OFI Letterhead
March 1996
Dear Connecticut Mutual Government Securities Account Shareholder:
I am writing to you today to let you know about a positive
change that has been proposed for Connecticut Mutual Government
Securities Account (the "Fund").
After careful consideration, the Board of Directors of your
Fund determined that it would be in the best interest of
shareholders of the Fund to reorganize into another Oppenheimer
fund, Oppenheimer U.S. Government Trust.
A shareholder meeting has been scheduled in April, and all
shareholders of record on March 18 are being asked to vote either
in person or by proxy. You will find a notice of the meeting, a
proxy statement detailing the proposal, a ballot card, a prospectus
of Oppenheimer U.S. Government Trust as well as a postage-paid
envelope enclosed for your use.
What is being proposed?
Your Fund's Board of Directors, which represents your
interests in the management of the Fund has recommended approval of
the merger of the Fund into another Oppenheimer fund, Oppenheimer
U.S. Government Trust.
Why to the Board of the Fund's new Investment Adviser,
OppenheimerFunds, Inc., recommend this change?
The consolidation of the Fund into Oppenheimer U.S. Government
Trust makes sense because both funds share substantially similar
investment objectives and policies. In addition, the Board
believes the merger is advantageous for shareholders because the
larger asset size of Oppenheimer U.S. Government Trust offers
shareholders the potential for greater portfolio diversification
than is currently possible in either fund alone, especially the
Fund.
Another benefit for shareholders is the potential for greater
economies of scale that may result from consolidation into a much
larger fund. By merging into Oppenheimer U.S. Government Trust--
which now has approximately $510 million in assets--shareholders of
the Fund may benefit from economies of scale in overall operating
expenses as costs are spread among a larger number of shareholders.
You vote is very important because these decisions will affect
your investment. So, we urge you to consider these issues
carefully, and to make your vote count.
How do you vote?
No matter how large or small your investment, your vote is
important, so please review the proxy statement carefully. To cast
your vote, simply mark, sign and date the enclosed proxy ballot and
return it in the postage-paid envelope today. It can be expensive
to remail ballots if not enough responses are received to conduct
the meeting.
Please contact your financial advisor or call us at 1-800-525-
7048 if your have any questions.
As always, we thank you for allowing us to manage a portion of
your investment assets.
Sincerely,
[BAM signature]
Enclosure
<PAGE>
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT
Two World Trade Center
New York, New York 10048-0203
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1996
To the Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders
of Connecticut Mutual Government Securities Account ("Government
Fund" or the "Fund"), a series of Oppenheimer Series Fund, Inc.
(the "Company") (formerly named Connecticut Mutual Investment
Accounts, Inc.), an open-end, management investment company, will
be held at OppenheimerFunds, Inc., 3410 South Galena Street,
Denver, Colorado 80231 at 10:00 A.M. Denver time, on April 24,
1996, and any adjournments thereof (the "Meeting"), for the
following purposes:
1. To consider and vote upon approval of the Agreement and Plan
of Reorganization dated as of March 18, 1996 (the
"Reorganization Agreement") by and between Government Fund and
Oppenheimer U.S. Government Trust ("USGT"), and the
transactions contemplated thereby (the "Reorganization"),
including (i) the transfer of substantially all the assets of
Government Fund to USGT in exchange for the issuance of Class
A and Class B shares of USGT, (ii) the distribution of such
shares of USGT to shareholders of Government Fund in
liquidation of Government Fund, and (iii) the cancellation of
the outstanding shares of the Fund (the "Proposal"); and
2. To act upon such other matters as may properly come before the
Meeting.
The Reorganization is more fully described in the accompanying
Proxy Statement and Prospectus and a copy of the Reorganization
Agreement is attached as Exhibit A thereto. Government Fund's
Class A and Class B shareholders of record at the close of business
on March 18, 1996 are entitled to notice of, and to vote at, the
Meeting. Please read the Proxy Statement and Prospectus carefully
before telling us, through your proxy or in person, how you wish
your shares to be voted. The Board of Directors of the Company
recommends a vote in favor of the Reorganization. WE URGE YOU TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Directors,
Andrew J. Donohue, Secretary
March 18, 1996
Shareholders who do not expect to attend the Meeting are requested
to indicate voting instructions on the enclosed proxy and to date,
sign and return it in the accompanying postage-paid envelope. To
avoid unnecessary duplicate mailings, we ask your cooperation in
promptly mailing your proxy no matter how large or small your
holdings may be.
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATION
1. What is the Reorganization?
The proposed Reorganization provides for the transfer of
substantially all the assets of Connecticut Mutual Government
Securities Account ("Government Fund" or the "Fund") to
Oppenheimer U.S. Government Trust ("USGT"), the issuance of shares
of USGT to shareholders of Government Fund for distribution to its
shareholders and the cancellation of the outstanding shares of
Government Fund. The number of shares of USGT that will be
received by shareholders of Government Fund will be determined on
the basis of the relative net asset values of USGT and Government
Fund. Although the number of shares of USGT received by a
shareholder of Government Fund may be more or less than the
shareholder's holdings of Government Fund shares, the value of the
shares of USGT issued in the Reorganization will be equal to the
value of the shares previously held in Government Fund.
2. What are the reasons for the Reorganization?
On February 14, 1996, at a meeting of Government Fund's
shareholders, the Fund's shareholders voted to approve the
appointment of OppenheimerFunds, Inc. ("OFI") as the Fund's
investment adviser. In the proxy statement dated December 18, 1995
and the supplement dated January 19, 1996 (the "1995 Proxy
Statement") relating to that meeting, the Fund's shareholders were
advised that at a later date they would vote on the merger of the
Fund into a comparable Oppenheimer mutual fund.
3. What benefits to shareholders may result from this
transaction?
The Directors of Government Fund believe that combining these two
funds may benefit shareholders of Government Fund by allowing the
Fund to capitalize on expected economies of scale in the provision
of the following services: accounting, legal, transfer agency,
insurance, custody and administration.
4. Who is paying the expenses of the Reorganization?
All expenses of the Reorganization will be paid by Massachusetts
Mutual Life Insurance Company (which is the indirect parent of G.R.
Phelps & Co., Inc. ("Phelps"), the administrator and previous
investment manager of the Fund, and of OFI, the Fund's new
investment manager).
5. Who is OppenheimerFunds, Inc.?
OppenheimerFunds, Inc. ("OFI") and its subsidiaries are engaged
principally in the business of managing, distributing and servicing
registered investment companies. OFI is indirectly controlled by
Massachusetts Mutual Life Insurance Company ("MassMutual") which
controls Phelps as a result of the merger of MassMutual and
Connecticut Mutual Life Insurance Company on February 29, 1996, as
described in the 1995 Proxy Statement. As of March 1, 1996,
OppenheimerFunds, Inc. and a subsidiary had assets of more than $50
billion under management in more than 40 mutual funds.
6. Do the Oppenheimer funds have a sales charge?
Yes, the Oppenheimer funds impose a sales charge, other than their
money market funds (certain of which have an asset-based sales
charge on certain classes of shares). However, there will be no
commission or sales load of any kind charged in connection with
this Reorganization.
7. May I exchange between other Oppenheimer funds without a sales
charge or exchange fee?
Yes. As a shareholder of an Oppenheimer fund after this
Reorganization, you will be able to make exchanges into any of the
other Oppenheimer funds without payment of any sales charges or
exchange fees. Exchange privileges may be modified or discontinued
at any time.
8. Where can I get prospectuses and other information on the
Oppenheimer funds?
Call OppenheimerFunds Distributor, Inc. at 1-800-255-2755. They
will be pleased to supply you with all the information, including
prospectuses, which you will need to make an investment decision.
9. Whom do I contact about my account or to initiate a
transaction in my account?
For information about your account or to initiate a transaction in
your account, you may continue to contact your registered
representative at your broker/dealer or, in the alternative,
OppenheimerFunds Services at 1-800-525-7048.
10. Will this Reorganization result in any tax liability to
Government Fund, USGT or to me as a shareholder?
The Reorganization is intended to qualify for Federal income tax
purposes as a tax-free reorganization. The aggregate tax basis of
USGT shares received by you will be the same as the aggregate tax
basis of your Government Fund shares prior to the Reorganization
and the holding period of the shares of USGT to be received by you
will include the period during which Government Fund shares
surrendered in exchange therefore were held, provided that those
Government Fund shares were held as capital assets.
<PAGE>
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROXY STATEMENT
---------------
OPPENHEIMER U.S. GOVERNMENT TRUST
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PROSPECTUS
This Proxy Statement and Prospectus is being furnished to
shareholders of Connecticut Mutual Government Securities Account
("Government Fund" or the "Fund"), a series of Oppenheimer Series
Fund, Inc. (the "Company"), an open-end, management investment
company, in connection with the solicitation by the Board of
Directors of the Company (the "Board") of proxies to be used at the
Special Meeting of Shareholders of Government Fund to be held at
OppenheimerFunds, Inc., 3410 South Galena Street, Denver, Colorado
80231, at 10:00 A.M. Denver time, on April 24, 1996, and any
adjournments thereof (the "Meeting"). It is expected that this
Proxy Statement and Prospectus will be mailed to shareholders on or
about March 22, 1996.
At the Meeting, shareholders of the Fund will be asked to consider
and vote upon approval of the Agreement and Plan of Reorganization,
dated as of March 18, 1996 (the "Reorganization Agreement"), by and
between Government Fund and Oppenheimer U.S. Government Trust
("USGT"), and the transactions contemplated by the Reorganization
Agreement (the "Reorganization"). The Reorganization Agreement
provides for the transfer of substantially all the assets of
Government Fund to USGT in exchange for the issuance of Class A and
Class B shares of USGT, the distribution of such shares of USGT to
the respective Class A and Class B shareholders of Government Fund
in liquidation of Government Fund and the cancellation of the
outstanding shares of Government Fund. A copy of the
Reorganization Agreement is attached hereto as Exhibit A and is
incorporated by reference herein. As a result of the proposed
Reorganization, each Class A and Class B shareholder of Government
Fund will receive that number of Class A and Class B shares,
respectively, of USGT having an aggregate net asset value equal to
the net asset value of such shareholder's shares of Government Fund
of that class. This transaction is being structured as a tax-free
reorganization. See "Approval of the Reorganization."
USGT currently offers Class A, Class B and Class C shares. Class
A shares are sold with a sales charge imposed at the time of
purchase. Certain purchases aggregating $1.0 million or more
($500,000 as to purchases by OppenheimerFunds prototype 401(k)
plans) are not subject to a sales charge, but may be subject to a
contingent deferred sales charge ("CDSC") if redeemed within 18
months of the date of purchase. Class B shares are sold without a
front-end sales charge but may be subject to a CDSC if redeemed
within six years of the date of purchase. Class C shares are sold
without a front-end sales charge, but may be subject to a CDSC if
redeemed within one year of purchase.
As a result of the transaction, holders of Government Fund Class A
shares will receive Class A shares of USGT and no sales charge will
be imposed on the Class A shares received by the Fund's Class A
shareholders. Holders of Government Fund Class B shares will
receive Class B shares of USGT. Any CDSC which is applicable to a
shareholder's investment will continue to apply. In calculating
the applicable CDSC payable upon the subsequent redemption of
either Class A or Class B shares of USGT, the period during which
a Government Fund shareholder held shares of the Fund will be
counted. Because Government Fund has no Class C shares outstanding,
USGT will not issue Class C shares in the Reorganization.
Accordingly, complete information on Class C shares of USGT is not
included in this Proxy Statement and Prospectus, and no offering of
Class C shares is made hereby.
USGT is a mutual fund with the investment objective of seeking high
current income, preservation of capital and maintenance of
liquidity primarily through investments in debt instruments issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities. Government Fund seeks a high level of current
income with a high degree of safety of principal. Government Fund
invests primarily in debt instruments issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Although the
investment objectives of USGT and Government Fund are similar,
shareholders of Government Fund should consider the differences in
investment policies of USGT and the Fund, including Government
Fund's ability to invest a greater percentage of its assets in
investment grade debt securities of private issuers. See
"Comparison Between USGT and Government Fund - Comparison of
Investment Objectives, Policies and Restrictions."
USGT has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form N-14 (the "Registration
Statement") relating to the registration of shares of USGT to be
offered to the respective Class A and Class B shareholders of
Government Fund pursuant to the Reorganization Agreement. This
Proxy Statement and Prospectus relating to the Reorganization also
constitutes a Prospectus of USGT filed as part of such Registration
Statement. Information contained or incorporated by reference
herein relating to USGT has been prepared by and is the
responsibility of USGT. Information contained or incorporated by
reference herein relating to Government Fund has been prepared by
and is the responsibility of Government Fund.
This Proxy Statement and Prospectus sets forth concisely
information about USGT that a prospective investor should know
before voting on the Reorganization. The following documents have
been filed with the SEC, are incorporated herein by reference, and
are available without charge upon written request to the transfer
and shareholder servicing agent for USGT and Government Fund,
OppenheimerFunds Services ("OFS"), at P.O. Box 5270, Denver,
Colorado 80217, or by calling 1-800-525-7048 (a toll-free number):
(i) a Prospectus for Government Fund, dated October 1, 1995, as
supplemented March 18, 1996; (ii) a Statement of Additional
Information about Government Fund, dated October 1, 1995, as
supplemented March 1, 1996; (iii) a Prospectus for USGT, dated
November 1, 1995, as supplemented January 1, 1996 and January 5,
1996; (iv) a Statement of Additional Information about USGT dated
November 1, 1995, which contains more detailed information about
USGT and its management, and (v) a Statement of Additional
Information relating to the Reorganization described in this Proxy
Statement and Prospectus (the "Additional Statement"), dated March
18, 1996 and filed as part of the Registration Statement, which
Additional Statement includes, among other things, the Government
Fund Prospectus, the Government Fund Statement of Additional
Information and the USGT Statement of Additional Information.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
Shares of USGT or Government Fund are not deposits or obligations
of any bank, are not guaranteed by any bank, and are not insured by
the F.D.I.C. or any other agency, and involve investment risks,
including the possible loss of the principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Proxy Statement and Prospectus is dated March 18, 1996.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
COMPARATIVE FEE TABLES
SYNOPSIS
Parties to the Reorganization
The Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution Plan Fees
Purchases, Exchanges and Redemptions
PRINCIPAL RISK FACTORS
THE PROPOSAL - APPROVAL OF THE REORGANIZATION
Background
Board Approval of the Reorganization
Regulatory Approval of the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
COMPARISON BETWEEN USGT AND GOVERNMENT FUND
Comparison of Investment Objectives, Policies and Restrictions
Special Investment Methods
Investment Restrictions
Additional Comparative Information
Performance of USGT and the Fund
INFORMATION CONCERNING THE MEETING
The Meeting
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
MISCELLANEOUS
Financial Information
Public Information
OTHER BUSINESS
EXHIBIT A - Agreement and Plan of Reorganization, dated as of
March 18, 1996, by and between Oppenheimer U.S.
Government Trust and Oppenheimer Series Fund, Inc. on
behalf of Connecticut Mutual Government Securities
Account
<PAGE>
COMPARATIVE FEE TABLES
Shareholders pay certain expenses directly, such as sales charges
and account transaction charges. The schedule of such charges for
both USGT and Government Fund is as noted below.
<TABLE>
<CAPTION>
Government
Securities Account USGT
Transaction Charges Class A Class B Class A Class B Class C
<S> <C> <C> <C> <C> <C>
Maximum Initial Sales
Charge on Purchases (as
a % of offering price) 4.00% None 4.75% None None
Maximum Deferred Sales
Charge (as a % of the
lower of the original
purchase price or the
redemption proceeds) None(1) 5.00%(2) None(1) 5.00%(2) 1.00%(3)
Sales Charge on
Reinvested Dividends None None None None None
Redemption Fee None None None None None
Exchange Fee None None None None None
</TABLE>
(1) For Government Fund, certain purchases of Class A shares of
$500,000 or more are not subject to front-end sales charges, but a
contingent deferred sales charge ("CDSC") is imposed on the
proceeds of such shares equal to 1% if the shares are redeemed
within 12 months after the calendar month of purchase. For USGT,
a CDSC of up to 1% is imposed on purchases of Class A shares of
more than $1 million (more than $500,000 for purchases by
OppenheimerFunds prototype 401(k) plans) if the shares are redeemed
within 18 months.
(2) The CDSC schedules are 5%/5%/4%/4%/2%/1% for Government Fund
and 5%/4%/3%/3%/2%/1% for USGT, and eliminated thereafter. After
eight years, Class B Government Fund shares automatically convert
to Class A shares. After six years, Class B USGT shares
automatically convert to Class A shares.
(3) A CDSC of 1% may be imposed upon a redemption of USGT Class C
shares made within 12 months of purchase.
Expenses of USGT and Government Fund; Pro Forma Expenses
USGT and Government Fund each pay a variety of expenses directly
for management of their assets, administration, distribution of
their shares and other services, and those expenses are reflected
in the net asset value per share of each of USGT and Government
Fund. The following calculations are based on the annualized
expenses of USGT for the six months ended 12/31/95 and the expenses
of Government Fund for the 12 months ended December 31, 1995. The
inception date for Class B shares of Government Fund was October 1,
1995. Total fund operating expenses of Class B shares of
Government Fund are based on estimated expenses that would have
been incurred during the fiscal year ended 12/31/95 had such
respective shares been outstanding during that entire period.
These amounts are shown as a percentage of the average net assets
of each class of shares of Government Fund and of USGT for those
periods. The pro forma fees reflect what the fee schedules would
have been at 12/31/95 if the Reorganization had occurred 12 months
prior to that date.
For the 12 months ended December 31, 1995:
<TABLE>
<CAPTION>
Pro Forma
Government Fund USGT Combined Fund
Class A Class B Class A(1) Class B(1) Class A Class B
<S> <C> <C> <C> <C> <C> <C>
Management Fee 0.625% 0.625% 0.61% 0.61% 0.59% 0.59%
12b-1 Fee 0.25%(2) 1.00% 0.24% 1.00% 0.24%(2) 1.00%
Other Expenses 0.355% 0.355% 0.25% 0.26% 0.25% 0.25%
Total Fund
Operating
Expenses 1.23% 1.98% 1.10% 1.87% 1.08% 1.84%
</TABLE>
(1) Annualized.
(2) 12b-1 fees and other expenses for Government Fund have been
restated to reflect the fees that would have been paid in the
absence of a temporary agreement by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), formerly the distributor of Government
Fund shares, not to impose such fees and to assume such expenses
during the fiscal year ended December 31, 1995. That expense
limitation was terminated effective March 18, 1996.
Examples
To attempt to show these expenses over time, the examples shown
below have been created. Assume that you make a $1,000 investment
in either Government 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 table above for the 12 months ended
12/31/95. If you were to redeem your shares at the end of each
period shown below, your investment would incur the following
expenses by the end of 1, 3, 5 and 10 years:
1 year 3 years 5 years 10 years*
Government Fund
Class A $52 $77 $105 $183
Class B $70 $102 $127 $211
Oppenheimer U.S.
Government Trust
Class A $58 $81 $105 $175
Class B $69 $89 $121 $180
Pro Forma
Combined Fund
Class A $58 $80 $104 $173
Class B $69 $88 $120 $178
If you did not redeem your investment, it would incur the following
expenses:
1 year 3 years 5 years 10 years*
Government Fund
Class A $52 $77 $105 $183
Class B $20 $62 $107 $211
Oppenheimer U.S.
Government Trust
Class A $58 $81 $105 $175
Class B $19 $59 $101 $180
Pro Forma
Combined Fund
Class A $58 $80 $104 $173
Class B $19 $58 $100 $178
* The Class B expenses in years seven through ten for USGT and the
Pro Forma Combined Fund, and the Class B expenses in years nine and
ten for Government Fund, are based on the Class A expenses shown
above, because USGT and Government Fund automatically convert Class
B shares into Class A shares after six years and eight years,
respectively. Long-term Class B shareholders could pay the
economic equivalent of more than the maximum front-end sales charge
allowed under applicable regulations, because of the effect of the
asset-based sales charge and contingent deferred sales charge. For
Class B shareholders of both funds, the automatic conversion of
Class B shares to Class A shares is designed to minimize the
likelihood that this will occur.
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 Exhibit
hereto. Shareholders should carefully review this Proxy Statement
and Prospectus and the Exhibit hereto in their entirety and, in
particular, the current Prospectus of USGT which accompanies this
Proxy Statement and Prospectus and is incorporated by reference
herein.
Parties to the Reorganization
USGT is a diversified, open-end, management investment company
organized in 1982 as a Massachusetts business trust. USGT is
located at Two World Trade Center, New York, New York 10048-0203.
OppenheimerFunds, Inc. ("OFI") acts as investment adviser to USGT.
OppenheimerFunds Distributor, Inc. ("OFDI"), a subsidiary of OFI,
acts as the distributor of USGT's shares. Additional information
about USGT is set forth below.
Government Fund is a diversified portfolio (or "series") of
Oppenheimer Series Fund, Inc. (the "Company"), an open-end,
management investment company organized as a multi-series Maryland
corporation on December 9, 1981 that changed its name from
Connecticut Mutual Investment Accounts, Inc. on March 18, 1996.
The following changes took effect March 1, 1996: Government Fund's
address changed to Two World Trade Center, New York, NY 10048-0203,
and OFI became the Fund's investment adviser. On March 18, 1996,
OFS became Government Fund's transfer agent and shareholder
servicing agent and OFDI became the distributor of Government
Fund's shares. Additional information about Government Fund is set
forth below.
The Reorganization
The Reorganization Agreement provides for the transfer of
substantially all the assets of Government Fund to USGT in exchange
for the issuance of Class A and Class B shares of USGT to the
respective Class A and Class B shareholders of Government Fund, in
liquidation of Government Fund. The Reorganization Agreement also
provides for the distribution by the Fund of these shares of USGT
to the Fund shareholders in complete liquidation of the Fund. As
a result of the Reorganization, each Government Fund shareholder
will receive that number of full and fractional USGT shares equal
in value to such shareholder's pro rata interest in the net assets
transferred to USGT as of the Valuation Date (as hereinafter
defined). Holders of Class A and Class B shares of Government Fund
will receive Class A and Class B shares, respectively, of USGT.
For further information about the Reorganization see "Approval of
the Reorganization" below.
For the reasons set forth below under "The Proposal - Approval of
the Reorganization - Reasons for the Reorganization," the Board,
including the Directors who are not "interested persons" of the
Company (the "Independent Directors"), as that term is defined in
the Investment Company Act of 1940, as amended (the "1940 Act"),
has concluded that the Reorganization is in the best interests of
Government Fund and its shareholders and that the interests of
existing Government Fund shareholders will not be diluted as a
result of the Reorganization, and recommends approval of the
Reorganization by Government Fund shareholders. The Board of
Trustees of USGT has also approved the Reorganization and
determined that the interests of existing USGT shareholders will
not be diluted as a result of the Reorganization. If the
Reorganization is not approved, Government Fund will continue in
existence and the Board will determine whether to pursue
alternative actions. "The Proposal - Approval of the
Reorganization" sets forth certain information with respect to the
background of the Reorganization, including other transactions and
agreements entered into, or contemplated to be entered into, by
OFI, G.R. Phelps and their respective affiliates.
Approval of the Reorganization will require the affirmative vote of
the holders of a majority of Government Fund's Class A and Class B
shares outstanding and entitled to vote, voting together as a
series.
Tax Consequences of the Reorganization
As a condition to the closing of the Reorganization, Government
Fund and USGT will have received an opinion from Arthur Andersen
LLP, tax adviser to the Fund, to the effect that the Reorganization
will qualify as a tax-free reorganization for Federal income tax
purposes. As a result of such a tax-free reorganization, no gain
or loss would be recognized by Government Fund, USGT, or the
shareholders of either fund for Federal income tax purposes, except
to the extent the shareholders of Government Fund may realize
taxable income or gain if a distribution is made to them of any
portion of the "Cash Reserve," as defined below. For further
information about the tax consequences of the Reorganization, see
"The Proposal - Approval of the Reorganization -Tax Aspects of the
Reorganization" below.
Investment Objectives and Policies
The investment objectives of Government Fund and USGT are similar.
USGT seeks high current income, preservation of capital and
maintenance of liquidity primarily through investments in debt
instruments issued or guaranteed by the U.S. Government or its
agencies or instrumentalities ("U.S. Government Securities").
Government Fund seeks a high level of current income with a high
degree of safety of principal by investing primarily in U.S.
Government Securities.
U.S. Government Securities include: (1) U.S. Treasury Bills
(maturities of one year or less when issued), U.S. Treasury Notes
(maturities of between two and ten years when issued), and U.S.
Treasury Bonds (generally maturities of greater than 10 years when
issued), all of which are backed by the full faith and credit of
the United States, and (2) obligations issued or guaranteed by U.S.
Government agencies or instrumentalities, some of which are backed
by the full faith and credit of the U.S. Treasury such as direct
pass-through certificates of the Government National Mortgage
Association ("Ginnie Mae" or "GNMA"); some of which are supported
by the right of the issuer to borrow from the U.S. Government, such
as obligations of the Federal National Mortgage Association
("Fannie Mae" or "FNMA") or Federal Home Loan Banks; and some of
which are backed only by the credit of the issuer itself, such as
obligations of the Federal Home Loan Mortgage Corporation ("Freddie
Mac") or Student Loan Marketing Association.
As a matter of fundamental policy, USGT will invest, under normal
market conditions, at least 80% of its total assets in U.S.
Government Securities. As a matter of non-fundamental policy, USGT
may invest up to 20% of its total assets in investment grade debt
securities of private issuers. Investment grade debt securities are
those rated within the four highest rating categories of Moody's
Investor Service, Inc. ("Moody's"), Standard and Poor's Rating
Group ("S&P") or such other nationally recognized rating agency,
or, if unrated, judged by OFI to be of comparable quality to debt
securities rated within such grades.
Government Fund will, under normal market conditions, invest at
least 65% of its total assets in U.S. Government Securities.
Government Fund may invest up to 35% of its total assets in
investment grade debt securities of private issuers.
Both Government Fund and USGT may invest in collateralized mortgage
obligations ("CMOs") issued by private issuers, or issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities. The Fund's investments in private-issuer CMOs
are limited to those rated within the two highest rating categories
by a nationally recognized rating agency. Both the Fund and USGT
may also invest in stripped interest-only or principal-only
mortgage-backed securities.
Government Fund may invest up to 5% of its total assets in inverse-
floating rate instruments. USGT may hold a de minimis position in
such instruments. Government Fund may invest up to 20% of its
total assets in mortgage dollar rolls. USGT may also enter into
mortgage dollar rolls.
To hedge against interest rate changes or for non-hedging purposes,
Government Fund may buy and sell various futures, and may sell
covered call options on any of such futures. USGT may write
covered call options on securities held by it to seek income. For
hedging purposes, USGT may buy and sell various futures, options on
such futures, and options on securities. Both Government Fund and
USGT may enter into interest rate swaps for hedging purposes.
Government Fund may also use interest rate swaps to seek to
increase income.
Both Government Fund and USGT may lend their portfolio securities,
enter into repurchase agreements, and invest in illiquid
securities.
Although the respective investment objectives of the funds are
similar, shareholders of Government Fund should consider certain
differences in investment policies. See "Comparison Between USGT
and Government Fund - Comparison of Investment Objectives, Policies
and Restrictions."
Investment Advisory and Distribution Plan Fees
The funds obtain investment management services from OFI pursuant
to the terms of their respective investment advisory agreements.
Each fund's management fee is payable to OFI monthly and is
computed on the net asset value of the respective fund as of the
close of business each day.
USGT pays a monthly management fee which declines on additional
assets as USGT increases its asset base, at the annual rate of
0.65% of the first $200 million of aggregate net assets, 0.60% of
the next $100 million, 0.57% of the next $100 million, 0.55% of the
next $400 million and 0.50% of aggregate net assets over $800
million. Government Fund pays a monthly management fee at an
annual rate of 0.625% of the first $300 million of net assets,
0.500% of the next $100 million and 0.450% of net assets over $400
million.
Both USGT and Government Fund have adopted service plans for their
Class A shares, and service and distribution plans for their Class
B shares, pursuant to Rule 12b-1 under the 1940 Act. Pursuant to
the plans, Class A and Class B shares of USGT and the Fund are
authorized to pay OFDI in connection with the distribution of
shares and the servicing of shareholder accounts that hold the
fund's shares. The Class A 12b-1 plans provide for reimbursement
of expenses of OFDI. The Class B 12b-1 plans provide for payments
at a fixed rate to compensate OFDI. The current maximum annual fee
payable by shares of USGT and the Fund pursuant to their 12b-1
plans is (i) as to Class A shares, 0.25% (as a service fee) and
(ii) as to Class B shares, 1.00% (consisting of a 0.25% service fee
and a 0.75% "asset-based sales charge").
Class B shares of USGT and Government Fund automatically convert to
Class A shares six years and eight years after purchase,
respectively. Accordingly, Class B shareholders of the Fund may
pay the asset-based sales charge on their shares for a longer
period than USGT Class B shareholders.
Purchases, Exchanges and Redemptions
Purchases. Purchases of shares of USGT and the Fund may be made
directly through OFDI or through any dealer, broker or financial
institution that has a sales agreement with OFDI. In addition, a
shareholder of USGT may purchase shares automatically from an
account at a domestic bank or other financial institution under the
"OppenheimerFunds AccountLink" service. Class A shares of both
USGT and the Fund generally are sold subject to an initial sales
charge. The maximum initial sales charge rate is 0.75% higher for
USGT Class A shares than for Government Fund Class A shares. Class
B shares of both funds generally are sold without a front-end sales
charge but may be subject to a CDSC upon redemption. See
"Comparative Fee Tables -- Transaction Charges" above for a
complete description of such sales charges.
Class A shares of each fund may be purchased at reduced sales
charges, and the Class B CDSC of each fund may be waived in certain
circumstances, as described in that fund's Prospectus. USGT has
agreed that each shareholder holding Government Fund shares as of
the reorganization date who is presently eligible (i) to purchase
Class A shares of Government Fund at net asset value or (ii) for a
waiver from the CDSC applicable to either Class A or Class B shares
of Government Fund, in accordance with Government Fund's current
prospectus, will retain these privileges with respect to USGT
shares, commencing as of the date USGT's prospectus is
appropriately revised. These privileges apply only to accounts
holding USGT shares received in the Reorganization, and terminate
once all shares held in such an account are redeemed or exchanged.
Effective March 18, 1996, Government Fund shares are no longer
available for purchase by new investors, including shares purchased
by exchange from any other mutual fund. Existing Government Fund
shareholders may purchase additional shares through subsequent
investment, investment of dividends and distributions, or exchange.
The Class A USGT shares to be issued under the Reorganization
Agreement will be issued by USGT at net asset value without a sales
charge. The sales charge on Class A shares of USGT will only
affect shareholders of Government Fund to the extent that they
desire to make additional purchases of Class A shares of USGT in
addition to the shares which they will receive as a result of the
Reorganization. Future dividends and capital gain distributions of
USGT, if any, may be reinvested without sales charge. The Class B
shares of USGT to be issued under the Reorganization Agreement will
be issued at net asset value and, along with Class A shares of USGT
to be issued under the Reorganization Agreement, will be deemed
aged to the same level as the shareholder's existing Government
Fund Class A and Class B shares, for purposes of imposing the CDSC
of that class at redemption and for converting Class B to Class A
shares.
Exchanges. Shareholders of USGT may exchange their shares at net
asset value for shares of the same class of mutual funds within the
Oppenheimer funds family (46 other portfolios), subject to certain
conditions. Shares of Government Fund may only be exchanged for
shares of the same class of another series of the Company (7 other
portfolios). USGT offers an automatic exchange plan providing for
systematic exchanges from USGT of a specified amount for shares of
the same class of other funds within the Oppenheimer funds family.
Exchanges of Government Fund shares in excess of 12 in a 12-month
period are subject to an exchange fee of 0.75% of net assets of the
exchanged shares.
Redemptions. Class A shares of the funds may be redeemed without
charge at their respective net asset values per share calculated
after the redemption order is received and accepted. However,
certain large investments of Class A shares that were exempt from
the front-end sales charge upon purchase may be subject to a CDSC
upon redemption. See "Comparative Fee Tables -- Transaction
Charges" above. Class B shares of the funds may be redeemed at
their net asset value per share, subject to a maximum CDSC of 5.0%
for redemptions occurring within six years of purchase. The Class
B CDSC is 1% lower for USGT shares during the second, third and
fourth years after purchase.
Shareholders of USGT may reinvest redemption proceeds of Class A
shares on which an initial sales charge was paid, or Class A or
Class B shares on which a CDSC was paid, within six months of a
redemption at net asset value in Class A shares of USGT or any of
numerous mutual funds within the Oppenheimer funds family.
Shareholders of Government Fund may reinvest all or part of the
redemption proceeds of Class A shares in Class A shares of
Government Fund within 60 days after the date of the redemption
without the imposition of a sales charge. Shareholders of both
funds may redeem their shares by written request or by telephone
request in certain stated amounts, or they may arrange to have
share redemption proceeds wired, for a fee, to a pre-designated
account at a U.S. bank or other financial institution that is an
automated clearing house ("ACH") member. Checkwriting privileges
on Class A shares of USGT are also available. 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. For Government Fund, the corresponding minimum is
100 shares once the account has been open at least 24 months. The
funds offer automatic withdrawal plans providing for systematic
withdrawals of a specified amount from the fund account.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in
USGT, shareholders should carefully consider the following summary
of risk factors, relating to both USGT and Government Fund, in
addition to the other information set forth in this Proxy Statement
and Prospectus. A more complete description of risk factors for
each fund is set forth in the Prospectuses of the funds and their
respective Statements of Additional Information.
USGT and Government Fund are intended for investors seeking high
current income and not for investors seeking capital appreciation.
There is no assurance that either USGT or Government Fund will
achieve its investment objective and investment in the funds is
subject to investment risks, including the possible loss of the
principal invested. As described below, each fund generally
invests a certain percentage of its assets in non-U.S. government
investment-grade debt securities.
Investment in Debt Securities
The funds both seek their investment objective through investments
primarily in debt instruments issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Interest Rate Risk. Debt securities are subject to interest rate
risk. Interest rate risk relates to fluctuations in market value
due to changes in prevailing interest rates. When prevailing
interest rates fall, the values of already-issued debt securities
generally rise. When interest rates rise, the values of already-
issued debt securities generally decline. The magnitude of these
fluctuations will often be greater for longer-term debt securities
than shorter-term debt securities. Changes in the value of
securities held by a fund mean that the fund's share prices can go
up or down when interest rates change because of the effect of the
change on the value of the fund's portfolio of debt securities.
Credit Risk. Credit risk relates to the ability of the issuer of
a debt security to make interest or principal payments on the
security as they become due. Generally, higher-yielding, lower-
rated bonds are subject to greater credit risk than higher-rated
bonds. Securities issued or guaranteed by the U.S. government are
subject to little, if any, credit risk. USGT is permitted to
invest up to 20% of its total assets in non-U.S. Government
investment-grade debt securities or, if unrated, judged by OFI to
be of comparable quality to debt securities rated within such
grades. Government Fund may invest up to 35% of its total assets
in non-U.S. Government investment-grade debt securities.
Mortgage-Backed Securities; CMOs; Derivatives. The funds may
invest in mortgage-backed "pass-through" securities. Mortgage-
backed securities are subject to prepayment risks. The effective
maturity of a mortgage-backed security may be shortened by
unscheduled or early payment of principal and interest on the
underlying mortgages. This may result in greater price and yield
volatility than traditional fixed-income securities that have a
fixed maturity and interest rate. The principal that is returned
may be invested in instruments having a higher or lower yield than
the prepaid instruments depending on then-current market
conditions. Such securities therefore may be less effective as a
means of "locking in" attractive long-term interest rates and may
have less potential for appreciation during periods of declining
interest rates than conventional bonds with comparable stated
maturities.
If the funds buy mortgage-backed securities at a premium,
prepayments of principal and foreclosures of mortgages may result
in some loss of the fund's principal investment to the extent of
the premium paid. The value of mortgage-backed securities may also
be affected by changes in the market's perception of the
creditworthiness of the entity issuing or guaranteeing them or by
changes in government regulations and tax policies.
The funds may invest in collateralized mortgage obligations
("CMOs") issued by either the U.S. Government, its agencies or
instrumentalities, or by private issuers. Government Fund's
investments in private-issuer CMOs will be limited to those rated
within the two highest rating categories by a nationally recognized
rating agency. CMOs may be issued in a variety of classes or
series ("tranches"). The principal value of certain CMO tranches
may be more volatile and less liquid than other types of mortgage-
related securities, because of the possibility that the principal
value of the CMOs may be prepaid earlier than the maturity of the
CMOs as a result of prepayments of the underlying mortgage loans by
the borrowers.
Government Fund may invest up to 5% of its total assets in inverse
floating rate instruments. USGT may hold a de minimis position in
such securities. Yields on inverse floaters move in the opposite
direction as short-term interest rates change. Prices of inverse
floaters may be more volatile than prices of comparable fixed-rate
securities.
USGT and Government Fund may also invest in "stripped" mortgage-
backed securities, a type of derivative investment. Derivatives
are investments that provide for payments based on or "derived
from" the performance of an underlying asset or index. Derivatives
may be, but are not necessarily, more risky than conventional
stocks, bonds and money market instruments. Stripped mortgage-
backed securities usually have two classes. The classes receive
different proportions of the interest and principal distributions
on the pool of mortgage assets that act as collateral for the
security. In certain cases, one class will receive all of the
interest payments (and is known as an "I/O"), while the other class
will receive all of the principal payments (and is known as a
"P/O").
The yield to maturity on an I/O is extremely sensitive to the rate
of payment of the principal on the underlying mortgages. Principal
prepayments increase that sensitivity. Stripped securities that
pay "interest only" are therefore subject to greater price
volatility when interest rates change, and they have the additional
risk that if the underlying mortgages are prepaid, the fund will
lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates
fall, and in times of rapidly falling interest rates, the fund
might receive back less than its investment in such I/Os. The
value of P/O securities generally decreases as interest rates rise
and prepayment rates fall. The price of these securities is
typically more volatile than that of coupon-bearing bonds of the
same maturity.
Repurchase Agreements
The funds may enter into repurchase agreements of seven days or
less without limit and may cause up to 10% of their respective net
assets to be subject to repurchase agreements having a maturity
beyond seven days. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the resale
price on the delivery date, the funds may experience costs or
delays in disposing of the collateral and may experience losses to
the extent that the proceeds from the sale of the collateral is
less than the repurchase price.
Options, Futures and Interest Rate Swaps
To hedge against interest rate changes or for non-hedging purposes,
Government Fund may buy and sell various futures, and may sell
covered call options on any of such futures. USGT may write
covered call options on securities held by it to seek income. For
hedging purposes, USGT may buy and sell various futures, options on
such futures, and options on securities. Both the Fund and USGT
may enter into interest rate swaps for hedging purposes. The Fund
may also use interest rate swaps to seek to increase income.
The risk of writing covered call options includes the inability to
participate in the appreciation of the underlying security above
the exercise price. Hedging with options and futures may reduce
the fund's total return if used at the wrong time or if market
conditions are not judged correctly. Government Fund or USGT 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 option or future.
APPROVAL OF THE REORGANIZATION
(The Proposal)
Background
On February 29, 1996, the indirect parent company of Phelps,
Connecticut Mutual Life Insurance Company ("Connecticut Mutual"),
merged with and into Massachusetts Mutual Life Insurance Company
("MassMutual"). On that date, Connecticut Mutual ceased to exist
and MassMutual became the surviving company. Immediately
subsequent to the merger, MassMutual became the nation's fifth
largest life insurance company.
MassMutual is the ultimate parent company of OppenheimerFunds, Inc.
("OFI"), which is engaged (directly and through subsidiaries) in
the business of managing, distributing and servicing registered
investment companies. As of March 1, 1996, OFI (including a
subsidiary) had more $50 billion in assets under management, the
majority of which is represented by the Oppenheimer funds.
Board Approval of the Reorganization
At its meeting on November 17, 1995, the Company's Board, including
the Independent Directors, unanimously approved the Reorganization
and the Reorganization Agreement, determined that the
Reorganization is in the best interests of Government Fund and its
shareholders and resolved to recommend that Government Fund
shareholders vote for approval of the Reorganization. The Board
further determined that the Reorganization would not result in
dilution of Government Fund's shareholders' interests. The
Company's Board of Directors, on behalf of Government Fund,
believes that the proposed Reorganization will be advantageous to
the shareholders of Government Fund in several respects. The Board
considered the following matters, among others, in approving the
Proposal.
First, the Board believes that it is not advantageous to operate
and market Government Fund separately from USGT because their
investment objectives and policies are substantially similar. By
being offered simultaneously, each fund hinders the other fund's
potential for asset growth. For a complete description of USGT's
investment objectives and policies, see USGT's Prospectus included
with this Proxy Statement.
Second, the Board considered that shareholders may be better served
by a fund offering greater diversification. To the extent that the
funds' assets are combined into a single portfolio and a larger
asset base is created as a result of the Reorganization, greater
diversification of USGT's investment portfolio can be achieved than
is currently possible in either fund alone, especially Government
Fund. Greater diversification is expected to be beneficial to
shareholders of both funds because it may reduce the negative
effect which the adverse performance of any one security may have
on the performance of the entire portfolio.
Third, the Board considered the fact that USGT is subject to a
higher management fee rate than Government Fund. The Board
believes that the assets of USGT attributable to Government Fund
will receive the benefit of OFI's capabilities and resources in
investment management and that the payment by the assets of
Government Fund of a higher management fee rate for these services
and resources is reasonable and in the best interests of Government
Fund's shareholders.
Fourth, the Board believes that the USGT shares received in the
Reorganization will provide existing Government Fund shareholders
with substantially the same investment advantages that they
currently enjoy. The Board also considered the performance history
of each fund.
Fifth, a combined fund offers economies of scale that may have a
positive effect on the expenses currently borne by Government Fund,
and hence, indirectly, its shareholders. Both funds incur
substantial costs for accounting, legal, transfer agency services,
insurance, and custodial and administrative services. The Board
expects that the Reorganization may result over time in a decrease
in the expenses currently borne indirectly by Government Fund's
shareholders. See expense information in "Comparative Fee Tables."
The Board considered the fact that, from the perspective of USGT,
the Reorganization presents an opportunity to acquire assets
without the obligation to incur costs that may be associated with
the purchase of securities. This opportunity provides an economic
benefit to USGT and its shareholders.
The Board also considered the fact that OFI and OFDI will receive
certain benefits from the Reorganization. The consolidated
portfolio management effort might result in time savings for OFI
and the preparation of fewer prospectuses, reports and regulatory
filings. The Board, however, believes that this consideration will
not amount to a significant economic benefit.
USGT's Board of Trustees, including the trustees who are not
"interested persons" of USGT, unanimously approved the
Reorganization and the Reorganization Agreement and determined that
the Reorganization is in the best interests of USGT and its
shareholders. The Board further determined that the Reorganization
would not result in dilution of the USGT shareholders' interests.
The USGT Board considered, among other things, that an increase in
USGT's asset base as a result of the Reorganization could benefit
USGT shareholders due to the economies of scale available to a
larger fund. Over time, these economies of scale should result in
slightly lower costs per account for each USGT shareholder through
lower operating expenses and transfer agency expenses.
Regulatory Approval of the Reorganization
The funds, OFI and MassMutual have applied to the SEC for an order
exempting the Reorganization from the provisions of Section 17 of
the 1940 Act. Because MassMutual owns more than 5% of the shares
of Government Fund, the reorganization does not qualify to use the
exemptive provisions of the 1940 Act without an order of the SEC.
If the SEC does not grant the exemptive relief requested, the
Reorganization will not proceed and the Company's Board of
Directors will determine what action, if any, will be taken on
behalf of Government Fund.
The Reorganization
The following summary of the Reorganization Agreement is qualified
in its entirety by reference to the Reorganization Agreement (a
copy of which is set forth in full as Exhibit A to this Proxy
Statement and Prospectus). The Reorganization Agreement
contemplates a reorganization under which (i) substantially all of
the assets of Government Fund would be transferred to USGT in
exchange for the issuance of Class A and Class B shares of USGT,
(ii) these Class A and Class B shares would be distributed to the
respective Class A and Class B shareholders of Government Fund in
liquidation of the Fund and (iii) the outstanding shares of
Government Fund would be cancelled. Prior to the closing date
(April 26, 1996, or such other date as the funds may designate; the
"Closing Date"), Government Fund will endeavor to discharge all of
its liabilities and obligations when and as due prior to such date.
USGT will not assume any liabilities or obligations of Government
Fund except for portfolio securities purchased which have not
settled and any Government Fund liability for outstanding
shareholder redemptions and dividend checks. In this regard,
Government Fund will retain a cash reserve (the "Cash Reserve") in
an amount which is deemed sufficient in the discretion of the Board
for the payment of (a) the Fund's expenses of liquidation (if any)
and (b) the Fund's liabilities, other than those assumed by USGT.
The Cash Reserve will be accounted for as a liability of Government
Fund prior to the determination of its net asset value. The number
of full and fractional Class A and Class B shares of USGT to be
issued to Government Fund will be determined on the basis of USGT's
and the Fund's relative net asset values per Class A and Class B
shares, respectively, computed as of the close of business of The
New York Stock Exchange on the business day preceding the Closing
Date (the "Valuation Date").
OFI will utilize the valuation procedures set forth in the
Prospectus and Statement of Additional Information of USGT to
determine the value of the Fund's assets to be transferred to USGT
pursuant to the Reorganization, the value of USGT's assets and the
net asset value of each class of shares of USGT. Such values will
be computed by OFI as of the Valuation Date in a manner consistent
with its regular practice in pricing USGT.
The Reorganization Agreement provides for coordination between the
funds as to their respective portfolios so that, on and after the
Closing Date, USGT will be in compliance with all of its investment
policies and restrictions. Government Fund will recognize capital
gain or loss on any sales made pursuant to this condition. As
noted in "Tax Aspects of the Reorganization" below, if Government
Fund realizes net gain from the sale of securities, such gain, to
the extent not offset by capital loss carry-forwards, will be
distributed to shareholders prior to the Closing Date and will be
taxable to shareholders as long-term capital gain or, if the assets
disposed of had not been held for more than one year, as ordinary
income.
Contemporaneously with the closing, Government Fund will be
liquidated (except for the Cash Reserve) and Government Fund will
distribute or cause to be distributed pro rata to Government Fund
shareholders of record as of the close of business on the Valuation
Date the full and fractional USGT shares of each class received by
Government Fund. Upon such liquidation, all issued and outstanding
shares of Government Fund will be cancelled on Government Fund's
books and Government Fund shareholders will have no further rights
as shareholders of Government Fund. To assist Government Fund in
the distribution of USGT shares, USGT will, in accordance with a
shareholder list supplied by Government Fund, cause USGT's transfer
agent to credit and confirm an appropriate number of shares of USGT
to each shareholder of Government Fund.
Certificates for shares of USGT will be issued upon written request
of a former shareholder of Government Fund but only for whole
shares with fractional shares credited to the name of the
shareholder on the books of USGT. Former shareholders of
Government Fund who wish certificates representing their shares of
USGT must, after receipt of their confirmations, make a written
request to OppenheimerFunds Services, P.O. Box 5270, Denver,
Colorado 80217. Shareholders of Government Fund holding
certificates representing their shares will not be required to
surrender their certificates to anyone in connection with the
Reorganization. After the Reorganization, however, it will be
necessary for such shareholders to surrender such certificates in
order to redeem, transfer, pledge or exchange any shares of USGT.
After the closing of the Reorganization, Government Fund will not
conduct any business except in connection with the winding up of
its affairs. Under the Reorganization Agreement, within one year
after the Closing Date, Government Fund shall: 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 Government Fund who
were such on the Valuation Date. After this transfer or
distribution, Government Fund's existence will be terminated. 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
Government Fund shares outstanding on the Valuation Date.
The consummation of the Reorganization is subject to the conditions
set forth in the Reorganization Agreement, including, without
limitation, approval of the Reorganization by Government Fund's
shareholders. Notwithstanding approval of Government Fund's
shareholders, the Reorganization may be terminated at any time at
or prior to the Closing Date (i) by mutual written consent of the
Company, on behalf of Government Fund, and USGT, (ii) by the
Company, on behalf of Government Fund, or USGT upon a breach by the
other of any material provision of the Reorganization Agreement, or
(iii) if the requested SEC order described above is not granted by
the SEC.
Termination of the Reorganization Agreement will terminate all
obligations of the parties thereto (other than a confidentiality
obligation of USGT with respect to information relating to the Fund
and the obligation of USGT to return certain books and records to
the Fund) without liability except, in the event of a termination
pursuant to (ii) above, any party in breach (other than a breach
due to the Fund's shareholders not approving the Reorganization) of
the Reorganization Agreement will, upon demand, reimburse the non-
breaching party for all reasonable out-of-pocket fees and expenses,
if any, incurred in connection with the transactions contemplated
by the Reorganization Agreement.
Approval of the Reorganization will require the vote specified
below in "Information Concerning the Meeting - Record Date; Vote
Required; Share Information." If the Reorganization is not
approved by the shareholders of the Fund, the Directors of the
Company will consider other possible courses of action.
Tax Aspects of the Reorganization
At or prior to the Closing Date, Government Fund will declare a
dividend in an amount large enough so that it will have declared a
dividend of all of its investment company taxable income and net
capital gain, if any, for the taxable period ending on the Closing
Date (determined without regard to any deduction for dividends
paid). Such dividends will be included in the taxable income of
the Fund's shareholders as ordinary income and long-term capital
gain, respectively.
The exchange of the assets of Government 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 reorganization under Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Fund has represented to
Arthur Andersen 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 Arthur Andersen LLP the fact that, as of the Closing
Date, the Fund and USGT will qualify as regulated investment
companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, USGT and the
Fund will receive the opinion of Arthus Andersen LLP to the effect
that, based on the Reorganization Agreement, the above
representations and other representations as such firm shall
reasonably request, existing provisions of the Code, Treasury
Regulations issued thereunder, current Revenue Rulings, Revenue
Procedures and court decisions, for Federal income tax purposes:
1. The transfer of substantially all of Government Fund's
assets in exchange for Class A and Class B shares of USGT and
the assumption by USGT of certain identified liabilities of
the Fund followed by the distribution by the Fund of Class A
and Class B shares of USGT to the Fund shareholders in
exchange for their Fund shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of
the Code and the Fund and USGT will each be a "party to a
reorganization" within the meaning of Section 368(b) of the
Code.
2. Pursuant to Section 1032 of the Code, no gain or loss will
be recognized by USGT upon the receipt of the assets of the
Fund solely in exchange for Class A and Class B shares of USGT
and the assumption by USGT of the identified liabilities of
the Fund.
3. Pursuant to Section 361(a) of the Code, no gain or loss
will be recognized by the Fund upon the transfer of the assets
of the Fund to USGT in exchange for Class A and Class B shares
of USGT and the assumption by USGT of certain identified
liabilities of the Fund or upon the distribution of Class A
and Class B shares of USGT to the Fund shareholders in
exchange for the Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain or loss
will be recognized by the Fund shareholders upon the exchange
of the Fund shares for the Class A and Class B shares of USGT.
5. Pursuant to Section 358 of the Code, the aggregate tax
basis for Class A and Class B shares of USGT received by each
Fund shareholder pursuant to the reorganization will be the
same as the aggregate tax basis of the Fund shares held by
each such Fund shareholder immediately prior to the
reorganization.
6. Pursuant to Section 1223 of the Code, the holding period
of Class A and Class B shares of USGT to be received by each
Fund shareholder will include the period during which the Fund
shares surrendered in exchange therefor were held (provided
such Fund shares were held as capital assets on the date of
the reorganization).
7. Pursuant to Section 362(b) of the Code, the tax basis of
the assets of the Fund acquired by USGT will be the same as
the tax basis of such assets of the Fund immediately prior to
the Reorganization.
8. Pursuant to Section 1223 of the Code, the holding period
of the assets of the Fund in the hands of USGT will include
the period during which those assets were held by the Fund.
9. USGT will succeed to and take into account the items of
the Fund described in Section 381(c) of the Code, including
the earnings and profits, or deficit in earnings and profits,
of the Fund as of the date of the transactions. USGT will
take these items into account subject to the conditions and
limitations specified in Sections 381, 382, 383 and 384 of the
Code and applicable regulations thereunder.
However, in the event that any of the remaining cash reserve of
Government Fund is distributed to the Government Fund's
shareholders, gain will be realized by each of Government Fund's
shareholders and recognized under Section 356(a)(1) of the Code to
the extent of the cash received.
Shareholders of the Fund should consult their tax advisors
regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Since the foregoing discussion
only relates to the Federal income tax consequences of the
Reorganization, shareholders of the Fund should also consult their
tax advisers as to state and local tax consequences, if any, of the
Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of USGT and
Government Fund and indicates the pro forma combined capitalization
as of December 31, 1995 as if the Reorganization had occurred on
that date.
Net
Asset
Net Shares Value
Assets Outstanding Per Share
(in thousands)
USGT
Class A Shares $523,795 54,196,215 $9.66
Class B Shares $ 28,809 2,465,857 $9.66
Class C Shares* $ 17,678 1,831,190 $9.65
Government Fund
Class A Shares $49,829 4,644,816 $10.73
Class B Shares $ 74 6,904 $10.77
Pro Forma Combined
Fund**
Class A Shares $573,624 59,354,497 $9.66
Class B Shares $ 23,883 2,473,558 $9.66
Class C Shares* $ 17,678 1,831,190 $9.65
- ------------------
*No USGT Class C shares are being issued in the Reorganization
because there are no outstanding Government Fund Class C shares.
**Reflects issuance of 5,158,282 Class A shares and 7,701 Class B
shares of USGT in a tax-free exchange for the net assets of the
Fund, aggregating $573,624,000 and $23,883,000 for Class A and
Class B shares, respectively, of the Fund.
The pro forma ratio of expenses to average annual net assets of the
combined funds at December 31, 1995 would have been 1.08% with
respect to Class A shares and 1.84% with respect to Class B shares.
COMPARISON BETWEEN USGT AND GOVERNMENT FUND
Comparative information about USGT and the Fund is presented below.
More complete information about USGT and the Fund is set forth in
their respective Prospectuses (which, as to USGT, accompanies this
Proxy Statement and Prospectus and is incorporated herein by
reference) and Statements of Additional Information. To obtain
copies of a fund's prospectus, see "Miscellaneous - Public
Information."
Comparison of Investment Objectives, Policies and Restrictions
As its investment objective, USGT seeks high current income,
preservation of capital and maintenance of liquidity primarily
through investments in debt instruments issued or guaranteed by the
U.S. Government or its agencies or instrumentalities ("U.S.
Government Securities"). As its investment objective, Government
Fund seeks a high level of current income with a high degree of
safety of principal by investing primarily in U.S. Government
Securities.
Under normal market conditions, USGT invests at least 80% of its
total assets in U.S. Government Securities. These include: (1)
U.S. Treasury Bills, U.S. Treasury Notes, and U.S. Treasury Bonds
(see "Synopsis - Investment Objectives and Policies"),(2)
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities (see "Synopsis - Investment Objectives and
Policies"), and (3) mortgage-backed securities including (a)
collateralized mortgage-backed securities ("CMOs") and (b)
"stripped" mortgage backed securities.
USGT may invest up to 20% of its total assets in non-U.S.
Government debt securities which, as a matter of non-fundamental
policy, will be limited to debt securities rated within the four
highest rating categories of Moody's, S&P, or such other nationally
recognized rating agency or, if unrated, judged by OFI to be of
comparable quality to debt securities rated within such grades.
USGT may, subject to the foregoing, invest in private issuer CMOs
and "stripped" mortgage-backed securities.
Under normal market conditions, Government Fund invests at least
65% of its total assets in U.S. Government Securities. The
remainder of its assets (up to 35%) may be invested in non-U.S.
Government investment grade debt obligations. Both Government Fund
and USGT may invest in private-issuer CMO's and "stripped"
mortgage-backed securities. Government Fund's investments in
private-issuer CMOs are limited to those rated within the two
highest rating categories by a nationally recognized rating agency.
Government Fund may invest up to 5% of its total assets in inverse
floating rate instruments. USGT may hold a de minimis position in
such instruments.
Government Fund may invest up to 20% of its total assets in
mortgage dollar rolls. In these transactions, it sells mortgage-
backed securities for delivery in the current month and
simultaneously contracts to purchase similar securities on a
specified future date. All mortgage dollar rolls entered into by
Government Fund will be "covered" whereby there is an offsetting
cash or cash equivalent security position maturing on or before the
settlement date of the dollar roll. USGT may enter into "covered"
or "uncovered" mortgage dollar rolls. If uncovered, USGT is
required to identify liquid assets to its custodian bank in an
amount equal to its purchase payment obligation under the dollar
roll.
Special Investment Methods
USGT and Government Fund may use the special investment methods
summarized below.
Loans of Portfolio Securities. Both USGT and Government Fund may
lend their portfolio securities to brokers, dealers and other
financial institutions, subject to certain conditions. The funds
must receive collateral for the loans. USGT presently does not
intend that the value of securities loaned will exceed 5% of the
value of the total assets of USGT in the coming year. The value of
securities loaned by Government Fund may not exceed 33-1/3% of the
value of the Fund's total assets.
Repurchase Agreements. Both USGT and the Fund may enter into
repurchase agreements. There is no limit on the amount of either
fund's net assets that may be subject to repurchase agreements of
seven days or less. Neither fund will enter into a repurchase
agreement that will cause more than 10% of its net assets to be
subject to repurchase agreements having a maturity beyond seven
days.
Hedging. To hedge against interest rate changes or for non-hedging
purposes, Government Fund may buy and sell various futures, and may
write covered call options on any of such futures. The Fund may
also enter into closing purchase and sale transactions with respect
to any of such contracts and options. Futures contracts may be
based on various securities, such as U.S. Government Securities, on
securities indices, or on other financial indices. The aggregate
initial margin and premiums required to establish positions in
futures contracts and options on futures may not exceed 5% of the
Fund's total assets.
USGT may write covered call options on securities held by it to
seek income. For hedging purposes, USGT may buy and sell various
futures, options on such futures, and options on securities.
Futures contracts which USGT may buy and sell relate to interest
rates. USGT may hedge with options and futures to seek to manage
its exposure to changing interest rates. USGT may also hedge with
options and futures to try to manage its exposure to the
possibility that the prices of its portfolio securities may
decline, or to establish a position in the securities markets as a
temporary substitute for purchasing individual securities. USGT
may not purchase a call or put option if the value of all put and
call options held by USGT would exceed 5% of USGT's total assets.
The aggregate initial margin and premiums required to establish
positions in futures contracts and options on futures may not
exceed 5% of the Fund's total assets.
Both Government Fund and USGT may enter into interest rate swaps
for hedging purposes. The Fund may also use interest rate swaps to
seek to increase income. Both funds would typically use interest
rate swaps to adjust the effective duration of their portfolio.
Duration is a measure of a fund's sensitivity to interest rate
changes, and is a measure of volatility. Each fund will identify
liquid assets to its custodian bank in an amount equal to the
excess of its entitlements under interest rate swaps over its
obligations. USGT will not enter into interest rate swaps with
respect to more than 25% of its total assets.
Derivative Investments. In general, a "derivative investment" is
an investment whose performance is linked to the performance of
another investment or security, such as an option, future or index.
In the broadest sense, derivative investments include the hedging
instruments in which USGT and the Fund may invest. Other types of
derivatives in which USGT and the Fund may invest include
"stripped" interest-only mortgage-backed securities and "stripped"
principal-only mortgage-backed securities. Derivatives may be, but
are not necessarily, more risky than conventional securities, such
as stocks, bonds and money market instruments.
A risk of derivatives is that the underlying investment or security
might not perform the way the investment adviser expected it to
perform. Another risk is that the company issuing the derivative
investment might not pay amounts due on the investment. 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 a fund will realize less income than expected from
its investments, or that it can lose part or all of the value of
its investments, which will affect its share price. Certain
derivative instruments may trade in the over-the-counter markets
and may be illiquid.
Investment Restrictions
Both USGT and Government Fund have certain investment restrictions
that, together with their respective investment objectives, are
fundamental policies changeable only by shareholder approval. The
investment restrictions of USGT and the Fund are substantially the
same except as set forth below:
The Fund may not, as a matter of fundamental policy, purchase
equity securities (e.g., common stocks, preferred stocks), voting
stocks or local or state government securities (e.g., municipal
bonds, state bonds).
Additional Comparative Information
General
For a discussion of the organization and operation of USGT,
including brokerage practices, see "Investment Objective and
Policies" and "How the Fund is Managed" in USGT's current
Prospectus and "Brokerage Policies of the Fund" in USGT's
Additional Statement. For a discussion of the organization and
operation of the Fund, including brokerage practices, see
"Investment Objectives and Policies," "Management" and "The
Company" in the Fund's current prospectus and "Portfolio
Transactions and Brokerage" in the Fund's current Statement of
Additional Information.
Financial Information
For certain financial information about USGT and the Fund, see (as
to USGT) "Financial Highlights" and "Performance of the Fund" in
USGT's current Prospectus and (as to the Fund) "Summary of Investor
Expenses" and "Financial Highlights" in the Fund's current
Prospectus.
Management of USGT and the Fund
For information about the management of USGT and the Fund,
including their respective Boards of Trustees or Directors,
investment advisers, portfolio managers and distributors, see (as
to USGT) "Expenses" and "How the Fund is Managed" in USGT's current
Prospectus and (as to the Fund) "Management" in the Fund's current
Prospectus.
Description of Shares of USGT and the Fund
USGT is a Massachusetts business trust with each share of USGT
representing an interest in USGT proportionately equal to the
interest of each other share of the same class and entitles the
holder to one vote per share (and a fractional vote for a
fractional share) on matters submitted to a vote at shareholder
meetings. Shares of USGT vote together in the aggregate on certain
matters at shareholder meetings, such as the election of Trustees
and ratification of appointment of auditors. Shareholders of a
particular class vote separately on proposals which affect that
class, and shareholders of a class which are not affected by that
matter are not entitled to vote on the proposal. USGT is not
required to hold, and does not plan to hold, regular annual
meetings of shareholders. Shareholders of USGT have the right,
under certain circumstances, to remove a Trustee and will be
assisted in communicating with other shareholders for such purpose.
USGT is authorized to issue an unlimited number of shares of
beneficial interest. Shares are freely transferrable and shares do
not have cumulative voting rights or preemptive or subscription
rights. USGT is governed by a Board of Trustees that has the
power, without shareholder approval, to establish and designate one
or more series and to divide unissued shares into two or more
classes. The Board of Trustees has established three classes of
shares for USGT, Class A, Class B and Class C. Each class invests
in the same investment portfolio. Each class has its own dividends
and distributions, and pays certain expenses which may be different
for the different classes. Under certain circumstances, a
shareholder of USGT may be held personally liable as a partner for
the obligations of USGT, and under the Declaration of Trust, such
a shareholder is entitled to indemnification rights by USGT; the
risk of a shareholder incurring any such loss is limited to the
remote circumstances in which USGT is unable to meet its
obligations.
The Company is a Maryland corporation with 3 billion shares of
common stock, par value $0.001 per share, authorized. The Board is
authorized to classify and reclassify unissued common stock into
additional series and the series into one or more classes. The
shares of each class represent an interest in the same portfolio of
investments as the series and have equal rights as to voting,
redemption, dividends and liquidation. On matters affecting only
one series, only the shareholders of that series are entitled to
vote. On matters relating to all of the series but affecting the
series differently, separate votes by each series are required. On
matters relating to a single class of shares of a series, only the
shareholders of that class are entitled to vote. Shareholders
holding more than 50% of the shares of the Company can elect all of
the Company's directors. Each share is entitled to one vote within
each series.
For further information about the shares of USGT and the Fund,
including voting rights, restrictions on disposition and potential
liability associated with their ownership, see (as to USGT) "How
the Fund is Managed" in USGT's current Prospectus and USGT
Additional Statement, and (as to the Fund) "The Company" in the
Fund's current Prospectus.
Dividends, Distributions and Taxes
USGT declares dividends separately for Class A, Class B and Class
C shares from net investment income on each regular business day
and distribute dividends monthly. The Fund declares dividends
separately for Class A and Class B shares from net investment
income monthly and distributes dividends monthly. Both funds
declare and distribute net short-term and net long-term capital
gains, if any, annually. For a discussion of the policies of USGT
and the Fund with respect to dividends and distributions, and a
discussion of the tax consequences of an investment in USGT and the
Fund, see "Dividends, Capital Gains and Taxes" in the current
Prospectuses of both USGT and the Fund.
Purchases, Redemptions and Exchanges of Shares
For a discussion of how shares of USGT and the Fund may be
purchased, redeemed and exchanged, see (as to USGT) "How to Buy
Shares," "How to Sell Shares," "Exchanges of Shares," "Special
Investor Services," "Service Plan for Class A Shares," and
"Distribution and Service Plan for Class B Shares" in USGT's
current Prospectus; and see (as to the Fund) "How to Buy Shares,"
"How to Sell Shares," "How to Exchange Shares," "Investor Services"
and "Transaction Details" in the Fund's current Prospectus.
Shareholder Inquiries
For a description of how shareholder inquiries should be made, see
(as to USGT) "How the Fund is Managed" in USGT's current
Prospectus, and (as to the Fund) "Your Shareholder Manual" and
"Investor Services" in the Fund's current Prospectus.
Performance of USGT and the Fund
USGT does not maintain a fixed dividend rate and there can be no
assurance as to the payment of any dividends or realization of any
capital gains.
Included on page 20 of the prospectus for USGT, a copy of which
accompanies this Proxy Statement and Prospectus, in the section
entitled "Performance of the Fund," is a performance graph which
depicts the performance of a hypothetical investment of $10,000 in
Class A and Class C shares of USGT held until fiscal year-end June
30, 1995; in the case of Class A shares, since August 15, 1985 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. The graph
reflects the deduction of the 4.75% maximum initial sales charge on
Class A shares and the applicable CDSC on Class C shares. The
graph compares the average annual total return of Class A and Class
C shares of USGT with the performance of Lehman Brothers Corporate
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, which
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.
Class B shares of USGT were not offered prior to June 30, 1995 and
thus no performance information is shown for USGT's Class B shares
at fiscal year-end June 30, 1995.
Information on the Fund's performance is set forth in the Fund's
Annual Report as of December 31, 1995, which is incorporated herein
by reference and may be obtained without charge as set forth in
"Miscellaneous - Public Information."
INFORMATION CONCERNING THE MEETING
The Meeting
The Meeting and any adjournments thereof will be held at
OppenheimerFunds, Inc., 3410 South Galena Street, Denver, Colorado
80231, at 10:00 A.M., Denver time, on April 24, 1996. At the
Meeting, shareholders of the Fund will be asked to consider and
vote upon approval of the Reorganization Agreement, and the
transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund to USGT in exchange for
the issuance of Class A and Class B shares of USGT, the
distribution by the Fund of such shares to the shareholders of the
Fund in liquidation of the Fund and the cancellation of the
outstanding shares of the Fund.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on March 18, 1996 as the
record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Meeting.
The affirmative vote of the holders of a majority of Government
Fund's Class A and Class B shares outstanding and entitled to vote,
voting together as a series, 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 4,602,635.385 Class A and 8,291.336 Class B shares of
Government Fund issued and outstanding. The presence in person or
by proxy of the holders of a majority of Government Fund's 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 the Fund's
outstanding Class A or Class B shares, except for the following
persons:
Approximate % of
Outstanding Shares
Name and Address Shares of the Class
Massachusetts Mutual 678,294.574 14.73%
Life Insurance Company Class A shares
1295 State Street
Springfield, MA 01111
Wayne & Delores Bauman JTWROS 674.548 8.13%
4122 Leyden Avenue Class B shares
Des Moines, IA 50317-5524
Natalie A. Begelow 544.620 6.56%
24207 Chippewa Drive Class B shares
Flat Rock, MI 48134-1795
Harrie & Petrus Valckx JTWROS 946.319 11.41%
3615 Seabreeze CT Class B shares
Hayward, CA 94542-2517
Ardys Novinskie 480.105 5.79%
845 Eisenhower Street Class B shares
Fennimore, WI 53809-1311
Judith A. Damschroder 3,582.177 43.20%
3374 Muirfield Place Class B shares
Lima, OH 45805-4015
RPSS TR IRA FBO Donna Poole 1,089.170 13.13%
36 Riverdale Road Class B shares
Concord, MA 01742-3414
MassMutual acquired its shares as a consequence of its merger with
Connecticut Mutual, described above under "The Proposal - Approval
of the Reorganization - Background." The Company has been advised
that MassMutual intends to vote its shares in favor of the
Proposal.
As of the close of business on the Record Date, there were
approximately 49,915,751.302 Class A shares, 2,873,227.511 Class B
shares and 1,915,276.111 Class C shares of USGT issued and
outstanding. To the knowledge of USGT, as of the Record Date, no
person owned of record or beneficially 5% or more of USGT's
outstanding Class A, Class B or Class C shares, except for: Unified
Advisers Inc. as Agent for Oppenheimer US Government Trust A, 429
N. Pennsylvania St., Indianapolis, IN 46204-1873, which owned
2,538,498.219 Class A shares, representing approximately 5.06% of
the outstanding Class A shares, and Merrill Lynch Pierce Fenner &
Smith Inc., 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL 32246-
6484, which owned 238,526.000 Class C shares, representing
approximately 12.66% of the outstanding Class C shares.
As of the Record Date, the officers and Trustees of USGT, and the
officers and Directors of the Company, beneficially owned as a
group less than 1% of the outstanding shares of each class of USGT
and Government Fund, respectively.
In the event a quorum does not exist on the date originally
scheduled for the Meeting, or, subject to approval of the Board,
for other reasons, one or more adjournments of the Meeting may be
sought by the Board. Any adjournment would require a vote in favor
of the adjournment by the holders of a majority of the shares
present at the Meeting (or any adjournment thereof) in person or by
proxy. The persons named as proxies will vote all shares
represented by proxies which they are required to vote in favor of
the Proposal, in favor of an adjournment, and will vote all shares
which they are required to vote against the Proposal, against an
adjournment. In the event that a quorum is present at the Meeting
but shareholders do not approve the Reorganization, the
Reorganization will be deemed to have not been approved and the
Board will consider what further action, if any, to take.
Shares of common stock of the Company represented in person or by
proxy (including shares which abstain or do not vote with respect
to the Proposal presented for shareholder approval) will be counted
for purposes of determining whether a quorum is present at the
Meeting. 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 ("broker non-
votes"). Abstentions and broker non-votes will be counted as
present for purposes of determining a quorum and will have the same
effect as a vote against the Proposal, except as follows. If a
broker or nominee holding street account shares indicates on the
proxy that it does not have discretionary authority to vote on the
Proposal, those shares will not be considered as present and
entitled to vote on the Proposal and are not considered to be votes
cast.
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 a quorum to conduct the Meeting.
If a shareholder executes and returns a proxy but fails to indicate
how the votes should be cast, the proxy will be voted in favor of
the Proposal.
The proxy may be revoked at any time prior to the voting thereof
by: (i) writing to the Secretary of the Company at
OppenheimerFunds, Inc., Two World Trade Center, New York, New York
10048-0203; (ii) attending the Meeting and voting in person; (iii)
signing and returning a new proxy (if returned and received in time
to be voted); or (iv) voting by telephone, as explained below.
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
MassMutual. Any documents such as existing prospectuses or annual
reports that are included in that mailing will be a cost of the
fund issuing the document. In addition to the solicitation of
proxies by mail, proxies may be solicited by officers and employees
of OFI or OFI's affiliates, personally or by telephone or
telegraph. In addition, the Company has retained D.F. King & Co.,
Inc., 77 Water Street, New York, New York 10005 to assist in the
solicitation of proxies primarily by contacting shareholders by
telephone and telegram. The cost of such proxy solicitation will
be borne by MassMutual. D.F. King & Co., Inc. may call
shareholders to ask if they would be willing to have their votes
recorded by telephone. The telephone voting procedure is designed
to authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been
recorded properly. If these procedures were subject to a
successful legal challenge, such votes would not be counted at the
Meeting. The Company has not sought to obtain an opinion of
counsel on this matter and is unaware of any such challenge at this
time.
A shareholder would be called on a recorded line at the telephone
number the Company has in its records for the account and could be
asked the shareholder's Social Security number or other identifying
information. The shareholder would then be given an opportunity to
authorize proxies to vote his or her shares at the Meeting in
accordance with the shareholder's instructions. To ensure that the
shareholder's instructions have been recorded correctly, the
shareholder will also receive a confirmation of the voting
instructions in the mail. A special telephone number will be
available in case the voting information contained in the
confirmation is incorrect, to enable the shareholder to revise a
vote submitted by telephone. If the shareholder decides after
voting by telephone to provide a written proxy or attend the
Meeting, the shareholder can revoke the proxy at that time and
provide a written proxy or vote the shares at the Meeting.
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 MassMutual
for their reasonable out-of-pocket expenses.
In addition to the proxy solicitation expenses (as described
above), MassMutual will bear the cost of the tax opinion, as well
as any other expenses associated with the Reorganization, including
legal and accounting expenses.
MISCELLANEOUS
Financial Information
The Reorganization will be accounted for by USGT in its financial
statements similar to a pooling without restatement. Further
financial information as to Government Fund is contained in its
current Prospectus, which is available without charge upon written
request to OppenheimerFunds Services at P.O. Box 5270, Denver,
Colorado 80217 or by calling 1-800-525-7048, and is incorporated
herein, and in its audited financial statements as of December 31,
1995, which are included in the Additional Statement. Financial
information for USGT is contained in its current Prospectus
accompanying this Proxy Statement and Prospectus and incorporated
herein, and in its audited financial statements as of June 30, 1995
and unaudited financial statements as of December 31, 1995, which
are included in the Additional Statement.
Public Information
Additional information about USGT and the Fund is available, as
applicable, in the following documents which may be obtained
without charge by writing to OFS at P.O. Box 5270, Denver, Colorado
80217 or by calling 1-800-525-7048: (i) USGT's Prospectus dated
November 1, 1995, supplemented January 1, 1996 and January 5, 1996,
accompanying this Proxy Statement and Prospectus; (ii) Government
Fund's Prospectus dated October 1, 1995, supplemented March 18,
1996; (iii) USGT's Annual Report as of June 30, 1995 and Semi-
Annual Report (unaudited) as of December 31, 1995; and (iv)
Government Fund's Annual Report as of December 31, 1995.
Additional information about the following matters is contained in
the Additional Statement, which is incorporated herein by reference
and includes USGT's Statement of Additional Information dated
November 1, 1995; Government Fund's Prospectus dated October 1,
1995, supplemented March 18, 1996; Government Fund's Statement of
Additional Information dated October 1, 1995, supplemented March 1,
1996; and the Annual and Semi-Annual Reports described in the
preceding paragraph: the organization and operation of USGT and
Government Fund; more information on investment policies, practices
and risks; information about USGT's and Government Fund's
respective Boards of Trustees or Directors and officers and their
responsibilities; a further description of the services provided by
USGT's and Government 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 Government Fund; purchase,
redemption and exchange programs; and distribution arrangements.
USGT and Government Fund are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file reports and other information
with the SEC. Proxy material, reports and other information about
USGT and the Fund which are of public record can be inspected and
copied at public reference facilities maintained by the SEC in
Washington, D.C. and certain of its regional offices, and copies
of such materials can be obtained at prescribed rates from the
Public Reference Branch, Office of Consumer Affairs and Information
Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of the Fund knows of no business other than the matters
specified above which will be presented at the Meeting. Since
matters not known at the time of the solicitation may come before
the Meeting, the proxy as solicited confers discretionary authority
with respect to such matters as properly come before the Meeting,
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 if no voting instructions are provided.
By Order of the Board of Directors
Andrew J. Donohue, Secretary
March 18, 1996
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated
as of March 18, 1996 by and between Oppenheimer Series Fund, Inc.,
a Maryland corporation (the "Company") on behalf of Connecticut
Mutual Government Securities Account, a series of the Company
("Government Fund") 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 Government Fund
and USGT through the acquisition by USGT of substantially all of
the assets of Government Fund in exchange solely for the issuance
of voting shares of beneficial interest ("shares") of Class A and
Class B of USGT to Government Fund and the assumption by USGT of
certain liabilities of Government Fund, which Class A and Class B
shares of USGT are thereafter to be distributed by Government Fund
pro rata to its shareholders in complete liquidation of Government
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 this Agreement and Plan
of Reorganization (the "Agreement") 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 Government Fund in exchange for the issuance of Class A
and Class B shares of USGT to Government Fund and the assumption by
USGT of certain liabilities of Government Fund, followed by the
distribution by Government Fund of such Class A and Class B shares
of USGT to the Class A and Class B shareholders of Government Fund
in exchange for their Class A and Class B shares of Government
Fund, all upon and subject to the terms of the Agreement
hereinafter set forth.
The share transfer books of Government 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 Government Fund; redemption requests
received by Government Fund after that date shall be treated as
requests for the redemption of the shares of USGT that shall have
been distributed to the shareholder in question as provided in
Section 5.
2. On the Closing Date (as hereinafter defined), all of the
assets of Government Fund on that date, excluding a cash reserve
(the "Cash Reserve") to be retained by Government Fund sufficient
in its discretion for the payment of the expenses of Government
Fund's dissolution and its liabilities, but not in excess of the
amount contemplated by Section 10E of the Agreement, shall be
delivered as provided in Section 8 of the Agreement to USGT, in
exchange for and against delivery to Government Fund on the Closing
Date of a number of Class A and Class B shares of USGT, having an
aggregate net asset value equal to the value of the assets of
Government Fund so transferred and delivered.
3. The net asset value of Class A and Class B shares of USGT
and the value of the assets of Government 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 Class A and Class B shares of Government Fund shall be done in
the manner used by USGT and Government 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
Government Fund to be transferred to USGT.
Government 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 Government Fund's shareholders all of Government 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 of the transactions contemplated herein (the
"Closing") shall be at the office of OppenheimerFunds, Inc. (the
"Agent"), Two World Trade Center, Suite 3400, New York, New York
10048, at 4:00 P.M. New York time on April 26, 1996, 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, Government Fund
shall distribute on a pro rata basis to the shareholders of
Government Fund on the Valuation Date the Class A and Class B
shares of USGT received by Government Fund on the Closing Date in
exchange for the assets of Government Fund in complete liquidation
of Government Fund; for the purpose of the distribution by
Government Fund of Class A and Class B shares of USGT to its
shareholders, USGT will promptly cause its transfer agent to: (a)
credit an appropriate number of Class A and Class B shares of USGT
on the books of USGT to each Class A and Class B shareholder,
respectively of Government Fund in accordance with a list (the
"Shareholder List") of its shareholders received from Government
Fund; and (b) confirm an appropriate number of Class A and Class B
shares of USGT to each shareholder of Government Fund; certificates
for Class A and Class B shares of USGT will be issued upon written
request of a former shareholder of Government 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 Government Fund, indicating his or her share
balance. Government Fund agrees to supply the Shareholder List to
USGT not later than the Closing Date. Shareholders of Government
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 shares of USGT which
they received.
6. Within one year after the Closing Date, Government 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 Government 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 Government 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, Government
Fund shall deliver to USGT two copies of a list setting forth the
securities, cash and receivables then owned by Government Fund.
Promptly after the Closing, Government 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 Government Fund pursuant to Rule 17f-4 and
Rule 17f-5 under the Act shall be endorsed and delivered, or
transferred by appropriate transfer or assignment documents, by
Government 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 holding of Government Fund
shall be delivered to USGT in the form of certified or bank
cashiers' checks or by bank wire or intra-bank transfer to USGT's
custodian bank payable to the order of USGT for the account of
USGT.
Shares of USGT representing the number of shares of USGT
being delivered against the assets of Government Fund, registered
in the name of Government Fund, shall be transferred to Government
Fund on the Closing Date. Such shares shall thereupon be assigned
by Government Fund to its shareholders so that the shares of USGT
may be distributed as provided in Section 5.
If, at the Closing Date, Government 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 Government Fund, or the cash proceeds of a sale of
portfolio securities, prior to the Closing Date have not yet been
delivered to it or Government Fund's custodian, then the delivery
requirements of this Section 8 with respect to said undelivered
securities or cash will be waived and Government 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 as to such securities or cash proceeds 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 (a)
portfolio securities purchased which have not settled and (b)
shareholder redemption and dividend checks outstanding) of
Government Fund, but Government Fund will, nevertheless, use its
best efforts to discharge all known liabilities, so far as may be
possible, prior to the Closing Date. Each party represents to the
other that Massachusetts Mutual Life Insurance Company has agreed
to assume liability for and pay all expenses associated with the
reorganization, including legal and accounting expenses, the cost
of required tax opinions, and the cost of printing and mailing the
proxies and proxy statements in connection with the solicitation of
the approval by the shareholders of Government Fund of this
reorganization. However, any documents such as existing
prospectuses or annual reports that are included in that proxy
mailing will be a cost of the fund issuing the document. Other
than the cost of such documents, neither party will bear any
expenses associated with the reorganization.
10. The obligations of USGT hereunder shall be subject to the
following conditions:
A. The Board of Directors of the Company on behalf of
Government Fund shall have authorized the execution of the
Agreement, and the shareholders of Government Fund shall have
approved the Agreement and the transactions contemplated thereby,
and Government Fund shall have furnished to USGT copies of
resolutions to that effect certified by the Secretary or an
Assistant Secretary of the Company; such shareholder approval shall
have been by the affirmative vote of a majority of the outstanding
voting securities of Government 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 Piper & Marbury LLP, counsel to the Company, to the
effect that (i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of Maryland with full powers to conduct its business
as described by its charter and as currently being conducted; (ii)
the execution and delivery of the Agreement and the consummation of
the transactions contemplated therein will not result in any
violation of the provisions of the charter or by-laws of the
Company; and (iii) the Agreement has been duly authorized and
executed by the Company and the Agreement constitutes a legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratoriums and other similar laws relating to or affecting
creditor rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing.
C. The representations and warranties of the Company on
behalf of Government 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
Company, dated the Closing Date, to that effect.
D. On the Closing Date, Government Fund shall have
furnished to USGT a certificate of the Treasurer or Assistant
Treasurer of the Company as to the amount of the capital loss
carry-over , if any, and net unrealized appreciation or
depreciation, if any, with respect to Government Fund as of the
Closing Date.
E. The Cash Reserve shall not exceed 1% of the value of
the net assets, nor 10% in value of the gross assets, of Government
Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by
Oppenheimer U.S. Government Trust under the Securities Act of 1933,
as amended (the "1933 Act"), containing a preliminary form of the
Proxy Statement and Prospectus required under the Act to request
the approval of the shareholders of Government Fund of the
reorganization contemplated in the Agreement (the "Proxy Statement
and Prospectus"), shall have become effective under the 1933 Act
not later than December 31, 1996.
G. On the Closing Date, USGT shall have received a
letter of David E. Sams, Jr. or other senior executive officer of
G.R. Phelps & Co. Inc. (Government Fund's administrator and former
investment manager) 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 Government Fund arising out of
litigation brought against Government 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 Government 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 Arthur Andersen 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 Government Fund to be conveyed hereunder, which assets
shall be free and clear of all liens, encumbrances, security
interests, restrictions and limitations whatsoever.
J. Each Fund shall have received from the Securities
and Exchange Commission such order or orders as counsel to such
Fund deem reasonably necessary or desirable under the 1933 Act and
the Act in connection with the transactions contemplated hereby,
and that all such orders shall be in full force and effect.
11. The obligations of Government 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
thereby, and USGT shall have furnished to Government Fund copies of
resolutions to that effect certified by the Secretary or an
Assistant Secretary of Oppenheimer U.S. Government Trust.
B. Government Fund's shareholders shall have approved
the Agreement and the transactions contemplated hereby, by an
affirmative vote of the holders of a majority of Government Fund's
Class A and Class B shares outstanding and entitled to vote, voting
together as a series; and Government Fund shall have furnished USGT
copies of resolutions to that effect certified by the Secretary or
an Assistant Secretary of Government Fund.
C. Government Fund shall have received an opinion dated
the Closing Date of Myer, Swanson, Adams & Wolf, P.C., 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 described by its Declaration of Trust and to the best
knowledge of such counsel, 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 the Trust in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratoriums and other similar laws relating to or affecting
creditor rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing, and to authorize
effectively the transactions contemplated by the Agreement, have
been taken by USGT, and (iii) the 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
Government 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 the Trust to that effect dated the
Closing Date.
E. Government Fund shall have received an opinion of
Arthur Andersen LLP to the effect that the Federal tax consequences
of the transaction, if carried out in the manner outlined in this
Agreement and Plan of Reorganization and in accordance with (i)
Government Fund's representation that there is no plan or intention
by any Fund shareholder who owns 5% or more of Government Fund's
outstanding shares, and, to Government 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
Government 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, and (ii) the representation by each of Government
Fund and USGT that, as of the Closing Date, Government 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 Government Fund and
USGT made to Arthur Andersen LLP, and set forth in the opinion,
will generally be as follows:
1. The transfer of substantially all of Government
Fund's assets in exchange for Class A and Class B shares of USGT
and the assumption by USGT of certain identified liabilities of
Government Fund followed by the distribution by Government Fund of
Class A and Class B shares of USGT to Government Fund shareholders
in exchange for their Government Fund shares will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the
Code and Government Fund and USGT will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
2. Pursuant to Section 1032 of the Code, no gain
or loss will be recognized by USGT upon the receipt of the assets
of Government Fund solely in exchange for Class A and Class B
shares of USGT and the assumption by USGT of certain identified
liabilities of Government Fund.
3. Pursuant to Sections 361(a) and 361(c) of the
Code, no gain or loss will be recognized by Government Fund upon
the transfer of the assets of Government Fund to USGT in exchange
for Class A and Class B shares of USGT and the assumption by USGT
of certain identified liabilities of Government Fund or upon the
distribution of Class A and Class B shares of USGT to Government
Fund shareholders in exchange for Government Fund shares.
4. Pursuant to Section 354(a) of the Code, no gain
or loss will be recognized by Government Fund shareholders upon the
exchange of Government Fund shares for the Class A and Class B
shares of USGT. However, Government Fund shareholders may
recognize taxable income or gain to the extent they receive any
portion of the Cash Reserve, as defined in the Agreement.
5. Pursuant to Section 358 of the Code, the
aggregate tax basis for Class A and Class B shares of USGT received
by each Government Fund shareholder pursuant to the Reorganization
will be the same as the aggregate tax basis of Government Fund
shares held by each such Government Fund shareholder immediately
prior to the Reorganization.
6. Pursuant to Section 1223 of the Code, the
holding period of Class A and Class B shares of USGT to be received
by each Government Fund shareholder will include the period during
which Government Fund shares surrendered in exchange therefor were
held (provided such Government Fund shares were held as capital
assets on the date of the Reorganization.
7. Pursuant to Section 362(b) of the Code, the tax
basis of the assets of Government Fund acquired by USGT will be the
same as the tax basis of such assets of Government Fund immediately
prior to the Reorganization.
8. Pursuant to Section 1223 of the Code, the
holding period of the assets of Government Fund in the hands of
USGT will include the period during which those assets were held by
Government Fund.
9. USGT will succeed to and take into account the
items of Government Fund described in Section 381(c) of the Code,
including the earnings and profits, or deficit in earnings and
profits, of Government Fund as of the date of the transactions.
USGT will take these items into account subject to the conditions
and limitations specified in Sections 381, 382, 383 and 384 of the
Code and applicable regulations thereunder.
F. The Cash Reserve shall not exceed 1% of the value of
the net assets, nor 10% in value of the gross assets, of Government
Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by
Oppenheimer U.S. Government Trust under the 1933 Act, containing a
preliminary form of the Proxy Statement and Prospectus required
under the Act to request the approval of the shareholders of
Government Fund of the reorganization contemplated in the Agreement
shall have become effective under the 1933 Act not later than
December 31, 1996.
H. On the Closing Date, Government Fund shall have
received a letter of Andrew J. Donohue or other senior executive
officer of OppenheimerFunds, Inc. acceptable to Government 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 Government 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. Government Fund shall acknowledge receipt of the
shares of USGT.
J. Each Fund shall have received from the Securities
and Exchange Commission such order or orders as counsel to such
Fund deem reasonably necessary or desirable under the 1933 Act and
the Act in connection with the transactions contemplated hereby,
and that all such orders shall be in full force and effect.
12. The Company on behalf of Government Fund hereby
represents and warrants that:
A. The financial statements of Government Fund as at
December 31, 1995 (audited) heretofore furnished to USGT, present
fairly the financial position, results of operations, and changes
in net assets of Government Fund as of that date, in conformity
with generally accepted accounting principles applied on a basis
consistent with the preceding year; and that from December 31, 1995
through the date hereof there have not been, and through the
Closing Date there will not be, any material adverse change in the
business or financial condition of Government Fund, it being agreed
that a decrease in the size of Government 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 thereby by Government Fund's
shareholders, Government Fund has authority to transfer all of the
assets of Government 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 Company'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
Government Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Government Fund, threatened against Government Fund, not reflected
in such Prospectus;
E. There are no material contracts outstanding to which
Government Fund is a party other than those ordinary in the conduct
of its business;
F. Government Fund is a series of Oppenheimer Series
Fund, Inc., a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland; 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 Government 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
Government 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 Government 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 Government Fund ended December
31, 1995 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. Government Fund has elected to be treated as a
regulated investment company and, for each taxable year of its
operations, Government Fund has met the requirements of Subchapter
M of the Code for qualification and treatment as a regulated
investment company and Government Fund intends to meet such
requirements with respect to its current taxable year.
13. The Trust on behalf of USGT hereby represents and
warrants that:
A. The financial statements of USGT as at December 31,
1995 (audited) heretofore furnished to Government 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 December 31, 1995
through the date hereof there have not been, and through the
Closing Date there will not be, any material adverse changes 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 Government 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, 1995 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 taxable 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 Government 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 Government Fund that, if the reorganization becomes
effective, USGT will treat each shareholder of Government 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. USGT represents to Government Fund that
each shareholder of Government Fund who received shares of USGT as
a result of the reorganization and was subject to a Class B
contingent deferred sales charge waiver, as described in the proxy
statement of Government Fund dated December 18, 1995, relating to
the approval of OppenheimerFunds, Inc. as Government Fund's
investment adviser, will remain eligible for such waiver as
described therein, upon the supplementing of the Prospectus of USGT
with respect thereto.
15. USGT agrees that it will prepare and file a Registration
Statement on Form N-14 under the 1933 Act (unless it has already
done so) 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.
16. The obligations of the parties under the Agreement shall
be subject to the right of (a) both parties to mutually consent to
abandon and terminate the Agreement without liability, and (b)
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. In the event of termination, damages will be limited
to reimbursement by the party breaching any material provision of
the Agreement of the reasonable out-of-pocket fees and expenses (if
any) incurred by the other party in connection with the
transactions contemplated by the Agreement.
17. The Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all 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. Government 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.
Government 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.
<PAGE>
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 SERIES FUND, INC.
On behalf of
CONNECTICUT MUTUAL GOVERNMENT
SECURITIES ACCOUNT
/s/ Robert G. Zack By: /s/ Andrew J. Donohue
________________________ _________________________
Robert G. Zack, Assisant Andrew J. Donohue, Secretary
Secretary
Attest: OPPENHEIMER U.S. GOVERNMENT TRUST
/s/ Robert G. Zack By: /s/ Andrew J. Donohue
________________________ ______________________________
Robert G. Zack, Assistant Andrew J. Donohue, Secretary
Secretary
<PAGE>
OPPENHEIMER SERIES FUND, INC.
CONNECTICUT MUTUAL GOVERNMENT SECURITIES ACCOUNT
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD APRIL 24, 1996
The undersigned shareholder of Connecticut Mutual Government
Securities Account (the "Fund"), a series of Oppenheimer Series
Fund, Inc. (the "Company"), does hereby appoint Andrew J. Donohue,
George Bowen and Robert Bishop, 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 April 24, 1996, at OppenheimerFunds, Inc., 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 DIRECTORS, WHICH
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 THE PROPOSAL IF NO CHOICE IS INDICATED.
Please mark your proxy, date and sign it on the reverse side and
return it promptly in the accompanying envelope, which requires no
postage if mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization dated as of
March 18, 1996 by and between Oppenheimer U.S. Government
Trust and the Company, on behalf of the Fund, and the
transactions contemplated thereby, including the transfer of
substantially all the assets of the Fund to Oppenheimer U.S.
Government Trust in exchange for the issuance of Class A and
Class B shares of Oppenheimer U.S. Government Trust , the
distribution by the Fund of such shares to the Fund's
shareholders in liquidation of the Fund and the cancellation
of the outstanding shares of the Fund.
FOR____ AGAINST____ ABSTAIN____
Dated:________________________, 1996
(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.
