Annual Report August 31, 1999
[GRAPHIC]
OPPENHEIMER
U.S. GOVERNMENT TRUST
[LOGO] OPPENHEIMER FUNDS(R)
The Right Way To Invest
<PAGE>
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REPORT HIGHLIGHTS
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CONTENTS
3 President's Letter
5 An Interview
with Your Fund's
Managers
9 Fund Performance
14 FINANCIAL
STATEMENTS
35 INDEPENDENT
AUDITORS' REPORT
36 Federal
Income Tax
Information
37 Officers and Trustees
38 OppenheimerFunds
Family
39 Information and
Services
THOUGH THE FUND WAS SHAKEN BY MAJOR UPHEAVAL in the bond market during the late
summer of 1998, it has steadily regained ground since.
DURING MUCH OF THE FISCAL YEAR, WE ADJUSTED OUR MIX of mortgages and Treasuries
to seek market opportunities.
OUR USE OF ADVANCED PROPRIETARY RISK MANAGEMENT SYSTEMS helped the Fund prepare
for changes in U.S. interest rates.
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AVERAGE ANNUAL
TOTAL RETURNS
For the 1-Year Period
Ended 8/31/99*
CLASS A
Without With
Sales Chg. Sales Chg.
- ----------------------------
- -0.40% -5.13%
CLASS B
Without With
Sales Chg. Sales Chg.
- ----------------------------
- -1.15% -5.85%
CLASS C
Without With
Sales Chg. Sales Chg.
- ----------------------------
- -1.05% -1.99%
CLASS Y
Without With
Sales Chg. Sales Chg.
- ----------------------------
- -0.83% -0.83%
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- ----------------------------
Not FDIC Insured.
No Bank Guarantee.
May Lose Value.
- ----------------------------
* See page 12 for further details.
2 | OPPENHEIMER U.S. GOVERNMENT TRUST
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PRESIDENT'S LETTER
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[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer
U.S. Government Trust
- --------------------------
DEAR SHAREHOLDER,
In many ways, the 1999 investment environment has, so far, unfolded as many
expected it would, producing both attractive opportunities and formidable
challenges for investors.
On the economic front, early worries about the effects of global weakness
in the wake of last year's credit and currency crises have abated. Instead, as
many economies around the world begin to strengthen, concerns now center around
whether the U.S. economy may be growing too quickly. Throughout the year,
consumers in the United States have continued to spend and borrow heavily, more
than offsetting any temporary slowdown in the industrial and export sectors.
The economy's strength has not gone unnoticed by the nation's monetary
policymakers. In an effort to ward off emerging inflationary pressures, the
Federal Reserve Board increased short-term interest rates this past summer.
Market reaction to robust economic growth has been mixed. The U.S. bond
market has generally declined, as fixed income investors became increasingly
concerned about the effects of rising interest rates.
In the stock market, the performance of large-capitalization growth stocks,
which has driven the market's advance over the past few years, has begun to
moderate, and many previously out-of-favor value-oriented mid-cap and small-cap
stocks have rallied. At the same time, a healthy percentage of actively managed,
diversified portfolios have once again begun to outperform unmanaged stock
indices such as Standard & Poor's 500.
At OppenheimerFunds, we applaud the Fed's pre-emptive strike against
inflation. In our view, history has repeatedly demonstrated that most financial
assets do best in a low-inflation environment. What's more, we believe that the
move to higher interest rates should be temporary.
3 | OPPENHEIMER U.S. GOVERNMENT TRUST
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PRESIDENT'S LETTER
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One recent development is quite troublesome to us however: the increasing
popularity of "day trading" among individuals seeking to make fast money in a
volatile stock market. In our opinion, day trading is not investing, it is
gambling. Experience proves that without extensive research and analysis,
attempting to time short-term price swings is a fool's errand. Instead, we
continue to encourage investors to maintain a long-term perspective that is
measured in years, not days.
Finally, while we remain alert to the potential impact of the Y2K issue, we are
encouraged by the progress made in addressing the matter. At OppenheimerFunds,
our shareholder accounting systems are already Y2K compliant, and we have
successfully participated in all required industry-wide tests. We intend to
continue re-testing our systems in order to help further protect against any
potential problems. After all, whether in our computer accounting systems or the
financial markets, managing risk is an important part of what makes
OppenheimerFunds THE RIGHT WAY TO INVEST.
Sincerely,
/s/ Bridget A. Macaskill
- -------------------------
Bridget A. Macaskill
September 22, 1999
4 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- ---------------------------------------
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
John Kowalik
Leslie Falconio
Gina Palmieri
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HOW DID THE FUND PERFORM DURING THE PAST FISCAL YEAR?
A. For the one-year period that ended August 31, 1999, Oppenheimer U.S.
Government Trust delivered an average annual total return, without sales
charges, of -0.40% for Class A shares.1 Though the Fund was shaken by major
upheaval in the bond market during the late summer of 1998, it has regained
ground steadily since.
WHAT WAS THE MAJOR EVENT THAT AFFECTED THE BOND MARKET?
Economic problems in Asia and Russia's default on its debt caused tremendous
turmoil in the global markets last August, and fixed income investors flocked to
the relative safety of U.S. Treasury issues. The sudden increase in demand
pushed Treasury prices up and their yields down. At the same time, prices of
"spread products," such as mortgage-backed securities (MBSs) and corporate
bonds, significantly lagged their Treasury counterparts. Giant hedge funds that
had invested heavily in spread products were forced to sell, and the rapid rise
in supply led to even weaker prices and higher yields for these securities.
As the economic crisis spread worldwide, concern developed about a possible
economic slowdown here at home. To fend off that possibility, the Federal
Reserve reduced the key interest rate three times during the fall of 1998.
Yields on Treasury instruments followed, and the gap between Treasury yields and
yields on other fixed income investments grew even wider.
1. Includes changes in net asset value per share without deducting any sales
charges, and reflects the reinvestment of dividends and capital gains
distributions.
5 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
AN INTERVIEW WITH YOUR FUND'S MANAGERS
However, growth in the United States remained robust and, by January 1999,
ignited fears of inflation. Concerned that the Federal Reserve might raise
interest rates to curb inflationary pressures, investors bid up the yields on
Treasury instruments, dramatically reducing the spread between Treasury and
non-Treasury yields. By April of this year, inflation concerns abated and the
markets became relatively stable.
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"We have a tremendous risk management system, based on in-depth analysis of
years of data on Treasury securities and mortgages."
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DID THIS EVENT AFFECT THE FUND'S INVESTMENT STRATEGY?
No. Our extensive research shows that total return for a fixed income
investment derives primarily from yield, not price appreciation. Our strategy
generally is to enhance yield by adjusting our mix of Treasury and
mortgage-backed securities as the market changes. We also invest up to 20% of
assets in alternative mortgage products, such as commercial mortgage-backed
securities, that added to the Fund's yield and potential returns. A proprietary
advanced risk management system helps us identify superior risk-adjusted
opportunities.
HOW DID YOU MANAGE THE PORTFOLIO DURING THE PERIOD?
Before the August 1998 shakeup, we had trimmed our position in MBSs, which tend
to underperform in a falling-rate environment. Substituting Treasuries, we
focused on longer-term issues that appreciate more when rates decline. In the
fall of 1998, we repurchased MBSs because their yields relative to Treasuries
had become very attractive. When the spread narrowed during the second half of
the fiscal year, MBSs appreciated, and we sold a portion of our holdings to lock
in profits.
6 | OPPENHEIMER U.S. GOVERNMENT TRUST
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As 1999 began, we focused on shorter-term investments, which are less volatile
when rates change, so the Fund was well positioned when rates subsequently
ratcheted upward. After April, we moved the Fund's duration (a measure of
sensitivity to interest rate changes) to a relatively neutral position.
As interest rates steadily increased during the period, we anticipated
reduced prepayment risk in the mortgage sector. As a result, we lowered our
holdings in Principal Only Mortgage Strips (POs) which tend to perform well when
prepayments are accelerated, and increased our exposure to lower coupon Interest
Only Mortgage Strips, which tend to outperform when prepayment fears are
lessened.
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AVERAGE ANNUAL
TOTAL RETURNS
For the Periods Ended 9/30/99(2)
Class A
1-Year 5-Year 10-Year
- ------------------------------
- -5.54% 6.03% 6.69%
Class B Since
1-Year 5-Year Inception
- ------------------------------
- -6.26% N/A 4.99%
Class C Since
1-Year 5-Year Inception
- ------------------------------
- -2.53% 6.25% 4.90%
Class Y Since
1-Year 5-Year Inception
- ------------------------------
- -0.98% N/A 2.26%
==============================
STANDARDIZED YIELDS
For the 30 Days Ended 8/31/99(3)
- ------------------------------
Class A 5.67%
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Class B 5.22
- ------------------------------
Class C 5.22
- ------------------------------
Class Y 6.41
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HAVE ANY AREAS PROVED DISAPPOINTING TO THE FUND?
Part of our strategy is to invest in commercial mortgage-backed securities
(CMBSs). These are non-government, investment-grade securities that generally
provide attractive yields and relatively stable maturities. For several years,
they have been strong contributors to the Fund's performance. But the sudden
sale of CMBSs by the hedge funds last August depressed their prices. The
setback, however, was temporary. Yield spreads have since stabilized, commercial
real estate remains a fundamentally strong sector of our economy, and we
continue to view CMBSs as good long-term holdings.
2. See page 12 for further details.
3. Standardized yield is based on net investment income for the 30-day period
ended August 31, 1999. Falling share prices will tend to artificially raise
yields.
7 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
WHAT IS YOUR OUTLOOK FOR THE BOND MARKETS AND THE FUND?
We look for less volatility in the markets. Europe is recovering, while Japan
and much of Asia may be past the worst of the crisis. If there are interest rate
hikes here in the United States (to moderate economic growth), they could well
be offset by progress elsewhere, giving us a more stable situation in the bond
markets than last year. Interest rates moving in a relatively narrow range would
bode well for the Fund because MBSs, which comprised as much as 64% of the
Fund's assets as of August 31, 1999, perform best when rates are stable.
Whether the environment proves volatile or sedate, we will continue to
actively adjust the portfolio mix, in pursuit of high current income consistent
with the preservation of capital. This active management style, coupled with our
strong proprietary analytics, is why Oppenheimer U.S. Government Trust is an
important part of The Right Way to Invest.
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CREDIT ALLOCATION(4)
[The following table represents a pie chart in the printed piece.
o U.S. Gov't 37.4%
o U.S. Agency 44.8
o AAA/AA 7.3
o A 3.3
o BBB 7.2
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TOP 5 HOLDINGS(5)
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U.S. Treasury Nts. 33.9%
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Federal National Mortgage Assn. 21.5
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Federal Home Loan Mortgage Corp. 12.0
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Government National Mortgage Assn. 11.1
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U.S. Treasury Bonds 6.3
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4. Portfolio is subject to change. Percentages are as of August 31, 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 3.44% 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, 1999, and
are based on total market value of investments.
8 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
FUND PERFORMANCE
HOW HAS THE FUND PERFORMED? Below is a discussion, by the Manager, of the Fund's
performance during its fiscal year ended August 31, 1999, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the first several months of the
fiscal year that ended August 31, 1999, investments in Oppenheimer U.S.
Government Trust generally appreciated in value, due to rapidly rising interest
rates precipitated by economic crisis in Asia and its effect on global
securities markets. While the Fund's investments in Treasury securities
benefited from this trend, its holdings of mortgage-backed securities and
certain collateralized mortgage obligations did not benefit nearly as well and
in some cases were adversely affected. These instruments, nonetheless, provide
important diversification for the Fund and, during the second half of the
reporting period, contributed markedly to the performance of the Fund through
both capital appreciation and enhanced yields. The Fund's portfolio holdings,
allocations and strategies are subject to change.
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, 1999. In the case of Class A
shares, performance is measured over a ten-year period. In the case of Class B
shares, performance is measured from the inception of the class on July 21,
1995, and in the case of Class C shares, from the inception of the class on
December 1, 1993. In the case of Class Y shares, performance is measured from
the inception of the class on May 18, 1998. The Fund's performance reflects the
deduction of the current maximum initial sales charge on Class A shares, the
applicable contingent deferred sales charge for Class B and Class C shares, 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
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 any one 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 represents a line chart in the printed piece.]
Oppenheimer Lehman Brothers
U.S. Government U.S. Government
Trust Class A Bond Index
6.30.89 9525 10000
6.30.90 10129 10693
6.30.91 11094 11776
6.30.92 12542 13395
6.30.93 13738 15123
6.30.94 13577 14921
6.30.95 15101 16721
6.30.96 15841 17475
8.31.961 15907 17479
8.31.97 17569 19110
8.31.98 19196 21455
8.31.99 19121 21484
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 8/31/99(2)
1-YEAR-5.13% 5-YEAR 5.62% LIFE 6.64%
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 represents a line chart in the printed piece.]
Oppenheimer Lehman Brothers
U.S. Government U.S. Government
Trust Class B Bond Index
7.21.95 10000 10000
6.30.96 10480 10490
8.31.961 10510 10492
8.31.97 11520 11471
8.31.98 12494 12879
8.31.99 12156 12897
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 8/31/99(2)
1-YEAR-5.85% LIFE 4.86%
The performance information for the Lehman Brothers U.S. Government Bond Index
in the graphs begins on 6/30/89 for Class A, 7/31/95 for Class B, 11/30/93 for
Class C and 5/31/98 for Class Y.
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 represents a line chart in the printed piece.]
Oppenheimer Lehman Brothers
U.S. Government U.S. Government
Trust Class C Bond Index
12.1.93 10000 10000
6.30.94 9678 9625
6.30.95 10675 10786
6.30.96 11115 11273
8.31.961 11146 11276
8.31.97 12222 12327
8.31.98 13241 13841
8.31.99 13101 13859
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 8/31/99(2)
1-YEAR-1.99% 5-YEAR 5.84% LIFE 4.81%
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 represents a line chart in the printed piece.]
Oppenheimer Lehman Brothers
U.S. Government U.S. Government
Trust Class Y Bond Index
5/18/98 10000 10000
8/31/98 10282 10393
8/31/99 10198 10407
AVERAGE ANNUAL TOTAL RETURN OF CLASS Y SHARES OF THE FUND AT 8/31/99(2)
1-YEAR-0.83% LIFE 1.53%
1. The Fund changed its fiscal year end from 6/30 to 8/31.
2. See page 12 for further details.
Past performance is not predictive of future performance. Graphs are not drawn
to the same scale.
11 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
NOTES
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.
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown.
CLASS A. The inception date of the Fund was 8/16/85. Class A returns include the
current maximum initial sales charge of 4.75%.
CLASS B shares of the Fund were first publicly offered on 7/21/95. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 2% (since inception). Class B shares are subject to an annual 0.75%
asset-based sales charge. The ending account value shown in the graph is net of
the applicable 2% contingent deferred sales charge.
Class C shares of the Fund were first publicly offered on 12/1/93. CLASS C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 5/18/98. Class Y
shares are offered only to certain institutional investors under special
agreement with the Distributor.
An explanation of the different performance calculations is in the Fund's
prospectus.
12 | OPPENHEIMER U.S. GOVERNMENT TRUST
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FINANCIALS
13 | OPPENHEIMER U.S. GOVERNMENTTRUST
<PAGE>
STATEMENT OF INVESTMENTS AUGUST 31, 1999
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================================================
MORTGAGE-BACKED OBLIGATIONS--63.9%
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<S> <C> <C>
GOVERNMENT AGENCY--48.8%
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FHLMC/FNMA/SPONSORED--36.5%
Federal Home Loan Mortgage Corp.,
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:
9.50%, 12/1/02-11/1/03 $ 177,140 $ 180,893
14%, 1/1/11 254,802 291,963
Series 151, Cl. F, 9%, 5/15/21 1,488,587 1,542,072
Series 1295, Cl. J, 7.50%, 3/15/07 4,438,203 4,485,337
Series 1675, Cl. G, 6%, 2/15/20 6,000,000 5,919,360
Series 2006, Cl. B, 6.50%, 8/15/23 4,981,493 4,944,132
Series 2061, Cl. PH, 6%, 5/15/16 10,612,000 10,482,640
Series 2149, Cl. TR, 6.50%, 1/15/22 5,000,000 4,854,687
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Federal Home Loan Mortgage Corp.,
Gtd. Multiclass Mtg. Participation Certificates:
7.50%, 9/1/12 9,260,610 9,346,364
11.50%, 6/1/20 505,848 563,389
13%, 8/1/15 1,004,374 1,184,220
Series 1684, Cl. G, 6.50%, 3/15/23 10,000,000 9,812,500
Series 1702-A, Cl. PD, 6.50%, 4/15/22 6,259,000 6,141,644
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Federal Home Loan Mortgage Corp.,
Interest-Only Stripped Mtg.-Backed Security:
Series 164, Cl. A, 6.858%, 3/1/241 10,064,058 3,409,200
Series 176, Cl. IO, 1.098%-12.599%, 6/1/26 (1) 5,224,718 1,571,497
Series 183, Cl. IO, 11.142%-28.78%, 4/1/27 (1) 15,559,825 4,677,673
Series 192, Cl. IO, 19.329%, 2/1/28 (1) 5,933,118 1,841,121
Series 194, Cl. IO, 10.741%, 4/1/28 (1) 8,212,742 2,622,945
Series 197, Cl. IO, 15.075%-15.099%, 4/1/28 (1) 18,124,826 5,754,633
Series 199, Cl. IO, 15.047%-23.016%, 8/1/28 (1) 39,350,475 12,690,530
Series 202, Cl. IO, 12.479%-13.51%, 4/1/29 (1) 21,974,962 7,299,808
Series 1627, Cl. PN, 11.839%, 9/15/22 (1) 6,444,950 1,627,350
Series 2178, Cl. PI, 10.057%, 8/15/29 (1) 15,800,000 4,038,875
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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 2,004,360
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Federal National Mortgage Assn.:
6.50%, 11/1/28 13,412,549 12,702,489
7%, 8/1/25-9/1/25 16,674,348 16,252,153
7%, 9/25/27 (2) 50,000,000 48,562,500
7.50%, 8/1/25 1,878,981 1,870,639
7.50%, 10/1/27 (2) 25,000,000 24,773,500
11%, 7/1/16 648,139 721,055
11.50%, 11/1/15 475,867 529,413
12%, 2/15/16-4/15/19 3,123,357 3,550,921
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Federal National Mortgage Assn.,
Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:
Trust 1993-188, Cl. PH, 6.25%, 3/25/13 5,946,000 5,853,064
Trust 1994-56, Cl. H, 6%, 7/25/22 6,900,000 6,624,000
Trust 1998-30, Cl. QB, 6.50%, 4/18/19 9,000,000 8,974,620
Trust 1999-19, Cl. TC, 6.50%, 11/25/11 5,000,000 4,918,750
</TABLE>
14 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================================================
FHLMC/FNMA/SPONSORED Continued
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
8%, 12/1/22 $ 1,215,254 $ 1,235,075
13%, 11/1/12 24,555 27,606
Trust 1990-18, Cl. K, 9.60%, 3/25/20 3,558,599 3,743,184
Trust 1992-34, Cl. G, 8%, 3/25/22 2,520,000 2,565,662
Trust 1992-188, Cl. PG, 6.65%, 1/25/17 1,507,382 1,504,549
Trust 1993-183, Cl. G, 6%, 1/25/19 3,500,000 3,454,045
Trust 1993-202, Cl. PH, 6.50%, 2/25/22 2,601,615 2,547,944
Trust 1994-27, Cl. PH, 6.50%, 9/25/22 4,000,000 3,930,000
Trust 1994-51, Cl. PF, 6.50%, 1/25/23 10,000,000 9,793,700
Trust 1997-63, Cl. PC, 6.50%, 3/18/26 7,500,000 7,342,950
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Federal National Mortgage Assn.,
Interest-Only Stripped Mtg.-Backed Security:
Trust 276, Cl. 2, 7.63%, 10/1/24 (1) 3,319,441 983,903
Trust 294, Cl. 2, 11.849%-24.801%, 2/1/28 (1) 19,865,750 6,164,591
Trust 302, Cl. 2, 9.952%, 6/1/29 (1) 12,377,060 3,995,470
Trust 1997-9, Cl. H, 8.704%, 3/25/27 (1) 12,500,000 4,453,125
-----------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed Security,
Trust 291, Cl. 1, 3.521%, 11/1/27 (3) 6,795,823 5,188,186
------------
299,550,287
-----------------------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--12.3%
Government National Mortgage Assn.:
6.375%, 4/20/174 217,978 219,511
6.50%, 11/15/23-12/15/23 1,287,127 1,227,830
7%, 1/15/28-8/15/28 13,593,254 13,186,280
7.25%, 12/15/05 19,716 19,602
7.50%, 10/15/06-3/15/29 48,907,759 48,604,586
8%, 4/15/02-8/15/28 9,024,793 9,155,562
8.25%, 4/15/08 76,433 78,658
8.50%, 6/15/01-1/15/06 27,228 27,680
9%, 9/15/08-5/15/09 188,205 198,026
9.50%, 4/15/01-1/15/20 484,820 516,479
10%, 6/15/16-8/15/19 1,107,447 1,209,828
10.50%, 9/15/00-5/15/21 2,965,007 3,261,753
11%, 10/20/19-7/20/20 2,303,678 2,565,330
11.50%, 2/15/13-4/15/13 90,154 101,150
12%, 12/15/12-3/15/14 9,388 10,644
12.50%, 1/15/14-6/15/19 538,511 612,393
13%, 4/15/11-12/15/14 110,604 126,204
13.50%, 4/15/11-8/15/14 94,505 109,748
14%, 6/15/11 19,357 22,599
-----------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., Collateralized Mtg. Obligations:
Series 1998-1, Cl. PA, 6.25%, 9/20/21 8,080,000 8,069,900
Series 1999-1, Cl. VC, 6.50%, 9/20/13 5,000,000 4,632,812
</TABLE>
15 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================================================
GNMA/GUARANTEED Continued
<S> <C> <C>
Government National Mortgage Assn., Interest-Only Stripped Mtg.-
Backed Security, Series 1999-29, Cl. PI, 10.951%, 7/16/28(1) $17,395,833 $ 5,224,186
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, 9.94%, 6/15/25(1) 89,958,974 2,227,890
------------
101,408,651
-----------------------------------------------------------------------------------------------------------------------------------
PRIVATE--15.1%
-----------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL--12.4%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-D3, Cl. A5, 8.332%, 10/13/26 (4) 3,700,000 3,371,625
Series 1996-MD6, Cl. A5, 7.437%, 11/13/26 (4) 5,000,000 4,828,125
-----------------------------------------------------------------------------------------------------------------------------------
BKB Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 1997-C1, Cl. C, 7.45%, 10/25/00 (5) 10,917 10,863
-----------------------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate
Credit-Backed Pass-Through Certificates:
Series 1997-CTL1, 9.597%, 6/22/24 (1),(5) 59,510,633 2,417,619
SERIES 1997-CTL1, 9.617%, 6/22/24 (1),(5) 4,760,851 193,410
-----------------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 17.042%, 12/25/20 (1),(5) 24,833,200 325,936
-----------------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, Series 1999-C1, Cl. C, 7.35%, 8/17/13 10,000,000 9,392,187
-----------------------------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1998-C1, Cl. AX, 8.702%, 4/11/30 (1),(5) 24,923,629 1,581,093
-----------------------------------------------------------------------------------------------------------------------------------
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 2,892,187
-----------------------------------------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage Trust,
Interest-Only Stripped Mtg.-Backed Security,
Series 1998-C2, Cl. IO, 9.48%, 5/18/28 (1) 29,568,577 1,110,554
-----------------------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates,
Series 1999-6, Cl. 1A2, 6.35%, 5/25/29 4,000,000 3,832,500
-----------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., Interest-Only Stripped Mtg.-
Backed Security, Series 1997-C1, Cl. X, 8.61%, 7/15/27(1) 22,812,044 1,767,933
-----------------------------------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 1997-CL1, Cl. F, 7.352%, 7/13/30(4) 3,000,000 2,897,812
-----------------------------------------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, Sub. Bonds, Series 1999-C1:
Cl. A2, 6.78%, 10/15/30 10,000,000 9,537,500
Cl. E, 7.02%, 10/15/30 6,602,000 5,692,162
-----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. D1, 7.425%, 2/15/28(4,5) 3,000,000 2,945,156
</TABLE>
16 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================================================
COMMERCIAL Continued
<S> <C> <C>
Northwest Asset Securities Corp., Collateralized Mtg. Obligations,
Series 1996-5, Cl. A17, 8%, 11/25/26 $ 5,000,000 $ 5,070,312
-----------------------------------------------------------------------------------------------------------------------------------
Option One Mortgage Trust, Collateralized Mtg. Obligations,
Series 1999-2, 9.66%, 6/25/29 (5) 16,469,343 16,325,237
-----------------------------------------------------------------------------------------------------------------------------------
Potomac Gurnee Financial Corp., Commercial Mtg. Pass-Through Certificates,
Series 1, Cl. D, 7.68%, 12/21/26 (5) 2,500,000 2,382,812
-----------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates:
Series 1992-C5, Cl. C, 8.85%, 5/25/22 855,690 850,209
Series 1993-C1, Cl. D, 9.45%, 5/25/24 1,042,108 1,029,815
Series 1994-C1, Cl. C, 8%, 6/25/26 7,075,000 7,038,520
Series 1995-C1, Cl. D, 6.90%, 2/25/27 7,677,000 7,470,681
-----------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-C3, Cl. C, 7.375%, 6/25/30 (4),(5) 3,534,453 3,523,408
Series 1997-LLI, Cl. E, 7.30%, 4/12/12 2,500,000 2,187,500
-----------------------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Multiclass Pass-Through Certificates,
Series 1996-CFL, Cl. D, 7.034%, 2/25/28 3,700,000 3,667,625
------------
102,342,781
-----------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY--0.4%
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%, 2/25/24 2,876,895 2,622,919
- ------------------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1991-M5, Cl. A, 9%, 3/25/17 (5) 413,496 409,039
------------
3,031,958
-----------------------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--2.3%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. E, 7.50%, 3/1/11 (5) 5,000,000 4,115,625
-----------------------------------------------------------------------------------------------------------------------------------
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through Certificates,
Series 1997-CHL1, Cl. C, 8.148%, 7/25/06 (4),(5) 5,000,000 4,514,062
-----------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1995-GAL1, Cl. C, 7.95%, 8/15/27 (5) 5,014,988 5,014,988
-----------------------------------------------------------------------------------------------------------------------------------
Residental Asset Securitization Trust, Collateralized Mtg. Obligations,
Non-Accelerated Security, Series 1997-A2, Cl. A8, 7.75%, 4/25/27 3,000,000 3,038,437
-----------------------------------------------------------------------------------------------------------------------------------
Residential Funding Mortgage Securities I, Inc., Mtg. Pass-Through Certificates,
Series 1993-S10, Cl. A9, 8.50%, 2/25/23 327,644 331,635
-----------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%, 3/25/22 (5) 1,700,000 1,607,031
------------
18,621,778
------------
Total Mortgage-Backed Obligations (Cost $528,888,197) 524,955,455
</TABLE>
17 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF INVESTMENTS Continued
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
====================================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--43.8%
-----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BONDS:
<S> <C> <C>
7.25%, 5/15/16 (7) $ 29,630,000 $ 31,944,844
STRIPS, 6.075%, 5/15/18 (6) 10,400,000 3,081,676
STRIPS, 6.346%, 11/15/18 (6) 75,200,000 21,569,766
-----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.75%, 2/15/04 29,500,000 28,172,500
5.50%, 5/15/09 11,200,000 10,762,506
5.625%, 5/15/08 97,600,000 94,275,549
5.875%, 8/15/09 38,500,000 38,560,175
6.25%, 8/31/02 45,500,000 45,983,438
6.50%, 5/31/01-10/15/06 27,710,000 28,084,180
7%, 7/15/06 54,800,000 57,248,902
------------
Total U.S. Government Obligations (Cost $370,639,176) 359,683,536
====================================================================================================================================
REPURCHASE AGREEMENTS--1.3%
----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 5.41%,
dated 8/31/99, to be repurchased at $10,701,608 on 9/1/99,
collateralized by U.S. Treasury Nts., 6%-7.75%, 12/31/99-8/15/00,
with a value of $10,922,960 (Cost $10,700,000) 10,700,000 10,700,000
-----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $910,227,373) 109.0% 895,338,991
-----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (9.0) (73,960,691)
---------------------------------
NET ASSETS 100.0% $821,378,300
=================================
</TABLE>
FOOTNOTES TO STATEMENT OF INVESTMENTS
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. These securities amount to $75,979,342 or 9.25% of the Fund's net
assets as of August 31, 1999.
2. When-issued security to be delivered and settled after August 31, 1999.
3. 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.
4. Represents the current interest rate for a variable rate security.
5. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
6. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
7. Securities with an aggregate market value of $1,724,960 are held in
collaterialized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES August 31, 1999
<TABLE>
======================================================================================================
<S> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value (cost $910,227,373)--see accompanying statement $895,338,991
- ------------------------------------------------------------------------------------------------------
Cash 11,855
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
- ------------------------------------------------------------------------------------------------------
Investments sold (including $79,326,155 sold on a when-issued basis)--Note 1 85,968,996
Interest and principal paydowns 7,236,190
Shares of beneficial interest sold 4,331,883
Daily variation on futures contracts--Note 5 25,997
Other 25,918
------------
Total assets 992,939,830
======================================================================================================
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $152,905,365 purchased on a when-issued basis)--Note 1 168,537,349
Shares of beneficial interest redeemed 1,330,469
Dividends 737,514
Distribution and service plan fees 343,222
Trustees' compensation--Note 1 205,646
Shareholder reports 151,732
Transfer and shareholder servicing agent fees 122,296
Daily variation on futures contracts--Note 5 31,625
Custodian fees 5,705
Other 95,972
------------
Total liabilities 171,561,530
======================================================================================================
NET ASSETS $821,378,300
============
======================================================================================================
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Paid-in capital $869,562,267
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 679,602
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (34,119,395)
- ------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Notes 3 and 5 (14,744,174)
------------
Net assets $821,378,300
============
</TABLE>
19 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES Continued
<TABLE>
======================================================================================================
<S> <C>
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$579,064,190 and 63,273,316 shares of beneficial interest outstanding) $9.15
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $9.61
- ------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets of
$174,621,815 and 19,102,624 shares of beneficial interest outstanding) $9.14
- ------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $67,691,343 and 7,407,885 shares of beneficial interest outstanding) $9.14
- ------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $952 and 104 shares of beneficial interest outstanding) $9.15
</TABLE>
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended August 31, 1999
<TABLE>
======================================================================================================
<S> <C>
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest $ 55,819,760
======================================================================================================
EXPENSES
- ------------------------------------------------------------------------------------------------------
Management fees--Note 4 4,710,907
- ------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,441,714
Class B 1,606,198
Class C 568,674
- ------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 1,185,017
- ------------------------------------------------------------------------------------------------------
Shareholder reports 319,700
- ------------------------------------------------------------------------------------------------------
Custodian fees and expenses 117,751
- ------------------------------------------------------------------------------------------------------
Trustees' compensation--Note 1 65,967
- ------------------------------------------------------------------------------------------------------
Registration and filing fees 57,109
- ------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 49,944
- ------------------------------------------------------------------------------------------------------
Other 52,771
-------------
Total expenses 10,175,752
Less expenses paid indirectly--Note 1 (44,644)
-------------
Net expenses 10,131,108
======================================================================================================
NET INVESTMENT INCOME 45,688,652
======================================================================================================
REALIZED AND UNREALIZED LOSS Net realized loss on:
- ------------------------------------------------------------------------------------------------------
Investments (9,206,955)
Closing of futures contracts (11,287,447)
-------------
Net realized loss (20,494,402)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (30,866,136)
-------------
Net realized and unrealized loss (51,360,538)
======================================================================================================
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (5,671,886)
=============
</TABLE>
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999 1998
=================================================================================================================
<S> <C> <C>
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income $ 45,688,652 $ 37,336,714
- -----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (20,494,402) 716,927
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (30,866,136) 14,680,337
---------------------------------
Net increase (decrease) in net assets resulting from operations (5,671,886) 52,733,978
=================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (33,809,733) (31,821,383)
Class B (7,957,107) (4,060,085)
Class C (2,827,598) (1,455,228)
Class Y (62) (18)
- -----------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (799,667) --
Class B (217,465) --
Class C (77,019) --
Class Y (1) --
=================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
beneficial interest transactions--Note 2:
Class A 42,350,597 92,039,786
Class B 66,248,916 64,808,552
Class C 31,017,430 18,140,754
Class Y 3 1,002
=================================================================================================================
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase 88,256,408 190,387,358
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 733,121,892 542,734,534
--------------------------------
End of period (including undistributed net investment
income of $679,602 and $681,732, respectively) $821,378,300 $733,121,892
================================
</TABLE>
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUG. 31, JUNE 30,
CLASS A 1999 1998 1997 1996(1) 1996 1995
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.74 $9.48 $9.23 $9.30 $9.51 $9.20
---------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .56 .65 .71 .10 .67 .68
Net realized and unrealized gain (loss) (.59) .26 .23 (.07) (.21) .31
---------------------------------------------------------------
Total income (loss) from
investment operations (.03) .91 .94 .03 .46 .99
---------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.55) (.65) (.69) (.10) (.66) (.68)
Tax return of capital distribution (.01) -- -- -- (.01) --
---------------------------------------------------------------
Total dividends and distributions
to shareholders (.56) (.65) (.69) (.10) (.67) (.68)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.15 $9.74 $9.48 $9.23 $9.30 $9.51
===============================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (0.40)% 9.26% 10.45% 0.42% 4.91% 11.22%
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $579,064 $573,792 $468,809 $503,693 $504,966 $312,607
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $591,229 $516,173 $478,410 $508,123 $452,236 $307,306
Ratios to average net assets:(3)
Net investment income 5.85% 6.17% 7.58% 6.64% 7.07% 7.32%
Expenses 1.06% 1.03%(4) 1.06%(4) 1.09%(4) 1.08%(4) 1.09%(4)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 199% 80% 43% 6% 400% 304%
1. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31.
2. 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities and
purchases and sales from mortgage dollar-rolls) for the period ended August 31, 1999, were $1,738,786,778 and $1,608,237,248,
respectively. For the periods ended June 30, 1996 and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
</TABLE>
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
OPPENHEIMER U.S. GOVERNMENTTRUST
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUG. 31, JUNE 30,
CLASS B 1999 1998 1997 1996(1) 1996(6)
==========================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.73 $9.47 $9.22 $9.29 $9.40
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .48 .56 .64 .09 .56
Net realized and unrealized gain (loss) (.59) .27 .23 (.07) (.11)
-----------------------------------------------------
Total income (loss) from investment operations (.11) .83 .87 .02 .45
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.47) (.57) (.62) (.09) (.55)
Tax return of capital distribution (.01) -- -- -- (.01)
-----------------------------------------------------
Total dividends and distributions
to shareholders (.48) (.57) (.62) (.09) (.56)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.14 $9.73 $9.47 $9.22 $9.29
=====================================================
==========================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (1.15)% 8.45% 9.63% 0.28% 4.80%
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $174,622 $118,873 $52,301 $36,504 $30,737
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $160,782 $ 76,030 $41,420 $35,078 $19,227
Ratios to average net assets:(3)
Net investment income 5.09% 5.33% 6.77% 5.82% 6.44%
Expenses 1.81% 1.78%(4) 1.81%(4) 1.88%(4) 1.93%(4)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 199% 80% 43% 6% 400%
1. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31.
2. 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities and
purchases and sales from mortgage dollar-rolls) for the period ended August 31, 1999, were $1,738,786,778 and $1,608,237,248,
respectively. For the periods ended June 30, 1996 and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
6. For the period from July 21, 1995 (inception of offering) to June 30, 1996.
</TABLE>
See accompanying Notes to Financial Statements.
24 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
AUG. 31, JUNE 30,
CLASS C 1999 1998 1997 1996(1) 1996 1995
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.72 $9.47 $9.22 $9.29 $9.50 $9.19
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .48 .56 .64 .09 .60 .61
Net realized and unrealized gain (loss) (.58) .26 .23 (.07) (.21) .30
---------------------------------------------------------------
Total income (loss) from investment operations (.10) .82 .87 .02 .39 .91
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.47) (.57) (.62) (.09) (.59) (.60)
Tax return of capital distribution (.01) -- -- -- (.01) --
- --------------------------------------------------------------------------------------------------------------------
Total dividends and distributions
to shareholders (.48) (.57) (.62) (.09) (.60) (.60)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.14 $9.72 $9.47 $9.22 $9.29 $9.50
===============================================================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (1.05)% 8.34% 9.65% 0.28% 4.11% 10.31%
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $67,691 $40,456 $21,625 $18,547 $18,531 $11,019
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $56,943 $27,135 $19,505 $18,620 $15,766 $ 6,503
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 5.11% 5.36% 6.81% 5.90% 6.27% 6.44%
Expenses 1.81% 1.78%(4) 1.80%(4) 1.84%(4) 1.85%(4) 1.89%(4)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 199% 80% 43% 6% 400% 304%
1. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31.
2. 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities and
purchases and sales from mortgage dollar-rolls) for the period ended August 31, 1999, were $1,738,786,778 and $1,608,237,248,
respectively. For the periods ended June 30, 1996 and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
6. For the period from July 21, 1995 (inception of offering) to June 30, 1996.
</TABLE>
See accompanying Notes to Financial Statements.
25 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
FINANCIAL HIGHLIGHTS CONTINUED
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUG. 31, AUG. 31,
CLASS Y 1999 1998(7)
====================================================================================================================
<S> <C> <C>
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $9.74 $10.00
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .51 .18
Net realized and unrealized gain (loss) (.59) (.26)
------------------
Total income (loss) from investment operations (.08) (.08)
- --------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.50) (.18)
Tax return of capital distribution (.01) --
------------------
Total dividends and distributions to shareholders (.51) (.18)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.15 $ 9.74
==================
====================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) (0.83)% 2.83%
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1 $1
- --------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1 $1
- --------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 6.19% 1.77%
Expenses 0.69% 0.73%(4)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 199% 80%
1. For the two months ended August 31, 1996. The Fund changed its fiscal year end from June 30 to August 31.
2. 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.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. The lesser of purchases or sales of portfolio securities for a period, divided by the monthly average of the market value of
portfolio securities owned during the period. Securities with a maturity or expiration date at the time of acquisition of one year
or less are excluded from the calculation. Purchases and sales of investment securities (excluding short-term securities and
purchases and sales from mortgage dollar-rolls) for the period ended August 31, 1999, were $1,738,786,778 and $1,608,237,248,
respectively. For the periods ended June 30, 1996 and 1995, purchases and sales of investment securities included mortgage
dollar-rolls.
6. For the period from July 21, 1995 (inception of offering) to June 30, 1996.
7. For the period from May 18, 1998 (inception of offering) to August 31, 1998.
</TABLE>
See accompanying Notes to Financial Statements.
26 | 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 consistent with preservation of capital. 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 on
investments up to $1 million. Class B and Class C shares may be subject to a
contingent deferred sales charge (CDSC). Class Y shares are sold to certain
institutional investors without either a front-end sales charge or a CDSC. 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.
- --------------------------------------------------------------------------------
SECURITIES 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.
27 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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. Normally the
settlement date occurs within six months after the transaction date; however,
the Fund may, from time to time, purchase securities whose settlement date
extends beyond six months and possibly as long as two years or more beyond trade
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 segregated assets with a market value equal to or
greater than 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, 1999, the Fund had
entered into net outstanding when-issued or forward commitments of $73,579,210.
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, 1999, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $19,352,000, which expires between 2003 and 2007.
28 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
- --------------------------------------------------------------------------------
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 year ended August
31, 1999, a provision of $12,437 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 $198,998 as of August 31, 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 compensation 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 Trustees 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.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of 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 differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1999, amounts have been reclassified to reflect a decrease
in paid-in capital of $18,099, a decrease in undistributed net investment income
of $1,096,282, and a decrease in accumulated net realized loss on investments of
$1,114,381.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend 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 options
written and unrealized appreciation and depreciation are determined on an
identified cost basis, which is the same basis used for federal income tax
purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
29 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 ofbeneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999 YEAR ENDED AUGUST 31, 1998(1)
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Sold 34,020,869 $325,142,831 24,251,363 $234,611,395
Dividends and/or
distributions reinvested 3,045,596 28,908,446 2,664,932 25,680,401
Redeemed (32,725,221) (311,700,680) (17,421,053) (168,252,010)
-----------------------------------------------------------------------
Net increase 4,341,244 $42,350,597 9,495,242 $92,039,786
=======================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS B
Sold 16,811,970 $160,560,159 9,187,155 $ 88,792,370
Dividends and/or
distributions reinvested 657,755 6,227,351 295,745 2,849,272
Redeemed (10,589,856) (100,538,594) (2,780,800) (26,833,090)
-----------------------------------------------------------------------
Net increase 6,879,869 $66,248,916 6,702,100 $64,808,552
=======================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS C
Sold 6,544,899 $ 62,371,170 3,113,106 $ 30,059,124
Dividends and/or
distributions reinvested 251,739 2,379,583 113,578 1,093,135
Redeemed (3,550,200) (33,733,323) (1,348,850) (13,011,505)
-----------------------------------------------------------------------
Net increase 3,246,438 $31,017,430 1,877,834 $18,140,754
=======================================================================
- -----------------------------------------------------------------------------------------------------------------
CLASS Y
Sold -- $ 3 104 $ 1,002
-----------------------------------------------------------------------
Net increase -- $ 3 104 $ 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.
30 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
- -------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of August 31, 1999, net unrealized depreciation on securities of $14,888,382
was composed of gross appreciation of $9,775,834, and gross depreciation of
$24,664,216.
- -------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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 year ended August 31, 1999 was 0.58% of the
average annual net assets for each class of shares.
- -------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and for other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- -------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR1 DISTRIBUTOR1 DISTRIBUTOR1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
August 31, 1999 $1,387,987 $352,357 $196,644 $3,692,550 $244,362
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
August 31, 1999 $2,459 $599,551 $49,206
</TABLE>
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B and Class C shares under Rule 12b-1 of the Investment
Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
31 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended August 31, 1999, payments under
the Class A Plan totaled $1,441,714, all of which was paid by the Distributor to
recipients. That included $99,061 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution fees are computed on the average of the net asset value of
shares in the respective class, determined as of the close of each regular
business day during the period. The Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the plan was terminated. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended August 31, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $1,606,198 $1,374,811 $6,391,431 3.66%
Class C Plan 568,674 405,391 609,796 0.90
</TABLE>
32 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
- -------------------------------------------------------------------------------
5. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 may recognize 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
and/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.
As of August 31, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
CONTRACT DESCRIPTION DATE CONTRACTS AUGUST 31, 1999 (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
U.S. Treasury Bonds, 30 yr. 9/1/99 60 $6,860,625 $ (54,375)
U.S. Treasury Bonds, 30 yr. 12/1/99 9 1,025,719 (2,250)
----------
(56,625)
----------
CONTRACTS TO SELL
U.S. Treasury Bonds, 10 yr. 9/1/99 77 8,470,000 108,281
U.S. Treasury Nts., 5 yr. 12/1/99 178 19,212,875 71,844
----------
180,125
----------
$123,500
==========
</TABLE>
33 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
NOTES TO FINANCIAL STATEMENTS CONTINUED
- --------------------------------------------------------------------------------
6. ILLIQUID OR RESTRICTED SECURITIES
As of August 31, 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 also 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 limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of August 31, 1999, was $48,258,466,
which represents 5.88% 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 year ended August 31,
1999.
34 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
INDEPENDENT AUDITORS REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER U.S. GOVERNMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer U.S. Government Trust as of August
31, 1999, 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 three-year
period then ended, the two-month period ended August 31, 1996, and each of the
years in the two-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. Our procedures included confirmation of securities owned as of
August 31, 1999, 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, 1999, the results of its
operations for the year then ended, the changes in its net assets each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the three-year period then ended, the two-month period ended
August 31, 1996, and for each of the years in the two-year period ended June 30,
1996, in conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
September 22, 1999
35 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
FEDERAL INCOME TAX REPORT UNAUDITED
- -------------------------------------------------------------------------------
In early 2000, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1999. 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,
1999, 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.
36 | 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
Phillip A. Griffiths, 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
Andrew J. Donohue, Secretary
Brian W. Wixted, Treasurer
Robert G. Zack, Assistant Secretary
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
- -------------------------------------------------------------------------------
INVESTMENT ADVISOR OppenheimerFunds, Inc.
- -------------------------------------------------------------------------------
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
- -------------------------------------------------------------------------------
TRANSFER AND SHAREHOLDE OppenheimerFunds Services
SERVICING AGENT
- -------------------------------------------------------------------------------
CUSTODIAN OF Citibank, N.A.
PORTFOLIO SECURITIES
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS KPMG LLP
- -------------------------------------------------------------------------------
LEGAL COUNSEL Mayer, Brown & Platt
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.
37 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
OPPENHEIMERFUNDS FAMILY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
<S> <C> <C>
GLOBAL EQUITY
Developing Markets Fund Global Fund
International Small Company Fund Quest Global Value Fund
Europe Fund Global Growth & Income Fund
International Growth Fund
- ------------------------------------------------------------------------------------------
EQUITY
Stock Stock & Bond
Enterprise Fund1 Main Street(R)Growth & Income Fund
Discovery Fund Quest Opportunity Value Fund
Main Street(R)Small Cap Fund Total Return Fund
Quest Small Cap Value Fund Quest Balanced Value Fund
MidCap Fund Capital Income Fund2
Capital Appreciation Fund Multiple Strategies Fund
Growth Fund Disciplined Allocation Fund
Disciplined Value Fund Convertible Securities Fund
Quest Value Fund
Specialty
Real Asset Fund
Gold & Special Minerals Fund
- ------------------------------------------------------------------------------------------
FIXED INCOME
Taxable Municipal
International Bond Fund California Municipal Fund3
World Bond Fund Florida Municipal Fund3
High Yield Fund New Jersey Municipal Fund3
Champion Income Fund New York Municipal Fund3
Strategic Income Fund Pennsylvania Municipal Fund3
Bond Fund Municipal Bond Fund
U.S. Government Trust Insured Municipal Fund
Limited-Term Government Fund Intermediate Municipal Fund
Rochester Division
Rochester Fund Municipals
Limited Term New York Municipal Fund
- -------------------------------------------------------------------------------------------
MONEY MARKET4 Money Market Fund Cash Reserves
</TABLE>
1. Effective July 1, 1999, this fund is closed to new investors. See prospectus
for details.
2. On 4/1/99, the Fund's name was changed from "Oppenheimer Equity Income Fund."
3. Available to investors only 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, NY10048-0203.
(C) Copyright 1999 OppenheimerFunds, Inc. All rights reserved.
38 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
INFORMATION AND SERVICES
As an Oppenheimer fund shareholder, you can benefit from special
services designed to make investing simple. Whether it's automatic
investment plan, timely market updates, or immediate account access,
you can count on us whenever you need assistance. So call us today, or
visit our website--we're here to help.
- --------------------------------------------------------------------------------
Internet
24-hr access to account information and transactions
www.oppenheimerfunds.com
----------------------------------------------------------------------
General Information
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.925.7018
----------------------------------------------------------------------
Telephone Transactions
Mon-Fri 8:30am-9pm ET, Sat 10am-4pm ET
1.800.852.8457
----------------------------------------------------------------------
PhoneLink
24-hr automated information and automated transactions
1.800.533.3310
----------------------------------------------------------------------
Telecommunications Device for the Deaf (TDD)
Mon-Fri 8:30am-7pm ET
1.800.843.4061
----------------------------------------------------------------------
OppenheimerFunds Information Hotline
24 hours a day, timely and insightful messages on the
economy and issues that may affect your investments
1.800.635.3104
----------------------------------------------------------------------
Transfer and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270, Denver, CO 80217-5270
- --------------------------------------------------------------------------------
[OppenheimerFunds Logo] OppenheimerFunds(R)
Distributor, Inc.
RA0220.001.0899 October 29, 1999
39 | OPPENHEIMER U.S. GOVERNMENT TRUST
