<PAGE> 1
[PHOTO]
OPPENHEIMER U.S. GOVERNMENT TRUST
Semiannual Report February 28, 1997
"We need
monthly
income,
and we need
to feel
comfortable
about how
our money
is invested."
[OPPENHEIMERFUNDS LOGO]
<PAGE> 2
THIS FUND IS FOR PEOPLE WHO WANT MONTHLY INCOME AND FEEL SECURE WITH A FUND
EMPHASIZING U.S. GOVERNMENT-BACKED SECURITIES.
YIELD
STANDARDIZED YIELDS(3)
For the 30 Days Ended 2/28/97:
Class A
6.98%
Class B
6.56%
Class C
6.58%
BEAT THE AVERAGE
Cumulative Total Return for the 3-Year Period Ended 3/31/97:
Oppenheimer U.S. Government
Trust Class A (at net asset value)(1)
21.09%
Lipper General U.S. Government Average for 123 General U.S. Government Funds
for the 3-Year Period Ended 3/31/97(4)
16.66%
HOW YOUR FUND IS MANAGED
Oppenheimer U.S. Government Trust seeks high current income and safety of
principal by investing primarily in a portfolio of fixed income securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities.
While an investment in the Fund is neither insured nor guaranteed, and
its share prices and dividends fluctuate in value, the fact that most of the
securities in the Fund's portfolio are government-backed means investors enjoy
superior credit safety and assurance of timely payment to the Fund of principal
and interest on those securities.
In addition, the Fund is designed to provide higher income than more
conservative fixed income investments.
PERFORMANCE
Cumulative total returns for the six months ended 2/28/97 were 5.23% for Class
A shares, 4.84% for Class B shares and 4.86% for Class C shares, without
deducting sales charges.(1)
Your Fund's average annual total returns for Class A shares for the
1-, 5- and 10-year periods ended 3/31/97 were 0.45%, 5.50% and 6.83%,
respectively. For Class B shares, average annual total returns for the 1-year
period ended 3/31/97 and since inception on 7/21/95 were (0.25)% and 3.10%,
respectively. For Class C shares, average annual total returns for the 1-year
period ended 3/31/97 and since inception on 12/1/93 were 3.81% and 4.52%,
respectively.(2)
OUTLOOK
"Our outlook for the Fund is positive. We maintain that funds pursuing a yield
strategy should be well-poised to perform well in the first few months of
1997."
David Rosenberg, Portfolio Manager
February 28, 1997
Total returns include change in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. For more complete
information, please review the prospectus carefully before you invest.
1. Based on the change in net asset value per share without deducting any sales
charges. Such performance is not annualized and would have been lower if sales
charges were taken into account.
2. Class A returns include the current maximum initial sales charge of 4.75%.
The Fund's maximum sales charge rate for Class A shares was higher during a
portion of some of the periods shown, and actual investment results would have
been less. Class B returns include the applicable contingent deferred sales
charge of 5% (1-year) and 4% (since inception). Class C returns include the 1%
contingent deferred sales charge for the 1-year result. An explanation of the
different performance calculations is in the Fund's prospectus. Class B and
Class C shares are subject to an annual 0.75% asset-based sales charge.
3. Standardized yield is based on net investment income for the 30-day period
ended 2/28/97. Falling net asset values will tend to artificially raise yields.
4. Source: Lipper Analytical Services, 3/31/97. The Lipper average is shown for
comparative purposes only. Funds included in the Lipper index may have
different investment policies and risks than the Fund. Oppenheimer U.S.
Government Trust is characterized by Lipper as a general U.S. government fund.
Lipper performance is based on total return and does not take sales charges
into account.
2 Oppenheimer U.S. Government Trust
<PAGE> 3
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
U.S. Government Trust
DEAR SHAREHOLDER,
As we enter the second quarter, we are optimistic regarding the prospects for
fixed income investors who maintain a long-term perspective. While U.S.
economic policy makers face a considerable challenge in 1997, maintaining the
delicate balance between moderate growth and low inflation, we believe current
political and economic stability creates a favorable environment for long-term
investments. In fact, the current economic trend appears to follow the pattern
that emerged in early 1996.
The similarities between the first few months of 1996 and those of
1997 are striking. In both cases, economic growth was slightly more robust than
expected, and many experts were concerned that an overheating economy would
generate inflation. On March 18, as a preemptive move against inflation,
Federal Reserve Board Chairman Alan Greenspan raised short-term interest rates
by a modest amount. This was the first change in monetary policy since January
1996, and the first increase in short-term interest rates in over two years.
Today, it appears this initial interest-rate increase may not be the last, and
investors remain concerned about high stock market valuations and the potential
re-emergence of inflation.
At OppenheimerFunds, we are optimistic regarding the long-term
expectations for fixed income markets. We maintain that economic growth will
not accelerate substantially but should continue at a modest rate. In addition,
as investors in general become more realistic about stock market returns, we
foresee fixed income investments becoming attractive relative to potentially
more volatile investments in equities.
In the near term, select yield-oriented securities, such as
mortgage-backed and foreign securities-particularly those in emerging
markets-are well-positioned for producing higher returns and current income.
That's because mortgage-backed securities perform well in a rising
interest-rate environment, and emerging market securities tend to be less
sensitive to U.S. interest-rate and currency movements. Our long-term outlook
is that we may see an increase in the demand for U.S. fixed income products
which could drive yields lower and make it difficult to maintain today's
income stream. However, this increased demand could provide the fixed income
investor with enhanced long-term fixed income investment opportunities.
Your portfolio managers discuss the outlook for your Fund in light of
these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds, The Right Way to Invest. We look forward to helping you reach
your investment goals in the future.
/s/ BRIDGET A. MACASKILL
Bridget A. Macaskill
March 21, 1997
3 Oppenheimer U.S. Government Trust
<PAGE> 4
Q + A
[PHOTO]
Q WHAT
AREAS ARE YOU CURRENTLY
TARGETING?
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW HAS THE FUND PERFORMED?
This was a relatively good period for Oppenheimer U.S. Government Trust, after
three very good years in a row. As a result of our defensive, income-oriented
strategy, Oppenheimer U.S. Government Trust finished 4th out of 173 general
U.S. government funds ranked by Lipper for the 1-year period ended 3/31/97.(1)
WHAT FACTORS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
The goal of this Fund is to provide competitive income with relatively low
risk. In order to meet this goal, we made a few changes to the portfolio's
composition this period. First, we trimmed our mortgage-backed securities
exposure. These holdings pay very high income and, at certain periods over the
last six months, our involvement in mortgage-backed securities represented as
much as 85% to 90% of the portfolio. Because these securities performed so well
throughout the year, we decided to take some profits. Another reason we reduced
our holdings was that as interest rates dropped slightly in November, we were
taking a somewhat cautious stance regarding prepayment risk-a situation that
always arises during periods of interest rate declines.(2)
Second, as we decreased our mortgage-backed securities exposure, we
diversified the portfolio by adding non-agency commercial mortgage-backed
securities. Real estate risks are associated with the strength of the economy,
rather than interest rates. This characteristic adds diversification to the
portfolio, thereby reducing risk. We are optimistic about the real estate
market, particularly commercial real estate, and have seen a strong recovery
across the country over the year.
1. Source: Lipper Analytical Services, 3/31/97. The Lipper average is shown for
comparative purposes only. Oppenheimer U.S. Government Trust's Class A shares
were ranked 21 out of 75 funds in its category for the 5-year period ended
3/31/97 and 9 out of 45 funds for the 10-year period ended 3/31/97. Oppenheimer
U.S. Government Trust is characterized by Lipper as a general U.S. government
fund. Lipper performance is based on total return and does not take sales
charges into account.
2. The Fund's portfolio is subject to change. Non-agency mortgage-backed
securities are neither insured nor guaranteed by any government agency.
4 Oppenheimer U.S. Government Trust
<PAGE> 5
[PHOTO]
FACING PAGE
Top left: David Rosenberg, Portfolio Manager
Top right: Art Steinmetz, Senior VP, Fixed Income Investments Team
Bottom: Len Darling, Executive VP, Director of Fixed Income
Investments
THIS PAGE
Top: David Rosenberg with Gina Palmieri, Mortgage Analyst
Bottom: David Rosenberg with Leslie Falconio and Gina Palmieri, Members of
Fixed Income Investments Team
A WE PLAN
TO INCREASE OUR
EXPOSURE TO
MORTGAGE-BACKED
SECURITIES.
Third, we further reduced risk in the portfolio by shortening the
average maturity, a move that made the portfolio less sensitive to interest
rates as they fluctuated through-out the period. This defensive structure was
one of the primary reasons for our relatively strong performance.
DID ANY INVESTMENTS HINDER PERFORMANCE?
Looking back, we could have positioned ourselves even more defensively by
adjusting our maturities as interest rates moved throughout the year. For
example, when the economy accelerated in the first and second quarters of 1996,
we could have shortened our duration, which is a measure of the portfolio's
price sensitivity to changes in interest rates, more dramatically. And, in the
second half of the year, when the economy slowed, we should have extended it.
Additionally, we probably decreased our mortgage-backed securities exposure too
soon. These securities performed very well throughout the last quarter of 1996,
and the Fund would have benefited had we not reduced these holdings so quickly.
WHAT AREAS OF THE MARKET ARE YOU CURRENTLY TARGETING?
During the first half of 1997, we plan to slowly increase our exposure to
mortgage-backed securities to provide extra income for the Fund. We also intend
to rebuild our commercial mortgage-backed exposure. And, we plan to reduce our
Treasury exposure in order to support this conversion.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Our outlook for the Fund is positive. We believe that in the current
interest-rate environment, characterized by stable to potentially slightly
rising interest rates, the most important attribute of any fund is its
concentration on seeking yield. Therefore, we maintain that funds pursuing a
yield strategy should be well-poised to perform well in the first few months of
1997.
[PHOTO]
5 Oppenheimer U.S. Government Trust
<PAGE> 6
STATEMENT OF INVESTMENTS February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
===================================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--100.4%
- -----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--86.7%
- -----------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/
SPONSORED--69.0%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation Certificates:
14%, 1/1/11 $ 493,642 $ 584,744
11.50%, 6/1/20 1,179,883 1,372,721
13%, 8/1/15 2,051,286 2,478,851
9.50%, 12/1/02--11/1/03 457,561 478,881
Series 0192, Cl. H., 9%, 7/15/21 1,200,192 1,221,940
Series 1065, Cl. H, 8.50%, 10/15/19 911,329 923,286
Series 1343, Cl. LA, 8%, 8/15/22 8,000,000 8,232,480
Series 1347, Cl. I, 8%, 8/15/22 10,000,000 10,287,500
Series 1455, Cl. J, 7.50%, 12/15/22 5,000,000 5,026,550
Series 5, Cl. Z, 9%, 5/15/19 2,929,001 3,081,401
Interest-Only Stripped Mtg.-Backed Security:
Trust 177, Cl. B, 13.121%--15.639%, 7/1/26(1) 141,610,005 50,625,576
Trust 179, 9.054%, 9/1/26(1) 8,728,695 2,815,004
Principal-Only Stripped Mtg.-Backed Security, Trust 179, 7.033%, 9/1/26(2) 8,728,695 6,100,540
----------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11%, 7/1/16 1,457,690 1,669,055
11.50%, 11/1/15 1,120,965 1,282,373
12%, 4/15/19 1,441,331 1,698,969
7%, 8/1/25--5/1/26 22,165,342 21,631,077
7.50%, 3/15/12(3) 35,250,000 35,679,698
7.50%, 3/15/27(3) 101,750,000 101,527,168
7.50%, 8/1/25 4,487,438 4,485,643
8.50%, 4/1/27(3) 23,500,000 24,300,410
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
13%, 11/1/12 166,927 196,503
8%, 12/1/22 2,767,895 2,838,560
8.75%, 11/25/05 4,000,000 4,141,240
Series 1991-176,Cl. PL, 7%, 12/25/21 29,617,000 27,969,406
Series 1992-34, Cl. G, 8%, 3/25/22 2,520,000 2,574,331
Series G92-42, Cl. C, 7%, 9/25/19 240,777 240,175
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1989-4, Cl. D, 10%, 2/25/19 3,000,000 3,387,180
Trust 1990-143, Cl. J, 8.75%, 12/25/20 26,000,000 27,430,000
Trust 1990-18, Cl. K, 9.60%, 3/25/20 5,000,000 5,543,750
Trust 1992-112, Cl. ED, 4%, 12/25/20 3,000,000 2,597,790
Trust 1995-4, Cl. PC, 8%, 5/25/25 3,885,880 4,017,028
Interest-Only Stripped Mtg.-Backed Security, Trust 177, Cl. B, 13.023%, 1/1/24(1) 6,003,487 2,012,106
------------
368,451,936
- -----------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--17.7%
Government National Mortgage Assn.:
10%, 6/15/16--8/15/19 3,239,136 3,574,447
10.50%, 1/15/98--5/15/21 7,331,401 8,202,931
11%, 10/20/19--7/20/20 6,009,838 6,866,241
11.50%, 1/15/98--4/15/13 120,265 135,986
12%, 12/15/12--3/15/14 66,282 77,441
12.50%, 1/15/14--6/15/19 1,111,463 1,308,748
13%, 4/15/11--12/15/14 171,321 204,095
13.50%, 4/15/11--8/15/14 202,140 243,204
14%, 6/15/11 41,740 50,767
</TABLE>
6 Oppenheimer U.S. Government Trust
<PAGE> 7
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GNMA/GUARANTEED
(CONTINUED)
15%, 7/15/11--9/15/12 $ 177,458 $ 219,430
6%, 3/20/27(3)(4) 23,500,000 23,555,078
6.50%, 11/15/23--12/15/23 1,882,364 1,800,747
7%, 2/15/22--10/15/23 9,786,641 9,604,778
7.125%, 4/20/17 367,206 376,559
7.25%, 12/15/05 37,782 38,210
7.50%, 10/15/06--7/15/26 21,416,791 21,453,610
8%, 4/15/02--5/15/25 3,483,065 3,592,927
8.25%, 4/15/08 137,313 143,749
8.50%, 6/15/01--1/15/06 109,668 114,322
9%, 9/15/08--5/15/09 475,391 510,343
9.50%, 4/15/01--1/15/20 1,426,404 1,551,136
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-5, Cl. PQ, 7.493%, 7/16/24 6,000,000 5,956,860
----------------------------------------------------------------------------------------------------------------------------
U.S. Department of Veterans Affairs, Interest-Only Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Vendee Mtg. Trust,
Series 1995-2B, Cl. 2-IO, 24.353%, 6/15/25(1)(5) 130,436,775 4,702,857
------------
94,284,466
- -----------------------------------------------------------------------------------------------------------------------------------
PRIVATE--13.7%
- -----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL--11.2%
Asset Securitization Corp.:
Commercial Mtg. Pass-Through Certificates,
Series 1996-MD6, Cl. A-5, 7.132%, 11/13/26(4) 5,000,000 4,956,250
Series 1996-D3, Cl. A5, 8.346%, 10/13/26(4)(5) 3,700,000 3,789,031
----------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.96%, 12/25/20(1)(5) 24,833,200 869,162
----------------------------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25(5) 3,000,000 3,057,188
----------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc. Mtg. Pass-Through Certificates,
Series 1996-C1, 7.42%, 4/25/28 5,061,000 5,032,136
----------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc.:
Collateralized Mtg. Obligations, Cl. C, 7.95%, 8/15/27(5) 5,014,988 5,118,422
Commercial Mtg. Pass-Through Certificates,
Series 1996-C1, Cl. D-1, 7.51%, 2/15/28(4)(5) 3,000,000 2,992,500
----------------------------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg.
Pass-Through Certificates, Cl. D, 7.683%, 12/21/26(5) 2,500,000 2,480,078
----------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-C5, Cl. C, 8.85%, 5/25/22 7,124,096 7,273,258
Series 1993-C1, Cl. D, 9.45%, 5/25/24 1,183,001 1,214,240
Series 1994-C1, Cl. C, 8%, 6/25/26 7,075,000 7,197,154
Series 1995-C1, Cl. D, 6.90%, 2/25/27 7,677,000 7,161,801
----------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates:
Series 1996-C3, Cl. C, 7.375%, 6/25/30(4)(5) 5,000,000 4,964,063
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 3,700,000 3,660,688
------------
59,765,971
- -----------------------------------------------------------------------------------------------------------------------------------
MULTI-FAMILY--1.8%
Countrywide Funding Corp., Series 1993-12, Cl. B1, 6.625%, 2/25/24 3,000,000 2,724,375
----------------------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Mtg.
Pass-Through Interest-Only Certificates:
Series 94-M1, Cl. A-X, 0.52%, 2/15/02(1)(5) 88,100,000 27,531
Series 94-M1, Cl. B-X, 0.61%, 2/15/02(1)(5) 19,300,000 6,031
Series 94-M1, Cl. C-X, 0.66%, 2/15/02(1)(5) 15,400,000 4,813
Series 94-M1, Cl. D-X, 0.82%, 2/15/02(1)(5) 2,968,000 928
</TABLE>
7 Oppenheimer U.S. Government Trust
<PAGE> 8
STATEMENT OF INVESTMENTS (Unaudited) (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MULTI-FAMILY (CONTINUED)
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991-M5, Cl. A, 9%, 3/25/17 $ 5,845,973 $ 6,008,564
Series 1992-M4, Cl. B, 7.20%, 9/25/21 755,532 755,533
------------
9,527,775
- -----------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--0.7%
Prudential Home Mortgage Securities Corp., Sub. Fixed Rate Mtg. Securities,
Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1995-A, Cl. B2, 8.684%, 3/28/25(4)(5) 1,477,582 1,515,445
----------------------------------------------------------------------------------------------------------------------------
Residential Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-S10, Cl. A9, 8.50%, 2/25/23 2,025,112 2,076,368
------------
3,591,813
------------
Total Mortgage-Backed Obligations (Cost $529,716,468) 535,621,961
===================================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--32.8%
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
7.50%, 11/15/24(6) 18,245,000 19,527,840
STRIPS, Zero Coupon, 6.68%, 2/15/19(7) 22,000,000 4,734,861
STRIPS, Zero Coupon, 7.03%, 5/15/22(7) 37,800,000 6,514,334
----------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6.375%, 8/15/02 122,000 121,886
6.875%, 3/31/00 17,640,000 17,965,227
7.50%, 5/15/02 10,400,000 10,897,255
7.75%, 12/31/99--1/31/00 73,375,000 76,324,687
8%, 5/15/01 28,100,000 29,803,563
9.125%, 5/15/99 3,500,000 3,713,279
9.25%, 8/15/98 1,350,000 1,411,171
STRIPS, Zero Coupon, 6.70%, 8/15/16(7) 15,000,000 3,867,103
-------------
Total U.S. Government Obligations (Cost $178,645,832) 174,881,206
===================================================================================================================================
REPURCHASE AGREEMENT--1.0%
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc., 5.37%, dated 2/28/97,
to be repurchased at $5,302,372 on 3/3/97, collateralized by U.S. Treasury
Nts., 5.875%, 2/28/99, with a value of $5,407,310 (Cost $5,300,000) 5,300,000 5,300,000
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $713,662,300) 134.2% 715,803,167
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (34.2) (182,288,821)
------------- -------------
NET ASSETS 100.0% $533,514,346
============= =============
</TABLE>
1. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows.
2. Principal-Only Strips represent the right to receive the monthly
principal payments on an underlying pool of mortgage loans. The value of
these securities generally increases as interest rates decline and
prepayment rates rise. The price of these securities is typically more
volatile than that of coupon-bearing bonds of the same maturity.
Interest rates disclosed represent current yields based upon the current
cost basis and estimated timing of future cash flows.
3. When-issued security to be delivered and settled after February 28,
1997.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid--See Note 6 of Notes to
Financial Statements.
6. Securities with an aggregate market value of $3,219,357 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 5 of Notes to Financial Statements.
7. For zero coupon bonds, the interest rate shown is the effective yield
on the date of purchase.
See accompanying Notes to Financial Statements.
8 Oppenheimer U.S. Government Trust
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES February 28, 1997 (Unaudited)
<TABLE>
===================================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $713,662,300)--see accompanying statement $715,803,167
----------------------------------------------------------------------------------------------------------------------------
Cash 199,400
----------------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 52,103,784
Interest and principal paydowns 6,106,194
Shares of beneficial interest sold 1,265,424
Daily variation on futures contracts--Note 5 33,047
----------------------------------------------------------------------------------------------------------------------------
Other 20,413
------------
Total assets 775,531,429
===================================================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased on a when-issued basis--Note 1 238,389,566
Shares of beneficial interest redeemed 2,334,654
Dividends 705,621
Distribution and service plan fees 209,158
Trustees' fees 180,501
Other 197,583
------------
Total liabilities 242,017,083
===================================================================================================================================
NET ASSETS $533,514,346
============
===================================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $552,352,656
----------------------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (90,990)
----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (21,225,343)
----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 2,478,023
------------
Net assets $533,514,346
============
===================================================================================================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $473,794,118 and 50,633,792 shares of beneficial interest outstanding) $9.36
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $9.83
----------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $40,398,266 and 4,321,607 shares of beneficial interest outstanding) $9.35
----------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net assets
of $19,321,962 and 2,067,392 shares of beneficial interest outstanding) $9.35
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer U.S. Government Trust
<PAGE> 10
STATEMENT OF OPERATIONS For the Six Months Ended February 28, 1997
(Unaudited)
<TABLE>
===================================================================================================================================
<S> <C>
INVESTMENT INCOME
Interest $23,118,788
- -----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees--Note 4 1,615,490
----------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 580,158
Class B 180,999
Class C 92,481
----------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 363,600
----------------------------------------------------------------------------------------------------------------------------
Shareholder reports 141,201
----------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 59,296
----------------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 31,165
----------------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class B 2,246
----------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 6,418
----------------------------------------------------------------------------------------------------------------------------
Other 32,269
-----------
Total expenses 3,105,323
===================================================================================================================================
NET INVESTMENT INCOME 20,013,465
===================================================================================================================================
REALIZED AND
UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 2,891,400
Closing of futures contracts (2,057,730)
------------
Net realized gain 833,670
----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 6,529,811
------------
Net realized and unrealized gain 7,363,481
===================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $27,376,946
============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer U.S. Government Trust
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1997 PERIOD ENDED YEAR ENDED
(UNAUDITED) AUGUST 31, 1996(1) JUNE 30, 1996
========================================================================================================================
<S> <C> <C> <C>
OPERATIONS
Net investment income $ 20,013,465 $ 6,266,136 $ 34,112,103
-----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 833,670 3,446,018 (5,345,762)
-----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 6,529,811 (7,579,207) (5,672,502)
------------- ------------- -------------
Net increase in net assets resulting from operations 27,376,946 2,132,947 23,093,839
========================================================================================================================
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from net investment income:
Class A (18,167,329) (5,731,651) (31,382,515)
Class B (1,219,262) (348,062) (1,137,105)
Class C (626,875) (186,423) (968,691)
-----------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- -- (618,306)
Class B -- -- (37,635)
Class C -- -- (22,691)
========================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A (36,605,778) 2,449,140 202,362,216
Class B 3,482,029 6,033,028 31,353,131
Class C 530,023 161,928 7,965,917
========================================================================================================================
NET ASSETS
Total increase (decrease) (25,230,246) 4,510,907 230,608,160
-----------------------------------------------------------------------------------------------------------------
Beginning of period 558,744,592 554,233,685 323,625,525
------------- ------------- -------------
End of period [including undistributed
(overdistributed) net investment income of $(90,990),
$(90,989) and $57,809, respectively] $533,514,346 $558,744,592 $554,233,685
============= ============= =============
</TABLE>
1. The Fund changed its fiscal year end from June 30 to August 31.
See accompanying Notes to Financial Statements.
11 Oppenheimer U.S. Government Trust
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
SIX MONTHS PERIOD
ENDED ENDED
FEB. 28, 1997 AUGUST 31, YEAR ENDED JUNE 30,
(UNAUDITED) 1996(2) 1996 1995
============================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $9.23 $9.30 $9.51 $9.20
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 .10 .67 .68
Net realized and unrealized gain (loss) .13 (.07) (.21) .31
--------- -------- -------- --------
Total income (loss) from investment operations .48 .03 .46 .99
- ----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.10) (.66) (.68)
Dividends in excess of net investment income -- -- -- --
Tax return of capital distribution -- -- (.01) --
--------- -------- -------- --------
Total dividends and distributions to shareholders (.35) (.10) (.67) (.68)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.36 $9.23 $9.30 $9.51
========= ======== ======== ========
============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 5.23% 0.42% 4.91% 11.22%
============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $473,794 $503,693 $504,966 $312,607
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $488,897 $508,123 $452,236 $307,306
- ----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.49%(5) 6.64%(5) 7.07% 7.32%
Expenses 1.07%(5) 1.09%(5) 1.08% 1.09%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 23.4% 5.6% 399.7% 303.5%
</TABLE>
1. For the period from December 1, 1993 (inception of offering) to June
30, 1994.
2. The Fund changed its fiscal year end from June 30 to August 31.
3. For the period from July 21, 1995 (inception of offering) to June 30,
1996.
4. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on
the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for
periods of less than one full year.
12 Oppenheimer U.S. Government Trust
<PAGE> 13
<TABLE>
<CAPTION>
CLASS B CLASS C
- --------------------------------- --------------------------------- ----------------------------------------------------
SIX MONTHS PERIOD PERIOD SIX MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED
FEB. 28, 1997 AUGUST 31, JUNE 30, FEB. 28, 1997 AUGUST 31, YEAR ENDED JUNE 30,
1994 1993 1992 (UNAUDITED) 1996(2) 1996(3) (UNAUDITED) 1996(2) 1996 1995 1994(1)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$9.95 $9.73 $9.25 $9.22 $9.29 $9.40 $9.22 $9.29 $9.50 $9.19 $9.83
- -----------------------------------------------------------------------------------------------------------------------------
.67 .68 .69 .31 .09 .56 .31 .09 .60 .61 .33
(.74) .22 .48 .13 (.07) (.11) .13 (.07) (.21) .30 (.64)
- --------- --------- --------- ------- ------- ------- ------- ------- ------- ------- ------
(.07) .90 1.17 .44 .02 .45 .44 .02 .39 .91 (.31)
- -----------------------------------------------------------------------------------------------------------------------------
(.64) (.68) (.69) (.31) (.09) (.55) (.31) (.09) (.59) (.60) (.33)
(.01) -- -- -- -- -- -- -- -- -- --
(.03) -- -- -- -- (.01) -- -- (.01) -- --
- --------- --------- --------- ------- ------- ------- ------- ------- ------- ------- ------
(.68) (.68) (.69) (.31) (.09) (.56) (.31) (.09) (.60) (.60) (.33)
- -----------------------------------------------------------------------------------------------------------------------------
$9.20 $9.95 $9.73 $9.35 $9.22 $9.29 $9.35 $9.22 $9.29 $9.50 $9.19
========= ========= ========= ======= ======= ======= ======= ======= ======= ======= ======
=============================================================================================================================
(1.17)% 9.55% 13.05% 4.84% 0.28% 4.80% 4.86% 0.28% 4.11% 10.31% (3.12)%
=============================================================================================================================
$310,027 $380,916 $395,863 $40,398 $36,504 $30,737 $19,322 $18,547 $18,531 $11,019 $4,261
- -----------------------------------------------------------------------------------------------------------------------------
$355,698 $401,789 $376,532 $36,586 $35,078 $19,227 $18,687 $18,620 $15,766 $6,503 $2,173
- -----------------------------------------------------------------------------------------------------------------------------
6.61% 6.90% 7.23% 6.72%(5) 5.82%(5) 6.44%(5) 6.75%(5) 5.90%(5) 6.27% 6.44% 5.97%(5)
1.14% 1.17% 1.17% 1.84%(5) 1.88%(5) 1.93%(5) 1.81%(5) 1.84%(5) 1.85% 1.89% 1.96%(5)
- -----------------------------------------------------------------------------------------------------------------------------
139.5% 96.8% 207.8% 23.4% 5.6% 399.7% 23.4% 5.6% 399.7% 303.5% 139.5%
</TABLE>
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a
period, divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the period ended
February 28, 1997 were $345,474,844 and $159,201,682, respectively. For
the years ended June 30, 1996 and 1995, purchases and sales of
investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
13 Oppenheimer U.S. Government Trust
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Unaudited)
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer U.S. Government Trust (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is to
seek high current income, preservation of capital and maintenance of
liquidity primarily through investments in debt instruments issued or
guaranteed by the U.S. government or its agencies or instrumentalities.
The Fund's investment adviser is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge. Class B and C shares may be subject
to a contingent deferred sales charge. All classes of shares have
identical rights to earnings, assets and voting privileges, except that
each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights
with respect to matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by the
Fund.
-------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at values
based on the closing bid or the last sale price on the prior trading
day. Long-term and short-term "non-money market" debt securities are
valued by a portfolio pricing service approved by the Board of Trustees.
Such securities which cannot be valued by the approved portfolio pricing
service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the
quotes reflect current market value, or are valued under consistently
applied procedures established by the Board of Trustees to determine
fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount. Options are valued based upon the
last sale price on the principal exchange on which the option is traded
or, in the absence of any transactions that day, the value is based upon
the last sale price on the prior trading date if it is within the spread
between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
-------------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the
transaction date. During this period, such securities do not earn
interest, are subject to market fluctuation and may increase or decrease
in value prior to their delivery. The Fund maintains, in a segregated
account with its custodian, assets with a market value equal to the
amount of its purchase commitments. The purchase of securities on a
when-issued or forward commitment basis may increase the volatility of
the Fund's net asset value to the extent the Fund makes such purchases
while remaining substantially fully invested. As of February 28, 1997,
the Fund had entered into outstanding when-issued or forward commitments
of $238,389,566.
In connection with its ability to purchase securities on
a when-issued or forward commitment basis, the Fund may enter into
mortgage "dollar-rolls" in which the Fund sells securities for delivery
in the current month and simultaneously contracts with the same
counterparty to repurchase similar (same type, coupon and maturity) but
not identical securities on a specified future date. The Fund records
each dollar-roll as a sale and a new purchase transaction.
14 Oppenheimer U.S. Government Trust
<PAGE> 15
================================================================================
1. SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Allocation of Income, Expenses, and Gains and Losses. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses
directly attributable to a specific class are charged against the
operations of that class.
-------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of
the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income, including any net realized
gain on investments not offset by loss carryovers, to shareholders.
Therefore, no federal income or excise tax provision is required.
-------------------------------------------------------------------------
TRUSTEES' FEES AND EXPENSES. The Fund has adopted a nonfunded retirement
plan for the Fund's independent trustees. Benefits are based on years of
service and fees paid to each trustee during the years of service.
During the six months ended February 28, 1997, a reduction of $32,315
was made for the Fund's projected benefit obligations and payments of
$9,051 were made to retired trustees, resulting in an accumulated
liability of $172,497 at February 28, 1997.
-------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and pay
such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
-------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of paydown gains and losses. The
character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gain (loss) was
recorded by the Fund.
-------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Discount on securities
purchased is amortized over the average life of the respective
securities. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
15 Oppenheimer U.S. Government Trust
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28, 1997 PERIOD ENDED AUGUST 31, 1996(2) YEAR ENDED JUNE 30, 1996(1)
---------------------------------- ---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 2,644,532 $ 24,872,516 1,923,780 $17,886,206 10,356,711 $ 98,293,347
Dividends reinvested 1,532,672 14,411,680 493,845 4,572,687 2,643,981 25,030,137
Issued in connection with the
acquisition of:
Oppenheimer Mortgage Income
Fund--Note 7 -- -- -- -- 8,262,838 77,918,563
Quest for Value U.S. Government
Income Fund--Note 7 -- -- -- -- 10,598,976 101,114,231
Connecticut Mutual Government
Account--Note 7 -- -- -- -- 5,008,473 46,829,224
Redeemed (8,096,573) (75,889,974) (2,152,748) (20,009,753) (15,453,509) (146,823,286)
---------- ------------ ---------- ----------- ----------- ------------
Net increase (decrease) (3,919,369) $(36,605,778) 264,877 $ 2,449,140 21,417,470 $202,362,216
========== ============ ========== =========== =========== ============
- ----------------------------------------------------------------------------------------------------------------- ------------
Class B:
Sold 1,244,498 $ 11,681,886 769,313 $ 7,144,526 2,376,966 $ 22,507,322
Dividends reinvested 89,217 837,898 26,786 247,712 81,288 766,568
Issued in connection with the
acquisition of:
Oppenheimer Mortgage Income
Fund--Note 7 -- -- -- -- 683,099 6,434,794
Quest for Value U.S. Government
Income Fund--Note 7 -- -- -- -- 967,755 9,222,705
Connecticut Mutual Government
Account--Note 7 -- -- -- -- 10,367 96,832
Redeemed (969,495) (9,037,755) (146,276) (1,359,210) (811,911) (7,675,090)
---------- ------------ ---------- ----------- ----------- ------------
Net increase 364,220 $ 3,482,029 649,823 $ 6,033,028 3,307,564 $ 31,353,131
========== ============ ========== =========== =========== ============
- ----------------------------------------------------------------------------------------------------------------- ------------
Class C:
Sold 397,874 $ 3,733,240 209,265 $ 1,946,901 1,386,839 $ 13,136,459
Dividends reinvested 54,162 508,718 16,389 151,584 85,473 807,582
Issued in connection with the
acquisition of
Quest for Value U.S. Government
Income Fund--Note 7 -- -- -- -- 284,411 2,710,439
Redeemed (395,666) (3,711,935) (209,156) (1,936,557) (921,932) (8,688,563)
---------- ------------ ---------- ----------- ----------- ------------
Net increase 56,370 $ 530,023 16,498 $ 161,928 834,791 $ 7,965,917
========== ============ ========== =========== =========== ============
</TABLE>
1. For the year ended June 30, 1996 for Class A and Class C shares and
for the period from July 21, 1995 (inception of offering) to June 30,
1996 for Class B shares.
2. The Fund changed its fiscal year end from June 30 to August 31.
================================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At February 28, 1997, net unrealized appreciation on investments of
$2,140,867 was composed of gross appreciation of $9,560,758, and gross
depreciation of $7,419,891.
16 Oppenheimer U.S. Government Trust
<PAGE> 17
================================================================================
4. MANAGEMENT FEES AND
OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee 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. The
Manager has agreed to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable regulatory
limit on Fund expenses.
For the six months ended February 28, 1997, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$336,226, of which $115,344 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer. Sales charges advanced
to broker/dealers by OFDI on sales of the Fund's Class B and Class C
shares totaled $424,330 and $27,051, of which $11,633 and $2,848,
respectively, was paid to an affiliated broker/dealer. During the six
months ended February 28, 1997, OFDI received contingent deferred sales
charges of $62,210 and $1,942, respectively, upon redemption of Class B
and Class C shares as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the Fund,
and for other registered investment companies. OFS's total costs of
providing such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with
the personal service and maintenance of accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not
exceed 0.25% of the average annual net assets of Class A shares of the
Fund. OFDI uses the service fee to reimburse brokers, dealers, banks and
other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares.
During the six months ended February 28, 1997, OFDI paid $82,801 to an
affiliated broker/dealer as reimbursement for Class A personal service
and maintenance expenses.
The Fund has adopted compensation type Distribution and
Service Plans for Class B and Class C shares to compensate OFDI for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares and Class C
shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. OFDI also
receives a service fee of 0.25% per year as compensation for costs
incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to
brokers, dealers, banks and other financial institutions. Both fees are
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During the six
months ended February 28, 1997, OFDI paid $6,874 to an affiliated
broker/dealer as compensation for Class C personal service and
maintenance expenses and retained $158,332 and $29,509, respectively, as
compensation for Class B and Class C sales commissions and service fee
advances, as well as financing costs. If the Plans are terminated by the
Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to OFDI for certain expenses it incurred
before the Plans were terminated. At February 28, 1997, OFDI had
incurred unreimbursed expenses of $1,191,373 for Class B and $223,237
for Class C.
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge
against increases in interest rates and the resulting negative effect on
the value of fixed rate portfolio securities. The Fund may also purchase
futures contracts to gain exposure to changes in interest rates as it
may be more efficient or cost effective than actually buying fixed
income securities.
Upon entering into a futures contract, the Fund is
required to deposit either cash or securities in an amount (initial
margin) equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the Fund each day.
The variation margin payments are equal to the daily changes in the
contract value and are recorded as unrealized gains and losses. The Fund
recognizes a realized gain or loss when the contract is closed or
expires.
17 Oppenheimer U.S. Government Trust
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
================================================================================
5. FUTURES CONTRACTS
(CONTINUED)
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a
receivable or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related
options) include the possibility that there may be an illiquid market
and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying securities.
At February 28, 1997, the Fund had outstanding futures contracts to buy
and sell debt securities as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF VALUATION AS OF APPRECIATION
CONTRACTS TO BUY EXPIRATION DATE FUTURES CONTRACTS FEBRUARY 28, 1997 (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds 3/97 220 $24,399,375 $(293,000)
CONTRACTS TO SELL
--------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts. 3/97 295 31,283,828 617,656
U.S. Treasury Bonds 6/97 100 11,043,750 12,500
------------
Total Unrealized Appreciation $377,156
============
</TABLE>
================================================================================
6. ILLIQUID AND
RESTRICTED SECURITIES
At February 28, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in
private placement transactions, are not registered under the Securities
Act of 1933, may have contractual restrictions on resale, and are valued
under methods approved by the Board of Trustees as reflecting fair
value. A security may be considered illiquid if it lacks a readily
available market or if its valuation has not changed for a certain
period of time. The Fund intends to invest no more than 10% of its net
assets (determined at the time of purchase and reviewed from time to
time) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors,
are not subject to that limit. The aggregate value of illiquid or
restricted securities subject to this limitation at February 28, 1997
was $29,528,048, which represents 5.53% of the Fund's net assets.
================================================================================
7. ACQUISITION OF OPPENHEIMER
MORTGAGE INCOME FUND,
QUEST FOR VALUE U.S.
GOVERNMENT INCOME FUND
AND CONNECTICUT MUTUAL
GOVERNMENT ACCOUNT
On July 28, 1995, the Fund acquired all of the net assets of Oppenheimer
Mortgage Income Fund, pursuant to an Agreement and Plan of
Reorganization approved by the Oppenheimer Mortgage Income Fund
shareholders on July 12, 1995. The Fund issued 8,262,838 and 683,099
shares of Class A and Class B beneficial interest, respectively, valued
at $77,918,563 and $6,434,794 in exchange for the net assets, resulting
in combined Class A net assets of $385,440,401 and Class B net assets of
$6,806,465 on July 28, 1995. The net assets acquired included net
unrealized appreciation of $844,310. The exchange qualifies as a
tax-free reorganization for federal income tax purposes.
On November 24, 1995, the Fund acquired all of the net
assets of Quest for Value U.S. Government Income Fund, pursuant to an
Agreement and Plan of Reorganization approved by the Quest for Value
U.S. Government Income Fund shareholders on November 16, 1995. The Fund
issued 10,598,976, 967,755 and 284,411 shares of Class A, Class B and
Class C beneficial interest, respectively, valued at $101,114,231,
$9,222,705 and $2,710,439 in exchange for the net assets, resulting in
combined Class A net assets of $518,859,988, Class B net assets of
$21,270,443 and Class C net assets of $16,422,311 on November 24, 1995.
The net assets acquired included net unrealized depreciation of
$533,506. The exchange qualifies as a tax-free reorganization for
federal income tax purposes.
On April 26, 1996, the Fund acquired all of the net
assets of Connecticut Mutual Government Account, pursuant to an
Agreement and Plan of Reorganization approved by the Connecticut Mutual
Government Account shareholders on April 24, 1996. The Fund issued
5,008,473 and 10,367 shares of Class A and Class B beneficial interest,
respectively, valued at $46,829,224 and $96,832 in exchange for the net
assets, resulting in combined Class A net assets of $513,892,599 and
Class B net assets of $28,393,161 on April 26, 1996. The net assets
acquired included net unrealized depreciation of $184,154. The exchange
qualifies as a tax-free reorganization for federal income tax purposes.
18 Oppenheimer U.S. Government Trust
<PAGE> 19
OPPENHEIMER U.S. GOVERNMENT TRUST
================================================================================
OFFICERS AND TRUSTEES
Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
David A. Rosenberg, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
INVESTMENT ADVISER
OppenheimerFunds, Inc.
================================================================================
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
================================================================================
TRANSFER AND SHAREHOLDER SERVICING AGENT
OppenheimerFunds Services
================================================================================
CUSTODIAN OF
PORTFOLIO SECURITIES
Citibank, N.A.
================================================================================
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
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LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have been taken from the
records of the Fund without examination by the independent auditors.
This is a copy of a report to shareholders of Oppenheimer U.S.
Government Trust. This report must be preceded or accompanied by a
Prospectus of Oppenheimer U.S. Government Trust. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank,
are not guaranteed by any bank, are not insured by the FDIC or any other
agency, and involve investment risks, including possible loss of the
principal amount invested.
19 Oppenheimer U.S. Government Trust
<PAGE> 20
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RS0220.001.0297 April 30, 1997
[PHOTO]
CUSTOMER SERVICE REPRESENTATIVE
OPPENHEIMERFUNDS SERVICES
"HOW MAY I HELP YOU?"
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling
our toll-free Telephone Transactions number. And, by enrolling in AccountLink,
a convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
[OPPENHEIMERFUNDS LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
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Bulk Rate
U.S. Postage
PAID
Permit No. 130
Torrington, CT
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