution and Service Plan for its
Class B and Class C shares to compensate the Distributor for its
services and costs in distributing Class B and Class C shares and
servicing accounts. The Service Plan adopted by the Fund, and the
Service Plan adopted by USGT for its Class A shares (the "Service
Plan") provide that each of the funds reimburses Oppenheimer Funds
Distributor, Inc. (the "Distributor"), the distributor of each fund's
shares, quarterly for all or a portion of the Distributor's costs
incurred in connection with the personal service and maintenance of
shareholder accounts that hold the funds' shares. The current maximum
annual fee payable by both the Fund and USGT pursuant to their
service plans for Class A and Class B shares is 0.25% of the average
net asset value of each of the fund's shares, computed as of the close
of each business day. See "Comparison Between the Fund and USGT -
Expense Ratios and Performance" below.
Purchases, Exchanges and Redemptions
The Fund and USGT are part of the OppenheimerFunds complex of mutual
funds. The procedures for purchases, exchanges and redemptions of
shares of the funds are substantially the same.
The maximum sales charge on Class A shares of the Fund and Class A
shares of USGT is 4.75%, and is reduced for purchases of $50,000 or
more. For certain purchases of $1 million or more, the funds do not
charge a front-end sales charge but impose a contingent deferred sales
charge of a maximum of 1% on shares redeemed within 18 months of the
end of the calendar month of their purchase. Shares of USGT received
in the Reorganization will be issued at net asset value, without a
sales charge. Shareholders may purchase through AccountLink (whereby
funds are transmitted electronically from an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
up to $100,000. Shareholders of the funds may exchange their shares at
net asset value for shares of any of over 30 equity, fixed-income and
money market funds for which the Distributor or an affiliate acts as
the distributor. Shares of any money market fund purchased without a
sales charge may be exchanged for shares of a fund offered with a sales
charge upon payment of the sales charge. However, shares of a
particular class may be exchanged only for shares of the same class in
other OppenheimerFunds. For example, shareholders of the Fund can only
exchange their Class A shares for Class A shares of another fund.
Shareholders of the funds may redeem their shares by written request or
by telephone request in an amount up to $50,000 in any seven-day
period, or they may arrange to have share redemption proceeds wired to
a pre-designated account at a U.S. bank or other financial institution
that is an ACH member ("AccountLink redemption"). Shareholders may
redeem shares automatically by calling PhoneLink and having redemption
proceeds wired to a pre-established AccountLink bank account.
Additionally, shareholders of both funds may also request that
redemption proceeds of $2,500 or more be wired to a previously
designated bank account at a commercial bank that is a member of the
Federal Reserve wire system. There is a $10 fee for each wire.
Shareholders of the funds may reinvest redemption proceeds of Class A
shares on which the shareholder paid an initial sales charge or Class
B shares subject to a contingent deferred sales charge within six
months of a redemption at net asset value in Class A shares of the
funds or any of numerous "Eligible Funds" within the OppenheimerFunds
complex. Both the Fund and USGT may redeem accounts valued at less
than $200 if the account has fallen below such stated amount for
reasons other than market value fluctuations. Both funds offer
Automatic Withdrawal and Exchange Plans.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in USGT,
shareholders should carefully consider the following risk factors,
which is a summary only, relating to both USGT and the Fund, in
addition to the other information set forth in this Proxy Statement and
Prospectus and the more complete description of risk factors set forth
in the documents incorporated by reference herein, including the
Prospectuses of the funds and their respective Statements of Additional
Information. As stated in their respective Prospectuses, as a general
matter, the Fund and USGT are both intended for investors seeking high
current income and not for investors seeking capital appreciation.
There is no assurance that either the Fund or USGT will achieve its
investment objective.
Investment in U.S. Government Securities
The funds both seek their investment objective of high current income,
preservation of capital and maintenance of liquidity through
investments in fixed-income securities including U.S. government
securities and repurchase agreements on such securities.
U.S. Government 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. U.S. Treasury Securities are backed by the full faith and
credit of the United States. Obligations issued or guaranteed by U.S.
government agencies or instrumentalities are supported by any of the
following; (a) full faith and credit of the U.S. government, (b) the
right of the issuer to borrow an amount limited to a specific line of
credit from the U.S. government, (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.
Each of the funds 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 Moodys Investors
Services, Inc. or Standard & Poors 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 funds
are not obligated to dispose of securities if the rating is reduced
below investment grade. There is a credit risk 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.
Mortgage-Backed Obligations
Both funds invest in mortgage-backed securities which may or may not be
guaranteed as to timely payment of interest or principal by the full
faith and credit of the U.S. government. Each fund may invest in
collateralized mortgage obligations (CMO's) that may be 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. CMO's 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's may be prepaid earlier than the maturity
of the CMO's as a result of prepayments of the underlying mortgage
loans by the borrowers.
Each of the funds may invest in stripped mortgage-backed securities
of CMO's 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).
Repurchase Agreements
The funds may enter into repurchase agreements. There is no limit on
the amount of each of the funds net assets that may be subject to
repurchase agreements of seven days or less. The funds 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 funds may experience costs in disposing of the collateral and
may experience losses if there is any delay in doing so.
Loans of Portfolio Securities
To raise cash for liquidity purposes, the each of the funds may lend
its portfolio securities to brokers, dealers and other financial
institutions. These loans are limited to not more than 25% of the
funds total assets and are subject to certain conditions described in
the Statement of Additional Information. The funds presently do not
intend to lend their portfolio securities, but if they do, the value of
securities loaned is not expected to exceed 5% of the value of the
funds total assets in the coming year.
Risks of Options, Futures Trading and Derivatives
The funds may purchase and sell certain kinds of futures contracts, put
and call options, forward contracts, and options on futures and
broadly-based securities indices, or enter into interest rate swap
agreements. These are all referred to as "hedging instruments". The
funds may also invest in a number of different kinds of derivative
investments. Hedging instruments and derivative investments and their
special risks are described below in "Comparison Between the Fund and
USGT".
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
The Board of Trustees of the Fund (the "Board"), including the
Independent Trustees, at a meeting held on March 16, 1995, unanimously
approved and recommended to the shareholders of the Fund that they
approve the Reorganization and Reorganization Agreement. In
considering the Reorganization, the Board compared the Fund to USGT
with respect to size, investment objectives, management fees and
performance. Both the Fund and USGT are income funds sharing similar
investment objectives of seeking high current income, preservation of
capital and maintenance of liquidity. The Fund invests in mortgage-
backed securities, whether or not issued or guaranteed by the U.S.
government. USGT invests primarily in debt instruments issued or
guaranteed by the U.S. government, its agencies or instrumentalities
and in mortgage-backed securities. Both funds may invest in certain
hedging instruments approved by their respective Boards of Trustees.
The funds do not invest to seek capital appreciation. Among other
factors, the Board took into consideration that the schedule of
management fee rates are significantly lower for USGT which will result
in a savings to Fund shareholders. The Board also considered pro forma
financial information which indicated that the average management fee
rate paid by shareholders in a combined fund would likely be lower and
that the expense ratio would be lower for Class A and Class B
shareholders of the combined fund. For the fiscal period ended
September 30, 1994, the expense ratio for Mortgage Income Fund was
1.22% of average annual net assets for Class A shares, and 1.93%
(annualized) of average annual net assets for Class B shares. For the
fiscal period ended June 30, 1994, the expense ratio for USGT was 1.14%
of the average annual net assets for Class A shares and 1.96%
(annualized) of the average annual net assets for Class C shares. For
the fiscal year ended December 31, 1994, on a pro forma basis, giving
effect to the Reorganization, the expense ratio for USGT as the
surviving fund, would be 1.06% of the average annual net assets for
Class A shares, 1.86% of average annual net assets for Class B shares
and 1.84% of the average annual net assets for Class C shares.
The Board also considered that the Fund consists solely of Class A and
Class B shares, while USGT offers Class A shares, Class B and Class C
shares. Class B shares of USGT are not currently available but will be
available at the time of the Reorganization. Class A and Class B
shares of the Fund could easily be exchanged for Class A and Class B
shares respectively of USGT. The Board compared the size of each fund.
As of December 31, 1994, the net assets of the Fund were approximately
$81 million and the net assets of USGT were approximately $307 million.
It is expected that shareholders of the Fund would benefit from the
economies of scale available to a larger fund. These economies of
scale should result in lower costs per account for each shareholder
through lower operating expenses and transfer agency expenses.
The Board also considered that there would be no sales charge imposed
in effecting the Reorganization, and that the Reorganization would be
effected as a tax-free exchange. The Board determined that it would be
in the best interests of the Fund and its shareholders to combine with
USGT. The Board also determined that combining the funds would not
result in a dilution of the interests of the Fund's shareholders.
In determining to recommend approval of the reorganization to
shareholders, the Board also considered information on the historical
performance of both funds. Both the Fund and USGT have experienced
substantially similar performance over the one and five year periods
ended December 31, 1994, however USGT has experienced better
performance since inception. Although past performance is not
predictive of future results the Board determined that the shareholders
of the Fund would have the opportunity to be shareholders of a larger
fund with more favorable past performance.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as
Annex A to this Proxy Statement and Prospectus) contemplates a
reorganization under which (i) all of the assets of the Fund (other
than the cash reserve described below (the "Cash Reserve") would be
transferred to USGT in exchange for Class A shares and Class B shares
respectively of USGT, (ii) the Class A and B shares would be
distributed among the respective Class A and Class B shareholders of
the Fund in complete liquidation of the Fund, (iii) the Fund would be
deregistered as an investment company under the Investment Company Act
and (iv) the outstanding shares of the Fund would be cancelled. USGT
will not assume any of the Fund's liabilities except for portfolio
securities purchased which have not settled and outstanding shareholder
redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) USGT
would add to its gross assets all of the assets (net of any liability
for portfolio securities purchased but not settled and outstanding
shareholder redemption and dividend checks) of the Fund other than its
Cash Reserve; and (ii) the shareholders of the Fund as of the close of
business on the Closing Date would become shareholders of USGT.
The effect of the Reorganization will be that shareholders of the Fund
who vote their shares in favor of the Reorganization will be electing
to redeem their shares of the Fund (at net asset value on the Valuation
Date referred to below under "Method of Carrying Out the Reorganization
Plan," calculated after subtracting the Cash Reserve) and reinvest the
proceeds in shares of the same class of USGT at net asset value without
sales charge and without recognition of taxable gain or loss for
Federal income tax purposes (see "Tax Aspects of the Reorganization"
below). The Cash Reserve is that amount retained by the Fund which is
sufficient in the discretion of the Board for the payment of: (a) the
Fund's expenses of liquidation, and (b) its liabilities, other than
those assumed by USGT. The Fund and USGT will bear all of their
respective expenses associated with the Reorganization, as set forth
under "Costs of the Solicitation and the Reorganization" above.
Management estimates that such expenses associated with the
Reorganization to be borne by the Fund will not exceed $50,000.
Liabilities as of the date of the transfer of assets will consist
primarily of accrued but unpaid normal operating expenses of the Fund,
excluding the cost of any portfolio securities purchased but not yet
settled and outstanding shareholder redemption and dividend checks.
See "Method of Carrying Out the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, after the closing,
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 paragraph. 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-
forward, will be distributed to shareholders prior to the Closing Date
and will be taxable to shareholders as capital gain.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the
Reorganization Agreement, the Fund will pay a dividend or dividends
which, together with all previous such dividends, will have the effect
of distributing to the Fund shareholders all of the Fund's investment
company taxable income for taxable years ending on or prior to the
Closing Date (computed without regard to any deduction for dividends
paid) and all of its net capital gain, if any, realized in taxable
years ending on or prior to the Closing Date (after reduction for any
available capital loss carry-forward). 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 and Class B 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 KPMG Peat
Marwick LLP, tax adviser to the Fund, that 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 and Class B 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 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 KPMG Peat Marwick LLP to the effect that,
based on the Reorganization Agreement, the above representations,
existing provisions of the Code, Treasury Regulations issued
thereunder, current Revenue Rulings, Revenue Procedures and court
decisions, for Federal income tax purposes:
1. The transactions contemplated by the Reorganization Agreement will
qualify as a tax-free "reorganization" within the meaning of
Section 368(a)(1) of the Code.
2. The Fund and USGT will each qualify as "a party to a
reorganization" within the meaning of Section 368(b)(2) of the
Code.
3. No gain or loss will be recognized by the shareholders of the Fund
upon the distribution of Class A and Class B shares of beneficial
interest in USGT to the shareholders of the Fund pursuant to
Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by the Fund by reason of the transfer of its assets
solely in exchange for Class A and Class B shares of USGT.
5. Under Section 1032 of the Code no gain or loss will be recognized
by USGT by reason of the transfer of the Fund's assets in exchange
for Class A and Class B shares of USGT.
6. The Class A and Class B shareholders of the Fund will have the
same tax basis and holding period for the respective class of
shares of beneficial interest in USGT that they receive as they
had for the Fund stock that they previously held, pursuant to
Sections 358(a) and 1223(1) of the Code, respectively.
7. The securities transferred by the Fund to USGT will have the same
tax basis and holding period in the hands of USGT as they had for
the Fund, pursuant to Sections 362(b) and 1223(1) of the Code,
respectively.
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 the Fund and USGT and
indicates the pro forma combined capitalization as of December 31, 1994
as if the Reorganization had occurred on that date.
<TABLE>
<CAPTION> Net Asset
Shares Value
Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer USGT
Class A Shares $300,992,755 33,339,540 $9.03
Class B Shares $0 0 $9.03
Class C Shares $6,010,914 666,567 $9.02
Oppenheimer Mortgage Income Fund
Class A Shares $77,159,355 5,987,303 $12.89
Class B Shares $4,002,004 310,703 $12.88
Pro Forma Combined Fund
Class A Shares $378,152,110 41,884,319 $9.03
Class B Shares $4,002,004 443,190 $9.03
Class C Shares $6,010,914 666,564 $9.02
<FN>
___________________
* Reflects issuance of 8,544,779 shares of USGT for Class A shares and 443,190 shares of USGT for Class B shares in a
tax-free exchange for the net assets of the Fund, aggregating $77,159,355 for Class A and $4,002,004 for Class B.
</TABLE>
The pro forma ratio of expenses to average annual net assets of the
combined funds at December 31, 1994 would have been 1.06% with respect
to Class A shares, 1.86% with respect to Class B shares and 1.84% with
respect to Class C shares.
COMPARISON BETWEEN THE FUND AND USGT
Comparative information about the Fund and USGT is presented below.
Additional information about USGT is set forth in its Prospectus,
accompanying this Proxy Statement and Prospectus, and additional
information about both funds is set forth in documents that may be
obtained upon request of OSS or are available for review at the offices
of the SEC. See "Miscellaneous - Public Information."
Investment Objectives and Policies
As its investment objective, both the Fund and USGT seek high current
income, preservation of capital and maintenance of liquidity. In
seeking their investment objectives, the Fund and USGT employ various
investment policies as described in detail below. The Manager is the
investment adviser to both the Fund and USGT.
The Fund. The Fund seeks its investment objective of capital
appreciation by emphasizing investment in mortgage-backed securities,
whether or not issued or guaranteed by the U.S. government, it agencies
or instrumentalities, and investments in income producing securities
not secured by mortgages on real estate, including asset-backed
securities.
Under normal market conditions (when the Manager believes that the
securities market is not in a volatile or unstable period), the Fund
invests at least 65% of its total assets invested in mortgage-related
securities, including whole loans and participation mortgages, and
securities collateralized by mortgages on real estate. The Fund may
invest its assets in mortgage-backed securities whether or not issued
or guaranteed by the U.S. government or U.S. government agencies or
instrumentalities, and whether or not secured by mortgages on real
estate. Mortgage-backed securities for purposes of the 65% limitation
include privately issued or guaranteed (and non-guaranteed) mortgage
pass-through securities and participation interests, including multi-
class pass-through securities, private label collateralized mortgage
obligations ("CMO's"), and private-label derivative mortgage-backed
securities. The Fund may invest up to 35% of its total assets in
income producing securities not secured by mortgages on real estate,
including asset-backed securities, and participation interests and
government debt obligations.
While it is not a fundamental policy of the Fund, the Fund expects that
it will invest no more than 35% of its total assets in debt securities
rated below "BBB" by Standard & Poor's Corporation ("Standard &
Poor's") or below "Baa" by Moody's Investors Service, Inc. ("Moody's")
or, if unrated, determined by the Manager to be of comparable quality
to debt securities rated below "BBB" by Standard & Poor's or below
"Baa" by Moody's. Lower-rated securities, while generally offering
higher current income and greater opportunities for gain than
investments in higher-rated securities, are considered speculative and
involve greater volatility of price, risk of principal and income
default than securities in higher-rated categories. Debt securities
rated "BBB"/"Baa" or better are referred to as "investment grade." The
Fund is not obligated to dispose of securities subsequently downgraded
below investment grade. However, if as a result of subsequent
downgrades more than 35% of the Fund's total assets were invested in
non-investment grade debt securities, the Fund would consider whether,
consistent with its investment objective, certain of such investments
should be sold.
The Fund may try to hedge against losses in the value of its portfolio
of securities by using hedging strategies, as described under "Special
Investment Methods" below. Securities selected for defensive purposes
may include debt rated or unrated bonds and debentures, and preferred
stocks, cash or cash equivalents, such as U.S. Treasury Bills and other
short-term obligations of the U.S. government, its agencies or
instrumentalities, or commercial paper rated "A-1" or better by
Standard & Poor's Corporation or "P-1" or better by Moody's Investors
Services, Inc.
U.S. Government Trust. USGT's investment objective is to seek 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 ("U.S.
government securities") and repurchase agreements on such securities.
At least 80% of USGT's total assets will be invested under normal
conditions in U.S. government securities, which include U.S. Treasury
Obligations, Obligations issued or guaranteed by U.S. government
agencies or instrumentalities and mortgage-backed securities
U.S. government securities 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 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.
USGT also invests in Mortgage-Backed Securities, also known as pass-
through securities, where 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.
USGT may also invest in investment grade debt securities other than
U.S. government securities or mortgage-backed securities. It is not
obligated to dispose of securities subsequently downgraded below
investment grade.
Special Investment Methods
The Fund and USGT each use the special investment methods summarized
below.
Loans of Portfolio Securities. To raise cash for liquidity purposes,
both the Fund and USGT may lend their portfolio securities to brokers,
dealers and other financial institutions. These loans are limited to
not more than 25% of each of the fund's total assets and are subject to
certain conditions. The funds presently do not intend to lend their
portfolio securities, but if they do, the value of securities loaned is
not expected to exceed 5% of the value of each of the fund's total
assets in the coming year.
Repurchase Agreements. Both the Fund and USGT 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.
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. 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, both the Fund and USGT 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 funds do not use
hedging instruments for speculative purposes, and have limits on the
use of them.
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. 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.
Each of the funds may buy and sell futures contracts that relate to
interest rates (these are referred to as Interest Rate Futures) and
certain kinds of put options (puts) and call options on securities or
Interest Rate Futures, or to terminate its obligation on a call the
funds previously wrote. Additionally, the funds may purchase interest
rate swaps where the fund and another party exchange their right to
receive or their obligation to pay interest on a security. The funds
may not enter into swaps with respect to more than 25% of their total
assets. Also, the funds 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.
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.
Derivative Investments. Each of the funds can invest in a number of
different kinds of "derivative investments." The funds 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.
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.
Investment Restrictions
Both the Fund and USGT have certain investment restrictions that,
together with its investment objectives, are fundamental policies
changeable only by shareholder approval. Set forth below is a summary
of these investment restrictions, which summary is qualified in its
entirety by the investment policies and restrictions of the funds
contained in their respective Prospectuses and Statements of Additional
Information.
The Fund and USGT cannot: (1) 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 the fund's
total assets would be invested in securities of that issuer, or (b) the
fund would then own more than 10% of that issuer's voting securities;
(2) make loans, except through the purchase of portfolio securities
subject to repurchase agreements or as described above under "Loans of
Portfolio Securities"; (3) borrow money in excess of 10% of the value
of its total assets (and then only as a temporary measure for emergency
purposes) or make any investment at a time during which such borrowing
exceeds 5% of the value of its assets; (4) pledge, mortgage or
hypothecate any of its assets to secure a debt; such prohibition does
not bar the Fund from escrow arrangements for options trading or
collateral or margin arrangements in connection with hedging
instruments approved by the Board; (5) invest more than 10% of its
assets in securities subject to repurchase agreements maturing in more
than seven days, securities which are restricted as to resale, illiquid
securities (those not readily convertible to cash) and securities for
which market quotations are not readily available; or with respect to
USGT, (6) concentrate investments to the extent of 25% of its assets
in any industry; there is no limitation on obligations issued by the
U.S. government and its agencies or instrumentalities.
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, a fund incurs little or no
brokerage costs for U.S. government securities. High portfolio
turnover may affect the ability of a fund to qualify as a "regulated
investment company" under the Internal Revenue Code to obtain tax
deductions for dividends and distributions paid to shareholders. Both
the Fund and USGT qualified in their last fiscal year and intends to do
so in the coming year, although each reserves the right not to qualify.
For the fiscal year ended September 30, 1994, the portfolio turnover
rate for the Fund was 78.4%. For the fiscal year ended June 30, 1994,
the portfolio turnover rate for USGT 139.5%.
Description of Brokerage Practices
Brokerage practices for the Fund and USGT are the same. Subject to the
provisions of the Fund's and USGT's respective investment advisory
agreements with the Manager, allocations of brokerage are made by
portfolio managers under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and otherwise only if it appears
likely that a better price or execution can be obtained. When the fund
engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transactions in the
securities to which the option relates. When possible, concurrent
orders to purchase or sell the same security by more than one of the
accounts managed by the Manager or it affiliates are combined.
Transactions effected pursuant to such combined orders are averaged as
to price and allocated in accordance with the purchase or sale orders
actually placed for each account. Option commissions may be relatively
higher than those which would apply to direct purchases and sales of
portfolio securities.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of
those other accounts may be useful both to the fund and one or more of
such other accounts. Such research, which may be supplied by a third
party at the instance of a broker, includes information and analyses on
particular companies and industries as well as market or economic
trends and portfolio strategy, receipt of market quotations for
portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the
Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making
process may be paid for in commission dollars. The research services
provided by brokers broaden the scope and supplement the research
activities of the Manager, by making available additional views for
consideration and comparisons, and enabling the Manager to obtain
market information for the valuation of securities held in the fund's
portfolio or being considered for purchase. The Board of Trustees,
including the independent Trustees of the Fund and USGT (those Trustees
of the Fund and USGT who are not "interested persons" as defined in the
Investment Company Act, and who have no direct or indirect financial
interest in the operation of the investment advisory agreements
described below or the service plans described above), annually reviews
information furnished by the Manager relative to the commissions paid
to brokers furnishing such services in an effort to ascertain that the
amount of such commissions was reasonably related to the value or the
benefit of such services.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Both funds normally deal
directly with the selling or purchasing principal or market maker
without using the services of a broker on their behalf unless it is
determined that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from an
underwriter includes a commission or concession paid to the issuer by
the underwriter and purchases from dealers include a spread between the
bid and the ask price. Therefore, neither fund paid any brokerage
commissions during their last three fiscal years.
Expense Ratios and Performance
The ratio of expenses to average net assets for Class A shares and
Class B shares of the Fund for the fiscal period ended September 30,
1994 were 1.22% and 1.93% (annualized), respectively. The ratio of
expenses to average net assets for Class A shares and Class C shares of
USGT for the fiscal period ended June 30, 1994 were 1.14% and 1.96%
(annualized), respectively. Further details are set forth under "Fund
Expenses" and "Financial Highlights" in USGT's Prospectus dated
May 30, 1995, which accompanies this Proxy Statement and Prospectus,
and in the Fund's Annual Report as of September 30, 1994 , and USGT's
Annual Report as of June 30, 1994 and Semi-Annual Report as of December
31, 1994, which are included in the Additional Statement. The Fund's
average annual total returns for Class A shares (at net asset value)
for one and five-year periods ended December 31, 1994 and from
inception to December 31, 1994 were -0.77%, 7.07% and 7.30%,
respectively. The Fund's average annual total returns for Class B
shares (at net asset value) for one-year period ended December 31, 1994
and from the inception to December 31, 1994 were -1.59% and 0.92%,
respectively.
USGT's average annual total returns (at net asset value) for the one
and five-year periods ended December 31, 1994 and since the inception
of the class for Class A shares were -1.28%, 6.79% and 7.98%,
respectively. USGT's average annual total return (at net asset value)
for its Class C shares for the one-year period ended December 31, 1994
was -2.25% and from inception to December 31, 1994 was -1.71%.
Shareholder Services
The policies of the Fund and USGT with respect to minimum initial
investments and subsequent investments by its shareholders are the
same. Both the Fund and USGT offer the following privileges: (i)
Rights of Accumulation, (ii) Letters of Intent, (iii) reinvestment of
dividends and distributions at net asset value, (iv) net asset value
purchases by certain individuals and entities, (v) Asset Builder
(automatic investment) Plans, (vi) Automatic Withdrawal and Exchange
Plans for shareholders who own shares of the fund valued at $5,000 or
more (a shareholder may not combine different classes of shares in
order to qualify for privileges under "Rights of Accumulation" and
"Letter of Intent"), (vii) reinvestment of net redemption proceeds of
Class A shares and Class B shares which were subject to a contingent
deferred sales charge when redeemed at net asset value within six
months of a redemption, (viii) AccountLink and PhoneLink arrangements,
(ix) exchanges of shares for shares of certain other funds at net asset
value, and (x) telephone redemption and exchange privileges.
Rights of Shareholders
Class A Shares of the Fund and USGT are redeemable at their net asset
value. Class B shares of the Fund and USGT may be subject to a
contingent deferred sales charge if redeemed within 6 years of the date
of purchase. Class C shares of USGT may be subject to a contingent
deferred sales charge if redeemed within 12 months of the end of the
calendar month in which they were purchased. The shares of each such
fund entitle the holder to one vote per share on the election of
trustees and all other matters submitted to shareholders of the fund.
Class A and Class B shares of the Fund and Class A and Class B shares
of USGT which Fund shareholders will receive in the Reorganization
participate equally in the fund's dividends and distributions and in
the fund's net assets on liquidation. All shares of each, when issued,
are fully paid and non-assessable (except as to USGT, as described
below) and have no preference, preemptive or conversion rights. It is
not contemplated that either the Fund or USGT will hold regular annual
meetings of shareholders. Under the Investment Company Act,
shareholders of the Fund do not have rights of appraisal as a result of
the transactions contemplated by the Reorganization Agreement.
However, they have the right at any time prior to the consummation of
such transaction to redeem their shares at net asset value.
Shareholders of the Fund and USGT have the right, under certain
circumstances, to remove a Trustee and will be assisted in
communicating with other shareholders for such purpose.
The Fund and USGT, organized as Massachusetts Business Trusts, are
governed principally by their Declaration of Trusts and by-laws. The
shareholders of the Fund and USGT have certain rights to call a meeting
of shareholders as described in their respective Statements of
Additional Information. Amendments to the Declaration of Trust require
the approval of a "majority" (as defined in the Investment Company Act)
of the fund's shareholders. However, the Board of Trustees, under the
provisions of the Declaration of Trust, have the power without
shareholder approval to divide unissued shares of each of the funds
into two or more classes. With respect to USGT, the Board has done so
and USGT has three classes of shares, Class A, Class B and Class C.
The Board for the Fund has divided the unissued shares of the Fund into
two classes of shares, Class A and Class B. Each class has its own
dividends and distributions and pays certain expenses which may be
different. Each class may have a different net asset value. Each
share has one vote at shareholder meetings, with fractional shares
voting proportionately. Only shares of a particular class vote
together on matters that affect that class alone. Under certain
circumstances, shareholders of the fund may be held personally liable
as partners for the fund's obligations, and under the Declaration of
Trust such a shareholder is entitled to indemnification rights by the
fund; the risk of a shareholder incurring any such loss is limited to
the remote circumstances in which the fund is unable to meet its
obligations.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York
10048-0203, acts as the investment adviser for the Fund pursuant to an
investment advisory agreement with the Fund dated May 15, 1992 (the
"Fund Advisory Agreement") and acts as the investment adviser to USGT
pursuant to an investment advisory agreement with USGT dated May 25,
1995 ("USGT Advisory Agreement"), although the new management fee rates
have voluntarily been in effect since January 3, 1995. The Fund's
Advisory Agreement was submitted to and approved by the shareholders of
the Fund at a meeting held October 1, 1990 because the acquisition of
the Manager by Oppenheimer Acquisition Corporation ("OAC") on
terminated the previous investment advisory agreement. USGT's Advisory
Agreement was submitted and approved by the shareholders of USGT at a
meeting held May 25, 1995. The monthly management fee payable to the
Manager by each fund and the 12b-1 service plan fee paid by each fund
to the Distributor is set forth above under "Synopsis - Investment
Advisory and Service Plan Fees." The Fund and USGT have each adopted a
Service Plan for their Class A shares to reimburse the Distributor for
a portion of its costs incurred in connection with personal service and
maintenance of accounts that hold Class A shares. 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 each Fund's Board of Trustees authorizes such
reimbursements, which it has not yet done) for its other expenditures.
Services to be provided include, among others, answering customer
inquiries about each fund, assisting in establishing and maintaining
accounts in each fund, making each fund's investment plans available
and providing other services at the request of a fund or the
Distributor.
Pursuant to the Fund Advisory Agreement and the USGT Advisory
Agreement, the Manager supervises the investment operations of the
funds and the composition of their portfolios and furnishes advice and
recommendations with respect to investments, investment policies and
the purchase and sale of securities. The Manager also provides the
Fund and USGT with adequate office space, facilities and equipment and
provides, and supervises the activities of, all administrative and
clerical personnel required to provide effective administration,
including the compilation and maintenance of records with respect to
its operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for
continuous public sale of shares of each fund.
For the fiscal year ended September 30, 1994 and the three months
ended December 31, 1994, the management fees paid by the Fund were
$611,316 and $130,750; respectively. For the fiscal year ended June 30,
1994 and the six months ended December 31, 1994, the management fees
paid by USGT were $2,515,934 and $987,787, respectively. The Fund
Advisory Agreement contains no expense limitation. However,
independently of the agreement, the Manager has undertaken that the
total expenses of the Fund in any fiscal year (including the management
fee but exclusive of taxes, interest, brokerage commissions,
distribution plan payments and any extraordinary non-recurring
expenses, including litigation) shall not exceed the most stringent
state regulatory limitation on fund expenses applicable to the Fund.
At present, that limitation is imposed by California and limits
expenses (with specified exclusions) to 2.5% of the first $30 million
of average annual net assets, 2% of the next $70 million and 1.5% of
average annual net assets in excess of $100 million. The USGT Advisory
Agreement also contains the foregoing expense limitation. The Manager
reserves the right to change or eliminate the expense limitation at any
time and there can be no assurance as to the duration of the expense
limitation.
The Manager is controlled by OAC, a holding company owned in part by
senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies. The
Manager has operated as an investment company adviser since 1959. The
Manager and its affiliates currently advise investment companies with
combined net assets aggregating over $30 billion as of March 31, 1995,
with more than 2.4 million shareholder accounts. OSS, a division of
the Manager, acts as transfer and shareholder servicing agent on an at-
cost basis for the Fund and USGT and for certain other open-end funds
managed by the Manager and its affiliates.
The Distributor, a wholly-owned subsidiary of the Manager, acts as the
general distributor of each fund's shares under a General Distributor's
Agreement for each fund dated December 10, 1992. The General
Distributor's Agreement is subject to the same annual renewal
requirements and termination provisions as the investment advisory
agreements. For the fiscal years ended September 30, 1992, 1993 and
1994, selling charges on the Fund's Class A shares amounted to
$564,700, 401,435 and $237,418, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $191,265, $132,961
and $75,572, respectively. For the fiscal year ended September 30,
1994 contingent deferred sales charges collected by the distributor on
the redemption of Class B shares amounted to $2,348. For the fiscal
years ended June 30, 1992, 1993 and 1994, selling charges on USGT Class
A shares amounted to $1,881,944, $1,823,585 and $876,525, of which the
Distributor and an affiliated broker-dealer retained, in the aggregate,
$660,099, $594,110 and $282,424, respectively. For the period ended
June 30, 1994, contingent deferred sales charges collected by the
Distributor on the redemption of USGT Class C shares amounted to
$3,250.
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 the Fund's fiscal year ended June 30, 1994, the Federal Reserve
increased U.S. short-term interest rates as a preemptive 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.
Included in the prospectus for the U.S. Government, a copy of which
accompanies this proxy statement, in the section entitled "Performance
of the Fund" is a performance graph which depicts the performance of a
hypothetical investment of $10,000 in each Class A and Class C of
shares of USGT held until June 30, 1994; in the case of Class A shares,
since August 16, 1985 (the date in 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 on the reinvestment date. Class
B share performance is not shown since Class B shares are not currently
available. 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 and Class C shares. The graph compares the average annual
total return of Class A shares of USGT's shares over that period with
the performance of 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 shows the effect of taxes.
Purchase of Additional Shares
Class A shares of the Fund and Class A shares USGT are sold at net
asset value plus a maximum sales charge of 4.75% of the offering price.
The sales charge is reduced for purchases of either fund's shares of
$50,000 or more. On certain purchases of shares of $1 million or more,
a contingent deferred sales charge of 1% is imposed when such shares
are redeemed within 18 months of the end of the calendar month of their
purchase, subject to certain conditions. Class B shares of the Fund
and USGT will be sold at net asset value but if Class B shares are
redeemed within six years of buying them, they may be subject to a
contingent deferred sales charge beginning at 5% and declining
thereafter. Class C shares of USGT 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% may be deducted from the redemption proceeds.
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. The
shares to be issued under the Reorganization Agreement will be issued
by USGT at net asset value without a sales charge. Future dividends
and capital gain distributions of USGT, if any, may be reinvested
without sales charge into Class A shares. Any Fund shareholder who is
entitled to a reduced sales charge on additional purchases by reason of
a Letter of Intent or Rights of Accumulation based upon holdings of
shares of the Fund will continue to be entitled to a reduced sales
charge on any future purchase of Class A shares of USGT.
The Class B shares of USGT to be issued under the Reorganization
Agreement will be issued at net asset value and will be aged to the
same level as the shareholders existing Fund Class B shares.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of the Fund and the receipt of the other opinions and
certificates set forth in Sections 10 and 11 of the Reorganization
Agreement (set forth in Annex A) and the occurrence of the events
described in those Sections. Under the Reorganization Agreement, all
the assets of the Fund, excluding the Cash Reserve, will be delivered
to USGT in exchange for Class A and Class B shares of USGT. The Cash
Reserve to be retained by the Fund will be sufficient in the discretion
of the Board for the payment of the Fund's liabilities, and the Fund's
expenses of liquidation.
Assuming the shareholders of the Fund approve the Reorganization, the
actual exchange of assets is expected to take place as soon thereafter
as is practicable (the "Closing Date") on the basis of net asset values
as of the close of business on the business day preceding the Closing
Date (the "Valuation Date"). Under the Reorganization Agreement, all
redemptions of shares of the Fund shall be permanently suspended on the
Valuation Date; only redemption requests received in proper from on or
prior to the close of business on that date shall be fulfilled by it;
redemption requests received by the Fund after that date will be
treated as requests for redemptions of the Class A and Class B shares
of USGT to be distributed to the shareholders requesting redemption.
The exchange of assets for Class A and Class B shares respectively will
be done on the basis of the per share net asset value of the Class A
and Class B shares of USGT, and the value of the assets of the Fund to
be transferred as of the close of business on the Valuation Date, in
the manner used by USGT in the valuation of assets. USGT is not
assuming any of the liabilities of the Fund, except for portfolio
securities purchased which have not settled and outstanding shareholder
redemption and dividend checks.
The net asset value of the Class A and Class B shares transferred by
USGT to the Fund will be the same as the value of the net assets
received by USGT. For example, if, on the Valuation Date, the Fund
were to have securities with a market value of $95,000 and cash in the
amount of $10,000 (of which $5,000 was to be retained by it as the Cash
Reserve), the value of the assets which would be transferred to USGT
would be $100,000. If the net asset value per share of USGT were $10
per share at the close of business on the Valuation Date, the number of
shares to be issued would be 10,000 ($100,000 divided by $10). These 10,000
shares of USGT would be distributed to the former shareholders of the
Fund. This example is given for illustration purposes only and does
not bear any relationship to the dollar amounts or shares expected to
be involved in the Reorganization.
After the Closing Date, the Fund will distribute on a pro rata basis to
its shareholders of record on the Valuation Date the Class A and Class
B shares of USGT received by the Fund at the closing, in liquidation of
the outstanding shares of the Fund, and the outstanding shares of the
Fund will be cancelled. To assist the Fund in this distribution, USGT
will, in accordance with a shareholder list supplied by the Fund, cause
its 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 or exchange
any shares of USGT.
Under the Reorganization Agreement, within one year after the Closing
Date, the Fund shall: (a) either pay or make provision for all of its
debts and taxes; and (b) 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. Within one year after
the Closing Date, the Fund will complete its liquidation.
Under the Reorganization Agreement, either the Fund or USGT may abandon
and terminate the Reorganization Agreement without liability if the
other party breaches any material provision of the Reorganization
Agreement or, if prior to the closing, any legal, administrative or
other proceeding shall be instituted or threatened (i) seeking to
restrain or otherwise prohibit the transactions contemplated by the
Reorganization Agreement and/or (ii) asserting a material liability of
either party, which proceeding or liability has not been terminated or
the threat thereto removed prior to the Closing Date.
In the event that the Reorganization Agreement is not consummated for
any reason, the Board will consider and may submit to the shareholders
other alternatives.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by the surviving fund 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 from OSS, P.O. Box 5270,
Denver, Colorado 80217, and is incorporated herein, and in its audited
financial statements as of September 30, 1994, 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, 1994 and unaudited financial statements
(semi-annual) as of December 31, 1994, which are included in the
Additional Statement.
Public Information
Additional information about the Fund and USGT is available, as
applicable, in the following documents which are incorporated herein
by reference: (i) USGT's Prospectus dated May 30, 1995, accompanying
this Proxy Statement and Prospectus and incorporated herein; (ii) the
Fund's Prospectus, which may be obtained without charge by writing to
Oppenheimer Shareholder Services, P.O. Box 5270, Denver, Colorado
80217; (iii) USGT's Annual Report as of June 30, 1994 and Semi-Annual
Report as of December 31, 1994, which may be obtained without charge
by writing to OSS at the address indicated above; and (iv) the Fund's
Annual Report as of September 30, 1994 , which may be obtained without
charge by writing to OSS at the address indicated above. All of the
foregoing documents may be obtained by calling the toll-free number on
the cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which incorporates by reference the USGT
Additional Statement, and the Fund's Prospectus dated January 24, 1995,
and Statement of Additional Information dated January 24, 1995: the
organization and operation of USGT and the Fund; more information on
investment policies, practices and risks; information about the Fund's
and USGT'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.
The Fund and USGT 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 the Fund and USGT 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
Andrew J. Donohue, Secretary
June 13, 1995 220
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
March 16, 1995 by and between Oppenheimer Mortgage Income Fund (the
"Fund"), a Massachusetts business trust, and Oppenheimer U.S.
Government Trust ("USGT"), a Massachusetts business trust.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the
reorganization pursuant to Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"), of the Fund through the
acquisition by USGT of substantially all of the assets of the Fund in
exchange for the Class A and Class B voting shares of beneficial
interest ("shares") of USGT and the assumption by USGT of certain
liabilities of the Fund, which shares of USGT are thereafter to be
distributed by the Fund pro rata to its shareholders in complete
liquidation of the Fund and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt a Plan of Reorganization
pursuant to Section 368(a)(1) of the Code as follows: The
reorganization will be comprised of the acquisition by USGT of
substantially all of the properties and assets of the Fund in exchange
for shares of USGT and the assumption by USGT of certain liabilities of
the Fund, followed by the distribution of such USGT shares to the
shareholders of the Fund in exchange for their shares of the Fund, all
upon and subject to the terms of the Agreement hereinafter set forth.
The share transfer books of the Fund will be permanently closed at
the close of business on the Valuation Date (as hereinafter defined)
and only redemption requests received in proper form on or prior to the
close of business on the Valuation Date shall be fulfilled by the Fund;
redemption requests received by the Fund after that date shall be
treated as requests for the redemption of the shares of USGT to be
distributed to the shareholder in question as provided in Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of the Fund on that date, excluding a cash reserve (the "Cash Reserve")
to be retained by the Fund sufficient in its discretion for the payment
of the expenses of the Fund's dissolution and its liabilities, but not
in excess of the amount contemplated by Section 10E, shall be delivered
as provided in Section 8 to USGT, in exchange for and against delivery
to the Fund on the Closing Date of a number of shares of USGT having an
aggregate net asset value equal to the value of the assets of the Fund
so transferred and delivered.
3. The net asset value of the shares of USGT and the value of the
assets of the Fund to be transferred shall in each case be determined
as of the close of business of the New York Stock Exchange on the
Valuation Date. The computation of the net asset value of the Class A
and Class B shares of USGT and the Fund shall be done in the manner
used by USGT and the Fund, respectively, in the computation of such net
asset value per share as set forth in their respective prospectuses.
The methods used by USGT in such computation shall be applied to the
valuation of the assets of the Fund to be transferred to USGT.
The Fund shall declare and pay, immediately prior to the Valuation
Date, a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be at the office of
Oppenheimer Management Corporation (the "Agent"), Two World Trade
Center, Suite 3400, New York, New York 10048, at 4:00 P.M. New York
time on July 21, 1995, or at such other time or place as the parties
may designate or as provided below (the "Closing Date"). The business
day preceding the Closing Date is herein referred to as the "Valuation
Date."
In the event that on the Valuation Date either party has, pursuant
to the Investment Company Act of 1940, as amended (the "Act"), or any
rule, regulation or order thereunder, suspended the redemption of its
shares or postponed payment therefor, the Closing Date shall be
postponed until the first business day after the date when both parties
have ceased such suspension or postponement; provided, however, that if
such suspension shall continue for a period of 60 days beyond the
Valuation Date, then the other party to the Agreement shall be
permitted to terminate the Agreement without liability to either party
for such termination.
5. As soon as practicable after the Closing, the Fund shall
distribute on a pro rata basis to the shareholders of the Fund on the
Valuation Date the shares of USGT received by the Fund on the Closing
Date in exchange for the assets of the Fund in complete liquidation of
the Fund; for the purpose of the distribution by the Fund of such
shares of USGT to its shareholders, USGT will promptly cause its
transfer agent to: (a) credit an appropriate number of shares of USGT
on the books of USGT to each shareholder of the Fund in accordance with
a list (the "Shareholder List") of its shareholders received from the
Fund; and (b) 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.
The Shareholder List shall indicate, as of the close of business on
the Valuation Date, the name and address of each shareholder of the
Fund, indicating his or her share balance. The Fund agrees to supply
the Shareholder List to USGT not later than the Closing Date.
Shareholders of the Fund holding certificates representing their shares
shall not be required to surrender their certificates to anyone in
connection with the reorganization. After the Closing Date, however,
it will be necessary for such shareholders to surrender their
certificates in order to redeem, transfer or pledge the Class A shares
of USGT which they received.
6. Within one year after the Closing Date, the Fund 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 USGT, 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 Fund 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 Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the
closing, USGT will be in compliance with all of its investment policies
and restrictions. At the Closing, the Fund shall deliver to USGT two
copies of a list setting forth the securities then owned by the Fund.
Promptly after the Closing, the Fund shall provide USGT a list setting
forth the respective federal income tax bases thereof.
8. Portfolio securities or written evidence acceptable to USGT of
record ownership thereof by The Depository Trust Company or through the
Federal Reserve Book Entry System or any other depository approved by
the Fund pursuant to Rule 17f-4 under the Act shall be endorsed and
delivered, or transferred by appropriate transfer or assignment
documents, by the Fund on the Closing Date to USGT, or at its
direction, to its custodian bank, in proper form for transfer in such
condition as to constitute good delivery thereof in accordance with the
custom of brokers and shall be accompanied by all necessary state
transfer stamps, if any. The cash delivered shall be in the form of
certified or bank cashiers' checks or by bank wire or intra-bank
transfer payable to the order of USGT for the account of USGT. Class A
and Class B shares respectively of USGT representing the number of
Class A and Class B shares of USGT being delivered against the assets
of the Fund, registered in the name of the Fund, shall be transferred
to the Fund on the Closing Date. Such shares shall thereupon be
assigned by the Fund to its shareholders so that the shares of USGT may
be distributed as provided in Section 5.
If, at the Closing Date, the Fund is unable to make delivery under
this Section 8 to USGT of any of its portfolio securities or cash for
the reason that any of such securities purchased by the Fund, or the
cash proceeds of a sale of portfolio securities, prior to the Closing
Date have not yet been delivered to it or the Fund's custodian, then
the delivery requirements of this Section 8 with respect to said
undelivered securities or cash will be waived and the Fund will deliver
to USGT by or on the Closing Date and with respect to said undelivered
securities or cash executed copies of an agreement or agreements of
assignment in a form reasonably satisfactory to USGT, together with
such other documents, including a due bill or due bills and brokers'
confirmation slips as may reasonably be required by USGT.
9. USGT shall not assume the liabilities (except for portfolio
securities purchased which have not settled and for shareholder
redemption and dividend checks outstanding) of the Fund, but the Fund
will, nevertheless, use its best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date. The
cost of printing and mailing the proxies and proxy statements will be
borne by the Fund. The Fund and USGT will bear the cost of their
respective tax opinion. 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. Any other out-of-pocket expenses of USGT
and the Fund associated with this reorganization, including legal,
accounting and transfer agent expenses, will be borne by the Fund and
USGT, respectively, in the amounts so incurred by each.
10. The obligations of USGT hereunder shall be subject to the
following conditions:
A. The Board of Trustees of the Fund shall have authorized the
execution of the Agreement, and the shareholders of the Fund shall have
approved the Agreement and the transactions contemplated hereby, and
the Fund shall have furnished to USGT copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of the
Fund; such shareholder approval shall have been by the affirmative vote
of "a majority of the outstanding voting securities" (as defined in the
Act) of the Fund at a meeting for which proxies have been solicited by
the Proxy Statement and Prospectus (as hereinafter defined).
B. USGT shall have received an opinion dated the Closing Date of
counsel to the Fund, to the effect that (i) the Fund is a business
trust duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts with full powers to carry on
its business as then being conducted and to enter into and perform the
Agreement; and (ii) that all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable on the Fund and
to authorize effectively the transactions contemplated by the Agreement
have been taken by the Fund.
C. The representations and warranties of the Fund contained
herein shall be true and correct at and as of the Closing Date, and
USGT shall have been furnished with a certificate of the President, or
a Vice President, or the Secretary or the Assistant Secretary or the
Treasurer of the Fund, dated the Closing Date, to that effect.
D. On the Closing Date, the Fund shall have furnished to USGT a
certificate of the Treasurer or Assistant Treasurer of the Fund as to
the amount of the capital loss carry-over and net unrealized
appreciation or depreciation, if any, with respect to the Fund as of
the Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Fund at the close
of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by USGT under the
Securities Act of 1933, as amended (the "1933 Act"), containing a
preliminary form of the Proxy Statement and Prospectus, shall have
become effective under the 1933 Act not later than December 31, 1995.
G. On the Closing Date, USGT shall have received a letter of
Andrew J. Donohue or other senior executive officer of Oppenheimer
Management Corporation acceptable to USGT, stating that nothing has
come to his or her attention which in his or her judgment would
indicate that as of the Closing Date there were any material actual or
contingent liabilities of the Fund arising out of litigation brought
against the Fund or claims asserted against it, or pending or to the
best of his or her knowledge threatened claims or litigation not
reflected in or apparent from the most recent audited financial
statements and footnotes thereto of the Fund delivered to USGT. Such
letter may also include such additional statements relating to the
scope of the review conducted by such person and his or her
responsibilities and liabilities as are not unreasonable under the
circumstances.
H. USGT shall have received an opinion, dated the Closing Date,
of KPMG Peat Marwick LLP, to the same effect as the opinion
contemplated by Section 11.E. of the Agreement.
I. USGT shall have received at the closing all of the assets of
the Fund to be conveyed hereunder, which assets shall be free and clear
of all liens, encumbrances, security interests, restrictions and
limitations whatsoever.
11. The obligations of the Fund hereunder shall be subject to the
following conditions:
A. The Board of Trustees of USGT shall have authorized the
execution of the Agreement, and the transactions contemplated hereby,
and USGT shall have furnished to the Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of USGT.
B. The Fund's shareholders shall have approved the Agreement and
the transactions contemplated hereby, by an affirmative vote of "a
majority of the outstanding voting securities" (as defined in the Act)
of the Fund, and the Fund shall have furnished USGT copies of
resolutions to that effect certified by the Secretary or an Assistant
Secretary of the Fund.
C. The Fund shall have received an opinion dated the Closing Date
of counsel to USGT, to the effect that (i) USGT is a business trust
duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts with full powers to carry on its
business as then being conducted and to enter into and perform the
Agreement; (ii) all action necessary to make the Agreement, according
to its terms, valid, binding and enforceable upon USGT and to authorize
effectively the transactions contemplated by the Agreement have been
taken by USGT, and (iii) the Class A and Class B shares of USGT to be
issued hereunder are duly authorized and when issued will be validly
issued, fully-paid and non-assessable, except as set forth in USGT's
then current Prospectus and Statement of Additional Information.
D. The representations and warranties of USGT contained herein
shall be true and correct at and as of the Closing Date, and the Fund
shall have been furnished with a certificate of the President, a Vice
President or the Secretary or an Assistant Secretary or the Treasurer
of USGT to that effect dated the Closing Date.
E. The Fund shall have received an opinion to the effect that the
Federal tax consequences of the transaction, if carried out in the
manner outlined in this Plan of Reorganization and in accordance with
(i) the Fund's representation that 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
shares to a number of shares having a value, as of the Closing Date, of
less than 50% of the value of all of the formerly outstanding Fund
shares as of the same date, (ii) the representation by each of the Fund
and USGT 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, and (iii) the other
representations by each of the Fund and USGT made to KPMG Peat Marwick
LLP and set forth in the opinion will generally be as follows:
1. The transactions contemplated by the Agreement will
qualify as a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Code, and under the regulations promulgated
thereunder.
2. The Fund and USGT will each qualify as a "party to a
reorganization" within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of
the Fund upon the distribution of Class A or Class B shares of
beneficial interest in USGT to the shareholders of the Fund pursuant to
Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be
recognized by the Fund by reason of the transfer of substantially all
its assets in exchange for Class A and Class B shares respectively of
USGT.
5. Under Section 1032 of the Code no gain or loss will be
recognized by USGT by reason of the transfer of substantially all the
Fund's assets in exchange for shares of USGT and USGT's assumption of
certain liabilities of the Fund.
6. The shareholders of the Fund will have the same tax basis
and holding period for the Class A and Class B shares of beneficial
interest in USGT that they receive as they had for the Fund shares that
they previously held, pursuant to Section 358(a) and 1223(1),
respectively, of the Code.
7. The securities transferred by the Fund to USGT will have
the same tax basis and holding period in the hands of USGT as they had
for the Fund, pursuant to Section 362(b) and 1223(1), respectively, of
the Code.
F. The Cash Reserve shall not exceed 10% of the value of the net
assets, nor 30% in value of the gross assets, of the Fund at the close
of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by USGT under the
1933 Act, containing a preliminary form of the Proxy Statement and
Prospectus, shall have become effective under the 1933 Act not later
than May 30, 1995.
H. On the Closing Date, the Fund shall have received a letter of
Andrew J. Donohue or other senior executive officer of Oppenheimer
Management Corporation acceptable to the Fund, stating that nothing has
come to his or her attention which in his or her judgment would
indicate that as of the Closing Date there were any material actual or
contingent liabilities of USGT arising out of litigation brought
against USGT or claims asserted against it, or pending or, to the best
of his or her knowledge, threatened claims or litigation not reflected
in or apparent by the most recent audited financial statements and
footnotes thereto of USGT delivered to the Fund. Such letter may also
include such additional statements relating to the scope of the review
conducted by such person and his or her responsibilities and
liabilities as are not unreasonable under the circumstances.
I. The Fund shall acknowledge receipt of the Class A and Class B
shares of USGT.
12. The Fund hereby represents and warrants that:
A. The financial statements of the Fund as of September 30, 1994
heretofore furnished to USGT, present fairly the financial position,
results of operations, and changes in net assets of the Fund as of that
date, in conformity with generally accepted accounting principles
applied on a basis consistent with the preceding year; and that from
October 1, 1994 through the date hereof there has not been, and through
the Closing Date there will not be, any material adverse change in the
business or financial condition of the Fund, it being agreed that a
decrease in the size of the Fund due to a diminution in the value of
its portfolio and/or redemption of its shares shall not be considered a
material adverse change;
B. Contingent upon approval of the Agreement and the transactions
contemplated hereby by the Fund's shareholders, the Fund has authority
to transfer all of the assets of the Fund to be conveyed hereunder free
and clear of all liens, encumbrances, security interests, restrictions
and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in the
Fund's Registration Statement under the 1933 Act, as amended, is true,
correct and complete, conforms to the requirements of the 1933 Act and
does 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 not misleading. The Registration
Statement, as amended, was, as of the date of the filing of the last
Post-Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did 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 not
misleading;
D. There is no material contingent liability of the Fund and no
material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of the Fund, threatened
against the Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which the Fund
is a party other than those ordinary in the conduct of its business;
F. The Fund is a business trust duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts; and has all necessary and material Federal and state
authorizations to own all of its assets and to carry on its business as
now being conducted; and the Fund is duly registered under the Act and
such registration has not been rescinded or revoked and is in full
force and effect;
G. All Federal and other tax returns and reports of the Fund
required by law to be filed have been filed, and all Federal and other
taxes shown due on said returns and reports have been paid or provision
shall have been made for the payment thereof and to the best of the
knowledge of the Fund no such return is currently under audit and no
assessment has been asserted with respect to such returns and to the
extent such tax returns with respect to the taxable year of the Fund
ended June 30, 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; and
H. The Fund has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, the Fund has met
the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and the Fund intends to
meet such requirements with respect to its current taxable year.
13. USGT hereby represents and warrants that:
A. The financial statements of USGT as of June 30, 1994, and
December 31, 1994 heretofore furnished to the Fund, present fairly the
financial position, results of operations, and changes in net assets of
USGT, as of that date, in conformity with generally accepted accounting
principles applied on a basis consistent with the preceding year; and
that from January 1, 1995 through the date hereof there has not been,
and through the Closing Date there will not be, any material adverse
change in the business or financial condition of USGT, it being
understood that a decrease in the size of USGT due to a diminution in
the value of its portfolio and/or redemption of its shares shall not be
considered a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in
USGT's Registration Statement under the 1933 Act, is true, correct and
complete, conforms to the requirements of the 1933 Act and does 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 not misleading. The Registration Statement, as
amended, was, as of the date of the filing of the last Post-Effective
Amendment, true, correct and complete, conformed to the requirements of
the 1933 Act and did 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 not misleading;
C. There is no material contingent liability of USGT and no
material claim and no material legal, administrative or other
proceedings pending or, to the knowledge of USGT, threatened against
USGT, not reflected in such Prospectus;
D. There are no material contracts outstanding to which USGT is a
party other than those ordinary in the conduct of its business;
E. USGT is a business trust duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts;
has all necessary and material Federal and state authorizations to own
all its properties and assets and to carry on its business as now being
conducted; the shares of USGT which it issues to the Fund pursuant to
the Agreement will be duly authorized, validly issued, fully-paid and
non-assessable, except as otherwise set forth in USGT's Registration
Statement; and will conform to the description thereof contained in
USGT's Registration Statement, will be duly registered under the 1933
Act and in the states where registration is required; and USGT is duly
registered under the Act and such registration has not been revoked or
rescinded and is in full force and effect;
F. All Federal and other tax returns and reports of USGT required
by law to be filed have been filed, and all Federal and other taxes
shown due on said returns and reports have been paid or provision shall
have been made for the payment thereof and to the best of the knowledge
of USGT no such return is currently under audit and no assessment has
been asserted with respect to such returns and to the extent such tax
returns with respect to the taxable year of USGT ended December 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;
G. USGT has elected to be treated as a regulated investment
company and, for each fiscal year of its operations, USGT has met the
requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company and USGT intends to meet
such requirements with respect to its current taxable year;
H. USGT has no plan or intention (i) to dispose of any of the
assets transferred by the Fund, other than in the ordinary course of
business, or (ii) to redeem or reacquire any of the shares issued by it
in the reorganization other than pursuant to valid requests of
shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, USGT intends to operate its business in a substantially
unchanged manner.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each party also represents and
warrants to the other that the information concerning it in the Proxy
Statement and Prospectus will not as of its date contain any untrue
statement of a material fact or omit to state a fact necessary to make
the statements concerning it therein not misleading and that the
financial statements concerning it will present the information shown
fairly in accordance with generally accepted accounting principles
applied on a basis consistent with the preceding year. Each party also
represents and warrants to the other that the Agreement is valid,
binding and enforceable in accordance with its terms and that the
execution, delivery and performance of the Agreement will not result in
any violation of, or be in conflict with, any provision of any charter,
by-laws, contract, agreement, judgment, decree or order to which it is
subject or to which it is a party. USGT hereby represents to and
covenants with the Fund that, if the reorganization becomes effective,
USGT will treat each shareholder of the Fund who received any of USGT's
shares as a result of the reorganization as having made the minimum
initial purchase of shares of USGT received by such shareholder for the
purpose of making additional investments in shares of USGT, regardless
of the value of the shares of USGT received.
15. USGT agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act which shall contain a
preliminary form of proxy statement and prospectus contemplated by Rule
145 under the 1933 Act. The final form of such proxy statement and
prospectus is referred to in the Agreement as the "Proxy Statement and
Prospectus." Each party agrees that it will use its best efforts to
have such Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement and
Prospectus as may be necessary or desirable in this connection. USGT
covenants and agrees to deregister as an investment company under the
Investment Company Act of 1940, as amended, as soon as practicable and,
thereafter, to cause the cancellation of its outstanding shares.
16. The obligations of the parties under the Agreement shall be
subject to the right of either party to abandon and terminate the
Agreement without liability if the other party breaches any material
provision of the Agreement or if any material legal, administrative or
other proceeding shall be instituted or threatened between the date of
the Agreement and the Closing Date (i) seeking to restrain or
otherwise prohibit the transactions contemplated hereby and/or (ii)
asserting a material liability of either party, which proceeding has
not been terminated or the threat thereof removed prior to the Closing
Date.
17. The Agreement may be executed in counterpart, each of which
shall be deemed an original, but taken together shall constitute one
Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
18. All prior or contemporaneous agreements and representations are
merged into the Agreement, which constitutes the entire contract
between the parties hereto. No amendment or modification hereof shall
be of any force and effect unless in writing and signed by the parties
and no party shall be deemed to have waived any provision herein for
its benefit unless it executes a written acknowledgement of such
waiver.
19. The Fund understands that the obligations of USGT under the
Agreement are not binding upon any Trustee or shareholder of USGT
personally, but bind only USGT and USGT's property. The Fund
represents that it has notice of the provisions of the Declaration of
Trust of USGT disclaiming shareholder and Trustee liability for acts or
obligations of USGT.
20. USGT understands that the obligations of the Fund under the
Agreement are not binding upon any Trustee or shareholder of the Fund
personally, but bind only the Fund and the Fund's property. USGT
represents that it has notice of the provisions of the Declaration of
Trust of the Fund disclaiming shareholder and Trustee liability for
acts or obligations of the Fund.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to
be executed and attested by its officers thereunto duly authorized on
the date first set forth above.
Attest: OPPENHEIMER MORTGAGE INCOME FUND
______________________________ By:_______________________
Robert G. Zack Andrew J. Donohue
Assistant Secretary Secretary
Attest: OPPENHEIMER U.S. GOVERNMENT TRUST
______________________________ By:________________________
Robert G. Zack Andrew J. Donohue
Assistant Secretary Secretary
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER MORTGAGE INCOME FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD JULY 12, 1995
The undersigned shareholder of Oppenheimer Mortgage Income Fund (the
"Fund"), does hereby appoint George C. Bowen, Andrew J. Donohue, Robert
Bishop and Scott Farrar, 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 July 12,
1995, at 3410 South Galena Street, Denver, Colorado 80231 at 10:00
A.M., Denver 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 between the
Fund and Oppenheimer U.S. Government Trust, and the transactions
contemplated thereby, including the transfer of substantially all
the assets of the Fund in exchange for Class A and Class B shares
of Oppenheimer U.S. Government Trust, the distribution of such
shares to the shareholders of the Fund in complete liquidation of
the Fund, the deregistration of the Fund as an investment company
under the Investment Company Act of 1940, as amended, 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>
OPPENHEIMER GOVERNMENT SECURITIES FUND
3410 South Galena Street, Denver, CO 80231
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
June 28, 1993
___________________________________
This Statement of Additional Information of Oppenheimer Government
Securities Fund ("OGSF") consists of this cover page and the following
documents:
1. OGSF's Statement of Additional Information dated February 1,
1993, revised May 3, 1993, which has been previously filed
and is incorporated herein by reference.
2. OGSF's Annual Report as of September 30, 1992, which has been
previously filed and is incorporated herein by reference.
3. OGSF's Semi-Annual Report as of March 31, 1993, which has
been previously filed and is incorporated herein by
reference.
4. Prospectus of Main Street Funds, Inc. dated October 20, 1992,
as supplemented May 19, 1993, which has been previously filed
and is incorporated herein by reference.
5. Statement of Additional Information of Main Street Funds,
Inc. dated October 20, 1992, as supplemented April 29, 1993,
which has been previously filed and is incorporated herein by
reference.
6. Annual Report as of June 30, 1992 of Main Street Funds, Inc.,
which has been previously filed and is incorporated herein by
reference.
7. Semi-Annual Report as of December 31, 1992 of Main Street
Funds, Inc., which has been previously filed and is
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 of OGSF
dated June 28, 1993, 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>
Pro Forma Combining Statement of Investments December 31, 1994 (Unaudited)
Oppenheimer U.S. Government Trust and Oppenheimer Mortgage Income Fund
<TABLE>
<CAPTION>
Face Amount Market Value
U.S Mortgage Pro Forma U.S. Mortgage Pro Forma
Government Income Combined Government Income Combined
<S> <C> <C> <C> <C> <C> <C>
Mortgage-Backed Obligations - 88.3%
Government Agency - 79.4%
FHLMC/FNMA/Sponsored - 41.0%
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation
Certificates:
10%, 6/15/20 $ 5,511,000 $ 0 $ 5,511,000 $ 5,949,345 $ 0 $ 5,949,345
14%, 1/11/11 651,212 0 651,212 727,977 0 727,977
6.65%, 4/15/21 10,750,000 0 10,750,000 9,466,771 0 9,466,771
6.80%, 3/15/16 15,000,000 0 15,000,000 14,591,249 0 14,591,249
8.50%, 10/15/19 2,801,766 0 2,801,766 2,811,684 0 2,811,684
9%, 7/15/21 3,154,441 0 3,154,441 3,191,349 0 3,191,349
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations,
Series 1548, Cl. C, 7%, 4/15/21 0 3,000,000 3,000,000 0 2,567,490 2,567,490
Federal National Mortgage Assn.,
Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg.
Investment Conduit Pass-Through
Certificates:
13%, 11/1/12 281,412 0 281,412 311,642 0 311,642
8%, 3/25/01-12/1/22 15,167,643 0 15,167,643 15,035,752 0 15,035,752
8.50%, 1/25/00 29,617,000 0 29,617,000 24,949,950 0 24,949,950
8.75%, 12/25/20 22,500,000 0 22,500,000 22,801,147 0 22,801,147
9%, 7/1/21 1,845,984 0 1,845,984 1,866,457 0 1,866,457
Federal National Mortgage Assn.,
Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
10.50%, 11/25/20 10,000,000 0 10,000,000 11,034,599 0 11,034,599
8%, 7/25/19 18,000,000 0 18,000,000 17,481,778 0 17,481,778
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security,
Trust 218, Cl. 2, 7.50%, 4/25/23 (1) 19,173,448 0 19,173,448 7,184,052 0 7,184,052
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security,
Trust 240, Cl. 2, 7%, 9/25/23 (1) 38,355,636 0 38,355,636 14,305,455 0 14,305,455
Federal National Mortgage Assn.,
Interest-Only Stripped
Mtg.-Backed Security, Trust 252,
Cl. 2, 7.50%, 11/30/23 (1) 11,383,932 0 11,383,932 4,338,345 0 4,338,345
Federal National Mortgage Assn.,
Principal-Only Stripped
Mtg.-Backed Security, Trust 253,
Cl. G, Zero Coupon, 11/25/23 (2) 1,000,028 0 1,000,028 421,340 0 421,340
156,468,892 2,567,490 159,036,382
GNMA/Guaranteed - 38.4%
Government National Mortgage Assn.:
7.50%, 9/15/22 0 3,022,820 3,022,820 0 2,819,928 2,819,928
7.50%, 3/1/25 (3) 25,000,000 0 25,000,000 24,960,938 0 24,960,938
8%, 1/15/23 0 6,766,970 6,766,970 0 6,486,343 6,486,343
8%, 4/15/22-9/15/24 48,416,361 0 48,416,361 46,421,678 0 46,421,678
8.50%, 12/1/24-12/15/24 41,650,000 0 41,650,000 40,947,157 0 40,947,157
9%, 7/15/21-8/15/21 0 6,177,309 6,177,309 0 6,254,710 6,254,710
9.50%, 7/15/18-1/15/20 0 2,133,462 2,133,462 0 2,217,322 2,217,322
10%, 6/15/16-8/18/17 2,911,513 0 2,911,513 3,082,300 0 3,082,300
10%, 5/15/19 0 1,032,584 1,032,584 0 1,094,188 1,094,188
10.50%, 2/15/13-8/15/19 12,351,693 0 12,351,693 13,205,169 0 13,205,169
10.50%, 9/15/17-4/15/21 0 1,237,129 1,237,129 0 1,323,497 1,323,497
11%, 7/20/20 222,743 0 222,743 239,387 0 239,387
128,856,629 20,195,988 149,052,617
Private -- 8.9%
Agricultural -- 0.6%
Prudential Agricultural Credit, Inc.,
Farmer Mac Agricultural Real Estate
Trust Sr. Sub. Mtg. Pass-Through
Certificates, Series 1992-2:
Cl. B2, 8.961%, 1/15/03 (4)(5) 0 935,070 935,070 0 686,107 686,107
Cl. B3, 9.294%, 4/15/09 (4)(5) 0 2,342,354 2,342,354 0 1,697,328 1,697,328
0 2,383,435 2,383,435
Commercial - 4.5%
CS First Boston Mortgage
Securities Corp.,
Mtg. Pass-Through Certificates,
Cl. 1E-1, 11%, 2/15/14 0 3,000,000 3,000,000 0 2,803,437 2,803,437
Resolution Trust Corp.,
Commercial Mtg.
Pass-Through Certificates:
Series 1991-M5, Cl. A, 9%, 3/25/17 0 1,361,419 1,361,419 0 1,350,571 1,350,571
Series 1992-CHF, Cl. C,
8.25%, 12/25/20 0 2,880,898 2,880,898 0 2,746,756 2,746,756
Series 1992-16, Cl. B3,
10.627%, 5/24/24 (4) 0 2,000,000 2,000,000 0 2,015,000 2,015,000
Series 1993-C1, Cl. E,
9.50%, 5/25/24 0 2,343,620 2,343,620 0 2,252,073 2,252,073
Series 1993-C2, Cl. E,
8.50%, 3/25/25 0 2,837,049 2,837,049 0 2,685,444 2,685,444
Series 1994-C1, Cl. E,
8%, 6/25/26 0 1,973,175 1,973,175 0 1,496,530 1,496,530
SE Commercial Mortgage
Pass-Through Certificates,
Series 93-01, Cl. A1,
6.65%, 11/28/13 0 2,438,176 2,438,176 0 2,127,689 2,127,689
0 17,477,500 17,477,500
Multi-Family - 1.5%
Countrywide Funding Corp.:
Series 1993-11, Cl. B1,
6.25%, 1/25/09 0 1,433,431 1,433,431 0 1,157,944 1,157,944
Series 1993-11, Cl. B3,
6.25%, 2/25/09 (5) 0 836,171 836,171 0 263,655 263,655
CS First Boston Mortgage
Securities Corp.,
Mtg. Pass-Through
Interest-Only Certificates:
.52%, Cl. A-X, 2/15/02 (1) 0 88,100,000 88,100,000 0 715,812 715,812
.61%, Cl. B-X, 2/15/02 (1) 0 19,300,000 19,300,000 0 162,844 162,844
.66%, Cl. C-X, 2/15/02 (1) 0 15,400,000 15,400,000 0 134,750 134,750
.82%, Cl. D-X, 2/15/02 (1) 0 2,968,000 2,968,000 0 26,898 26,898
Multi-family Capital
Access One, Inc., Series 1,
Cl. D, 10.604%, 1/15/24 (4) 0 3,576,803 3,576,803 0 3,300,719 3,300,719
0 5,762,622 5,762,622
Residential - 2.3%
Chase Mortgage Finance Corp.,
Sub. Mtg. Pass-Through
Certificates, Series 1994-1:
Cl. B-11, 6.601%, 3/25/25 (6) 0 1,081,443 1,081,443 0 648,680 648,680
Cl. B-12, 6.601%, 3/25/25 (6) 0 1,081,443 1,081,443 0 657,065 657,065
Residential Funding Corp.,
Mtg. Pass-Through
Certificates:
Series 1993-S20, Cl. A9,
8.50%, 2/25/23 0 2,907,734 2,907,734 0 2,806,021 2,806,021
Series 1993-6, Cl. B5,
7.785%, 6/15/23 0 1,969,058 1,969,058 0 1,382,955 1,382,955
Series 1993-J2, Cl. B1,
7.97%, 6/15/23 0 1,978,531 1,978,531 0 1,403,830 1,403,830
Ryland Mortgage Securities Corp.,
Sub. Bonds, Series 1993-3,
Cl. B2, 6.7125%, 8/25/08 (6) 0 1,389,947 1,389,947 0 1,014,661 1,014,661
SKW Real Estate
Limited Partnership,
Secured Note, Cl. E,
9.05%, 4/15/04 (4)(6) 0 1,000,000 1,000,000 0 951,563 951,563
0 8,864,775 8,864,775
Total Mortgage-Backed
Obligations
(Cost $286,446,651, $61,099,689,
Combined $347,546,340) 285,325,521 57,251,810 342,577,331
U.S. Government Obligations - 17.5%
Treasury - 17.5%
U.S. Treasury Bonds:
8.75%, 8/15/00 (7) 43,000,000 0 43,000,000 44,800,625 0 44,800,625
11.50%, 11/15/95 0 5,000,000 5,000,000 0 5,176,559 5,176,559
13.75%, 8/15/04 0 5,000,000 5,000,000 0 6,956,250 6,956,250
U.S. Treasury Nts.:
7.75%, 12/31/99 0 8,000,000 8,000,000 0 7,975,000 7,975,000
7.75%, 11/30/99 0 3,000,000 3,000,000 0 2,989,686 2,989,686
Total U.S. Government
Obligations
(Cost $44,838,594, $23,377,344,
Combined $68,215,938) 44,800,625 23,097,495 67,898,120
Repurchase Agreements - 2.0%
Repurchase agreement with
First Chicago Capital
Markets, 6%, dated 12/30/94,
to be repurchased at
$7,905,267 on 1/3/95,
collateralized by
U.S. Treasury Nts., 4.125%,
5/31/95 with a value
of $8,060,751
(Cost $7,900,000) 0 7,900,000 7,900,000 0 7,900,000 7,900,000
Total Investments,
at Value
(Cost $331,285,245,
$92,377,033,
Combined $423,662,278) 107.5% 109.1% 107.8% 330,126,146 88,249,305
418,375,451
Liabilities in Excess
of Other Assets (7.5) (9.1) (7.8) (23,122,477) (7,087,946) (30,210,423)
Net Assets 100.0% 100.0% 100.0% $307,003,669 $81,161,359 $388,165,028
</TABLE>
1. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed-income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs).
2. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as 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.
3. When-issued security to be delivered and settled after December 31, 1994.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid.
6. Represents a security sold under Rule 144A, which is exempt from registration
under the Securities Act of 1933, as amended. This security has been determined
to be liquid under guidelines established by the Board of Trustees. These
securities amount to $3,271,969 or 4.03% (Combined 0.84%) of the Fund's net
assets, at December 31, 1994.
7. Securities with an aggregate market value of $36,465,625 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts, as follows:
Type of Contract Number of Contracts Face Amount
U.S. Treasury Nts., 3/95 350 $35,000,000
The market value of the open contracts was $35,032,813 at December 31, 1994,
with a net unrealized gain of $10,938.
<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 6/1/1992; 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: Filed herewith.
(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) (i) Investment Advisory Agreement dated 10/22/90: Filed with
Registrant's Post-Effective Amendment No 18, 11/1/90, refiled with
Registrant's Post-Effective Amendment No. 24, 8/24/94, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.
(ii) Investment Advisory Agreement dated 5/25/95: Filed herewith.
(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) Service Plan and Agreement dated 6/10/93 under Rule 12b-1 of
the Investment Company Act of 1940 for Class A shares distribution:
Filed with Registrant's Post-Effective Amendment No. 24, 8/24/94, and
incorporated herein by reference, Distribution Plan and Service Plan
and Agreement for Class B Shares under Rule 12b-1 of the Investment
Company Act, filed herewith, Distribution and Service Plan Agreement
for Class C shares under Rule 12b-1 of the Investment Company Act of
1940 dated 12/1/93: Filed with Registrant's Post-Effective Amendment
No. 24, 8/24/94, 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) Draft of Tax Opinion Relating to the Reorganization: Filed
herewith.
(13) Not applicable.
(14) Consent of KPMG Peat Marwick LLP: Filed herewith.
(15) Not applicable.
(16) Not applicable.
(17) Declaration of Registrant under Rule 24f-2: Filed herewith.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, 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 5th day of May, 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:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees May 5, 1995
Leon Levy
/s/ Donald W. Spiro* Chief Executive
- -------------------- Officer and
Donald W. Spiro Trustee May 5, 1995
/s/ George Bowen* Chief Financial
- ----------------- and Accounting
George Bowen Officer May 5, 1995
/s/ Leo Cherne* Trustee May 5, 1995
- ---------------
Leo Cherne
/s/ Robert G. Galli* Trustee May 5, 1995
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee May 5, 1995
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee May 5, 1995
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee May 5, 1995
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee May 5, 1995
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee May 5, 1995
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins* Trustee May 5, 1995
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere* Trustee May 5, 1995
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee May 5, 1995
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
EXHIBIT INDEX
Form N-14
Item No.
- --------
16(5) Specimen Class B Share Certificate
16(6) Investment Advisory Agreement dated May 25, 1995.
16(10) Distribution Plan and Service Plan and Agreement for Class B
Shares under Rule 12b-1 of the Investment Company Act
16(12) Tax Opinion in Draft Form
16(14) Independent Auditors' Consent
</TABLE>
INDEPENDENT AUDITORS' CONSENT
The Boards of Trustees
Oppenheimer U.S. Government Trust and
Oppenheimer Mortgage Income Fund:
We consent to the incorporation by reference in the registration statement
(No. 2-76645) on Form N-14 of Oppenheimer U.S. Government Trust of our
report dated July 22, 1994, appearing in the 1994 Annual Report of
Oppenheimer U.S. Government Trust and our report dated October 21, 1994,
appearing in the 1994 Annual Report of Oppenheimer Mortgage Income Fund
and to the references to our Firm under the headings "Tax Consequences of
the Reorganization" and "Tax Aspects of the Reorganization" in the
registration statement.
/s/ KPMG Peat Marwick LLP
- ------------------------
KPMG Peat Marwick LLP
2300 Arco Tower
707 17th Street
Denver, Colorado 80202
May 4, 1995
[Letterhead of KPMG Peat Marwick LLP]
______________, 1995
Oppenheimer Mortgage Income Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Oppenheimer U.S. Government Trust
Two World Trade Center 34th floor
New York, New York 10048-0203
Dear Sirs:
We have reviewed the Agreement and Plan of Reorganization between
Oppenheimer Mortgage Income Fund (the "Fund") and Oppenheimer U.S.
Government Trust ("USGT") which is attached as Exhibit A to the Proxy
Statement and Prospectus of the Fund included as part of USGT's
Registration Statement on Form N-14 filed under the Securities Act of
1933, as amended, with the Securities and Exchange Commission on May 5,
1995 (the "Agreement"), concerning the acquisition by USGT of
substantially all of the assets of the Fund solely for voting shares of
beneficial interest in USGT, followed by the distribution of USGT shares
to the shareholders of the Fund in complete liquidation of the Fund.
In connection with the rendering of this opinion, we have reviewed the
Agreement, the most recent audited financial statements and related
documents and other materials as we deemed relevant to the rendering of
this opinion. Based upon all of the foregoing and the representations
made by the Fund and USGT, attached hereto, in our opinion, the federal
tax consequences of the transaction will be as follows:
1. The transactions contemplated by the Agreement will qualify as a tax-
free "reorganization" within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
2. The Fund and USGT will each qualify as a "party to a reorganization"
within the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of the Fund
upon the distribution of shares of beneficial interest in USGT to the
shareholders of the Fund, pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized
by the Fund by reason of the transfer of its assets solely in
exchange for Class A and Class B shares of USGT, respectively.
5. Under Section 1032 of the Code no gain or loss will be recognized by
USGT by reason of the transfer of the Fund's assets solely in
exchange for Class A and Class B shares of USGT, respectively.
6. The stockholders of the Fund will have the same tax basis and holding
period for the shares of beneficial interest in USGT that they
receive as they had for the stock of the Fund that they previously
held, pursuant to Sections 358(a) and 1223(1), respectively, of the
Code.
7. The securities transferred by the Fund to USGT will have the same tax
basis and holding period in the hands of USGT as they had for the
Fund, pursuant to Sections 362(b) and 1223(1), respectively, of the
Code.
Very truly yours
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 25th day of May, 1995, by and between
OPPENHEIMER U.S. GOVERNMENT TRUST (the "Fund"), and OPPENHEIMER MANAGEMENT
CORPORATION ("OMC").
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company registered as such with the Securities and Exchange Commission
(the "Commission") pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), and the Management Company is a registered
investment adviser;
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein contained and other good and valuable consideration, the
receipt of which is hereby acknowledged, it is agreed by and between the
parties hereto as follows:
1. In General
OMC agrees, all as more fully set forth herein, to act as
investment adviser to the Fund with respect to the investment of its
assets; to supervise and arrange the purchases of securities for and the
sale of securities held in the portfolio of the Fund; and to furnish
facilities and furnish and supervise personnel as shall be required to
provide effective administration of the Fund.
2. Duties and Obligations of OMC with respect to investments of
assets of the Fund
(a) Subject to the succeeding provisions of this section
and subject to the direction and control of the Board of Trustees, OMC shall:
(i) Regularly provide investment advice and
recommendations to the Fund with respect to its investments, investment
policies and the purchase and sale of securities;
(ii) Supervise continuously the investment program of
the Fund and the composition of its portfolio; and
(iii) Arrange, subject to the provisions of paragraph
"4" hereof, for the purchase of securities and other investments and for
the sale of securities and other investments held in the portfolio of the
Fund.
(b) Any investment advice furnished by OMC under this
section shall at all times conform to, and be in accordance with, any
requirements imposed by: (1) the provisions of the Investment Company Act
of 1940, and of any rules or regulations in force thereunder; (2) any
other applicable provision of law; (3) the provisions of the Declaration
of Trust and By-Laws of the Fund as amended from time to time; (4) any
policies and determinations of the Board of Trustees of the Fund; and (5)
the terms of the registration statement of the Fund, as amended from time
to time under the Securities Act of 1933 and the Investment Company Act
of 1940.
(c) Nothing in this Agreement shall prevent OMC or any
officer thereof from acting as investment adviser for any other person,
firm or corporation and shall not in any way limit or restrict OMC or any
of its directors, officers, stockholders or employees from buying, selling
or trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided, however,
that OMC expressly represents that it will undertake no activities which,
in its judgment, will adversely affect the performance of its obligations
to the Fund under this Agreement.
3. Fund Administration and Allocation of Expenses
OMC shall at its expense provide all executive,
administration and clerical personnel as shall be required to provide
effective administration for the Fund including the compilation and
maintenance of such records with respect to its operations as may
reasonably be required;
the preparation and filing of such reports with respect thereto as shall
be required by the Securities and Exchange Commission; composition of
periodic reports with respect to its operations for the shareholders of
the Fund; composition of proxy materials for meetings of the Fund's
shareholders; and the composition of such registration statements as may
be required by federal securities laws for continuous public sale of
shares of the Fund. OMC shall, at its own cost and expense, also provide
the Fund with adequate office space, facilities and equipment. All other
costs and expenses not expressly assumed by OMC under this Agreement shall
be paid by the Fund, including, but not limited to (i) interests and
taxes; (ii) insurance premiums for fidelity and other coverage requisite
to its operations; (iii) compensation and expenses of its Trustees other
than those associated or affiliated with OMC; (iv) legal and audit
expenses; (v) custodian and transfer agent fees and expenses, and
brokerage commissions, if any; (vi) expenses incident to the redemption
of its shares; (vii) expenses incident to the issuance of its shares
against payment therefor by or on behalf of the subscribers thereto;
(viii) fees and expenses, other than as hereinabove provided, incident to
the registration, under Federal law, of shares of the Fund for public
sale; (ix) expenses of printing and mailing periodic reports with respect
to its operations and notices and proxy materials to shareholders of the
Fund; (x) except as noted above, all other expenses incidental to holding
meetings of the Fund's shareholders; (xi) payments under the Fund's
Service Plan and its Distribution and Service Plans and Agreements; and
(xii) such non-recurring expenses as may arise, including litigation
affecting the Fund and the legal obligation which the Fund may have to
indemnify its officers and Trustees with respect thereto.
4. Portfolio Transactions and Brokerage
OMC is authorized, for the purchase and sale of the Fund's
portfolio securities, to employ such securities dealers as may, in the
best judgment of OMC, implement the policy of the Fund to obtain prompt
and reliable execution of orders at the most favorable net price.
Consistent with this policy, OMC is authorized to direct the execution of
the Fund's portfolio transactions to dealers furnishing statistical
information or research deemed by OMC to be useful or valuable to the
performance of its investment advisory functions for the Fund.
5. Compensation of OMC
The Fund agrees to pay OMC and OMC agrees to accept as full
compensation for all services rendered by OMC as such, a fee computed on
the aggregate net assets of the Fund as of the close of business each day
and payable monthly at the following annual rates:
0.65% of the first $200 million of net assets of the Fund;
plus
0.60% of the next $100 million; plus
0.57% of the next $100 million; plus
0.55% of the next $400 million; plus
0.50% of net assets over $800 million.
6. Use of Name
OMC hereby grants to the Fund a royalty-free, non-exclusive
license to use the name "Oppenheimer" in the name of the Fund and any
trademarks or service marks, whether or not registered, which it may own.
To the extent necessary to protect OMC's rights to the name "Oppenheimer"
under applicable law, such license shall allow OMC to inspect and, subject
to control by the Fund's Board, control the nature and quality of services
offered by the Fund under such name. The license may be terminated by OMC
upon termination of this agreement in which case the Fund shall have no
further right to use the name "Oppenheimer" in its name or otherwise or
any of such marks, and the Fund, the holders of its shares, and its
officers and Trustees shall promptly take whatever action may be necessary
to change its name accordingly. The name "Oppenheimer" or any of said
marks may be used or licensed by OMC in connection with any of its
activities, or licensed by OMC to any other party, and the Fund, the
holders of its shares, and its Trustees and officers agree to take
promptly whatever action may be necessary to permit such use or license.
7. Duration and Termination
(a) This Agreement shall go into effect on the date first set
forth above, and replaces the Fund's Investment Advisory Agreement dated
October 22, 1990. It shall continue in effect until December 31, 1995, and
thereafter from year to year, but only so long as such continuance is
specifically approved at least annually (a) by the Board of Trustees,
including the vote of a majority of the Trustees of the Fund who are not
parties to this Agreement or "interested persons" (as defined in the
Investment Company Act of 1940) of any such party, cast in person at a
meeting called for the purpose of voting on such approval, or (b) by the
vote of the holders of a "majority" (as so defined) of the outstanding
voting securities of the Fund and by such aforementioned vote of the Board
of Trustees.
(b) This Agreement may be terminated by OMC at any time without
penalty upon giving the Fund sixty days' written notice (which notice may
be waived by the Fund) and may be terminated by the Fund at any time
without penalty upon giving OMC sixty days' notice (which notice may be
waived by OMC), provided that such termination by the Fund shall be
directed or approved by the vote of a majority of all of the Board of
Trustees of the Fund in office at the time or by the vote of the holders
of a "majority" (as defined in the Investment Company Act of
1940) of the voting securities of the Fund at the time outstanding and
entitled to vote. This Agreement shall automatically terminate in the
event of its assignment (as "assignment" is defined in the Investment
Company Act of 1940).
8. Liability
(a) In the absence of willful misfeasance, bad faith gross
negligence or reckless disregard of its obligations or duties under this
Agreement, OMC shall not be liable to this Fund or any shareholder for any
act or omission in performing the services required by this Agreement or
for any losses that may be sustained in the purchase, holding or sale of
any security or other investment.
(b) OMC understands and agrees that the obligations of the
Fund under this Agreement are not binding upon any Trustee or shareholder
of the Fund personally, but bind only the Fund and the Fund's property;
OMC represents that it has notice of the provisions of the Declaration of
Trust of the Fund disclaiming shareholder liability for acts or
obligations of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers as of the day
and year first above written.
ATTEST: OPPENHEIMER U.S. GOVERNMENT TRUST
_______________________ By: _______________________________
ATTEST: OPPENHEIMER MANAGEMENT
CORPORATION
_______________________ By: _____________________________
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER U.S. GOVERNMENT TRUST
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 26th
day of May, 1995, by and between OPPENHEIMER U.S. GOVERNMENT TRUST (the
"Fund") and OPPENHEIMER FUNDS DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service
plan for Class B shares of the Fund (the "Shares"), contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "1940
Act"), pursuant to which the Fund will compensate the Distributor for its
services in connection with the distribution of Shares, and the personal
service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it
is the issuer, pursuant to the Rule, according to the terms of this Plan.
The Distributor is authorized under the Plan to pay "Recipients," as
hereinafter defined, for rendering (1) distribution assistance in
connection with the sale of Shares and/or (2) administrative support
services with respect to Accounts. Such Recipients are intended to have
certain rights as third-party beneficiaries under this Plan. The terms
and provisions of this Plan shall be interpreted and defined in a manner
consistent with the provisions and definitions contained in (i) the 1940
Act, (ii) the Rule, (iii) Article III, Section 26, of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., or its
successor (the "NASD Rules of Fair Practice") and (iv) any conditions
pertaining either to distribution-related expenses or to a plan of
distribution, to which the Fund is subject under any order on which the
Fund relies, issued at any time by the Securities and Exchange Commission.
2. Definitions. As used in this Plan, the following terms shall have
the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered assistance (whether direct,
administrative or both) in the distribution of Shares or has provided
administrative support services with respect to Shares held by
Customers (defined below) of the Recipient; (ii) shall furnish the
Distributor (on behalf of the Fund) with such information as the
Distributor shall reasonably request to answer such questions as may
arise concerning the sale of Shares; and (iii) has been selected by
the Distributor to receive payments under the Plan. Notwithstanding
the foregoing, a majority of the Fund's Board of Trustees (the
"Board") who are not "interested persons" (as defined in the 1940
Act) and who have no direct or indirect financial interest in the
operation of this Plan or in any agreements relating to this Plan
(the "Independent Trustees") may remove any broker, dealer, bank or
other institution as a Recipient, whereupon such entity's rights as
a third-party beneficiary hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
customers, clients and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "Customers"), but in no event shall any such Shares be deemed
owned by more than one Recipient for purposes of this Plan. In the
event that two entities would otherwise qualify as Recipients as to
the same Shares, the Recipient which is the dealer of record on the
Fund's books shall be deemed the Recipient as to such Shares for
purposes of this Plan.
3. Payments for Distribution Assistance and Administrative Support
Services.
(a) The Fund will make payments to the Distributor, within forty-
five (45) days of the end of each calendar quarter, in the aggregate
amount of (i) 0.0625% (0.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day (the "Service
Fee"), plus (ii) 0.1875% (0.75% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of
Shares computed as of the close of each business day (the "Asset-
Based Sales Charge"). Such Service Fee payments received from the
Fund will compensate the Distributor and Recipients for providing
administrative support services of the type approved by the Board
with respect to Accounts. Such Asset-Based Sales Charge payments
received from the Fund will compensate the Distributor and Recipients
for providing distribution assistance in connection with the sales
of Shares.
The administrative support services in connection with the
Accounts to be rendered by Recipients may include, but shall not be
limited to, the following: answering routine inquiries concerning
the Fund, assisting in the establishment and maintenance of accounts
or sub-accounts in the Fund and processing Share redemption
transactions, making the Fund's investment plans and dividend payment
options available, and providing such other information and services
in connection with the rendering of personal services and/or the
maintenance of Accounts, as the Distributor or the Fund may
reasonably request.
The distribution assistance in connection with the sale of
Shares to be rendered by the Distributor and Recipients may include,
but shall not be limited to, the following: distributing sales
literature and prospectuses other than those furnished to current
holders of the Fund's Shares ("Shareholders"), and providing such
other information and services in connection with the distribution
of Shares as the Distributor or the Fund may reasonably request.
It may be presumed that a Recipient has provided distribution
assistance or administrative support services qualifying for payment
under the Plan if it has Qualified Holdings of Shares to entitle it
to payments under the Plan. In the event that either the Distributor
or the Board should have reason to believe that, notwithstanding the
level of Qualified Holdings, a Recipient may not be rendering
appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the
Distributor, at the request of the Board, shall require the Recipient
to provide a written report or other information to verify that said
Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor still is not satisfied,
it may take appropriate steps to terminate the Recipient's status as
such under the Plan, whereupon such entity's rights as a third-party
beneficiary hereunder shall terminate.
(b) The Distributor shall make service fee payments to any Recipient
quarterly, within forty-five (45) days of the end of each calendar
quarter, at a rate not to exceed 0.0625% (0.25% on an annual basis)
of the average during the calendar quarter of the aggregate net asset
value of Shares computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by
the Recipient or by its Customers for a period of more than the
minimum period (the "Minimum Holding Period"), if any, to be set from
time to time by a majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make
service fee payments ("Advance Service Fee Payments") to any
Recipient quarterly, within forty-five (45) days of the end of each
calendar quarter, at a rate not to exceed (i) 0.25% of the average
during the calendar quarter of the aggregate net asset value of
Shares, computed as of the close of business on the day such Shares
are sold, constituting Qualified Holdings sold by the Recipient
during that quarter and owned beneficially or of record by the
Recipient or by its Customers, plus (ii) 0.0625% (0.25% on an annual
basis) of the average during the calendar quarter of the aggregate
net asset value of Shares computed as of the close of each business
day, constituting Qualified Holdings owned beneficially or of record
by the Recipient or by its Customers for a period of more than one
(1) year, subject to reduction or chargeback so that the Advance
Service Fee Payments do not exceed the limits on payments to
Recipients that are, or may be, imposed by Article III, Section 26,
of the NASD Rules of Fair Practice. In the event Shares are redeemed
less than one year after the date such Shares were sold, the
Recipient is obligated and will repay to the Distributor on demand
a pro rata portion of such Advance Service Fee Payments, based on the
ratio of the time such shares were held to one (1) year.
The Advance Service Fee Payments described in part (i) of this
paragraph (b) may, at the Distributor's sole option, be made more
often than quarterly, and sooner than the end of the calendar
quarter. However, no such payments (collectively, the "Recipient
Payments") shall be made to
any Recipient for any such quarter in which its Qualified Holdings
do not equal or exceed, at the end of such quarter, the minimum
amount ("Minimum Qualified Holdings"), if any, to be set from time
to time by a majority of the Independent Trustees.
A majority of the Independent Trustees may at any time or from
time to time decrease and thereafter adjust the rate of fees to be
paid to the Distributor or to any Recipient, but not to exceed the
rates set forth above, and/or direct the Distributor to increase or
decrease the Maximum Holding Period, the Minimum Holding Period or
the Minimum Qualified Holdings. The Distributor shall notify all
Recipients of the Minimum Qualified Holdings and Minimum Holding
Period, if any, and the rates of Recipient Payments hereunder
applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these
provisions. Inclusion of such provisions or a change in such
provisions in a revised current prospectus shall constitute
sufficient notice. The Distributor may make Plan payments to any
"affiliated person" (as defined in the 1940 Act) of the Distributor
if such affiliated person qualifies as a Recipient.
(c) The Distributor is entitled to retain from the payments
described in Section 3(a) the aggregate amount of (i) the Service Fee
on Shares outstanding for less than the Minimum Holding Period plus
(ii) the Asset-Based Sales Charge on Shares outstanding for not more
than one (1) year, plus (iii) any additional Asset-Based Sales Charge
payment which no Recipient qualifies to receive, in each case
computed as of the close of each business day during that period and
subject to reduction or elimination of such amounts under the limits
to which the Distributor is, or may become, subject under Article
III, Section 26, of the NASD Rules of Fair Practice. The
distribution assistance and administrative support services to be
rendered by the Distributor in connection with the Shares may
include, but shall not be limited to, the following: (i) paying sales
commissions to any broker, dealer, bank or other institution that
sells Shares, and\or paying such persons Advance Service Fee Payments
in advance of, and\or greater than, the amount provided for in
Section 3(a) of this Agreement; (ii) paying compensation to and
expenses of personnel of the Distributor who support distribution of
Shares by Recipients; (iii) paying of or reimbursing the Distributor
for interest and other borrowing costs on its unreimbursed expenses
at the rate paid by the Distributor or, if such amounts are financed
by the Distributor from its own resources or by an affiliate, at the
rate of 1% per annum above the prime rate (which shall mean the most
preferential interest rate on corporate loans at large U.S. money
center commercial banks) then being reported in the Eastern edition
of the Wall Street Journal (or if such prime rate is no longer so
reported, such other rate as may be designated from time to time by
the Distributor with the approval of the Independent Trustees); (iv)
other direct distribution costs, including without limitation the
costs of sales literature, advertising and prospectuses (other than
those furnished to current Shareholders) and state "blue sky"
registration expenses; and (v) any service rendered by the
Distributor that a Recipient may render pursuant to part (a) of this
Section 3. Such services include distribution and administrative
support services rendered in connection with Shares acquired by the
Fund (i) by purchase, (ii) in exchange for shares of another
investment company for which the Distributor serves as distributor
or sub-distributor, or (ii) pursuant to a plan of reorganization to
which the Fund is a party. In the event that the Board should have
reason to believe that the Distributor may not be rendering
appropriate distribution assistance or administrative support
services in connection with the sale of Shares, then the Distributor,
at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is
providing appropriate services in this regard.
(d) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") from its own resources
(which may include profits derived from the advisory fee it receives
from the Fund), or (ii) by the Distributor (a subsidiary of OMC),
from its own resources, from Asset-Based Sales Charge payments or
from its borrowings.
4. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of those persons to be Trustees of the Fund
who are not "interested persons" of the Fund ("Disinterested Trustees")
shall be committed to the discretion of such Disinterested Trustees.
Nothing herein shall prevent the Disinterested Trustees from soliciting
the views or the involvement of others in such selection or nomination if
the final decision on any such selection and nomination is approved by a
majority of the incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund
shall provide written reports to the Fund's Board for its review,
detailing services rendered in connection with the distribution of the
Shares. The reports shall be provided in the frequency requested by the
Board, and shall state whether all provisions of Section 3 of this Plan
have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at
any time, without payment of any penalty, by a vote of a majority of the
Independent Trustees or by a vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class, on not more than sixty days written notice to any other party
to the agreement; (ii) such agreement shall automatically terminate in the
event of its assignment (as defined in the 1940 Act); (iii) it shall go
into effect when approved by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such agreement; and (iv) it shall, unless terminated as herein provided,
continue in effect from year to year only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan
has been approved by a vote of the Board and its Independent Trustees cast
in person at a meeting called on March 16, 1995, for the purpose of voting
on this Plan, and shall take effect on the date first shown above. Unless
terminated as hereinafter provided, it shall continue in effect until
December 31, 1995 and from year to year thereafter or as the Board may
otherwise determine only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent
Trustees cast in person at a meeting called for the purpose of voting on
such continuance. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the Class B
Shareholders, in the manner described above, and all material amendments
must be approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities of
the Class. In the event of such termination, the Board and its
Independent Trustees shall determine whether the Distributor shall be
entitled to payment from the Fund of all or a portion of the Service Fee
and/or the Asset-Based Sales Charge in respect of Shares sold prior to the
effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund under this Plan are not
binding upon any Trustee or shareholder of the Fund personally, but bind
only the Fund and the Fund's property. The Distributor represents that
it has notice of the provisions of the Declaration of Trust of the Fund
disclaiming shareholder and Trustee liability for acts or obligations of
the Fund.
OPPENHEIMER U.S. GOVERNMENT TRUST
By:------------------------------------
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By:------------------------------------
Katherine P. Feld, Vice President
& Secretary
OPPENHEIMER U.S. GOVERNMENT TRUST
Class B Share Certificate (8-1/2" x 11")
I. FACE OF CERTIFICATE (All text and other matter lies within
8-1/4" x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) share certificate no.
(upper right box with heading: CLASS B SHARES
below cert. no.)
(centered
below boxes) OPPENHEIMER U.S. GOVERNMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP _____________
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER U.S. GOVERNMENT TRUST
(hereinafter called the "Fund"), transferable only on the
books of the Fund by the holder hereof in person or by
duly authorized attorney, upon surrender of this
certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held
subject to all of the provisions of the Declaration of
Trust of the Fund to all of which the holder by acceptance
hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
<PAGE>
WITNESS the facsimile seal of the Fund and the signatures
of its duly authorized officers.
(signature Dated: (signature
at left of seal) at right of seal)
_______________________ ___________________
SECRETARY PRESIDENT
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER U.S. GOVERNMENT TRUST
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed
vertically) Countersigned
OPPENHEIMER SHAREHOLDER SERVICES
(A DIVISION OF OPPENHEIMER MANAGEMENT
CORPORATION)
Denver (CO) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11"
dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out
in full according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as joint tenants with
rights of survivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ................ hereby sell(s), assign(s), and
transfer(s) unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
_______________________________________________________________________
(Please print or type name and address of assignee)
______________________________________________________
________________________________________________Class B Shares of
beneficial interest [capital stock] represented by the within Certificate,
and do hereby irrevocably constitute and appoint
___________________________ Attorney to transfer the said shares on the
books of the within named Fund with full power of substitution in the
premises.
Dated: ______________________
Signed: __________________________
___________________________________
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
vertically to right correspond with the name(s) as written upon the
of above paragraph) face of the certificate in every particular
without alteration or enlargement or any change
whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds
when viewed at an angle. It is invalid without this "four hands"
watermark: logotype
________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY
edgar\220certb
