Registration No. 2-76645
File No. 811-3430
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 37 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 34 [X]
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OPPENHEIMER U.S. GOVERNMENT TRUST
(Exact Name of Registrant as Specified in Charter)
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Two World Trade Center, New York, NY 10048
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(Address of Principal Executive Offices) (Zip Code)
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(212) 323-0200
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b) [X] On December 28, 1998
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _______________ pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
Oppenheimer U.S. Government Trust
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Prospectus dated December 28, 1998
Oppenheimer U.S. Government Trust is a mutual fund that seeks high current
income consistent with the preservation of capital. The Fund invests primarily
in debt instruments issued or guaranteed by the U.S. government or its agencies
and instrumentalities, including mortgage-backed securities.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
(OppenheimerFunds logo)
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
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11
3
Contents
About the Fund
3 The Fund's Objective and Investment Strategies
4 Main Risks of Investing in the Fund
6 The Fund's Past Performance
7 Fees and Expenses of the Fund
9 About the Fund's Investments
13 How the Fund is Managed
About Your Account
14 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class Y Shares
22 Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Web Site
Retirement Plans
24 How to Sell Shares
By Mail
By Telephone
By Checkwriting
26 How to Exchange Shares
28 Shareholder Account Rules and Policies
29 Dividends, Capital Gains and Taxes
31 Financial Highlights
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<PAGE>
About the Fund
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The Fund's Objective and Investment Strategies
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What Is the Fund's Investment Objective? The Fund's objective is to seek high
current income consistent with preservation of capital.
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What Does the Fund Invest In? The Fund invests mainly in U.S. government
securities. These include debt securities that are issued or guaranteed by the
United States Treasury, such as Treasury bills, bonds or notes, and securities
issued or guaranteed by agencies or entities that are referred to as
"instrumentalities" of the U.S. government. The Fund invests significant amounts
of its assets in mortgage-related derivative securities, such as collateralized
mortgage obligations and mortgage participation certificates.
Not all of the U.S. government securities the Fund buys are backed by
the full faith and credit of the U.S. government as to payment of interest
and repayment of principal. Some are backed by the right of the entity to
borrow from the U.S. Treasury. Others are backed only by the credit of the
instrumentality. All of these different types of securities described above
are generally referred to as "U.S. government securities" in this prospectus.
The Fund can also buy securities issued by private issuers that do not have
any U. S. government guarantees.
The securities the Fund buys may pay interest at fixed or floating rates,
or may be "stripped" securities. They may have short, medium or long-term
maturities. The Fund can use hedging instruments and other derivative
investments to try to enhance income and to manage investment risks. These
investments are more fully explained in "About the Fund's Investments," below.
|X| How Does the Manager Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the portfolio managers research the
universe of U.S. government securities and private mortgage related
securities and weigh yields and relative values against risks. While this
process and the inter-relationship of the factors used may change over time
and may vary in particular cases, in general, they look for:
o Sectors of the U.S. government debt market that they believe offer high
relative value,
o Securities that have high income potential to help cushion total return
against price volatility,
o Securities that are less sensitive to changes in interest rates,
o Different types of U.S. government and private issuer securities.
Who Is the Fund Designed For? The Fund is designed primarily for investors
seeking current income from a fund that also has the goal of preserving capital
and invests mainly in U.S. government securities. However, the Fund's share
price and income levels will fluctuate. The Fund's share price and distributions
are not backed or guaranteed by the U.S. government. The Fund is intended to be
a long-term investment, not a short-term trading vehicle. It may be appropriate
for moderately conservative investors seeking current income and may be
appropriate for a portion of a retirement plan's investments, but not if you
need assured levels of income.
Main Risks of Investing in the Fund
All investments carry risks to some degree. The Fund's investments in debt
securities are subject to changes in their value from a number of factors. They
include changes in general bond market movements (this is referred to as "market
risk"), or the change in value of particular bonds because of an event affecting
the issuer (this is known as "credit risk"). Changes in interest rates can also
affect the prices of debt securities (this is known as "interest rate risk").
Mortgage-related securities may also be subject to "prepayment risk," which can
affect their yields and price volatility.
These risks collectively form the risk profile of the Fund, and can affect
the value of the Fund's investments, its investment performance and its price
per share. These risks mean that you can lose money by investing in the Fund.
When you redeem your shares, they may be worth more or less than what you paid
for them.
The Fund's investment Manager, OppenheimerFunds, Inc., tries to reduce
risks by carefully researching securities before they are purchased, and in some
cases by using hedging techniques. The Fund attempts to reduce its exposure to
market risks by not investing too great a percentage of the Fund's assets in any
one type or issue of debt security (other than direct Treasury obligations,
which have little credit risk). However, changes in the overall market prices of
securities and their yield can occur at any time. The share price and yield of
the Fund will change daily based on changes in market prices of securities and
market conditions, and in response to other economic events. There is no
assurance that the Fund will achieve its investment objective.
|X| Interest Rate Risks. Debt securities are subject to changes in value
when prevailing interest rates change. When interest rates fall, the values of
outstanding debt securities generally rise, and the bonds may sell for more than
their face amount. When interest rates rise, the values of outstanding debt
securities generally fall, and the bonds may sell at a discount from their face
amount. The magnitude of these price changes is generally greater for bonds with
longer maturities. However, interest rate changes may have different effects on
the values of mortgage-related securities because of prepayment risks, discussed
below.
At times the Fund may buy longer-term debt securities to seek higher
income. When the average maturity of the Fund's portfolio is longer, its share
price may fluctuate more when interest rates change. The Fund may buy
zero-coupon or "stripped" securities, which are particularly sensitive to
interest rate changes and the rate of principal payments (and prepayments), and
have prices that may go up or down more than other types of debt securities in
response to those changes.
|X| Prepayment Risk. Prepayment risk occurs when the issuer of a security
can prepay the principal prior to the security's maturity. Securities subject to
prepayment risk, including the mortgage-related securities that the Fund buys,
generally offer less potential for gains when prevailing interest rates decline,
and have greater potential for loss when interest rates rise. The impact of
prepayments on the price of a security may be difficult to predict and may
increase the volatility of the price. Additionally, the Fund may buy
mortgage-related securities at a premium. Accelerated prepayments on those
securities could cause the Fund to lose a portion of its principal investment
represented by the premium the Fund paid.
If interest rates rise rapidly, prepayments may occur at slower rates than
expected, which could have the effect of lengthening the expected maturity of a
short or medium-term security. That could cause its value to fluctuate more
widely in response to changes in interest rates. In turn, this could cause the
value of the Fund's shares to fluctuate more.
|X| Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a security to make interest and
principal payments on the security as they become due. While securities directly
issued by the U.S. Treasury and certain agencies that are backed by the full
faith and credit of the U.S. government have little credit risk and securities
issued by other agencies of the U.S. government generally have low credit risks,
securities issued by private issuers may have greater credit risks. If the
issuer fails to pay interest, the Fund's income may be reduced and if the issuer
fails to repay principal, the value of that bond and of the Fund's shares may be
reduced.
|X| There are Special Risks in Using Derivative Investments. The Fund may
use derivatives to seek increased returns or to try to hedge investment risks
and preserve capital. In general terms, a derivative investment is an investment
contract whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, stripped securities,
collateralized mortgage obligations, and interest rate swaps are examples of
derivatives.
If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, may not perform the
way the Manager expected it to perform. If that happens, the Fund's share price
could decline or the Fund could get less income than expected. The Fund has
limits on the amount of particular types of derivatives it can hold. However,
using derivatives can cause the Fund to lose money on its investments and/or
increase the volatility of its share prices.
How Risky is the Fund Overall? Although U.S. government securities that are
backed by the full faith and credit of the U.S. government have little credit
risk, they are subject to interest rate risks. Collateralized mortgage
obligations and other mortgage related securities in particular are subject to a
number of risks that can affect their values. These risks can cause the Fund's
share price to fluctuate and can affect its yield. In the OppenheimerFunds
spectrum, the Fund is generally less aggressive than other types of bond funds,
particularly those that invest in lower-grade securities. It is more risky than
a money market fund or a fund that invests only in U.S. Treasury securities.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing
in the Fund, by showing changes in the Fund's performance (for its Class A
shares) from year to year for the past ten calendar years and by showing how the
average annual total returns of the Fund's shares compare to those of a
broad-based market index. The Fund's past investment performance is not
necessarily an indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total
returns]
For the period from 1/1/98 through 9/30/98, the cumulative return (not
annualized) for Class A shares was 6.39%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown. During the period shown in the bar
chart, the highest return (not annualized) for a calendar quarter was 6.02%
(2Q'89) and the lowest return (not annualized) for a calendar quarter was -2.06%
(1Q'94).
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Average Annual Past 10 Years
Total Returns for Past 5 Years (or
the periods ending (or life-of-class, life-of-class,
December 31, 1997 Past 1 Year if less) if less)
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Class A Shares 5.11% 6.09% 7.67%
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Class B Shares 4.54% 6.51%* N/A
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Class C Shares 8.56% 6.02%* N/A
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Class Y Shares N/A* N/A N/A
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Lehman Bros. U.S.
Government Bond 9.59% 7.34% 8.88%*
Index
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* Inception dates of classes: Class A: 8/16/85. Class B: 7/21/95. Class C:
12/1/93. Class Y: 5/18/98. The index performance is shown from 12/31/87.
The Fund's average annual total returns in the table include the applicable
sales charge for Classes A, B and C shares: for Class A, the current maximum
initial sales charge of 4.75%; for Class B, the contingent deferred sales
charges of 5% (1-year) and 3% (life of class); and for Class C, the 1%
contingent deferred sales charge for the 1-year period. There is no sales charge
for Class Y shares.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. Because the Fund invests primarily in U.S. government securities, the
Fund's performance is compared to the Lehman Brothers U.S. Government Bond
Index, an unmanaged market-weighted index of U.S. government securities with
maturities of 1 year or more. However, it must be remembered that the index
performance reflects the reinvestment of income but does not consider the
effects of capital gains or transaction costs, and the Fund's investments may
vary from those in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset value
per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are provided to help you understand
the fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
August 31, 1998.
<PAGE>
Shareholder Fees (charges paid directly from your investment):
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Class B Class C Class Y
Class A Shares Shares Shares Shares
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Maximum Sales Charge
(Load) on purchases
(as % of offering 4.75% None None None
price)
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Maximum Deferred
Sales Charge (Load)
(as % of the lower of
the original offering None1 5%2 1%3 None
price or redemption
proceeds)
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1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class A Class B Class C Class Y
Shares Shares Shares Shares
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Management Fees 0.59% 0.59% 0.59% 0.59%
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Distribution and/or 0.24% 1.00% 1.00% N/A
Service (12b-1) Fees
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Other Expenses 0.20% 0.19% 0.19% 0.14%
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Total Annual Operating 1.03% 1.78% 1.78% 0.73%
Expenses
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Numbers in the chart are based on the Fund's expenses in its last fiscal year,
ended 8/31/98. Expenses may vary in future years. "Other expenses" include
transfer agent fees, custodial expenses, and accounting and legal expenses the
Fund pays.
Examples. These examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
The examples assume that you invest $10,000 in a class of shares of the
Fund for the time periods indicated and reinvest your dividends and
distributions. The first example assumes that you redeem all of your shares at
the end of those periods. The second example assumes that you keep your shares.
Both examples also assume that your investment has a 5% return each year and
that the class's operating expenses remain the same. Your actual costs may be
higher or lower because expenses will vary over time. Based on these assumptions
your expenses would be as follows:
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If shares are
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $575 $787 $1,017 $1,675
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Class B Shares $681 $860 $1,164 $1,716
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Class C Shares $281 $560 $964 $2,095
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Class Y Shares $75 $233 $406 $906
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If shares are not
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $575 $787 $1,017 $1,675
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Class B Shares $181 $560 $964 $1,716
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Class C Shares $181 $560 $964 $2,095
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Class Y Shares $75 $233 $406 $906
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses,
since Class B shares automatically convert to Class A after 6 years.
About the Fund's Investments
The Fund's Principal Investment Policies. The composition of the Fund's
portfolio among the different types of permitted investments will vary over time
based upon the evaluation of economic and market trends by the Manager. The
Fund's portfolio might not always include all of the different types of
investments described in this Prospectus.
[_] Under normal market conditions, as a fundamental policy the Fund
invests at least 80% of its total assets in U.S. government securities.
[_] U.S. government securities the Fund buys are issued or guaranteed by
the U.S. government or its agencies or instrumentalities.
[_] The Fund can also buy some securities of private issuers that have
no government backing.
The Statement of Additional Information contains more detailed information
about the Fund's investment policies and risks.
U.S. Government Securities. These are securities issued or guaranteed by the
U.S. Treasury or U.S. government agencies or instrumentalities:
|X| U.S. Treasury Obligations. These include Treasury bills (having
maturities of one year or less when issued), Treasury notes (having maturities
of from one to ten years), and Treasury bonds (having maturities of more than
ten years). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal. The
Fund can buy U. S. Treasury securities that have been "stripped" of their
coupons by a Federal Reserve Bank, zero-coupon U.S. Treasury securities
described below, and Treasury Inflation-Protection Securities ("TIPS").
|X| Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association (called "Ginnie
Mae") pass-through mortgage certificates. Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association ("Fannie Mae") bonds. Others are supported
only by the credit of the entity that issued them, such as Federal Home Loan
Mortgage Corporationobligations ("Freddie Macs").Mac") obligations.
[_] Mortgage-Related U.S. Government Securities. These include interests
in pools of residential or commercial mortgages, in the form of
collateralized mortgage obligations ("CMOs") and other "pass-through"
mortgage securities. CMOs that are U.S. government securities have collateral
to secure payment of interest and principal. They may be issued in different
series with different interest rates and maturities. The collateral is either
in the form of mortgage pass-through certificates issued or guaranteed by a
U.S. agency or instrumentality or mortgage loans insured by a U.S. government
agency. The Fund can have significant amounts of its assets invested in
mortgage related U.S. government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO could be reduced
and the Fund may have to reinvest the prepayment proceeds at lower interest
rates, which could reduce its yield. When interest rates rise rapidly, if
prepayments occur more slowly than expected, a short- or medium-term CMO can in
effect become a long term security, subject to greater fluctuations in value.
These prepayment risks can make the prices of CMOs very volatile when interest
rates change. The prices of longer-term debt securities tend to fluctuate more
than those of shorter-shorter-term debt securities. That volatility will affect
the Fund's share prices.
CMOs issued by private issuers are not U.S. government securities, and
are subject to greater credit risks than CMOs that are U.S. government
securities.
|X| Can the Fund's Investment Objective and Policies Change? The Fund's
Board of Trustees may change non-fundamental investment policies without
shareholder approval, although significant changes will be described in
amendments to this Prospectus. Fundamental policies are those that cannot be
changed without the approval of a majority of the Fund's outstanding voting
shares. The Fund's investment objective is a fundamental policy. Other
investment restrictions that are fundamental policies are listed in the
Statement of Additional Information. An investment policy is not fundamental
unless this Prospectus or the Statement of Additional Information says that it
is.
|X| Portfolio Turnover. The Fund may engage in some short-term trading to
try to achieve its objective. While portfolio turnover may affect transaction
costs the Fund pays, in most cases it does not pay brokerage commissions on debt
securities it buys. excess The Financial Highlights table below shows the Fund's
portfolio turnover rates during prior fiscal years.
Other Investment Strategies. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Manager might not
always use all of the different types of techniques and investments described
below. These techniques involve certain risks, although some are designed to
help reduce investment or market risks.
|X| Private-Issuer Securities. The Fund can invest a substantial portion
of its assets in securities issued by private issuers, that do not offer the
credit backing of U.S. government securities. Primarily these include
mortgage-related securities of private issuers, such as multi-class debt or
pass-through certificates secured by mortgage loans. They may be issued by
banks, savings and loans, mortgage bankers and other non-governmental issuers.
The Fund can buy other types of asset-backed securities collateralized by loans
or other assets or receivables.
Private issuer securities are subject to the credit risks of the issuers.
There is the risk that the issuers may not make timely payment of interest or
repay principal when due, although in some cases they may be supported by
insurance or guarantees. The Fund limits its investments in private issuer
securities to securities rated within the four highest rating categories of
Moody's Investors Service, Inc. or Standard & Poor's Rating Service, or, if
unrated, assigned a comparable rating by the Manager. These are known as
"investment-grade" securities. A reduction in the rating of a security after its
purchase by the Fund will not automatically require the Fund to dispose of that
security. However, the Manager will evaluate those securities to determine
whether to keep them in the Fund's portfolio.
|X| Zero-Coupon and "Stripped" Securities. Some of the U.S. government and
private issuer debt securities the Fund buys are zero-coupon bonds that pay no
interest. They are issued at a substantial discount from their face value. They
may be securities issued by the U.S. government or private issuers. "Stripped"
securities are the separate income or principal components of a debt security.
Some CMOs or other mortgage related securities may be stripped, with each
component having a different proportion of principal or interest payments. One
class might receive all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-bearing securities. The Fund may
have to pay out the imputed income on zero coupon securities without receiving
the actual cash currently. Interest-only securities are particularly sensitive
to changes in interest rates.
The values of interest-only mortgage related securities are also very sensitive
to prepayments of underlying mortgages. Principal-only securities are also
sensitive to changes in interest rates. When the rates of prepayments tend to
fall, the timing of cash flows to these securities is delayed. The market for
these securities may be limited, making it difficult for the Fund to sell its
holdings at an acceptable price.
|X| "When-Issued" and Delayed-Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" basis. These terms refer to securities that have been created
and for which a market exists, but which are not available for immediate
delivery. There may be a risk of loss to the Fund if the value of the security
declines prior to the settlement date.
|X| Repurchase and Reverse Repurchase Agreements. In a repurchase
agreement, the Fund buys a security and simultaneously agrees to sell it back at
a higher price in the future. Delays or losses could occur if the other party to
the agreement defaults or becomes insolvent. In a reverse repurchase agreement,
the Fund sells securities and simultaneously agrees to buy them back at a higher
price in the future (the difference in price the Fund pays is deemed to be
interest). These are used primarily for cash management and liquidity purposes.
|X| Illiquid and Restricted Securities. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is one
that has a contractual restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933. The Fund will
not invest more than 10% of its net assets in illiquid or restricted securities.
Certain restricted securities that are eligible for resale to qualified
institutional purchasers are not subject to that limit. The Manager monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.
|X| Derivative Investments. The Fund can invest in a number of different
kinds of "derivative" investments. In the broadest sense, collateralized
mortgage obligations and other mortgage-related securities, as well as
exchange-traded options, futures contracts and other hedging instruments the
Fund can use may be considered "derivative investments." In addition to using
hedging instruments, the Fund can use other derivative investments because they
offer the potential for increased income, such as interest rate swap agreements.
Markets underlying securities and indices may move in a direction not
anticipated by the Manager. Interest rate and stock market changes in the U.S.
and abroad may also influence the performance of derivatives. As a result of
these risks the Fund could realize less principal or income from the investment
than expected. Certain derivative investments held by the Fund may be illiquid.
|X| Hedging. The Fund can buy and sell certain kinds of futures contracts,
put and call options, interest rate swaps and options on futures and debt
securities indices. These are all referred to as "hedging instruments." The Fund
does not use hedging instruments for speculative purposes, and has limits on its
use of them. The Fund is not required to use hedging investments in seeking its
goal.
The Fund could buy and sell options and futures for a number of purposes.
It might do so to try to manage its exposure to the possibility that the prices
of its portfolio securities may decline, or to establish a position in the
securities market as a temporary substitute for purchasing individual
securities. It might do so to try to manage its exposure to changing interest
rates.
Some of these strategies would hedge the Fund's portfolio against price
fluctuations. Other hedging strategies, such as buying futures and call options,
would tend to increase the Fund's exposure to the securities market. Writing
covered call options might also provide income to the Fund for liquidity
purposes or to raise cash to distribute to shareholders.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. For example, if a covered call written by the Fund is exercised on
an investment that has increased in value, the Fund will be required to sell the
investment at the call price and will not be able to realize any profit if the
investment has increased in value above the call price. In writing a put, there
is a risk that the Fund may be required to buy the underlying security at a
disadvantageous price.
If the Manager used a hedging instrument at the wrong time or judged
market conditions incorrectly, the strategy could reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments or if it could not
close out a position because of an illiquid market.
Year 2000 Risks. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and those issuers
may incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's Custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
How the Fund Is Managed
The Manager. The Fund's investment Manager, OppenheimerFunds, Inc., chooses the
Fund's investments and handles its day-to-day business. The Manager carries out
its duties, subject to the policies established by the Board of Trustees, under
an Investment Advisory Agreement that states the Manager's responsibilities. The
Agreement sets forth the fees paid by the Fund to the Manager and describes the
expenses that the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The Manager
(including subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $85 billion as of September 30,
1998, and with more than 4 million shareholder accounts. The Manager is located
at Two World Trade Center, 34th Floor, New York, New York 10048-0203.
FundPortfolio Managers. The Fund is managed by John Kowalik, Leslie
Falconio and Gina Palmieri. Mr. Kowalik, who became the lead portfolio manager
of the Fund on October 27, 1998, is a Vice President of the Fund and a Senior
Vice President of the portfolio manager of the Fund since July 15, 1997.Manager.
Prior to joining the Manager in July 1998, he was Managing Director and senior
portfolio manager for Prudential Investments Global Fixed Income Group.
Ms. Falconio and Ms. Palmieri are associate portfolio managers of the Fund
(since December 1996) and Assistant Vice Presidents of the Manager. Prior to
joining the Manager in December 1995, Ms. Falconio was a co-manager of the short
and intermediate government funds at Prudential Funds (May 1995 - November since
July 15, 1997.1995) and a member of the portfolio management team for
mortgage-backed securities at MetLife Investments (1992 - April 1995). Before
joining the Manager in March 1994, Ms. Palmieri was a member of the portfolio
management team for mortgage-backed securities at MetLife Investment (1992 -
February 1996, Mr. Webman was1994). Each member of the management team holds
similar positions with other Oppenheimer funds.
|X| Advisory Fees. Under the Investment Advisory Agreement, the Fund pays
the Manager an advisory fee at an annual rate that declines on additional assets
as the Fund grows: 0.65% of the first $200 million of average annual net assets
of the Fund, 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 average annual net assets in excess
of $800 million. The Fund's management fee for its last fiscal year ended August
31, 1998 was 0.59% of average annual net assets for each class of shares.
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About Your Account
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How to Buy Shares
How Are Shares Purchased? You can buy shares several ways -- through any dealer,
broker or financial institution that has a sales agreement with the Fund's
Distributor, or directly through the Distributor, or automatically through an
Asset Builder Plan under the OppenheimerFunds AccountLink service. The
Distributor may appoint certain servicing agents to accept purchase (and
redemption) orders. The Distributor, in its sole discretion, may reject any
purchase order for the Fund's shares.
|X| Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
|X| Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you
don't list a dealer on the application, the Distributor will act as your agent
in buying the shares. However, we recommend that you discuss your investment
with a financial advisor before your make a purchase to be sure that the Fund is
appropriate for you.
|X| Buying Shares by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum investment is
$2,500. Before sending a wire, call the Distributor's Wire Department at
1-800-525-7048 to notify the Distributor of the wire, and to receive further
instructions.
|X| Buying Shares Through OppenheimerFunds AccountLink. With AccountLink,
shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the Automated Clearing House (ACH)
transfer to buy the shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink,"
below for more details.
|X| Buying Shares Through Asset Builder Plans. You may purchase shares of
the Fund (and up to four other Oppenheimer funds) automatically each month from
your account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are in the Asset Builder Application and the
Statement of Additional Information.
How Much Must You Invest? You can open a Fund account with a minimum initial
investment of $1,000 and make additional investments at any time with as little
as $25. There are reduced minimum investments under special investment plans.
[_] With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments for as
little as $25. Subsequent purchases of at least $25 can be made by telephone
through AccountLink.
[_] Under retirement plans, such as IRAs, pension and profit-sharing plans
and 401(k) plans, you can start your account with as little as $250. If your IRA
is started under an Asset Builder Plan, the $25 minimum applies. Additional
purchases may be as little as $25.
[_] The minimum investment requirement does not apply to reinvesting
dividends from the Fund or other Oppenheimer funds (a list of them appears in
the Statement of Additional Information, or you can ask your dealer or call the
Transfer Agent), or reinvesting distributions from unit investment trusts that
have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price (the net
asset value per share plus any initial sales charge that applies). The offering
price that applies to a purchase order is based on the next calculation of the
net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
[_] The net asset value of each class of shares is determined as of the
close of The New York Stock Exchange, on each day the Exchange is open for
trading (referred to in this Prospectus as a "regular business day"). The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some days. (All references to time in this Prospectus mean "New York time").
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that class
that are outstanding. To determine net asset value, the Fund's Board of Trustees
has established procedures to value the Fund's securities, in general based on
market value. The Board has adopted special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be readily
obtained.
[_] To receive the offering price for a particular day, in most cases the
Distributor or its designated agent must receive your order by the time of day
The New York Stock Exchange closes that day. If your order is received on a day
when the Exchange is closed or after it has closed, the order will receive the
next offering price that is determined after your order is received.
[_] If you buy shares through a dealer, your dealer must receive the order
by the close of The New York Stock Exchange and transmit it to the Distributor
so that it is received before the Distributor's close of business on a regular
business day (normally 5:00 P.M.) to receive that day's offering price.
Otherwise, the order will receive the next offering price that is determined.
- ------------------------------------------------------------------------------
What Classes of Shares Does the Fund Offer? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject
to different expenses and will likely have different share prices. When you
buy shares, be sure to specify the class of shares. If you do not choose a
class, your investment will be made in Class A shares.
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- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
|X| Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million for regular accounts or $500,000 for
certain retirement plans). The amount of that sales charge will vary depending
on the amount you invest. The contingent deferred sales charge rates are listed
in "How Can I Buy Class A Shares?" below.
|X| Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but you will pay an annual asset-based sales charge,
and if you sell your shares within six years of buying them, you will
normally pay a contingent deferred sales charge. That contingent deferred
sales charge varies depending on how long you own your shares, as described in
"How Can I Buy Class B Shares?" below.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
|X| Class C Shares. If you buy Class C shares, you pay no sales charge at
the time of purchase, but you will pay an annual asset-based sales charge, and
if you sell your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1%, as described in "How Can I Buy Class C
Shares?" below.
|X| Class Y Shares. Class Y shares are offered only to certain
institutional investors that have special agreements with the Distributor.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
|X| How Long Do You Expect to Hold Your Investment? While future financial
needs cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of shares.
Because of the effect of class-based expenses, your choice will also depend on
how much you plan to invest. For example, the reduced sales charges available
for larger purchases of Class A shares may, over time, offset the effect of
paying an initial sales charge on your investment, compared to the effect over
time of higher class-based expenses on shares of Class B or Class C .
[_] Investing for the Short Term. If you have a relatively short-term
investment horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares rather
than Class B shares. That is because of the effect of the Class B contingent
deferred sales charge if you redeem within six years, as well as the effect of
the Class B asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice (especially for
investments of less than $100,000), because there is no initial sales charge on
Class C shares, and the contingent deferred sales charge does not apply to
amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C shares might
not be as advantageous as Class A shares. That is because the annual asset-based
sales charge on Class C shares will have a greater impact on your account over
the longer term than the reduced front-end sales charge available for larger
purchases of Class A shares.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend to
hold your shares. For that reason, the Distributor normally will not accept
purchase orders of $500,000 or more of Class B shares or $1 million or more of
Class C shares from a single investor.
[_] Investing for the Longer Term. If you are investing less than $100,000
for the longer-term, for example for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your
options carefully with your financial advisor before making that choice.
|X| Are There Differences in Account Features That Matter to You? Some
account features may not be available to Class B or Class C shareholders. Other
features (such as Automatic Withdrawal Plans) may not be advisable (because of
the effect of the contingent deferred sales charge) for Class B or Class C
shareholders. Therefore, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are not
borne by Class A shares, such as the Class B and Class C asset-based sales
charge described below and in the Statement of Additional Information. Share
certificates are not available for Class B and Class C shares, and if you are
considering using your shares as collateral for a loan, that may be a factor to
consider.
|X| How Does It Affect Payments to My Broker? A salesperson, such as a
broker, may receive different compensation for selling one class of shares than
for selling another class. It is important to remember that Class B and Class C
contingent deferred sales charges and asset-based sales charges have the same
purpose as the front-end sales charge on sales of Class A shares: to compensate
the Distributor for commissions and expenses it pays to dealers and financial
institutions for selling shares. The Distributor may pay additional compensation
from its own resources to securities dealers or financial institutions based
upon the value of shares of the Fund owned by the dealer or financial
institution for its own account or for its customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions.
How Can I Buy Class A Shares? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net
asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
--------------------------------------------------------------------------
Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Commission As
Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Less than $50,000 4.75% 4.98% 4.00%
--------------------------------------------------------------------------
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$50,000 or more but 4.50% 4.71% 3.75%
less than $100,000
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$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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|X| Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more of the Oppenheimer
funds aggregating $1 million or more or for certain purchases by particular
types of retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more other than by those retirement
accounts. For those retirement plan accounts, the commission is 1.0% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of purchases
over $5 million, calculated on a calendar year basis. In either case, the
commission will be paid only on purchases that were not previously subject to a
front-end sales charge and dealer commission.1
1 No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge (called the
"Class A contingent deferred sales charge") may be deducted from the redemption
proceeds. That sales charge will be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares at the time of redemption
(excluding shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original net asset value of the redeemed shares.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer on all
purchases of Class A shares of all Oppenheimer funds you made that were subject
to the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable when
shares are redeemed, the Fund will first redeem shares that are not subject to
the sales charge, including shares purchased by reinvestment of dividends and
capital gains. Then the Fund will redeem other shares in the order in which you
purchased them. The Class A contingent deferred sales charge is waived in
certain cases described in Appendix C to the Statement of Additional
Information.
The Class A contingent deferred sales charge is not charged on exchanges
of shares under the Fund's exchange privilege (described below). However, if the
shares acquired by exchange are redeemed within 18 calendar months of the end of
the calendar month in which the exchanged shares were originally purchased, then
the sales charge will apply.
How Can I Reduce Sales Charges for Class A Share Purchases? You may be eligible
to buy Class A shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges" in
the Statement of Additional Information.
|X| Waivers of Class A Sales Charges. The Class A initial and contingent
deferred sales charges are not imposed in the circumstances described in
Appendix C to the Statement of Additional Information. In order to receive a
waiver of the Class A contingent deferred sales charge, you must notify the
Transfer Agent when purchasing shares whether any of the special conditions
apply.
How Can I Buy Class B Shares? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. The contingent deferred sales charge is not imposed on:
[_] the amount of your account value represented by an increase in net
asset value over the initial purchase price,
[_] shares purchased by the reinvestment of dividends or capital gains
distributions, or
[_] shares redeemed in the special circumstances described in Appendix C
to the Statement of Additional Information.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for over 6 years, and
3. shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
--------------------------------------------------------------------------
Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
0 - 1 5.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1 - 2 4.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2 - 3 3.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
3 - 4 3.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
4 - 5 2.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
5 - 6 1.0%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
6 and following None
--------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
|X| Automatic Conversion of Class B Shares. Class B shares automatically
convert to Class A shares 72 months after you purchase them. This conversion
feature relieves Class B shareholders of the asset-based sales charge that
applies to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value of the
two classes, and no sales load or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions on the converted shares will also convert to Class A
shares. The conversion feature is subject to the continued availability of a tax
ruling described in the Statement of Additional Information.
How Can I Buy Class C Shares? Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. The contingent deferred sales charge is not imposed on:
[_] the amount of your account value represented by the increase in net
asset value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for over 12 months, and
3. shares held the longest during the 12-month period.
Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per share
without sales charge directly to certain institutional investors that have
special agreements with the Distributor for this purpose. They may include
insurance companies, registered investment companies and employee benefit plans,
for example. Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds advised by MassMutual) for asset allocation
programs, investment companies or separate investment accounts it sponsors and
offers to its customers. Individual investors are not able to buy Class Y shares
directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares and the
special account features available to investors buying those other classes of
shares do not apply to Class Y shares. An exception is that the time those
orders must be received by the Distributor or its agents or by the Transfer
Agent is the same for Class Y as for other share classes. However, those
instructions must be submitted by the institutional investor, not by its
customers for whose benefit the shares are held.
Distribution and Service (12b-1) Plans.
|X| Service Plan for Class A Shares. The Fund has adopted a Service Plan
for Class A shares. It reimburses the Distributor for a portion of its costs
incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average
annual net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to reimburse dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
|X| Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and Class C shares
to compensate the Distributor for its services and costs in distributing Class B
and Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class B
shares and on Class C shares. The Distributor also receives a service fee of
0.25% per year under each plan.
The asset-based sales charge and service fees increase Class B and Class C
expenses by up to 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than other types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the first year
after the shares were sold by the dealer. After the shares have been held for a
year, the Distributor pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commission of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sales of Class B shares is therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of sale.
Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor pays the asset-based sales charge
as an ongoing commission to the dealer on Class C shares that have been
outstanding for a year or more.
Special Investor Services
AccountLink. You can use our AccountLink feature to link your Fund account
with an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone
(through a service representative or by PhoneLink) or automatically
under Asset Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit
dividends and distributions directly to your bank account. Please call
the Transfer Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1-800-852-8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PhoneLink. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1-800-533-3310.
[_] Purchasing Shares. You may purchase shares in amounts up to $100,000
by phone, by calling 1-800-533-3310. You must have established AccountLink
privileges to link your bank account with the Fund to pay for these purchases.
[_] Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
[_] Selling Shares. You can redeem shares by telephone automatically by
calling the PhoneLink number and the Fund will send the proceeds directly to
your AccountLink bank account. Please refer to "How to Sell Shares," below
for details.
Can I Submit Transaction Requests by Fax? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1-800-525-7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OppenheimerFunds Internet Web Site. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1-800-533-3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1-800-525-7048.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
Reinvestment Privilege. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other OppenheimerFunds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C or Class Y shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
Retirement Plans. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that can be used
by individuals and employers:
[_] Individual Retirement Accounts (IRAs), including regular IRAs, Roth
IRAs, SIMPLE IRAs, rollover and Education IRAs. [_] SEP-IRAs, which are
Simplified Employee Pensions Plan IRAs for small business owners or
self-employed individuals. [_] 403(b)(7) Custodial Plans, that are tax deferred
plans for employees of eligible tax-exempt organizations, such as schools,
hospitals and charitable organizations. [_] 401(k) Plans, which are special
retirement plans for businesses. [_] Pension and Profit-Sharing Plans, designed
for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business
day. Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must conform with the
procedures described below) and is accepted by the Transfer Agent. The Fund lets
you sell your shares by writing a letter, by telephone or by writing a check
against your account. You can also set up Automatic Withdrawal Plans to redeem
shares on a regular basis. If you have questions about any of these procedures,
and especially if you are redeeming shares in a special situation, such as due
to the death of the owner or from a retirement plan account, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
|X| Certain Requests Require a Signature Guarantee. To protect you and the
Fund from fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that also
require a signature guarantee):
[_] You wish to redeem $50,000 or more and receive a check
[_] The redemption check is not payable to all shareholders listed on the
account statement
[_] The redemption check is not sent to the address of record on your
account statement
[_] Shares are being transferred to a Fund account with a different owner
or name
[_] Shares are being redeemed by someone (such as an Executor) other than
the owners
|X| Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial institutions,
including: a U.S. bank, trust company, credit union or savings association,
or by a foreign bank that has a U.S. correspondent bank, or by a U.S.
registered dealer or broker in securities, municipal securities or government
securities, or by a U.S. national securities exchange, a registered
securities association or a clearing agency. If you are signing on behalf of
a corporation, partnership or other business or as a fiduciary, you must also
include your title in the signature.
|X| Retirement Plan Accounts. There are special procedures to sell shares
in an OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements apply to
distributions from retirement plans. You must submit a withholding form with
your redemption request to avoid delay in getting your money and if you do not
want tax withheld. If your employer holds your retirement plan account for you
in the name of the plan, you must ask the plan trustee or administrator to
request the sale of the Fund shares in your plan account.
|X| Sending Redemption Proceeds by Wire. While the Fund normally sends
your money by check, you can arrange to have the proceeds of the shares you sell
sent by Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The minimum
redemption you can have sent by wire is $2,500. There is a $10 fee for each
wire. To find out how to set up this feature on your account or to arrange a
wire, call the Transfer Agent at 1-800-852-8457.
How Do I Sell Shares by Mail? Write a letter of instructions that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is
registered, and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
- ------------------------------------------------------------------------------
Use the following address for requests by mail:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
OppenheimerFunds Services
- ------------------------------------------------------------------------------
P.O. Box 5270, Denver, Colorado 80217-5270
- ------------------------------------------------------------------------------
Send courier or express mail requests to:
- ------------------------------------------------------------------------------
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
How Do I Sell Shares by Telephone? You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price on a
regular business day, your call must be received by the Transfer Agent by the
close of The New York Stock Exchange that day, which is normally 4:00 P.M., but
may be earlier on some days. You may not redeem shares held in an
OppenheimerFunds retirement plan account or under a share certificate by
telephone.
o To redeem shares through a service representative, call
1-800-852-8457
o To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
Are There Limits on Amounts Redeemed by Telephone?
|X| Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed by
telephone in any 7-day period. The check must be payable to all owners of record
of the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an account.
|X| Telephone Redemptions Through AccountLink. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
How Do I Write Checks Against My Account? To write checks against your Fund
account, request that privilege on your account Application, or contact the
Transfer Agent for signature cards. They must be signed (with a signature
guarantee) by all owners of the account and returned to the Transfer Agent so
that checks can be sent to you to use. Shareholders with joint accounts can
elect in writing to have checks paid over the signature of one owner. If you
previously signed a signature card to establish checkwriting in another
Oppenheimer fund, simply call 1-800-525-7048 to request checkwriting for an
account in this Fund with the same registration as the other account.
o Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or Custodian.
o Checkwriting privileges are not available for accounts holding
shares that are subject to a contingent deferred sales charge.
o Checks must be written for at least $100.
o Checks cannot be paid if they are written for more than your account
value.
o You may not write a check that would require the Fund to redeem shares
that were purchased by check or Asset Builder Plan payments within the prior 10
days.
o Don't use your checks if you changed your Fund account number, until
you receive new checks.
Can I Sell Shares Through My Dealer? The Distributor has made arrangements to
repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale
in your state of residence.
o The prospectuses of this Fund and the fund whose shares you want to
buy must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at
least 7 days before you can exchange them. After the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund you
purchase by exchange.
o Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale of the shares of the fund you own and a
purchase of the shares of the other fund, which may result in a capital gain or
loss. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
How Do I Submit Exchange Requests? Exchanges may be requested in writing or
by telephone:
|X| Written Exchange Requests. Submit an OppenheimerFunds Exchange Request
form, signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates cannot be
processed unless the Transfer Agent receives the certificates with the request.
|X| Telephone Exchange Requests. Telephone exchange requests may be made
either by calling a service representative at 1-800-852-8457, or by using
PhoneLink for automated exchanges by calling 1-800-533-3310. Telephone exchanges
may be made only between accounts that are registered with the same name(s) and
address. Shares held under certificates may not be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a service
representative at 1-800-525-7048. That list can change from time to time.
Are There Limitations on Exchanges? There are certain exchange policies you
should be aware of:
[_] Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which the
Transfer Agent receives an exchange request that conforms to the policies
described above. It must be received by the close of The New York Stock Exchange
that day, which is normally 4:00 P.M. but may be earlier on some days. However,
either fund may delay the purchase of shares of the fund you are exchanging into
up to seven days if it determines it would be disadvantaged by a same-day
exchange. For example, the receipt of multiple exchange requests from a "market
timer" might require the Fund to sell securities at a disadvantageous time
and/or price
|_| Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests submitted
by a shareholder or dealer.
|_| The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund will attempt to provide you notice whenever it is
reasonably able to do so, it may impose these changes at any time.
|_| If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained in the Statement of Additional Information.
|X| The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
|X| Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any time. If
an account has more than one owner, the Fund and the Transfer Agent may rely on
the instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from an owner of the account.
|X| The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund will
not be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine.
|X| Redemption or transfer requests will not be honored until the Transfer
Agent receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
|X| Dealers that can perform account transactions for their clients by
participating in NETWORKING through the National Securities Clearing Corporation
are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
|X| The redemption price for shares will vary from day to day because the
value of the securities in the Fund's portfolio fluctuates. The redemption
price, which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less than
their original cost.
|X| Payment for redeemed shares ordinarily is made in cash. It is
forwarded by check or through AccountLink or by Federal Funds wire (as elected
by the shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual circumstances
determined by the Securities and Exchange Commission, payment may be delayed or
suspended. For accounts registered in the name of a broker-dealer, payment will
normally be forwarded within three business days after redemption.
|X| The Transfer Agent may delay forwarding a check or processing a
payment via AccountLink for recently purchased shares, but only until the
purchase payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase shares by
Federal Funds wire or certified check, or arrange with your bank to provide
telephone or written assurance to the Transfer Agent that your purchase payment
has cleared.
|X| Involuntary redemptions of small accounts may be made by the Fund if
the account value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions may be
made to repay the Distributor for losses from the cancellation of share purchase
orders.
|X| Shares may be "redeemed in kind" under unusual circumstances (such as
a lack of liquidity in the Fund's portfolio to meet redemptions). This means
that the redemption proceeds will be paid with securities from the Fund's
portfolio.
|X| "Backup Withholding" of Federal income tax may be applied against
taxable dividends, distributions and redemption proceeds (including exchanges)
if you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
|X| To avoid sending duplicate copies of materials to households, the Fund
will mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1-800-525-7048 to ask that copies of
those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income each regular business day and pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Dividends and distributions paid on Class A and Class Y shares will generally be
higher than dividends for Class B and Class C shares, which normally have higher
expenses than Class A and Class Y.
Daily dividends will not be declared or paid on newly-purchased shares
until Federal Funds are available to the Fund from the purchase payment for
shares. The Fund has no fixed dividend rate and cannot guarantee that it will
pay any dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
What Choices Do I Have for Receiving Distributions? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
|X| Reinvest All Distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
|X| Reinvest Long-Term Capital Gains Only. You can elect to reinvest
long-term capital gains distributions in the Fund while receiving
dividends by check or having them sent to your bank account through
AccountLink.
|X| Receive All Distributions in Cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or
have them sent to your bank through AccountLink.
|X| Reinvest Your Distributions in Another OppenheimerFunds Account.
You can reinvest all distributions in the same class of shares of
another OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Mutual fund distributions from U.S. government securities are generally
free from state and local income taxes. However, particular states may limit
that benefit, and some types of securities, such as repurchase agreements and
asset-backed securities, may not qualify for that benefit.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
|X| Avoid "Buying a Dividend." If you buy shares just before the Fund
declares a capital gain distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable dividend or capital
gain.
|X| Remember There May be Taxes on Transactions. Because the Fund's share
price fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price you paid
for the shares and the price you received when you sold them.
Any capital gain is subject to capital gains tax.
|X| Returns of Capital Can Occur. In certain cases, distributions
made by the Fund may be considered a non-taxable return of capital to
shareholders. If that occurs, it will be identified in notices to
shareholders.
This information is only a summary of certain federal tax information
about your investment. You should consult with your tax adviser about the effect
of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 5 fiscal years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned [or lost] on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by KPMG Peat Marwick LLP, the Fund's independent
auditors, whose report, along with the Fund's financial statements, is included
in the Statement of Additional Information, which is available on request.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
- ---------------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE
30,
1998 1997 1996(/3/) 1996
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA
Net asset value,
beginning of period $9.48 $9.23 $9.30 $9.51
$9.20 $9.95
- -------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .65 .71 .10 .67
.68 .67
Net realized and
unrealized gain (loss) .26 .23 (.07) (.21)
.31 (.74)
----- ----- ----- -----
- ----- -----
Total income (loss) from
investment operations .91 .94 .03 .46
.99 (.07)
- -------------------------------------------------------------------------------
Dividends and
distributions
to shareholders:
Dividends from net
investment income (.65) (.69) (.10) (.66)
(.68) (.64)
Dividends in excess of
net investment income -- -- -- --
- -- (.01)
Tax return of capital
distribution -- -- -- (.01)
- -- (.03)
---- ---- ---- -----
- ---- -----
Total dividends and
distributions to
shareholders (.65) (.69) (.10) (.67)
(.68) (.68)
- -------------------------------------------------------------------------------
Net asset value, end of
period $9.74 $9.48 $9.23 $9.30
$9.51 $9.20
===== ===== ===== =====
===== =====
- -------------------------------------------------------------------------------
TOTAL RETURN, AT NET
ASSET VALUE(/5/) 9.26% 10.45% 0.42% 4.91%
11.22% (1.17)%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in thousands) $573,792 $468,809 $503,693 $504,966
$312,607 $310,027
- -------------------------------------------------------------------------------
Average net assets (in
thousands) $516,173 $478,410 $508,123 $452,236
$307,306 $355,698
- -------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 6.17% 7.58% 6.64%(/6/) 7.07%
7.32% 6.61%
Expenses 1.03% 1.06% 1.09%(/6/) 1.08%
1.09% 1.14%
- -------------------------------------------------------------------------------
Portfolio turnover
rate(/7/) 79.5% 42.6% 5.6% 399.7%
303.5% 139.5%
</TABLE>
1. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994. 3. For the two months ended August 31, 1996. The Fund changed its fiscal
year end from June 30 to August 31. 4. For the period from July 21, 1995
(inception of offering) to June 30, 1996. 5. 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. 6. Annualized. 7. 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 and purchases and sales from
mortgage dollar-rolls) for the period ended August 31, 1998 were $822,053,654
and $626,901,145, respectively. For the periods ended June 30, 1996 and 1995,
purchases and sales of investment securities included mortgage dollar-rolls.
31
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS B
(CONTINUED) ---------------------------------------------
PERIOD ENDED
YEAR ENDED AUGUST 31, JUNE 30,
1998 1997 1996(/3/) 1996(/4/)
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning
of period $9.47 $9.22 $9.29 $9.40
- -------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .64 .09 .56
Net realized and
unrealized gain (loss) .27 .23 (.07) (.11)
----- ----- ----- ----
Total income (loss) from
investment operations .83 .87 .02 .45
- -------------------------------------------------------------------------------
Dividends and
distributions to
shareholders:
Dividends from net
investment income (.57) (.62) (.09) (.55)
Dividends in excess of net
investment income -- -- -- --
Tax return of capital
distribution -- -- -- (.01)
---- ---- ---- -----
Total dividends and
distributions to
shareholders (.57) (.62) (.09) (.56)
- -------------------------------------------------------------------------------
Net asset value, end of
period $9.73 $9.47 $9.22 $9.29
===== ===== ===== =====
- -------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE(/5/) 8.45% 9.63% 0.28% 4.80%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $118,873 $52,301 $36,504 $30,737
- -------------------------------------------------------------------------------
Average net assets (in
thousands) $ 76,030 $41,420 $35,078 $19,227
- -------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.33% 6.77% 5.82%(/6/)
6.44%(/6/)
Expenses 1.78% 1.81% 1.88%(/6/)
1.93%(/6/)
- -------------------------------------------------------------------------------
Portfolio turnover
rate(/7/) 79.5% 42.6% 5.6% 399.7%
</TABLE>
1. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994. 3. For the two months ended August 31, 1996. The Fund changed its fiscal
year end from June 30 to August 31. 4. For the period from July 21, 1995
(inception of offering) to June 30, 1996. 5. 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. 6. Annualized. 7. 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 and purchases and sales from
mortgage dollar-rolls) for the period ended August 31, 1998 were $822,053,654
and $626,901,145, respectively. For the periods ended June 30, 1996 and 1995,
purchases and sales of investment securities included mortgage dollar-rolls.
32
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS
C CLASS Y
(CONTINUED)
- -------------------------------------------------------- ------------
PERIOD ENDED
YEAR ENDED AUGUST 31, YEAR ENDED JUNE
30, AUGUST 31,
1998 1997 1996(/3/) 1996 1995
1994(/2/) 1998(/1/)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
<C> <C>
PER SHARE OPERATING DATA
Net asset value,
beginning of period $9.47 $9.22 $9.29 $9.50 $9.19
$9.83 $10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .64 .09 .60
.61 .33 .18
Net realized and
unrealized gain (loss) .26 .23 (.07) (.21) .30
(.64) (.26)
----- ----- ----- ----- -----
- ----- ------
Total income (loss) from
investment operations .82 .87 .02 .39 .91
(.31) (.08)
- --------------------------------------------------------------------------------
Dividends and
distributions
to shareholders:
Dividends from net
investment income (.57) (.62) (.09) (.59) (.60)
(.33) (.18)
Dividends in excess of
net investment income -- -- -- --
- -- -- --
Tax return of capital
distribution -- -- -- (.01)
- -- -- --
---- ---- ---- ----- ----
- ---- ----
Total dividends and
distributions
to shareholders (.57) (.62) (.09) (.60) (.60)
(.33) (.18)
- --------------------------------------------------------------------------------
Net asset value, end of
period $9.72 $9.47 $9.22 $9.29 $9.50
$9.19 $ 9.74
===== ===== ===== ===== =====
===== ======
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET
ASSET VALUE(/5/) 8.34% 9.65% 0.28% 4.11% 10.31%
(3.12)% 2.83%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (in thousands) $40,456 $21,625 $18,547 $18,531 $11,019
$4,261 $1
- --------------------------------------------------------------------------------
Average net assets (in
thousands) $27,135 $19,505 $18,620 $15,766 $ 6,503
$2,173 $1
- --------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 5.36% 6.81% 5.90%(/6/) 6.27% 6.44%
5.97%(/6/) 1.77%(/6/)
Expenses 1.78% 1.80% 1.84%(/6/) 1.85% 1.89%
1.96%(/6/) 0.73%(/6/)
- --------------------------------------------------------------------------------
Portfolio turnover
rate(/7/) 79.5% 42.6% 5.6% 399.7% 303.5%
139.5% 79.5%
</TABLE>
1. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994. 3. For the two months ended August 31, 1996. The Fund changed its fiscal
year end from June 30 to August 31. 4. For the period from July 21, 1995
(inception of offering) to June 30, 1996. 5. 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. 6. Annualized. 7. 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 and purchases and sales from
mortgage dollar-rolls) for the period ended August 31, 1998 were $822,053,654
and $626,901,145, respectively. For the periods ended June 30, 1996 and 1995,
purchases and sales of investment securities included mortgage dollar-rolls.
33
<PAGE>
Oppenheimer U.S. Government Trust
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For More Information:
The following additional information about the Fund is available without charge
upon request:
Statement of Additional Information
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
Annual and Semi-Annual Reports
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
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How to Get More Information:
- ---------------------------------------------------------------------------
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1-800-525-7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can read or down-load documents on the OppenheimerFunds web site:
http://www.oppenheimerfunds.com You can also obtain copies of the Statement of
Additional Information and other Fund documents and reports by visiting the
SEC's Public Reference Room in Washington, D.C. (Phone 1-800-SEC-0330) or the
SEC's Internet web site at http://www.sec.gov. Copies may be obtained upon
payment of a duplicating fee by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-3430
PR0220.001.1298 Printed on recycled paper.
Appendix to Prospectus of
Oppenheimer U.S. Government Trust
Graphic material included in the Prospectus of Oppenheimer U.S. Government
Trust "Annual Total Returns (Class A)(% as of 12/31 each year)":
A bar chart will be included in the Prospectus of Oppenheimer U.S.
Government Trust (the "Fund") depicting the annual total returns of a
hypothetical investment in Class A shares of the Fund for each of the nine most
recent calendar years, without deducting sales charges. Set forth below are the
relevant data points that will appear in the bar chart:
Calendar Oppenheimer
Year U.S. Government Trust
Ended Class A
Shares
12/31/88 6.84%
12/31/89 11.93%
12/31/90 7.63%
12/31/91 15.24%
12/31/92 5.04%
12/31/93 8.00%
12/31/94 -1.28%
12/31/95 14.94%
12/31/96 4.34%
12/31/97 10.36%
<PAGE>
Oppenheimer U.S. Government Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December 28, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December 28, 1998. It should be read
together with the Prospectus. You can obtain the Prospectus by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number shown
above, or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 6
Investment Restrictions............................................ 17
How the Fund is Managed ............................................... 18
Organization and History........................................... 18
Trustees and Officers.............................................. 20
The Manager........................................................ 25
Brokerage Policies of the Fund......................................... 27
Distribution and Service Plans......................................... 29
Performance of the Fund................................................ 32
About Your Account
How To Buy Shares...................................................... 38
How To Sell Shares..................................................... 46
How To Exchange Shares................................................. 51
Dividends, Capital Gains and Taxes..................................... 53
Additional Information About the Fund.................................. 55
Financial Information About the Fund
Independent Auditors' Report........................................... 56
Financial Statements................................................... 57
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Industry Classifications................................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
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<PAGE>
ABOUT THE FUND
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Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below in seeking its objective.
It may use some of the special investment techniques and strategies at some
times or not at all.
[_] Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or entities or by private issuers. These
securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real-estate
related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages. Therefore, it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. Therefore, these securities may
be less effective as a means of "locking in" attractive long-term interest
rates, and they may have less potential for appreciation during periods of
declining interest rates, than conventional bonds with comparable stated
maturities.
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
[_] Collateralized Mortgage Obligations. CMOs are multi-class
bonds that are backed by pools of mortgage loans or mortgage pass-through
certificates. They may be collateralized by:
(1)pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae, or
Freddie Mac,
(2)unsecuritized mortgage loans insured by the Federal Housing Administration
or guaranteed by the Department of Veterans' Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or (5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
[_] U.S. Government Mortgage-Related Securities. The Fund can invest in
a variety of mortgage-related securities that are issued by U.S. government
entities or instrumentalities, some of which are described below.
[_] GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States within
the U.S. Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. GNMA Certificates are debt securities representing an interest in one
or a pool of mortgages that are insured by the Federal Housing Administration or
the Farmers Home Administration or guaranteed by the Veterans Administration.
The GNMA Certificates in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Certificates
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the GNMA
Certificates, whether or not the interest on the underlying mortgages has been
collected by the issuers.
The GNMA Certificates purchased by the Fund are guaranteed as to timely
payment of principal and interest by GNMA. In giving that guaranty, GNMA expects
that payments received by the issuers of GNMA Certificates on account of the
mortgages backing the Certificates will be sufficient to make the required
payments of principal of and interest on those Certificates. However if those
payments are insufficient, the guaranty agreements between the issuers of the
Certificates and GNMA require the issuers to make advances sufficient for the
payments. If the issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under any
guaranty issued by GNMA as to such mortgage pools. An opinion of an Assistant
Attorney General of the United States, dated December 9, 1969, states that such
guaranties "constitute general obligations of the United States backed by its
full faith and credit." GNMA is empowered to borrow from the United States
Treasury to the extent necessary to make any payments of principal and interest
required under those guaranties.
GNMA Certificates are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, GNMA
Certificates do not constitute a liability of those issuer, nor do they evidence
any recourse against those issuers. Recourse is solely against GNMA. Holders of
GNMA Certificates (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
GNMA Certificates held by the Fund. All of the mortgages in the pools relating
to the GNMA Certificates owned by the Fund are subject to prepayment without any
significant premium or penalty, at the option of the mortgagors. While the
mortgages on 1-to-4-family dwellings underlying certain GNMA Certificates have a
stated maturity of up to 30 years, it has been the experience of the mortgage
industry that the average life of comparable mortgages, as a result of
prepayments, refinancing and payments from foreclosures, is considerably less.
[_] Federal Home Loan Mortgage Corporation Certificates. FHLMC, a corporate
instrumentality of the United States, issues FHLMC Certificates representing
interests in mortgage loans. FHLMC guarantees to each registered holder of a
FHLMC Certificate timely payment of the amounts representing a holder's
proportionate share in: (i) interest payments less servicing and guarantee fees,
(ii) principal prepayments and (iii) the ultimate collection of amounts
representing the holder's proportionate interest in principal payments on the
mortgage loans in the pool represented by the FHLMC Certificate, in each case
whether or not such amounts are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.
[_] Federal National Mortgage Association (Fannie Mae) Certificates. Fannie
Mae, a federally-chartered and privately-owned corporation, issues Fannie Mae
Certificates which are backed by a pool of mortgage loans. Fannie Mae guarantees
to each registered holder of a Fannie Mae Certificate that the holder will
receive amounts representing the holder's proportionate interest in scheduled
principal and interest payments, and any principal prepayments, on the mortgage
loans in the pool represented by such Certificate, less servicing and guarantee
fees, and the holder's proportionate interest in the full principal amount of
any foreclosed or other liquidated mortgage loan. In each case the guarantee
applies whether or not those amounts are actually received. The obligations of
Fannie Mae under its guarantees are obligations solely of Fannie Mae and are not
backed by the full faith and credit of the United States or any of its agencies
or instrumentalities other than Fannie Mae.
[_] Treasury Inflation-Protection Securities. The Fund can buy these U.S.
Treasury securities, called "TIPS," that are designed to provide an investment
vehicle that is not vulnerable to inflation. The interest rate paid by TIPS is
fixed. The principal value rises or falls semi-annually based on changes in the
published Consumer Price Index. If inflation occurs, the principal and interest
payments on TIPS are adjusted to protect investors from inflationary loss. If
deflation occurs, the principal and interest payments will be adjusted downward,
although the principal will not fall below its face amount at maturity.
[_] Zero-Coupon Securities. The Fund may buy zero-coupon U.S.
government securities. These will typically be U.S. Treasury Notes and Bonds
that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
[_] Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year, although the Fund does not expect to have a
portfolio turnover rate of more than 100%. Increased portfolio turnover could
create higher transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
[_] Forward Rolls. The Fund can enter into "forward roll" transactions with
respect to mortgage-related securities. In this type of transaction, the Fund
sells a mortgage-related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security, and having the same
coupon and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction, are expected to generate income to the Fund in excess
of the yield on the securities that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books cash, U.S.
government securities or other high-grade debt securities in an amount equal to
the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
[_] Commercial (Privately-Issued) Mortgage Related Securities. The Fund may
invest in commercial mortgage-related securities issued by private entities.
Generally these are multi-class debt or pass-through certificates secured by
mortgage loans on commercial properties. They are subject to the credit risk of
the issuer. These securities typically are structured to provide protection to
investors in senior classes from possible losses on the underlying loans. They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying loans. They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.
[_] "Stripped" Mortgage Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security, or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
[_] Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet
anticipated redemptions of Fund shares, or pending the investment of the
proceeds from sales of Fund shares, or pending the settlement of portfolio
securities transactions.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its ability
to do so. The Manager will impose creditworthiness requirements to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
[_] Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements as a cash management tool, but not as a source of leverage for
investing. When the Fund enters into a reverse repurchase agreement, it
segregates on its books an amount of cash or U.S. government securities equal in
value to the purchase price of the securities it has committed to buy, plus
accrued interest, until the payment is made to the seller. Before the Fund
enters into a reverse repurchase agreement, the Manager evaluates the
creditworthiness of the seller, typically a bank or broker-dealer. As a
fundamental policy, the Fund will not enter into a reverse repurchase agreement
unless the securities that collateralize the transaction have a maturity date
not later than the settlement date of the transaction.
|X| Floating Rate and Variable Rate Obligations. Some of the securities
the Fund can purchase have variable or floating interest rates. Variable rates
are adjusted at stated periodic intervals. Variable rate obligations can have a
demand feature that allows the Fund to tender the obligation to the issuer or a
third party prior to its maturity. The tender may be at par value plus accrued
interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate demand note is also based on a stated prevailing market rate but
is adjusted automatically at specified intervals. Generally, the changes in the
interest rate on such securities reduce the fluctuation in their market value.
As interest rates decrease or increase, the potential for capital appreciation
or depreciation is less than that for fixed-rate obligations of the same
maturity. The Manager may determine that an unrated floating rate or variable
rate demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets those
quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally the issuer must provide a specified number of days' notice to the
holder.
|X| Inverse Floaters. The Fund can invest in a type of variable rate
instrument known as an "inverse floater." These pay interest at rates that vary
as the rates on bonds change. However, the rates of interest on inverse floaters
move in the opposite direction of yields on other bonds in response to market
changes. As interest rates rise, inverse floaters produce less current income,
and their market value can become volatile.
Inverse floaters may offer relatively high current income, reflecting the
spread between short-term and long-term interest rates. As long as the yield
curve remains relatively steep and short term rates remain relatively low,
owners of inverse floaters will have the opportunity to earn interest at
above-market rates because they receive interest at the higher long-term rates
but have paid for bonds with lower short-term rates. If the yield curve flattens
and shifts upward, an inverse floater will lose value more quickly than a
conventional long-term bond. The Fund will invest in inverse floaters to seek
higher yields than are available from fixed-rate bonds that have comparable
maturities and credit ratings. In some cases, the holder of an inverse floater
may have an option to convert the floater to a fixed-rate bond, pursuant to a
"rate-lock" option.
Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuations.
"Embedded" caps can be used to hedge a portion of the Fund's exposure to rising
interest rates. When interest rates exceed a pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates on the
inverse floater, and the hedge is successful. However, the Fund bears the risk
that if interest rates do not rise above the pre-determined rate, the cap (which
is purchased for additional cost) will not provide additional cash flows and
will expire worthless. Inverse floaters are a form of derivative investment.
|X| When-Issued and Delayed-Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed-delivery" (or "forward commitment") basis. "When-issued" or
"delayed-delivery" refers to securities whose terms and indenture are available
and for which a market exists, but which are not available for immediate
delivery.
When such transactions are negotiated the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date. from The securities
are subject to change in value from market fluctuation during the settlement
period. The value at delivery may be less than the purchase price. For example,
changes in interest rates in a direction other than that expected by the Manager
before settlement will affect the value of such securities and may cause loss to
the Fund.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed-delivery
transactions, it relies on the buyer or seller, as the case may be, to complete
the transaction. Their failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield it considers
advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its
investment objective and policies for its portfolio or for delivery pursuant to
options contracts it has entered into, and not for the purposes of investment
leverage. Although the Fund will enter into when-issued or delayed-delivery
purchase transactions to acquire securities, the Fund may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition or to dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss.
At the time the Fund makes a commitment to purchase or sell a security on
a when-issued or forward commitment basis, it records the transaction on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its net asset value. The
Fund will identify on its books cash, U.S. government securities or other high
grade debt obligations at least equal to the value of purchase commitments until
the Fund pays for the investment.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to hedge against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, to obtain the benefit of currently higher cash yields.
[_] Loans of Portfolio Securities. To raise cash for liquidity purposes,
the Fund can lend its portfolio securities to brokers, dealers and other types
of financial institutions approved by the Fund's Board of Trustees. As a
fundamental policy, these loans are limited to not more than 25% of the value of
the Fund's total assets. The Fund currently does not intend to engage in loans
of securities, but if it does so, such loans will not likely exceed 5% of the
Fund's total assets.
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. government or
its agencies or instrumentalities, or other cash equivalents in which the Fund
is permitted to invest. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
[_] Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. A number of these
derivative investments have been described above. Some other derivative
investments the Fund may use are the hedging instruments described below in
this Statement of Additional Information.
[_] Hedging. Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. To attempt to protect
against declines in the market value of the Fund's portfolio, to permit the Fund
to retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund could:
[_] sell futures contracts,
[_] buy puts on such futures or on securities, or
[_] write covered calls on securities or futures. Covered calls may
also be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could:
[_] buy futures, or
[_] buy calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
[_] Futures. The Fund can buy and sell futures contracts that relate to
debt securities (these are referred to as "interest rate futures"). An interest
rate future obligates the seller to deliver (and the purchaser to take) cash or
a specified type of debt security to settle the futures transaction at a
specified future date. Either party could also enter into an offsetting contract
to close out the position.
No payment is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
Custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
[_] Put and Call Options. The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options
on the other types of futures described above.
[_] Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. That means
the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if the
call is exercised. Up to 100% of the Fund's total assets may be subject to calls
the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for Federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate additional
liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no
circumstances would the Fund's receipt of an exercise notice as to that future
require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.
[_] Writing Put Options. The Fund may sell put options. A put option
on securities gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying investment at the exercise price during the
option period. The Fund will not write puts if, as a result, more than 50% of
the Fund's net assets would be required to be segregated to cover such put
options.
If the Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price. If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, to secure its obligation to pay
for the underlying security the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
The Fund therefore forgoes the opportunity of investing the segregated assets or
writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay the exercise price. The Fund has no control over when it may be required
to purchase the underlying security, since it may be assigned an exercise notice
at any time prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction will also
permit the Fund to write another put option on the security, or to sell the
security and use the proceeds from the sale for other investments. The Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for Federal tax purposes, and when distributed by the
Fund, are taxable as ordinary income.
[_] Purchasing Calls and Puts. The Fund can purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund buys a call (other than
in a closing purchase transaction), it pays a premium. The Fund then has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price. The Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If the Fund does not exercise the call or sell it (whether
or not at a profit), the call will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to purchase the
underlying investment.
The Fund can buy puts whether or not it holds the underlying investment in
its portfolio. When the Fund purchases a put, it pays a premium and, except as
to puts on indices, has the right to sell the underlying investment to a seller
of a put on a corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the value
of the underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
may sell the put prior to its expiration. That sale may or may not be at a
profit.
When the Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
The Fund may buy a call or put only if, after the purchase, the value of
all call and put options held by the Fund will not exceed 5% of the Fund's total
assets.
[_] Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
[_] Interest Rate Swap Transactions. The Fund can enter into interest rate
swap agreements. In an interest rate swap, the Fund and another party exchange
their right to receive or their obligation to pay interest on a security. For
example, they might swap the right to receive floating rate payments for fixed
rate payments. The Fund can enter into swaps only on securities that it owns.
The Fund will not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets (such as cash or U.S.
government securities) to cover any amounts it could owe under swaps that exceed
the amounts it is entitled to receive, and it will adjust that amount daily, as
needed.
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet received. The
Manager will monitor the creditworthiness of counterparties to the Fund's
interest rate swap transactions on an ongoing basis.
The Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results in a loss to one party, the measure of
that party's damages is calculated by reference to the average cost of a
replacement swap for each swap. It is measured by the mark-to-market value at
the time of the termination of each swap. The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on termination
is generally referred to as "aggregation."
[_] Regulatory Aspects of Hedging Instruments. When using futures and
options on futures, the Fund is required to operate within certain guidelines
and restrictions with respect to the use of futures as established by the
Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund is
exempted from registration with the CFTC as a "commodity pool operator" if the
Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for futures
margin and related options premiums for a bona fide hedging position. However,
under the Rule, the Fund must limit its aggregate initial futures margin and
related options premiums to not more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies under
the Rule. Under the Rule, the Fund must also use short futures and options on
futures solely for bona fide hedging purposes within the meaning and intent of
the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same adviser as the Fund (or an adviser that is an affiliate of the Fund's
adviser). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
Investment Restrictions
[_] What Are "Fundamental Policies?" Fundamental policies are those policies
that the Fund has adopted to govern its investments that can be changed only by
the vote of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, a "majority" vote is defined as the vote of the holders
of the lesser of:
[_] 67% or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding
shares are present or represented by proxy, or
[_] more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
[_] Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
[_] The Fund cannot enter into repurchase agreements maturing in more than
seven days nor invest in securities that are restricted as to their resale or
that are not readily convertible to cash ("illiquid securities"), nor invest in
securities for which market quotations are not readily available if more than
10% of the Fund's total assets would be invested in those securities.
[_] The Fund cannot make loans. However, it can buy the debt securities that
its investment policies and restrictions permit it to purchase, whether or not
those securities are subject to repurchase agreements. The Fund may also lend
its portfolio securities as described in "Loans of Portfolio Securities."
[_] The Fund cannot borrow money in excess of 10% of the value of its net
assets. It can borrow only as a temporary measure for extraordinary or emergency
purposes. It cannot make any investments when its borrowings exceed 5% of the
value of its assets. No assets of the Fund may be pledged, mortgaged or
hypothecated to secure a debt. However, the escrow arrangements involved in
options trading are not considered to involve a mortgage, hypothecation or
pledge for this purpose.
[_] The Fund cannot purchase securities on margin or make short sales of
securities. However, the Fund may make margin deposits in connection with any of
the hedging instruments permitted by any of its other fundamental policies.
[_] The Fund cannot invest in real estate.
[_] The Fund cannot underwrite securities of other companies.
[_] The Fund cannot invest in securities of other investment companies,
except if it acquires them as part of a merger, consolidation or acquisition of
assets.
[_] The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include borrowing
money reverse repurchase agreements, delayed-delivery and when-issued
arrangements for portfolio securities transactions, and contracts to buy or sell
derivatives, hedging instruments, options or futures.
As a non-fundamental policy, the Fund cannot invest in interests in oil,
gas, or other mineral exploration or development programs.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment increases in proportion to
the size of the Fund.
The Fund will not invest 25% or more of its assets in investments in any
industry. There is no limit, however, on the Fund's investments in obligations
of the U.S. government or its agencies or instrumentalities. For purposes of the
Fund's policy not to concentrate its investments, the Fund has adopted the
industry classifications set forth in Appendix B to this Statement of Additional
Information. This is not a fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in 1982.
Prior to August 16, 1985, the Fund operated as a money market fund with a fixed
net asset value per share. Effective August 16, 1985, the Fund changed its
investment objective and ceased to be a money market canfund. It can currently
invest in securities of any maturity.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. Although the Fund will
not normally hold annual meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and shareholders have the right
to call a meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
[_] Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares: Class A, Class B, Class C and Class Y. All classes invest in the
same investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Fund into additional series
or classes of shares. The Trustees also may divide or combine the shares of a
class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy at shareholder meetings.
|_| Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of its outstanding shares.
If the Trustees receive a request from at least 10 shareholders stating that
they wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|_| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. The contracts further
state that the Trustees shall have no personal liability to any such person, to
the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company Act.
All of the Trustees are Trustees or Directors of the following New York-based
Oppenheimer funds2:
2 Ms. Macaskill is not a Director of Oppenheimer Money Market Fund, Inc.
Oppenheimer California Municipal Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Fund
Oppenheimer Developing Markets Fund Oppenheimer Multiple Strategies
Fund
Fund
Oppenheimer Discovery Fund Oppenheimer Multi-Sector Income
Trust
Oppenheimer Enterprise Fund Oppenheimer Multi-State Municipal
Trust
Oppenheimer Global Fund Oppenheimer Municipal Bond Fund
Oppenheimer Global Growth & Income Fund Oppenheimer New York Municipal Fund
Oppenheimer Gold & Special Minerals Oppenheimer Series Fund, Inc.
Fund
Oppenheimer Growth Fund Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund Oppenheimer World Bond Fund
Oppenheimer International Small
Company Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Bowen, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of December 1, 1998, the Trustees and officers of the
Fund as a group owned of record or beneficially less than 1% of each class of
shares of the Fund. The foregoing statement does not reflect ownership of shares
of the Fund held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under the plan by the officers
of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of that
plan.
Leon Levy, Chairman of the Board of Trustees, Age 73
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since
1982) and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee, Age 65
19750 Beach Road, Jupiter Island, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 to
December 1997); Vice President (June 1990 to March 1994) and General Counsel of
Oppenheimer Acquisition Corp., the Manager's parent holding company; Executive
Vice President (December 1977 to October 1995), General Counsel and a director
(December 1975 to October 1993) of the Manager; Executive Vice President and a
director (July 1978 to October 1993) and General Counsel of the Distributor,
OppenheimerFunds Distributor, Inc.; Executive Vice President and a director
(April 1986 to October 1995) of HarbourView Asset Management Corporation; Vice
President and a director (October 1988 to October 1993) of Centennial Asset
Management Corporation, (HarbourView and Centennial are investment adviser
subsidiaries of the Manager); and an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee, Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill,* President and Trustee, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView; Chairman and a director of SSI (since August 1994),
and SFSI (September 1995); President (since September 1995) and a director
(since October 1990) of OAC; President (since September 1995) and a director
(since November 1989) of Oppenheimer Partnership Holdings, Inc., a holding
company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund manager
subsidiary of the andManager ("OFIL"); Chairman, President and a director of
Oppenheimer Millennium Funds plc (since October 1997); President and a director
or trustee of other Oppenheimer funds; Member, Board of Governors, NASD, Inc.;
and a director of Hillsdown Holdings plc (a U.K. food company); formerly a
director (until 1998) of NASDAQ Stock Market, Inc.
Elizabeth B. Moynihan, Trustee, Age 69
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age 71
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texas
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc. (international economic and business research) and a
director of Lumbermens Mutual Casualty Company, American Motorists Insurance
Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee, Age 68
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a director of RBAsset
(real estate manager); a director of OffitBank; Trustee Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age 67
8 Sound Shore Drive, Greenwich, Connecticut 06830
Retired Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship Inc. (corporate governance consulting);
a director of Professional Staff Limited (U.K); a trustee of Mystic
Seaport Museum, International House and Greenwich Historical Society.
Donald W. Spiro,* Vice Chairman and Trustee, Age 73
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.
Pauline Trigere, Trustee, Age 86
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of P.T. Concept (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee, Age 68
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order), Counselor to the President
(Bush) for Domestic Policy, Chairman of the Republican National Committee,
Secretary of the U.S. Department of Agriculture, U.S. Trade Representative,
formerly a director of B.A.T. Industries, Ltd. (tobacco and financial
services), IMC Global (fertilizer) and Lindsay Mfg. Co. (irrigation
equipment).
John S. Kowalik, Vice President and Portfolio Manager; Age 41
Two World Trade Center, 34th Floor, New York, New York 10048-0203
Vice President of the Manager (since July 1998); previously a Managing
Director and senior portfolio manager for Prudential Investments Global Fixed
Income Group.
Andrew J. Donohue, Secretary, Age 48
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Executive Vice
President (since January 1993), General Counsel (since October 1991) and a
Director (since September 1995) of the Manager; Executive Vice President and
General Counsel (since September 1993), and a director (since January 1992) of
the Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. (since
September 1995); President and a director of Centennial (since September 1995);
President, General Counsel and a director of Oppenheimer Real Asset Management,
Inc. (since July 1996); General Counsel (since May 1996) and Secretary (since
April 1997) of OAC; Vice President and a director of OFIL and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
George C. Bowen, Treasurer, Age 62
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Assistant Treasurer of OAC (since March 1998); Treasurer
of Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President
and Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996);
Treasurer of OFIL and Oppenheimer Millennium Fund plc (since October 1997); a
trustee or director and an officer of other Oppenheimer funds; formerly
Treasurer of OAC (June 1990 March 1998).
Robert G. Zack, Assistant Secretary, Age 50
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of SSI (since May 1985), and SFSI (since November
1989); Assistant Secretary of Oppenheimer Millennium Funds plc and OFIL (since
October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund
Controller for the Manager.
Scott T. Farrar, Assistant Treasurer, Age 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
|X| Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Spiro) who are affiliated with the
Manager receive no salary or fee from the Fund. The remaining Trustees of the
Fund received the compensation shown below. The compensation from the Fund was
paid during its fiscal year ended August 31, 1998. The compensation from all of
the New York-based Oppenheimer funds (including the Fund) was received as a
director, trustee or member of a committee of the boards of those funds during
the calendar year 1997.
<PAGE>
----------------------------------------------------------------------------
Total
Compensation
From all
Retirement New York
Benefits based
Aggregate Accrued as Part Oppenheimer
Trustee's Name Compensation of Fund Funds (20
and Position from Fund Expenses Funds)1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Leon Levy
Chairman $18,233 $6,085 $158,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Robert G. Galli
Study Committee Member2 $4,730 $0 $0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Benjamin Lipstein
Study Committee
Chairman,3
Audit Committee Member $19,366 $8,866 $137,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Elizabeth B. Moynihan
Study Committee
Member $7,397 $0 $96,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Kenneth A. Randall
Audit Committee Member $10,862 $4,078 $88,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Edward V. Regan
Proxy Committee
Chairman, Audit
Committee Member $6,710 $0 $87,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Russell S. Reynolds, Jr.
Proxy Committee
Member $6,120 $1,099 $65,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Pauline Trigere $7,440 $2,957 $58,500
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Clayton K. Yeutter
Proxy Committee
Member $5,0214 $0 $65,500
----------------------------------------------------------------------------
For the 1997 calendar year.
Reflects fees from 1/1/98 to 8/31/98
Committee position held during a portion of the period shown. Includes $504
deferred under Deferred Compensation Plan described below.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as trustee for any of
the New York-based Oppenheimer funds for at least 15 years to be eligible for
the maximum payment. Each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service. Therefore the
amount of those benefits cannot be determined at this time, nor can we estimate
the number of years of credited service that will be used to determine those
benefits.
|X| Deferred Compensation Plan for Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for disinterested trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Fund. Under the plan, the compensation deferred by
a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The
amount paid to the Trustee under the plan will be determined based upon the
performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
? Major Shareholders. As of December 1 1998, the only person who owned
of record or was known by the Fund to own beneficially 5% or more of any
class of the Fund's outstanding shares were follows:
BancOne Securities Corp., 733 Greencrest Drive, Westerville, Ohio 43081,
which owned 7,009,889.540 Class A shares (11.59% of the then-outstanding
Class A shares) and 765,615.976 Class C shares (14.48% of the
then-outstanding Class C shares), for the benefit of its customers.
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246, which owned 1,463,276.687 Class B shares
(9.20% of the then-outstanding Class B shares) and 1,103,747.481 Class C
shares (20.88% of the then-outstanding Class C shares) for the benefit of
its customers.
OppenheimerFunds, Inc., 6803 S. Tucson Way, Denver, Colorado 80112, which
owned 100% of the then-outstanding Class Y shares of the Fund.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company. The
Manager and the Fund have a Code of Ethics. It is designed to detect and prevent
improper personal trading by certain employees, including portfolio managers,
that would compete with or take advantage of the Fund's portfolio transactions.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
[_] The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
and associate portfolio managers of the Fund are employed by the Manager and are
the persons who are principally responsible for the day-to-day management of the
Fund's portfolio. Other members of the Manager's Fixed Income Portfolio Team
provide the portfolio managers with counsel and support in managing the Fund's
portfolio.
The agreement requires the Manager, at its expense, to provide the Fund with
adequate office space, facilities and equipment. It also requires the Manager to
provide and supervise the activities of all administrative and clerical
personnel required to provide effective administration for the Fund. Those
responsibilities include the compilation and maintenance of records with respect
to its operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous public
sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class.
--------------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1996 (2 months)1 $569,144
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1997 $3,233,578
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1998 $3,673,645
--------------------------------------------------------------------------
1. Fiscal period from 7/1/96 to 8/31/96. The management fees for the 12
month fiscal year ended 6/30/96 were $2,946,711.
The investment advisory agreement contains an indemnity of the Manager. In
the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties or reckless disregard of its obligations and duties
under the investment advisory agreement, the Manager is not liable for any loss
resulting from a good faith error or omission on its part with respect to any of
its duties under the agreement.
The agreement permits the Manager to act as investment adviser for any other
person, firm or corporation and to use the name "Oppenheimer" in connection with
other investment companies for which it may act as investment adviser or general
distributor. If the Manager shall no longer act as investment adviser to the
Fund, the Manager may withdraw the right of the Fund to use the name
"Oppenheimer" as part of its name.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment adviser.
Brokerage Practices Followed by the Manager. Most securities purchases made
by the Fund are in principal transactions at net prices. The Fund usually deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless the Manager
determines that a better price or execution may be obtained by using the
services of a broker. Therefore, the Fund does not incur substantial brokerage
costs. Portfolio securities purchased from underwriters include a commission or
concession paid by the issuer to the underwriter in the price of the security.
Portfolio securities purchased from dealers include a spread between the bid and
asked price. The Fund seeks to obtain prompt execution of these orders at the
most favorable net price.
The Manager allocates brokerage for the Fund subject to the provisions of
the investment advisory agreement and the procedures and rules described above.
Generally, the Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers. In certain instances,
portfolio managers may directly place trades and allocate brokerage. In either
case, the Manager's executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. Other funds advised by the Manager have investment
policies similar to those of the Fund. Those other funds may purchase or sell
the same securities as the Fund at the same time as the Fund, which could affect
the supply and price of the securities. If two or more funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
In an option transaction, the Fund ordinarily uses the same broker for the
purchase or sale of the option and any transaction in the securities to which
the option relates. When possible, the Manager tries to combine concurrent
orders to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The investment advisory agreement permits the Manager to allocate brokerage
for research services. The research services provided by a particular broker may
be useful only to one or more of the advisory accounts of the Manager and its
affiliates. The investment research received for the commissions of those other
accounts may be useful both to the Fund and one or more of the Manager's other
accounts. Investment research may be supplied to the Manager by a third party at
the instance of a broker through which trades are placed.
Investment research services include information and analysis on particular
companies and industries as well as market or economic trends and portfolio
strategy, market quotations for portfolio evaluations, information systems,
computer hardware and similar products and services. If a research service also
assists the Manager in a non-research capacity (such as bookkeeping or other
administrative functions), then only the percentage or component that provides
assistance to the Manager in the investment decision-making process may be paid
in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and supplements
the research activities of the Manager. That research provides additional views
and comparisons for consideration, and helps the Manager to obtain market
information for the valuation of securities that are either held in the Fund's
portfolio or are being considered for purchase. The Manager provides information
to the Board about the commissions paid to brokers furnishing such services,
together with the Manager's representation that the amount of such commissions
was reasonably related to the value or benefit of such services.
- -------------------------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
- -------------------------------------------------------------------------------
----------------------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1996 (2 months)2 $26,168
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1997 $143,007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1998 $226,7433
----------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
Fiscal period from 7/1/96 to 8/31/96. For the fiscal year ended June 30, 1996,
total brokerage commissions paid by the Fund were $28,118.
3. In the fiscal year ended 8/31/98, the amount of transactions directed to
brokers for research services was $15,049,138 and the amount of the
commissions paid to broker-dealers for those services was $1,300.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's classes of shares. The Distributor is not obligated to
sell a specific number of shares. Expenses normally attributable to sales are
borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
- -----------------------------------------------------------------------------
Aggregate Class A Commissions
Front-End Front-End Commissions Commissions on Class C
Fiscal Sales Sales on Class A on Class B Shares
Year Charges on Charges Shares Shares Advanced
Ended Class A Retained by Advanced by Advanced by by
8/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
19962 $119,450 $35,853 N/A $130,843 $9,765
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1997 $709,843 $230,181 N/A $1,031,181 $65,115
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1998 $1,159,123 $313,780 $164,214 $2,163,419 $177,771
- -----------------------------------------------------------------------------
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
2. Fiscal period from 7/1/96 to 8/31/96. For the fiscal year ended 6/30/96, the
aggregate front-end sales charges on Class A shares were $880,535, of which
the Distributor retained $277,638.
- -----------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent
Year Deferred Sales Deferred Sales Deferred Sales
Ended Charges Retained by Charges Retained by Charges Retained by
8/31: Distributor Distributor Distributor
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
1998 $4,668 $191,698 $20,580
- -----------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
<PAGE>
Each plan has been approved by a vote of the Board of Trustees, including a
majority of the Independent Trustees3, cast in person at a meeting called for
the purpose of voting on that plan. Each plan has also been approved by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable class. The shareholder vote for the Distribution and Service
Plans for Class B and Class C shares was cast by the Manager as the sole initial
holder of Class B and Class C shares of the Fund.
3. In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
Under the plans, the Manager and the Distributor, in their sole discretion,
from time to time, may use their own resources (at no direct cost to the Fund)
to make payments to brokers, dealers or other financial institutions for
distribution and administrative services they perform. The Manager may use its
profits from the advisory fee it receives from the Fund. In their sole
discretion, the Distributor and the Manager may increase or decrease the amount
of payments they make from their own resources to plan recipients.
Unless a plan is terminated as described below, the plan continues in effect
from year to year but only if the Fund's Board of Trustees and its Independent
Trustees specifically vote annually to approve its continuance. Approval must be
by a vote cast in person at a meeting called for the purpose of voting on
continuing the plan. A plan may be terminated at any time by the vote of a
majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Trustees and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments
to be made under a plan must be approved by shareholders of the class affected
by the amendment. Because Class B shares of the Fund automatically convert into
Class A shares after six years, the Fund must obtain the approval of both Class
A and Class B shareholders for a proposed material amendment to the Class A Plan
that would materially increase payments under the Plan. That approval must be by
a "majority" (as defined in the Investment Company Act) of the shares of each
Class, voting separately by class.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan, the purpose for which the payments were made and the identity
of each recipient of a payment. The reports on the Class B Plan and Class C Plan
shall also include the Distributor's distribution costs for that quarter and in
the case of the Class B plan the amount of those costs for previous fiscal
periods that have been carried forward. Those reports are subject to the review
and approval of the Independent Trustees.
Each Plan states that while it is in effect, the selection and nomination of
those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any recipient in any
quarter in which the aggregate net asset value of all Fund shares of that class
held by the recipient for itself and its customers does not exceed a minimum
amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
[_] Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended August 31, 1998 payments under the Class A Plan
totaled $1,243,265, all of which was paid by the Distributor to recipients. That
included $116,541 paid to an affiliate of the Distributor's parent company. Any
unreimbursed expenses the Distributor incurs with respect to Class A shares in
any fiscal year cannot be recovered in subsequent years. The Distributor may not
use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
[_] Class B and Class C Service and Distribution Plan Fees. Under each plan,
service fees and distribution fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The Class B and C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
that recipients provide are similar to the services provided under the Class A
service plan, described above.
The Class B and the Class C Plans permit the Distributor to retain both the
asset-based sales charges and the service fees or to pay recipients the service
fee on a quarterly basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the first
year after the shares are purchased. After the first year shares are
outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. It pays the asset-based sales charge as
an ongoing commission to the recipient on Class C shares outstanding for a year
or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow investors
to buy shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. The payments are made to the Distributor in recognition that the
Distributor: o pays sales commissions to authorized brokers and dealers at the
time of
sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C
shares, and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
For the fiscal year ended August 31, 1998, payments under the Class B plan
totaled $758,585 (including $2,330 paid to an affiliate of the Distributor's
parent). The Distributor retained $661,495 of the total amount. For the fiscal
year ended August 31, 1998, payments under the Class C plan totaled,$270,859,
(including $10,536 paid to an affiliate of the Distributor's parent). The
Distributor retained $142,545 of the total amount.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. As of August 31,
1998, the Distributor had incurred unreimbursed expenses under the Class B plan
in the amount of $3,562,816 (equal to 3.00% of the Fund's net assets represented
by Class B shares on that date) and unreimbursed expenses under the Class C plan
of $464,146 (equal to 1.15% of the Fund's net assets represented by Class C
shares on that date). If either the Class B or the Class C plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to the Distributor for distributing shares before the
plan was terminated.
All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield," "dividend
yield," "average annual total return," "cumulative total return," "average
annual total return at net asset value" and "total return at net asset value."
An explanation of how yields and total returns are calculated is set forth
below. The charts below show the Fund's performance as of the Fund's most recent
fiscal year end. You can obtain current performance information by calling the
Fund's Transfer Agent at 1-800-525-7048 or by visiting the OppenheimerFunds
Internet web site at http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1-, 5- and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
|_| Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model. o The Fund's performance returns do not
reflect the effect of taxes on dividends and capital gains distributions.
|_| An investment in the Fund is not insured by the FDIC or any other
government agency.
|_| The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less
than their original cost.
|_| Yields and total returns for any given past period represent
historical performance information and are not, and should not be considered, a
prediction of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period. It
is not based on actual distributions paid by the Fund to shareholders in the
30-day period, but is a hypothetical yield based upon the net investment income
from the Fund's portfolio investments for that period. It may therefore differ
from the "dividend yield" for the same class of shares, described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding during
the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day
of the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC formula assumes that the standardized yield for
a 30-day period occurs at a constant rate for a six-month period and is
annualized at the end of the six-month period. Additionally, because each class
of shares is subject to different expenses, it is likely that the standardized
yields of the Fund's classes of shares will differ for any 30-day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each class
of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and the
sum is multiplied by 12 (to annualize the yield) and divided by the maximum
offering price on the last day of the dividend period. The formula is shown
below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. There is no sales charge on Class Y shares. The Class A
dividend yield may also be quoted without deducting the maximum initial sales
charge.
---------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 8/31/98
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Class of
Shares Standardized Yield Dividend Yield
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Class A 5.30% 5.05% 5.55% 5.29%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Class B 4.54% N/A 4.83% N/A
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Class C 4.55% N/A 4.84% N/A
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Class Y 5.62% N/A 6.39% N/A
---------------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied, depending on the period
for which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter. For Class C shares, the 1% contingent deferred sales
charge is deducted for returns for the 1-year period.
|_| Average Annual Total Return. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return" calculation
measures the change in value of a hypothetical investment of $1,000 over an
entire period of years. Its calculation uses some of the same factors as average
annual total return, but it does not average the rate of return on an annual
basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B or Class C shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 8/31/98
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Cumulative Total
Class Returns (10
of years or
Shares life-of-class) Average Annual Total Returns
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or (or (or
life-of-class) life-of-class) life-of-class)
------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class A 110.63% 121.13% 4.07% 9.26% 5.49% 6.52% 7.73%1 8.26%1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class B 21.94% 24.94% 3.45% 8.45% 6.58%2 7.42%2 N/A N/A
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class C 32.41% 32.41% 7.34% 8.34% 6.09%3 6.09%3 N/A N/A
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Class Y N/A 2.83% N/A 2.83%4 N/A N/A N/A N/A
------------------------------------------------------------------------------
1. Inception of Class A: 8/16/85
2. Inception of Class B: 7/21/95
3. Inception of Class C: 12/1/93
4. Inception of Class Y: 5/18/98
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|_| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is a widely-recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories relating to
investment objectives. Lipper currently ranks the Fund's performance against all
other general U.S. government funds. The Lipper performance rankings are based
on total returns that include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes into consideration.
Lipper also publishes "peer-group" indices of the performance of all mutual
funds in a category that it monitors and averages of the performance of the
funds in particular categories.
|_| Morningstar Rankings. From time to time the Fund may publish the star
ranking of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar ranks mutual funds in
broad investment categories: domestic stock funds, international stock funds,
taxable bond funds and municipal bond funds. The Fund is ranked among taxable
bond funds.
Morningstar star rankings are based on risk-adjusted total investment
return. Investment return measures a fund's (or class's) one-, three-, five- and
ten-year average annual total returns (depending on the inception of the fund or
class) in excess of 90-day U.S. Treasury bill returns after considering the
fund's sales charges and expenses. Risk measures a fund's (or class's)
performance below 90-day U.S. Treasury bill returns. Risk and investment return
are combined to produce star rankings reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top 10%
of funds in a category), four stars is "above average" (next 22.5%), three stars
is "average" (next 35%), two stars is "below average" (next 22.5%) and one star
is "lowest" (bottom 10%). The current star ranking is the fund's (or class's)
3-year ranking or its combined 3- and 5-year ranking (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year ranking (weighted 40%, 30%
and 30%, respectively), depending on the inception date of the fund (or class).
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
|_| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to shareholders
of the Oppenheimer funds, other than performance rankings of the Oppenheimer
funds themselves. Those ratings or rankings of shareholder and investor services
by third parties may include comparisons of their services to those provided by
other mutual fund families selected by the rating or ranking services. They may
be based upon the opinions of the rating or ranking service itself, using its
research or judgment, or based upon surveys of investors, brokers, shareholders
or others.
<PAGE>
- ------------------------------------------------------------------------------
ABOUT YOUR ACCOUNT
- ------------------------------------------------------------------------------
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
[_] Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together:
[_] Class A and Class B shares you purchase for your individual
accounts, or for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
[_] Current purchases of Class A and Class B shares of the Fund and
other Oppenheimer funds to reduce the sales charge rate that applies
to current purchases of Class A shares, and
[_] Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge to
reduce the sales charge rate for current purchases of Class A shares,
provided that you still hold your investment in one of the Oppenheimer
funds.
A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
? The Oppenheimer Funds. The Oppenheimer funds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Limited-Term Government
Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Main Street Growth &
Income Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund Oppenheimer
Convertible Securities Oppenheimer Multiple Strategies Fund Fund Oppenheimer
Developing Markets Fund Oppenheimer Municipal Bond Fund Oppenheimer
Disciplined Allocation Oppenheimer New York Municipal Fund Fund Oppenheimer
Disciplined Value Fund Oppenheimer New Jersey Municipal Fund Oppenheimer
Discovery Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer Enterprise Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Equity Income Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer Florida Municipal Fund Oppenheimer Quest Global Value Fund,
Inc.
Oppenheimer Global Fund Oppenheimer Quest Opportunity Value
Fund
Oppenheimer Global Growth & Income Oppenheimer Quest Small Cap Value Fund
Fund
Oppenheimer Gold & Special Minerals Oppenheimer Quest Value Fund, Inc.
Fund
Oppenheimer Growth Fund Oppenheimer Real Asset Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate Municipal Oppenheimer U. S. Government Trust
Fund
Oppenheimer International Bond Fund Oppenheimer World Bond Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Rochester Fund Municipals
Company Fund
Oppenheimer Large Cap Growth Fund
and the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Centennial Tax Exempt Trust
Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the offering price (including
the sales charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the Application used
for a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the excess of the amount
of commissions allowed or paid to the dealer over the amount of commissions that
apply to the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
[X] Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the intended
purchase amount specified in the Letter shall be held in escrow by the Transfer
Agent. For example, if the intended purchase amount is $50,000, the escrow shall
be shares valued in the amount of $2,500 (computed at the offering price
adjusted for a $50,000 purchase). Any dividends and capital gains distributions
on the escrowed shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares will be
promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase amount
specified in the Letter, the investor must remit to the Distributor an amount
equal to the difference between the dollar amount of sales charges actually paid
and the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request from
the Distributor or the dealer, the Distributor will, within sixty days of the
expiration of the Letter, redeem the number of escrowed shares necessary to
realize such difference in sales charges. Full and fractional shares remaining
after such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales charge, the
sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption any
or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of which
may be counted toward completion of a Letter) include: (a) Class A shares sold
with a front-end sales charge or subject to a Class
A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1)
Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred
sales charge or (2) Class B shares of one of the other
Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow will
be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (minimum $25) for the initial
purchase with your application. Shares purchased by Asset Builder Plan payments
from bank accounts are subject to the redemption restrictions for recent
purchases described in the Prospectus. Asset Builder Plans also enable
shareholders of Oppenheimer Cash Reserves to use their fund account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be automatically debited, normally four to five
business days prior to the investment dates selected in the Application. Neither
the Distributor, the Transfer Agent nor the Fund shall be responsible for any
delays in purchasing shares resulting from delays in ACH transmissions.
Before initiating Asset Builder payments, obtain a prospectus of the
selected fund(s) from the Distributor or your financial advisor and request an
application from the Distributor, complete it and return it. The amount of the
Asset Builder investment may be changed or the automatic investments may be
terminated at any time by writing to the Transfer Agent. The Transfer Agent
requires a reasonable period (approximately 15 days) after receipt of such
instructions to implement them. The Fund reserves the right to amend, suspend,
or discontinue offering Asset Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
[X] Class B Conversion. The conversion of Class B shares to Class A
shares after six years is subject to the continuing availability of a private
letter ruling from the Internal Revenue Service, or an opinion of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable event for the shareholder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class B
shares would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge or fee,
such exchange could constitute a taxable event for the shareholder, and absent
such exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.
[X] Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days, when
shareholders may not purchase or redeem shares.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
[_] Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
[_] Equity securities traded on a U.S. securities exchange or on NASDAQ
are valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid"
and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
[_] Equity securities traded on a foreign securities exchange generally
are valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
[_] Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
[_] The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry: (1) debt instruments that have a
maturity of more than 397 days when issued, (2) debt instruments that had a
maturity of 397 days or less when issued and have a remaining maturity of more
than 60 days, and (3) non-money market debt instruments that had a maturity of
397 days or less when issued and which have a remaining maturity of 60 days or
less. [_] The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a maturity of less than 397 days when issued
that have a remaining maturity of 60 days or less, and (2) debt instruments held
by a money market fund that have a remaining maturity of 397 days or less.
[_] Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the value shall be the closing bid price on the principal exchange
or on NASDAQ on the valuation date. If the put, call or future is not traded on
an exchange or on NASDAQ, it shall be valued by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. In
determining the Fund's gain on investments, if a call or put written by the Fund
is exercised, the proceeds are increased by the premium received. If a call or
put written by the Fund expires, the Fund has a gain in the amount of the
premium. If the Fund enters into a closing purchase transaction, it will have a
gain or loss, depending on whether the premium received was more or less than
the cost of the closing transaction. If the Fund exercises a put it holds, the
amount the Fund receives on its sale of the underlying investment is reduced by
the amount of premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's Custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships,trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of
the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed by
them to be genuine, or for returning or not paying checks that have not
been accepted for any reason.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next bank
business day on which the Fund is open for business. No dividends will be paid
on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
[_] Class A shares purchased subject to an initial sales charge or Class
A shares on which a contingent deferred sales charge was paid, or
[_] Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
or Class Y shares. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of securities from the portfolio of
the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have been changed within the prior 30 days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares (of
the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $25.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
[_] All of the Oppenheimer funds currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares.
[_] Oppenheimer Main Street California Municipal Fund currently offers
only Class A and Class B shares.
{_] Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other Oppenheimer
funds or through OppenheimerFunds-sponsored 401 (k) plans.
[_] Class Y shares of Oppenheimer Real Asset Fund may not be exchanged
for shares of any other Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sales charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
a contingent deferred sales charge.
Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial or contingent deferred sales charge. To
qualify for that privilege, the investor or the investor's dealer must notify
the Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must
supply proof of entitlement to this privilege.
For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds. Exchanges to Class M shares of
Oppenheimer Convertible Securities Fund are permitted from Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves that were
acquired by exchange of Class M shares. No other exchanges may be made to Class
M shares.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
[X] How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 18 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares. The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within 6
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify which class of shares they with to exchange.
[X] Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
[X] Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. For full or partial exchanges of
an account made by telephone, any special account features such as Asset Builder
Plans and Automatic Withdrawal Plans will be switched to the new account unless
the Transfer Agent is instructed otherwise. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
[X] Processing Exchange Requests. Shares to be exchanged are redeemed
on the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it. For example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund, the Fund may refuse the
request.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
vary from time to time depending on market conditions, the composition of the
Fund's portfolio, and expenses borne by the Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A and Class Y shares. That is
because of the effect of the asset-based sales charge on Class B and Class C
shares. Those dividends will also differ in amount as a consequence of any
difference in the net asset values of the different classes of shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.
Reinvestment will be made as promptly as possible after the return of such
checks to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
It is unlikely that the Fund's dividends will qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year. If it
does not, the Fund must pay an excise tax on the amounts not distributed. It is
presently anticipated that the Fund will meet those requirements. However, the
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interests of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized capital
gains to shareholders without having to pay tax on them. This avoids a double
tax on that income and capital gains, since shareholders normally will be taxed
on the dividends and capital gains they receive from the Fund (unless the Fund's
shares are held in a retirement account or the shareholder is otherwise exempt
from tax). If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by Federal deposit insurance. Those
uninsured balances at times may be substantial. Independent Auditors. KPMG Peat
Marwick LLP are the independent auditors of the Fund. They audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for certain other funds advised by the Manager and its affiliates.
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Oppenheimer U.S. Government Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer U.S. Government Trust as of August 31, 1998, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the two-year period ended
August 31, 1998, the two-month period ended August 31, 1996, and for each of the
years in the three-year period ended June 30, 1996. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 1998, by correspondence with
the custodian and brokers; and where confirmations were not received from
brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer U.S. Government Trust as of August 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the two-year period ended August 31, 1998,
the two-month period ended August 31, 1996, and for each of the years in the
three-year period ended June 30, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
September 22, 1998
36 Oppenheimer U.S. Government Trust
<PAGE>
Financials
- --------------------------------------------------------------------------------
12 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
===============================================================================
<S>
<C> <C>
Mortgage-Backed Obligations--64.7%
- --------------------------------------------------------------------------------
Government Agency--51.0%
- -------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--42.1%
Federal Home Loan Mortgage Corp., Collateralized
Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates:
9.50%,
12/1/02-11/1/03
$ 280,920 $ 293,553
14%,
1/1/11
310,150 368,567
Series 151, Cl. F, 9%,
5/15/21
2,500,000 2,684,375
Series 192, Cl. H, 9%,
7/15/21
88,668 88,418
Series 1546, Cl. H, 7%,
12/15/22
3,000,000 3,206,250
Series 1914, Cl. H, 6.50%,
8/15/24
2,500,000 2,546,875
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass
Mtg. Participation Certificates:
11.50%,
6/1/20
715,243 827,894
13%,
8/1/15
1,373,754 1,661,814
Series 1797, Cl. D, 6.166%,
7/15/08
5,000,000 5,107,800
Series 2021, Cl. PR, 6%,
7/15/26
8,000,000 8,030,000
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates:
Series 1583, Cl. K, 6.75%,
2/15/23
10,000,000 10,434,300
Series 1603, Cl. J, 6.50%,
7/15/23
5,000,000 5,156,250
Series 1702-A, Cl. PD, 6.50%,
4/15/22
6,259,000 6,491,710
Series 1836, Cl. H, 6.50%,
9/15/24
5,000,000 5,181,250
Series 1914, Cl. G, 6.50%,
2/15/24
3,000,000 3,059,040
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only
Stripped Mtg.-Backed Security:
Series 164, Cl. A, 2.424%,
3/1/24(1)
11,313,922 3,012,332
Series 176, Cl. IO, 6.317%-11.221%,
6/1/26(1) 20,505,096
3,843,104
Series 183, Cl. IO, 8.657%-9.003%,
4/1/27(1) 21,197,657
3,977,874
Series 197, Cl. IO, 15.389%-15.784%,
4/1/28(1) 34,272,065
9,419,463
Series 199, Cl. IO, 10.289%-10.626%,
8/1/28(1) 45,500,000
11,709,140
</TABLE>
13 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------
<S>
<C> <C>
FHLMC/FNMA/Sponsored (continued)
Federal Home Loan Mortgage Corp., Principal-Only
Stripped Mtg.-Backed Security:
Series 192, Cl. PO, 3.433%,
2/1/28(2) $ 7,331,540
$ 5,757,550
Series 199, Cl. PO, 5.21%,
8/1/28(2)
8,000,000 6,028,750
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.-Government
National Mortgage Assn., Gtd. Multiclass Mtg
Participation Certificates:
Series 26, Cl. B, 7.383%,
5/25/15
4,999,999 5,034,492
Series 32, Cl. TG, 6.217%,
1/25/21
2,000,000 2,084,360
- --------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%,
9/25/13(3)
13,980,000 13,953,787
6.50%,
7/25/12-9/1/28(3)
50,700,000 51,086,193
7%,
9/1/12(3)
3,830,000 3,912,575
7%,
8/1/25-9/1/25
23,266,870 23,703,357
7.50%,
8/1/25
3,167,991 3,255,776
11%,
7/1/16
1,009,110 1,153,066
11.50%,
11/1/15
701,658 800,171
12%,
2/15/16-4/15/19
4,563,237 5,296,299
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
8%,
12/1/22
1,953,296 2,026,955
13%,
11/1/12
90,510 106,583
Trust 1992-34, Cl. G, 8%,
3/25/22
2,520,000 2,729,462
Trust 1992-188, Cl. PG, 6.65%,
1/25/17
4,000,000 4,050,000
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1990-18, Cl. K, 9.60%,
3/25/20
5,000,000 5,542,919
Trust 1993-183, Cl. G, 6%,
1/25/19
3,500,000 3,553,585
Trust 1994-27, Cl. PH, 6.50%,
9/25/22
4,000,000 4,138,720
Trust 1994-51, Cl. PH, 6.50%,
1/25/23
10,000,000 10,353,100
Trust 1996-64, Cl. PB, 6.50%,
1/18/19
2,049,000 2,077,174
Trust 1997-25, Cl. B, 7%,
12/18/22
2,910,000 3,010,919
Trust 1997-54, Cl. C, 6.50%,
9/18/24
5,000,000 5,070,312
Trust 1997-63, Cl. PC, 6.50%,
3/18/26
7,500,000 7,725,000
Trust G93-31, Cl. PN, 7%,
9/25/23
5,000,000 5,394,018
</TABLE>
14 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------
<S>
<C> <C>
FHLMC/FNMA/Sponsored(continued)
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Trust 276, Cl. 2, 2.672%,
10/1/24(1) $ 3,904,403
$ 880,931
Trust 292, Cl. 2, 6.844%,
12/1/24(1)
5,003,663 1,257,170
Trust 293, Cl. 2, 5.957%,
12/1/24(1)
9,391,841 2,359,700
Trust 294, Cl. 2, 13.666%,
2/1/28(1)
8,467,842 1,653,875
Trust 1997-9, Cl. H, 7.522%,
3/25/27(1)
10,000,000 3,900,000
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only
Stripped Mtg.-Backed Security:
Trust 277, Cl. 1, 19.171%-19.916%,
4/1/27(2) 2,526,414
2,237,456
Trust 291, Cl. 1, 7.543%,
11/1/27(2)
11,439,699 10,227,806
Trust 294, Cl. 1, 4.15%-5.476%,
2/1/28(2) 25,727,924
21,402,418
- ---------------
308,864,488
- --------------------------------------------------------------------------------
GNMA/Guaranteed--8.9%
Government National Mortgage Assn.:
6.50%,
11/15/23-12/15/23
1,586,793 1,603,471
7%,
1/15/28-8/15/28
15,409,997 15,735,618
7.25%,
12/15/05
26,553 27,285
7.375%,
4/20/17
286,821 293,545
7.50%,
9/1/27(3)
10,000,000 10,298,400
7.50%,
10/15/06-7/15/26
16,826,938 17,337,760
8%,
4/15/02-5/15/25
2,389,914 2,482,089
8.25%,
4/15/08
97,444 102,291
8.50%,
6/15/01-1/15/06
53,023 54,035
9%,
9/15/08-5/15/09
274,221 293,692
9.50%,
4/15/01-1/15/20
986,216 1,065,648
10%,
6/15/16-8/15/19
1,706,947 1,874,837
10.50%,
9/15/00-5/15/21
4,267,449 4,733,338
11%,
10/20/19-7/20/20
3,584,650 4,067,817
11.50%,
9/15/98-4/15/13
92,965 105,215
12%,
12/15/12-3/15/14
41,796 48,048
12.50%,
1/15/14-6/15/19
781,398 907,161
13%,
4/15/11-12/15/14
121,508 141,909
13.50%,
4/15/11-8/15/14
131,371 156,678
14%,
6/15/11
19,961 23,757
15%,
7/15/11-9/15/12
139,269 168,636
- --------------------------------------------------------------------------------
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, 15.45%,
6/15/25(1)(4) 109,487,465 3,541,235
- ---------------
65,062,465
</TABLE>
15 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------
<S>
<C> <C>
Private--13.7%
- --------------------------------------------------------------------------------
Commercial--10.3%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-D3, Cl. A5, 8.332%,
10/13/26(4)(5) $ 3,700,000 $
4,093,125
Series 1996-MD6, Cl. A5, 6.956%,
11/13/26(5) 5,000,000
5,390,625
Series 1997-MD7, Cl. A6, 8.242%,
1/13/30(5) 1,150,000
1,267,156
- --------------------------------------------------------------------------------
BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 6.535%,
10/25/00(4)
1,735,000 1,712,770
- --------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate
Credit-Backed Pass-Through Certificates, Series 1997-CTL1,
9.418%-9.453%,
6/22/24(1)(4)
66,607,990 3,043,985
- --------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 10%,
12/25/20(1)(4) 24,833,200 574,268
- --------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.263%,
4/11/30(1) 25,250,000 1,984,492
- --------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-C1, Cl. 2-G, 8.70%,
9/25/25(4) 3,000,000 3,087,187
- --------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed Security:
Series 1997-C1, Cl. IO, 7.355%,
4/18/27(1) 33,622,962
2,384,472
Series 1998-C2, Cl. IO, 9.072%,
5/18/28(1) 30,000,000
1,317,187
- --------------------------------------------------------------------------------
General Motors Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1997-C1, Cl. X, 8.094%,
7/15/27(1) 23,844,827 2,213,098
- --------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 1997-CL1, Cl. F, 7.352%,
7/13/30(5) 3,000,000 3,060,937
- --------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D, 7.42%,
4/25/28 5,061,000 5,277,674
- --------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D-1, 7.436%,
2/15/28(4)(5) 3,000,000 3,191,250
- --------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through
Certificates, Series 1, Cl. D, 7.683%,
12/21/26(4) 2,500,000
2,576,562
</TABLE>
16 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------
<S>
<C> <C>
Commercial (continued)
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-C5, Cl. C, 8.85%,
5/25/22 $ 6,618,831
$ 6,638,275
Series 1993-C1, Cl. D, 9.45%,
5/25/24
1,183,001 1,183,001
Series 1994-C1, Cl. C, 8%,
6/25/26
7,075,000 7,178,914
Series 1995-C1, Cl. D, 6.90%,
2/25/27
7,677,000 7,697,992
- -------------------------------------------------------------------------------
Structured Asset Securities Corp., Commercial Mtg. Pass-Through
Certificates, Series 1997-LLI, Cl. E, 7.30%,
10/20/34 2,500,000 2,528,906
- --------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates:
Series 1996-C3, Cl. C, 7.375%,
6/25/30(4)(5)
5,000,000 5,050,000
Series 1996-CFL, Cl. D, 7.034%,
2/25/28 3,700,000
3,748,563
- ---------------
75,200,439
- --------------------------------------------------------------------------------
Multi-Family--0.6%
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%,
2/25/24 3,000,000
3,003,281
- --------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1991-M5, Cl. A, 9%,
3/25/17
1,540,904 1,539,701
Series 1992-M4, Cl. B, 7.20%,
9/25/21(4)
13,121 13,015
- ---------------
4,555,997
- --------------------------------------------------------------------------------
Residential--2.8%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. E, 7.50%,
3/1/11(4) 5,000,000 5,187,500
- --------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, 8.398%,
7/25/06(4)(5) 5,000,000
5,215,625
- --------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1995-GAL-1, Cl. C, 7.95%,
8/15/27(4) 5,014,988 5,416,187
- --------------------------------------------------------------------------------
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) 1,454,137 1,536,841
- --------------------------------------------------------------------------------
Residential Funding Mortgage Securities I, Inc., Mtg. Pass-Through
Certificates, Series 1993-S10, Cl. A9, 8.50%,
2/25/23 1,129,804 1,186,645
- -------------------------------------------------------------------------------
Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%,
3/25/22(4) 1,700,000 1,810,500
- ---------------
20,353,298
- ---------------
Total Mortgage-Backed Obligations (Cost
$468,261,292)
474,036,687
</TABLE>
17 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
================================================================================
<S>
<C> <C>
U.S. Government Obligations--41.9%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
7.50%,
11/15/24(6)
$ 19,345,000 $ 24,846,254
8.125%,
8/15/21
7,815,000 10,513,621
11.75%,
11/15/14
19,700,000 30,350,332
STRIPS, 5.832%,
11/15/21(7)
30,750,000 8,574,914
STRIPS, 5.833%,
8/15/22(7)
9,500,000 2,553,942
- --------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.375%,
6/30/03
23,000,000 23,424,073
5.50%,
1/31/03-2/28/03
7,000,000 7,132,817
5.625%,
5/15/08
66,500,000 69,471,752
5.75%,
10/31/02-11/30/02
12,427,000 12,763,305
6.25%,
6/30/02
9,720,000 10,127,035
6.375%,
9/30/01-8/15/02
4,872,000 5,060,413
6.50%,
10/15/06
11,320,000 12,342,343
6.625%,
5/15/07
9,300,000 10,261,973
7.50%,
2/15/05
47,000,000 53,183,461
7.75%,
12/31/99
1,985,000 2,051,996
7.875%,
11/15/04
5,300,000 6,078,443
10.75%,
5/15/03
9,900,000 12,241,974
STRIPS, 6.506%,
8/15/16(7)
17,250,000 6,433,060
- ---------------
Total U.S. Government Obligations (Cost
$297,795,665)
307,411,708
================================================================================
Repurchase Agreements--7.9%
- --------------------------------------------------------------------------------
Repurchase agreement with Salomon Smith Barney Holdings, Inc., 5.75%, dated
8/31/98, to be repurchased at $58,209,296 on 9/1/98, collateralized by U.S.
Treasury Bonds, 11.25%, 2/15/15, with a value of $59,581,100 (Cost
$58,200,000)
58,200,000 58,200,000
- --------------------------------------------------------------------------------
Total Investments, at Value (Cost
$824,256,957) 114.5%
839,648,396
- --------------------------------------------------------------------------------
Liabilities in Excess of Other
Assets (14.5)
(106,526,504)
- --------------- ---------------
Net
Assets
100.0% $ 733,121,892
=============== ===============
</TABLE>
18 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 August 31, 1998.
4. Identifies issues considered to be illiquid or restricted--See Note 7 of
Notes to Financial Statements.
5. Represents the current interest rate for a variable rate security.
6. Securities with an aggregate market value of $3,853,128 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.
19 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
==================================================================================================
<S>
<C>
Assets
Investments, at value (cost $824,256,957)--see accompanying
statement $ 839,648,396
- --------------------------------------------------------------------------------------------------
Receivables:
Investments sold (including $63,092,956 of when-issued securities
sold) 65,969,674
Shares of beneficial interest
sold 12,714,492
Interest and principal
paydowns 8,508,115
Daily variation on futures contracts--Note
5 913,010
- --------------------------------------------------------------------------------------------------
Other
23,631
- ---------------
Total
assets
927,777,318
================================================================================
Liabilities
Bank
overdraft
172,720
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $142,270,561 purchased
on a when-issued basis)--Note
1 191,224,345
Shares of beneficial interest
redeemed 1,967,401
Dividends
582,531
Distribution and service plan
fees 274,330
Trustees' fees--Note
1 205,515
Transfer and shareholder servicing agent
fees 80,233
Shareholder
reports
70,456
Custodian
fees
7,176
Other
70,719
- ---------------
Total
liabilities
194,655,426
================================================================================
Net
Assets
$ 733,121,892
===============
================================================================================
Composition of Net Assets
Paid-in
capital
$ 731,057,572
- --------------------------------------------------------------------------------
Undistributed net investment
income 681,732
- --------------------------------------------------------------------------------
Accumulated net realized loss on investment
transactions (14,739,374)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and
5 16,121,962
- ---------------
Net
assets
$ 733,121,892
===============
</TABLE>
20 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
================================================================================
<S>
<C>
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$573,791,514 and 58,932,072 shares of beneficial interest outstanding) $ 9.74
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $ 10.23
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $118,872,905 and
12,222,755 shares of beneficial interest outstanding) $ 9.73
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $40,456,460 and
4,161,447 shares of beneficial interest outstanding) $ 9.72
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,013 and 104 shares of beneficial interest outstanding) $ 9.74
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended August 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
===============================================================================
<S>
<C>
Investment Income
Interest
$ 44,502,376
================================================================================
Expenses
Management fees--Note
4 3,673,645
- --------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class
A
1,243,265
Class
B
758,585
Class
C
270,859
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note
4 727,976
- --------------------------------------------------------------------------------
Shareholder
reports
180,323
- --------------------------------------------------------------------------------
Custodian fees and
expenses
104,714
- --------------------------------------------------------------------------------
Trustees' fees and expenses--Note
1 85,879
- --------------------------------------------------------------------------------
Registration and filing
fees 60,049
- --------------------------------------------------------------------------------------------------
Legal, auditing and other professional
fees 29,577
- --------------------------------------------------------------------------------------------------
Other
30,790
- ---------------
Total
expenses
7,165,662
==================================================================================================
Net Investment
Income
37,336,714
==================================================================================================
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments
1,403,956
Closing of futures
contracts
(247,340)
Closing and expiration of option contracts written--Note
6 (439,689)
- ---------------
Net realized
gain
716,927
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments 14,680,337
- ---------------
Net realized and unrealized
gain 15,397,264
==================================================================================================
Net Increase in Net Assets Resulting from
Operations $ 52,733,978
===============
</TABLE>
See accompanying Notes to Financial Statements.
22 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended August 31,
1998 1997
=======================================================================================================================
<S>
<C> <C>
Operations
Net investment
income $
37,336,714 $ 40,397,443
- -----------------------------------------------------------------------------------------------------------------------
Net realized
gain
716,927 7,592,680
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation 14,680,337 5,493,413
- --------------- ---------------
Net increase in net assets resulting from
operations 52,733,978 53,483,536
=======================================================================================================================
Dividends to Shareholders
Dividends from net investment income:
Class
A
(31,821,383) (35,009,347)
Class
B
(4,060,085) (2,694,329)
Class
C
(1,455,228) (1,280,831)
Class
Y
(18) --
=======================================================================================================================
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class
A
92,039,786 (47,818,410)
Class
B
64,808,552 14,753,876
Class
C
18,140,754 2,555,447
Class
Y
1,002 --
=======================================================================================================================
Net Assets
Total increase
(decrease)
190,387,358 (16,010,058)
- -----------------------------------------------------------------------------------------------------------------------
Beginning of
period
542,734,534 558,744,592
- --------------- ---------------
End of period (including undistributed net investment
income of $681,732 and $1,240,651,
respectively) $ 733,121,892 $
542,734,534
=============== ===============
</TABLE>
See accompanying Notes to Financial Statements.
23 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
A
- ---------------------------------------
Year Ended August
31,
1998 1997
1996(3)
========================================================================================
<S> <C> <C>
<C>
Per Share Operating Data
Net asset value, beginning of period $ 9.48 $ 9.23 $
9.30
- ----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .65
.71 .10
Net realized and unrealized gain (loss) .26 .23
(.07)
-------- --------
- --------
Total income (loss) from investment operations .91
.94 .03
- ----------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.65) (.69)
(.10)
Dividends in excess of net investment income --
- -- --
Tax return of capital distribution --
- -- --
-------- --------
- --------
Total dividends and distributions to shareholders (.65) (.69)
(.10)
- ----------------------------------------------------------------------------------------
Net asset value, end of period $ 9.74 $ 9.48 $
9.23
======== ========
========
========================================================================================
Total Return, at Net Asset Value(5) 9.26% 10.45%
0.42%
========================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $573,792 $468,809
$503,693
- ----------------------------------------------------------------------------------------
Average net assets (in thousands) $516,173 $478,410
$508,123
- ----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.17% 7.58%
6.64%(6)
Expenses 1.03% 1.06%
1.09%(6)
- ----------------------------------------------------------------------------------------
Portfolio turnover rate(7) 79.5%
42.6% 5.6%
</TABLE>
(1). For the period from May 18, 1998 (inception of offering) to August 31,
1998. (2). For the period from December 1, 1993 (inception of offering) to June
30, 1994. (3). For the two months ended August 31, 1996. The Fund changed its
fiscal year end from June 30 to August 31. (4). For the period from July 21,
1995 (inception of offering) to June 30, 1996. (5). 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.
24 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
A Class B
- ---------------------------------
- ---------------------------------------------
Period
Ended
Year Ended June
30, Year Ended August 31, June 30,
1996 1995
1994 1998 1997 1996(3) 1996(4)
================================================================================================================================
<S> <C> <C>
<C> <C> <C> <C> <C>
Per Share Operating
Data
Net asset value, beginning of period $ 9.51 $ 9.20 $
9.95 $ 9.47 $ 9.22 $ 9.29 $ 9.40
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .67 .68
.67 .56 .64 .09 .56
Net realized and unrealized gain (loss) (.21) .31
(.74) .27 .23 (.07) (.11)
--------- ---------
- --------- --------- -------- -------- --------
Total income (loss) from investment
operations .46 .99
(.07) .83 .87 .02 .45
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.66) (.68)
(.64) (.57) (.62) (.09) (.55)
Dividends in excess of net investment income -- --
(.01) -- -- -- --
Tax return of capital distribution (.01) --
(.03) -- -- -- (.01)
--------- ---------
- --------- --------- -------- -------- --------
Total dividends and distributions to
shareholders (.67) (.68)
(.68) (.57) (.62) (.09) (.56)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.30 $ 9.51 $
9.20 $ 9.73 $ 9.47 $ 9.22 $ 9.29
========= =========
========= ========= ======== ======== ========
================================================================================================================================
Total Return, at Net Asset Value(5) 4.91% 11.22%
(1.17)% 8.45% 9.63% 0.28% 4.80%
================================================================================================================================
Ratios/Supplemental
Data
Net assets, end of period (in thousands) $ 504,966 $ 312,607 $
310,027 $ 118,873 $ 52,301 $ 36,504 $ 30,737
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 452,236 $ 307,306 $
355,698 $ 76,030 $ 41,420 $ 35,078 $ 19,227
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income 7.07% 7.32%
6.61% 5.33% 6.77% 5.82%(6) 6.44%(6)
Expenses 1.08% 1.09%
1.14% 1.78% 1.81% 1.88%(6) 1.93%(6)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 399.7% 303.5%
139.5% 79.5% 42.6% 5.6% 399.7%
</TABLE>
(6). Annualized.
(7). 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 and purchases
and sales from mortgage dollar-rolls) for the year ended August 31, 1998 were
$822,053,654 and $626,901,145, respectively. For the periods ended June 30, 1996
and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
25 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
C
- ------------------------------------
Year Ended August
31,
1998 1997
1996(3)
======================================================================================
<S> <C> <C>
<C>
Per Share Operating Data
Net asset value, beginning of period $ 9.47 $ 9.22 $
9.29
- --------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .64
.09
Net realized and unrealized gain (loss) .26 .23
(.07)
-------- --------
- --------
Total income (loss) from investment operations .82 .87
.02
- --------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.57) (.62)
(.09)
Dividends in excess of net investment income -- --
- --
Tax return of capital distribution -- --
- --
-------- --------
- --------
Total dividends and distributions to
shareholders (.57) (.62)
(.09)
- --------------------------------------------------------------------------------------
Net asset value, end of period $ 9.72 $ 9.47 $
9.22
======== ========
========
======================================================================================
Total Return, at Net Asset Value(5) 8.34% 9.65%
0.28%
======================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 40,456 $ 21,625 $
18,547
- --------------------------------------------------------------------------------------
Average net assets (in thousands) $ 27,135 $ 19,505 $
18,620
- --------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.36% 6.81%
5.90%(6)
Expenses 1.78% 1.80%
1.84%(6)
- --------------------------------------------------------------------------------------
Portfolio turnover rate(7) 79.5% 42.6%
5.6%
</TABLE>
1. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
3. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
4. For the period from July 21, 1995 (inception of offering) to June 30, 1996.
5. 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.
26 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class
C Class Y
- ----------------------------- --------
Period
Ended
Year Ended June
30, Aug. 31,
1996 1995
1994(2) 1998(1)
=============================================================================================
<S> <C> <C>
<C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 9.50 $ 9.19 $
9.83 $ 10.00
- ---------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .60 .61
.33 .18
Net realized and unrealized gain (loss) (.21) .30
(.64) (.26)
-------- --------
- ------- -------
Total income (loss) from investment operations .39 .91
(.31) (.08)
- ---------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.59) (.60)
(.33) (.18)
Dividends in excess of net investment income -- --
- -- --
Tax return of capital distribution (.01) --
- -- --
-------- --------
- ------- -------
Total dividends and distributions to
shareholders (.60) (.60)
(.33) (.18)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.29 $ 9.50 $
9.19 $ 9.74
======== ========
======= =======
=============================================================================================
Total Return, at Net Asset Value(5) 4.11% 10.31%
(3.12)% 2.83%
=============================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $ 18,531 $ 11,019 $
4,261 $ 1
- ---------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 15,766 $ 6,503 $
2,173 $ 1
- ---------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.27% 6.44%
5.97%(6) 1.77%(6)
Expenses 1.85% 1.89%
1.96%(6) 0.73%(6)
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 399.7% 303.5%
139.5% 79.5%
</TABLE>
(6). Annualized.
(7). 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 and purchases
and sales from mortgage dollar-rolls) for the year ended August 31, 1998 were
$822,053,654 and $626,901,145, respectively. For the periods ended June 30, 1996
and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
See accompanying Notes to Financial Statements.
27 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies
Oppenheimer U.S. Government Trust (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment objective is to seek high current
income, preservation of capital and maintenance of liquidity through investments
in debt instruments issued or guaranteed by the U.S. Government or its agencies
or instrumentalities. The Fund's investment advisor is OppenheimerFunds, Inc.
(the Manager). The Fund offers Class A, Class B, Class C and Class Y 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 expenses directly attributable to that class and exclusive
voting rights with respect to matters affecting that class. Class A, B and C
have separate distribution and/or service plans. No such plan has been adopted
for Class Y shares. Class B shares will automatically convert to Class A shares
six years after the date of purchase. 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 an
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.
28 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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 August 31, 1998,
the Fund had entered into outstanding when-issued or forward commitments of
$79,177,295.
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.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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. At August 31, 1998, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $14,438,000, which expires in 2003 and 2004.
29 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 1998, a provision of $23,085 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 $196,868 at August 31, 1998.
The Board of Trustees has adopted a deferred compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual fees they are entitled to receive from the Fund. Under the
plan, the compensation deferred is periodically adjusted as though an equivalent
amount had been invested for the Trustee in shares of one or more Oppenheimer
funds selected by the Trustee. The amount paid to the Trustee under the plan
will be determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net income per
share.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B, Class C and Class Y 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 its 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 fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders
to reflect the difference between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1998, amounts have been reclassified to reflect a decrease
in undistributed net investment income of $558,919, an increase in accumulated
net realized loss on investments of $957,499, and an increase in paid-in capital
of $1,516,418.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Discount on securities purchased is amortized
over the life of the respective securities in accordance with federal income tax
requirements. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
30 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
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.
================================================================================
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Year Ended August 31,
1998(1) Year Ended August 31, 1997
- ------------------------------------
- -------------------------------------
Shares
Amount Shares Amount
- ------------------------------------------------------------------------------------------------------
<S> <C>
<C> <C> <C>
Class A:
Sold 24,251,363 $
234,611,395 7,147,373 $ 67,261,266
Dividends reinvested 2,664,932
25,680,401 2,947,978 27,722,663
Redeemed (17,421,053)
(168,252,010) (15,211,682) (142,802,339)
-------------
- ------------- ------------- -------------
Net increase (decrease) 9,495,242 $
92,039,786 (5,116,331) $ (47,818,410)
=============
============= ============= =============
- -------------------------------------------------------------------------------------------------------
Class B:
Sold 9,187,155 $
88,792,370 3,179,059 $ 29,856,499
Dividends reinvested 295,745
2,849,272 194,821 1,831,039
Redeemed (2,780,800)
(26,833,090) (1,810,612) (16,933,662)
-------------
- ------------- ------------- -------------
Net increase 6,702,100 $
64,808,552 1,563,268 $ 14,753,876
=============
============= ============= =============
- --------------------------------------------------------------------------------------------------------------
Class C:
Sold 3,113,106 $
30,059,124 882,280 $ 8,277,787
Dividends reinvested 113,578
1,093,135 109,121 1,025,173
Redeemed (1,348,850)
(13,011,505) (718,810) (6,747,513)
-------------
- ------------- ------------- -------------
Net increase 1,877,834 $
18,140,754 272,591 $ 2,555,447
=============
============= ============= =============
- --------------------------------------------------------------------------------------------------------------
Class Y:
Sold 104
$ 1,002 -- $ --
Dividends reinvested
- -- -- -- --
Redeemed
- -- -- -- --
-------------
- ------------- ------------- -------------
Net increase 104
$ 1,002 -- $ --
=============
============= ============= =============
</TABLE>
(1). For the year ended August 31, 1998 for Class A, B and C shares, and for the
period from May 18, 1998 (inception of offering) to August 31, 1998 for Class
Y shares.
31 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
3. Unrealized Gains and Losses on Investments
At August 31, 1998, net unrealized appreciation on investments of $15,391,439
was composed of gross appreciation of $23,460,104, and gross depreciation of
$8,068,665.
================================================================================
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 average annual 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 average
annual net assets over $800 million.
For the year ended August 31, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled $1,159,123, of which $313,780
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 $2,163,419 and $177,771, respectively, of which $53,283
and $3,079, respectively, was paid to an affiliated broker/dealer. During the
year ended August 31, 1998, OFDI received contingent deferred sales charges of
$191,698 and $20,580, 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 other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
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 shareholder 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 year ended August 31, 1998, OFDI paid $116,541
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
32 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its 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 and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% to compensate dealers for providing personal services for
accounts that hold Class B and Class C shares. Each fee is computed on the
average annual net assets of Class B or Class C shares, determined as of the
close of each regular business day. During the year ended August 31, 1998, OFDI
paid $2,330 and $10,536, respectively, to an affiliated broker/dealer as
compensation for Class B and Class C personal service and maintenance expenses
and retained $661,495 and $142,545, respectively, as compensation for Class B
and Class C sales commissions and service fee advances, as well as financing
costs. If either Plan is terminated by the Fund, the Board of Trustees may allow
the Fund to continue payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. As of August 31, 1998, OFDI
had incurred excess distribution and servicing costs of $3,562,816 for Class B
and $464,146 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 (initial margin) in an amount 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.
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.
33 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
5. Futures Contracts (continued)
At August 31, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Number of Valuation
as of Unrealized
Expiration Date Contracts August 31,
1998 Appreciation
- ----------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C>
<C> <C>
U.S. Treasury Bonds, 10 yr. 12/98 365
$42,750,625 $179,648
U.S. Treasury Bonds, 20 yr. 12/98 452
57,404,000 550,875
- --------
$730,523
========
</TABLE>
================================================================================
6. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in
the Statement of Investments where applicable. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
34 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Written option activity for the year ended August 31, 1998 was as follows:
Call Options
- -----------------------
Number of Amount
of
Options Premiums
- -------------------------------------------------------------------------------
Options outstanding at August 31, 1997 35,000 $
246,094
Options written 60,600
186,062
Options closed or expired (95,600)
(432,156)
-------
- ---------
Options outstanding at August 31, 1998 -- $
- --
=======
=========
================================================================================
7. Illiquid and Restricted Securities
At August 31, 1998, 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
periodically) 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 August 31, 1998 was $46,050,052, which represents
6.28% of the Fund's net assets.
================================================================================
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
August
31, 1998.
35 Oppenheimer U.S. Government Trust
<PAGE>
<PAGE>
Appendix A
- ------------------------------------------------------------------------------
RATINGS DEFINITIONS
- ------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- ------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may
be present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
<PAGE>
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- ------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation. CC: An
obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been filed
or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- ------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for
meeting financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
1A-1
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-2
Appendix B
- ------------------------------------------------------------------------------
Industry Classifications
- ------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Technology
Electrical Equipment Telephone - Utility
Electronics Textile/Apparel
Energy Services & Producers Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-45
APPENDIX C
Special Sales Charge Arrangements and Waivers
- ------------------------------------------------------------------------------
In certain cases, the initial sales charge that applies to purchases of
Class A shares of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived. That is
because of the economies of sales efforts realized by the Distributor or the
dealers or other financial institutions offering those shares to certain classes
of investors or in certain transactions.
Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares of
those funds are not available for purchase by or on behalf of retirement plans.
Other waivers apply only to shareholders of certain funds that were merged into
or became Oppenheimer funds.
For the purposes of some of the waivers described below and in the
Prospectus and Statement of Additional Information of the applicable Oppenheimer
funds, the term "Retirement Plan" refers to the following types of plans: (1)
plans qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans1 (4)
Group Retirement Plans2 (5) 403(b)(7) custodial plan accounts (6) SEP-IRAs,
SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a
waiver or sales charge reduction in a particular case is determined solely by
the Distributor or the Transfer Agent of the fund. These provisions may be
changed at any time without prior notice by a fund.
- --------------
1. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
2. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
<PAGE>
- ------------------------------------------------------------------------------
Class A Contingent Deferred Sales Charge
- ------------------------------------------------------------------------------
n Purchases of Class A Shares That Are Not Subject to Initial Sales
Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, those purchase may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, the Distributor will pay the applicable commission on
these purchases described in the Prospectus under "Class A Contingent Deferred
Sales Charge": o Purchases of Class A shares aggregating $1 million or more. o
Purchases by a Retirement Plan that: (1) buys shares costing $500,000 or more,
or (2) has, at the time of purchase, 100 or more eligible participants, or (3)
certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
o Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
o Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith,
Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the
record-keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM"), that are made available under a
Service Agreement between Merrill Lynch and the mutual fund's
principal underwriter or distributor, and (b) funds advised or
managed by MLAM (the funds described in (a) and (b) are referred
to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and
Merrill Lynch. On the date the plan sponsor signs the record
keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets (excluding assets invested in
money market funds) invested in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
- ------------------------------------------------------------------------------
Waivers of Class A Sales Charges
- ------------------------------------------------------------------------------
|X| Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not subject
to any Class A sales charges (and no commissions are paid by the Distributor on
such purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term "immediate
family" refers to one's spouse, children, grandchildren, grandparents, parents,
parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by
virtue of a remarriage (step-children, step-parents, etc.) are included.
|_| Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the Distributor for
that purpose.
|_| Dealers or brokers that have a sales agreement with the Distributor,
if they purchase shares for their own accounts or for retirement plans for their
employees.
|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are identified
as such to the Distributor) or with the Distributor. The purchaser must certify
to the Distributor at the time of purchase that the purchase is for the
purchaser's own account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically for the
use of shares of the Fund in particular investment products made available to
their clients. Those clients may be charged a transaction fee by their dealer,
broker, bank or advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an advisory,
consulting or other fee for their services and buy shares for their own accounts
or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the
purchases are made through a broker or agent or other financial intermediary
that has made special arrangements with the Distributor for those purchases.
|_| Clients of investment advisors or financial planners (that have
entered into an agreement for this purpose with the Distributor) who buy shares
for their own accounts may also purchase shares without sales charge but only if
their accounts are linked to a master account of their investment advisor or
financial planner on the books and records of the broker, agent or financial
intermediary with which the Distributor has made such special arrangements. Each
of these investors may be charged a fee by the broker, agent or financial
intermediary for purchasing shares.
|_| Directors, trustees, officers or full-time employees of OpCap Advisors
or its affiliates, their relatives or any trust, pension, profit sharing or
other benefit plan which beneficially owns shares for those persons.
|_| Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this arrangement) and
persons who are directors or trustees of the company or trust which is the
beneficial owner of such accounts.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
? Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
? Retirement plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under sections
401(a), 403(b) or 457 of the Internal Revenue Code), in each case if those
purchases are made through a broker, agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
? A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995.
? A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, if that arrangement was consummated and share
purchases commenced by December 31, 1996.
|X| Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following transactions
are not subject to sales charges (and no commissions are paid by the Distributor
on such purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment
arrangements have been made with the Distributor.
|_| Shares purchased and paid for with the proceeds of shares redeemed in
the prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent
deferred sales charge was paid. This waiver also applies to shares purchased by
exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased
and paid for in this manner. This waiver must be requested when the purchase
order is placed for shares of the Fund, and the Distributor may require evidence
of qualification for this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
? Shares purchased by the reinvestment of loan repayments by a participant
in a Retirement Plan for which the Manager or an affiliate acts as sponsor.
|X| Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived if
shares that would otherwise be subject to the contingent deferred sales charge
are redeemed in the following cases:
|_| To make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value.
|_| Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies," in
the Prospectus).
? For distributions from a TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program.
o For distributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary. The death or disability
must occur after the participant's account was established.
(2) To return excess contributions.
(3) To return contributions made due to a mistake of fact.
(4) Hardship withdrawals, as defined in the plan.
(5) Under a Qualified Domestic Relations Order, as defined in the Internal
Revenue Code.
(6) To meet the minimum distribution requirements of the Internal
Revenue Code.
(7) To establish "substantially equal periodic payments" as described
in Section 72(t) of the Internal Revenue Code.
(8) For retirement distributions or loans to participants or beneficiaries.
(9) Separation from service.
(10) Participant-directed redemptions to purchase shares of a mutual
fund other than a fund managed by the Manager or a subsidiary. The
fund must be one that is offered as an investment option in a
Retirement Plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the
Distributor.
(11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored
IRA.
? For distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the Oppenheimer
funds as an investment option under the Plan.
? For distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
- ------------------------------------------------------------------------------
Waivers of Class B and Class C Sales Charges.
- ------------------------------------------------------------------------------
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below. In order to receive a waiver of the Class B and
Class C contingent deferred sales charge, you must notify the Transfer Agent
which conditions apply.
|X| Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
|_| Redemptions from accounts following the death or disability of the
last surviving shareholder, including a trustee of a "grantor" trust or
revocable living trust for which the trustee is also the sole beneficiary. The
death or disability must have occurred after the account was established. For
disability you must provide evidence of a determination of disability by the
Social Security Administration. o Shares redeemed involuntarily, as described in
""Shareholder Account
Rules and Policies," in the Statement of Additional Information.
o Distributions to participants or beneficiaries from Retirement Plans,
if the distributions are made:
(a) under an Automatic Withdrawal Plan after the participant reaches age
59-1/2, as long as the payments are no more than 10% of the account
value annually (measured from the date the Transfer Agent receives
the request), or
(b) following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary (the death or
disability must have occurred after the account was established).
[_] Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
grantor trust or revocable living trust for which the trustee is also the sole
beneficiary. The death or disability must have occurred after the account was
established, and for disability you must provide evidence of a determination of
disability by the Social Security Administration.
[_] Returns of excess contributions to Retirement Plans.
[_] Distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request). o Distributions from OppenheimerFunds
prototype 401(k) plans and from certain Massachusetts Mutual Life Insurance
Company prototype 401(k) plans: (1) for hardship withdrawals; (2) under a
Qualified Domestic Relations Order, as defined in the Internal
Revenue Code;
(3) to meet minimum distribution requirements as defined in the Internal
Revenue Code;
(4) to make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code;
(5) for separation from service; or (6) for loans to participants or
beneficiaries.
o Distributions from 401(k) plans sponsored by broker-dealers that have entered
into a special agreement with the Distributor allowing this waiver. o
Redemptions of Class B shares held by Retirement Plans whose records are
maintained on a daily valuation basis by Merrill Lynch or an independent record
keeper under a contract with Merrill Lynch.
|X| Waivers for Shares Sold or Issued in Certain Transactions. The contingent
deferred sales charge is also waived on Class B and Class C shares sold or
issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a
party.
- ------------------------------------------------------------------------------
Special Sales Charge Arrangements for Shareholders of the Fund
- ------------------------------------------------------------------------------
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described in the Prospectus or Statement
of Additional Information of the Fund are modified as described below for
certain persons who were shareholders of the former Quest for Value Funds. Those
funds include:
Oppenheimer Quest Value Fund, Inc., Oppenheimer Quest Balanced Value Fund,
Oppenheimer Quest Opportunity Value Fund, Oppenheimer Quest Small Cap
Value Fund and Oppenheimer Quest Global Value Fund, Inc.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds.
The table also applies to shareholders of the following funds when they merged
into various Oppenheimer funds on November 24, 1995:
Quest for Value U.S. Government Income Fund, Quest for Value Investment
Quality Income Fund, Quest for Value Global Income Fund, Quest for Value
New York Tax-Exempt Fund, Quest for Value National Tax-Exempt Fund and
Quest for Value California Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the "Former
Quest for Value Funds." The waivers of initial and contingent deferred sales
charges described in this Appendix apply to shares of the Fund that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of one
of the Oppenheimer funds that was one of the Former Quest for Value Funds
or |_| purchased by such shareholder by exchange of other Oppenheimer
funds that were acquired pursuant to the merger of any of the Former Quest
for Value Funds into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if that Association purchased shares of any of the Former Quest for
Value Funds or received a proposal to purchase such shares from OCC Distributors
prior to November 24, 1995.
<PAGE>
Initial Initial Commission
Sales Charge Sales Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
- --------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the Fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the Fund's Prospectus and Statement of Additional Information. Individuals
who qualify under this arrangement for reduced sales charge rates as members of
Associations also may purchase shares for their individual or custodial accounts
at these reduced sales charge rates, upon request to the Fund's Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A shares of
the Fund purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
|_| Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions.
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
Class A, Class B and Class C Contingent Deferred Sales Charge Waivers
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the
following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of the Fund. The Fund shares
must have been acquired by the merger of a Former Quest for Value Fund into the
Fund or by exchange from an Oppenheimer fund that was a Former Quest for Value
Fund or into which such fund merged. Those shares must have been purchased prior
to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10%
of the initial value of the account, and |_| liquidation of a
shareholder's account if the aggregate net asset value of shares held
in the account is less than the required minimum value of such
accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of the Fund. The Fund shares must have been acquired by the merger of a
Former Quest for Value Fund into the Fund or by exchange from an Oppenheimer
fund that was a Former Quest For Value Fund or into which such fund merged.
Those shares must have been purchased on or after March 6, 1995, but prior to
November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s)
(as evidenced by a determination of total disability by the U.S. Social
Security Administration); |_| withdrawals under an automatic withdrawal
plan (but only for Class B or Class C shares) where the annual
withdrawals do not exceed 10% of the initial value of the account; and
|_| liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum
account value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Fund described in this section if the proceeds are invested in the
same Class of shares in this Fund or another Oppenheimer fund within 90 days
after redemption.
- ------------------------------------------------------------------------------
Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of the Former Connecticut Mutual Investment
Accounts, Inc.
- ------------------------------------------------------------------------------
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the Prospectus or this Appendix for Oppenheimer
U. S. Government Trust, Oppenheimer Bond Fund, Oppenheimer Disciplined Value
Fund and Oppenheimer Disciplined Allocation Fund (each is included in the
reference to "Fund" below) are modified as described below for those
shareholders who were shareholders of Connecticut Mutual Liquid Account,
Connecticut Mutual Government Securities Account, Connecticut Mutual Income
Account, Connecticut Mutual Growth Account, Connecticut Mutual Total Return
Account, CMIA LifeSpan Capital Appreciation Account, CMIA LifeSpan Balanced
Account and CMIA Diversified Income Account (the "Former Connecticut Mutual
Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment
adviser to the Former Connecticut Mutual Funds.
Prior Class A CDSC and Class A Sales Charge Waivers
? Class A Contingent Deferred Sales Charge. Certain shareholders of the
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of the Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result of
direct purchases or purchases pursuant to the Funds' policies on Combined
Purchases or Rights of Accumulation, who still hold those shares in the Fund or
other Former Connecticut Mutual Funds, and (2) persons whose intended purchases
under a Statement of Intention entered into prior to March 18, 1996, with the
Funds' former general distributor to purchase shares valued at $500,000 or more
over a 13-month period entitled those persons to purchase shares at net asset
value without being subject to the Class A initial sales charge.
Any of the Class A shares of the Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
n Class A Sales Charge Waivers. Additional Class A shares of the Fund may be
purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled
$500,000 or more, including investments made pursuant to the Combined
Purchases, Statement of Intention and Rights of Accumulation features
available at the time of the initial purchase and such investment is
still held in one or more of the Former Connecticut Mutual Funds or a
Fund into which such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Trustees of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the Fund's prior distributor, and its
affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of the Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
Class A and Class B Contingent Deferred Sales Charge Waivers
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of the Fund and exchanges of Class A or Class B
shares of the Fund into Class A or Class B shares of a Former Connecticut Mutual
Fund provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer Fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996: (1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
the Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Trustees of the Fund.
- ------------------------------------------------------------------------------
Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
- ------------------------------------------------------------------------------
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U. S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%
<PAGE>
- ------------------------------------------------------------------------------
<PAGE>
Oppenheimer U.S. Government Trust
- ------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Adviser
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG Peat Marwick LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
67890
PX220.1298
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust of Registrant dated June 1, 1992:
Filed with Registrant's Post-Effective Amendment No. 20, 10/16/92, refiled with
Registrant's Post-Effective Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(b) By-Laws as amended through 6/4/98: Previously filed with
Post-Effective Amendment No. 36, 10/29/98, and incorporated herein by
reference.
(c) (i) Specimen Class A Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 32, 10/24/96, and incorporated
herein by reference.
(ii) Specimen Class B Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 32, 10/24/96, and incorporated
herein by reference.
(iii) Specimen Class C Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 32, 10/24/96, and incorporated
herein by reference.
(iv) Specimen Class Y Share Certificate: Previously filed with
Registrant's Post-Effective Amendment No. 35, 5/18/98, and incorporated
herein by reference.
(d) Investment Advisory Agreement dated 5/25/95: Previously filed with
Registrant's Post-Effective Amendment No. 28, 5/26/95, and incorporated
herein by reference.
(e) (i) General Distributor's Agreement dated 12/10/92: Filed with
Registrant's Post-Effective Amendment No. 21, 8/20/93, and incorporated
herein by reference.
Form of Oppenheimer Funds Distributor Inc. Dealer Agreement - Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by
reference.
(iii) Form of OppenheimerFunds Distributor, Inc. Broker Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(iv) Form of OppenheimerFunds Distributor, Inc. Agency Agreement: Filed
with Post-Effective Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein by reference.
(f) (i) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant - 6/7/90): Previously filed with Post-Effective
Amendment No. 97 of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90, refiled
with Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg. No.
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 33, of the
Registration Statement for Oppenheimer Gold & Special Minerals Fund (Reg. No.
2-82590), 10/28/98, and incorporated herein by reference.
(g) Custody Agreement dated 11/12/92: Filed with Post-Effective Amendment
No. 21 of the Registrant's Registration Statement, 8/20/93, and incorporated
herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 5/18/98: Previously filed with
Registrant's Post-Effective Amendment No. 35 to Registrant's Registration
Statement, 5/18/98, and incorporated herein by reference.
(j) Independent Auditors Consent: Filed herewith.
(k) Not applicable.
(l) No applicable.
(m) (i) Service Plan and Agreement for Class A shares under Rule
12b-1 of the Investment Company Act of 1940 dated as of 6/10/93: Filed with
Registrant's Post-Effective Amendment No. 24, 8/24/94, and incorporated
herein by reference.
(ii) Amended and Restated Distribution and Service Plan and Agreement for
Class B Shares dated 2/12/98: Previously filed with Post-Effective
Amendment No. 36, 10/29/98, and incorporated herein by reference.
(iii) Amended and Restated Distribution and Service Plan and Agreement for
Class C Shares dated 2/12/98: Previously filed with Post-Effective
Amendment No. 36, 10/29/98, and incorporated herein by reference.
(n) (i) Financial Data Schedule for Class A Shares: Filed herewith.
(ii) Financial Data Schedule for Class B Shares: Filed herewith.
(iii) Financial Data Schedule for Class C Shares: Filed herewith.
(iv) Financial Data Schedule for Class Y Shares: Filed herewith.
(o) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/25/98: Previously filed with Post-Effective Amendment No. 70 to the
Registration Statement of Oppenheimer Global Fund (Reg. No. 2-31661),
9/14/98, and incorporated herein by reference.
- -- Powers of Attorney (including Certified Board resolutions): For all
trustees except (Bridget Macaskill) filed with post-Effective Amendment No.
21 of the Registrant's Registration Statement, 8/20/93, and incorporated
herein by reference. For Ms. Macaskill, filed with post-effective Amendment
No. 33 of the Registrant's Registration Statement, 12/15/97, and incorporated
herein by reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seventh of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
- ------------------------------------------------------------------------------
Name and Current Position Other Business and Connections
- ------------------------------------------------------------------------------
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since April 1998);
a Chartered Financial Analyst;
formerly, a Vice President and
portfolio manager for Guardian
Investor Services, the investment
management subsidiary of The Guardian
Life Insurance Company (since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President,
Securities Analyst for Morgan Stanley
Dean Witter (May 1997 - April 1998); and
Research Analyst (July 1996 - May 1997),
Portfolio Manager (February 1992 - July
1996) and Department Manager (June 1988
to February 1992) for The Bank of New
York.
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly,
Vice President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice President
of HarbourView Asset Management
Corporation ("HarbourView"); prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama Series
Fund, Inc. (the "Company") and other
mutual funds and pension funds managed by
G.R. Phelps & Co. Inc. ("G.R. Phelps"),
the Company's former investment adviser,
which was a subsidiary of Connecticut
Mutual Life Insurance Company; he was
also responsible for managing the common
stock department and common stock
investments of Connecticut Mutual Life
Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly, a
Vice President and Senior Portfolio
Manager at First of America Investment
Corp.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group
Executive, and Senior Systems Officer for
American International Group (October
1994 - May, 1998).
John R. Blomfield,
Vice President Formerly Senior Product Manager
(November, 1995 - August, 1997) of
International Home Foods and American
Home Products (March, 1994 - October,
1996).
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January
1992 - February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting
(since May 1996); an officer of other
Oppenheimer funds; formerly, an
Assistant Vice President of OFI/Mutual
Fund Accounting (April 1994-May 1996),
and a Fund Controller for OFI.
George C. Bowen,
Senior Vice President, Treasurer
and Director Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice
President (since February 1992),
Treasurer (since July 1991)and a director
(since December 1991) of Centennial;
President, Treasurer and a director of
Centennial Capital Corporation (since
June 1989); Vice President and Treasurer
(since August 1978) and Secretary (since
April 1981) of Shareholder Services, Inc.
("SSI"); Vice President, Treasurer and
Secretary of Shareholder Financial
Services, Inc. ("SFSI") (since November
1989); Assistant Treasurer of Oppenheimer
Acquisition Corp. ("OAC") (since March,
1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since
November 1989); Vice President and
Treasurer of ORAMI (since July 1996);
an officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial.
John Cardillo,
Assistant Vice President None.
Erin Cawley,
Assistant Vice President None.
H.C. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January, 1995 - January, 1996),
Fidelity Investments FMR Co. (January,
1996 - June, 1997) and Fidelity
Investments FTPG (June, 1997 - January,
1998).
Robert Doll, Jr.,
Executive Vice President & Director An officer and/or
portfolio manager of certain Oppenheimer
funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January
1992) of the Distributor; Executive Vice
President, General Counsel and a director
of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc.
since (September 1995); President and a
director of Centennial (since September
1995); President and a director of ORAMI
(since July 1996); General Counsel
(since May 1996) and Secretary (since
April 1997) of OAC; Vice President and
Director of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
Patrick Dougherty, None.
Assistant Vice President
Bruce Dunbar, None.
Vice President
Eric Edstrom,
Vice President Formerly an Assistant Vice
President and National Account Executive
(February 1996 - August 1998) for MBNA
America.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October
1997); an officer of other Oppenheimer
funds; formerly, an Assistant Vice
President of OFI/Mutual Fund Accounting
(April 1994-May 1996), and a Fund
Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView,
and Centennial; Secretary, Vice President
and Director of Centennial Capital
Corporation; Vice President and Secretary
of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since
1994) of St. John's College; Director
(since 1994 - present) of International
Museum of Photography at George Eastman
House. Formerly, he held the following
positions: formerly, Chairman of the
Board and Director of Rochester Fund
Distributors, Inc. ("RFD"); President and
Director of Fielding Management Company,
Inc. ("FMC"); President and Director of
Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester
Capital Advisors, L.P., President and
Director of Rochester Fund Services, Inc.
("RFS"); President and Director of
Rochester Tax Managed Fund, Inc.;
Director (1993 - 1997) of VehiCare Corp.;
Director (1993 - 1996) of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly, she held the following
positions: An officer of certain former
Rochester funds (May, 1993 - January,
1996); Secretary of Rochester Capital
Advisors, Inc. and General Counsel (June,
1993 - January 1996) of Rochester Capital
Advisors, L.P.
Jennifer Foxson,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987-1997) for
Schroder Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President and
Chief Financial Officer Chief Financial Officer and Treasurer
(since March, 1998) of Oppenheimer
Acquisition Corp.; a Member and Fellow of
the Institute of Chartered Accountants;
formerly, an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice
President for Bankers Trust Company
(1993-1996); Steering Committee Member,
Subcommittee Chairman for American Savings
Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Elaine T. Hamann,
Vice President Formerly, Vice President (September, 1989
- January, 1997) of Bankers Trust Company.
Robert Haley
Assistant Vice President Formerly, Vice President of
Information Services for Bankers Trust
Company (January, 1991 - November, 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager President and
Director of SFSI; President and Chief
executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly, a Senior Vice President and
Portfolio Manager for Warburg, Pincus
Counsellors, Inc. (1993-1997), Co-manager
of Warburg, Pincus Emerging Markets Fund
(12/94 - 10/97), Co-manager Warburg,
Pincus Institutional Emerging Markets
Fund - Emerging Markets Portfolio (8/96 -
10/97), Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of Warburg
Pincus International Equity Fund, Warburg
Pincus Institutional Fund - Intermediate
Equity Portfolio, and Warburg Pincus EAFE
Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Vice President None.
Jane Ingalls,
Vice President None.
Kathleen T. Ives,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Thomas W. Keffer,
Senior Vice President None.
Avram Kornberg,
Vice President None.
John Kowalik,
Senior Vice President An officer and/or portfolio manager for
certain OppenheimerFunds; formerly,
Managing Director and Senior Portfolio
Manager at Prudential Global Advisors
(1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the
senior bond portfolio manager for
Panorama Series Fund Inc., other mutual
funds and pension accounts managed by
G.R. Phelps; also responsible for
managing the public fixed-income
securities department at Connecticut
Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Dan Loughran,
Assistant Vice President:
Rochester Division None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September
1995); President and director (since June
1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and
SFSI (September 1995); President (since
September 1995) and a director (since
October 1990) of OAC; President (since
September 1995) and a director (since
November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding
company subsidiary of OFI; a director of
ORAMI (since July 1996) ; President and a
director (since October 1997) of OFIL, an
offshore fund manager subsidiary of OFI
and Oppenheimer Millennium Funds plc
(since October 1997); President and a
director of other Oppenheimer funds; a
director of Hillsdown Holdings plc (a
U.K. food company); formerly, an
Executive Vice President of OFI.
Wesley Mayer,
Vice President Formerly, Vice President (January, 1995 -
June, 1996) of Manufacturers Life
Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kelley A. McCarthy-Kane
Assistant Vice President Formerly, Product Manager,
Assistant Vice President (June 1995-
October, 1997) of Merrill Lynch Pierce
Fenner & Smith.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager May, 1996 - June, 1997) and Director
of Product Marketing (August, 1992 - May,
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Denis R. Molleur,
Vice President None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager
of certain Oppenheimer funds (since April
1998); a Certified Financial Analyst;
formerly, a Vice President and portfolio
manager for Guardian Investor Services,
the management subsidiary of The Guardian
Life Insurance Company (since 1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase Investment
Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Phillips
Assistant Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April, 1995 - January, 1998) of
Van Kampen American Capital.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March, 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Ruxandra Risko,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President None.
Michelle Simone,
Assistant Vice President None.
Richard Soper,
Vice President None.
Stuart J. Speckman
Vice President Formerly, Vice President and Wholesaler
for Prudential Securities (December, 1990
- July, 1997).
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and Trustee of the New
York-based Oppenheimer Funds; formerly,
Chairman of the Manager and the
Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
John Stoma,
Senior Vice President, Director
of Retirement Plans None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of
HarbourView.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of OAMC, CAMC and
Chairman of the Board of SSI.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
James Tobin,
Vice President None.
Susan Torrisi,
Assistant Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Teresa Ward,
Assistant Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt
fixed income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice President
of
HarbourView.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial; Vice President, Finance
and Accounting; Point of Contact:
Finance Supporters of Children;
Member of the Oncology Advisory Board
of the Childrens Hospital.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since
May 1985), SFSI (since November 1989), OFIL
(since 1998), Oppenheimer Millennium Funds
plc (since October 1997); an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30364
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55403
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
And General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
412 Commons Way
Doylestown, PA 18901
Patrice Falagrady(1) Senior Vice President None
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
2120 Brookhaven View, N.E.
Atlanta, GA 30319
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Allen Hamilton Vice President None
5 Giovanni
Aliso Viejo, CA 92656
C. Webb Heidinger Vice President None
138 Gales Street
Portsmouth, NH 03801
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
John Kennedy Vice President None
799 Paine Drive
Westchester, PA 19382
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Vice President/ None
Director of Sales
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
54511 Southern Hills
LaQuinta, CA 92253
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
2714 Orchard Terrace
Linden, NJ 07036
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
LuAnn Mascia(2) Assistant Vice President None
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
100 Anderson Street, #427
Pittsburgh, PA 15212
John McDonough Vice President None
3812 Leland Street
Chevey Chase, MD 20815
Wayne Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
2408 Eagleridge Dr.
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
Timothy Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
44 Abington Road
Danvers, MA 0923
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
7009 Metropolitan Place, #300
Falls Church, VA 22043
Sarah Turpin Vice President None
2201 Wolf Street, #5202
Dallas, TX 75201
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
Mark Stephen Vandehey(1) Vice President None
James Wiaduck Vice President None
29900 Meridian Place
#22303
Farmington Hills, MI 48331
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 S. Tucson Way, Englewood, CO 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
(a) Not applicable
(b) Not applicable
(c) Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 21st day of December, 1998.
Oppenheimer U.S. Government Trust
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
By: /s/ Bridget A. Macaskill *
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ Leon Levy* Chairman of the December 21, 1998
- ------------------------------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro* Vice Chairman and
December 21, 1998
- ------------------------------------- Trustee
Donald W. Spiro
/s/ George Bowen* Treasurer and December
21, 1998
- ------------------------------------- Principal Financial
George Bowen and Accounting
Officer
/s/ Robert G. Galli* Trustee
December 21, 1998
- -------------------------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee December
21, 1998
- -------------------------------------
Benjamin Lipstein
/s/ Bridget A. Macaskill* President,
December 21, 1998
- ------------------------------------- Principal Executive
Bridget A. Macaskill Officer, Trustee
/s/ Elizabeth B. Moynihan* Trustee
December 21, 1998
- -------------------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee December
21, 1998
- -------------------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee
December 21, 1998
- -------------------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee
December 21, 1998
- -------------------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee
December 21, 1998
- -------------------------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee December
21, 1998
- -------------------------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- ---------------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
EXHIBIT INDEX
Exhibit No. Description
23(j) Independent Auditors Consent
23(n)(i) Financial Data Schedule for Class A Shares
23(n)(ii) Financial Data Schedule for Class B Shares
23(n)(iii) Financial Data Schedule for Class C Shares
23(n)(iv) Financial Data Schedule for Class Y Shares
- --------
Independent Auditors' Consent
The Board of Trustees
Oppenheimer U.S. Government Trust Fund:
We consent to the use in this Registration Statement of Oppenheimer U.S.
Government Trust Fund of our report dated September 22, 1998 included in the
Statement of Additional Information, which is part of such Registration
Statement, and to the references to our firm under the headings "Financial
Highlights" appearing in the Prospectus, which is also part of such
Registration Statement, and "Independent Auditors" appearing in the Statement
of Additional Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
December 21, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ASSETS-OTHER> 23,631
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<NET-CHANGE-FROM-OPS> 52,733,978
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<ACCUM-APPREC-OR-DEPREC> 16,121,962
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