Registration No. 2-76645
File No. 811-03430
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 38 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
Amendment No. 35 [X]
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OPPENHEIMER U.S. GOVERNMENT TRUST
(Exact Name of Registrant as Specified in Charter)
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Two World Trade Center, New York, NY 10048
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(Address of Principal Executive Offices) (Zip Code)
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(212) 323-0200
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(Registrant's Telephone Number, including Area Code)
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Andrew J. Donohue, Esq.
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OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b) [ ] On December 21, 1999
pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _______________ pursuant to paragraph (a)(1) [ ] 75 days after filing
pursuant to paragraph (a)(2) [ ] On _______________ pursuant to paragraph (a)(2)
of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Oppenheimer
U.S. Government Trust
Prospectus dated December 21, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
Oppenheimer U.S. Government Trust is a mutual fund. It seeks high current
income consistent with the preservation of capital. The Fund invests primarily
in debt instruments issued or guaranteed by the U.S. government or its agencies
and instrumentalities, including mortgage-related securities.
This Prospectus contains important information about the Fund's objective,
its investment policies, strategies and risks. It also contains important
information about how to buy and sell shares of the Fund and other account
features. Please read this Prospectus carefully before you invest and keep it
for future reference about your account.
4
[logo] OppenheimerFunds Distributor, Inc.
<PAGE>
CONTENTS
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ABOUT THE FUND
3
4 The Fund's Investment Objective and Strategies
6 Main Risks of Investing in the Fund
7 The Fund's Past Performance
8 Fees and Expenses of the Fund
11 About the Fund's Investments
How the Fund is Managed
13 ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
22 Class B Shares
Class C Shares
Class Y Shares
23 Special Investor Services
AccountLink
PhoneLink
26 OppenheimerFunds Internet Web Site
27 Retirement Plans
29
30 How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Financial Highlights
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<PAGE>
ABOUT THE FUND
The Fund's Investment Objective and Strategies
What Is the Fund's Investment Objective? The Fund seeks high current income
consistent with preservation of capital.
What Does the Fund Invest In? The Fund invests mainly in U.S. government debt
securities. These include debt securities issued or guaranteed by the United
States Treasury, such as Treasury bills, notes or bonds, and securities issued
or guaranteed by agencies or entities that are referred to as
"instrumentalities" of the U.S. government.
What is a "Debt Security?" a debt security is essentially a loan by the buyer to
the issuer of the debt security. The issuer promises to pay back the principal
amount of the loan and normally pays interest, at a fixed or variable rate, on
the debt while it is outstanding.
Under normal market conditions, as a fundamental policy, the Fund invests at
least 80% of its total assets in U.S. government securities.
The Fund typically ivests a substantial portion of its assets in
mortgage-related derivative securities, such as collateralized mortgage
obligations (called CMOs) and mortgage participation certificates. They include
mortgage-related U.S. government securities as well as securities issued by
private institutions, such as banks and mortgage companies.
The Fund's share price and income levels will fluctuate. The Fund's share
price and distributions are not backed or guaranteed by the U.S. government.
Securities issued by private issuers do not have any U. S. government
guarantees.
The securities the Fund buys may pay interest at fixed or floating rates,
or may be "stripped" securities. The Fund can buy securities that have short-,
medium- or long-term maturities, and the average maturity of the Fund's
portfolio can be expected to change over time. The Fund uses derivative
investments, such as interest-only and principal-only securities, to try to
enhance income and to manage investment risks. These investments are more fully
explained in "About the Fund's Investments," below.
How Do the Portfolio Managers Decide What Securities to Buy or Sell? In
selecting securities for the Fund, the portfolio managers research the universe
of U.S. government securities and private mortgage-related securities and weigh
yields and relative values against risks. While this process and the
inter-relationship of the factors used may change over time and may vary in
particular cases, the portfolio managers currently look for: o Sectors of the
U.S. government debt market that they believe offer high
relative yields and value,
o Securities that have high income potential to help cushion total return
against price volatility, and
A mixture of Treasury and private-issue securities that can be adjusted as
interest rates and market prices change.
Who Is the Fund Designed For? The Fund is designed primarily for investors
seeking current income and preservation of capital from a fund that invests
mainly in U.S. government securities but also buys private-issuer
mortgage-related securities to enhance returns. The Fund is intended to be a
long-term investment, not a short-term trading vehicle. It may be appropriate
for moderately conservative investors seeking current income and may be
appropriate for a portion of a retirement plan's investments. However, the Fund
is not a complete investment program.
Main Risks of Investing in the Fund
All investments have risks to some degree. The Fund's investments in debt
securities are subject to changes in their value from a number of factors,
described below. There is also the risk that poor security selection by the
Fund's investment Manager, OppenheimerFunds, Inc., will cause the Fund to
underperform other funds having a similar objective.
These risks collectively form the risk profile of the Fund and can affect
the value of the Fund's investments, its investment performance and the prices
of its shares. These risks mean that you can lose money by investing in the
Fund. When you redeem your shares, they may be worth more or less than what you
paid for them. There is no assurance that the Fund will achieve its investment
objective.
Interest Rate Risks. Debt securities are subject to changes in value when
prevailing interest rates change. When interest rates fall, the values of
outstanding debt securities generally rise. When interest rates rise, the values
of outstanding debt securities generally fall, and those securities may sell at
a discount from their face amount. The magnitude of these fluctuations is
generally greater for securities having longer maturities than for short-term
securities. However, interest rate changes may have different effects on the
values of mortgage-related securities because of prepayment risks, discussed
below.
At times, the Fund may buy longer-term debt securities to seek higher
income. When the average maturity of the Fund's portfolio is longer, its share
prices may fluctuate more when interest rates change. The Fund can buy
zero-coupon or "stripped" securities, which are particularly sensitive to
interest rate changes and the rate of principal payments (and prepayments).
These are derivative securities that have prices that may go up or down more
than other types of debt securities in response to interest rate changes. The
Fund's share prices can go up or down when interest rates change, because of the
effect of the change on the value of the Fund's investments. Also, if interest
rates fall, the Fund's investments in new securities at lower yields will reduce
the Fund's income.
Prepayment Risk. Mortgage-related securities are subject to the risks of
unanticipated prepayment. The risk is that when interest rates fall, borrowers
under the mortgages that underlie these securities will prepay their mortgages
more quickly than expected, causing the issuer of the security to prepay the
principal to the Fund prior to the security's expected maturity. The Fund may be
required to reinvest the proceeds at a lower interest rate, reducing its income.
Mortgage-related securities subject to prepayment risk generally offer less
potential for gains when prevailing interest rates fall and have greater
potential for loss when prevailing interest rates rise. The impact of
prepayments on the price of a security may be difficult to predict and may
increase the volatility of the price. If the Fund buys mortgage-related
securities at a premium, accelerated prepayments on those securities could cause
the Fund to lose a portion of its principal investment represented by the
premium.
If interest rates rise rapidly, prepayments of mortgages may occur at a
slower rate than expected, and the expected maturity of long-term or medium-term
mortgage-related securities could lengthen as a result. That could cause their
values, and the prices of the Fund's shares, to fall.
Credit Risk. Debt securities are subject to credit risk. Credit risk is the risk
that the issuer of a debt security might not make interest and principal
payments on the security as they become due. Securities directly issued by the
U.S. Treasury and certain agencies that are backed by the full faith and credit
of the U.S. government have little credit risk, and securities issued by other
agencies of the U.S. government generally have low credit risks. Securities
issued by private issuers have greater credit risks. If the issuer fails to pay
interest, the Fund's income may be reduced. If the issuer fails to repay
principal, the value of that security and of the Fund's shares may be reduced.
risks of Using Derivative Investments. The Fund uses derivatives to seek
increased returns or to try to hedge investment and interest rate risks and
preserve capital. In general terms, a derivative investment is an investment
contract whose value depends on (or is derived from) the value of an underlying
asset, interest rate or index. Options, futures, stripped securities, CMOs, and
interest rate swaps are examples of derivatives the Fund uses.
If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, may not perform the
way the Manager expected it to perform. If that happens, the Fund's share prices
could fall and the Fund could get less income than expected, or its hedge might
be unsuccessful. Some derivatives may be illiquid, making it difficult to sell
them at an acceptable price. The Fund has limits on the amount of particular
types of derivatives it can hold. However, using derivatives can cause the Fund
to lose money on its investments and/or increase the volatility of its share
prices.
How Risky is the Fund Overall? Although U.S. government securities that are
backed by the full faith and credit of the U.S. government have little credit
risk, they are subject to interest rate risks. CMOs and other mortgage-related
securities are subject to risks that can affect their values and the income they
pay. These risks can cause the Fund's share price to fluctuate and can affect
its yield. In the OppenheimerFunds spectrum, the Fund is less aggressive than
bond funds that invest only in corporate debt securities, particularly
lower-grade securities. It is more risky than a money market fund or a fund that
invests only in U.S. Treasury securities.
An investment in the Fund is not a deposit of any bank, and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares) from
year to year for the past ten calendar years and by showing how the average
annual total returns of the Fund's shares compare to those of a broad-based
market index. The Fund's past investment performance is not necessarily an
indication of how the Fund will perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
For the period from 1/1/99 through 9/30/99, the cumulative return (not
annualized) of Class A shares was -0.71%. Sales charges are not included in the
calculations of return in this bar chart, and if those charges were included,
the returns would be less than those shown. During the period shown in the bar
chart, the highest return (not annualized) for a calendar quarter was 6.02%
(2Q'89) and the lowest return (not annualized) for a calendar quarter was -2.06%
(1Q'94).
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Average Annual Total 5 Years 10 Years
Returns for the periods (or life of (or life of
ending December 31, 1998 1 Year class, if less) class, if less)
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Class A Shares 1.22% 5.75% 7.61%
(inception 8/16/85)
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Lehman Bros. U.S.
Government Bond Index 9.85% 7.18% 9.17%
(from 12/31/88)
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Class B Shares 0.46% 6.25% N/A
(inception 7/21/95)
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Class C Shares 4.46% 5.93% 5.91%
(inception 12/1/93)
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Class Y Shares N/A1 N/A N/A
(inception 5/18/98)
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1 The cumulative total return for Class Y shares was 3.29% from 5/18/98 to
12/31/98.
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 4.75%; for Class B, the
contingent deferred sales charges of 5% (1-year) and 3% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period. There is
no sales charge for Class Y shares. The Fund's returns measure the performance
of a hypothetical account and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The Fund's performance
is compared to the Lehman Brothers U.S. Government Bond Index, an unmanaged
market-weighted index of U.S. government securities with maturities of 1 year or
more. The index performance does not consider the effects of capital gains or
transaction costs, and the Fund's investments may vary from the securities in
the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services. Those expenses
are subtracted from the Fund's assets to calculate the Fund's net asset values
per share. All shareholders therefore pay those expenses indirectly.
Shareholders pay other expenses directly, such as sales charges and account
transaction charges. The following tables are meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
August 31, 1999.
Shareholder Fees (charges paid directly from your investment):
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Class C
Class A Shares Class B Shares Shares Class Y Shares
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Maximum Sales Charge
(Load) on purchases 4.75% None None None
(as % of offering price)
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Maximum Deferred Sales
Charge (Load) (as % of
the lower of the None1 5%2 1%3 None
original offering price
or redemption proceeds)
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1. A contingent deferred sales charge may apply to redemptions of investments of
$1 million or more ($500,000 for retirement plan accounts) of Class A shares.
See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred
sales charge declines to 1% in the sixth year and is eliminated after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
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Class A Class B Class C Class Y
Shares Shares Shares Shares
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Management Fees 0.58% 0.58% 0.58% 0.58%
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Distribution and/or 0.24% 1.00% 1.00% N/A
Service (12b-1) Fees
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Other Expenses 0.24% 0.23% 0.23% 0.11%
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Total Annual Operating 1.06% 1.81% 1.81% 0.69%
Expenses
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Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
Examples. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end of
those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
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If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $578 $796 $1,032 $1,708
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Class B Shares $684 $869 $1,180 $1,749
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Class C Shares $284 $569 $980 $2,127
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Class Y Shares $70 $221 $384 $859
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If shares are not
redeemed: 1 Year 3 Years 5 Years 10 Years1
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Class A Shares $578 $796 $1,032 $1,708
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Class B Shares $184 $569 $980 $1,749
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Class C Shares $184 $569 $980 $2,127
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Class Y Shares $70 $221 $384 $859
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In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1 Class B
expenses for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A shares after 6 years.
About the Fund's Investments
The Fund's Principal Investment Policies. The allocation of the Fund's portfolio
among different investments will vary over time based on the Manager's
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. The Statement
of Additional Information contains more detailed information about the Fund's
investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by not investing too great
a percentage of the Fund's assets in any one type or issue of debt security
(other than direct Treasury obligations, which have little credit risk).
However, changes in the overall market prices of securities and their yield can
occur at any time. The share price and yield of the Fund will change daily based
on changes in market prices of securities and market conditions and in response
to other economic events.
U.S. Government Securities. Not all of the U.S. government securities the Fund
buys are backed by the full faith and credit of the U.S. government as to
payment of interest and repayment of principal. Some are backed by the right of
the entity to borrow from the U.S. Treasury. Others are backed only by the
credit of the instrumentality. All of these different types of securities
described below are generally referred to as "U.S. government securities" in
this prospectus.
U.S. Treasury Obligations. These include Treasury bills (having maturities
of one year or less when issued), Treasury notes (having maturities of more
than one year and up to ten years when issued), and Treasury bonds (having
maturities of more than ten years when issued). Treasury securities are
backed by the full faith and credit of the United States as to timely
payments of interest and repayments of principal. The Fund can buy U. S.
Treasury securities that have been "stripped" of their coupons, zero-coupon
U.S. Treasury securities described below, and Treasury Inflation Protection
Securities. Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage-related
securities that have different levels of credit support from the U.S.
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association ("Ginnie Mae")
pass-through mortgage certificates. Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such
as Federal National Mortgage Association ("Fannie Mae") bonds. Others are
supported only by the credit of the entity that issued them, such as
Federal Home Loan Mortgage Corporation ("Freddie Mac") obligations.
Mortgage-Related U.S. Government Securities. These include interests in
pools of residential or commercial mortgages, in the form of CMOs and other
"pass-through" mortgage securities. CMOs that are U.S. government
securities have collateral to secure payment of interest and principal.
They may be issued in different series with different interest rates and
maturities. The collateral is either in the form of mortgage pass-through
certificates issued or guaranteed by a U.S. agency or instrumentality or
mortgage loans insured by a U.S. government agency. The Fund typically
invests significant amounts of its assets in mortgage-related U.S.
government securities.
The prices and yields of CMOs are determined, in part, by assumptions about the
cash flows from the rate of payments of the underlying mortgages. Changes in
interest rates may cause the rate of expected prepayments of those mortgages to
change. These prepayment risks can make the prices of CMOs very volatile when
interest rates change. That volatility will affect the Fund's share prices.
Private-Issuer Securities. The Fund can invest up to 20% of its total assets in
securities issued by private issuers, that do not offer the credit backing
of the U.S. government. These include multi-class debt or pass-through
certificates secured by mortgage loans. They may be issued by banks,
savings and loans, mortgage bankers or special trusts. The Fund can buy
other types of asset-backed securities collateralized by loans or other
assets or receivables.
Private issuer securities are subject to the credit risks of the issuers.
There is the risk that the issuers may not make timely payment of interest
or repay principal when due, although in some cases those payment
obligations may be supported by insurance or guarantees. The Fund limits
its investments in private issuer securities to securities rated within
the four highest rating categories of Moody's Investors Service, Inc. or
Standard & Poor's Rating Service and unrated securities that the Manager
deems comparable to rated securities in those categories. These are known
as "investment-grade" securities. The Fund is not automatically required
to dispose of a security if its rating falls after the Fund buys it.
However, the Manager will evaluate those securities to determine whether
to keep them in the Fund's portfolio.
Zero-Coupon and "Stripped" Securities. Some of the debt securities the Fund buys
are zero-coupon bonds that pay no interest. They are issued at a
substantial discount from their face value. They may be securities issued
by the U.S. government or private issuers. "Stripped" securities are the
separate income or principal components of a debt security. Some CMOs or
other mortgage-related securities may be stripped, with each component
having a different proportion of principal or interest payments. One class
might receive all the interest and the other all the principal payments.
Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than typical interest-bearing debt
securities. The Fund may have to pay out the imputed income on zero coupon
securities without receiving the cash currently. Stripped securities are
particularly sensitive to changes in interest rates.
The values of interest-only and principal-only mortgage-related securities
are very sensitive to changes in interest rates and prepayments of
underlying mortgages. The market for these securities may be limited,
making it difficult for the Fund to sell its holdings at an acceptable
price.
Can the Fund's Investment Objective and Policies Change? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
Other Investment Strategies. To seek its objective, the Fund can also use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have risks, although some are designed to help
reduce overall investment or market risks.
Forward Rolls. The Fund can enter into "forward roll" transactions with respect
to mortgage-related securities. In this type of transaction, the Fund
sells a mortgage-related security to a buyer and simultaneously agrees to
repurchase a similar security at a later date at a set price.
During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities
that have been sold. It is possible that the market value of the
securities the Fund sells may decline below the price at which the Fund is
obligated to repurchase securities, or that the counterparty might default
in its obligation.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have an active trading market, making it difficult to value them or
dispose of them promptly at an acceptable price. A restricted security is
one that has a contractual restriction on its resale or which cannot be
sold publicly until it is registered under the Securities Act of 1933. The
Fund will not invest more than 10% of its net assets in illiquid or
restricted securities. Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that
limit. The Manager monitors holdings of illiquid securities on an ongoing
basis to determine whether to sell any holdings to maintain adequate
liquidity.
Hedging. The Fund can buy and sell futures contracts, put and call options, and
interest rate swaps. These derivative investments are all referred to as
"hedging instruments." The Fund does not use hedging instruments for
speculative purposes, and has limits on its use of them. The Fund is not
required to use hedging in seeking its goal.
The Fund can buy and sell options and futures for a number of purposes. It
might do so to try to manage its exposure to the possibility that the
prices of its portfolio securities may decline, or to establish a position
in the securities market as a temporary substitute for purchasing
individual securities. It might do so to try to manage its exposure to
changing interest rates.
There are also special risks in particular hedging strategies. Options
trading involves the payment of premiums and can increase portfolio
turnover. If the Manager used a hedging instrument at the wrong time or
judged market conditions incorrectly, the strategy could reduce the Fund's
return.
Portfolio Turnover. The Fund may engage in short-term trading to try to achieve
its objective. Portfolio turnover may increase the Fund's transaction
costs. However, in most cases the Fund does not pay brokerage commissions
on debt securities it trades, so active trading is not expected to
increase Fund expenses greatly. Securities trading can also cause the Fund
to realize capital gains that are distributed to shareholders as taxable
distributions. The Financial Highlights table at the end of this
Prospectus shows the Fund's portfolio turnover rates during recent fiscal
years.
How the Fund is Managed
The Manager. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Board of Trustees, under an investment advisory agreement
that states the Manager's responsibilities. The agreement sets the fees the Fund
pays to the Manager and describes the expenses that the Fund is responsible to
pay to conduct its business.
The Manager has operated as an investment advisor since January 1960. The
Manager (including subsidiaries) managed more than $110 billion in assets as of
November 30, 1999, including other Oppenheimer funds with more than 5 million
shareholder accounts. The Manager is located at Two World Trade Center, 34th
Floor, New York, New York 10048-0203.
Portfolio Managers. The Fund is managed by John Kowalik, Leslie Falconio
and Gina Palmieri. They are the persons principally responsible for the
day-to-day management of the Fund's portfolio. Mr. Kowalik is the lead
portfolio manager. He is a Vice President of the Fund and a Senior Vice
President of the Manager. Prior to joining the Manager, he was managing
director and senior portfolio manager for Prudential Global Advisors from
1989 to June 1998.
Ms. Falconio and Ms. Palmieri are portfolio managers of the Fund and Vice
Presidents of the Manager. Prior to joining the Manager in December 1995,
Ms. Falconio was a co-manager of the short and intermediate government
funds at Prudential Funds (May 1995 - November 1995) and a member of the
portfolio management team for mortgage-backed securities at MetLife
Investments (1992 - April 1995). Before joining the Manager in March 1994,
Ms. Palmieri was a member of the portfolio management team for
mortgage-backed securities at MetLife Investment (1992 - February 1994).
Each member of the management team holds similar positions with other
Oppenheimer funds.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines as the Fund's
assets grow: 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 over $800 million. The Fund's management fee for its last fiscal
year ended August 31, 1999 was 0.58% of average annual net assets for each
class of shares.
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Year 2000 ISSUES. Because many computer software systems in use today cannot
distinguish the year 2000 from the year 1900, the markets for securities in
which the Fund invests could be detrimentally affected by computer failures
beginning January 1, 2000. Failure of computer systems used for securities
trading could result in settlement and liquidity problems for the Fund and other
investors. That failure could have a negative impact on handling securities
trades, pricing and accounting services. Data processing errors by government
issuers of securities could result in economic uncertainties, and issuers may
incur substantial costs in attempting to prevent or fix such errors, all of
which could have a negative effect on the Fund's investments and returns.
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The Manager, the Distributor and the Transfer Agent have been working on
necessary changes to their computer systems to deal with the year 2000 and
expect that their systems will be adapted in time for that event, although there
cannot be assurance of success. Additionally, the services they provide depend
on the interaction of their computer systems with those of brokers, information
services, the Fund's custodian and other parties. Therefore, any failure of the
computer systems of those parties to deal with the year 2000 may also have a
negative effect on the services they provide to the Fund. The extent of that
risk cannot be ascertained at this time.
ABOUT YOUR ACCOUNT
How to Buy Shares
HOW DO you buy SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
BuyingShares Through Your Dealer You can buy shares through any dealer, broker,
or financial institution that has a sales agreement with the Distributor.
Your dealer will place your order with the Distributor on your behalf.
BuyingShares Through the Distributor. Complete an OppenheimerFunds New Account
Application and return it with a check payable to "OppenheimerFunds
Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If
you don't list a dealer on the application, the Distributor will act as
your agent in buying the shares. However, we recommend that you discuss
your investment with a financial advisor before you make a purchase to be
sure that the Fund is appropriate for you.
o Paying by Federal Funds Wire. Shares purchased through the Distributor may
be paid for by Federal Funds wire. The minimum investment is $2,500.
Before sending a wire, call the Distributor's Wire Department at
1.800.525.7048 to notify the Distributor of the wire and to receive
further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
pay for shares by electronic funds transfers from your bank account.
Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can
provide those instructions automatically, under an Asset Builder Plan,
described below, or by telephone instructions using OppenheimerFunds
PhoneLink, also described below. Please refer to "AccountLink," below for
more details.
o Buying Shares Through Asset Builder Plans. You may purchase shares of the
Fund (and up to four other Oppenheimer funds) automatically each month
from your account at a bank or other financial institution under an Asset
Builder Plan with AccountLink. Details are in the Asset Builder
Application and the Statement of Additional Information.
How Much Must You Invest? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and
military allotment plans, you can make initial and subsequent investments
for as little as $25. You can make additional purchases of at least $25
through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing plans and
401(k) plans, you can start your account with as little as $250. If your
IRA is started as an Asset Builder Plan, the $25 minimum applies.
Additional purchases may be for as little as $25.
o The minimum investment requirement does not apply to reinvesting dividends
from the Fund or other Oppenheimer funds (a list of them appears in the
Statement of Additional Information, or you can ask your dealer or call
the Transfer Agent), or reinvesting distributions from unit investment
trusts that have made arrangements with the Distributor.
At What Price Are Shares Sold? Shares are sold at their offering price, which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Denver, Colorado, or after any agent appointed
by the Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of
shares as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days. All references to time in this
Prospectus mean "New York time".
The net asset value per share is determined by dividing the value of the
Fund's net assets attributable to a class by the number of shares of that
class that are outstanding. To determine net asset value, the Fund's Board
of Trustees has established procedures to value the Fund's securities, in
general based on market value. The Board has adopted special procedures
for valuing illiquid securities and obligations for which market values
cannot be readily obtained.
The Offering Price. To receive the offering price for a particular day, in
most cases the Distributor or its designated agent must receive your order
by the time of day The New York Stock Exchange closes that day. If your
order is received on a day when the Exchange is closed or after it has
closed, the order will receive the next offering price that is determined
after your order is received.
BuyingThrough a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit
it to the Distributor so that it is received before the Distributor's
close of business on a regular business day (normally 5:00 P.M.) to
receive that day's offering price. Otherwise, the order will receive the
next offering price that is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
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Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on the
amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
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Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of
purchase, but you will pay an annual asset-based sales charge. If you sell
your shares within six years of buying them, you will normally pay a
contingent deferred sales charge. That contingent deferred sales charge
varies depending on how long you own your shares, as described in "How Can
You Buy Class B Shares?" below.
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Class C Shares.If you buy Class C shares, you pay no sales charge at the time of
purchase, but you will pay an annual asset-based sales charge. If you sell
your shares within 12 months of buying them, you will normally pay a
contingent deferred sales charge of 1%, as described in "How Can You Buy
Class C Shares?" below.
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Class Y Shares. Class Y shares generally are offered only to certain
institutional investors that have special agreements with the Distributor.
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Which class of shares should you choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some factors to consider are how much you plan to invest
and how long you plan to hold your investment. If your goals and objectives
change over time and you plan to purchase additional shares, you should
re-evaluate those factors to see if you should consider another class of shares.
The Fund's operating costs that apply to a class of shares and the effect of the
different types of sales charges on your investment will vary your investment
results over time.
The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold
your investment will assist you in selecting the appropriate class of
shares. Because of the effect of class-based expenses, your choice will
also depend on how much you plan to invest. For example, the reduced sales
charges available for larger purchases of Class A shares may, over time,
offset the effect of paying an initial sales charge on your investment,
compared to the effect over time of higher class-based expenses on shares
of Class B or Class C .
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. That is because of the effect of the Class B contingent deferred
sales charge if you redeem within six years, as well as the effect of the
Class B asset-based sales charge on the investment return for that class in
the short-term. Class C shares might be the appropriate choice (especially
for investments of less than $100,000), because there is no initial sales
charge on Class C shares, and the contingent deferred sales charge does not
apply to amounts you sell after holding them one year.
However, if you plan to invest more than $100,000 for the shorter term,
then as your investment horizon increases toward six years, Class C shares
might not be as advantageous as Class A shares. That is because the annual
asset-based sales charge on Class C shares will have a greater impact on
your account over the longer term than the reduced front-end sales charge
available for larger purchases of Class A shares.
And for investors who invest $1 million or more, in most cases Class A
shares will be the most advantageous choice, no matter how long you intend
to hold your shares. For that reason, the Distributor normally will not
accept purchase orders of $500,000 or more of Class B shares or $1 million
or more of Class C shares from a single investor.
o Investing for the Longer Term. If you are investing less than $100,000 for
the longer-term, for example for retirement, and do not expect to need
access to your money for seven years or more, Class B shares may be
appropriate.
Of course, these examples are based on approximations of the effect of
current sales charges and expenses projected over time, and do not detail
all of the considerations in selecting a class of shares. You should
analyze your options carefully with your financial advisor before making
that choice.
Are There Differences in Account Features That Matter to You? Some account
features (such as checkwriting) may not be available to Class B or Class C
shareholders. Other features may not be advisable (because of the effect
of the contingent deferred sales charge) for Class B or Class C
shareholders. Therefore, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are
not borne by Class A or Class Y shares, such as the Class B and Class C
asset-based sales charge described below and in the Statement of
Additional Information. Share certificates are not available for Class B
and Class C shares, and if you are considering using your shares as
collateral for a loan, that may be a factor to consider. Also,
checkwriting is not available on accounts subject to a contingent deferred
sales charge.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, may
receive different compensation for selling one class of shares than for
selling another class. It is important to remember that Class B and Class
C contingent deferred sales charges and asset-based sales charges have the
same purpose as the front-end sales charge on sales of Class A shares: to
compensate the Distributor for commissions and expenses it pays to dealers
and financial institutions for selling shares. The Distributor may pay
additional compensation from its own resources to securities dealers or
financial institutions based upon the value of shares of the Fund owned by
the dealer or financial institution for its own account or for its
customers.
Special Sales Charge Arrangements and Waivers. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special condition
applies.
HOW CAN you BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some
cases, described below, purchases are not subject to an initial sales charge,
and the offering price will be the net asset value. In other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net
asset value to invest for your account.
The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
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Front-End Sales
Front-End Sales Charge As a
Charge As a Percentage of Commission As
Percentage of Net Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
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Less than $50,000 4.75% 4.98% 4.00%
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$50,000 or more but 4.50% 4.71% 3.75%
less than $100,000
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$100,000 or more but 3.50% 3.63% 2.75%
less than $250,000
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$250,000 or more but 2.50% 2.56% 2.00%
less than $500,000
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$500,000 or more but 2.00% 2.04% 1.60%
less than $1 million
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Class A Contingent Deferred Sales Charge. There is no initial sales charge on
purchases of Class A shares of any one or more of the Oppenheimer funds
aggregating $1 million or more or for certain purchases by particular types of
retirement plans described in Appendix C to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more other than by those retirement
accounts. For those retirement plan accounts, the commission is 1.0% of the
first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25% of purchases
over $5 million, based on the cumulative purchases during the prior 12 months
ending with the current purchase. In either case, the commission will be paid
only on purchases that were not previously subject to a front-end sales charge
and dealer commission.1 That commission will not be paid on purchases of shares
in amounts of $1 million or more (including any right of accumulation) by a
retirement plan that pays for the purchase with the redemption of Class C shares
of one or more Oppenheimer funds held by the plan for more than one year.
1No commission will be paid on sales of Class A shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") may be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the lesser of (1) the aggregate net asset value of the redeemed shares at
the time of redemption (excluding shares purchased by reinvestment of
dividends or capital gain distributions) or (2) the original net asset
value of the redeemed shares. The Class A contingent deferred sales charge
will not exceed the aggregate amount of the commissions the Distributor
paid to your dealer on all purchases of Class A shares of all Oppenheimer
funds you made that were subject to the Class A contingent deferred sales
charge.
In determining whether a contingent deferred sales charge is payable when
shares are redeemed, the Fund will first redeem shares that are not
subject to the sales charge, including shares purchased by reinvestment of
dividends and capital gains. Then the Fund will redeem other shares in the
order in which you purchased them.
The Class A contingent deferred sales charge is not charged on exchanges of
shares under the Fund's exchange privilege (described below). However, if
the shares acquired by exchange are redeemed within 18 calendar months of
the end of the calendar month in which the exchanged shares were
originally purchased, then the sales charge will apply.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A
shares at reduced sales charge rates under the Fund's "Right of
Accumulation" or a Letter of Intent, as described in "Reduced Sales
Charges" in the Statement of Additional Information.
HOW CAN you BUY CLASS B SHARES? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within 6 years of their purchase, a contingent deferred sales charge will be
deducted from the redemption proceeds. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. The contingent deferred sales charge is not imposed on:
o the amount of your account value represented by an increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains
distributions,
2. shares held for over 6 years, and
3. shares held the longest during the 6-year period.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<PAGE>
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Years Since Beginning of Month in Contingent Deferred Sales Charge on
Which Redemptions in That Year
Purchase Order was Accepted (As % of Amount Subject to Charge)
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0 - 1 5.0%
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1 - 2 4.0%
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2 - 3 3.0%
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3 - 4 3.0%
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4 - 5 2.0%
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5 - 6 1.0%
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6 and following None
In the table, a "year" is a 12-month period. In applying the sales charge, the
holding period is measured from the day you purchase the shares.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. This conversion feature
relieves Class B shareholders of the asset-based sales charge that applies
to Class B shares under the Class B Distribution and Service Plan,
described below. The conversion is based on the relative net asset value
of the two classes, and no sales load or other charge is imposed. When any
Class B shares that you hold convert, your Class B shares that were
acquired by reinvesting dividends and distributions on the converted
shares will also convert to Class A shares. The conversion feature is
subject to the continued availability of a tax ruling described in the
Statement of Additional Information.
How Can you Buy Class C Shares? Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within 12 months of their purchase, a contingent deferred sales charge of 1.0%
will be deducted from the redemption proceeds. The Class C contingent deferred
sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class C
shares.
The contingent deferred sales charge will be based on the lesser of the
net asset value of the redeemed shares at the time of redemption or the original
net asset value. The contingent deferred sales charge is not imposed on:
o the amount of your account value represented by the increase in net asset
value over the initial purchase price,
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to
the Statement of Additional Information. To determine whether the
contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
shares acquired by reinvestment of dividends and capital gains distributions,
shares held for over 12 months, and shares held the longest during the
12-month period.
Who Can Buy Class Y Shares? Class Y shares are sold at net asset value per share
without a sales charge directly to institutional investors that have special
agreements with the Distributor for this purpose. They may include insurance
companies, registered investment companies and employee benefit plans. For
example, Massachusetts Mutual Life Insurance Company, an affiliate of the
Manager, may purchase Class Y shares of the Fund and other Oppenheimer funds (as
well as Class Y shares of funds advised by MassMutual) for asset allocation
programs, investment companies or separate investment accounts it sponsors and
offers to its customers.
Individual investors cannot buy Class Y shares directly.
An institutional investor that buys Class Y shares for its customers'
accounts may impose charges on those accounts. The procedures for buying,
selling, exchanging and transferring the Fund's other classes of shares (other
than the time those orders must be received by the Distributor or Transfer Agent
at their Colorado office) and the special account features available to
investors buying those other classes of shares do not apply to Class Y shares.
Instructions for purchasing, redeeming, exchanging or transferring Class Y
shares must be submitted by the institutional investor, not by its customers for
whose benefit the shares are held.
Distribution and Service (12b-1) Plans.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred
for services provided to accounts that hold Class A shares. Reimbursement
is made quarterly at an annual rate of up to 0.25% of the average annual
net assets of Class A shares of the Fund. The Distributor currently uses
all of those fees to pay dealers, brokers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares.
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
pay the Distributor for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the plans, the Fund pays the
Distributor an annual asset-based sales charge of 0.75% per year on Class
B shares and on Class C shares. The Distributor also receives a service
fee of 0.25% per year under each plan. The asset-based sales charge and
service fees increase Class B and Class C expenses by 1.00% of the net
assets per year of the respective class. Because these fees are paid out
of the Fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than other
types of sales charges.
The Distributor uses the service fees to compensate dealers for providing
personal services for accounts that hold Class B or Class C shares. The
Distributor pays the 0.25% service fees to dealers in advance for the
first year after the shares are sold by the dealer. After the shares have
been held for a year, the Distributor pays the service fees to dealers on
a quarterly basis.
The Distributor currently pays a sales commission of 3.75% of the purchase
price of Class B shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sales of Class B shares is
therefore 4.00% of the purchase price. The Distributor retains the Class B
asset-based sales charge.
The Distributor currently pays a sales commission of 0.75% of the purchase
price of Class C shares to dealers from its own resources at the time of
sale. Including the advance of the service fee, the total amount paid by
the Distributor to the dealer at the time of sale of Class C shares is
therefore 1.00% of the purchase price. The Distributor pays the
asset-based sales charge as an ongoing commission to the dealer on Class C
shares that have been outstanding for a year or more.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset
Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer
Agent for more information.
You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.852.8457. The purchase payment
will be debited from your bank account.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions to the Transfer Agent. AccountLink privileges
will apply to each shareholder listed in the registration on your account as
well as to your dealer representative of record unless and until the Transfer
Agent receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank account
information must be made by signature-guaranteed instructions to the Transfer
Agent signed by all shareholders who own the account.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310. Purchasing Shares. You may purchase
shares in amounts up to $100,000 by phone, by calling 1.800.533.3310. You must
have established AccountLink privileges to link your bank account with the Fund
to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund
account to another OppenheimerFunds account you have already established
by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling the
PhoneLink number and the Fund will send the proceeds directly to your
AccountLink bank account. Please refer to "How to Sell Shares," below for
details.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEB SITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048. AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The
Fund has several plans that enable you to sell shares automatically or exchange
them to another OppenheimerFunds account on a regular basis. Please call the
Transfer Agent or consult the Statement of Additional Information for details.
REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C or Class Y shares. You must be
sure to ask the Distributor for this privilege when you send your payment.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and
charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your order
is received in proper form (which means that it must comply with the procedures
described below) and is accepted by the Transfer Agent. The Fund lets you sell
your shares by writing a letter or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner or from a retirement
plan account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must
include a signature guarantee (although there may be other situations that
also require a signature guarantee):
o You wish to redeem $100,000 or more and receive a check
o The redemption check is not payable to all shareholders listed on the
account statement
o The redemption check is not sent to the address of record on your account
statement
o Shares are being transferred to a Fund account with a different owner or
name o Shares are being redeemed by someone (such as an Executor) other than
the
owners
Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions,
including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or
government securities, or
o a U.S. national securities exchange, a registered securities association
or a clearing agency.
If you are signing on behalf of a corporation, partnership or other
business or as a fiduciary, you must also include your title in the signature.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements
apply to distributions from retirement plans. You must submit a
withholding form with your redemption request to avoid delay in getting
your money and if you do not want tax withheld. If your employer holds
your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares
in your plan account.
Sending Redemption Proceeds by Wire. While the Fund normally sends your money by
check, you can arrange to have the proceeds of the shares you sell sent by
Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The
minimum redemption you can have sent by wire is $2,500. There is a $10 fee
for each wire. To find out how to set up this feature on your account or
to arrange a wire, call the Transfer Agent at 1.800.852.8457.
HOWDO you SELL SHARES BY MAIL? Write a letter of instructions that includes: o
Your name o The Fund's name o Your Fund account number (from your account
statement) o The dollar amount or number of shares to be redeemed o Any
special payment instructions o Any share certificates for the shares you are
selling o The signatures of all registered owners exactly as the account is
registered,
and
o Any special documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
- -----------------------------------------
Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231
- -----------------------------------------
HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
o To redeem shares through a service representative, call 1.800.852.8457 o To
redeem shares automatically on PhoneLink, call 1.800.533.3310
Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds sent to that bank account.
ARE THERE LIMITS ON AMOUNTS REDEEMED BY TELEPHONE?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of
the shares and must be sent to the address on the account statement. This
service is not available within 30 days of changing the address on an
account.
Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits
on telephone redemption proceeds sent to a bank account designated when
you establish AccountLink. Normally the ACH transfer to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
If you have requested Federal Funds wire privileges for your account, the
wire of the redemption proceeds will normally be transmitted on the next
bank business day after the shares are redeemed. There is a possibility
that the wire may be delayed up to seven days to enable the fund to sell
securities to pay the redemption proceeds. No dividends are accrued or
paid on the proceeds of shares that have been redeemed and are awaiting
transmittal by wire.
Checkwriting. To write checks against your Fund account, request that privilege
on your account application, or contact the Transfer Agent for signature cards.
They must be signed (with a signature guarantee) by all owners of the account
and returned to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.525.7048
to request checkwriting for an account in this Fund with the same registration
as the other account.
Checks can be written to the order of whomever you wish, but may not be
cashed at the bank the checks are payable through or the Fund's custodian
bank.
Checkwriting privileges are not available for accounts holding shares that
are subject to a contingent deferred sales charge.
Checks must be written for at least $100.
Checks cannot be paid if they are written for more than your account value.
Remember, your shares fluctuate in value and you should not write a check
close to the total account value.
Youmay not write a check that would require the Fund to redeem shares that
were purchased by check or Asset Builder Plan payments within the prior 10
days.
Don't use your checks if you changed your Fund account number, until you
receive new checks.
CAN YOU SELL SHARES THROUGH your DEALER? The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their customers.
Brokers or dealers may charge for that service. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds on
the same basis. To exchange shares, you must meet several conditions:
o Shares of the fund selected for exchange must be available for sale in
your state of residence.
o The prospectuses of both funds must offer the exchange privilege. o You
must hold the shares you buy when you establish your account for at least
7 days before you can exchange them. After the account is open 7 days, you
can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose shares
you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its prospectus.
Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can
exchange Class A shares of this Fund only for Class A shares of another
fund. In some cases, sales charges may be imposed on exchange transactions.
For tax purposes, exchanges of shares involve a sale of the shares of the
fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. Please refer to "How to Exchange Shares"
in the Statement of Additional Information for more details.
You can find a list of Oppenheimer funds currently available for exchanges
in the Statement of Additional Information or obtain one by calling a
service representative at 1.800.525.7048. That list can change from time
to time.
HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:
Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
signed by all owners of the account. Send it to the Transfer Agent at the
address on the back cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates
with the request.
Telephone Exchange Requests. Telephone exchange requests may be made either by
calling a service representative at 1.800.852.8457, or by using PhoneLink
for automated exchanges by calling 1.800.533.3310. Telephone exchanges may
be made only between accounts that are registered with the same name(s)
and address. Shares held under certificates may not be exchanged by
telephone.
ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o Shares are normally redeemed from one fund and purchased from the other
fund in the exchange transaction on the same regular business day on which
the Transfer Agent receives an exchange request that conforms to the
policies described above. It must be received by the close of The New York
Stock Exchange that day, which is normally 4:00 P.M. but may be earlier on
some days. However, either fund may delay the purchase of shares of the
fund you are exchanging into up to seven days if it determines it would be
disadvantaged by a same-day exchange. For example, the receipt of multiple
exchange requests from a "market timer" might require the Fund to sell
securities at a disadvantageous time or price.
o Because excessive trading can hurt fund performance and harm shareholders,
the Fund reserves the right to refuse any exchange request that it
believes will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
o The Fund may amend, suspend or terminate the exchange privilege at any
time. The Fund will provide you notice whenever it is required to do so by
applicable law, but it may impose changes at any time for emergency
purposes.
o If the Transfer Agent cannot exchange all the shares you request because
of a restriction cited above, only the shares eligible for exchange will
be exchanged.
Shareholder Account Rules and Policies
More information about the Fund's policies and procedures for buying, selling,
and exchanging shares is contained in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be
suspended by the Board of Trustees at any time the Board believes it is in
the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account
has more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of
the account and the dealer representative of record for the account unless
the Transfer Agent receives cancellation instructions from an owner of the
account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. The Transfer Agent and the Fund
will not be liable for losses or expenses arising out of telephone
instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the
Transfer Agent in its discretion may waive certain of the requirements for
redemptions stated in this Prospectus.
Dealers that can perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of
the Fund if the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price,
which is the net asset value per share, will normally differ for each
class of shares. The redemption value of your shares may be more or less
than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or through AccountLink (as elected by the shareholder) within seven days
after the Transfer Agent receives redemption instructions in proper form.
However, under unusual circumstances determined by the Securities and
Exchange Commission, payment may be delayed or suspended. For accounts
registered in the name of a broker-dealer, payment will normally be
forwarded within three business days after redemption.
The Transfer Agent may delay forwarding a check or processing a payment via
AccountLink for recently purchased shares, but only until the purchase
payment has cleared. That delay may be as much as 10 days from the date
the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank
to provide telephone or written assurance to the Transfer Agent that your
purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account
value has fallen below $200 for reasons other than the fact that the
market value of shares has dropped. In some cases involuntary redemptions
may be made to repay the Distributor for losses from the cancellation of
share purchase orders.
Sharesmay be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that
the redemption proceeds will be paid with liquid securities from the
Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if
you fail to furnish the Fund your correct, certified Social Security or
Employer Identification Number when you sign your application, or if you
under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
mail only one copy of each annual and semi-annual report to shareholders
having the same last name and address on the Fund's records. However, each
shareholder may call the Transfer Agent at 1.800.525.7048 to ask that
copies of those materials be sent personally to that shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income each regular business day and pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Dividends and distributions paid on Class A and Class Y shares will generally be
higher than dividends for Class B and Class C shares, which normally have higher
expenses than Class A and Class Y.
Daily dividends will not be declared or paid on newly-purchased shares
until Federal Funds are available to the Fund from the purchase payment for
shares. The Fund has no fixed dividend rate and cannot guarantee that it will
pay any dividends or distributions.
Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options: Reinvest All Distributions in the Fund.
You can elect to reinvest all dividends and capital gains distributions in
additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital gains
distributions) in the Fund while receiving the other types of distributions by
check or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank
through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
Taxes. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
Mutual fund distributions of interest income from U.S. government
securities are generally free from state and local income taxes. However,
particular states may limit that benefit, and some types of securities, such as
repurchase agreements and asset-backed securities, may not qualify for that
benefit.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year..
Avoid "Buying a Dividend." If you buy shares on or just before the Fund declares
a capital gains distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable dividend or
capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange
your shares. A capital gain or loss is the difference between the price
you paid for the shares and the price you received when you sold them. Any
capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by the Fund
may be considered a non-taxable return of capital to shareholders. If that
occurs, it will be identified in notices to shareholders.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax advisor
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past 6 fiscal periods. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, the Fund's
independent auditors, whose report, along with the Fund's financial statements,
is included in the Statement of Additional Information, which is available on
request.
64
<PAGE>
<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>
23 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
<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>
24 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
<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>
25 | OPPENHEIMER U.S. GOVERNMENT TRUST
<PAGE>
<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>
<PAGE>
INFORMATION AND SERVICES
For More Information on Oppenheimer U.S. Government Trust
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
By Telephone: Call OppenheimerFunds Services toll-free:
1.800.525.7048
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ------------------------- Write to:
By Mail: -----------------------------------------
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ------------------------- You can send us a request by e-mail or
read or down-load documents on the
OppenheimerFunds website:
On the Internet: http://www.oppenheimerfunds.com
- ----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You can also obtain copies of the Statement of Additional Information and other
Fund documents and reports by visiting the SEC's Public Reference Room in
Washington, D.C. (Phone 1.202.942.8090) or the EDGAR database on the SEC's
Internet web site at http://www.sec.gov. Copies may be obtained after payment of
a duplicating fee by electronic request at the SEC's e-mail address:
[email protected], or by writing to the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to
make any representations about the Fund other than what is contained in
this Prospectus. This Prospectus is not an offer to sell shares of the
Fund, nor a solicitation of an offer to buy shares of the Fund, to any
person in any state or other jurisdiction where it is unlawful to make
such an offer.
The Fund's shares are distributed by:
SEC File No. 811-3430
PR0220.001.1299 Printed on recycled paper. [logo] OppenheimerFunds
Distributor, Inc.
<PAGE>
Appendix to Prospectus of
Oppenheimer U.S. Government Trust
Graphic material included in the Prospectus of Oppenheimer U.S. Government
Trust under the heading "Annual Total Returns (Class A)(% as of 12/31 each
year)":
A bar chart will be included in the Prospectus of Oppenheimer U.S.
Government Trust (the "Fund") depicting the annual total returns of a
hypothetical investment in Class A shares of the Fund for each of the ten most
recent calendar years, without deducting sales charges. Set forth below are the
relevant data points that will appear in the bar chart:
Calendar Annual
Year Total
Ended Returns
12/31/89 11.93%
12/31/90 7.63%
12/31/91 15.24%
12/31/92 5.04%
12/31/93 8.00%
12/31/94 -1.28%
12/31/95 14.94%
12/31/96 4.34%
12/31/97 10.36%
12/31/98 6.26%
<PAGE>
Oppenheimer U.S. Government Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated December 21, 1999,
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December 21, 1999. It should be read
together with the Prospectus. You can obtain the Prospectus by writing to the
Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number shown
above, or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
The Fund's Investment Policies..................................... 2
Other Investment Techniques and Strategies......................... 6
Investment Restrictions............................................ 18
How the Fund is Managed ............................................... 19
Organization and History........................................... 21
Trustees and Officers.............................................. 22
The Manager........................................................ 26
Brokerage Policies of the Fund......................................... 27
Distribution and Service Plans......................................... 29
Performance of the Fund................................................ 33
About Your Account
How To Buy Shares...................................................... 38
How To Sell Shares..................................................... 46
How To Exchange Shares................................................. 52
Dividends, Capital Gains and Taxes..................................... 54
Additional Information About the Fund.................................. 56
Financial Information About the Fund
Independent Auditors' Report........................................... 57
Financial Statements................................................... 58
Appendix A: Ratings Definitions........................................ A-1
Appendix B: Industry Classifications................................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1
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<PAGE>
A B O U T T H E F U N D
- --------------------------------------------------------------------------------
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's investment Manager, OppenheimerFunds,
Inc., can select for the Fund. Additional information is also provided about the
strategies that the Fund may use to try to achieve its objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below in seeking its objective.
It may use some of the special investment techniques and strategies at some
times or not at all.
n Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"), mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real estate mortgage investment conduits ("REMICs") and other real
estate-related securities.
Mortgage-related securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. government have relatively little credit risk
(depending on the nature of the issuer) but are subject to interest rate risks
and prepayment risks, as described in the Prospectus. Mortgage-related
securities issued by private issuers have greater credit risk.
As with other debt securities, the prices of mortgage-related securities
tend to move inversely to changes in interest rates. The Fund can buy
mortgage-related securities that have interest rates that move inversely to
changes in general interest rates, based on a multiple of a specific index.
Although the value of a mortgage-related security may decline when interest
rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened by
unscheduled prepayments on the underlying mortgages, and it is not possible to
predict accurately the security's yield. The principal that is returned earlier
than expected may have to be reinvested in other investments having a lower
yield than the prepaid security. As a result, these securities may be less
effective as a means of "locking in" attractive long-term interest rates, and
they may have less potential for appreciation during periods of declining
interest rates, than conventional bonds with comparable stated maturities.
<PAGE>
Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all or
part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes or
prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment than
were anticipated, the Fund may fail to recoup its initial investment on the
security.
During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on the
Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.
As with other debt securities, the values of mortgage-related securities
may be affected by changes in the market's perception of the creditworthiness of
the entity issuing the securities or guaranteeing them. Their values may also be
affected by changes in government regulations and tax policies.
|_| Collateralized Mortgage Obligations. CMOs are multi-class bonds that
are backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae,
Fannie Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veterans'
Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or (5) any combination of these.
Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal and
interest on the underlying mortgages may be allocated among the several classes
of a series of a CMO in different ways. One or more tranches may have coupon
rates that reset periodically at a specified increase over an index. These are
floating rate CMOs, and typically have a cap on the coupon rate. Inverse
floating rate CMOs have a coupon rate that moves in the reverse direction to an
applicable index. The coupon rate on these CMOs will increase as general
interest rates decrease. These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.
n U.S. Government Mortgage-Related Securities. The Fund can invest in a
variety of mortgage-related securities that are issued by U.S. government
agencies or instrumentalities, some of which are described below.
|_| GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States within
the U.S. Department of Housing and Urban Development. GNMA's principal programs
involve its guarantees of privately-issued securities backed by pools of
mortgages. Ginnie Maes are debt securities representing an interest in one or a
pool of mortgages that are insured by the Federal Housing Administration or the
Farmers Home Administration or guaranteed by the Veterans Administration
The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie Maes
will receive timely monthly payments of the pro-rata share of the scheduled
principal payments on the underlying mortgages, whether or not those amounts are
collected by the issuers. Amounts paid include, on a pro rata basis, any
prepayment of principal of such mortgages and interest (net of servicing and
other charges) on the aggregate unpaid principal balance of the Ginnie Maes,
whether or not the interest on the underlying mortgages has been collected by
the issuers.
The Ginnie Maes purchased by the Fund are guaranteed as to timely payment
of principal and interest by GNMA. In giving that guaranty, GNMA expects that
payments received by the issuers of Ginnie Maes on account of the mortgages
backing the Ginnie Maes will be sufficient to make the required payments of
principal of and interest on those Ginnie Maes. However if those payments are
insufficient, the guaranty agreements between the issuers of the Ginnie Maes and
GNMA require the issuers to make advances sufficient for the payments. If the
issuers fail to make those payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid
under any guaranty issued by GNMA as to such mortgage pools. An opinion of
an Assistant Attorney General of the United States, dated December 9,
1969, states that such guaranties "constitute general obligations of the
United States backed by its full faith and credit." GNMA is empowered to
borrow from the United States Treasury to the extent necessary to make any
payments of principal and interest required under those guaranties.
Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to the
extent of payments received by the issuers on account of such mortgages, Ginnie
Maes do not constitute a liability of those issuers, nor do they evidence any
recourse against those issuers. Recourse is solely against GNMA. Holders of
Ginnie Maes (such as the Fund) have no security interest in or lien on the
underlying mortgages.
Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
Ginnie Maes owned by the Fund. All of the mortgages in the pools relating to the
Ginnie Maes in the Fund are subject to prepayment without any significant
premium or penalty, at the option of the mortgagors. While the mortgages on
1-to-4-family dwellings underlying certain Ginnie Maes have a stated maturity of
up to 30 years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments, refinancing
and payments from foreclosures, is considerably less.
<PAGE>
|_| Federal Home Loan Mortgage Corporation ("FHLMC") Certificates.
FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the mortgage
loans in the pool represented by the FHLMC Certificate, in
each case whether or not such amounts are actually received.
The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States or
any of its agencies or instrumentalities other than FHLMC.
|_| Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues Fannie
Mae Certificates which are backed by a pool of mortgage loans. Fannie Mae
guarantees to each registered holder of a Fannie Mae Certificate that the holder
will receive amounts representing the holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments, on the
mortgage loans in the pool represented by such Certificate, less servicing and
guarantee fees, and the holder's proportionate interest in the full principal
amount of any foreclosed or other liquidated mortgage loan. In each case the
guarantee applies whether or not those amounts are actually received. The
obligations of Fannie Mae under its guarantees are obligations solely of Fannie
Mae and are not backed by the full faith and credit of the United States or any
of its agencies or instrumentalities other than Fannie Mae.
n Forward Rolls. The Fund can enter into "forward roll" transactions with
respect to mortgage-related securities. In this type of transaction, the Fund
sells a mortgage-related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security, having the same coupon
and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction, are expected to generate income to the Fund in excess
of the yield on the securities that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books cash, U.S.
government securities or other high-grade debt securities in an amount equal to
the payment obligation under the roll.
These transactions have risks. During the period between the sale and the
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
Commercial (Privately-Issued) Mortgage-Related Securities. The Fund may
invest up to 20% of its assets in commercial mortgage-related securities issued
by private entities. Generally these are multi-class debt or pass-through
certificates secured by mortgage loans on commercial properties. They are
subject to the credit risk of the issuer. These securities typically are
structured to provide protection to investors in senior classes from possible
losses on the underlying loans. They do so by having holders of subordinated
classes take the first loss if there are defaults on the underlying loans. They
may also be protected to some extent by guarantees, reserve funds or additional
collateralization mechanisms.
n "Stripped" Mortgage-Related Securities. The Fund may invest in stripped
mortgage-related securities that are created by segregating the cash flows from
underlying mortgage loans or mortgage securities to create two or more new
securities. Each has a specified percentage of the underlying security's
principal or interest payments. These are a form of derivative investment.
Mortgage securities may be partially stripped so that each class receives
some interest and some principal. However, they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an "interest-only" security or "I/O," and all of the principal is
distributed to holders of another type of security, known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.
n Zero-Coupon U.S. Government Securities. The Fund may buy zero-coupon
U.S. government securities. These will typically be U.S. Treasury Notes and
Bonds that have been stripped of their unmatured interest coupons, the coupons
themselves, or certificates representing interests in those stripped debt
obligations and coupons.
Zero-coupon securities do not make periodic interest payments and are sold
at a deep discount from their face value at maturity. The buyer recognizes a
rate of return determined by the gradual appreciation of the security, which is
redeemed at face value on a specified maturity date. This discount depends on
the time remaining until maturity, as well as prevailing interest rates, the
liquidity of the security and the credit quality of the issuer. The discount
typically decreases as the maturity date approaches.
Because zero-coupon securities pay no interest and compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more
volatile than the value of other debt securities that pay interest. Their value
may fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
n Portfolio Turnover. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during the year, its portfolio turnover
rate would have been 100%. The Fund's portfolio turnover rate will fluctuate
from year to year.
Increased portfolio turnover could create higher transaction costs for the
Fund, which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of
taxable long-term capital gains to shareholders, because the Fund will normally
distribute all of its capital gains realized each year, to avoid excise taxes
under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time employ the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times
and at times may not use them.
n Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It might do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an agreed-upon
future date. The resale price exceeds the purchase price by an amount that
reflects an agreed-upon interest rate effective for the period during which the
repurchase agreement is in effect. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its ability
to do so. The Manager will imposemonitor the vendor's
creditworthinessrequirements to confirm that the vendor is financially sound and
will monitor the collateral's value on an ongoing basis.
n Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements as a cash management tool, but not as a source of leverage for
investing. When the Fund enters into a reverse repurchase agreement, it
segregates on its books an amount of cash or U.S. government securities equal in
value to the purchase price of the securities it has committed to buy, plus
accrued interest, until the payment is made to the seller. Before the Fund
enters into a reverse repurchase agreement, the Manager evaluates the
creditworthiness of the seller, typically a bank or broker-dealer. As a
fundamental policy, the Fund will not enter into a reverse repurchase agreement
unless the securities that collateralize the transaction have a maturity date
not later than the settlement date of the transaction.
n Treasury Inflation-Protection Securities. The Fund can buy U.S. Treasury
securities, called "TIPS," that are designed to provide an investment vehicle
that is not vulnerable to inflation. The interest rate paid by TIPS is fixed.
The principal value rises or falls semi-annually based on published changes the
Consumer Price Index. If inflation occurs, the principal and interest payments
on TIPS are adjusted to protect investors from inflationary loss. If deflation
occurs, the principal and interest payments will be adjusted downward, although
the principal will not fall below its face amount at maturity.
|X| Floating Rate and Variable Rate Obligations. Some of the securities
the Fund can purchase have variable or floating interest rates. Variable rates
are adjusted at stated periodic intervals. Variable rate obligations can have a
demand feature that allows the Fund to tender the obligation to the issuer or a
third party prior to its maturity. The tender may be at par value plus accrued
interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is adjusted automatically
according to a stated prevailing market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable rate demand note is also based on a stated prevailing market rate but
is adjusted automatically at specified intervals. Generally, the changes in the
interest rate on such securities reduce the fluctuation in their market value.
As interest rates decrease or increase, the potential for capital appreciation
or depreciation is less than that for fixed-rate obligations of the same
maturity. The Manager may determine that an unrated floating rate or variable
rate demand obligation meets the Fund's quality standards by reason of being
backed by a letter of credit or guarantee issued by a bank that meets those
quality standards.
Floating rate and variable rate demand notes that have a stated maturity
in excess of one year may have features that permit the holder to recover the
principal amount of the underlying security at specified intervals not exceeding
one year and upon no more than 30 days' notice. The issuer of that type of note
normally has a corresponding right in its discretion, after a given period, to
prepay the outstanding principal amount of the note plus accrued interest.
Generally the issuer must provide a specified number of days' notice to the
holder.
|X| Inverse Floaters. The Fund can invest in a type of variable rate
instrument known as an "inverse floater." These pay interest at rates that vary
as the rates on bonds change. However, the rates of interest on inverse floaters
move in the opposite direction of yields on other bonds in response to market
changes. As interest rates rise, inverse floaters produce less current income,
and their market value can become volatile.
Inverse floaters may offer relatively high current income, reflecting the
spread between short- and long-term interest rates. As long as the yield
curve remains relatively steep and short-term rates remain relatively low,
owners of inverse floaters will have the opportunity to earn interest at
above-market rates because they receive interest at the higher long-term
rates but have paid for bonds with lower short-term rates. If the yield
curve flattens and shifts upward, an inverse floater will lose value more
quickly than a conventional long-term bond. The Fund will invest in
inverse floaters to seek higher yields than are available from fixed-rate
bonds that have comparable maturities and credit ratings. In some cases,
the holder of an inverse floater may have an option to convert the floater
to a fixed-rate bond, pursuant to a "rate-lock" option.
Some inverse floaters have a feature known as an interest rate "cap" as
part of the terms of the investment. Investing in inverse floaters that have
interest rate caps might be part of a portfolio strategy to try to maintain a
high current yield for the Fund when the Fund has invested in inverse floaters
that expose the Fund to the risk of short-term interest rate fluctuations.
"Embedded" caps can be used to hedge a portion of the Fund's exposure to rising
interest rates. When interest rates exceed a pre-determined rate, the cap
generates additional cash flows that offset the decline in interest rates on the
inverse floater, and the hedge is successful. However, the Fund bears the risk
that if interest rates do not rise above the pre-determined rate, the cap (which
is purchased for additional cost) will not provide additional cash flows and
will expire worthless. Inverse floaters are a form of derivative investment.
|X| When-Issued and Delayed-Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis, and may purchase or sell such securities on
a "delayed-delivery" (or "forward commitment") basis. "When-issued" or
"delayed-delivery" refers to securities whose terms and indenture are available
and for which a market exists, but which are not available for immediate
delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Fund.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund from the investment. No
income begins to accrue to the Fund on a when-issued security until the Fund
receives the security at settlement of the trade.
The Fund will engage in when-issued transactions in order to secure what
is considered to be an advantageous price and yield at the time of entering into
the obligation. When the Fund engages in when-issued or delayed-delivery
transactions, it relies on the buyer or seller, as the case may be, to complete
the transaction. Their failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield it considers
advantageous.
When the Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the
purposes of investment leverage. Although the Fund will enter into
when-issued or delayed-delivery purchase transactions to acquire
securities, the Fund may dispose of a commitment prior to settlement. If
the Fund chooses to dispose of the right to acquire a when-issued security
prior to its acquisition or to dispose of its right to deliver or receive
against a forward commitment, it may incur a gain or loss.
At the time the Fund makes a commitment to purchase or sell a security on
a when-issued or forward commitment basis, it records the transaction on its
books and reflects the value of the security purchased. In a sale transaction,
it records the proceeds to be received, in determining its net asset value. The
Fund will identify on its books cash, U.S. government securities or other
high-grade debt obligations at least equal to the value of purchase commitments
until the Fund pays for the investment.
When-issued transactions and forward commitments can be used by the Fund
as a defensive technique to hedge against anticipated changes in interest rates
and prices. For instance, in periods of rising interest rates and falling
prices, the Fund might sell securities in its portfolio on a forward commitment
basis to attempt to limit its exposure to anticipated falling prices. In periods
of falling interest rates and rising prices, the Fund might sell portfolio
securities and purchase the same or similar securities on a when-issued or
forward commitment basis, to obtain the benefit of currently higher cash yields.
n Loans of Portfolio Securities. To raise cash for liquidity purposes, the
Fund can lend its portfolio securities to brokers, dealers and other types of
financial institutions approved by the Fund's Board of Trustees. As a
fundamental policy, these loans are limited to not more than 25% of the value of
the Fund's total assets. The Fund currently does not intend to engage in loans
of securities, but if it does so, such loans will not likely exceed 5% of the
Fund's total assets. The Fund must receive collateral for a loan
There are some risks in connection with securities lending. The Fund might
experience a delay in receiving additional collateral to secure a loan, or a
delay in recovery of the loaned securities if the borrower defaults.. Under
current applicable regulatory requirements (which are subject to change), on
each business day the loan collateral must be at least equal to the value of the
loaned securities. It must consist of cash, bank letters of credit, securities
of the U.S. government or its agencies or instrumentalities, or other cash
equivalents in which the Fund is permitted to invest. To be acceptable as
collateral, letters of credit must obligate a bank to pay amounts demanded by
the Fund if the demand meets the terms of the letter. The terms of the letter of
credit and the issuing bank both must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities. It also receives one or more of (a) negotiated
loan fees, (b) interest on securities used as collateral, and (c) interest on
any short-term debt securities purchased with such loan collateral. Either type
of interest may be shared with the borrower. The Fund may also pay reasonable
finder's, custodian and administrative fees in connection with these loans. The
terms of the Fund's loans must meet applicable tests under the Internal Revenue
Code and must permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter.
n Derivatives. The Fund can invest in a variety of derivative investments
to seek income or for hedging purposes. A number of these derivative investments
have been described above. Some other derivative investments the Fund may use
are the hedging instruments described below in this Statement of Additional
Information.
|X| Hedging. Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. To attempt to protect
against declines in the market value of the Fund's portfolio, to permit the Fund
to retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the
Fund could:
sell futures contracts, buy puts on such futures or on securities, or write
covered calls on securities or futures. Covered calls may also be used to
increase the Fund's income, but the Manager does not expect to engage
extensively in that practice.
The Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case the
Fund would normally seek to purchase the securities and then terminate that
hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could: buy futures,
or buy calls on such futures or on securities.
The Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The
Fund's strategy of hedging with futures and options on futures will be
incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate
to debt securities (these are referred to as "interest rate futures"). An
interest rate future obligates the seller to deliver (and the purchaser to take)
cash or a specified type of debt security to settle the futures transaction at a
specified future date. Either party could also enter into an offsetting contract
to close out the position.
No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required to
deposit an initial margin payment with the futures commission merchant (the
"futures broker"). Initial margin payments will be deposited with the Fund's
custodian bank in an account registered in the futures broker's name. However,
the futures broker can gain access to that account only under specified
conditions. As the future is marked to market (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to close
out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain kinds of
put options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options
on the other types of futures described above.
Writing Covered Call Options. The Fund can write (that is,
sell) covered calls. If the Fund sells a call option, it must be covered. That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
segregating liquid assets to enable the Fund to satisfy its obligations if the
call is exercised. Up to 100% of the Fund's total assets may be subject to calls
the Fund writes.
When the Fund writes a call on a security, it receives cash (a premium).
The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by the specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case the Fund would keep the cash premium.
The Fund's custodian, or a securities depository acting for the custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written calls traded on exchanges or as to other acceptable escrow securities.
In that way, no margin will be required for such transactions. OCC will release
the securities on the expiration of the option or when the Fund enters into a
closing transaction.
When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the market price of the underlying security (that
is, the option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so,
at the time the call is written, the Fund must cover the call by
segregating an equivalent dollar amount of liquid assets. The Fund will
segregate additional liquid assets if the value of the segregated assets
drops below 100% of the current value of the future. Because of this
segregation requirement, in no circumstances would the Fund's receipt of
an exercise notice as to that future require the Fund to deliver a futures
contract. It would simply put the Fund in a short futures position, which
is permitted by the Fund's hedging policies.
Writing Put Options. The Fund may sell put options. A put option
on
securities gives the purchaser the right to sell, and the writer the obligation
to buy, the underlying investment at the exercise price during the option
period. The Fund will not write puts if, as a result, more than 50% of the
Fund's net assets would be required to be segregated to cover such put options.
If the Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to buy the underlying investment from the buyer of the put at
the exercise price, even if the value of the investment falls below the exercise
price. If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, to secure its obligation to pay
for the underlying security the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
The Fund therefore forgoes the opportunity of investing the segregated assets or
writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay the exercise price. The Fund has no control over when it may be required
to purchase the underlying security, since it may be assigned an exercise notice
at any time prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent the underlying
security from being put. Effecting a closing purchase transaction will also
permit the Fund to write another put option on the security, or to sell the
security and use the proceeds from the sale for other investments. The Fund will
realize a profit or loss from a closing purchase transaction depending on
whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for federal tax purposes, and when distributed by the
Fund, are taxable as ordinary income.
Purchasing Calls and Puts. The Fund can purchase calls to
protect against the possibility that the Fund's portfolio will not participate
in an anticipated rise in the securities market. When the Fund buys a call
(other than in a closing purchase transaction), it pays a premium. The Fund then
has the right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise price.
The Fund benefits only if it sells the call at a profit or if, during the call
period, the market price of the underlying investment is above the sum of the
call price plus the transaction costs and the premium paid for the call and the
Fund exercises the call. If the Fund does not exercise the call or sell it
(whether or not at a profit), the call will become worthless at its expiration
date. In that case the Fund will have paid the premium but lost the right to
purchase the underlying investment.
The Fund can buy puts whether or not it holds the underlying investment in
its portfolio. When the Fund purchases a put, it pays a premium and, except as
to puts on indices, has the right to sell the underlying investment to a seller
of a put on a corresponding investment during the put period at a fixed exercise
price. Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the value
of the underlying investment below the exercise price by selling the underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and, as a result, the put is not exercised or resold, the put will become
worthless at its expiration date. In that case the Fund will have paid the
premium but lost the right to sell the underlying investment. However, the Fund
may sell the put prior to its expiration. That sale may or may not be at a
profit.
When the Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
The Fund may buy a call or put only if, after the purchase, the value of
all call and put options held by the Fund will not exceed 5% of the Fund's total
assets.
|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments.
The Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Fund might cause the
Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Fund of puts on securities will cause the sale of underlying
investments, increasing portfolio turnover. Although the decision whether to
exercise a put it holds is within the Fund's control, holding a put might cause
the Fund to sell the related investments for reasons that would not exist in the
absence of the put.
The Fund could pay a brokerage commission each time it buys a call or put,
sells a call or put, or buys or sells an underlying investment in connection
with the exercise of a call or put. Those commissions could be higher on a
relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.
If a covered call written by the Fund is exercised on an investment that
has increased in value, the Fund will be required to sell the investment at the
call price. It will not be able to realize any profit if the investment has
increased in value above the call price.
An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable index.
To compensate for the imperfect correlation of movements in the price of the
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund may use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further or for
other reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the securities purchased.
|_| Interest Rate Swap Transactions. The Fund can enter into
interest rate swap agreements. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets. Also, the Fund will identify on its books liquid
assets (such as cash or U.S. government securities) to cover any amounts it
could owe under swaps that exceed the amounts it is entitled to receive, and it
will adjust that amount daily, as needed.
Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the Fund under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet received. The
Manager will monitor the creditworthiness of counterparties to the Fund's
interest rate swap transactions on an ongoing basis.
The Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results in a loss to one party, the measure of
that party's damages is calculated by reference to the average cost of a
replacement swap for each swap. It is measured by the mark-to-market value at
the time of the termination of each swap. The gains and losses on all swaps are
then netted, and the result is the counterparty's gain or loss on termination.
The termination of all swaps and the netting of gains and losses on termination
is generally referred to as "aggregation."
|_| Regulatory Aspects of Hedging Instruments. When using futures
and options on futures, the Fund is required to operate within certain
guidelines and restrictions with respect to the use of futures as established by
the Commodities Futures Trading Commission (the "CFTC"). In particular, the Fund
is exempted from registration with the CFTC as a "commodity pool operator" if
the Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The
Rule does not limit the percentage of the Fund's assets that may be used for
futures margin and related options premiums for a bona fide hedging position.
However, under the Rule, the Fund must limit its aggregate initial futures
margin and related options premiums to not more than 5% of the Fund's net assets
for hedging strategies that are not considered bona fide hedging strategies
under the Rule. Under the Rule, the Fund must also use short futures and options
on futures solely for bona fide hedging purposes within the meaning and intent
of the applicable provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations established
by the option exchanges. The exchanges limit the maximum number of options that
may be written or held by a single investor or group of investors acting in
concert. Those limits apply regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more accounts
or through one or more different exchanges or through one or more brokers. Thus,
the number of options that the Fund may write or hold may be affected by options
written or held by other entities, including other investment companies having
the same advisor as the Fund (or an advisor that is an affiliate of the Fund's
advisor). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of
those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
Investment Restrictions
n What Are "Fundamental Policies?" Fundamental policies are those policies
that the Fund has adopted to govern its investments that can be changed only by
the vote of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, a "majority" vote is defined as the vote of the holders
of the lesser of: 67%or more of the shares present or represented by proxy at a
shareholder meeting, if the holders of more than 50% of the outstanding shares
are present or represented by proxy, or more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
n Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
The Fund cannot enter into repurchase agreements maturing in more
than seven days nor invest in securities that are restricted as to their resale
or that are not readily convertible to cash ("illiquid securities"), nor invest
in securities for which market quotations are not readily available if more than
10% of the Fund's total assets would be invested in those securities.
The Fund cannot make loans. However, it can buy the debt securities
that its investment policies and restrictions permit it to purchase, whether or
not those securities are subject to repurchase agreements. The Fund may also
lend its portfolio securities as described in "Loans of Portfolio Securities."
The Fund cannot borrow money in excess of 10% of the value of its
net assets. It can borrow only as a temporary measure for extraordinary or
emergency purposes. It cannot make any investments when its borrowings exceed 5%
of the value of its assets. No assets of the Fund may be pledged, mortgaged or
hypothecated to secure a debt. However, the escrow arrangements involved in
options trading are not considered to involve a mortgage, hypothecation or
pledge for this purpose.
The Fund cannot purchase securities on margin or make short sales of
securities. However, the Fund may make margin deposits in connection with any of
the hedging instruments permitted by any of its other fundamental policies.
The Fund cannot invest in real estate.
The Fund cannot underwrite securities of other companies.
o The Fund cannot invest in securities of other investment companies, except if
it acquires them as part of a merger, consolidation or acquisition of assets.
The Fund cannot issue "senior securities," but this does not
prohibit certain investment activities for which assets of the Fund are
designated as segregated, or margin, collateral or escrow arrangements are
established, to cover the related obligations. Examples of those activities
include borrowing money, reverse repurchase agreements, delayed-delivery and
when-issued arrangements for portfolio securities transactions, and contracts to
buy or sell derivatives, hedging instruments, options or futures.
As a non-fundamental policy, the Fund cannot invest in interests in oil,
gas, or other mineral exploration or development programs.
The Fund will not invest 25% or more of its assets in investments in any
industry. There is no limit, however, on the Fund's investments in obligations
of the U.S. government or its agencies or instrumentalities. For purposes of the
Fund's policy not to concentrate its investments, the Fund has adopted the
industry classifications set forth in Appendix B to this Statement of Additional
Information. This is not a fundamental policy.
Unless the Prospectus or this Statement of Additional Information states
that a percentage restriction applies on an ongoing basis, it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment increases in proportion to
the size of the Fund.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in 1982.
Prior to August 16, 1985, the Fund operated as a money market fund with a fixed
net asset value per share. Effective August 16, 1985, the Fund changed its
investment objective and ceased to be a money market fund. It can currently
invest in securities of any maturity.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The Trustees
meet periodically throughout the year to oversee the Fund's activities, review
its performance, and review the actions of the Manager. Although the Fund will
not normally hold annual meetings of its shareholders, it may hold shareholder
meetings from time to time on important matters, and shareholders have the right
to call a meeting to remove a Trustee or to take other action described in the
Fund's Declaration of Trust.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has four classes of
shares: Class A, Class B, Class C and Class Y. All classes invest in the same
investment portfolio. Each class of shares: o has its own dividends and
distributions, o pays certain expenses which may be different for the different
classes, o may have a different net asset value, o may have separate voting
rights on matters in which interests of one class
are different from interests of another class, and o votes as a
class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one vote
at shareholder meetings, with fractional shares voting proportionally on matters
submitted to the vote of shareholders. Each share of the Fund represents an
interest in the Fund proportionately equal to the interest of each other share
of the same class.
The Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Fund into additional series
or classes of shares. The Trustees also may divide or combine the shares of a
class into a greater or lesser number of shares without changing the
proportionate beneficial interest of a shareholder in the Fund. Shares do not
have cumulative voting rights or preemptive or subscription rights. Shares may
be voted in person or by proxy at shareholder meetings.
|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings of
shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law. It will also do so when a
shareholder meeting is called by the Trustees or upon proper request of the
shareholders.
Shareholders have the right, upon the declaration in writing or vote of
two-thirds of the outstanding shares of the Fund, to remove a Trustee. The
Trustees will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of 10% of its outstanding shares.
If the Trustees receive a request from at least 10 shareholders stating that
they wish to communicate with other shareholders to request a meeting to remove
a Trustee, the Trustees will then either make the Fund's shareholder list
available to the applicants or mail their communication to all other
shareholders at the applicants' expense. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing business
with the Fund (and each shareholder of the Fund) agrees under its Declaration of
Trust to look solely to the assets of the Fund for satisfaction of any claim or
demand that may arise out of any dealings with the Fund. thatAdditionally, the
Trustees shall have no personal liability to any such person, to the extent
permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company Act.
All of the Trustees are Trustees or Directors of the following New York-based
Oppenheimer funds2:
<PAGE>
Oppenheimer California Municipal Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust Oppenheimer
Enterprise Fund Oppenheimer Municipal Bond Fund Oppenheimer Europe Fund
Oppenheimer New York Municipal Fund Oppenheimer Global Fund Oppenheimer Series
Fund, Inc. Oppenheimer Global Growth & Income Fund Oppenheimer U.S. Government
Trust Oppenheimer Gold & Special Minerals Fund Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund Oppenheimer Trinity Growth Fund Oppenheimer
International Growth Fund Oppenheimer Trinity Value Fund Oppenheimer
International Small Company Fund Oppenheimer World Bond Fund
Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar
respectively hold the same offices with the other New York-based Oppenheimer
funds as with the Fund. As of December 1, 1999, the Trustees and officers of the
Fund as a group owned of record or beneficially less than 1% of each class of
shares of the Fund. The foregoing statement does not reflect ownership of shares
of the Fund held of record by an employee benefit plan for employees of the
Manager, other than the shares beneficially owned under the plan by the officers
of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of that
plan.
2 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market
Fund, Inc. Mr. Griffiths is not a Trustee of Oppenheimer Discovery Fund.
Leon Levy, Chairman of the Board of Trustees, Age 74
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee, Age 66
19750 Beach Road, Jupiter Island, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 -
December 1997); Executive Vice President of the Manager (December 1977 - October
1995); Executive Vice President and a director (April 1986 - October 1995) of
HarbourView Asset Management Corporation, an investment advisor subsidiary of
the Manager.
Phillip A. Griffiths, Trustee; Age 61
97 Olden Lane, Princeton, N. J. 08540
The Director of the Institute for Advanced Study, Princeton, N.J. (since 1991)
and a member of the National Academy of Sciences (since 1979); formerly a
director of Bankers Trust Corporation (1994 through June, 1999), Provost and
Professor of Mathematics at Duke University (1983 - 1991), a director of
Research Triangle Institute, Raleigh, N.C. (1983 - 1991), and a Professor of
Mathematics at Harvard
University (1972 - 1983).
Benjamin Lipstein, Trustee, Age 76
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University.
Bridget A. Macaskill,* President and Trustee, Age 51
Two World Trade Center, 34th Floor, New York, NY 10048-0203
President (since June 1991), Chief Executive Officer (since September 1995) and
a Director (since December 1994) of the Manager; President and director (since
June 1991) of HarbourView Asset Management Corporation, an investment adviser
subsidiary of the Manager Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of OAC;Oppenheimer Acquisition Corp.,
the Manager's parent holding company; President (since September 1995) and a
director (since November 1989) of Oppenheimer Partnership Holdings, Inc., a
holding company subsidiary of the Manager; a director of Oppenheimer Real Asset
Management, Inc. (since July 1996); President and a director (since October
1997) of OppenheimerFunds International Ltd., an offshore fund management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Elizabeth B. Moynihan, Trustee, Age 70
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institute), Executive Committee of Board of Trustees of the
National Building Museum; a member of the Trustees Council, Preservation League
of New York State.
Kenneth A. Randall, Trustee, Age 72
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), and Prime Retail,
Inc. (real estate investment trust); formerly President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research) and a director of Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee, Age 69
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a director of RBAsset
(real estate manager); a director of OffitBank; Trustee, Financial Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee, Age 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Group, Inc. (corporate governance consulting and
executive recruiting); a director of Professional Staff Limited Museum,(a U.K.
temporary staffing company); a life trustee of International House (non-profit
educational organization), and a trustee of the Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Trustee, Age 74
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Formerly he held the following positions: Chairman Emeritus (August 1991 -
August 1999), Chairman (November 1987 - January 1991) and a director
Distributor.(January 1969 - August 1999) of the Manager; President and Director
of the Distributor (July 1978 - January 1992).
Pauline Trigere, Trustee, Age 87
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of P.T. Concept (design and sale of women's
fashions).
Clayton K. Yeutter, Trustee, Age 69
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan & Hartson (a law firm); a director of Zurich Financial
Services (financial services), Zurich Allied AG and Allied Zurich p.l.c.
(insurance investment management); Caterpillar, Inc. (machinery), ConAgra, Inc.
(food and agricultural products), Farmers Insurance Company (insurance), FMC
Corp. (chemicals and machinery) and Texas Instruments, Inc. (electronics);
formerly (in descending chronological order), Counselor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture, U.S. Trade Representative.
John S. Kowalik, Vice President and Portfolio Manager; Age 42 Two World Trade
Center, 34th Floor, New York, New York 10048-0203 Senior Vice President of the
Manager (since July 1998); an officer of other Oppenheimer funds; formerly
Managing Director and Senior Portfolio Manager at Prudential Global Advisors
(June 1989 - June 1998).
Andrew J. Donohue, Secretary, Age 49
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Executive Vice
President (since January 1993), General Counsel (since October 1991) and a
Director (since September 1995) of the Manager; Executive Vice President and
General Counsel (since September 1993) and a director (since January 1992) of
the Distributor; Executive Vice President, General Counsel and a director of
andHarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and (since September 1995) Oppenheimer
Partnership Holdings, Inc.; President and a director of Centennial Asset
Management Corporation (since September 1995); President, General Counsel and a
director of Oppenheimer Real Asset Management, Inc. (since July 1996); General
Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Brian W. Wixted, Treasurer; Age: 40
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since AprilTreasurer of1999) of the
Manager; Treasurer of HarbourView Asset Management Corporation, Shareholder
Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer Partnership
Holdings, Inc. (since April 1999); Assistant Treasurer of Oppenheimer
Acquisition Corp. (since April 1998).1999); Assistant Secretary of Centennial
Asset Management Corporation (since April 1999); formerly Principal and Chief
Operating Officer, Bankers Trust Company - Mutual Fund Services Division (March
1995 - March 1999); Vice President and Chief Financial Officer of CS First
Boston Investment Management Corp. (September 1991 - March 1995); and Vice
President and Accounting Manager, Merrill Lynch Asset Management (November 1987
- - September 1991).
Robert G. Zack, Assistant Secretary, Age 51
Two World Trade Center, 34th Floor, New York, New York 10048-0203 Senior Vice
President (since May 1985) and Associate General Counsel (since May 1981) of the
Manager, Assistant Secretary of SSI (since May 1985), and SFSI (since November
1989); Assistant Secretary of Oppenheimer Millennium Funds plc and OFIL (since
October 1997); an officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age 41
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Scott T. Farrar, Assistant Treasurer, Age 34
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
|X| Remuneration of Trustees. The officers of the Fund and Ms. Macaskill,
who is affiliated with the Manager receive no salary or fee from the Fund. The
remaining Trustees of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended August 31,
1999. The compensation from all of the New York-based Oppenheimer funds
(including the Fund) was received as a director, trustee or member of a
committee of the boards of those funds during the calendar year 1998.
- --------------------------------------------------------------------------------
Total
Retirement Compensation
Benefits from all
Aggregate Accrued as Part New York-based
Trustee's Name Compensation of Fund Oppenheimer
And Position From Fund 1 Expenses Funds (26 Funds)2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Leon Levy $13,827 $3,633 $162,600
Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert G. Galli3 $5,006 $0 $113,383
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Phillip Griffiths4 $757 $0 $0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Benjamin Lipstein
Study Committee Chairman, $13,031 $4,392 $140,550
Audit Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Elizabeth B. Moynihan $6,085 $0 $99,000
Study Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Kenneth A. Randall $7,861 $2,280 $90,800
Audit Committee Chairman
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward V. Regan
Proxy Committee Chairman, $5,520 $0 $89,800
Audit Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Russell S. Reynolds, Jr. $4,800 $670 $67,200
Proxy Committee Member
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Pauline Trigere $5,150 $1,462 $60,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Clayton K. Yeutter3 $4,1305 $0 $67,200
Proxy Committee Member
- --------------------------------------------------------------------------------
1 Aggregate compensation includes fees, deferred compensation, if any, and
retirement plan benefits accrued for a Trustee.
2 For the 1998 calendar year.
3 Total Compensation for the 1998 calendar year includes compensation received
for serving as a Trustee or Director of 11 other Oppenheimer funds.
4 Mr. Griffiths was not a Trustee or Director of the New York-based Oppenheimer
funds during 1998. under5 Includes $1,034 deferred under the Deferred
Compensation Plan described
below.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan
that provides for payments to retired Trustees. Payments are up to 80% of the
average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as trustee for any of
the New York-based Oppenheimer funds for at least 15 years to be eligible for
the maximum payment. Each Trustee's retirement benefits will depend on the
amount of the Trustee's future compensation and length of service. Therefore the
amount of those benefits cannot be determined at this time, nor can we estimate
the number of years of credited service that will be used to determine those
benefits.
|X| Deferred Compensation Plan for Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for disinterested trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they are
entitled to receive from the Fund. Under the plan, the compensation deferred by
a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The
amount paid to the Trustee under the plan will be determined based upon the
performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
n Major Shareholders. As of December 3, 1999, the only person who owned of
record or was known by the Fund to own beneficially 5% or more of any class of
the Fund's outstanding shares were follows:
BancOne Securities Corp., 733 Greencrest Drive, Westerville, Ohio 43081,
which owned 10,537,197.022 Class A shares (17.68% of the then-outstanding
Class A shares) and 3,635,009.580 Class C shares (44.50% of the
then-outstanding Class C shares), for the benefit of its customers.
Merrill Lynch Pierce Fenner & Smith, Inc., 4800 Deer Lake Drive East,
Jacksonville, Florida 32246, which owned 1,249,954.858 Class B shares
(6.73% of the then-outstanding Class B shares) and 776,453.735 Class C
shares (9.50% of the then-outstanding Class C shares) for the benefit of
its customers.
OppenheimerFunds, Inc., 6803 S. Tucson Way, Denver, Colorado 80112, which
owned 100% of the then-outstanding Class Y shares of the Fund.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code
of Ethics. It is designed to detect and prevent improper personal trading by
certain employees, including portfolio managers, that would compete with or take
advantage of the Fund's portfolio transactions. Covered persons include persons
with knowledge of the investments and investment intentions of the Fund and
other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
n The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio managers
and associate portfolio managers of the Fund are employed by the Manager and are
the persons who are principally responsible for the day-to-day management of the
Fund's portfolio. Other members of the Manager's Fixed Income Portfolio Team
provide the portfolio managers with counsel and support in managing the Fund's
portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include the compilation and maintenance of records with
respect to its operations, the preparation and filing of specified reports, and
composition of proxy materials and registration statements for continuous public
sale of shares of the Fund.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class.
- --------------------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 $3,233,578
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $3,673,645
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $4,710,907
- --------------------------------------------------------------------------------
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.
The agreement permits the Manager to act as investment advisor for any other
person, firm or corporation and to use the name "Oppenheimer" in connection with
other investment companies for which it may act as investment advisor or general
distributor. If the Manager shall no longer act as investment advisor to the
Fund, the Manager may withdraw the right of the Fund to use the name
"Oppenheimer" as part of its name.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
The Manager is authorized by the advisory agreement to employ broker-dealers,
including "affiliated" brokers, as that term is defined in the Investment
Company Act. The Manager may employ broker-dealers that the Manager thinks, in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of the Fund's
portfolio transactions. "Best execution" means prompt and reliable execution at
the most favorable price obtainable. The Manager need not seek competitive
commission bidding. However, it is expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent consistent
with the interests and policies of the Fund as established by its Board of
Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for the
Fund and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment advisor. Brokerage Practices Followed by
the Manager. Most securities purchases made by the Fund are in principal
transactions at net prices. The Fund usually deals directly with the selling or
purchasing principal or market maker without incurring charges for the services
of a broker on its behalf unless the Manager determines that a better price or
execution may be obtained by using the services of a broker. Therefore, the Fund
does not incur substantial brokerage costs. Portfolio securities purchased from
underwriters include a commission or concession paid by the issuer to the
underwriter in the price of the security. Portfolio securities purchased from
dealers include a spread between the bid and asked price. The Fund seeks to
obtain prompt execution of these orders at the most favorable net price.
The Manager allocates brokerage for the Fund subject to the provisions of
the investment advisory agreement and the procedures and rules described above.
Generally, the Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers. In certain instances,
portfolio managers may directly place trades and allocate brokerage. In either
case, the Manager's executive officers supervise the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. Other funds advised by the Manager have investment
policies similar to those of the Fund. Those other funds may purchase or sell
the same securities as the Fund at the same time as the Fund, which could affect
the supply and price of the securities. If two or more funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those combined orders are averaged as to price and allocated
in accordance with the purchase or sale orders actually placed for each account.
In an option transaction, the Fund ordinarily uses the same broker for the
purchase or sale of the option and any transaction in the securities to which
the option relates. When possible, the Manager tries to combine concurrent
orders to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a particular
broker may be useful only to one or more of the advisory accounts of the Manager
and its affiliates. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, market quotations for portfolio evaluations, information
systems, computer hardware and similar products and services. If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative functions), then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
to the Manager that: (i) the trade is not from or for the broker's own
inventory, (ii) the trade was executed by the broker on an agency basis at the
stated commission, and (iii) the trade is not a riskless principal transaction.
The Board of Trustees permits the Manager to use concessions on fixed-price
offerings to obtain research, in the same manner as is permitted for agency
transactions.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
- --------------------------------------------------------------------------------
Fiscal Year Ended 8/31: Total Brokerage Commissions Paid by the Fund1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 $143,007
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1998 $226,743
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1999 $358,8302
- --------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis. In the fiscal year ended 8/31/99, the amount of transactions
directed to brokers for research services was $6,664,897 and the amount of
the commissions paid to broker-dealers for those services was $16,025.
Distribution and Service Plans
The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's classes of shares. The Distributor is not obligated to
sell a specific number of shares. Expenses normally attributable to sales are
borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
<PAGE>
- -------------------------------------------------------------------------------
Aggregate Class A
Front-End Front-End Commissions Commissions Commissions
Fiscal Sales Sales on Class A on Class B on Class C
Year Charges on Charges Shares Shares Shares
Ended Class A Retained by Advanced by Advanced by Advanced by
8/31: Shares Distributor Distributor1 Distributor1 Distributor1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1997 $709,843 $230,181 N/A $1,031,181 $65,115
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1998 $1,159,123 $313,780 $164,214 $2,163,419 $177,771
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $1,387,987 $352,357 $196,644 $3,692,550 $244,362
- -------------------------------------------------------------------------------
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. Includes amounts retained by a broker-dealer
that is an affiliate of the Distributor.
- -------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent
Year Deferred Sales Deferred Sales Deferred Sales
Ended Charges Retained by Charges Retained by Charges Retained by
8/31: Distributor Distributor Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1999 $2,459 $599,551 $49,206
- -------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B and Class C shares under
Rule 12b-1 of the Investment Company Act. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees3, cast in person at a meeting called for
the purpose of voting on that plan.the The shareholder vote for the Distribution
and Service Plans for Class B and Class C shares was cast by the Manager as the
sole initial holder of Class B and Class C shares of the Fund.
3. In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
Under the plans, the Manager and the Distributor may make payouts to
affiliates and, in their sole discretion, from time to time, may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A plan may be terminated at any time by the vote
of a majority of the Independent Trustees or by the vote of the holders of a
"majority" (as defined in the Investment Company Act) of the outstanding shares
of that class.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the
amount of payments to be made under a plan must be approved by
shareholders of the class affected by the amendment. Because Class B
shares of the Fund automatically convert into Class A shares after six
years, the Fund must obtain the approval of both Class A and Class B
shareholders for a proposed material amendment to the Class A Plan that
would materially increase payments under the Plan. That approval must be
by a "majority" (as defined in the Investment Company Act) of the shares
of each Class, voting separately by class.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each Plan states that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund is
committed to the discretion of the Independent Trustees. This does not prevent
the involvement of others in the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plans for a class, no payment will be made to any
recipient in any quarter in which the aggregate net asset value of all
Fund shares of that class held by the recipient for itself and its
customers does not exceed a minimum amount, if any, that may be set from
time to time by a majority of the Independent Trustees. The Board of
Trustees has set no minimum amount of assets to qualify for payments under
the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services include, among others, answering
customer inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. The Class A
service plan permits reimbursements to the Distributor at a rate of up to 0.25%
of average annual net assets of Class A shares. The Board has set the rate at
that level. While the plan permits the Board to authorize payments to the
Distributor to reimburse itself for services under the plan, the Board has not
yet done so. The Distributor makes payments to plan recipients quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.
For the fiscal year ended August 31, 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. The Distributor may not
use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B and C plans provide for
the Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plans during the period for which the fee is paid. The types of services
that recipients provide are similar to the services provided under the Class A
service plan, described above.
The Class B and the Class C Plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow
investors to buy shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell those shares. The Fund pays the
asset-based sales charges to the Distributor for its services rendered in
distributing Class B and Class C shares. The payments are made to the
Distributor in recognition that the Distributor: o pays sales commissions to
authorized brokers and dealers at the time of sale
and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares, and
bears the costs of sales literature, advertising and prospectuses (other
than
those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
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. plan 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.
- --------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 8/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Distributor's Distributor's
Aggregate Unreimbursed
Amount Unreimbursed Expenses as %
Total Payments Retained by Expenses Under of Net Assets
Class: Under Plan Distributor Plan of Class
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Plan $1,606,198 $1,374,8111 $6,391,431 3.66%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Plan $568,674 $405,3912 $609,796 0.90%
- --------------------------------------------------------------------------------
1. Includes $5,846 paid to and affiliate of the Distributor's parent company. 2.
Includes $5,387 paid to and affiliate of the Distributor's parent company.
All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield," "dividend
yield," "average annual total return," "cumulative total return," "average
annual total return at net asset value" and "total return at net asset value."
An explanation of how yields and total returns are calculated is set forth
below. The charts below show the Fund's performance as of the Fund's most recent
fiscal year end. You can obtain current performance information by calling the
Fund's Transfer Agent at 1-800-525-7048 or by visiting the OppenheimerFunds
Internet web site at http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown for the 1-, 5- and 10-year periods (or
the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other investments:
Yields and total returns measure the performance of a hypothetical account
in the Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the model
performance data if your dividends are received in cash, or you buy or sell
shares during the period, or you bought your shares at a different time and
price than the shares used in the model. o The Fund's performance returns do not
reflect the effect of taxes on dividends and capital gains distributions.
An investment in the Fund is not insured by the FDIC or any other
government agency.
The principal value of the Fund's shares, and its yields and total returns
are not guaranteed and normally will fluctuate on a daily basis.
When an investor's shares are redeemed, they may be worth more or less
than their original cost.
Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a prediction
of future yields or returns.
The performance of each class of shares is shown separately, because the
performance of each class of shares will usually be different. That is because
of the different kinds of expenses each class bears. The yields and total
returns of each class of shares of the Fund are affected by market conditions,
the quality of the Fund's investments, the maturity of those investments, the
types of investments the Fund holds, and its operating expenses that are
allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because of
the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes referred
to just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in the
30-day period, but is a hypothetical yield based upon the net investment income
from the Fund's portfolio investments for that period. It may therefore differ
from the "dividend yield" for the same class of shares, described below.
Standardized yield is calculated using the following formula set forth in
rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period. b = expenses
accrued for the period (net of any expense assumptions). c = the average
daily number of shares of that class outstanding during the
30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last day of
the period, adjusted for undistributed net investment income.
The standardized yield for a particular 30-day period may differ from the
yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. Additionally,
because each class of shares is subject to different expenses, it is
likely that the standardized yields of the Fund's classes of shares will
differ for any 30-day period.
|_| Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and the
sum is multiplied by 12 (to annualize the yield) and divided by the maximum
offering price on the last day of the dividend period. The formula is shown
below:
Dividend Yield = dividends paid x 12/maximum offering price (payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. There is no sales charge on Class Y shares. The Class A
dividend yield may also be quoted without deducting the maximum initial sales
charge.
-----------------------------------------------------------------------------
The Fund's Yields for the 30-Day Periods Ended 8/31/98
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class of
Shares Standardized Yield Dividend Yield
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class A 5.96% 5.67% 6.01% 5.72%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class B 5.22% N/A 5.28% N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class C 5.22% N/A 5.27% N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Class Y 6.41% N/A 6.92% N/A
-----------------------------------------------------------------------------
|X| Total Return Information. There are different types of "total returns"
to measure the Fund's performance. Total return is the change in value of a
hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied, depending on the period
for which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter. For Class C shares, the 1% contingent deferred sales
charge is deducted for returns for the 1-year period.
|_| Average Annual Total Return. The "average annual total return"
of each class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below) held
for a number of years ("n" in the formula) to achieve an Ending Redeemable Value
("ERV" in the formula) of that investment, according to the following formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis. Cumulative total return is determined as follows:
ERV - P
------- = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B or Class C shares. Each
is based on the difference in net asset value per share at the beginning and the
end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into
consideration the reinvestment of dividends and capital gains distributions.
- --------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 8/31/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Cumulative Total
Class Returns (10
of years or
Shares life-of-class) Average Annual Total Returns
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or (or (or
life-of-class) life-of-class) life-of-class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A 90.23%1 99.71%1 -5.13% -0.40% 5.62% 6.65% 6.64%1 7.16%1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B 21.56%2 23.50%2 -5.85% -1.15% 4.86%2 5.27%2 N/A N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C 31.01%3 31.01%3 -1.99% -1.05% 5.84% 5.84% 4.81%3 4.81%3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y 1.98%4 1.98%4 -0.83% -0.83% 1.53%4 1.53%4 N/A N/A
- --------------------------------------------------------------------------------
1. Inception of Class A: 8/16/85
2. Inception of Class B: 7/21/95
3. Inception of Class C: 12/1/93
4. Inception of Class Y: 5/18/98
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking of
the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is a widely-recognized independent mutual fund monitoring service. Lipper
monitors the performance of regulated investment companies, including the Fund,
and ranks their performance for various periods based on categories relating to
investment objectives. The performance of the fund is ranked by Lipper against
all other general U.S. government funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gain
distributions and income dividends but do not take sales charges or taxes into
consideration. Lipper also publishes "peer-group" indices of the performance of
all mutual funds in a category that it monitors and averages of the performance
of the funds in particular categories.
|_| Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the intermediate government fund category.
Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's) one-,
three-, five- and ten-year average annual total returns (depending on the
inception of the fund or class) in excess of 90-day U.S. Treasury bill returns
after considering the fund's sales charges and expenses. Risk is measured by a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and investment return are combined to produce star ratings reflecting
performance relative to the other funds in the fund's category. Five stars is
the "highest" ranking (top 10% of funds in a category), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is "below
average" (next 22.5%) and one star is "lowest" (bottom 10%). The current star
rating is the fund's (or class's) overall rating, which is the fund's 3-year
rating or its combined 3- and 5-year ranking (weighted 60%/40% respectively), or
its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%, respectively),
depending on the inception date of the fund (or class). Ratings are subject to
change monthly.
The Fund may also compare its total return ranking to that of other funds
in its Morningstar category, in addition to its star rating. Those total return
rankings are percentages from one percent to one hundred percent and are not
risk-adjusted. For example, if a fund is in the 94th percentile, that means that
94% of the funds charges.in the same category performed better than it did.
|_| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share classes
to the return on fixed-income investments available from banks and thrift
institutions. Those include certificates of deposit, ordinary interest-paying
checking and savings accounts, and other forms of fixed or variable time
deposits, and various other instruments such as Treasury bills. However, the
Fund's returns and share price are not guaranteed or insured by the FDIC or any
other agency and will fluctuate daily, while bank depository obligations may be
insured by the FDIC and may provide fixed rates of return. Repayment of
principal and payment of interest on Treasury securities is backed by the full
faith and credit of the U.S.
government.
From time to time, the Fund may publish rankings or ratings of the Manager
or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of
the Oppenheimer funds themselves. Those ratings or rankings of shareholder
and investor services by third parties may include comparisons of their
services to those provided by other mutual fund families selected by the
rating or ranking services. They may be based upon the opinions of the
rating or ranking service itself, using its research or judgment, or based
upon surveys of investors, brokers, shareholders or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day the
Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. The Distributor
and the Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and Letters
of Intent because of the economies of sales efforts and reduction in expenses
realized by the Distributor, dealers and brokers making such sales. No sales
charge is imposed in certain other circumstances described in Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
n Right of Accumulation. To qualify for the lower sales charge rates that
apply to larger purchases of Class A shares, you and your spouse can add
together:
Class A and Class B shares you purchase for your individual accounts,
or for your joint accounts, or for trust or custodial accounts on
behalf of your children who are minors, and
current purchases of Class A and Class B shares of the Fund and other
Oppenheimer funds to reduce the sales charge rate that applies to
current purchases of Class A shares, and
Class A and Class B shares of Oppenheimer funds you previously
purchased subject to an initial or contingent deferred sales charge
to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
Oppenheimer funds.
A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently own
to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You must
request it when you buy shares.
n The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Main Street California
Oppenheimer Bond Fund Municipal Fund
Oppenheimer Main Street Growth & Income
Oppenheimer Capital Appreciation Fund Fund
Oppenheimer Capital Income Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation Fund Oppenheimer MidCap Fund
Oppenheimer California Municipal Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Champion Income Fund Oppenheimer Municipal Bond Fund
Oppenheimer Convertible Securities Fund Oppenheimer New York Municipal Fund
Oppenheimer Developing Markets Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Allocation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest Global Value Fund,
Oppenheimer Enterprise Fund Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund Oppenheimer
Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund Oppenheimer Global
Fund Oppenheimer Quest Value Fund, Inc. Oppenheimer Global Growth & Income Fund
Oppenheimer Real Asset Fund Oppenheimer Gold & Special Minerals Fund Oppenheimer
Senior Floating Rate Fund Oppenheimer Growth Fund Oppenheimer Strategic Income
Fund Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc. Oppenheimer
Insured Municipal Fund Oppenheimer Trinity Core Fund Oppenheimer Intermediate
Municipal Fund Oppenheimer Trinity Growth Fund Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund Oppenheimer International Growth Fund
Oppenheimer U.S. Government Trust Oppenheimer International Small Company Fund
Oppenheimer World Bond Fund Oppenheimer Large Cap Growth Fund Limited-Term New
York Municipal Fund Oppenheimer Limited-Term Government Fund Rochester Fund
Municipals
And the following money market funds:
Centennial America Fund, L. P. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government Trust Oppenheimer Cash Reserves
Centennial Money Market Trust Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of each
of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or
Class A and Class B shares of the Fund and other Oppenheimer funds during a
13-month period, you can reduce the sales charge rate that applies to your
purchases of Class A shares. The total amount of your intended purchases of both
Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter states
the investor's intention to make the aggregate amount of purchases of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the offering price (including
the sales charge) that applies to a single lump-sum purchase of shares in the
amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the Application used
for a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
total purchases. If total eligible purchases during the Letter of Intent period
exceed the intended purchase amount and exceed the amount needed to qualify for
the next sales charge rate reduction set forth in the Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
only if and when the dealer returns to the Distributor the excess of the amount
of commissions allowed or paid to the dealer over the amount of commissions that
apply to the actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such purchase,
promptly after the Distributor's receipt thereof.
The Transfer Agent will not hold shares in escrow for purchases of shares
of the Fund and other Oppenheimer funds by OppenheimerFunds prototype 401(k)
plans under a Letter of Intent. If the intended purchase amount under a Letter
of Intent entered into by an OppenheimerFunds prototype 401(k) plan is not
purchased by the plan by the end of the Letter of Intent period, there will be
no adjustment of commissions paid to the broker-dealer or financial institution
of record for accounts held in the name of that plan.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
|_| Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow
by the Transfer Agent. For example, if the intended purchase amount is
$50,000, the escrow shall be shares valued in the amount of $2,500
(computed at the offering price adjusted for a $50,000 purchase). Any
dividends and capital gains distributions on the escrowed shares will be
credited to the investor's account.
2. If the total minimum investment specified under the Letter is completed
within the thirteen-month Letter of Intent period, the escrowed shares
will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the total
purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
That sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If the difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding of which
may be counted toward completion of a Letter) include: (a) Class A shares sold
with a front-end sales charge or subject to a Class A
contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) Class A
shares of one of the other Oppenheimer funds that were acquired
subject to a Class A initial or contingent deferred sales charge or
(2) Class B shares of one of the other Oppenheimer funds that were
acquired subject to a contingent deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in
the section of the Prospectus entitled "How to Exchange Shares" and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make monthly automatic purchases of shares of up to four
other Oppenheimer funds.
If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent or the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend or discontinue offering Asset
Builder plans at any time without prior notice. Retirement Plans. Certain types
of Retirement Plans are entitled to purchase shares of the Fund without sales
charge or at reduced sales charge rates, as described in Appendix C to this
Statement of Additional Information. Certain special sales charge arrangements
described in that Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch Pierce Fenner & Smith,
Inc. or an independent record keeper that has a contract or special arrangement
with Merrill Lynch. If on the date the plan sponsor signed the Merrill Lynch
record keeping service agreement the plan has less than $3 million in assets
(other than assets invested in money market funds) invested in applicable
investments, then the retirement plan may purchase only Class B shares of the
Oppenheimer funds. Any retirement plans in that category that currently invest
in Class B shares of the Fund will have their Class B shares converted to Class
A shares of the Fund when the plan's applicable investments reach $5 million.
Cancellation of Purchase Orders. Cancellation of purchase orders for the Fund's
shares (for example, when a purchase check is returned to the Fund unpaid)
causes a loss to be incurred when the net asset value of the Fund's shares on
the cancellation date is less than on the purchase date. That loss is equal to
the amount of the decline in the net asset value per share multiplied by the
number of shares in the purchase order. The investor is responsible for that
loss. If the investor fails to compensate the Fund for the loss, the Distributor
will do so. The Fund may reimburse the Distributor for that amount by redeeming
shares from any account registered in that investor's name, or the Fund or the
Distributor may seek other redress.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. The conversion of Class B shares to Class A shares
after six years is subject to the continuing availability of a private letter
ruling from the Internal Revenue Service, or an opinion of counsel or tax
advisor, to the effect that the conversion of Class B shares does not constitute
a taxable event for the shareholder under federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class B
shares would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge or fee,
such exchange could constitute a taxable event for the shareholder, and absent
such exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets attributable
to a class by the number of shares of that class that are outstanding. The
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a U.S. holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days, when
shareholders may not purchase or redeem shares.
Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Board of Trustees determines that the event is likely to effect a material
change in the value of the security. The Manager may make that determination,
under procedures established by the Board.
n Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
|_| Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows: (1) if last sale information is regularly reported, they are
valued at the last
reported sale price on the principal exchange on which they are
traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid"
and "asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways: (1) at the last sale price available to the
pricing service approved by the Board
of Trustees, or
(2) at the last sale price obtained by the Manager from the report of
the principal exchange on which the security is traded at its
last trading session on or immediately before the valuation date,
or
(3) at the mean between the "bid" and "asked" prices obtained from
the principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
|_| Long-term debt securities having a remaining maturity in excess
of 60 days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
|_| The following securities are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the Fund's
Board of Trustees or obtained by the Manager from two active market makers in
the security on the basis of reasonable inquiry: (1) debt instruments that have
a maturity of more than 397 days when issued, (2) debt instruments that had a
maturity of 397 days or less when issued and have
a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of 60
days or less.
|_| The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts: (1) money market debt securities held by
a non-money market fund that had a
maturity of less than 397 days when issued that have a remaining
maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a
remaining maturity of 397 days or less.
|_| Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale
information is not generally available, the Manager may use pricing
services approved by the Board of Trustees. The pricing service may use
"matrix" comparisons to the prices for comparable instruments on the basis
of quality, yield and maturity. Other special factors may be involved
(such as the tax-exempt status of the interest paid by municipal
securities). The Manager will monitor the accuracy of the pricing
services. That monitoring may include comparing prices used for portfolio
valuation to actual sales prices of selected securities.
Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last sale
price on the preceding trading day if it is within the spread of the closing
"bid" and "asked" prices on the principal exchange or on NASDAQ on the valuation
date. If not, the value shall be the closing bid price on the principal exchange
or on NASDAQ on the valuation date. If the put, call or future is not traded on
an exchange or on NASDAQ, it shall be valued by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at the "bid" price if no "asked" price is available.
When the Fund writes an option, an amount equal to the premium received is
included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the
premium received. If a call or put written by the Fund expires, the Fund
has a gain in the amount of the premium. If the Fund enters into a closing
purchase transaction, it will have a gain or loss, depending on whether
the premium received was more or less than the cost of the closing
transaction. If the Fund exercises a put it holds, the amount the Fund
receives on its sale of the underlying investment is reduced by the amount
of premium paid by the Fund.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the Prospectus.
The information below provides additional information about the procedures and
conditions for redeeming shares.
Checkwriting. When a check is presented to the Bank for clearance, the Bank will
ask the Fund to redeem a sufficient number of full and fractional shares in the
shareholder's account to cover the amount of the check. This enables the
shareholder to continue receiving dividends on those shares until the check is
presented to the Fund. Checks may not be presented for payment at the offices of
the Bank or the Fund's custodian. This limitation does not affect the use of
checks for the payment of bills or to obtain cash at other banks. The Fund
reserves the right to amend, suspend or discontinue offering checkwriting
privileges at any time without prior notice.
In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs: (1) for individual accounts, represents that they are the registered
owner(s) of
the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or other
fiduciary or agent, as applicable, duly authorized to act on behalf of
the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the Fund
account of such person(s) and to redeem a sufficient amount of shares
from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against joint
accounts, or accounts for corporations, partnerships, trusts or other
entities, the signature of any one signatory on a check will be
sufficient to authorize payment of that check and redemption from the
account, even if that account is registered in the names of more than
one person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably believed by
them to be genuine, or for returning or not paying checks that have not
been accepted for any reason.
Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next bank
business day on which the Fund is open for business. No dividends will be paid
on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.
Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of:
Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
Class B shares that were subject to the Class B contingent deferred sales
charge when redeemed.
The reinvestment may be made without sales charge only in Class A shares
of the Fund or any of the other Oppenheimer funds into which shares of the Fund
are exchangeable as described in "How to Exchange Shares" below. Reinvestment
will be at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Transfer Agent for that
privilege at the time of reinvestment. This privilege does not apply to Class C
or Class Y shares. The Fund may amend, suspend or cease offering this
reinvestment privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on that
gain. If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the
Fund or another of the Oppenheimer funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the loss or
increase the gain recognized from the redemption. However, in that case the
sales charge would be added to the basis of the shares acquired by the
reinvestment of the redemption proceeds.
Payments "In Kind". The Prospectus states that payment for shares tendered for
redemption is ordinarily made in cash. However, the Board of Trustees of the
Fund may determine that it would be detrimental to the best interests of the
remaining shareholders of the Fund to make payment of a redemption order wholly
or partly in cash. In that case, the Fund may pay the redemption proceeds in
whole or in part by a distribution "in kind" of liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder might incur brokerage or other costs in selling the
securities for cash. The Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the
involuntary redemption of the shares held in any account if the aggregate net
asset value of those shares is less than $200 or such lesser amount as the Board
may fix. The Board will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, shares are not
subject to the payment of a contingent deferred sales charge of any class at the
time of transfer to the name of another person or entity. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be calculated as if the transferee shareholder had acquired the
transferred shares in the same manner and at the same time as the transferring
shareholder.
If less than all shares held in an account are transferred, and some but
not all shares in the account would be subject to a contingent deferred sales
charge if redeemed at the time of transfer, the priorities described in the
Prospectus under "How to Buy Shares" for the imposition of the Class B or Class
C contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements. Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary must sign the
request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed and submitted to the Transfer Agent
before the distribution may be made. Distributions from retirement plans are
subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed. Unless
the shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be withheld
from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no
responsibility to determine whether a distribution satisfies the conditions of
applicable tax laws and will not be responsible for any tax penalties assessed
in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers on behalf of their customers. Shareholders should contact their
broker or dealer to arrange this type of redemption. The repurchase price per
share will be the net asset value next computed after the Distributor receives
an order placed by the dealer or broker. However, if the Distributor receives a
repurchase order from a dealer or broker after the close of The New York Stock
Exchange on a regular business day, it will be processed at that day's net asset
value if the order was received by the dealer or broker from its customers prior
to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
transmitted to and received by the Distributor prior to its close of business
that day (normally 5:00 P.M.).
Ordinarily, for accounts redeemed by a broker-dealer under this procedure,
payment will be made within three business days after the shares have been
redeemed upon the Distributor's receipt of the required redemption documents in
proper form. The signature(s) of the registered owners on the redemption
documents must be guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the shareholder for
receipt of the payment. Automatic withdrawals of up to $1,500 per month may be
requested by telephone if payments are to be made by check payable to all
shareholders of record. Payments must also be sent to the address of record for
the account and the address must not have been changed within the prior 30 days.
Required minimum distributions from OppenheimerFunds-sponsored retirement plans
may not be arranged on this basis.
Payments are normally made by check, but shareholders having AccountLink
privileges (see "How To Buy Shares") may arrange to have Automatic Withdrawal
Plan payments transferred to the bank account designated on the Account
Application or by signature-guaranteed instructions sent to the Transfer Agent.
Shares are normally redeemed pursuant to an Automatic Withdrawal Plan three
business days before the payment transmittal date you select in the Account
Application. If a contingent deferred sales charge applies to the redemption,
the amount of the check or payment will be reduced accordingly.
The Fund cannot guarantee receipt of a payment on the date requested. The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A share
purchases while participating in an Automatic Withdrawal Plan. Class B and Class
C shareholders should not establish withdrawal plans, because of the imposition
of the contingent deferred sales charge on such withdrawals (except where the
contingent deferred sales charge is waived as described in Appendix C below).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares (of
the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $25.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional Information.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as necessary
to meet withdrawal payments. Shares acquired without a sales charge will be
redeemed first. Shares acquired with reinvested dividends and capital gains
distributions will be redeemed next, followed by shares acquired with a sales
charge, to the extent necessary to make withdrawal payments. Depending upon the
amount withdrawn, the investor's principal may be depleted. Payments made under
these plans should not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share certificates will not be issued for shares of the Fund purchased for
and held under the Plan, but the Transfer Agent will credit all such shares to
the account of the Planholder on the records of the Fund. Any share certificates
held by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may be
held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the account
may be paid in cash or reinvested.
Shares will be redeemed to make withdrawal payments at the net asset value
per share determined on the redemption date. Checks or AccountLink payments
representing the proceeds of Plan withdrawals will normally be transmitted three
business days prior to the date selected for receipt of the payment, according
to the choice specified in writing by the Planholder. Receipt of payment on the
date selected cannot be guaranteed.
The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such notification
for the requested change to be put in effect. The Planholder may, at any time,
instruct the Transfer Agent by written notice to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the Transfer
Agent. The Fund may also give directions to the Transfer Agent to terminate a
Plan. The Transfer Agent will also terminate a Plan upon its receipt of evidence
satisfactory to it that the Planholder has died or is legally incapacitated.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that have
not been redeemed will be held in uncertificated form in the name of the
Planholder. The account will continue as a dividend-reinvestment, uncertificated
account unless and until proper instructions are received from the Planholder,
his or her executor or guardian, or another authorized person.
To use shares held under the Plan as collateral for a debt, the Planholder
may request issuance of a portion of the shares in certificated form. Upon
written request from the Planholder, the Transfer Agent will determine the
number of shares for which a certificate may be issued without causing the
withdrawal checks to stop. However, should such uncertificated shares become
exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to act
as agent in administering the Plan.
How to Exchange Shares
As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
by calling the Distributor at 1-800-525-7048.
All of the Oppenheimer funds currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, and
Centennial America Fund, L.P., which only offer Class A shares.
Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares. Class B and Class C shares of Oppenheimer Cash
Reserves are generally available only by exchange from the same class of
shares of other Oppenheimer funds or through OppenheimerFunds-sponsored
401(k) plans. Only certain Oppenheimer funds currently offer Class Y
shares. Class Y shares of Oppenheimer Real Asset Fund may not be exchanged
for shares of any other fund.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be
acquired by exchange of shares of any class of any other Oppenheimer funds
except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
Reserves acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange
of Class A shares of other Oppenheimer funds. Class A shares of Senior
Floating Rate Fund that are exchanged for shares of the other Oppenheimer
funds may not be exchanged back for Class A shares of Senior Floating Rate
Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged
only for Class B shares of other Oppenheimer funds and no exchanges may be
made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash Reserves
or Oppenheimer Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Oppenheimer Capital Preservation
Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for shares
of Oppenheimer funds offered with a sales charge upon payment of the sales
charge. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
Shares of Oppenheimer Money Market Fund, Inc. purchased with the
redemption proceeds of shares of other mutual funds (other than funds managed by
the Manager or its subsidiaries) redeemed within the 30 days prior to that
purchase may subsequently be exchanged for shares of other Oppenheimer funds
without being subject to an initial sales charge or contingent deferred sales
charge. To qualify for that privilege, the investor or the investor's dealer
must notify the Distributor of eligibility for this privilege at the time the
shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested, they
must supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those change whenever it is required to do so by applicable
law. It may be required to provide 60 days' notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No contingent
deferred sales charge is imposed on exchanges of shares of any class purchased
subject to a contingent deferred sales charge. However, when Class A shares
acquired by exchange of Class A shares of other Oppenheimer funds purchased
subject to a Class A contingent deferred sales charge are redeemed within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge is imposed on
Class B shares acquired by exchange if they are redeemed within 6 years of the
initial purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange if they
are redeemed within 12 months of the initial purchase of the exchanged Class C
shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect any
contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify which class of shares they with to exchange.
|X| Limits on Multiple Exchange Orders. The Fund reserves the right to
reject telephone or written exchange requests submitted in bulk by anyone on
behalf of more than one account. The Fund may accept requests for exchanges of
up to 50 accounts per day from representatives of authorized dealers that
qualify for this privilege.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted.account If all telephone lines are
busy (which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by telephone
and would have to submit written exchange requests.
|X| Processing Exchange Requests. Shares to be exchanged are redeemed on
the regular business day the Transfer Agent receives an exchange request in
proper form (the "Redemption Date"). Normally, shares of the fund to be acquired
are purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The Fund
reserves the right, in its discretion, to refuse any exchange request that may
disadvantage it. For example, if the receipt of multiple exchange requests from
a dealer might require the disposition of portfolio securities at a time or at a
price that might be disadvantageous to the Fund, the Fund may refuse the
request. When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange features
such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be
switched to an account in Oppenheimer Senior Floating Rate Fund.
In connection with any exchange request, the number of shares exchanged
may be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or this
Statement of Additional Information, or would include shares covered by a share
certificate that is not tendered with the request. In those cases, only the
shares available for exchange without restriction will be exchanged.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. A shareholder should assure that the
fund selected is appropriate for his or her investment and should be aware of
the tax consequences of an exchange. For federal income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will
vary from time to time depending on market conditions, the composition of the
Fund's portfolio, and expenses borne by the Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same time, and on the same
day for each class of shares. However, dividends on Class B and Class C shares
are expected to be lower than dividends on Class A and Class Y shares. That is
because of the effect of the asset-based sales charge on Class B and Class C
shares. Those dividends will also differ in amount as a consequence of any
difference in the net asset values of the different classes of shares.
Dividends, distributions and proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service
as undeliverable will be invested in shares of Oppenheimer Money Market
Fund, Inc. Reinvestment will be made as promptly as possible after the
return of such checks to the Transfer Agent, to enable the investor to
earn a return on otherwise idle funds. Unclaimed accounts may be subject
to state escheatment laws, and the Fund and the Transfer Agent will not be
liable to shareholders or their representatives for compliance with those
laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders. Long-term capital gains distributions are not eligible for the
deduction. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
It is unlikely that the Fund's dividends will qualify for the deduction.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January 1
through December 31 of that year and 98% of its capital gains realized in
the period from November 1 of the prior year through October 31 of the
current year. If it does not, the Fund must pay an excise tax on the
amounts not distributed. It is presently anticipated that the Fund will
meet those requirements. However, the Board of Trustees and the Manager
might determine in a particular year that it would be in the best
interests of shareholders for the Fund not to make such distributions at
the required levels and to pay the excise tax on the undistributed
amounts. That would reduce the amount of income or capital gains available
for distribution to shareholders.
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code (although it reserves the right not to qualify).
That qualification enables the Fund to "pass through" its income and
realized capital gains to shareholders without having to pay tax on them.
This avoids a double tax on that income and capital gains, since
shareholders normally will be taxed on the dividends and capital gains
they receive from the Fund (unless the Fund's shares are held in a
retirement account or the shareholder is otherwise exempt from tax). If
the Fund qualifies as a "regulated investment company" under the Internal
Revenue Code, it will not be liable for federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified as a
regulated investment company in its last fiscal year. The Internal Revenue
Code contains a number of complex tests relating to qualification which
the Fund might not meet in any particular year. If it did not so qualify,
the Fund would be treated for tax purposes as an ordinary corporation and
receive no tax deduction for payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of
the effect of the Fund's investment policies, they will be identified as
such in notices sent to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Distributor. The Fund's shares are sold through dealers, brokers and other
financial institutions that have a sales agreement with OppenheimerFunds
Distributor, Inc., a subsidiary of the Manager that acts as the Fund's
Distributor. The Distributor also distributes shares of the other Oppenheimer
funds and is sub-distributor for funds managed by a subsidiary of the Manager.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It will be the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in
excess of $100,000 are not protected by federal deposit insurance. Those
uninsured balances at times may be substantial.
Independent Auditors. KPMG LLP are the independent auditors of the Fund. They
audit the Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager and its
affiliates.
<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
< 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%
- ------------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
GOVERNMENT AGENCY--48.8%
- ------------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------------------------------------------------------------
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%,
7/16/281 $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%,
6/15/251
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) 524,923,629 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%,
7/15/271 22,812,044 1,767,933
- -----------------------------------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 1997-CL1, Cl. F, 7.352%,
7/13/304 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%,
2/15/284,5 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 VALUE2 (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 rate5 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 VALUE2 (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 rate5 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. GOVERNMENTTRUST
<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 VALUE2 (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 rate5 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>
<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
VALUE2 (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
rate5
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>
- --------------------------------------------------------------------------------
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
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, 19981
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>
A-5
Appendix A
- --------------------------------------------------------------------------------
RATINGS DEFINITIONS
- --------------------------------------------------------------------------------
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
- --------------------------------------------------------------------------------
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group, they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as with Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than those of Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to be
considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium grade obligations; that is, they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and have speculative
characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements. Their future cannot
be considered well-assured. Often the protection of interest and principal
payments may be very moderate and not well safeguarded during both good and bad
times over the future. Uncertainty of position characterizes bonds in this
class.
B: Bonds rated B generally lack characteristics of desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing and may be in default or there may be
present elements of danger with respect to principal or interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high degree
and are often in default or have other marked shortcomings.
C: Bonds rated C are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
- -------------------------------------------------------------------------------
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation. CC: An
obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being made
on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the due
date. The rating may also be used if a bankruptcy petition has been filed or
similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
- --------------------------------------------------------------------------------
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of some
kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and are
extremely speculative. "DDD" designates the highest potential for recovery of
amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.
D: Default. Denotes actual or imminent payment default.
<PAGE>
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free U.S.
Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-2
Appendix B
- --------------------------------------------------------------------------------
Industry Classifications
- --------------------------------------------------------------------------------
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-16
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue
Code,
(2) non-qualified deferred compensation plans, (3) employee benefit plans3 (4)
Group Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth
IRAs, SEP-IRAs, SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the thetransfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and special
arrangements may be amended or terminated at any time by a particular fund, the
Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the
"Manager"). Waivers that apply at the time shares are redeemed must be requested
by the shareholder and/or dealer in the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered
closed-end fund, references to contingent deferred sales charges mean the
Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class A shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or other
financial institution that has made special arrangements with the Distributor
enabling those plans to purchase Class A shares at net asset value but
subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."4 This waiver provision applies to:
4 However, that commission will not be paid on purchases of shares in amounts of
$1 million or more (including any right of accumulation) by a Retirement Plan
that pays for the purchase with the redemption proceeds of Class C shares of one
or more Oppenheimer funds held by the Plan for more than one year.
o
Purchases of Class A shares aggregating $1 million or more. o Purchases by a
Retirement Plan (other than an IRA or 403(b)(7) custodial
plan) that:
(1) buys shares costing $500,000 or more, or
(2) has, at the time of purchase, 100 or more eligible employees or
total plan assets of $500,000 or more, or
(3) certifies to the Distributor that it projects to have annual plan
purchases of $200,000 or more.
o Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
purchases are made:
(1) through a broker, dealer, bank or registered investment adviser that
has made special arrangements with the Distributor for those
purchases, or
(2) by a direct rollover of a distribution from a qualified Retirement
Plan if the administrator of that Plan has made special arrangements
with the Distributor for those purchases.
o Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements:
(1) The record keeping is performed by Merrill Lynch Pierce Fenner &
Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
Retirement Plan. On the date the plan sponsor signs the record-keeping
service agreement with Merrill Lynch, the Plan must have $3 million or
more of its assets invested in (a) mutual funds, other than those
advised or managed by Merrill Lynch Asset Management, L.P. ("MLAM"),
that are made available under a Service Agreement between Merrill
Lynch and the mutual fund's principal underwriter or distributor, and
(b) funds advised or managed by MLAM (the funds described in (a) and
(b) are referred to as "Applicable Investments").
(2) The record keeping for the Retirement Plan is performed on a daily
valuation basis by a record keeper whose services are provided under a
contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the record keeping service
agreement with Merrill Lynch, the Plan must have $3 million or more of
its assets (excluding assets invested in money market funds) invested
in Applicable Investments.
(3) The record keeping for a Retirement Plan is handled under a
service agreement with Merrill Lynch and on the date the plan sponsor
signs that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).
o Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1,
1999.
<PAGE>
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers.
Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no commissions are paid by the Distributor on such
purchases):
The Manager or its affiliates.
Present or former officers, directors, trustees and employees (and their
"immediate families") of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees. The term
"immediate family" refers to one's spouse, children, grandchildren,
grandparents, parents, parents-in-law, brothers and sisters, sons- and
daughters-in-law, a sibling's spouse, a spouse's siblings, aunts,
uncles, nieces and nephews; relatives by virtue of a remarriage
(step-children, step-parents, etc.) are included.
Registered management investment companies, or separate accounts of
insurance companies having an agreement with the Manager or the
Distributor for that purpose.
Dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees.
Employees and registered representatives (and their spouses) of dealers or
brokers described above or financial institutions that have entered
into sales arrangements with such dealers or brokers (and which are
identified as such to the Distributor) or with the Distributor. The
purchaser must certify to the Distributor at the time of purchase that
the purchase is for the purchaser's own account (or for the benefit of
such employee's spouse or minor children).
Dealers, brokers, banks or registered investment advisors that have
entered into an agreement with the Distributor providing specifically
for the use of shares of the Fund in particular investment products
made available to their clients. Those clients may be charged a
transaction fee by their dealer, broker, bank or advisor for the
purchase or sale of Fund shares.
Investment advisors and financial planners who have entered into an
agreement for this purpose with the Distributor and who charge an
advisory, consulting or other fee for their services and buy shares for
their own accounts or the accounts of their clients.
"Rabbi trusts" that buy shares for their own accounts, if the purchases
are made through a broker or agent or other financial intermediary that
has made special arrangements with the Distributor for those purchases.
Clients of investment advisors or financial planners (that have entered
into an agreement for this purpose with the Distributor) who buy shares
for their own accounts may also purchase shares without sales charge
but only if their accounts are linked to a master account of their
investment advisor or financial planner on the books and records of the
broker, agent or financial intermediary with which the Distributor has
made such special arrangements . Each of these investors may be charged
a fee by the broker, agent or financial intermediary for purchasing
shares.
Directors, trustees, officers or full-time employees of OpCap Advisors or
its affiliates, their relatives or any trust, pension, profit sharing
or other benefit plan which beneficially owns shares for those persons.
Accounts for which Oppenheimer Capital (or its successor) is the
investment advisor (the Distributor must be advised of this
arrangement) and persons who are directors or trustees of the company
or trust which is the beneficial owner of such accounts.
A unit investment trust that has entered into an appropriate agreement
with the Distributor.
Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to
defined contribution employee retirement plans for which the dealer,
broker or investment adviser provides administration services.
o
<PAGE>
Retirement Plans and deferred compensation plans and trusts used to fund
those plans (including, for example, plans qualified or created under
sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
in each case if those purchases are made through a broker, agent or
other financial intermediary that has made special arrangements with
the Distributor for those purchases.
A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value
Fund were exchanged for Class A shares of that Fund due to the
termination of the Class B and Class C TRAC-2000 program on November
24, 1995.
A qualified Retirement Plan that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value
Funds at net asset value, with such shares to be held through
DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
arrangement was consummated and share purchases commenced by December
31, 1996.
B. Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions.
Class A shares issued or purchased in the following transactions are not subject
to sales charges (and no commissions are paid by the Distributor on such
purchases):
Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
Shares purchased by the reinvestment of dividends or other distributions
reinvested from the Fund or other Oppenheimer funds (other than
Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
Shares purchased withthrough a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers
to purchase and pay for shares of Oppenheimer funds using the proceeds
of shares redeemed in the prior 30 days from a mutual fund (other than
a fund managed by the Manager or any of its subsidiaries) on which an
initial sales charge or contingent deferred sales charge was paid. This
waiver also applies to shares purchased by exchange of shares of
Oppenheimer Money Market Fund, Inc. that were purchased and paid for in
this manner. This waiver must be requested when the purchase order is
placed for shares of the Fund, and the Distributor may require evidence
of qualification for this waiver.
Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
Shares purchased by the reinvestment of loan repayments by a participant
in a Retirement Plan for which the Manager or an affiliate acts as
sponsor.
C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.
The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
To make Automatic Withdrawal Plan payments that are limited annually to no
more than 12% of the account value adjusted annually.
Involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (please refer to "Shareholder Account
Rules and Policies," in the applicable fund Prospectus).
Fordistributions from Retirement Plans, deferred compensation plans or
other employee benefit plans for any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established.
(2) To return excess contributions.
(3) To return contributions made due to a mistake of fact.
(4) Hardship
withdrawals, as defined in the plan.5
5 This provision does not apply to IRAs.
(5) Under a Qualified Domestic Relations
Order, as defined in the Internal
Revenue Code, or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t)
of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.6
6 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
(10)Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a
arrangementsubsidiary of the Manager) if the plan has made special
arrangements with the Distributor. (11) Plan termination or "in-service
distributions," if the redemption proceeds are rolled over directly to
an OppenheimerFunds-sponsored IRA.
Fordistributions from Retirement Plans having 500 or more eligible
employees, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan.
Fordistributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this
waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied
to shares purchased in certain types of transactions or redeemed in
certain circumstances described below.
A. Waivers for Redemptions in Certain Cases.
The Class B and Class C contingent deferred sales charges will be waived for
redemptions of shares in the following cases: Shares redeemed involuntarily, as
described in "Shareholder Account Rules and Policies," in the applicable
Prospectus.
Redemptions from accounts other than Retirement Plans following the death
or disability of the last surviving shareholder, including a trustee of
a grantor trust or revocable living trust for which the trustee is also
the sole beneficiary. The death or disability must have occurred after
the account was established, and for disability you must provide
evidence of a determination of disability by the Social Security
Administration.
Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
Redemptions of Class B shares held by Retirement Plans whose records are
maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
accounts of clients of financial institutions that have entered into a
special arrangement with the Distributor for this purpose.
o Redemptions requested in writing by a Retirement Plan sponsor of Class
C shares of an Oppenheimer fund in amounts of $1 million or more held
by the Retirement Plan for more than one year, if the redemption
proceeds are invested in Class A shares of one or more Oppenheimer
funds.
o
<PAGE>
Distributions from Retirement Plans or other employee benefit plans for
any of the following purposes:
(1) Following the death or disability (as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To
return contributions made due to a mistake of fact.
(4) To make hardship
withdrawals, as defined in the plan.7
7 This provision does not apply to IRAs.
(5) To make distributions required under a
Qualified Domestic Relations Order or,
in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t)
of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.8
8 This provision does not apply to loans from 403(b)(7) custodial plans.
(9) On account of the participant's separation from service.9
9 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
(10) Participant-directed redemptions to purchase shares of a mutual
fund (other than a fund managed by the Manager or a subsidiary
of the Manager) offered as an investment option in a Retirement
Plan if the plan has made special arrangements with the
Distributor.
(11) Distributions made on account of a plan termination or
"in-service" distributions," if the redemption proceeds are
rolled over directly to an OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the
Plan's elimination as investment options under the Plan of all
of the Oppenheimer funds that had been offered.
(13) For distributions from a participant's account under an
Automatic Withdrawal Plan after the participant reaches age
59 1/2, as long as the aggregate value of the distributions
does not exceed 10% of the account's value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate
value of the redeemed shares does not exceed 10% of the
account's value, adjusted annually.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
Shares sold to the Manager or its affiliates.
Shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose.
Shares issued in plans of reorganization to which the Fund is a party.
Shares sold to present or former officers, directors, trustees or employees
(and their "immediate families" as defined above in Section I.A.) of the
Fund, the Manager and its affiliates and retirement plans established by
them for their employees.
<PAGE>
IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Former
Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc. Oppenheimer Quest Small Cap
Value Fund
Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value
Fund
Oppenheimer
Quest Small Cap Value
Oppenheimer Quest Opportunity Value
Fund
These arrangements also apply to shareholders of the following funds when
they merged (were reorganized) into various Oppenheimer funds on November 24,
1995:
Quest for Value U.S. Government Quest for Value New York Tax-Exempt
Income Fund Fund
Quest for Value Investment Quality Quest for Value National Tax-Exempt
Income Fund Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt
Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds or
purchased by such shareholder by exchange of shares of another Oppenheimer
fund that were acquired pursuant to the merger of any of the Former
Quest for Value Funds into that other Oppenheimer fund on November 24,
1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if that Association purchased shares of any of the Former Quest for
Value Funds or received a proposal to purchase such shares from OCC Distributors
prior to November 24, 1995.
- --------------------------------------------------------------------------------
Initial Sales Initial Sales
Number of Eligible Charge as a % of Charge as a % of Commission as %
Employees or Members Offering Price Net Amount Invested of Offering Price
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 49
- --------------------------------------------------------------------------------
<PAGE>
For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either the
sales charge rate in the table based on the number of members of an Association,
or the sales charge rate that applies under the Right of Accumulation described
in the applicable fund's Prospectus and Statement of Additional Information.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations also may purchase shares for their individual or
custodial accounts at these reduced sales charge rates, upon request to the
Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
Shareholders who were shareholders of the AMA Family of Funds on February
28, 1991 and who acquired shares of any of the Former Quest for Value
Funds by merger of a portfolio of the AMA Family of Funds.
Shareholders who acquired shares of any Former Quest for Value Fund by
merger of any of the portfolios of the Unified Funds.
|X| Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions. The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
withdrawals under an automatic withdrawal plan holding only either Class B
or Class C shares if the annual withdrawal does not exceed 10% of the
initial value of the account value, adjusted annually, and
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum value of
such accounts.
|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
withdrawals under an automatic withdrawal plan (but only for Class B or
Class C shares) where the annual withdrawals do not exceed 10% of the
initial value of the account value; adjusted annually, and
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account
value.
A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
o Oppenheimer U. S. Government Trust,
o Oppenheimer Bond Fund,
o Oppenheimer Disciplined Value Fund and
o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Account,
Connecticut Mutual Liquid Account Connecticut Mutual Total Return
Account
Account,
Connecticut Mutual Government Securities CMIA LifeSpan Capital Appreciation
Account Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Total Return
Account,
Account, CMIA LifeSpan
Connecticut Mutual Growth Account CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
n Class A Contingent Deferred Sales Charge. Certain shareholders of a Fund
and the other Former Connecticut Mutual Funds are entitled to continue to make
additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are: (1)
persons whose purchases of Class A shares of a Fund and other Former
Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a
result of direct purchases or purchases pursuant to the Fund's policies
on Combined Purchases or Rights of Accumulation, who still hold those
shares in that Fund or other Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention entered
into prior to March 18, 1996, with the former general distributor of
the Former Connecticut Mutual Funds to purchase shares valued at
$500,000 or more over a 13-month period entitled those persons to
purchase shares at net asset value without being subject to the Class A
initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut Mutual
Funds that were purchased at net asset value prior to March 18, 1996, remain
subject to the prior Class A CDSC, or if any additional shares are purchased
by those shareholders at net asset value pursuant to this arrangement they
will be subject to the prior Class A CDSC.
n Class A Sales Charge Waivers. Additional Class A shares of a Fund may be
purchased without a sales charge, by a person who was in one (or more) of the
categories below and acquired Class A shares prior to March 18, 1996, and still
holds Class A shares: (1) any purchaser, provided the total initial amount
invested in the Fund or any
one or more of the Former Connecticut Mutual Funds totaled $500,000 or
more, including investments made pursuant to the Combined Purchases,
Statement of Intention and Rights of Accumulation features available at
the time of the initial purchase and such investment is still held in
one or more of the Former Connecticut Mutual Funds or a Fund into which
such Fund merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the
Former Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former
Connecticut Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business,
profession, civic or charitable endeavor or other activity, and the
spouses and minor dependent children of such persons, pursuant to a
marketing program between CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund
or any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or
employee benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or
agency thereof, that is prohibited by applicable investment laws from
paying a sales charge or commission in connection with the purchase of
shares of any registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a merger,
acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and Class B
shares in certain retirement plan accounts pursuant to an Automatic
Withdrawal Plan but limited to no more than 12% of the original value
annually; or
(9) as involuntary redemptions of shares by operation of law, or under
procedures set forth in the Fund's Articles of Incorporation, or as
adopted by the Board of Directors of the Fund.
VI. Special Reduced Sales Charge for Former Shareholders of
Advance America Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income
Fund who acquired (and still hold) shares of those funds as a result of
the reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance
America Funds, Inc. on March 30, 1990, may purchase Class A shares of
those four Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of
Oppenheimer Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge: o the Manager and its
affiliates, o present or former officers, directors, trustees and employees (and
their
"immediate families" as defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its affiliates, and
retirement plans established by them or the prior investment advisor of
the Fund for their employees,
o registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
o dealers or brokers that have a sales agreement with the Distributor, if
they purchase shares for their own accounts or for retirement plans for
their employees,
o employees and registered representatives (and their spouses) of dealers
or brokers described in the preceding section or financial institutions
that have entered into sales arrangements with those dealers or brokers
(and whose identity is made known to the Distributor) or with the
Distributor, but only if the purchaser certifies to the Distributor at
the time of purchase that the purchaser meets these qualifications,
o dealers, brokers, or registered investment advisors that had entered
into an agreement with the Distributor or the prior distributor of the
Fund specifically providing for the use of Class M shares of the Fund
in specific investment products made available to their clients, and
o dealers, brokers or registered investment advisors that had entered
into an agreement with the Distributor or prior distributor of the
Fund's shares to sell shares to defined contribution employee
retirement plans for which the dealer, broker, or investment advisor
provides administrative services.
<PAGE>
- --------------------------------------------------------------------------------
Oppenheimer U.S. Government Trust
- --------------------------------------------------------------------------------
Internet Web Site:
www.oppenheimerfunds.com
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian Bank
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
KPMG LLP
707 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
67890
PX220.1299
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust of Registrant dated June 1, 1992:
Filed with Registrant's Post-Effective Amendment No. 20, 10/16/92, refiled with
Registrant's Post-Effective Amendment No. 24, 8/24/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(b) By-Laws as amended through 6/4/98: Previously filed with Post-Effective
Amendment No. 36, 10/29/98, and incorporated herein by reference.
(c) (i) Specimen Class A Share Certificate: Filed herewith.
(ii) Specimen Class B Share Certificate: Filed herewith.
(iii) Specimen Class C Share Certificate: Filed herewith.
(iv) Specimen Class Y Share Certificate: Filed herewith.
(d) Investment Advisory Agreement dated 5/25/95: Previously filed with
Registrant's Post-Effective Amendment No. 28, 5/26/95, and incorporated herein
by reference.
(e) (i) General Distributor's Agreement dated 12/10/92: Filed with Registrant's
Post-Effective Amendment No. 21, 8/20/93, and incorporated herein by reference.
(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99,
and incorporated herein by reference.
(iii) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99,
and incorporated herein by reference.
(iv) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement of Oppenheimer Trinity Value Fund (Reg. No. 333-79707), 8/25/99,
and incorporated herein by reference.
(f) (i) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant - 6/7/90): Previously filed with Post-Effective
Amendment No. 97 of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90, refiled
with Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg. No.
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 33, of the
Registration Statement for Oppenheimer Gold & Special Minerals Fund (Reg. No.
2-82590), 10/28/98, and incorporated herein by reference.
(g) (i) Custody Agreement dated 11/12/92: Filed with Post-Effective
Amendment No. 21 of the Registrant's Registration Statement, 8/20/93, and
incorporated herein by reference.
(ii) Foreign Custody Manager Agreement between Registrant and The Bank of
New York: Previously filed with Pre-Effective Amendment No.2 to the
Registration Statement of Oppenheimer World Bond Fund (Reg. 333-48973),
4/23/98, and incorporated herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 5/18/98: Previously filed with
Registrant's Post-Effective Amendment No. 35 to Registrant's Registration
Statement, 5/18/98, and incorporated herein by reference.
(j) Independent Auditors Consent: Filed herewith.
(k) Not applicable.
(l) No applicable.
(m) (i) Service Plan and Agreement for Class A shares under Rule 12b-1 of
the Investment Company Act of 1940 dated as of 6/10/93: Filed with
Registrant's Post-Effective Amendment No. 24, 8/24/94, and incorporated
herein by reference.
(ii) Amended and Restated Distribution and Service Plan and Agreement for
Class B Shares dated 2/12/98: Previously filed with Post-Effective
Amendment No. 36, 10/29/98, and incorporated herein by reference.
(iii) Amended and Restated Distribution and Service Plan and Agreement for
Class C Shares dated 2/12/98: Previously filed with Post-Effective
Amendment No. 36, 10/29/98, and incorporated herein by reference.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/24/99: Previously filed with Pre-Effective Amendment No. 1 to the Registration
Statement of Oppenheimer Senior Floating Rate Fund (Reg. No. 333-82579),
8/27/99, and incorporated herein by reference.
-- Powers of Attorney for all Trustees/Directors: Previously filed with
Pre-Effective Amendment No. 1 to the Registration Statement of Oppenheimer
Trinity Value Fund (Reg. No. 333-79707), 8/4/99, and incorporated herein by
reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seventh of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant
of expenses incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person, Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
Item 26. Business and Other Connections of the Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
26(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
Name and Current Position Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
<TABLE>
<CAPTION>
<S> <C>
Charles E. Albers,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds (since April 1998); a
Chartered Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the investment management
subsidiary of The Guardian Life Insurance
Company (since 1972).
Edward Amberger,
Assistant Vice President Formerly Assistant Vice President, Securities
Analyst for Morgan Stanley Dean Witter (May
1997 - April 1998); and Research Analyst (July
1996 - May 1997), Portfolio Manager (February
1992 - July 1996) and Department Manager (June
1988 to February 1992) for The Bank of New York.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; a Chartered Financial
Analyst; Senior Vice President of HarbourView
Asset Management Corporation; prior to March
1996 he was the senior equity portfolio manager
for the Panorama Series Fund, Inc. (the
"Company") and other mutual funds and pension
funds managed by G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former investment
adviser, which was a subsidiary of Connecticut
Mutual Life Insurance Company; he was also
responsible for managing the common stock
department and common stock investments of
Connecticut Mutual Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Formerly, a Vice President and Senior
Portfolio Manager at First of America
Investment Corp.
George Batejan,
Executive Vice President,
Chief Information Officer Formerly Senior Vice President, Group
Executive, and Senior Systems Officer for
American International Group (October 1994 -
May 1998).
Richard Bayha,
Senior Vice President None.
John R. Blomfield,
Vice President Formerly Senior Product Manager (November 1995
- August 1997) of International Home Foods and
American Home Products (March 1994 - October
1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice President (January 1992 -
February, 1996) of Asian Equities for Barclays
de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting (since
May 1996); an officer of other Oppenheimer
funds; formerly, an Assistant Vice President of
OppenheimerFunds, Inc./Mutual Fund Accounting
(April 1994 - May 1996), and a Fund Controller
for OppenheimerFunds, Inc.
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly, Assistant Vice President of Rochester
Fund Services, Inc.
Christopher Capot,
Assistant Vice President Assistant Vice President of Public Relations at
Webster Financial Corporation (December 1995 -
December 1998).
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management
Corporation.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President
and Chief Investment
Officer Chief Investment Officer (since 6/99); Chief
Executive Officer and Senior Manager of
HarbourView Asset Management Corporation;
Trustee (1993 - present) of Awhtolia College
- Greece; formerly Chief Executive Officer
(1993-June 1999).
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Vice President None.
Craig P. Dinsell
Executive Vice President Formerly, Senior Vice President of Human
Resources for Fidelity Investments-Retail
Division (January 1995 - January 1996),
Fidelity Investments FMR Co. (January 1996 -
June 1997) and Fidelity Investments FTPG (June
1997 - January 1998).
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January 1992) of
the Distributor; Executive Vice President,
General Counsel and a director of HarbourView
Asset Management Corporation Shareholder
Services, Inc., Shareholder Financial Services,
Inc. and Oppenheimer Partnership Holdings, Inc.
since (September 1995); President and a
director of Centennial Asset Management
Corporation (since September 1995); President
and a director of Oppenheimer Real Asset
Management, Inc (since July 1996); General
Counsel (since May 1996) and Secretary (since
April 1997) of Oppenheimer Acquisition Corp.;
Vice President and Director of OppenheimerFunds
International, Ltd. and Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds.
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer Millennium
Funds plc (since October 1997); an officer of
other Oppenheimer funds; formerly an Assistant
Vice President of OppenheimerFunds, Inc./Mutual
Fund Accounting (April 1994 - May 1996), and a
Fund Controller for OppenheimerFunds, Inc.
Leslie A. Falconio,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Katherine P. Feld,
Vice President and Secretary Vice President and
Secretary of the Distributor; Secretary of
HarbourView Asset Management Corporation,
and Centennial Asset Management Corporation;
Secretary, Vice President and Director of
Centennial Capital Corporation; Vice
President and Secretary of Oppenheimer Real
Asset Management, Inc.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio manager
of certain Oppenheimer funds; Presently he
holds the following other positions: Director
(since 1995) of ICI Mutual Insurance Company;
Governor (since 1994) of St. John's College;
Director (since 1994 - present) of
International Museum of Photography at George
Eastman House. Formerly, he held the following
positions: formerly, Chairman of the Board and
Director of Rochester Fund Distributors, Inc.
("RFD"); President and Director of Fielding
Management Company, Inc. ("FMC"); President and
Director of Rochester Capital Advisors, Inc.
("RCAI"); Managing Partner of Rochester Capital
Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester Tax Managed
Fund, Inc.; Director (1993 - 1997) of VehiCare
Corp.; Director (1993 - 1996) of VoiceMode.
David Foxhoven,
Assistant Vice President Formerly Manager, Banking Operations Department
(July 1996 - November 1998).
Jennifer Foxson,
Vice President None.
Dan Gangemi,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Daniel Garrity,
Vice President None.
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President Formerly, Vice President (1987 - 1997) for
Schroder Capital Management International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and Chief Financial Officer and Treasurer (since
March
Director 1998) of Oppenheimer Acquisition Corp.; a
Member and Fellow of the Institute of
Chartered Accountants; formerly, an
accountant for Arthur Young (London, U.K.).
Robert Grill,
Senior Vice President Formerly, Marketing Vice
President for Bankers Trust Company (1993 -
1996); Steering Committee Member,
Subcommittee Chairman for American Savings
Education Council (1995 - 1996).
Robert Haley
Assistant Vice President Formerly, Vice President of Information
Services for Bankers Trust Company (January
1991 - November 1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Chairman of OppenheimerFunds Formerly, Executive Vice President and
Services, a Division of OFI Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President and None.
Senior Counsel
Merrell Hora,
Assistant Vice President Research Fellow for the University of Minnesota
(July 1997- July 1998).
Scott T. Huebl,
Vice President None.
James Hyland,
Assistant Vice President Formerly Manager of Customer Research for
Prudential Investments (February 1998 - July
1999).
Kathleen T. Ives,
Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback
Vice President Senior Vice President and Deputy General
Counsel of Oppenheimer Capital (April
1989-November 1999).
Lewis Kamman
Vice President
Senior Consultant for Bell Atlantic Network
Integration, Inc. (June 1997-December 1998) and
Vice President for JP Morgan, Inc. (August
1994-June 1997).
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer and/or portfolio
manager for certain OppenheimerFunds;
formerly, Managing Director and Senior
Portfolio Manager at Prudential Global
Advisors (1989 - 1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain
Oppenheimer funds; a Chartered Financial
Analyst; a Vice President of HarbourView Asset
Management Corporation; prior to March 1996,
the senior bond portfolio manager for Panorama
Series Fund Inc., other mutual funds and
pension accounts managed by G.R. Phelps; also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Vice President None.
Steve Macchia,
Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995);
President and director (since June 1991) of
HarbourView Asset Management Corporation; and a
director of Shareholder Services, Inc. (since
August 1994), and Shareholder Financial
Services, Inc. (September 1995); President
(since September 1995) and a director (since
October 1990) of Oppenheimer Acquisition Corp.;
President (since September 1995) and a director
(since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company
subsidiary of OppenheimerFunds, Inc.; a
director of Oppenheimer Real Asset Management,
Inc. (since July 1996); President and a
director (since October 1997) of
OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of
OppenheimerFunds, Inc. and Oppenheimer
Millennium Funds plc (since October 1997);
President and a director of other Oppenheimer
funds; a director of Hillsdown Holdings plc (a
U.K. food company); formerly, an Executive Vice
President of OFI.
Philip T. Masterson,
Vice President Formerly an Associate at Davis,
Graham, & Stubbs (January 1998 - July 1998);
Associate; Myer, Swanson, Adams & Wolf, P.C.
(May 1996 - June 1998).
Loretta McCarthy,
Executive Vice President None.
Beth Michnowski,
Assistant Vice President Formerly Senior Marketing
Manager (May 1996 - June 1997) and Director
of Product Marketing (August 1992 - May
1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a Second Vice
President for Guardian Investments (June
1990 - October 1999).
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President and/or portfolio manager of
certain Oppenheimer funds (since April 1998); a
Certified Financial Analyst; formerly, a Vice
President and portfolio manager for Guardian
Investor Services, the management subsidiary of
The Guardian Life Insurance Company (since
1979).
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995
-November 1996) for Chase Investment Services
Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99).
Robert E. Patterson,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Frank Pavlak,
Vice President Branch Chief of Investment Company Examinations
at U.S. Securities and Exchange Commission
(January 1981 - December 1998).
James Phillips
Assistant Vice President None.
David Pellegrino Vice President.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President Formerly, Assistant Vice
President (April 1995 - January 1998) of Van
Kampen American Capital.
Julie Radtke,
Vice President Formerly Assistant Vice President and Business
Analyst for Pershing, Jersey City (August 1997
-November 1997); Senior Business Consultant,
American International Group (January 1996 -
July 1997).
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset
Management, Inc. (since March 1995).
Thomas Reedy,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Securities Analyst for the
Manager.
John Reinhardt,
Vice President: Rochester Division None
Jeffrey Rosen,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Marci Rossell,
Vice President and
Corporate Economist Economist with Federal
Reserve Bank of Dallas (April 1996 - March
1999).
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Andrew Ruotolo
Executive Vice President of Formerly Chief Operations Officer for American
OppenheimerFunds Services, a International Group (1997-August 1999).
division of OFI
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Jeff Schneider,
Vice President Director, Personal Decisions International.
Ellen Schoenfeld,
Assistant Vice President None.
David Schultz,
Senior Vice President
and Chief Executive Officer Senior Managing Director, President (since
April 1999) and Chief Executive Officer of
HarbourView Asset Management Corporation (since
June 1999).
Stephanie Seminara,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Christian D. Smith
Senior Vice President Formerly Co-head of the
Municipal Portfolio Management Team,
Portfolio Manager for Prudential Global
Asset Management (January 1990 - September
1999).
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer Equity trader.
Vice President
Cathleen Stahl,
Vice President Assistant Vice President & Manager of Women &
Investing Program
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of
Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
Jayne Stevlingson,
Vice President None.
Marlo Stil,
Vice President Investment Specialist and Career
Agent/Registered
Representative for MML Investor services,
Inc.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice
President of HarbourView Asset Management
Corporation.
Kevin Surrett,
Assistant Vice President Assistant Vice President of Product Development
At Evergreen Investor Services, Inc. (June 1995
- -
May 1999).
Wayne Strauss,
Assistant Vice President: Rochester
Division Formerly Senior Editor, West Publishing Company
(January 1997 - March 1997).
James C. Swain,
Vice Chairman of the Board Chairman, CEO and
Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; formerly,
President and Director of Centennial Asset
Management Corporation and Chairman of the
Board of Shareholder Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
Jay Tracey,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero,
Vice President Chief Financial officer for the Sovlink Group
(April 1996 - June 1999).
Teresa Ward,
Vice President None.
Jerry Webman,
Senior Vice President Director of New York-based tax-exempt fixed
income Oppenheimer funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; a
Chartered Financial Analyst; Vice President
of HarbourView Asset Management Corporation.
William L. Wilby,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of HarbourView Asset Management
Corporation.
Donna Winn, Senior Vice President/Distribution Marketing.
Senior Vice President
Brian W. Wixted, Formerly Principal and Chief Operating Officer,
Senior Vice President and Bankers Trust Company - Mutual Fund Services
Treasurer Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS
First Boston Investment Management Corp.
(September 1991 - March 1995); and Vice
President and Accounting Manager, Merrill
Lynch Asset Management (November 1987 -
September 1991).
Carol Wolf,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; Vice President of Centennial
Asset Management Corporation; Vice President,
Finance and Accounting; Point of Contact:
Finance Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital.
Caleb Wong,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds (since
6/99) .
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of Shareholder Services,
Inc. (since May 1985), Shareholder Financial
Services, Inc. (since November 1989),
OppenheimerFunds International Ltd. (since
1998), Oppenheimer Millennium Funds plc (since
October 1997); an officer of other Oppenheimer
funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management
Corporation.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer Quest /Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Preservation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Europe Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Large Cap Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer Trinity Core Fund
Oppenheimer Trinity Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Capital Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Small Cap Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
26(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30064
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Peter W. Brennan Vice President None
8826 Amberton Lane
Charlotte, NC 28226
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Mary Crooks(1)
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President, Director Oppenheimer funds.
and General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
141 Breon Lane
Elkton, MD 21921
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary & Senior Counsel
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
4734 Highland Place Center
Lakeland, FL 33813
Luiggino Galleto Vice President None
10302 Reisling Court
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale, GA 30002
Lucio Giliberti Vice President None
78 Metro Vista Drive
Hawthorne, NJ 07506
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Linda Harding Vice President/FID None
6229 Love Drive
#413
Irving, TX 75039
Webb Heidinger Vice President None
138 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Tammy Hospodar Vice President None
30864 Paloma Court
Westlake Village, CA 91362
Edward Hrybenko (2) Vice President None
Richard L. Hymes (2) Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Lynn Jensen Vice President None
5120 Patterson Street
Long Beach, CA 90815
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
10687 East Ida Avenue
Englewood, CO 80111
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport, CA 92660
John Nesnay Vice President None
3410 East County Line
#17
Highlands Ranch, CO 80126
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Christopher L. Quinson (2) Vice President/ None
Variable Annuities
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President & Director None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy J. Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Marlo Stil Vice President None
8579 Prestwick Drive
La Jolla, CA 92037
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Sarah Turpin Vice President None
3517 Milton Avenue
Dallas, TX 75205
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
935 Wood Run Court
South Lyon, MI 48178
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Brian W. Wixted (1) Vice President Vice President and
and Treasurer Treasurer of the
Oppenheimer funds.
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and rules
promulgated thereunder are in the possession of OppenheimerFunds, Inc. at its
offices at 6803 S. Tucson Way, Englewood, CO 80112.
Item 29. Management Services
Not applicable
Item 30. Undertakings
(a) Not applicable
(b) Not applicable
(c) Not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and State of New York on the 20th day of December, 1999.
Oppenheimer U.S. Government Trust
By: /s/ Bridget A. Macaskill*
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
atement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
/s/ Leon Levy* Chairman of the December 20, 1999
- ------------------------------------- Board of Trustees
Leon Levy
/s/ Donald W. Spiro* Vice Chairman and December
20, 1999
- ------------------------------------- Trustee
Donald W. Spiro
/s/ Robert G. Galli* Trustee
December 20, 1999
- -------------------------------------
Robert G. Galli
/s/ Phillip A. Griffiths Trustee
December 20, 1999
- ------------------------------------
Phillip A. Griffiths
/s/ Benjamin Lipstein* Trustee December 20, 1999
- -------------------------------------
Benjamin Lipstein
/s/ Bridget A. Macaskill* President, December
20, 1999
- ------------------------------------- Principal Executive
Bridget A. Macaskill Officer, Trustee
/s/ Elizabeth B. Moynihan* Trustee
December 20, 1999
- -------------------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee December 20, 1999
- -------------------------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee
December 20, 1999
- -------------------------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee
December 20, 1999
- -------------------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee
December 20, 1999
- -------------------------------------
Pauline Trigere
/s/ Brian W. Wixted* Treasurer December
20, 1999
- -------------------------------------
Brian W. Wixted
/s/ Clayton K. Yeutter* Trustee December 20, 1999
- -------------------------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
- ---------------------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER U.S. GOVERNMENT TRUST
EXHIBIT INDEX
Exhibit No. Description
23(c)(i) Specimen Share Certificate for Class A shares
23(c)(ii) Specimen Share Certificate for Class B shares
23(c)(iii) Specimen Share Certificate for Class C shares
23(c)(iv) Specimen Share Certificate for Class Y shares
23(j) Independent Auditors Consent
220-PartC-B99.doc
OPPENHEIMER U.S. GOVERNMENT TRUST
Class A Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within 8-1/4"
x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.]
XX-000000
(upper right box, CLASS A SHARES below cert. no.)
(centered below boxes)
OPPENHEIMER U.S. GOVERNMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number) CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST
OPPENHEIMER U.S. GOVERNMENT TRUST
(hereinafter called the "Fund"), transferable only on the books of the
Fund By the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of
the provisions of the Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its duly
authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER U.S. GOVERNMENT TRUST
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ................ hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class A Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
THIS SPACE MUST NOT BE COVERED IN ANY WAY
220-Certificate-A99.doc
OPPENHEIMER U.S. GOVERNMENT TRUST
Class B Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within 8-1/4"
x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.]
XX-000000
(upper right box, CLASS B SHARES below cert. no.)
(centered below boxes)
OPPENHEIMER U.S. GOVERNMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number) CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST
OPPENHEIMER U.S. GOVERNMENT TRUST
(hereinafter called the "Fund"), transferable only on the books of the
Fund By the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of
the provisions of the Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its duly
authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER U.S. GOVERNMENT TRUST
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received .............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class B Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
THIS SPACE MUST NOT BE COVERED IN ANY WAY
220-Certificate-B99.doc
OPPENHEIMER U.S. GOVERNMENT TRUST
Class C Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within 8-1/4"
x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.]
XX-000000
(upper right box, CLASS C SHARES below cert. no.)
(centered below boxes)
OPPENHEIMER U.S. GOVERNMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number) CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST
OPPENHEIMER U.S. GOVERNMENT TRUST
(hereinafter called the "Fund"), transferable only on the books of the
Fund By the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of
the provisions of the Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its duly
authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER U.S. GOVERNMENT TRUST
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received ............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class C Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
THIS SPACE MUST NOT BE COVERED IN ANY WAY
220-Certificate-C99.doc
OPPENHEIMER U.S. GOVERNMENT TRUST
Class Y Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within 8-1/4"
x 10-3/4" decorative border, 5/16" wide)
(upper left corner, box with heading: NUMBER [of shares]
(upper right corner) [share certificate no.]
XX-000000
(upper right box, CLASS Y SHARES below cert. no.)
(centered below boxes)
OPPENHEIMER U.S. GOVERNMENT TRUST
A MASSACHUSETTS BUSINESS TRUST
(at left) THIS IS TO CERTIFY THAT (at right) SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number) CUSIP
(at left) is the owner of
(centered) FULLY PAID CLASS Y SHARES OF BENEFICIAL INTEREST
OPPENHEIMER U.S. GOVERNMENT TRUST
(hereinafter called the "Fund"), transferable only on the books of the
Fund By the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of
the provisions of the Declaration of Trust of the Fund to all of which the
holder by acceptance hereof assents. This certificate is not valid until
countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Fund and the signatures of its duly
authorized officers.
(at left of seal) Dated: (at right of seal)
(signature) (signature)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
- ----------------------- -------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER U.S. GOVERNMENT TRUST
SEAL
1982
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically) Countersigned
OPPENHEIMERFUNDS SERVICES
[A DIVISION OF OPPENHEIMERFUNDS, INC.]
Denver (CO.) Transfer Agent
By ____________________________
Authorized Signature
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common TEN ENT - as tenants by the entirety JT TEN WROS
NOT TC - as joint tenants with
rights of suvivorship and not
as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ___________________
(State)
Additional abbreviations may also be used though not on above list.
For Value Received .............. hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE
(box for identifying number)
<PAGE>
(Please print or type name and address of assignee)
________________________________________________Class Y Shares of beneficial
interest represented by the within certificate, and do hereby irrevocably
constitute and appoint ___________________________ Attorney to transfer the said
shares on the books of the within named Fund with full power of substitution in
the premises.
Dated: ______________________
Signed: __________________________
-----------------------------------
(Both must sign if joint owners)
Signature(s) __________________________
guaranteed Name of Guarantor
by: _____________________________
Signature of
Officer/Title
(text printed NOTICE: The signature(s) to this assignment must
correspond
vertically to right correspond with the name(s) as written upon the face
of the
of above paragraph certificate in every particular without alteration or
enlargement
or any change whatever.
(text printed in Signatures must be guaranteed by a financial
box to left of institution of the type described in the current
signature(s)) prospectus of the Fund.
PLEASE NOTE: This document contains a watermark OppenheimerFunds when viewed at
an angle. It is invalid without this "four hands" watermark: logotype
THIS SPACE MUST NOT BE COVERED IN ANY WAY
220-Certificate-Y99.doc
Independent Auditors' Consent
The Board of Trustees
Oppenheimer U.S. Government Trust Fund:
We consent to the use in this Registration Statement of Oppenheimer U.S.
Government Trust Fund of our report dated September 22, 1999 included in the
Statement of Additional Information, which is part of such Registration
Statement, and to the references to our firm under the headings "Financial
Highlights" appearing in the Prospectus, which is also part of such Registration
Statement, and "Independent Auditors" appearing in the Statement of Additional
Information.
/s/ KPMG LLP
KPMG LLP
Denver, Colorado
December 20, 1999
