-----------------------------
Annual Report August 31, 1998
-----------------------------
OPPENHEIMER
U.S. Government
Trust
[GRAPHIC OMITTED]
[LOGO]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
Contents
3 President's Letter
4 An Interview
with Your Fund's
Manager
8 Fund Performance
13 Financial
Statements
36 Independent
Auditors' Report
37 Federal
Income Tax
Information
38 Officers and
Trustees
40 Information and
Services
Report highlights
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o Oppenheimer U.S. Government Trust performed well over the 12-month period
ended August 31, 1998. The Fund's Class A shares provided an average annual
total return, without deducting sales charges, of 9.26% for the period.(1)
o The Fund's performance continues to be sensitive to world events, such as
Japan's ability to reinvigorate its economy and the rest of Asia.
- ------------------------------------
Avg Annual Total Returns
- ------------------------------------
For the 1-Year Period
Ended 8/31/98
Class A
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
9.26% 4.07%
- ------------------------------------
Class B
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
8.45% 3.45%
- ------------------------------------
Class C
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
8.34% 7.34%
- ------------------------------------
Class Y
Without With
Sales Chg.(1) Sales Chg.(2)
- ------------------------------------
2.83% 2.83%
- ------------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
short-term changes. For updates on the Fund's performance, please contact your
financial advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
(1). Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
(2). Class A return includes the current initial sales charge of 4.75%. Class B
return includes the applicable contingent deferred sales charge of 5%. Class C
return includes the contingent deferred sales charge of 1%. Class Y shares are
not available for sale to individual shareholders. An explanation of the
different performance calculations is in the Fund's prospectus. Class B and C
shares are subject to an annual 0.75% asset-based sales charge.
2 Oppenheimer U.S. Government Trust
<PAGE>
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
U.S. Government Trust
Dear shareholder,
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The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since that time, stocks have declined sharply
amid heightened volatility. Yet, the bond market remains poised to benefit from
the same positive economic conditions that existed earlier in the year.
Why have stocks faltered lately? The financial crises in Asia and Russia
have negatively affected the earnings of some large U.S. corporations and have
contributed to a slow-down in U.S. economic growth. Although slower economic
growth has been negative for stocks, it should not adversely impact bonds.
That's because slower economic growth generally means fewer inflationary
pressures and less likelihood that interest rates will rise.
What should you do during this period of relative uncertainty? If you have
well-defined long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged
by our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the per spective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ Bridget A. Macaskill
Bridget A. Macaskill
September 22, 1998
3 Oppenheimer U.S. Government Trust
<PAGE>
An interview with your Fund's manager
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How did the Fund perform?
Oppenheimer U.S. Government Trust performed well over the 12-month period ended
August 31, 1998. The Fund's Class A shares provided an average annual total
return, without deducting sales charges, of 9.26% for the period.(2) The 30-day
standardized yield for the period ended August 31, 1998 was 5.05%(1), down from
February 28, 1998, when it was 5.66%.
Standardized Yields(1)
For the 30 Days Ended 8/31/98
- -----------------------------
Class A 5.05%
- -----------------------------
Class B 4.54
- -----------------------------
Class C 4.55
- -----------------------------
Class Y 5.62
- -----------------------------
What factors affected the Fund's performance?
Since mid-1997, interest rates have fallen significantly, and bond prices
generally have risen. The Asian economic crisis, which surfaced last October,
caused investors to seek the relative safety and liquidity of U.S. Treasury secu
rities, boosting prices and reducing yields. Negative economic news from Russia
only reinforced this global flight to quality. As of August 31, 1998, the yield
of 30-year Treasury bonds fell to about 5.15%, its lowest level since 30-year
bonds were first sold in 1977. The absence of inflation has kept long-term bond
yields within a trading range of 5.00% and 5.50%.
A falling interest-rate environment is ideal for fixed income funds that
hold mostly non-callable bonds, such as U.S. Treasury securities. However,
Oppenheimer U.S. Government Trust holds a large proportion of mortgage-backed
securities, which also appreciate, but don't perform as well as Treasury bonds
during a bond market rally. Over time, mortgages can be a very good investment,
particularly for conservative income-oriented investors. That's because these
investments typically pay significantly higher yields to compensate investors
for "prepayment" risk. When interest rates fall, many
(1). Standardized yield is based on net investment income for the 30-day period
ended 8/31/98. Falling share prices will tend to artificially raise yields.
4 Oppenheimer U.S. Government Trust
<PAGE>
[PHOTO]
Portfolio Management
Team (l to r)
Jerry Webman
(Portfolio Manager)
Gina Palmieri
Leslie Falconio
homeowners refinance at lower rates and "prepay" their existing mortgages. As
prepayments surged in March and June, the value of the Fund's mortgage holdings
declined.
Generally, our Treasury securities added to the Fund's performance during
the year, although there were some temporary setbacks. In late June, the U.S.
Government decided to intervene in Japan's deteriorating economy by buying Yen,
in an effort to boost its value. To do so, the U.S. Government sold billions of
dollars worth of Treasury bonds to generate funds that were used to purchase the
Japanese currency. The flood of new issues depressed bond prices for a few
weeks. But overall, U.S. Treasury bonds performed very well for the twelve-month
period.
What changes have you made to the Fund's investments?
The Fund is an income-oriented portfolio that will continue to invest heavily in
mortgages, a sector of the market that we expect to perform well over the long
term. However, we have added collateralized mortgage obligations (CMOs), which
perform better in a declining interest rate environment. CMOs generally
appreciate in value when interest rates fall. We have also maintained a longer
duration (a measure of the Fund's sensitivity to interest rates) in our Treasury
portfolio. In a period of declining interest rates, longer-duration Treasury
bonds generally outperform shorter-duration bonds.
(2). Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
5 Oppenheimer U.S. Government Trust
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
- ---------------------------------
Avg Annual Total Returns
- ---------------------------------
For the Periods Ended 9/30/98(3)
Class A
1 year 5 year 10 year
- ---------------------------------
3.97% 5.75% 7.66%
- ---------------------------------
Class B
Since
1 year 5 year Inception
- ---------------------------------
3.34% N/A 6.87%
- ---------------------------------
Class C
Since
1 year 5 year Inception
- ---------------------------------
7.46% N/A 6.30%
- ---------------------------------
Class Y
Since
1 year 5 year Inception
- ---------------------------------
N/A N/A 4.12%
- ---------------------------------
What is your outlook?
Because of its large mortgage component, the Fund tends to perform best in an
environment where bond prices are stable or declining. However, world economic
events can influence the U.S. bond market. For instance, if Japan's new
government brings the country out of its recession, then the beginning of a
recovery may be anticipated. Such a development would suggest stronger economic
growth in the region. An improving world economy could bring a slight increase
in inflationary expectations in the United States, causing most bond prices to
fall. The Fund would perform relatively well in such a scenario because mortgage
security prices wouldn't fall as much as U.S. Treasury bonds.
If the bond market continues to trade within a narrow range, then
mortgage-backed securities would have an advantage. Like Treasury bonds, their
prices would remain stable, while offering higher yields.
On the other hand, if the Asian crisis worsens, then economic growth could
slow further, causing bond yields to decline and bond prices to rise. In this
case, because approximately 60% of the Fund's assets are generally invested in
mortgage-backed securities, we would expect the Fund to offer strong yields,
while lagging other bond funds that focus exclusively on Treasury securities.
(3). Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
4.75%. Class A shares were first publicly offered on 8/16/85. Class B returns
include the applicable contingent deferred sales charge of 5% (1-year) and 3%
(since inception on 7/21/95). Class C returns include the contingent deferred
sales charge of 1%. Class C shares were first publicly offered on 12/1/93. Class
Y shares are not available for sale to individual shareholders and have an
inception date of 5/18/98. An explanation of the different performance
calculations is in the Fund's prospectus. Class B and C shares are subject to an
annual 0.75% asset-based sales charge.
6 Oppenheimer U.S. Government Trust
<PAGE>
Of course, we will continue to adjust the percentage of mortgage-backed
securities in the portfolio as market conditions warrant. This active management
style is what makes Oppenheimer U.S. Government Trust part of The Right Way to
Invest.
Credit Allocation(4)
[The following table was originally represented as a pie chart in the printed
materials.]
o U.S. Gov't 36.6%
o U.S. Agency 44.5
o AAA/AA 8.6
o A 3.7
o BBB 6.6
Top 5 Holdings(5)
Percentage of net assets
- --------------------------------------------------------------------------------
U.S. Treasury Notes 31.4%
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Federal National Mortgage Assoc. 27.7
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Federal Home Loan Mortgage Assoc. 13.1
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U.S. Treasury Bonds 10.5
- --------------------------------------------------------------------------------
Government National Mortgage Assoc. 8.4
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(4). Portfolio data is as of August 31, 1998, is dollar-weighted based on
invested assets and subject to change. Securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category.
Average credit quality and allocation include rated securities and those not
rated by a national rating organization (currently 2.06% of total investments)
but to which the Manager in its judgment has assigned ratings as securities
comparable to those rated by a rating agency in the same category. The Fund may
invest in securities of any maturity, including those issued by private issuers
and federally chartered mortgage companies whose interest and principal
repayments are not guaranteed by the U.S. government. U.S. Treasury securities
are not rated but are deemed to have the highest rating equivalency.
(5). Portfolio is subject to change. Percentages are as of August 31, 1998, and
are based on net assets.
7 Oppenheimer U.S. Government Trust
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
How Has the Fund Performed?
Below is a discussion by the Manager of the Fund's per formance during its
fiscal year ended August 31, 1998, followed by a graphical comparison of the
Fund's per formance to an appropriate broad-based market index.
o Management's Discussion of Performance. During the past fiscal year that
ended August 31, 1998, investments in Oppenheimer U.S. Government Trust
generally appre ciated in value due to a falling interest rate environment. The
Asian economic crisis created a global demand for the safety and liquidity of
U.S. Treasury bonds, the best performing fixed-income sector over the period.
Although mortgage-backed securities don't perform well in a falling
interest-rate environment, the Fund's investments in Treasury securities enjoyed
strong price appreciation. Nevertheless, mortgages provide important
diversification because they tend to perform relatively better in stable to
rising interest-rate environments. The Fund's portfolio and its portfolio
manager's strategies are subject to change.
o Comparing the Fund's Performance to the Market. The graphs that follow
show the performance of a hypothetical $10,000 investment in each class of
shares of the Fund held until its fiscal year end of August 31, 1998. In the
case of Class A shares, performance is measured over a one-, five- and ten-year
period; in the case of Class B shares, performance is measured over a one-year
period and from the inception of the Class on July 21, 1995; in the case of
Class C shares, performance is measured over a one-year period and from the
inception of the Class on
8 Oppenheimer U.S. Government Trust
<PAGE>
December 1, 1993; and in the case of Class Y shares, from the inception of the
Class on May 18, 1998. The Fund's performance reflects the deduction of the
current 4.75% maximum initial sales charge on Class A shares, the 5% and 1%
applicable contingent deferred sales charge for Class B and Class C shares,
respectively, and reinvestment of all dividends and capital gains distributions.
The Fund's performance is compared to that of the Lehman Brothers U.S.
Government Bond Index, an unmanaged index including all U.S. Treasury issues,
publicly issued debt of U.S. Government agencies and quasi-public corporations
and U.S. Government guaranteed corporate debt, and is widely regarded as a
general measurement of the performance of the U.S. Government bond market. Index
performance reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data shows the
effect of taxes. Also, the Fund's performance reflects the effect of Fund
business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in the index.
9 Oppenheimer U.S. Government Trust
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class A) and Lehman Brothers U.S. Government
Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer U.S. Govt Lehman Brothers
Trust Cls A Government Bond Index
6.30.87 9525 10000
6.30.88 10266 10719
6.30.89 11243 12014
6.30.90 11955 12846
6.30.91 13094 14148
6.30.92 14802 16093
6.30.93 16215 18170
6.30.94 16024 17927
6.30.95 17823 20089
6.30.96 18698 20995
8.31.96(1) 18776 21000
8.31.97 20736 22959
8.31.98 22657 25777
Average Annual Total Return of Class A Shares of the Fund at 8/31/98(2)
1 Year 4.07% 5 Year 5.49% 10 Year 7.73%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class B) and Lehman Brothers U.S. Government
Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer U.S. Lehman Brothers
Govt Trust Cls B Government Bond Index
7.21.95 10000 10000
6.30.96 10480 10490
8.31.96(1) 10510 10492
8.31.97 11520 11471
8.31.98 12194 12879
Average Annual Total Return of Class B Shares of the Fund at 8/31/98(3)
1 Year 3.45% Life 6.58%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for the Lehman Brothers U.S. Government Bond Index
in the graphs for Class B begins on 7/31/95, for Class C begins on 11/30/93 and
for Class Y begins on 5/31/98.
(1). The Fund changed its fiscal year end from 6/30 to 8/31.
(2). The inception date of the Fund's Class A shares was 8/16/85. The average
annual total return is shown net of the applicable 4.75% maximum initial sales
charge.
10 Oppenheimer U.S. Government Trust
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class C) and Lehman Brothers U.S. Government
Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer U.S. Lehman Brothers
Govt Trust Cls C Government Bond Index
12.01.93 10000 10000
6.30.94 9678 9625
6.30.95 10675 10786
6.30.96 11115 11273
8.31.96(1) 11146 11276
8.31.97 12222 12327
8.31.98 13241 13841
Average Annual Total Return of Class C Shares of the Fund at 8/31/98(4)
1 Year 7.34% Life 6.09%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class Y) and Lehman Brothers U.S. Government
Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer U.S. Lehman Brothers
Govt Trust Cls Y Government Bond Index
5.18.98 10000 10000
8.31.98 10282 10393
Cumulative Total Return of Class Y Shares of the Fund at 8/31/98(5)
Life 2.83%
(3). Class B shares of the Fund were first publicly offered on 7/21/95. The
average annual total return is shown net of the applicable 5% and 3% contingent
deferred sales charge, respectively, for the 1-year period and the life of the
class. The ending account value in the graph is net of the applicable 3%
contingent deferred sales charge.
(4). Class C shares of the Fund were first publicly offered on 12/1/93. The
average annual total return is shown net of the applicable 1% contingent
deferred sales charge for the 1-year period.
(5). Class Y shares are offered only to certain institutional investors and have
an inception date of 5/18/98.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
11 Oppenheimer U.S. Government Trust
<PAGE>
Financials
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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) 0.21%(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>
- --------------------------------------------------------------------------------
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>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
None of the dividends paid by the Fund during the year ended August
31, 1998 are eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
37 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer U.S. Government Trust
- --------------------------------------------------------------------------------
================================================================================
Officers and Trustees Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Jerry A. Webman, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of Citibank, N.A.
Portfolio Securities
================================================================================
Independent Auditors KPMG Peat Marwick LLP
================================================================================
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer U.S. Government Trust. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
U.S. Government Trust. For material information
concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, and are not insured by the FDIC or any other
agency, and involve investment risks, including
possible loss of the principal amount invested.
38 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
OppenheimerFunds Family
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
===============================================================================================
Real Asset Funds
- -----------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
===============================================================================================
Global Stock Funds
- -----------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth & Income Fund
Company Fund
===============================================================================================
Stock Funds
- -----------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
===============================================================================================
Stock & Bond Funds
- -----------------------------------------------------------------------------------------------
Main Street Income & Total Return Fund Disciplined Allocation Fund
Growth Fund Quest Balanced Multiple Strategies Fund
Quest Opportunity Value Fund(1) Convertible Securities Fund(2)
Value Fund Equity Income Fund
===============================================================================================
Taxable Bond Funds
- -----------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
===============================================================================================
Municipal Bond Funds
- -----------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
===============================================================================================
Money Market Funds(4)
- -----------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
(1). On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value
Fund."
(2). On 4/28/98, the Fund's name was changed from "Bond Fund for Growth."
(3). Available only to investors in certain states.
(4). An investment in money market funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although these funds may seek to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
39 Oppenheimer U.S. Government Trust
<PAGE>
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assis- tance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
Internet
24-hr access to account
information. Online
trans actions now available
- -------------------------------
www.oppenheimerfunds.com
- -------------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- -------------------------------
1-800-525-7048
- -------------------------------
Account Transactions
Mon-Fri 8:30am-8pm ET
- -------------------------------
1-800-852-8457
- -------------------------------
PhoneLink
24-hr automated information
and automated transactions
- -------------------------------
1-800-533-3310
- -------------------------------
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
- -------------------------------
1-800-843-4461
- -------------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
- -------------------------------
1-800-835-3104
- -------------------------------
[LOGO] OppenheimerFunds(R)
Distributor, Inc.
RA0220.001.0898 October 30, 1998
