<PAGE>
Semiannual Report February 28, 1999
OPPENHEIMER
U.S. Government
Trust
[LOGO OF OPPENHEIMER FUNDS APPEARS HERE]
THE RIGHT WAY TO INVEST
<PAGE>
Contents
3 President's Letter
4 An Interview with Your Fund's Manager
11 Financial Statements
31 Officers and Trustees
32 Information and Services
Report highlights
- --------------------------------------------------------------------------------
. The Fund's weak performance was a reaction to a one-time market event, the
deleveraging of giant hedge funds, precipitated by economic problems in Asia and
a default in Russia.
. We have been gradually adding instruments that we expect to perform well under
current market conditions.
Cumulative Total Returns
For the 6-Month Period
Ended 2/28/99
Class A
Without With
Sales Chg./1/ Sales Chg./2/
- ----------------------------
0.34% -4.43%
- ----------------------------
Class B
Without With
Sales Chg./1/ Sales Chg./2/
- ----------------------------
- -0.05% -4.92%
- ----------------------------
Class C
Without With
Sales Chg./1/ Sales Chg./2/
- ----------------------------
- -0.05% -1.03%
- ----------------------------
Class Y
Without With
Sales Chg./1/ Sales Chg./2/
- ----------------------------
- -0.44% -0.44%
- ----------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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. The Fund's performance may from time to time be subject
to substantial short-term changes, particularly during periods of market or
interest rate volatility. 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.
2. Class A return includes the current maximum initial sales charge of 4.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C returns include the contingent deferred sales charge of 1%. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor. Class B and Class C shares are subject to an
annual 0.75% asset-based sales charge. An explanation of the different
performance calculations is in the Fund's prospectus.
2 Oppenheimer U.S. Government Trust
<PAGE>
[PHOTO OF BRIDGET A. MACASKILL APPEARS HERE]
Bridget A. Macaskill
President
Oppenheimer
U.S. Government Trust
Dear shareholder,
- --------------------------------------------------------------------------------
Contrary to what many analysts had expected, the U.S. economy appears to have
picked up steam over the past few months. The fourth quarter of 1998 posted the
fastest rate of economic growth in two years, and early indications suggest that
the first quarter of 1999 may follow suit.
With respect to the U.S. bond market, stronger-than-expected economic
growth has triggered concerns that the Federal Reserve may raise key interest
rates to forestall an acceleration of inflation. As a result, yields of
longer-term taxable bonds have risen from their October 1998 lows, when
investors had bid up prices during the global "flight to quality." At the same
time, tax exempt bond prices and yields have remained relatively stable.
In the U.S. stock market, it might appear at first glance that prices are
rising as rapidly as the economy is growing. However, a closer look reveals
that, with the exception of large-cap growth companies and the technology
industry, most stock prices remained relatively flat. What's more, the disparity
in valuations between large companies, which have led the market's advance, and
smaller ones, which have lagged, has become historically wide.
What do these observations mean for your investments? In our view, actively
managed portfolios that are closely monitored by expert money managers are
likely to provide better returns than passive index investing in 1999. That's
because selectivity is expected to be more critical to performance than it has
been over the past few years. In a potentially overvalued stock market and
rising interest-rate environment, the ability to identify the most promising
securities could become paramount.
Even though many equity investors may be tempted to jump aboard the
technology bandwagon, we suggest a more prudent course: broad diversification
beyond any single asset class, industry, capitalization range or geographic
region. We believe that the risks of this investment environment require
consideration of a broad range of investments and markets, including bonds. That
way, if one market experiences setbacks, one or more of the others may help
cushion the effects on your overall portfolio.
No matter what the financial markets have in store, we resolve to continue
working with your financial advisor to keep you apprised of potential risks and
opportunities. Providing you with the market information, professionally managed
investments and other resources you need to achieve your financial goals is an
important part of our enduring commitment to you as The Right Way to Invest.
Sincerely,
/s/ Bridget A. Macaskill
Bridget A. Macaskill
March 19, 1999
3 Oppenheimer U.S. Government Trust
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
How did the Fund perform during the six-month period that ended February 28,
1999?
During the period, Oppenheimer U.S. Government Trust's Class A shares provided a
cumulative return of 0.34% without a sales charge. The thirty-day standardized
yield for the period was 5.55% for Class A shares, which was a slight increase
from the yield of 5.05% in last August, when the entire bond market was shaken
by an unprecedented industry event -- the deleveraging of giant hedge funds.
What was the impact of this "deleveraging"?
To begin with, the term "hedge fund" refers to generally unregulated investment
funds which use a variety of investment strategies, including the use of
leverage (borrowed money) to enhance their returns. The hedge funds we are
referring to typically invest in "spread product" such as corporate bonds and
mortgage-backed securities (MBS), and sell Treasuries to hedge their interest
rate risk. When the prices of the spread product began to decline last summer
relative to Treasuries because of the global financial crises, these funds were
forced to sell their positions, which resulted in even weaker prices for
corporate bonds and MBS.
4 Oppenheimer U.S. Government Trust
<PAGE>
[PHOTO APPEARS HERE]
Portfolio Management
Team (l to r)
John Kowalik
(Portfolio Manager)
Leslie Falconio
Gina Palmieri
Although the crisis was precipitated by economic problems in Asia and the
default in Russia, the effects were most keenly felt by the U.S. holders of
non-Treasury fixed income investments, in particular, MBS. MBS are a staple of
the Fund's portfolio, and they are derived from portfolios of home mortgages,
generated by government agencies or private lending institutions. They are
attractive for their high yields relative to Treasuries, but unlike Treasuries,
they carry some risk: credit risk, based on the possibility that the underlying
mortgage holders could default, and/or prepayment risk, based on the possibility
that interest rates could decline and mortgage holders would refinance.
However, since we own primarily U.S. government agency mortgage-backed
securities, the Fund had relatively little credit risk. During this period of
declining interest rates, we minimized our prepayment risk by holding low coupon
mortgages, which are less susceptible to refinancing. Our active trading
strategy allowed us to add to the Fund's return by taking advantage of market
dislocations during this volatile time.
5 Oppenheimer U.S. Government Trust
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
How did the deleveraging of hedge funds affect the Fund's performance?
One of the strategies of the Fund is to seek to earn additional yield by
investing up to 20% of its assets (depending on market conditions) in investment
grade, non-government securities./1/ Typically these are commercial
mortgage-backed securities (CMBS). CMBS are selected portions of pools of
commercial mortgages, which have relatively stable maturities and offer
attractive yields compared to other investment grade sectors. These securities
have historically performed well compared to similar maturity intermediate
Treasury notes./2/
The hedge funds invested in CMBS for the same reason, using extreme
leverage to buy enormous positions. But in August 1998, they were forced to sell
off their holdings, flooding the market and depressing prices, causing unusually
poor performance of those securities relative to Treasury securities.
Ultimately, we believe the reduced participation of the hedge funds in the
CMBS market has been beneficial, improving the outlook for the next twelve
months. Now that the selling of CMBS has abated, the yield spreads have
stabilized at attractive levels. In concert with the U.S. economic environment,
we believe CMBS will continue to be good investments.
1. These securities are subject to the credit risks of the issuers.
2. Unlike Treasury notes, CMBS are not guaranteed as to principal and interest.
6 Oppenheimer U.S. Government Trust
<PAGE>
Avg Annual Total Returns
For the Periods Ended 3/31/99/3/
Class A
1 year 5 year 10 year
- --------------------------------
- -0.97% 6.03% 7.42%
- --------------------------------
Class B
Since
1 year 5 year Inception
- --------------------------------
- -1.73% N/A 5.54%
- --------------------------------
Class C
Since
1 year 5 year Inception
- --------------------------------
2.20% 6.27% 5.44%
- --------------------------------
Class Y
Since
1 year 5 year Inception
- -------------------------------
N/A N/A 2.59%
- --------------------------------
Standardized Yields
For the 30 Days Ended 2/28/99/4/
- --------------------------------
Class A 5.55%
- --------------------------------
Class B 5.05
- --------------------------------
Class C 5.06
- --------------------------------
Class Y 6.03
- --------------------------------
What changes have you made to the Fund's investments?
Since October 1998, we have been gradually adding instruments that we expect to
perform well under current market conditions. For instance, with continuing low
interest rates, we foresee some prepayment risk in the mortgage sector. To
manage this risk we have added Principal Only Mortgage Strips (POs), which have
a high yield because they tend to prepay very quickly, due to homeowners
refinancing mortgages. In addition, we bought Interest Only Strips (IOs) on low
coupon mortgage securities because we want the interest income from these lower
prepayment risk securities. Adding these over the long term is intended to allow
us to boost yield and improve income flow for our shareholders.
The hedge fund crisis was a temporary setback and the Fund's objective
remains the same: to seek high current income consistent with the preservation
of capital.
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 when Class B shares were first publicly offered.)
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 offered only
to certain institutional investors under special agreement with the Distributor.
Class B and C shares are subject to an annual 0.75% asset-based sales charge. An
explanation of the different performance calculations is in the Fund's
prospectus.
4. Standardized yield is based on net investment income for the 30-day period
ended February 28, 1999. Falling share prices will tend to artificially raise
yields.
7 Oppenheimer U.S. Government Trust
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
What are the current influences that might affect the government securities
market?
The main concern is the global economy -- and the U.S. economy in that context.
With few, if any, signs that the rest of the world's economies are improving,
the U.S. economy is essentially supporting the world's economy. U.S. consumers
are feeling confident and are willing to spend because of a strong stock market,
low inflation, and a robust job market. On the home front, the manufacturing
side of our economy is not particularly strong. Production is high and commodity
prices are low, but the pressure to keep prices down means margins are very
thin. With these fundamentals, many economists are predicting a weakening of our
economy several months down the line that could result in lower interest rates.
The major fear for higher rates comes from the possibility that the Federal
Reserve Bank has already lowered interest rates too much. The economic
stimulation that resulted could cause an acceleration of inflation, which would
cause the Fed to reverse course and raise rates.
What is your outlook for bond markets and the Fund?
Looking forward, we think all of the major surprises for lower interest rates
have been factored in -- even a possible devaluation on the part of China, which
is showing signs of strain in its headlong rush to capitalism. In terms of the
U.S. economy, we seem to be at a cusp. Whether interest rates remain stable or
turn in either direction, there is no shortage of opportunity in the
bond market.
8 Oppenheimer U.S. Government Trust
<PAGE>
Credit Allocation/5/
[PIE CHART APPEARS HERE]
[_] U.S. Gov't 38.4%
U.S. Agency 47.8
AAA 4.4
AA 0.1
A 3.2
BBB 6.1
With the exceptionally high yields offered by various government securities and
the Fund's ability to invest in securities in other areas of the fixed income
markets, we seek to offer good returns from a well-diversified portfolio. That's
active management -- and that's what makes Oppenheimer U.S. Government Trust
part of The Right Way To Invest.
Top Five Issuers/6/
- ---------------------------------------------------------------
U.S. Treasury Notes 31.2%
- ---------------------------------------------------------------
Federal National Mortgage Assoc. 26.0
- ---------------------------------------------------------------
Government National Mortgage Assoc. 13.2
- ---------------------------------------------------------------
U.S. Treasury Bonds 9.9
- ---------------------------------------------------------------
Federal Home Loan Mortgage Assoc. 9.4
- ---------------------------------------------------------------
5. Portfolio is subject to change. Percentages are as of February 28,
1999, and are dollar-weighted based on invested assets. 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 1.65% 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.
6. Portfolio is subject to change. Percentages are as of February 28, 1999, and
are based on net assets.
9 Oppenheimer U.S. Government Trust
<PAGE>
Financials
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10 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments February 28, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- -------------------------------------------------------------------------------------------------------
Mortgage-Backed Obligations--60.5%
- -------------------------------------------------------------------------------------------------------
Government Agency--48.6%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC/FNMA/Sponsored--35.4%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:
9.50%, 12/1/02-11/1/03 $ 230,483 $ 240,779
14%, 1/1/11 308,521 362,207
Series 151, Cl. F, 9%, 5/15/21 1,953,162 2,050,195
Series 2111, Cl. PE, 6.50%, 1/15/29 5,000,000 4,884,375
Series 2113, Cl. MW, 6.50%, 1/15/29 7,000,000 6,831,563
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass
Mtg. Participation Certificates:
11.50%, 6/1/20 612,412 705,614
13%, 8/1/15 1,176,233 1,416,259
Series 1702-A, Cl. PD, 6.50%, 4/15/22 6,259,000 6,300,059
Series 1797, Cl. D, 6.166%, 7/15/08 5,000,000 4,928,100
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 164, Cl. A, 5.525%, 3/1/24(1) 10,637,871 3,214,632
Series 176, Cl. IO, (6.59%)-5.49%, 6/1/26(1) 8,934,977 2,203,030
Series 183, Cl. IO, 7.318%-26.724%, 4/1/27(1) 18,045,577 4,342,217
Series 192, Cl. IO, 15.938%-19.826%, 2/1/28(1) 17,699,025 4,858,936
Series 197, Cl. IO, 10.207%-12.993%, 4/1/28(1) 18,848,945 5,690,025
Series 199, Cl. IO, 10.144%-20.547%, 8/1/28(1) 66,141,196 19,284,293
Series 1627, Cl. PN, 11.732%, 9/15/22(1) 6,750,000 1,804,570
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only Stripped
Mtg.-Backed Security, Series 192, Cl. PO, 5.92%, 2/1/28(2) 6,807,318 5,028,906
- -------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.--Government National
Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates,
Series 32, Cl. TG, 7%, 1/25/21 2,000,000 2,031,240
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 2/1/14-11/1/28 90,359,856 90,426,598
7%, 8/1/25-9/1/25 19,226,070 19,469,280
7.50%, 8/1/25 2,324,767 2,387,327
11%, 7/1/16 854,809 972,079
11.50%, 11/1/15 617,331 690,831
12%, 2/15/16-4/15/19 3,862,333 4,422,793
- -------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
8%, 12/1/22 1,533,804 1,598,868
13%, 11/1/12 26,670 30,497
Trust 1990-18, Cl. K, 9.60%, 3/25/20 4,845,223 5,160,163
Trust 1992-188, Cl. PG, 6.65%, 1/25/17 4,498,509 4,505,527
Trust 1992-34, Cl. G, 8%, 3/25/22 2,520,000 2,599,531
Trust 1993-183, Cl. G, 6%, 1/25/19 3,500,000 3,496,710
Trust 1993-202, Cl. PH, 6.50%, 2/25/22 1,601,615 1,619,633
</TABLE>
11 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Unaudited)(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC/FNMA/Sponsored (continued)
Federal National Mortgage Assn., Collateralized Mtg
Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates (continued):
Trust 1994-27, Cl. PH, 6.50%, 9/25/22 $ 4,000,000 $ 4,018,720
Trust 1994-51, Cl. PF, 6.50%, 1/25/23 10,000,000 10,071,800
Trust 1997-25, Cl. B, 7%, 12/18/22 2,910,000 2,927,256
Trust 1997-63, Cl. PC, 6.50%, 3/18/26 7,500,000 7,469,475
Trust 1998-58, Cl. AH, 6.351%, 11/25/25 6,780,781 6,744,707
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 176, Cl. 2, 19.775%-28.567%, 2/1/28(1) 28,036,142 7,070,364
Trust 276, Cl. 2, 4.717%, 10/1/24(1) 3,638,472 956,805
Trust 294, Cl. 2, 12.594%-27.051%, 2/1/28(1) 32,080,407 8,090,278
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped
Mtg.-Backed Security:
Trust 277, Cl. 1, 12.362%-12.834%, 4/1/27(2) 1,875,431 1,535,804
Trust 291, Cl. 1, 5.86%, 11/1/27(2) 8,671,232 7,180,864
Trust 294, Cl. 1, 4.384%-5.761%, 2/1/28(2) 22,028,396 17,257,874
------------
286,880,784
- ------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--13.2%
Government National Mortgage Assn.:
6.50%, 11/15/23-12/15/23 1,485,619 1,480,391
6.875%, 4/20/17(3) 243,370 248,771
7%, 1/15/28-8/15/28 14,614,258 14,832,312
7%, 3/1/28(4) 20,000,000 20,281,200
7.25%, 12/15/05 22,668 23,147
7.50%, 10/15/06-9/15/28 43,984,823 45,294,099
8%, 4/15/02-8/15/28 11,219,193 11,697,164
8.25%, 4/15/08 84,099 88,391
8.50%, 6/15/01-1/15/06 43,337 44,356
9%, 9/15/08-5/15/09 217,137 232,245
9.50%, 4/15/01-1/15/20 721,400 775,716
10%, 6/15/16-8/15/19 1,277,293 1,387,912
10.50%, 9/15/00-5/15/21 3,536,125 3,883,152
11%, 10/20/19-7/20/20 2,865,866 3,236,681
11.50%, 2/15/13-4/15/13 91,501 102,983
12%, 12/15/12-3/15/14 9,574 10,816
12.50%, 1/15/14-6/15/19 662,239 754,301
13%, 4/15/11-12/15/14 114,306 130,844
13.50%, 4/15/11-8/15/14 117,447 137,186
14%, 6/15/11 19,667 22,912
15%, 7/15/11-9/15/12 124,792 148,151
- ------------------------------------------------------------------------------------------------------
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, 11.441%, 6/15/25(1)(5) 100,736,041 2,518,401
------------
107,331,131
</TABLE>
12 Oppenheimer U.S. Government Trust
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------
Private--11.9%
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial--8.4%
Asset Securitization Corp., Commercial Mtg.
Pass-Through Certificates:
Series 1996-D3, Cl. A5, 8.326%, 10/13/26(3) $ 3,700,000 $ 3,651,438
Series 1996-MD6, Cl. A5, 7.333%, 11/13/26(3) 5,000,000 5,032,031
- ------------------------------------------------------------------------------------------------------
BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%, 10/25/00(5) 1,735,000 1,733,373
- ------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate
Credit-Backed Pass-Through Certificates, Series 1997-CTL1,
9.418%-9.453%, 6/22/24(1)(5) 65,093,158 2,707,875
- ------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp.,Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 12.991%, 12/25/20(1)(5) 24,833,200 512,185
- ------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.624%, 4/11/30(1)(5) 25,060,276 1,738,557
- ------------------------------------------------------------------------------------------------------
FDIC Trust, Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates, Series 1994-C1, Cl. 2-G, 8.70%, 9/25/25(5) 3,000,000 3,086,250
- ------------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed Security:
Series 1997-C1, 8.901%, 4/18/27(1) 33,386,853 2,146,670
Series 1998-C2, Cl. IO, 9.509%, 5/18/28(1) 29,751,842 1,184,263
- ------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1997-C1, Cl. X, 8.717%, 7/15/27(1) 23,275,890 2,000,272
- ------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 1997-CL1, Cl. F, 7.309%, 7/13/30(3) 3,000,000 2,896,875
- ------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D, 7.42%, 4/25/28 5,061,000 4,902,448
- ------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D1, 7.436%, 2/15/28(3)(5) 3,000,000 2,920,313
- ------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through
Certificates, Series 1, Cl. D, 7.68%, 12/21/26(5) 2,500,000 2,468,750
- ------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-C5, Cl. C, 8.85%, 5/25/22(5) 4,522,875 4,487,540
Series 1993-C1, Cl. D, 9.45%, 5/25/24 1,183,001 1,173,574
Series 1994-C1, Cl. C, 8%, 6/25/26 7,075,000 7,087,713
Series 1995-C1, Cl. D, 6.90%, 2/25/27 7,677,000 7,567,243
- ------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Commercial Mtg
Pass-Through Certificates:
Series 1996-C3, Cl. C, 7.375%, 6/25/30(3)(5) 5,000,000 5,028,125
Series 1997-LLI, Cl. E, 7.30%, 4/12/12 2,500,000 2,240,625
- ------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1996-CFL, Cl. D, 7.034%, 2/25/28 3,700,000 3,684,969
------------
68,251,089
</TABLE>
13 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investment (Unaudited)(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Multifamily--0.4%
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%, 2/25/24 $ 2,962,769 $ 2,835,000
- ------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17(5) 505,077 500,974
-----------
3,335,974
- ------------------------------------------------------------------------------------------------------
Residential--3.1%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. E, 7.50%, 3/1/11(5) 5,000,000 4,575,000
- ------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, Cl. C, 8.108%, 7/25/06(3)(5) 5,000,000 4,700,000
- ------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1995-GAL1, Cl. C, 7.95%, 8/15/27(5) 5,014,988 5,085,511
- ------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through
Certificates, Series 1997-QS11,7%, 10/25/12 5,380,327 5,444,219
- ------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust, Asset-Backed Pass-Through
Certificates, Series 1996-A4, Cl. A12, 7.50%, 9/25/26 3,000,000 3,054,375
- ------------------------------------------------------------------------------------------------------
Residential Funding Mortgage Securities I, Inc., Mtg. Pass-Through
Certificates, Series 1993-S10, Cl. A9, 8.50%, 2/25/23 763,361 777,911
- ------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%, 3/25/22(5) 1,700,000 1,689,375
-----------
25,326,391
-----------
Total Mortgage-Backed Obligations (Cost $483,488,237) 491,125,369
- ------------------------------------------------------------------------------------------------------
U.S. Government Obligations--41.1%
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.75%, 8/15/26 5,750,000 6,502,893
8.125%, 8/15/21(6) 7,815,000 10,015,415
9.875%, 11/15/15 28,750,000 41,211,342
10.75%, 5/15/03 9,900,000 11,886,187
STRIPS, 5.611%, 2/15/19(7) 19,500,000 5,979,928
STRIPS, 5.832%, 11/15/21(7) 10,750,000 2,820,553
STRIPS, 5.833%, 8/15/22(7) 9,500,000 2,400,603
</TABLE>
14 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
- -------------------------------------------------------------------------------
U.S. Government Obligations (continued)
U.S. Treasury Nts.:
4.25%, 11/15/03 $ 5,000,000 $ 4,796,875
4.50%, 9/30/00 6,200,000 6,141,875
5.625%, 5/15/08 66,500,000 67,809,252
5.75%, 4/30/03 10,000,000 10,165,630
6.125%, 8/15/07 12,650,000 13,242,969
6.25%, 8/31/02 40,500,000 41,752,989
6.375%, 9/30/01 4,750,000 4,883,594
6.50%, 5/31/01-10/15/06 35,320,000 36,748,493
6.625%, 5/15/07 9,300,000 10,032,375
7.50%, 2/15/05 41,000,000 45,394,708
7.875%, 11/15/04 5,300,000 5,944,284
STRIPS, 6.506%, 8/15/16(7) 17,250,000 6,113,228
-----------
Total U.S. Government Obligations
(Cost $340,374,509) 333,843,193
- ------------------------------------------------------------------------------
Total Investments, at Value (Cost $823,862,746) 101.6% 824,968,562
- ------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.6) (12,773,611)
-----------
Net Assets 100.0% $812,194,951
========= ============
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. Represents the current interest rate for a variable rate security.
4. When-issued security to be delivered and settled after February 28, 1999.
5. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
6. Securities with an aggregate market value of $3,607,600 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.
15 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities (February 28, 1999 Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Assets
Investments, at value (cost $823,862,746)--see accompanying
statement $824,968,562
- -------------------------------------------------------------------------------
Cash 5,910,676
- -------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 56,710,585
Interest and principal paydowns 8,310,000
Shares of beneficial interest sold 2,373,301
Daily variation on futures contracts--Note 5 611,016
Other 29,761
------------
Total assets 898,913,901
- -------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments purchased (including $20,398,056 purchased on a
when-issued basis)--Note 1 83,066,536
Shares of beneficial interest redeemed 2,283,672
Dividends 642,499
Distribution and service plan fees 313,970
Trustees' compensation--Note 1 203,426
Shareholder reports 65,969
Custodian fees 38,368
Transfer and shareholder servicing agent fees 16,939
Other 87,571
-----------
Total liabilities 86,718,950
- -------------------------------------------------------------------------------
Net Assets $812,194,951
============
- -------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $830,932,161
- -------------------------------------------------------------------------------
Undistributed net investment income 681,624
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (17,956,133)
- -------------------------------------------------------------------------------
Net unrealized depreciation on investments (1,462,701)
------------
Net assets $812,194,951
============
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $593,635,543 and 62,511,932 shares of beneficial
interest outstanding) $9.50
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $9.97
- -------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $161,009,657 and 16,973,765 shares of beneficial
interest outstanding) $9.49
- -------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $57,548,715 and 6,069,391 shares of beneficial interest
outstanding) $9.48
- -------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $1,036 and 109 shares of beneficial
interest outstanding) $9.50
See accompanying Notes to Financial Statements.
17 Oppenheimer U.S. Government Trust
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended February 28, 1999
(Unaudited)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Investment Income
Interest $ 26,608,751
- -------------------------------------------------------------------------------
Expenses
Management fees--Note 4 2,300,661
- -------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 707,942
Class B 751,846
Class C 252,576
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 542,418
- -------------------------------------------------------------------------------
Shareholder reports 120,542
- -------------------------------------------------------------------------------
Custodian fees and expenses 84,714
- -------------------------------------------------------------------------------
Registration and filing fees 45,859
- -------------------------------------------------------------------------------
Trustees' compensation--Note 1 35,568
- -------------------------------------------------------------------------------
Legal, auditing and other professional fees 20,395
- -------------------------------------------------------------------------------
Other 30,470
-----------
Total expenses 4,892,991
Less expenses paid indirectly--Note 4 (31,626)
-----------
Net expenses 4,861,365
- -------------------------------------------------------------------------------
Net Investment Income 21,747,386
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 1,643,046
Closing of futures contracts (4,859,805)
-----------
Net realized loss (3,216,759)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on
investments (17,584,663)
Net realized and unrealized loss (20,801,422)
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 945,964
===========
See accompanying Notes to Financial Statements.
18 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended
(Unaudited) August 31, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 21,747,386 $ 37,336,714
- ---------------------------------------------------------------------------------------------------------
Net realized gain (loss) (3,216,759) 716,927
- ---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (17,584,663) 14,680,337
------------- -------------
Net increase in net assets resulting from operations 945,964 52,733,978
- ---------------------------------------------------------------------------------------------------------
Dividends to Shareholders
Dividends from net investment income:
Class A (16,780,735) (31,821,383)
Class B (3,715,341) (4,060,085)
Class C (1,251,388) (1,455,228)
Class Y (30) (18)
- ---------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 35,040,316 92,039,786
Class B 46,292,893 64,808,552
Class C 18,541,330 18,140,754
Class Y 50 1,002
- ---------------------------------------------------------------------------------------------------------
Net Assets
Total increase 79,073,059 190,387,358
- ---------------------------------------------------------------------------------------------------------
Beginning of period 733,121,892 542,734,534
------------- -------------
End of period (including undistributed net investment
income of $681,624 and $681,732, respectively) $812,194,951 $733,121,892
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
Six Months
Ended
February 28,
1999 Year Ended August 31,
(Unaudited) 1998 1997 1996(3)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 9.74 $ 9.48 $ 9.23 $ 9.30
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .27 .65 .71 .10
Net realized and unrealized gain (loss) (.24) .26 .23 (.07)
Total income (loss) from investment
operations .03 .91 .94 .03
- ---------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.27) (.65) (.69) (.10)
Dividends in excess of net investment
income -- -- -- --
Tax return of capital distribution -- -- -- --
-------- -------- -------- --------
Total dividends and distributions
to shareholders (.27) (.65) (.69) (.10)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.50 $ 9.74 $ 9.48 $ 9.23
======== ======== ======== ========
- ---------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(5) 0.34% 9.26% 10.45% 0.42%
- ---------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $593,636 $573,792 $468,809 $503,693
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $592,513 $516,173 $478,410 $508,123
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.68%(6) 6.17% 7.58% 6.64%(6)
Expenses(7) 1.03%(6) 1.03% 1.06% 1.09%(6)
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 86% 80% 43% 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 $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
6. Annualized.
20 Oppenheimer U.S. Government Trust
<PAGE>
<TABLE>
<CAPTION>
Class B
- --------------------------------------------------------------------- -------------------------------------------------------
Six Months
Ended Period
February 28, Ended
Year Ended June 30, 1999 Year Ended August 31, June 30,
1996 1995 1994 (Unaudited) 1998 1997 1996(3) 1996(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $9.51 $9.20 $9.95 $9.73 $9.47 $9.22 $9.29 $9.40
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .67 .68 .67 .24 .56 .64 .09 .56
Net realized and unrealized gain (loss) (.21) .31 (.74) (.24) .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) (.24) (.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) (.24) (.57) (.62) (.09) (.56)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.30 $9.51 $9.20 $9.49 $9.73 $9.47 $9.22 $9.29
===== ===== ===== ===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(5) 4.91% 11.22% (1.17)% (0.05)% 8.45% 9.63% 0.28% 4.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $504,966 $312,607 $310,027 $161,010 $118,873 $52,301 $36,504 $30,737
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $452,236 $307,306 $355,698 $151,870 $ 76,030 $41,420 $35,078 $19,227
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.07% 7.32% 6.61% 4.91%(6) 5.33% 6.77% 5.82%(6) 6.44%(6)
Expenses(7) 1.08% 1.09% 1.14% 1.78%(6) 1.78% 1.81% 1.88%(6) 1.93%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 400% 304% 140% 86% 80% 43% 6% 400%
</TABLE>
7. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities and purchases
and sales from mortgage dollar-rolls) for the period ended February 28, 1999,
were $700,059,321 and $796,677,358, respectively. For the periods ended June 30,
1996 and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
21 Oppenheimer U.S. Government Trust
<PAGE>
Financial Highlights (Continued)
<TABLE>
<CAPTION>
Class C
-------------------------------------------
Six Months
Ended
February 28,
1999 Year Ended August 31,
(Unaudited) 1998 1997
====================================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $9.72 $9.47 $9.22
- ----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 .56 .64
Net realized and unrealized gain (loss) (.24) .26 .23
------ ------ ------
Total income (loss) from investment
operations -- .82 .87
- ----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.24) (.57) (.62)
Dividends in excess of net investment
income -- -- --
Tax return of capital distribution -- -- --
------ ------ ------
Total dividends and distributions
to shareholders (.24) (.57) (.62)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $9.48 $9.72 $9.47
===== ===== =====
====================================================================================================
Total Return, at Net Asset Value(5) (0.05)% 8.34% 9.65%
====================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $57,549 $40,456 $21,625
- ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $51,031 $27,135 $19,505
- ----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.92%(6) 5.36% 6.81%
Expenses(7) 1.79%(6) 1.78% 1.80%
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 86% 80% 43%
</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 $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
6. Annualized.
22 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class Y
- ------------------------------------------------------------------------------------------------ -----------------------------
Six Months
Ended Period
February 28, Ended
Year Ended June 30, 1999 August 31,
1996(3) 1996 1995 1994(2) (Unaudited) 1998(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $9.29 $9.50 $9.19 $9.83 $9.74 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .09 .60 .61 .33 .20 .18
Net realized and unrealized gain (loss) (.07) (.21) .30 (.64) (.24) (.26)
----- ----- ----- ----- ----- -----
Total income (loss) from investment
operations .02 .39 .91 (.31) (.04) (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.09) (.59) (.60) (.33) (.20) (.18)
Dividends in excess of net investment
income -- -- -- -- -- --
Tax return of capital distribution -- (.01) -- -- -- --
----- ----- ----- ----- ----- -----
Total dividends and distributions
to shareholders (.09) (.60) (.60) (.33) (.20) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.22 $9.29 $9.50 $9.19 $9.50 $9.74
===== ===== ===== ===== ===== =====
====================================================================================================================================
Total Return, at Net Asset Value(5) 0.28% 4.11% 10.31% (3.12)% (0.44)% 2.83%
====================================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $18,547 $18,531 $11,019 $4,261 $1 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $18,620 $15,766 $ 6,503 $2,173 $1 $1
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.90%(6) 6.27% 6.44% 5.97%(6) 5.74%(6) 1.77%(6)
Expenses(7) 1.84%(6) 1.85% 1.89% 1.96%(6) 0.79%(6) 0.73%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 6% 400% 304% 140% 86% 80%
</TABLE>
7. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
8. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities and purchases
and sales from mortgage dollar-rolls) for the period ended February 28, 1999,
were $700,059,321 and $796,677,358, 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.
23 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer U.S. Government Trust (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The Fund's investment objective is to seek high current
income consistent with preservation of capital. The Fund invests primarily in
debt instruments issued or guaranteed by the U.S. government or its agencies and
instrumentalities, including mortgage-backed securities. 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, except for purchases greater than $1 million. Class A, Class B and Class
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. Classes 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.
24 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 February 28, 1999,
the Fund had entered into outstanding when-issued or forward commitments of
$20,398,056.
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. As of 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.
25 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Trustees' Compensation. The Fund has adopted a nonfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the six months ended
February 28, 1999, a provision of $8,086 was made for the Fund's projected
benefit obligations, and payments of $10,307 were made to retired trustees,
resulting in an accumulated liability of $194,647 as of February 28, 1999.
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.
- --------------------------------------------------------------------------------
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.
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.
26 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Six Months Ended February 28, 1999 Year Ended August 31, 1998(1)
----------------------------------- --------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 19,408,722 $ 188,355,111 24,251,363 $ 234,611,395
Dividends reinvested 1,440,550 13,948,424 2,664,932 25,680,401
Redeemed (17,269,412) (167,263,219) (17,421,053) (168,252,010)
----------- -------------- ----------- -------------
Net increase 3,579,860 $ 35,040,316 9,495,242 $ 92,039,786
=========== ============== =========== =============
- -----------------------------------------------------------------------------------------------
Class B:
Sold 9,651,152 $ 93,660,230 9,187,155 $ 88,792,370
Dividends reinvested 291,162 2,814,782 295,745 2,849,272
Redeemed (5,191,304) (50,182,119) (2,780,800) (26,833,090)
----------- -------------- ----------- -------------
Net increase 4,751,010 $ 46,292,893 6,702,100 $ 64,808,552
=========== ============== =========== =============
- -----------------------------------------------------------------------------------------------
Class C:
Sold 3,603,526 $ 34,906,215 3,113,106 $ 30,059,124
Dividends reinvested 104,358 1,008,379 113,578 1,093,135
Redeemed (1,799,940) (17,373,264) (1,348,850) (13,011,505)
----------- -------------- ----------- -------------
Net increase 1,907,944 $ 18,541,330 1,877,834 $ 18,140,754
=========== ============== =========== =============
- -----------------------------------------------------------------------------------------------
Class Y:
Sold 5 $ 50 104 $ 1,002
Dividends reinvested -- -- -- --
Redeemed -- -- -- --
----------- -------------- ----------- -------------
Net increase 5 $ 50 104 $ 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.
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
As of February 28, 1999, net unrealized appreciation on investments of
$1,105,816 was composed of gross appreciation of $14,207,737, and gross
depreciation of $13,101,921.
27 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 of the Fund, 0.60% of the next $100
million, 0.57% of the next $100 million, 0.55% of the next $400 million, and
0.50% of average annual net assets in excess of $800 million. The Fund's
management fee for the six months ended February 28, 1999, was 0.58% of average
annual net assets for each class of shares.
For the six months ended February 28, 1999, commissions (sales
charges paid by investors) on sales of Class A shares totaled $757,232, of which
$189,821 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 A,
Class B and Class C shares totaled $65,102, $2,003,012 and $150,903,
respectively. Amounts paid to an affliated broker/dealer for Class B and Class C
shares were $69,524 and $1,286, respectively. During the six months ended
February 28, 1999, OFDI received contingent deferred sales charges of $238,846
and $19,344, 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.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained by the Fund.
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 six months
ended February 28, 1999, OFDI paid $51,375 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
28 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 six months ended February 28,
1999, OFDI paid $2,579 and $2,968, respectively, to an affiliated broker/dealer
as compensation for Class B and Class C personal service and maintenance
expenses and retained $646,752 and $196,389, 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 February 28, 1999,
OFDI had incurred excess distribution and servicing costs of $5,522,928 for
Class B and $554,338 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.
29 Oppenheimer U.S. Government Trust
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Futures Contracts (continued)
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.
As of February 28, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Contract Description Date Contracts February 28, 1999 Depreciation
- -------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 10 yr. 3/99 592 $67,913,500 $1,038,219
U.S. Treasury Bonds, 30 yr. 3/99 580 70,451,875 1,051,125
U.S. Treasury Nts., 5 yr. 3/99 369 40,797,563 479,173
----------
$2,568,517
==========
- -------------------------------------------------------------------------------------------------
</TABLE>
6. Illiquid and Restricted Securities
As of February 28, 1999, 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 as of February 28, 1999, was $43,752,229, which
represents 5.39% of the Fund's net assets.
- --------------------------------------------------------------------------------
7. 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 six months
ended February 28, 1999.
30 Oppenheimer U.S. Government Trust
<PAGE>
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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
John S. Kowalik, 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 Portfolio Citibank, N.A.
Securities
- --------------------------------------------------------------------------------
Independent Auditors KPMG LLP
- --------------------------------------------------------------------------------
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
The financial statements included herein have been
taken from the records of the Fund without examination
of the independent auditors. This is a copy of a report
to shareholders of Oppenheimer U.S. Government Trust.
This report must be preceded or accompanied by a
Prospectus of Oppenheimer U.S. Government Trust. For
material information concerning the Fund, see the
Prospectus.
Shares of Oppenheimer funds are not deposits or
obligations of any bank, are not guaranteed by any
bank, are not insured by the FDIC or any other agency,
and involve investment risks, including the possible
loss of the principal amount invested.
31 Oppenheimer U.S. Government Trust
<PAGE>
<TABLE>
<CAPTION>
Information and services
-------------------------------------------------------------------------------
<S> <C>
Internet
24-hr access to account As an Oppenheimer fund shareholder, you have some
information. Online special privileges. Whether it's automatic investment plans,
transactions now available informative newsletters and hotlines, or ready account
access, you can benefit from services designed to make
www.oppenheimerfunds.com investing simple.
General Information And when you need help, our Customer Service
Mon-Fri 8:30am-9pm ET Representatives are only a toll-free phone call away.
Sat 10am-4pm ET They can provide information about your account and
handle administrative requests. You can reach them at our
1-800-525-7048 General Information number.
Account Transactions When you want to make a transaction, you can do it
Mon-Fri 8:30am-9pm ET easily by calling our toll-free Telephone Transactions
Sat 10am-4pm ET number or by visiting our website. And, by enrolling in
AccountLink, a convenient service that "links" your
1-800-852-8457 Oppenheimer funds accounts and your bank checking or
savings account, you can use the Telephone Transactions
PhoneLink number or website to make investments.
24-hr automated information
and automated transactions For added convenience, you can get automated
information with OppenheimerFunds PhoneLink service,
1-800-533-3310 available 24 hours a day, 7 days a week. PhoneLink gives
you access to a variety of fund, account, and market
Telecommunication Device information. Of course, you can always speak with a
for the Deaf (TDD) Customer Service Representative during the General
Mon-Fri 8:30am-6pm ET Information hours shown at the left.
1-800-843-4461 You can count on us whenever you need assistance.
That's why the International Customer Service Association,
OppenheimerFunds an independent, nonprofit organization made up of over
Information Hotline 3,200 customer service management professionals from
24 hours a day, timely around the country, honored the Oppenheimer funds'
and insightful messages transfer agent, OppenheimerFunds Services, with their
on the economy and issues that Award of Excellence in 1993.
affect your investments
So call us today, or visit us at our website at
1-800-835-3104 www.oppenheimerfunds.com--we're here to help.
</TABLE>
RS 0220.001.0299 April 29, 1999
[LOGO OF OPPENHEIMERFUNDS APPEARS HERE]
