Registration No. 33-02769
File No. 811-4563
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. _____
/ /
POST-EFFECTIVE AMENDMENT NO. 17
/ X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 / X /
AMENDMENT NO. 16
/ X /
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(formerly named "Oppenheimer Government Securities Fund")
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street
Denver, Colorado 80231
(Address of Principal Executive Offices)
1-303-671-3200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box):
/ / Immediately upon filing pursuant to paragraph (b)
/ / On _______________, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ X / On May 1, 1994, pursuant to paragraph (a)
of Rule 485.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's
fiscal year ended September 30, 1993, was filed on November 24, 1993.
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FORM N-1A
Cross Reference Sheet
Part A of
Form N-1A
Item No. Prospectus Heading
1 Cover Page
2 Expenses
3 Financial History; Performance of the Fund
4 Cover Page; Investment Objective and Policies
5 Expenses; How the Fund is Managed
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes
7 How to Exchange Shares; Special Investor Services; Service Plan
for Class A Shares; Distribution and Service Plan for Class B
Shares; How to Buy Shares; How to Sell Shares
8 How to Sell Shares; How to Exchange Shares; Special Investor
Services
9 *
Part B of
Form N-1A
Item No. Statement of Additional Information Heading
10 Cover Page
11 Cover Page
12 *
13 Investment Objective and Policies; Additional Investment
Restrictions
14 Trustees and Officers of the Fund; How the Fund is Managed
15 Trustees and Officers of the Fund - Major Shareholders; How the
Fund is Managed
16 How the Fund is Managed; Distribution and Service Plans;
Additional Information about the Fund; Back Cover
17 How the Fund is Managed; Brokerage Policies of the Fund
18 Additional Information about the Fund
19 Your Investment Account
20 Dividends, Capital Gains and Taxes
21 Distribution and Service Plans; How the Fund is Managed;
Additional Information about the Fund; Financial Statements
22 Dividends, Capital Gains and Taxes
23 Financial Statements
____________________
*Not applicable or negative answer
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Prospectus dated May 1, 1994.
Oppenheimer Limited-Term Government Fund (the "Fund") is a mutual fund
that seeks high current return and safety of principal. Its previous name
was "Oppenheimer Government Securities Fund." The Fund invests
principally in obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities, including mortgage-backed securities
issued by Government National Mortgage Association ("GNMA"). While
payments of principal and interest on certain U.S. Government securities
(including the GNMA Certificates which the Fund will hold) are guaranteed
by the U.S. Government or its agencies or instrumentalities, neither the
principal value of those securities nor the net asset value of shares of
the Fund is guaranteed, and therefore the Fund's net asset value per share
is subject to fluctuations due to changes in the value of its portfolio
securities. Under normal circumstances, the Fund will maintain an
effective dollar-weighted average portfolio maturity of not more than
three years.
The Fund offers two classes of shares: (1) Class A shares sold at a
public offering price that includes a front-end sales charge, and (2)
Class B shares, which are sold without a front-end sales charge, although
you may pay a sales charge when you redeem your shares, depending on how
long you own them. Class B shares are also subject to an annual "asset-
based sales charge." Each class of shares bears different expenses. In
deciding which class of shares to buy, you should consider how much you
plan to purchase, how long you plan to keep your shares, and other factors
discussed in "How to Buy Shares" on page ____.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read it carefully and keep it for future
reference. You can find more detailed information about the Fund in the
May 1, 1994, Statement of Additional Information. For a free copy, call
Oppenheimer Shareholder Services, the Fund's Transfer Agent, at 1-800-525-
7048, or write to the Transfer Agent at the address on the back cover.
The Statement has been filed with the Securities and Exchange Commission
("SEC") and is incorporated into this Prospectus by reference (which means
that it is legally part of this Prospectus).
Shares of the Fund are not deposits or obligations of any bank, nor are
they guaranteed by any bank or insured by the FDIC or any other agency,
and involve investment risks including possible loss of principal.
This Prospectus sets forth concisely information about the Fund that a
prospective investor should know before investing. A Statement of
Additional Information about the Fund (the "Additional Statement"), dated
February 1, 1994, has been filed with the Securities and Exchange
Commission (the "SEC") and is available without charge upon written
request to Oppenheimer Shareholder Services (the "Transfer Agent"), P.O.
Box 5270, Denver, Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above. The Statement of Additional Information
(which is incorporated in its entirety by reference in this Prospectus)
contains more detailed information about the Fund and its management.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contents
Page
INFORMATION ABOUT THE FUND
Expenses
Financial History
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
YOUR INVESTMENT ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange
Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Ratings Categories
<PAGE>
INFORMATION ABOUT THE FUND
Expenses
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution and other services and those expenses
are reflected in the Fund's net asset value per share. As a shareholder,
you pay these expenses indirectly. Shareholders pay other expenses
directly, such as sales charges. The following tables are provided to
help you understand your direct expenses of investing and your share of
the Fund's operating expenses you might expect to bear indirectly, based
on the Fund's expenses during its fiscal year ended September 30, 1993 (as
to Class A shares) and its fiscal period ended September 30, 1993 (as to
Class B shares). Class B shares were first publicly offered on May 3,
1993. The sales charge and deferred sales charge rates in the table
reflect the current rates applicable to purchases of Fund shares.
- Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to pages ____ through _____ for an
explanation of how and when these charges apply.
Class A Shares Class B Shares
Maximum Sales Charge on Purchases
(as a % of offering price) 3.50% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None* 4% in the
first year,
declining to 1% in the
fifth year and eliminated
thereafter
Redemption Fee None** None**
Exchange Fee $5.00*** $5.00***
__________
*If you invest more than $1 million in Class A shares, you may have to pay
a sales charge of up to 1% if you sell your shares within 18 calendar
months from the end of the calendar month during which you purchased those
shares. See "How to Buy Shares - Class A Shares," below.
** There is a $15 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check, or by Automated Clearing
House ("ACH") transfer through AccountLink, or for which check writing
privileges are used. See "How to Sell Shares."
***Fee is waived for automated exchanges on PhoneLink, described in "How
to Buy Shares."
- Annual Fund Operating Expenses are paid out of the Fund's assets.
The Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (the "Manager") and other regular expenses for
services, such as transfer agent fees, custodial fees, audit, legal and
other business expenses. The following numbers are projections based on
the Fund's historical expenses and are calculated as a percentage of
average net assets. The actual numbers may be more or less, depending on
a number of factors, including the Fund's actual net assets.
Class A Shares Class B Shares
Management Fees 0.48% 0.47%
12b-1 Distribution Plan Fees None 0.75%
Shareholder Service Plan Fees 0.25% 0.25%
Other Expenses 0.29% 0.40%
------ --------
Total Fund Operating Expenses 1.02% 1.87%
- Examples. Assume that you made a $1,000 investment in the Fund,
that the Fund's annual return is 5% and that its operating expenses are
as described above in the charts.
If you redeemed your shares at the end of each period below, your
investment would incur the following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $57 $78 $101 $166
Class B Shares $69 $89 $121 $176
If you did not redeem your investment, it would incur the
following expenses:
1 year 3 years 5 years 10 years*
Class A Shares $57 $78 $101 $166
Class B Shares $19 $59 $101 $176
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long-term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales
charge allowed under applicable regulations, because of the effect of the
asset-based sales charge and contingent deferred sales charge. The
automatic conversion is designed to minimize the likelihood that this will
occur. Please refer to "How to Buy Shares - Class B Shares" for more
information.
This example illustrates the effect of expenses on an investment, but
it is not meant to state or predict actual or expected costs or investment
returns, all of which will vary.
<PAGE>
Financial History
The table on this page presents selected per share data and ratios for
the Fund. The fiscal years ended September 30, 1990, 1991, 1992 and
1993, has been audited by Deloitte & Touche, the Fund's independent
auditors. The information in the table (except for total return) for the
fiscal period ended September 30, 1986 (from the commencement of
operations on March 10, 1986) and the fiscal years ended September 30,
1987, 1988, and 1989, was audited by the Fund's prior independent
auditors. The report of Deloitte & Touche on the financial statements of
the Fund for the fiscal year ended September 30, 1993 (as to Class A
shares) and its fiscal period ended September 30, 1993 (as to Class B
shares) is included in the Statement of Additional Information. The
public offering of Class B shares of the Fund commenced on May 3, 1993.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high current return and safety of principal.
As a matter of fundamental policy the Fund seeks its objective by
investing only in obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities ("U.S. Government Securities"), and
repurchase agreements on such securities, and may write covered calls and
use hedging instruments approved by its Board of Trustees (the "Board").
U.S. Government Securities include the following:
-U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less), Treasury Notes (which have maturities of
one to ten years) and Treasury Bonds (which have maturities generally
greater than ten years); U.S. Treasury obligations are backed by the full
faith and credit of the United States; and
-Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These are obligations supported by any of the
following: (a) the full faith and credit of the U.S. Government, such as
GNMA modified pass-through certificates; (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S.
Government, such as bonds issued by Federal National Mortgage Association
("Fannie Mae"); (c) the discretionary authority of the U.S. Government to
purchase the obligations of the agency or instrumentality; or (d) the
credit of the instrumentality, such as obligations of Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Agencies and instrumentalities the
securities of which are supported by the discretionary authority of the
U.S. Government to purchase such securities and which the Fund may
purchase (under (c) above) include: Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Freddie Mac and Fannie Mae.
The Fund will invest in GNMA certificates only of the "fully-modified
pass-through" type, which are guaranteed as to timely payment of principal
and interest by the full faith and credit of the United States Government.
GNMA certificates are debt securities that represent an interest in one
or a pool of mortgages that are insured by the Federal Housing
Administration or the Farmers Home Administration, or are guaranteed by
the Veterans Administration. The Fund may also invest in other mortgage-
backed securities that are issued or guaranteed by agencies or
instrumentalities of the U.S. Government, such as Freddie Mac and Fannie
Mae. The effective maturity of a mortgage-backed security may be
shortened by unscheduled or early payment of principal and interest on the
underlying mortgages, which may affect the effective yield of such
securities. The principal that is returned may be invested in instruments
having a higher or lower yield than the prepaid instruments, depending on
then-current market conditions. Such securities therefore may be less
effective as a means of "locking in" attractive long-term interest rates
and may have less potential for appreciation during periods of declining
interest rates than conventional bonds with comparable stated maturities.
If the Fund buys mortgage-backed securities at a premium, prepayments of
principal and foreclosures of mortgages may result in some loss of the
Fund's principal investment to the extent of the premium paid.
Investment Policies and Strategies. The Fund will maintain an effective
dollar-weighted average portfolio maturity of not more than three years
under normal circumstances. In calculating maturity, the Fund will
consider various factors, including anticipated payments of principal.
See "Investment Objective and Policies" in the Statement of Additional
Information for more information on the Fund's calculation of portfolio
maturity.
Although U.S. Government Securities involve little credit risk, their
values will fluctuate depending on prevailing interest rates. Because of
these factors, the Fund's share value and yield are not guaranteed and
will fluctuate, and there can be no assurance that the Fund's objective
will be achieved. The magnitude of those fluctuations generally will be
greater when the average maturity of the Fund's portfolio securities is
longer. See "Investment Objective and Policies" in the Statement of
Additional Information for further information on U.S. Government
Securities. Because the yields on U.S. Government Securities are
generally lower than on corporate debt securities, the Fund may attempt
to increase the income it can earn from U.S. Government Securities by
writing covered call options against them, when market conditions are
appropriate. Writing covered calls is explained below, under "Other
Investment Techniques and Strategies."
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, which is described above, as well as
investment policies that it follows to try to achieve its objective.
Additionally, it uses certain investment techniques and strategies in
carrying out those policies. The Fund's investment policies and practices
are not "fundamental" unless a particular policy is identified in this
Prospectus as "fundamental."
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The term
"majority" is defined in the Investment Company Act to be a particular
level of shareholder approval (and this term is explained in the Statement
of Additional Information). The Fund's investment objective is a
"fundamental policy." The Fund's Board of Trustees may change non-
fundamental policies, strategies and techniques without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
Portfolio Turnover
U.S. Government Securities may be purchased or sold without regard to
the length of time they have been held, to attempt to take advantage of
short-term differentials in yields, with the objective of seeking income
while seeking safety of principal. While short-term trading increases
portfolio turnover, the Fund incurs little or no brokerage costs for U.S.
Government Securities. See "Dividends, Capital Gains and Taxes" in this
Prospectus and "Brokerage Policies of the Fund" in the Statement of
Additional Information for further details.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. The Statement of Additional Information contains more
detailed information about these practices, including limitations designed
to reduce some of the risks. For more information, please refer to the
description of these techniques under the same headings in "Other
Investment Techniques and Strategies" in the Statement of Additional
Information.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities amounting to not more than 25% of its total assets to brokers,
dealers and other financial institutions, subject to certain conditions
described in the Statement of Additional Information. The Fund presently
does not intend to lend its portfolio securities, but if it does, the
value of securities loaned is not expected to exceed 5% of the value of
its total assets.
- Writing Covered Calls. As part of the Fund's investment objective,
to earn additional income the Fund may write (sell) call options on U.S.
Government Securities. The Fund receives premiums from the calls it
writes. The calls are "covered" in that the Fund must own the securities
that are subject to the call (although it may substitute other qualifying
securities). There is no limit on the amount of the Fund's total assets
that may be subject to calls. In writing calls there are risks that the
Fund may forgo profits on an increase in the price of the underlying
security if the call is exercised. In addition, the Fund could experience
capital losses that might cause previously-distributed income to be re-
characterized for tax purposes as a return of capital to shareholders.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis and may purchase or sell
securities on a "delayed delivery" basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund
if the value of the security declines prior to the settlement date. As
a matter of fundamental policy, the Fund will not enter into when-issued
or delayed delivery transactions unless the acceptance and delivery of the
security to the Fund is mandatory, occurs within 120 days of the trade
date, and is settled in cash on the settlement date.
Repurchase Agreements
The Fund may enter into repurchase agreements, subject to the following
limits. The Fund will not enter into repurchase transactions that will
cause more than 25% of the Fund's net assets to be subject to repurchase
agreements having a maturity of seven days or less, or that will cause
more than 5% of the Fund's net assets to be subject to repurchase
agreements having a maturity beyond seven days. As a matter of
fundamental policy, the Fund will not enter into repurchase agreements
unless ownership and control of the securities subject to the agreement
are transferred to the Fund. Repurchase agreements must be fully
collateralized. However, if the vendor fails to pay the re-sale price on
the delivery date, the Fund may experience costs in disposing of the
collateral and losses if there is any delay in doing so.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements under which the
Fund sells securities and agrees to repurchase them at an agreed upon time
and at an agreed upon price. The difference between the amount the Fund
receives for the securities and the amount it pays on repurchase is deemed
to be a payment of interest. For further information, see "Investment
Objective and Policies - Reverse Repurchase Agreements" in the Statement
of Additional Information.
- Hedging With Options and Futures Contracts. The Fund may buy and
sell options and futures contracts to manage its exposure to changing
interest rates and securities prices. Some of these strategies, such as
selling futures, buying puts and writing calls, hedge the Fund's portfolio
against price fluctuations. Other hedging strategies, such as buying
futures, writing puts and buying calls, tend to increase market exposure.
The Fund may invest in interest rate futures, financial futures, interest
rate swap transactions, and call and put options on debt securities
futures and bond indices. All of these are referred to as "hedging
instruments."
A call or put may not be purchased if the value of all of the Fund's
call and put options would exceed 5% of the value of the Fund's total
assets. The Fund's option writing activities will not exceed 100% of its
assets, in the aggregate. Writing puts requires the segregation of liquid
assets to cover the put. The Fund will not write a put if it will require
more than 50% of the Fund's net assets to be segregated to cover the put
obligation. The Fund does not use futures and options on futures for
speculative purposes.
The use of hedging instruments may involve special risks. Options and
futures can be volatile investments and involve certain risks. 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 or if it
could not close out a position because of an illiquid market.
There are special risks in particular hedging strategies. For example,
in writing puts, there is the risk that the Fund may be required to buy
the underlying security at a disadvantageous price. Interest rate swaps
are subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks, because the Fund could be
obligated to pay more under its swap agreements than it receives under
them, as a result of interest rate changes. These risks and the hedging
strategies the Fund may use are described in greater detail in the
Statement of Additional Information.
Other Investment Restrictions. The Fund has other investment restrictions
which, together with its investment objective, are "fundamental" policies,
that is, subject to change only by approval of a majority of shareholders.
Under the Fund's fundamental policies, it may not do any of the
following: (a) invest in any security other than U.S. Government
Securities, including repurchase agreements thereon; the Fund may write
covered calls and use hedging instruments approved by the Board; (b)
borrow money, except from banks for temporary purposes in amounts not in
excess of 5% of the value of its assets; no assets of the Fund may be
pledged, mortgaged or hypothecated other than to secure a borrowing, and
then in amounts not exceeding 7.5% of the Fund's total assets; borrowings
may not be made for leverage, but only for liquidity purposes to satisfy
redemption requests when liquidation of portfolio securities is considered
inconvenient or disadvantageous; however, the Fund may enter into reverse
repurchase agreements and when-issued and delayed delivery transactions
as described herein; such prohibition against pledging, mortgaging or
hypothecating assets does not bar the Fund from escrow arrangements for
options trading or collateral or margin arrangements in connection with
hedging instruments approved by the Board; (c) enter into a repurchase
transaction that will cause more than 25% of the Fund's total assets to
be subject to such agreements; (d) make loans, except that the Fund may
purchase or hold debt obligations and enter into repurchase transactions
and may lend its portfolio securities in amounts not exceeding 25% of the
total assets of the Fund if such loans are collateralized by cash or U.S.
Government Securities in amounts equal at all times to at least 100% of
the value of the securities loaned, including accrued interest; (e)
purchase restricted or illiquid securities (including repurchase
agreements of more than seven days' duration and other securities that are
not readily marketable) if more than 5% of the Fund's total assets would
be invested in such securities; (f) purchase any securities (other than
U.S. Government Securities) that would cause more than 5% of the Fund's
total assets to be invested in securities of a single issuer, or purchase
more than 10% of the outstanding voting securities of an issuer; or (g)
deviate from its other fundamental policies described in "Investment
Objective and Policies."
All of the percentage limitations described above and elsewhere in this
Prospectus apply to the Fund only at the time of purchasing a security,
and the Fund need not dispose of a security merely because the Fund's
assets have changed or the security has increased in value relative to the
size of the Fund. There are other fundamental policies discussed in
"Additional Investment Restrictions" the Statement of Additional
Information, along with more information about the Fund's non-fundamental
investment policies and strategies.
How the Fund is Managed
Organization and History. The Fund was organized in 1986 as a
Massachusetts business trust. The Fund is an open-end diversified
management investment company with an unlimited number of authorized
shares of beneficial interest. Organized as a series fund, the Fund
presently has only one series.
The Board of Trustees has the power, without shareholder approval, to
divide unissued shares of this Fund into two or more classes, each having
its own dividends, distributions and expenses. Each class may have a
different net asset value. The Board has done so, and the Fund currently
has two classes of shares, Class A and Class B. Each share has one vote
at shareholder meetings, with fractional shares voting proportionally.
Only shares of a class vote together on matters that affect that class
alone. Shares are freely transferrable.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet throughout the year to oversee the Fund's activities, review
performance, and review the actions of the Manager. "Trustees and
Officers of the Fund" in the Statement of Additional Information names the
Trustees and provides more information about them and the officers of the
Fund. Although the Fund is not required by law to hold annual meetings,
it may hold meetings from time to time on important matters, and
shareholders have the right to call a meeting to remove Trustees or to
take other action described in the Declaration of Trust.
The Manager and its Affiliates. The Fund is managed by the Manager, which
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 which states the
Manager's responsibilities and its fees, and describes the expenses that
the Fund pays to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $26 billion as
of December 31, 1993, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is David Rosenberg, a Vice President of the
Manager. He has been responsible for the day-to-day management of the
Fund's portfolio since January, 1994. Mr. Rosenberg also serves as a
portfolio manager of another OppenheimerFund. Previously he was an
officer and portfolio manager for Delaware Investment Advisors and for one
of its mutual funds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.500% of the first $100 million of
the Fund's average annual net assets, 0.450% of the next $150 million,
0.425% of the next $250 million and 0.400% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.48% of
average annual net assets for Class A shares and 0.47% for Class B shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, transfer agency fees, legal and auditing costs. Those
expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses affect the net asset value of
shares, and therefore are indirectly borne by shareholders through their
investment. More information about the investment advisory agreement and
the other expenses paid by the Fund is contained in the Statement of
Additional Information.
There is also information about the Fund's brokerage policies and
portfolio transactions in "Brokerage Policies of the Fund" in the
Statement of Additional Information. Because the Fund purchases most of
its portfolio securities directly from the sellers and not through
brokers, it therefore incurs relatively little expense for brokerage.
From time to time it may use brokers when buying portfolio securities.
When deciding which brokers to use in those cases, the investment advisory
agreement allows the Manager to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager also serves as
investment adviser.
- The Distributor. The Fund's shares are sold through dealers or
brokers that have a sales agreement with Oppenheimer Funds Distributor,
Inc., a subsidiary of the Manager that acts as the Distributor. The
Distributor also distributes the shares of other mutual funds managed by
the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries to the
Transfer Agent at the address and toll-free numbers shown elsewhere in
this Prospectus or on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses certain terms to
illustrate its performance: "total return" and "yield." These terms are
used to show the performance of each class of shares separately, because
the performance of each class of shares will usually be different, as a
result of the different kinds of expenses each class bears. This
performance information may be in advertisements about the Fund or in
communications to shareholders. It may be useful to help you see how well
your investment has done and to compare it to other funds or market
indices, as we have done below.
It is important to understand that the Fund's yields and total returns
represent past performance and should not be considered to be predictions
of future returns or performance. This performance data is described
below, but more detailed information about how total returns and yields
are calculated is contained in the Statement of Additional Information,
which also contains information about indices and other ways to compare
the Fund's performance. The Fund's investment performance will vary,
depending on market conditions, the composition of the portfolio, expenses
and which class of shares you purchase.
- Total Returns. There are different types of "total returns" used
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. 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 the Fund's actual year-
by-year performance.
When total returns are quoted for Class A shares, they reflect the
payment of the maximum initial sales charge. Total returns may be quoted
"at net asset value," without considering the effect of the sales charge,
and these returns would be reduced if sales charges were deducted. When
total returns are shown for Class B shares, they reflect the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown, or else they may be shown based just on the change
in net asset value, without considering the effect of the contingent
deferred sales charge.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1993,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index. All performance information at
offering price reflects the current sales charge rates on shares of each
class.
Management's Discussion of Performance
During the Fund's fiscal year ended September 30, 1993, U.S. interest
rates continued to decline and the economy remained in a slow-growth mode.
During the past fiscal year, the Manager maintained a majority of the
Fund's investments in mortgage-backed securities, so as to help maximize
current income, and, to safeguard the Fund's portfolio from risks
associated with a rise in interest rates, shifted a portion of the Fund's
assets from long-term U.S. Treasury bonds to short-term U.S. Treasury
notes.
- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each Class
of shares of the Fund from the inception of the Class held through
September 30, 1993, with all dividends and capital gains distributions
reinvested in additional shares. The graph reflects the deduction of the
current 3.50% maximum initial sales charge on Class A shares and the
maximum 4% contingent deferred sales charge for Class B shares.
Because the Fund invests in a variety of debt securities in domestic
and foreign markets, the Fund's performance is compared to the performance
of two market indices: the Lehman Aggregate Bond Index, a broad-based,
unmanaged index of U.S. corporate bond issues, U.S. government securities
and mortgage-backed securities, to measure the performance of the domestic
debt securities market; and the Salomon Brothers World Government Bond
Index, an unmanaged index of fixed-rate bonds having a maturity of one
year or more, to provide a benchmark of fixed income performance on a
world-wide basis. Index performance reflects reinvestment of income but
not capital gains or transaction costs, and none of the data below shows
the effect of taxes. While index comparisons may be useful to provide a
benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the securities in any one index and the
index data does not reflect any assessment of the risk of the investments
included in the index.
Oppenheimer Limited-Term Government Fund
Comparison of Change in Value
of $10,000 Hypothetical Investment to
Lehman Brothers U.S. Government Bond Index
(Graph)
Past Performance is not predictive of future performance.
Oppenheimer Limited-Term Government Fund
Average Annual Total Returns at 9/30/93
1 Year 5 Years Life of Fund
Class A: 3.84% 9.39% 8.79% (from 3/10/86)
Cumulative Total Return at 9/30/93
Class B: 1 Year Life of Class
N/A (1.18%) (from 5/31/93)
YOUR INVESTMENT ACCOUNT
How to Buy Shares
The Fund offers investors two different classes of shares. The
different classes of shares represent investments in the same portfolio
of securities but are subject to different expenses and will likely have
different share prices.
- Class A Shares. If you buy Class A shares, you pay an initial sales
charge (on investments up to $1 million). If you purchase Class A shares
as part of an investment of at least $1 million in shares of one or more
OppenheimerFunds, and you sell any of those shares within 18 months after
your purchase, you will pay a contingent deferred sales charge, which will
vary depending on the amount you invested.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within six years, you
will normally pay a contingent deferred sales charge that varies depending
on how long you own your shares.
- 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 better suited to your needs depends on a number of factors
which you should discuss with your financial advisors:
- How much do you plan to invest? If you plan to invest a
substantial amount, the reduced sales charges available for larger
purchases of Class A shares may be more beneficial to you, and for
purchases over $1 million, the contingent deferred sales charge on Class
A shares may be more beneficial. The Distributor will not accept any order
for $1 million or more for Class B shares on behalf of a single investor
for that reason.
- How long do you expect to hold your investment? While future
financial needs cannot be predicted with certainty, investors who
prefer not to pay an initial sales charge and who plan to hold their
shares for more than 6 years might consider Class B shares. Investors
who plan to redeem shares within 7 years might prefer Class A shares.
- Are there differences in account features that matter to you?
Because some account features may not be available for Class B
shareholders, such as checkwriting, you should carefully review how
you plan to use your investment account before deciding which class of
shares is better for you. Additionally, the dividends payable to Class
B shareholders will be reduced by the additional expenses borne solely
by that class, such as the asset-based sales charge to which Class B
shares are subject, as described below and in the Statement of
Additional Information.
- How does it affect payments to my broker? A salesperson or
any other person who is entitled to receive compensation for selling
Fund shares may receive different compensation for selling one class
than for selling another class. It is important that investors
understand that the purpose of the contingent deferred sales charge
and asset-based sales charge for Class B shares is the same as the
purpose of the front-end sales charge on sales of Class A shares.
- How Much Must You Invest? You can open a Fund account with a
minimum initial investment of $1,000 and make additional investments at
any time with as little as $25. There are reduced minimum investments
under special investment plans:
- With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments for as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
- Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
- There is no minimum investment requirement if you are buying
shares by reinvesting dividends from the Fund or other OppenheimerFunds
(a list of them appears in the Statement of Additional Information, or you
can ask your dealer or call the Transfer Agent), or by reinvesting
distributions from unit investment trusts that have made arrangements with
the Distributor.
- How Are Shares Purchased? You can buy shares several ways -- through
any dealer, broker or financial institution that has a sales agreement
with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A or Class B shares. If you do not choose, your investment
will be made in Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds 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.
- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member, to transmit funds electronically to purchase shares, to send
redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You must
requestAccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink," below for more details.
Shares are sold at the public offering price based on the net asset
value that is next determined after the Distributor receives the purchase
order in Denver. In most cases, to receive that day's offering price, the
Distributor must receive your order by 4:00 P.M., New York time (all
references to time in this Prospectus mean "New York time."). The net
asset value of each class of shares is determined as of that time on each
day The New York Stock Exchange is open (which is a "regular business
day"). If you buy shares through a dealer, the dealer must receive your
order by 4:00 P.M., on a regular business day and transmit it to the
Distributor so that it is received before the Distributor's close of
business that day, which is normally 5:00 P.M. The Distributor may reject
any purchase order for the Fund's shares, in its sole discretion.
- Asset Builder Plans. You may purchase shares of the Fund (and up to
four other OppenheimerFunds) automatically each month from your account
at a bank or other financial institution under an Asset Builder Plan with
AccountLink. Details are on the Application and in the Statement of
Additional Information.
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, where purchases are not subject to an initial
sales charge, the offering price may be net asset value. In some cases,
reduced sales charges may be available, as described below. When you
invest, the Fund receives the net asset value for your account. The sales
charge varies depending on the amount of your purchase and a portion may
be retained by the Distributor and allocated to your dealer. The current
sales charge rates and commissions paid to dealers and brokers are as
follows:
Front-End Sales Charge Commission as
As a Percentage of: Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
_______________________________________________________________________
Less than $100,000 3.50% 3.63% 3.00%
$100,000 or more but
less than $250,000 3.00% 3.09% 2.50%
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
$500,000 or more but
less than $1 million 2.00% 2.04% 1.50%
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
- Class A Contingent Deferred Sales Charge. There is no initial sales
charge on purchases of Class A shares of any one or more OppenheimerFunds
aggregating $1 million or more. However, the Distributor pays dealers of
record commissions on such purchases in an amount equal to the sum of 1.0%
of the first $2.5 million, plus 0.50% of the next $2.5 million, plus 0.25%
of share purchases over $5 million. However, that commission will be paid
only on the amount of those purchases in excess of $1 million that were
not previously subject to a front-end sales charge and dealer commission.
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") will be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate commissions the Distributor paid to your dealer on all Class A
shares of all OppenheimerFunds you purchased subject to the Class A
contingent deferred sales charge. In determining whether a contingent
deferred sales charge is payable, the Fund will first redeem shares that
are not subject to the sales charge, including shares purchased by
reinvestment of dividends and capital gains, and then will redeem other
shares in the order that you purchased them. The Class A contingent
deferred sales charge is waived in certain cases described in "Waivers of
Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges of
shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. From time to time, the Distributor may make special arrangements
with dealers and make additional payments if the dealer meets specified
sales criteria and other requirements. Dealers whose sales of
OppenheimerFunds (other than money market funds) under OppenheimerFunds-
sponsored 403(b) custodial plans exceed $5 million per year (calculated
per quarter), will receive monthly one-half of the Distributor's retained
commissions on those sales, and if those sales exceed $10 million per
year, those dealers will receive the Distributor's entire retained
commission on those sales. The Distributor may sponsor an annual sales
conference to which a dealer firm is eligible to send, with a guest, a
registered representative who sells more than $2.5 million of Class A
shares of OppenheimerFunds (other than money market funds) in a calendar
year, or the dealer may, at its option, receive the equivalent cash value
of that award as additional commission.
- Reduced Sales Charges for Class A Share Purchases. You may be
eligible to buy Class A shares at reduced sales charge rates in one or
more of the following ways:
- Right of Accumulation. You and your spouse can cumulate Class A
shares you purchase for your own accounts, or jointly, or on behalf of
your children who are minors, under trust or custodial accounts. A
fiduciary can cumulate 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.
Additionally, you can cumulate current purchases of Class A shares of
the Fund and other OppenheimerFunds with Class A shares of
OppenheimerFunds you previously purchased subject to a sales charge,
provided that you still hold your investment in one of the
OppenheimerFunds; the value of those shares will be based on the
greater of the amount you paid for the shares or their current value
(at offering price). The OppenheimerFunds are listed in "Reduced
Sales Charges" in the Statement of Additional Information, or a list
can be obtained from the Transfer Agent. The reduced sales charge will
apply only to current purchases and must be requested when you buy
your shares.
-Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the aggregate amount of
the intended purchases, including purchases made up to 90 days before the
date of the Letter. More information is contained in the Application and
in "Reduced Sales Charges" in the Statement of Additional Information.
- Group Programs. Reduced sales charges are available to
participants in a group sales program if the administrator of the
program has entered into an agreement with the Distributor providing,
among other things, that all participants' purchases are made by a
single group order and payment for each investment period and that
requisite data about such participants and purchases be provided to
the Transfer Agent in acceptable computer format. The sales charge
for such purchases will be at the rate in the table above that applies
to combined current purchases (minimum $25 per participant per period)
of shares of the Fund, Oppenheimer Intermediate Tax-Exempt Bond Fund
and Oppenheimer Insured Tax-Exempt Bond Fund by all participants in
such program based upon the current value (at offering price) of
shares of such funds held by all participants in such program at the
time of purchase. No certificates will be issued for shares held by
program participants and dividends and distributions must be
reinvested in accounts held by such participants. Automatic
Withdrawal Plans (described below) may not be used for such accounts.
The Fund and the Distributor reserve the right to amend, suspend or
cease offering such programs at any time without prior notice.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following persons: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) 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; (5)
employees (and their spouses) of dealers or brokers described above or
financial institutions that have entered into sales arrangements with such
dealers or brokers (and are identified 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); (6) dealers, brokers
or registered investment advisers 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.
Additionally, no sales charge is imposed on shares that are (a) issued
in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than the Cash Reserves Funds) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge is also waived if shares
are redeemed in the following cases: (1) retirement distributions or loans
to participants or beneficiaries from qualified retirement plans, deferred
compensation plans or other employee benefit plans ("Retirement Plans"),
(2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, and (4) involuntary redemptions
of shares by operation of law or under the procedures set forth in the
Fund's Declaration of Trust or adopted by the Board of Trustees.
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided 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.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
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. That sales charge will not
apply to shares purchased by the reinvestment of dividends or capital
gains distributions. The charge will be assessed on the lesser of the net
asset value of the shares at the time of redemption or the original
purchase price. The contingent deferred sales charge is not imposed on the
amount of your account value represented by the increase in net asset
value over the initial purchase price (including increases due to the
reinvestment of dividends and capital gains distributions). The Class B
contingent deferred sales charge is paid to the Distributor to reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
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:
Contingent Deferred Sales Charge
Years Since Purchase Payment on Redemptions in that Year
Was Made (As % of Amount Subject to
Charge)
0 - 1 4.0%
1 - 2 3.0%
2 - 3 2.0%
3 - 4 2.0%
4 - 5 1.0%
5 and following None
In the table, a "year" is a 12-month period. All purchases are
considered to have been made on the first regular business day of the
month in which the purchase was made.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (as evidenced by a determination of disability by the Social
Security Administration), and (3) returns of excess contributions to
Retirement Plans.
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) 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; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described above. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal service for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
If the Plan is terminated by the Fund, it provides for continuing
payments of the asset-based sales charge to the Distributor for certain
expenses already incurred. The accounting treatment for the Fund's
obligation under the Plan for those future payments is discussed in
"Distribution and Service Plans" in the Statement of Additional
Information. The accounting standards now used are currently under review
by the American Institute of Certified Public Accountants, and it is
possible that those standards will change and that the Fund's Class B Plan
would be changed as a result. At September 30, 1993, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $212,641 (equal to 4.19% of the Fund's net assets represented by Class
B shares on that date), which have been carried over into the present Plan
year.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions, including purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges must be requested on the Application you use to
buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges on 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.
- Using AccountLink to Buy Shares. Purchases may be made 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.
- 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. Please refer
to "Exchange Privilege," below, for details.
- 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.
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:
- Automatic Withdrawal Plans. If your Fund account is $5,000 or more,
you can establish an Automatic Withdrawal Plan to receive payments of at
least $50 on a monthly, quarterly, semi-annual or annual basis. The checks
may be sent to you or sent automatically to your bank account on
AccountLink. You may even set up certain types of Withdrawals of up to
$1,500 per month by telephone. You should consult the Application and
Statement of Additional Information for more details.
- Automatic Exchange Plans. You can authorize the Transfer Agent to
exchange an amount you establish in advance automatically for shares of
up to five other OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Class A shares that you sell, and
Class B shares on which you paid a contingent deferred sales charge when
you redeemed them. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment
- Pension and Profit-Sharing Plans for self-employed persons and small
business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, by using the Fund's
Checkwriting privilege or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis, as described above.
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, please call the Transfer Agent
first, at 1-800-525-7048, for assistance.
- Retirement Accounts. To sell shares in an OppenheimerFunds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must
submit a Withholding form with your request to avoid delay. If your
retirement plan account is held for you by your employer, you must
arrange for the distribution request to be sent by the plan
administrator or trustee. There are additional details in the
Statement of Additional Information.
- Certain Requests Require a Signature Guarantee. To protect you and
the Fund from fraud, certain redemption requests must be in writing and
must include a signature guarantee in the following situations (there may
be other situations also requiring a signature guarantee):
- You wish to redeem more than $50,000 worth of shares and receive a
check
- The check is not payable to all shareholders listed on the account
statement
- The check is not sent to the address of record on your statement
- Shares are being transferred to a Fund account with a different owner
or name
- Shares are redeemed by someone other than the owners (such as an
Executor)
- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or from a foreign bank that has a U.S. correspondent
bank, or from a U.S. registered dealer or broker in securities, municipal
securities or government securities, or from a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing as a fiduciary or on behalf of a corporation, partnership or
other business, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.
<.R>
Use the following address for requests by mail: Send courier or Express
Mail requests to:
Oppenheimer Shareholder Services Oppenheimer
P.O. Box 5270, Denver, Colorado 80217 Shareholder Services
10200 E. Girard Avenue
Building D
Denver, Colorado 80231
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by 4:00 P.M. You may not redeem shares held in an OppenheimerFunds
retirement plan or under a share certificate by telephone.
- To redeem shares through a service representative, call 1-800-852-
8457
- 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, or, if you have linked your Fund account to your bank account
on AccountLink, you may have the proceeds wired to that account.
- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone, once in each 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. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink or Wire. Shareholders may
also request wires of redemption proceeds of $2,500 or more in Federal
Funds to a designated commercial bank account if the bank is a member of
the Federal Reserve wire system. To place a wire redemption request, call
the Transfer Agent at 1-800-852-8457. There is a $15 fee for each Federal
Funds wire. There are no dollar limits on telephone redemption proceeds
sent to a bank account designated when you establish AccountLink. Normally
the ACH wire 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 wired.
Check Writing. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which 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.
- Checks can be written to the order of whomever you wish, but may not
be cashed at the Fund's bank or custodian.
- Checkwriting privileges are not available for accounts holding Class
B shares or Class A 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.
- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
- Don't use your checks if you changed your Fund account number.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, (4) or the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges on PhoneLink described below. To
exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- 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
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same two classes of
shares. If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A, Class B and/or Class C shares, and a list
can be obtained by calling the Distributor at 1-800-525-7048. Please
refer to the Statement of Additional Information for more details about
this policy.
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 addresses listed in "How to Sell Shares."
- 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 names and address. Shares held under certificates may not
be exchanged by telephone.
You can obtain a list of eligible OppenheimerFunds in the Statement
of Additional Information or by calling the Transfer Agent at 1-800-525-
7048. Exchanges of shares involve a redemption of the shares of the fund
you own and a purchase of shares of the other fund.
There are certain exchange policies you should be aware of:
- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business
day on which the Transfer Agent receives an exchange request by 4:00
P.M. that is in proper form, but either fund may delay the purchase
of shares of the fund you are exchanging into if it determines it
would be disadvantaged by a same-day transfer of the proceeds to buy
shares. For example, the receipt of multiple exchange requests from
a dealer in a "market-timing" strategy might require the disposition
of securities at a time or price disadvantageous to the Fund.
- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange
request that will disadvantage it, or to refuse multiple exchange
requests submitted by a shareholder or dealer.
- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes
at any time.
- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
- Net Asset Value Per Share is determined for each class of shares
as of 4:00 P.M. each day The New York Stock Exchange is open 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 Fund's Board of
Trustees has established procedures to value the Fund's securities to
determine net asset value. In general, securities values are based on
market value. There are special procedures for valuing illiquid and
restricted securities, short-term obligations for which market values
cannot be readily obtained, and call options and hedging instruments.
These procedures are described more completely 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 and until 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. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- 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.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. 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 15 days from the date the shares
were purchased. That delay may be avoided if you 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 $1,000 for reasons other than the
fact that the market value of shares has dropped, and in some cases
involuntary redemptions may be made to repay the Distributor for losses
from the cancellation of share purchase orders. Under unusual
circumstances, shares of the Fund may be redeemed "in kind," which means
that the redemption proceeds will be paid with securities from the Fund's
portfolio. Please refer to the Statement of Additional Information for
more details.
- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or taxpayer identification number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charges when redeeming certain
Class A and Class B shares.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A and Class
B shares from net investment income each regular business day and pays
those dividends to shareholders monthly. Normally, dividends are paid on
the fourth Wednesday of every month, but the Board of Trustees can change
that date. Distributions may be made monthly from any net short-term
capital gains the Fund realizes in selling securities. It is expected
that distributions paid with respect to Class A shares will generally be
higher than for Class B shares because expenses allocable to Class B
shares will generally be higher.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
- Reinvest all distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in
additional shares of the Fund.
- Reinvest capital gains only. You can elect to reinvest long-term
capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
- Receive all distributions in cash. You can elect to receive a
check for all dividends and long-term capital gains distributions
or have them sent to your bank on AccountLink.
- Reinvest your distributions in another OppenheimerFunds account.
You can reinvest all distributions in another OppenheimerFunds
account you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. Dividends paid from short-term capital gains
and net investment income are taxable as ordinary income. Distributions
are subject to federal income tax and may be subject to state or local
taxes. Your distributions are taxable when paid, whether you reinvest
them in additional shares or take them in cash. Every year the Fund will
send you and the IRS a statement showing the amount of each taxable
distribution you received in the previous year.
- "Buying a Dividend": When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy
shares on or just before the ex-dividend date, you will pay the full
price for the shares and then receive a portion of the price back as
a taxable dividend.
- Taxes on transactions: Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. 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.
- Returns of Capital: If distributions made by the Fund must be
recharacterized at the end of a fiscal year because of the Fund's
investment policies (for example, due to losses on foreign currency
exchange), shareholders may have a non-taxable return of capital.
This will be identified in notices to shareholders.
This information is only a summary of certain federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
advisor about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Graphic material included in Prospectus of Oppenheimer Limited-Term
Government Fund: "Comparison of Total Return of Oppenheimer Limited-Term
Government Fund with the Lehman Brothers U.S. Government Bond Index -
Change in Value of a $10,000 Hypothetical Investment."
A linear graph will be included in the Prospectus of Oppenheimer
Limited-Term Government Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in (i) Class A shares of the Fund during each of the Fund's fiscal years
since the commencement of the Fund's operations (March 10, 1986) and (ii)
Class B shares of the Fund during the period May 3, 1993 (first public
offering of Class B shares) to September 30, 1993, in each case comparing
such values with the same investments over the same time periods with the
Lehman Brothers U.S. Government Bond Index. Set forth below are the
relevant data points that will appear on the linear graph. Additional
information with respect to the foregoing, including a description of the
Lehman Brothers U.S. Government Bond Index, is set forth in the Prospectus
under "Fund Performance Information - Management's Discussion of
Performance."
Oppenheimer
Limited-Term
Fiscal Year Government Fund Lehman Brothers U.S.
(Period) Ended Class A Shares Government Bond Index
03/10/86 * $ 9,650 $10,000
09/30/86 $10,130 (1) $10,330
09/30/87 $10,226 $10,266
09/30/88 $11,643 $11,500
09/30/89 $12,767 $12,780
09/30/90 $13,935 $13,666
09/30/91 $15,982 $15,778
09/30/92 $17,560 $17,817
09/30/93 $18,896 $19,791
Oppenheimer
Limited-Term
Fiscal Government Fund Lehman Brothers U.S.
Period Ended Class B
Shares Government Bond Index
5/03/93 $10,000 $10,000
9/30/93 $ 9,882 (2) $10,552
______________________________
* The Fund commenced operations on March 10, 1986.
(1) From commencement of operations (3/10/86) to 9/30/86.
(2) From commencement of first public offering of Class B shares
(5/03/93) to 9/30/93.
Oppenheimer Limited-Term Government Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser Prospectus and
Oppenheimer Management Corporation New Account Application
Two World Trade Center
New York, New York 10048-0203
Distributor OPPENHEIMER
Oppenheimer Funds Distributor, Inc. Limited-
Two World Trade Center Fund
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given
or made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR855 (4/94) *Printed on recycled paper
<PAGE>
Oppenheimer Limited Term Government Fund
3410 South Galena Street, Denver, CO 80231
Telephone: 1-800-525-7048
Investment Adviser Prospectus
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc. OPPENHEIMER
Two World Trade Center Limited-Term Government Fund
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities Dated May 1, 1994
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel (OppenheimerFunds Logo)
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in
this Prospectus or the Statement of Additional Information, and if given
or made, such information and representations must not be relied upon as
having been authorized by the Fund, Oppenheimer Management Corporation,
Oppenheimer Funds Distributor, Inc. or any affiliate thereof. This
Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR856 (4/94) *Printed on recycled paper
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
This Statement of Additional Information is not a Prospectus.
This Statement of Additional Information contains more complete
information about the investment policies and the account features of
Oppenheimer Limited-Term Government Fund (formerly named "Oppenheimer
Government Securities Fund") (the "Fund") described in the Fund's
Prospectus dated May 1, 1994, and should be read together with the
Prospectus. A copy of the Prospectus may be obtained by writing to
Oppenheimer Shareholder Services ("the Transfer Agent"), P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
Investment Objective and Policies
Other Investment Techniques and Strategies
Additional Investment Restrictions
Trustees and Officers of the Fund
How the Fund is Managed
Brokerage Policies of the Fund
Your Investment Account
Performance of the Fund
Distribution and Service Plans
Dividends, Capital Gains and Taxes
Additional Information about the Fund
Independent Auditors' Report
Financial Statements of the Fund
This Statement of Additional Information is dated May 1, 1994.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in
the Prospectus. Set forth below is supplemental information about those
policies and the types of securities in which the Fund invests. Certain
capitalized terms used in this Statement of Additional Information have
the same meaning as those terms have in the Prospectus.
Investment Policies and Strategies. The obligations of U.S. Government
agencies or instrumentalities in which the Fund may invest may or may not
be guaranteed or supported by the "full faith and credit" of the United
States. Some are backed by the right of the issuer to borrow from the
U.S. Treasury; others, by discretionary authority of the U.S. Government
to purchase the agencies' obligations; while others are supported only by
the credit of the instrumentality. All U.S. Treasury obligations are
backed by the full faith and credit of the United States. If the
securities are not backed by the full faith and credit of the United
States, the owner of the securities must look principally to the agency
issuing the obligation for repayment and may not be able to assert a claim
against the United States in the event that the agency or instrumentality
does not meet its commitment. The Fund will invest in U.S. Government
Securities of such agencies and instrumentalities only when the Fund's
investment manager, Oppenheimer Management Corporation (the "Manager") is
satisfied that the credit risk with respect to such instrumentality is
minimal.
General changes in prevailing interest rates will affect the values
of the Fund's portfolio securities. The value will vary inversely to
changes in such rates. For example, if such rates go up after a security
is purchased, the value of the security will generally decline. A
decrease in interest rates may affect the maturity and yield of mortgage-
backed securities by increasing unscheduled prepayments of the underlying
mortgages. With its objective of seeking high current return while
conserving capital, the Fund may purchase or sell securities without
regard to the length of time the security has been held, to take advantage
of short-term differentials in yields. While short-term trading increases
the portfolio turnover, the execution cost for U.S. Government Securities
is substantially less than for equivalent dollar values of equity
securities (see "Brokerage Provisions of the Investment Advisory
Agreement," below).
Under normal circumstances the Fund will maintain a dollar-weighted
average portfolio maturity of not more than three years. The Manager will
in good faith determine the maturity of debt obligations purchased by the
Fund and will consider various factors applicable to each type of debt
obligation, including those set forth below. In determining the maturity
of mortgage-backed securities, the Manager reviews the prepayment history
of the obligation and similar securities, current interest rates and
median estimates of maturity for the obligation available from dealers.
With respect to hedging instruments, the Manager looks at the term of both
the hedging instrument and the underlying security and the relationship
between the instruments. Subject to the requirement that the dollar
weighted average portfolio maturity will not exceed three years, the Fund
may invest in individual debt obligations of any maturity, including
obligations with a remaining stated maturity of more than three years.
The U.S. Government Securities in which the Fund may invest include
the following:
GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's
principal programs involve its guarantees of privately-issued securities
backed by pools of mortgages. GNMA Certificates are debt securities
representing an interest in one or a pool of mortgages that are insured
by the Federal Housing Administration ("FHA") or the Farmers Home
Administration ("FMHA") or guaranteed by the Veterans Administration
("VA").
The GNMA Certificates in which the Fund invests are of the "fully
modified pass-through" type, that is, they provide that the registered
holders of the Certificates will receive timely monthly payments of the
pro-rata share of the scheduled principal payments on the underlying
mortgages, whether or not those amounts are collected by the issuers.
Amounts paid include, on a pro rata basis, any prepayment of principal of
such mortgages and interest (net of servicing and other charges) on the
aggregate unpaid principal balance of such GNMA Certificates, whether or
not the interest on the underlying mortgages has been collected by the
issuers.
The GNMA Certificates purchased by the Fund are guaranteed as to
timely payment of principal and interest by GNMA. It is expected that
payments received by the issuers of GNMA Certificates on account of the
mortgages backing the Certificates will be sufficient to make the required
payments of principal of and interest on such GNMA Certificates, but if
such payments are insufficient for that purpose, the guaranty agreements
between the issuers of the Certificates and GNMA require the issuers to
make advances sufficient for such payments. If the issuers fail to make
such 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 which 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 such guaranties.
GNMA Certificates are backed by the aggregate indebtedness secured
by the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages
and, except to the extent of payments received by the issuers on account
of such mortgages, GNMA Certificates do not constitute a liability of, nor
evidence any recourse against, such issuers, but recourse is solely
against GNMA. Holders of GNMA Certificates (such as the Fund) have no
security interest in or lien on the underlying mortgages.
Monthly payments of principal will be made, and additional
prepayments of principal may be made, to the Fund with respect to the
mortgages underlying the GNMA Certificates held by the Fund. All of the
mortgages in the pools relating to the GNMA Certificates 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 GNMA Certificates have a stated maturity of up to 30
years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less. Periods
of dropping interest rates may spur refinancing of existing mortgages,
accelerating the rate of prepayments. Prepayments on such mortgages
received by the Fund will be reinvested in additional GNMA Certificates
or other U.S. Government Securities. The yields on such additional
securities may not necessarily be the same as (and may be lower than) the
yields on the prepaid securities, which will affect the income the Fund
receives and pays to its shareholders.
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 such holder's
proportionate interest in principal payments on the mortgage loans in the
pool represented by such FHLMC Certificate, in each case whether or not
such amounts are actually received. The obligations of FHLMC under its
guarantees are obligations solely of FHLMC and are not backed by the full
faith and credit of the United States.
Federal National Mortgage Association ("FNMA") Certificates. FNMA,
a federally-chartered and privately-owned corporation, issues FNMA
Certificates which are backed by a pool of mortgage loans. FNMA
guarantees to each registered holder of a FNMA Certificate that the holder
will receive amounts representing such holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such FNMA Certificate,
less servicing and guarantee fees, and such holder's proportionate
interest in the full principal amount of any foreclosed or other
liquidated mortgage loan, in each case whether or not such amounts are
actually received. The obligations of FNMA under its guarantees are
obligations solely of FNMA and are not backed by the full faith and credit
of the United States or any agency or instrumentality thereof other than
FNMA.
OTHER INVESTMENT TECHNIQUES AND STRATEGIES
Repurchase Agreements. The Fund may acquire securities that are subject
to repurchase agreements, in order to generate income while providing
liquidity. In a repurchase transaction, the Fund acquires a security
from, and simultaneously resells it to, an approved vendor (a U.S.
commercial bank, U.S. branch of a foreign bank or a broker-dealer which
has been designated a primary dealer in government securities, which must
meet the credit requirements set by the Fund's Board of Trustees from time
to time), for delivery on an agreed upon future date. The sale 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. The majority of these transactions run from day
to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered
"loans" under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements will require that at all times
while the repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to collateralize the loan fully.
Additionally, the Manager will impose creditworthiness requirements to
confirm that the vendor is financially sound and will continuously monitor
the collateral's value. If the vendor of a repurchase agreement fails to
pay the agreed-upon resale price on the delivery date, the Fund's risks
in such event may include any costs of disposing of the collateral, and
any loss from any delay in foreclosing on the collateral.
Reverse Repurchase Agreements. The Fund will maintain, in a segregated
account with its Custodian, cash, Treasury bills or other U.S. Government
Securities having an aggregate value equal to the amount of such
commitment to repurchase, including accrued interest, until payment is
made. The Fund will use reverse repurchase agreements as a source of
funds on a short-term basis (and not for leverage), and will not enter
into reverse repurchase agreements in amounts exceeding 25% of the total
assets of the Fund. In determining whether to enter into a reverse
repurchase agreement with a bank or broker-dealer, the Fund will take into
account the creditworthiness of such party. The Fund will not enter into
reverse repurchase agreements in an amount which, when combined with all
other borrowings by the Fund, will exceed 5% of the Fund's total assets.
As a matter of fundamental policy, the Fund will not enter into a reverse
repurchase transaction unless the securities collateralizing the
transaction have a maturity date not later than the settlement date for
the transaction.
Loans of Portfolio Securities. The Fund may lend its portfolio securities
(other than in repurchase transactions) to brokers, dealers and other
financial institutions meeting certain credit standards if the loan is
collateralized in accordance with applicable regulatory requirements, and
if, after any loan, the value of securities loaned does not exceed 25% of
the value of the Fund's total assets. Under applicable regulatory
requirements (which are subject to change), the loan collateral must, on
each business day, at least equal the market value of the loaned
securities and must consist of cash, bank letters of credit, U.S.
Government Securities, 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. Such terms and the issuing bank must be
satisfactory to the Fund. In a portfolio securities lending transaction,
the Fund receives from the borrower an amount equal to the interest paid
or the dividends declared on the loaned securities during the term of the
loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Fund pays in arranging the loan. The
Fund may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by its Board of Trustees.
In connection with securities lending, the Fund might experience risks of
delay in receiving additional collateral, or risks of delay in recovery
of the securities, or loss of rights in the collateral should the borrower
fail financially. The Fund will not lend its portfolio securities to any
officer, trustee, employee or affiliate of the Fund or its Manager. The
terms of the Fund's loans must meet certain tests under the Internal
Revenue Code and permit the Fund to reacquire loaned securities on five
business days' notice or in time to vote on any important matter.
"When-Issued" and Delayed Delivery Transactions. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. Although the Fund will enter
into such transactions for the purpose of acquiring securities for its
portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "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, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to purchase a
security for which payment will be made on a future date may be deemed a
separate security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
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 consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. 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 and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use 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, thereby obtaining the benefit of
currently higher cash yields.
Writing Covered Calls. The Fund may write (i.e. sell) call options
("calls") on U.S. Government Securities, to enhance income through the
receipt of premiums from expired calls and any net profits from closing
purchase transactions subject to the limitations stated in the Prospectus.
All such calls written by the Fund must be "covered" while the call is
outstanding (i.e. the Fund must own the securities subject to the call or
other securities acceptable for applicable escrow requirements). Calls
on Futures (discussed below) must be covered by deliverable securities or
by liquid assets segregated to satisfy the Futures contract. When the
Fund writes a call on a security, it receives a premium and agrees to sell
the callable investment to a purchaser of a corresponding call on the same
security during the call period (usually not more than 9 months) at a
fixed exercise price (which may differ from the market price of the
underlying security), regardless of market price changes during the call
period. The Fund has retained the risk of loss should the price of the
underlying security decline during the call period, which may be offset
to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice 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.
Hedging with Options and Futures Contracts. As described in the
Prospectus, the Fund may employ one or more types of Hedging Instruments
for temporary defensive purposes. 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. Puts may also be written on debt
securities to attempt to increase the Fund's income. For hedging
purposes, the Fund may use Interest Rate Futures and call and put options
on debt securities, Futures, bond indices and foreign currencies (all of
the foregoing are referred to as "Hedging Instruments"). Hedging
Instruments may be used to attempt to: (i) protect against possible
declines in the market value of the Fund's portfolio resulting from
downward trends in the debt securities markets (generally due to a rise
in interest rates), (ii) protect unrealized gains in the value of the
Fund's debt securities which have appreciated, (iii) facilitate selling
debt securities for investment reasons, (iv) establish a position in the
debt securities markets as a temporary substitute for purchasing
particular debt securities, or (v) reduce the risk of adverse currency
fluctuations. A call or put may be purchased only if, after such
purchase, the value of all call and put options held by the Fund would not
exceed 5% of the Fund's total assets. The Fund will not use Futures and
options on Futures for speculation. The Hedging Instruments the Fund may
use are described below.
When hedging 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 may: (i)
sell Futures, (ii) purchase puts on such Futures or U.S. Government
Securities, or (iii) write calls on securities held by it or on Futures.
When hedging to attempt to protect against the possibility that portfolio
securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) purchase Futures, or (ii) purchase
calls on such Futures or on U.S. Government Securities. Covered calls and
puts may also be written on debt securities to attempt to increase the
Fund's income.
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.
Additional Information about the Hedging Instruments the Fund may use is
provided below. At present, the Fund does not intend to enter into
Futures and options on Futures if, after any such purchase, the sum of
margin deposits on Futures and premiums paid on Futures options exceeds
5% of the value of the Fund's total assets. In the future, the Fund may
employ Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, legally
permissible and adequately disclosed.
Writing Put Options. The Fund may write put options on U.S.
Government securities or Interest Rate Futures but only if such puts are
covered by segregated liquid assets. 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 obligations. In writing puts, there is the
risk that the Fund may be required to buy the underlying security at a
disadvantageous price. 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. Writing a put
covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The
premium the Fund receives from writing a put option represents a profit,
as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the
put at the exercise price, even though the value of the investment may
fall below the exercise price. If the put lapses unexercised, the Fund
(as the writer of the put) realizes a gain in the amount of the premium.
If the put is exercised, the Fund must fulfill its obligation to purchase
the underlying investment at the exercise price, which will usually exceed
the market value of the investment at that time. In that case, the Fund
may incur a loss, equal to the sum of the current market value of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities, 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 put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of 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. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
Purchasing Calls and Puts. The Fund may purchase calls on U.S.
Government Securities or on Interest Rate Futures, in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term debt
securities market. The value of U.S. Government Securities underlying
calls purchased by the Fund will not exceed the value of the portion of
the Fund's portfolio invested in cash or cash equivalents (i.e. securities
with maturities of less than one year). When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium and,
except as to calls on indices or Futures, 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. When the
Fund purchases a call on a Future, it pays a premium, but settlement is
in cash rather than by delivery of the underlying investment to the Fund.
In purchasing a call, the Fund benefits only if the call is sold 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 and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless
at its expiration date and the Fund will lose its premium payment and the
right to purchase the underlying investment.
The Fund may purchase put options ("puts") which relate to U.S.
Government Securities (whether or not it holds such securities in its
portfolio) or Futures. 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 corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns enables the Fund to protect itself during the put
period against a decline in the value of the underlying investment below
the exercise price by selling such 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, and the Fund will lose its premium payment and the
right to sell the underlying investment. The put may, however, be sold
prior to expiration (whether or not at a profit.)
Buying a put on Interest Rate Futures or U.S. Government Securities
permits the Fund either to resell the put or buy the underlying investment
and sell it at the exercise price. The resale price of the put will vary
inversely with the price of the underlying investment. If the market
price of the underlying investment is above the exercise price and as a
result the put is not exercised, the put will become worthless on its
expiration date. In the event of a decline in the stock market, the Fund
could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities. When the Fund purchases a
put on Interest Rate Futures or U.S. Government Securities not held by it,
the put protects the Fund to the extent that the prices of the underlying
Future or U.S. Government Security move in a similar pattern to the prices
of the U.S. Government Securities in the Fund's portfolio.
An option position may be closed out only on a market which 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's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
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
investments.
Interest Rate Futures. The Fund may buy and sell Futures. No price
is paid or received upon the purchase or sale of an Interest Rate Future.
An Interest Rate Future obligates the seller to deliver and the purchaser
to take a specific type o debt security at a specific future date for a
fixed price. That obligation may be satisfied by actual delivery of the
debt security or by entering into an offsetting contract.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills with
the futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian 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 to reflect changes in its market value,
subsequent margin payments, called variation margin, will be made to or
by the futures broker on a daily basis. Prior to expiration of the
Future, if the Fund elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional
cash is required to be paid by or released to the Fund, and any loss or
gain is realized for tax purposes. Although Interest Rate Futures by
their terms call for settlement by delivery or acquisition of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting position. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are
traded.
Interest Rate Swap Transactions. 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 have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap 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 will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done
between the Fund and that counterparty under that master agreement shall
be regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions,
the net amount payable on that date in that currency shall be paid. In
addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the
swaps with that party. Under such agreements, if there is a default
resulting 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 with
respect to each swap (i.e., 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".
Additional Information About Hedging Instruments and Their Use. 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 options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which 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.
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 would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would 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 extent to which the
option "is in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
Regulatory Aspects of Hedging Instruments. The Fund must operate
within certain restrictions as to its long and short positions in Futures
and options thereon under a rule (the "CFTC Rule") adopted by the
Commodity Futures Trading Commission (the "CFTC") under the Commodity
Exchange Act (the "CEA"), which exempts the Fund from registration with
the CFTC as a "commodity pool operator" (as defined in the CEA) if it
complies with the CFTC Rule. Under these restrictions the Fund will not,
as to any positions, whether short, long or a combination thereof, enter
into Futures and options thereon for which the aggregate initial margins
and premiums exceed 5% of the fair market value of its total assets, with
certain exclusions as defined in the CFTC Rule. Under the restrictions,
the Fund also must, as to its short positions, use Futures and options
thereon solely for bona-fide hedging purposes within the meaning and
intent of the applicable provisions under the CEA.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, 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 exchanges or brokers. Thus, the
number of options which the Fund may write or hold may be affected by
options written or held by other entities, including other investment
companies having the same or an affiliated investment adviser. Position
limits also apply to Futures. An exchange may order the liquidation of
positions found to be in violation of those limits and may impose certain
other sanctions. Due to requirements under the Investment Company Act,
when the Fund purchases a Future, the Fund will maintain, in a segregated
account or accounts with its custodian bank, cash or readily-marketable,
short-term (maturing in one year or less) debt instruments in an amount
equal to the market value of the securities underlying such Future, less
the margin deposit applicable to it.
Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. One of the tests for such qualification is that less than
30% of its gross income (irrespective of losses) must be derived from
gains realized on the sale of securities held for less than three months.
Due to this limitation, the Fund will limit the extent to which it engages
in the following activities, but will not be precluded from them: (i)
selling investments, including Futures, held for less than three months,
whether or not they were purchased on the exercise of a call held by the
Fund; (ii) purchasing calls or puts which expire in less than three
months; (iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; and (v) writing calls on
investments held for less than three months.
Possible Risk Factors in Hedging. In addition to the risks with
respect to options discussed in the Prospectus and above, there is a risk
in using short hedging by selling Futures to attempt to protect against
decline in value of the Fund's portfolio securities (due to an increase
in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions due to differences in the
natures of those markets. First, all participants in the futures markets
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depend 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 markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
U.S. Government Securities markets as a temporary substitute for the
purchase of individual U.S. Government Securities (long hedging) by buying
Interest Rate Futures and/or calls on such Futures or on U.S. Government
Securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline 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 U.S. Government Securities purchased.
ADDITIONAL INVESTMENT RESTRICTIONS
The most significant investment restrictions that apply to the Fund
are described in the Prospectus. There are additional investment
restrictions that the Fund must follow that are fundamental policies of
the Fund. Fundamental policies and the Fund's investment objective,
described in the Prospectus, cannot be changed without the vote of a
"majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholders' meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund cannot: (1) purchase
or sell real estate, commodities or commodity contracts; however, the Fund
may use hedging instruments approved by its Board whether or not such
hedging instruments are considered commodities or commodity contracts; (2)
invest in interests in oil, gas, or other mineral exploration or
development programs; (3) purchase securities on margin or make short
sales of securities; however the Fund may make margin deposits in
connection with its use of hedging instruments approved by its Board; (4)
underwrite securities except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities held in its
portfolio; (5) invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation or other
acquisition; (6) enter into reverse repurchase agreements that will cause
more than 25% of the Fund's total assets to be subject to such agreements;
(7) make investments for the purpose of exercising control of management;
(8) purchase or retain securities of any company if, to the knowledge of
the Fund, its officers and trustees and officers and directors of the
Manager who individually own more than .5% of the securities of such
company together own beneficially more than 5% of such securities; (9)
purchase or retain securities of issuers having a record of less than
three years' continuous operation (such period may include the operation
of predecessor companies or enterprises if the issuer came into existence
as a result of a merger, consolidation or reorganization, or the purchase
of substantially all of the assets of the predecessor companies or
enterprises); (10) purchase or sell standby commitments; or (11) invest
more than 25% of its assets in a single industry (neither the U.S.
Government nor any of its agencies or instrumentalities are considered an
industry for the purposes of this restriction).
TRUSTEES AND OFFICERS OF THE FUND
The Fund's Trustees and officers and their principal occupations and
business affiliations during the past five years are listed below. All
of the Trustees are also trustees, directors or managing general partners
of Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer High Yield Fund, Oppenheimer Cash Reserves, Oppenheimer Tax-
Exempt Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, The New York Tax-
Exempt Income Fund, Inc., Centennial America Fund, L.P., Oppenheimer
Champion High Yield Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer
Strategic Funds Trust, Oppenheimer Strategic Income & Growth Fund,
Oppenheimer Strategic Investment Grade Bond Fund, Oppenheimer Strategic
Short-Term Income Fund, Oppenheimer Variable Account Funds, and
Oppenheimer Integrity Funds; as well as the following "Centennial Funds":
Daily Cash Accumulation Fund, Inc., Centennial Money Market Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial Tax Exempt Trust and Centennial California Tax Exempt Trust,
(all of the foregoing funds are collectively referred to as the "Denver
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver OppenheimerFunds. As of December 31, 1993, the Trustees and
officers of the Fund as a group owned less than 1% of the Fund's
outstanding shares.
ROBERT G. AVIS, Trustee*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
WILLIAM A. BAKER, Trustee
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee
5301 Bolsa Avenue, Huntington Beach, California 92647
Vice President of McDonnell Douglas Ltd.; formerly associated with the
National Aeronautics and Space Administration.
JON S. FOSSEL, President and Trustee*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a Director of the Manager; President
and director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation, a subsidiary of the Manager ("HarbourView"); a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
RAYMOND J. KALINOWSKI, Trustee
44 Portland Drive, St. Louis, Missouri 63131
Formerly Vice Chairman and a director of A.G. Edwards, Inc., parent
holding company of A.G. Edwards & Sons, Inc. (a broker-dealer), of which
he was a Senior Vice President.
C. HOWARD KAST, Trustee
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
ROBERT M. KIRCHNER, Trustee
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
NED M. STEEL, Trustee
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; formerly Senior Vice
President and a director of Van Gilder Insurance Corp. (insurance
brokers).
JAMES C. SWAIN, Chairman and Trustee*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman of the Manager; President and Director of Centennial Asset
Management Corporation, an investment adviser subsidiary of the Manager
("Centennial"); formerly President and Director of Oppenheimer Asset
Management Corporation ("OAMC"), an investment adviser which was a
subsidiary of the Manager, and Chairman of the Board of SSI.
ANDREW J. DONOHUE, Vice President
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor, Partner in Kraft &
McManimon (a law firm), an officer of First Investors Corporation (a
broker-dealer) and First Investors Management Company, Inc. (broker-dealer
and investment adviser), director and an officer of First Investors Family
of Funds and First Investors Life Insurance Company.
DAVID ROSENBERG, Vice President and Portfolio Manager
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
previously an officer and portfolio manager for Delaware Investment
Advisors and for one of its mutual funds.
GEORGE C. BOWEN, Vice President, Secretary and Treasurer
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds; formerly Senior Vice President/Comptroller and Secretary
of OAMC.
ROBERT G. ZACK, Assistant Secretary
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
LYNN M. COLUCCY, Assistant Treasurer
3410 South Galena Street, Denver, Colorado 80231
Vice President and Assistant Treasurer of the Manager; an officer of other
OppenheimerFunds; formerly Vice President/Director of Internal Audit of
the Manager.
__________________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Remuneration of Trustees and Officers. The officers of the Fund
(including Mr. Swain and Mr. Fossel) are affiliated with the Manager and
receive no salary or fee from the Fund. During the Fund's fiscal year
ended September 30, 1993, the remuneration (including expense
reimbursements) paid by the Fund to the Trustees of the Fund as a group
(excluding Messrs. Fossel and Swain) in the aggregate for services as
Trustees and as members of one or more committees totaled $9,331. The
Fund has an Audit and Review Committee, comprised of Messrs. Baker
(Chairman), Conrad and Kirchner, which meets regularly to review audits,
audit procedures, financial statements and other financial and operational
matters of the Fund.
Major Shareholders. As of December 31, 1993, no person owned of record
or was known by the Fund to own beneficially 5% or more of the Fund's
outstanding Class A or Class B shares, except for the following (share
amounts and percentages as of 12/31/93): (i) Muir & Co., c/o Frost
National Bank, P.O. Box 1600, San Antonio, TX 78296, 992,438.864 Class A
shares (6.04%); (ii) Chillenden County Teachers Credit Union, P.O. Box 82,
1 Town Market Place, Essex Junction, VT 05452, 55,857.632 Class B shares
(8.17%); (iii) Census Federal Credit Union, P.O. Box 735, Suitland, MD
20752, 46,888.463 Class B shares (6.86%); and (iv) Klass Van Der Ploeg and
Mares Van Der Ploeg, 1224 S. Begole Road, Ithica MI 48847, 37,397.535
Class B shares (5.97%).
HOW THE FUND IS MANAGED
The Fund's Manager is wholly-owned by OAC, a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and its officers, some of whom may
also serve as officers of the Fund, and two of whom (Messrs. Fossel and
Swain) serve as Trustees of the Fund.
A management fee is payable monthly to the Manager under the terms of
the investment advisory agreement between the Manager and the Fund (the
"Agreement"), and is computed on the aggregate net assets of the Fund as
of the close of business each day. The Agreement requires the Manager,
at its expense, to provide the Fund with adequate office space, facilities
and equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
administration for the Fund, including 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. Expenses not
expressly assumed by the Manager under the Agreement or by the Distributor
are paid by the Fund. The Agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to unaffiliated trustees, legal, bookkeeping
and audit expenses, custodian and transfer agent expenses, share issuance
costs, certain printing and registration costs and non-recurring expenses,
including litigation. During the Fund's fiscal years ended September 30,
1991, 1992, and 1993 the management fees paid by the Fund to the Manager
were $912,906, $773,822 and $781,718, respectively.
The Fund also paid the Manager $12,000 during each of the fiscal years
ended September 30, 1991 and September 30, 1992 and $12,000 during the
fiscal year ended September 30, 1993 for accounting services permitted by
the Agreement. In addition, the Fund reimbursed the Manager its expenses
of $1,125 and $1,500 during the fiscal year ended September 30, 1992 and
1993, respectively, for tax services.
The Manager has voluntarily agreed to reimburse the Fund if aggregate
expenses (with specified exceptions) exceed the most stringent state
regulatory limitation on Fund expenses applicable to the Fund. At
present, this limitation, imposed by California, limits such expenses to
2.5% of the first $30 million of average annual net assets, 2.0% of the
next $70 million, and 1.5% of average annual net assets in excess of $100
million. The payment of the management fee at the end of the month will
be reduced so that there will not be any accrued but unpaid liability
under this expense limitation. The Manager reserves the right to
terminate or amend this undertaking at any time. Any assumption of the
Fund's expenses under this undertaking would lower the Fund's overall
expense ratio and increase its total return during any period in which
expenses are limited.
The Agreement provides 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 Agreement, the Manager
is not liable for any loss sustained by reason of good faith errors or
omissions in connection with any matters to which the Agreement relates.
The Agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as
investment adviser or general distributor. If the Manager or one of its
affiliates shall no longer act as investment adviser to the Fund, the
right of the Fund to use the name "Oppenheimer" as part of its name may
be withdrawn.
BROKERAGE POLICIES OF THE FUND
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the Agreement is to arrange the portfolio
transactions of the Fund. In doing so, the Manager is authorized by the
Agreement to employ broker-dealers ("brokers"), including "affiliated"
brokers, as that term is defined in the Investment Company Act, as may,
in its best judgment based on all relevant factors, implement the policy
of the Fund to obtain, at reasonable expense, the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of such
transactions. The Manager need not seek competitive commission bidding
or base its selection on "posted" rates, but is expected to be aware of
the current rates of eligible brokers and to minimize the commissions paid
to the extent consistent with the provisions of the Agreement and the
interests and policies of the Fund as established by its Board of
Trustees.
Under the Agreement, the Manager is authorized to select brokers which
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 have charged, if a good faith determination
is made by the Manager that the commission is fair and reasonable in
relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of the shares of the
Fund and other investment companies managed by the Manager or its
affiliates as a factor in the selection of brokers for the Fund's
portfolio transactions. Most purchases made by the Fund are principal
transactions at net prices, and the Fund incurs little or no brokerage
costs.
Description of Brokerage Practices Followed by the Manager. When brokerage
costs are incurred, the Fund's policy is to pay a reasonable commission
in terms of the range and quality of the broker's service which benefit
the Fund, rather than always to seek the lowest commission cost. The
requirement to seek the lowest commission cost could exclude the Fund and
the Manager from information, analysis, research and other services which
are of value to the Fund, as well as proper execution. In all cases, the
Manager is required to be aware of a broker's purported or "posted"
commission rates, if any, as may be applicable to the transaction, as well
as other information available at the time as to the level of commissions
known to be charged on comparable transactions by other qualified brokers.
Transactions may be directed to brokers or dealers in return for special
research and statistical information as well as for services rendered by
such brokers or dealers in the execution of orders. The allocation of
transactions in order to obtain additional research service permits the
Manager to supplement its own research and analysis activities and to make
available to the Manager the views and information of individuals and
research staffs of other securities firms. The Board has permitted the
Manager to use concessions on fixed price offerings to obtain research,
in the same manner as is permitted for agency transactions.
When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any
transactions in the securities to which the option relates. The Board has
adopted a procedure permitting the combination of purchase or sale
transactions in instances in which more than one of the funds managed by
the Manager and its affiliates simultaneously elect to effect portfolio
transactions in the same security. It is recognized that in some cases
this procedure could have a detrimental effect on the price or volume of
such securities as far as the Fund is concerned. In other cases, however,
it is believed that the ability of the Fund to participate in volume
transactions will produce better execution for the Fund.
YOUR INVESTMENT ACCOUNT
How the Fund Determines Net Asset Value Per Share. The net asset values
per share of Class A and Class B shares of the Fund are determined as of
4:00 P.M., New York time each day The New York Stock Exchange (the "NYSE")
is open (a "regular business day") by dividing the value of the Fund's net
assets attributable to that class by the number of shares of that class
outstanding. The NYSE's most recent annual holiday schedule (which is
subject to change) states that it will close New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day; it may also close on other days. Trading may occur
in U.S. Government Securities at times when the NYSE is closed (including
weekends and holidays or after 4:00 P.M., New York time, on a regular
business day). Because the net asset values of the Fund will not be
calculated at such times, if securities held in the Fund's portfolio are
traded at such times, the net asset values per share of Class A and Class
B shares of the Fund may be significantly affected at times when
shareholders do not have the ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities as follows: (i) equity securities
traded on a securities exchange or on NASDAQ are valued at the last sale
prices on their primary exchange or NASDAQ that day (or, in the absence
of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) NASDAQ and
other unlisted equity securities for which last sales prices are not
regularly reported but for which over-the-counter market quotations are
readily available are valued at the highest closing bid price at the time
of valuation, or, if no closing bid price is reported, on the basis of a
closing bid price obtained from a dealer who maintains an active market
in that security; (iii) securities (including restricted securities) not
having readily-available market quotations are valued at fair value under
the Board's procedures; (iv) debt securities having a maturity in excess
of 60 days are valued at the mean between the bid and asked prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained from active market makers in the security on the
basis of reasonable inquiry; (v) short-term debt securities having a
remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts.
In the case of U.S. Government Securities, mortgage-backed securities,
foreign fixed-income securities and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities for which last sale
information is not generally available. The Trustees will monitor the
accuracy of such pricing services by comparing prices used for portfolio
evaluation to actual sales prices of selected securities.
Calls, puts and Futures are valued at the last sale prices on the
principal exchanges or on the NASDAQ National Market on which they are
traded, or, if there are no sales that day, in accordance with (i) above.
When the Fund writes an option, an amount equal to the premium received
by the Fund is included in its Statement of Assets and Liabilities as an
asset, and an equivalent deferred credit is included in the liability
section. The deferred credit is adjusted ("marked-to-market") to reflect
the current market value of the option.
Alternative Sales Arrangements - Class A and Class B Shares. The
Alternative Sales Arrangements permit an investor to choose the method of
purchasing shares that is more beneficial to the investor depending on the
amount of the purchase, the length of time the investor expects to hold
shares and other relevant circumstances. Investors should understand that
the purpose and function of the deferred sales charge and asset-based
sales charge with respect to Class B shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or
other person entitled to receive compensation for selling Fund shares may
receive different compensation with respect to one class of shares than
the other. The Distributor will not accept any order for $1 million or
more of Class B shares on behalf of a single investor (not including
dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Matured Class B shares to Class A shares is subject
to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the
effect that the conversion of Matured Class B shares does not constitute
a taxable event for the holder 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 Matured
Class B shares would occur while such suspension remained in effect.
Although Matured 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 holder, and absent such exchange, Class B shares
might continue to be subject to the asset-based sales charge for longer
than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution Plan fees, (ii)
incremental transfer and shareholder servicing agent fees and expenses,
(iii) registration fees and (iv) shareholder meeting expenses, to the
extent that such expenses pertain to a specific class rather than to the
Fund as a whole.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before 4:00 P.M., which is normally 3 days after the ACH
transfer is initiated. The Distributor and the Fund are not responsible
for any delays. If the Federal Funds are received after 4:00 P.M.,
dividends will begin to accrue on the next regular business day after such
Federal Funds are received.
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 the Prospectus because the Distributor incurs
little or no selling expenses. 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
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Bio-Tech Fund
Oppenheimer Global Environment Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Tax-Exempt Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a CDSC).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, 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 (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter to obtain the reduced sales charge rate (as set forth in the
Prospectus) applicable to purchases of shares in that amount (the
"intended amount"). Each purchase under the Letter will be made at the
public offering price applicable to a single lump-sum purchase of shares
in the intended amount, as described in the Prospectus in effect at the
time the purchase is made.
In submitting a Letter, the investor makes no commitment to purchase
shares, but 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 amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended 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 such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, 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 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 amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but 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.
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
to 5% of the intended amount specified in the Letter shall be held in
escrow by the Transfer Agent. For example, if the intended amount
specified under the Letter is $50,000, the escrow shall be shares valued
in the amount of $2,500 (computed at the public 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 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. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such 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 the Letter) do not
include any shares sold without a front-end sales charge or without being
subject to a Class A contingent deferred sales charge unless (for the
purpose of determining completion of the obligation to purchase shares
under the Letter) the shares were acquired in exchange for shares of one
of the OppenheimerFunds whose shares were acquired by payment of a 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 "Exchange Privilege," and the
escrow will be transferred to that other fund.
Redemptions. Information on how to redeem shares of the Fund is provided
in the Prospectus. The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, if the Board of
Trustees determines that it would be detrimental to the best interests of
the remaining shareholders of the Fund to make payment wholly in cash, the
Fund may pay the redemption price in whole or in part by a distribution
in kind of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable Securities and Exchange Commission rules. If
shares are redeemed in kind, the redeeming shareholder might incur
brokerage or other costs in converting the assets to cash. Any securities
distributed by the Fund pursuant to an "in-kind" redemption will be
readily marketable. The method of valuing securities used to make
redemptions in kind will be the same as the method of valuing portfolio
securities described above under "Determination of Net Asset Value Per
Share," and such valuation will be made as of the same time the redemption
price is determined.
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 such shares is less than $1,000 or such lesser amount as the
Board may fix. The Fund's Board of Trustees will not cause the
involuntary redemption of shares held in an account if the aggregate net
asset value of such shares has fallen below the stated minimum solely as
result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act,
the requirements for any notice to be given to the shareholders in
question (not less than 30 days), or may set requirements for permission
to allow the shareholder to increase the investment so that the shares
would not be involuntarily redeemed.
Wire Redemption Procedures. Under the Wire Redemption Procedure discussed
in the Prospectus, 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 wire.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Tax-Exempt Cash Reserves or
Oppenheimer Cash Reserves to use those accounts for monthly automatic
purchases of shares of up to four other Eligible Funds.
There is a sales charge on the purchase of certain Eligible Funds. An
application should be obtained from the Transfer Agent, completed and
returned, and a prospectus of the selected fund(s) (available from the
Distributor) should be obtained before initiating Asset Builder payments.
The amount of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
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.
Check Writing. 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.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed, in Class A shares of the Fund or any
of the other OppenheimerFunds into which shares of the Fund are
exchangeable as described below, at the net asset value next computed
after receipt by the Transfer Agent of the reinvestment order. The
shareholder must ask the Distributor for such privilege at the time of
reinvestment. 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 OppenheimerFunds 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. 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.
Transfer of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of either class at the time of transfer to the name
of another person or entity (whether the transfer occurs by absolute
assignment, gift or bequest, not involving, directly or indirectly, a
public sale). The transferred shares will remain subject to the
contingent deferred sales charge, 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 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, 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. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties
if the distribution is premature; and (iii) 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 may not directly request redemption of their
accounts. The employer or plan administrator 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 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, the Trustee 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. The repurchase price will be the net asset
value next computed after the receipt of an order placed by such dealer
or broker, except that orders received from dealers or brokers after 4:00
P.M. on a regular business day will be processed at that day's net asset
value if such orders were received by the dealer or broker from its
customers prior to 4:00 P.M., and were transmitted to and received by the
Distributor prior to its close of business that day (normally 5:00 P.M.).
Payment ordinarily will be made within seven days after the Distributor's
receipt of the required documents, with signature(s) guaranteed as
described above.
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 (minimum $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 by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not 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 OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such 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
purchases while participating in an Automatic Withdrawal Plan. Class B
shareholders should not establish withdrawal plans, because of the
imposition of the Class B CDSC on such withdrawals (except where the Class
B CDSC is waived as described in "Class B Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
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. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in
"Exchange Privilege" in the Prospectus and "How to Exchange Shares" below
in this Statement of Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter 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
such plans should not be considered as a yield or income on your
investment. It may not be desirable to purchases additional Class A
shares while making automatic withdrawals because of the sales charges
that apply to purchases when made. Accordingly, a shareholder normally
may not maintain an Automatic Withdrawal Plan while simultaneously making
regular purchases of Class A shares.
The transfer agent will administer the investor's Automatic Withdrawal
Plan (the "Plan") as agent for the investor (the "Planholder") who
executed the Plan authorization and application submitted to the Transfer
Agent. The Transfer Agent shall incur no liability to the Planholder for
any action taken or omitted by the Transfer Agent in good faith to
administer the Plan. 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.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (the date selected for receipt is an approximate
date), according to the choice specified in writing by the Planholder.
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 in 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
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing to
the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other 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 because of exhaustion of
uncertificated shares needed to continue payments. 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. The list of OppenheimerFunds to which exchanges
of shares may be made (subject to restrictions in the Prospectus and in
this Statement of Additional Information) is contained in "Reduced Sales
Charges," above.
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund; shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a CDSC); and
shares of this Fund acquired by reinvestment of dividends or distributions
from any other of the OppenheimerFunds 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
OppenheimerFunds. No CDSC is imposed on exchanges of shares of either
class purchased subject to a CDSC. However, when Class A shares acquired
by exchange of Class A shares purchased subject to a Class A CDSC 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 CDSC is imposed on
the redeemed shares (see "Class A Contingent Deferred Sales Charge" in the
Prospectus), and the Class B CDSC is imposed on Class B shares redeemed
within six years of the initial purchase of the exchanged Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. 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 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.
When Class B 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 contingent deferred sales charge will be followed in
determining the order in which the shares are exchanged. Shareholders
should take into account the effect of any exchange on the applicability
and rate of any contingent deferred sales charge that might be imposed in
the subsequent redemption of remaining shares. Shareholders owning shares
of both classes must specify whether they intend to exchange Class A or
Class B shares.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
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
request 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 different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and 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 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
transaction.
Exchanges of Class B Shares. As stated in the Prospectus, shares of
a particular class of OppenheimerFunds having more than one class of
shares may be exchanged only for shares of the same class of another of
the OppenheimerFunds. All of the OppenheimerFunds (except Oppenheimer
Strategic Diversified Income Fund) offer Class A shares; if the shares of
a fund offering one class are not denominated with a class designation in
the Prospectus, they are considered "Class A" shares. Only the following
other OppenheimerFunds offer Class B shares as of the date of this
Statement of Additional Information (this list may change from time to
time, and to obtain a current list, please call the Transfer Agent at 1-
800-525-7048):
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Special Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
The Transfer Agent. Oppenheimer Shareholder Services, as transfer agent,
is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for shareholder servicing and
administrative functions. For information about your account, call the
toll-free number or write to the address of the Transfer Agent on the
front cover.
PERFORMANCE OF THE FUND
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "average annual total return", "total return,"
and "total return at net asset value" of an investment in each class of
Fund shares may be advertised. An explanation of how yields and total
returns are calculated for each class and the components of those
calculations are set forth below.
Yield and total return information may be useful to investors in
reviewing the Fund's performance. The Fund's advertisement of its
performance must, under applicable SEC rules, include the average annual
total returns for each class of shares of the Fund for the 1, 5 and 10-
year period (or the life of the class, if less) as of the most recently
ended calendar quarter. This 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 such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its yield and total return are not
guaranteed and normally will fluctuate on a daily basis. When redeemed,
an investor's shares may be worth more or less than their original cost.
Yield and total return for any given past period are not a prediction or
representation by the Fund of future yields or rates of return on its
shares. The yield and total returns of the Class A and Class B shares of
the Fund are affected by portfolio quality, portfolio maturity, the type
of investments the Fund holds and its operating expenses. All performance
information calculated at offering price is determined using the current
sales charge rates for each class of the Fund's shares.
Standardized Yields. The Fund's "yield" (referred to as "standardized
yield") for a given 30-day period for a class of shares is calculated
using the following formula set forth in rules adopted by the Securities
and Exchange Commission that apply to all funds that quote 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
reimbursements).
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 the class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. 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.
This standardized yield 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
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. 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
the 30-day period ended September 30, 1993, the standardized yields for
the Fund's Class A and Class B shares were _____% and _____%,
respectively.
Dividend Yield and Distribution Return. From time to time the Fund may
quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class)
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum front-
end sales charge. For Class B shares, the maximum offering price is the
net asset value per share, without considering the effect of contingent
deferred sales charges.
From time to time similar yield or distribution return calculations may
also be made using the Class A net asset value (instead of its respective
maximum offering price) at the end of the period. The dividend yields on
Class A shares for the 30-day period ended September 30, 1993, were ___%
and 6.11% when calculated at maximum offering price and at net asset
value, respectively. The dividend yield on Class B shares for the 30-day
period ended September 30, 1993, was 5.22% when calculated at net asset
value.
Total Returns. 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") to achieve an Ending Redeemable Value
("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
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.
Total return is determined as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as discussed below). For Class B shares, the payment of the
applicable contingent deferred sales charge (4.0% for the first year, 3.0%
for the second year, 2.0% for the third and fourth years, 1.0% in the
fifth year and none thereafter) is applied to the investment result for
the time period shown (unless the total return is shown at net asset
value, as described below). Total returns also assume that all dividends
and capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period. The "average annual total returns"
on an investment in Class A shares of the Fund for the one year and five
year periods ended September 30, 1993 were 2.5% and 9.1%, respectively,
and for the period from March 10, 1986 (commencement of operations) to
September 30, 1993, was 8.6%. The "total return" on Class A shares for
the period from March 10, 1986 through September 30, 1993 was 86.51%. For
the fiscal period from May 3, 1993, through September 30, 1993, the
average annual total return and the cumulative total return on an
investment in Class B shares of the Fund were (5.25%) and (2.18%),
respectively.
From time to time the Fund may also quote an "average annual total
return at net asset value" or a cumulative "total return at net asset
value" for Class A or Class B shares. It 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 sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions. The cumulative
"total returns at net asset value" on the Fund's Class A shares for the
fiscal year ended September 30, 1993, was 7.61%. The cumulative total
return at net asset value on the Fund's Class B shares for the fiscal
period from May 3, 1993 through September 30, 1993 was 2.82%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of the performance of its Class A or Class B shares by Lipper
Analytical Services, Inc. ("Lipper"), 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's classes is ranked against (i)
all other funds, excluding money market funds, and (ii) all other U.S.
Government Securities funds. The Lipper performance rankings are based
on total return that includes the reinvestment of capital gains
distributions and income dividends but does not take sales charges or
taxes into consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A or Class B shares by Morningstar, Inc., an independent
mutual fund monitoring service that ranks mutual funds, including the
Fund, in broad investment categories (equity, taxable bond, tax-exempt and
other) monthly, based upon each fund's three, five and ten-year average
annual total returns (when available) and a risk adjustment factor that
reflects Fund performance relative to three-month U.S. Treasury bill
monthly returns. Such returns are adjusted for fees and sales loads.
There are five ranking categories with a corresponding number of stars:
highest (5), above average (4), neutral (3), below average (2) and lowest
(1). Ten percent of the funds, series or classes in an investment
category receive 5 stars, 22.5% receive 4 stars, 35% receive 3 stars,
22.5% receive 2 stars, and the bottom 10% receive one star. Morningstar
ranks the Class A and Class B shares of the Fund in relation to other
taxable bond funds.
The total return on an investment made in Class A or Class B shares of
the Fund may be compared with the performance for the same period of the
Lehman Brothers U.S. Government Bond Index, an unmanaged index including
all U.S. Treasury issues, publicly- issued debt of U.S. Government
agencies and quasi-public corporation and U.S. Government-guaranteed
corporate debt, and is widely regarded as a measure of the performance of
the U.S. Government bond market, and the Consumer Price Index, which is
generally considered to be a measure of inflation. The foregoing bond
index includes a factor for the reinvestment of interest but does not
reflect expenses or taxes. Other indices may be used from time to time.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New
York Times, or other publications. These articles may include quotations
of performance from other sources, such as Lipper or Morningstar.
When comparing yield, total return and investment risk of an investment
in Class A or Class B shares of the Fund with other investments, investors
should understand that certain other investments have different risk
characteristics than an investment in shares of the Fund. For example,
certificates of deposit may have fixed rates of return and may be insured
as to principal and interest by the FDIC, while the Fund's returns will
fluctuate and its share values and returns are not guaranteed. U.S.
Treasury securities are guaranteed as to principal and interest by the
full faith and credit of the U.S. government.
DISTRIBUTION AND SERVICE PLANS
The Fund has adopted a Service Plan for Class A Shares and a
Distribution and Service Plan for Class B shares of the Fund under Rule
12b-1 of the Investment Company Act, pursuant to which the Fund will
reimburse the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class (for the
Distribution and Service Plan for the Class B shares, that vote was cast
by the Manager as the then-sole initial holder of Class B shares of the
Fund). In addition, the Manager and the Distributor may, under the Plans,
from time to time from their own resources (which, as to the Manager, may
include profits derived from the advisory fee it receives from the Fund)
make payments to Recipients for distribution and administrative services
they perform. The Distributor and the Manager may, in their sole
discretion, increase or decrease the amount of distribution assistance
payments they make to Recipients from their own assets. For further
details, see the discussions relating to the Plans in "How to Buy Shares"
in the Prospectus.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either 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. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the respective class, who vote
exclusively on approval or amendment of the Plan for that class. All
material amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall provide
separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan shall
also include the distribution costs for that quarter, and such costs for
previous fiscal periods that are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides 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 such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of the Independent Trustees.
Under the Plans, no payment will be made to any broker, dealer or other
financial institution under the Plan (each is referred to as a
"Recipient") in any quarter if the aggregate net asset value of all Fund
shares held by the Recipient for itself and its customers did not exceed
a minimum amount, if any, that may be determined from time to time by a
majority of the Fund's Independent Trustees. Initially, the Board of
Trustees has set the fee at the maximum rate allowed under the Plans and
set no minimum amount.
For the fiscal year ended September 30, 1993, payments under the Class
A Plan totaled $404,118, all of which was paid by the Distributor to
Recipients, including $2,339 paid to an affiliate of the Distributor. For
the period February 1, 1992 to September 30, 1992, pursuant to the Class
A Plan, the Fund reimbursed the Distributor $192,377, of which $117 was
paid to an affiliated broker and $2,431 was retained by the Distributor.
For the period October 1, 1991 to January 31, 1992, pursuant to the Plan
the Fund reimbursed Clayton Brown & Associates, Inc., the Fund's
distributor prior to February 1, 1992, $193,609, of which $125,883 was
paid to Recipients by that firm and $67,726 was retained by Clayton Brown.
Unreimbursed expenses incurred with respect to Class A shares for any
fiscal quarter by the Distributor may not be recovered under the Class A
Plan in subsequent fiscal quarters. Payments received by the Distributor
under the Class A Plan will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of 0.25% of the average daily net
asset value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance payment of the service fee. In the event Class B shares are
redeemed during the first year such shares are outstanding, the Recipient
will be obligated to repay a pro rata portion of the advance of the
service fee payment to the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan by the Board.
Initially, the Board has set no minimum holding period. All payments
under the Class B Plan become subject to the limitations imposed by the
National Association of Securities Dealers, Inc. Rules of Fair Practice
on payments of asset based sales charges and service fees. The
Distributor anticipates that it will take a number of years for it to
recoup (from the Fund's payments to the Distributor under the Class B
Plan) the sales commissions paid to authorized brokers or dealers. For
the Fiscal period from May 3, 1993 (inception of the Class) through
September 30, 1993, payments under the Class B plan totaled $10,203.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
were reimbursed in the form of payments made by the Fund to the
Distributor under the Class B Plan, the balance of $400,000 (plus
interest) would be subject to recovery in future fiscal years from such
sources.
The Class B Plan allows for the carry-forward of distribution expenses,
to be recovered from asset-based sales charges in subsequent fiscal
periods, as described above and in the Prospectus. In the event the
Class B Plan is terminated, the Distributor is entitled to continue to
receive the asset-based sales charge of 0.75% per annum on Class B shares
sold prior to termination until the Distributor has recovered its Class
B distribution expenses incurred prior to termination from such payments
and from the Class B CDSC.
The Fund believes that current applicable accounting standards do not
require the Fund to record as a current liability its obligation under the
Class B Plan to carry over and continue payments of the asset-based sales
charge to the Distributor in the future to reimburse it for expenses
incurred as to Class B shares sold prior to the termination of the Plan.
Those accounting standards are currently being reviewed by the American
Institute of Certified Public Accountants, as discussed in the Prospectus.
If those accounting standards should be changed to require the Fund to
recognize that obligation for future payments as a current liability, the
Fund's Board would consider other alternatives to that provision of the
Class B Plan, because otherwise the treatment of such expenses as a
current liability would affect all then-outstanding Class B shares
regardless of how long they had been held. Furthermore, Class B
shareholders whose shares had not matured would continue to remain subject
to the Class B CDSC.
The asset-based sales charge paid to the Distributor by the Fund under
the Class B Plan is intended to allow the Distributor to recoup the cost
of sales commissions paid to authorized brokers and dealers at the time
of sale, plus financing costs, as described in the Prospectus. Such
payments may also be used to pay for the following expenses in connection
with the distribution of Class B shares: (i) financing the advance of the
service fee payment to Recipients under the Class B Plan, (ii)
compensation and expenses of personnel employed by the Distributor to
support distribution of Class B shares, and (iii) costs of sales
literature, advertising and prospectuses (other than those furnished to
current shareholders) and state "blue sky" registration fees.
DIVIDENDS, CAPITAL GAINS AND TAXES
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the 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., 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.
The amount of a class's distributions may 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, as
described in "Alternative Sales Arrangements -- Class A and Class B,"
above. Dividends are calculated in the same manner, at the same time and
on the same day for shares of each class. However, dividends on Class B
shares are expected to be lower as a result of the asset-based sales
charge on Class B shares, and Class B dividends will also differ in amount
as a consequence of any difference in net asset value between Class A and
Class B shares.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A and Class B shares will be
reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Any long-term capital gains distributions will be identified
separately when paid and when tax information is distributed by the Fund.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
(although the Fund may have a targeted dividend rate for Class A shares)
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
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 and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
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, or else the Fund must pay an excise tax on the amounts not
distributed. The Manager might determine in a particular year that it
might be in the best interest of shareholders for the Fund not to make
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.
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 OppenheimerFunds listed in "Reduced
Sales Charges" above at net asset value without sales charge. Not all
OppenheimerFunds currently offer Class B shares. The names of Funds that
offer Class B shares can be obtained by calling the Distributor at 1-800-
525-7048, see also "Exchanges of Class B Shares" above. To elect this
option, the shareholder must notify the Transfer Agent in writing and
either must have an existing account in the fund selected for reinvestment
or must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution.
ADDITIONAL INFORMATION ABOUT THE FUND
Information about the Fund's Declaration of Trust and Business Structure.
The Fund was named "First Trust Fund - U.S. Government Series" prior to
July 10, 1992 and "Oppenheimer Government Securities Fund" from that date
to May 1, 1994, when it assumed its current name. Shares of the Fund
represent an interest in the Fund proportionately equal to the interest
of each other share of the same class and entitle their holders to one
vote per share (and a proportional vote for a fractional share) on matters
submitted to their vote at shareholder meetings. Only shareholders of a
particular class vote on matters affecting only that class. The Trustees
may divide or combine the shares of a class into a greater or lesser
number of shares without thereby changing the proportionate beneficial
interest in the Fund. Shares do not have cumulative voting rights or
preemptive or subscription rights.
While Massachusetts law permits a shareholder of a business trust (such
as the Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is highly unlikely and is limited to the
relatively remote circumstances in which the Fund would be unable to meet
its obligations. The Fund's Declaration of Trust contains an express
disclaimer of shareholder or Trustee liability for the Fund's obligations,
and provides for indemnification and reimbursement of expenses out of its
property for any shareholder held personally liable for its obligations.
The Declaration of Trust also provides that the Fund shall, upon request,
assume a defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Any person doing
business with the Fund, and any shareholder of the Fund, agrees under the
Fund's 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, and the Trustees shall have no personal liability to any
such person, to the extent permitted by law.
It is not contemplated that regular annual meetings of shareholders
will be held. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or 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 shareholders of 10%
of its outstanding shares. In addition, if the Trustees receive a request
from at least 10 shareholders (who have been shareholders for at least six
months) holding in the aggregate shares of the Fund valued at $25,000 or
more or holding 1% or more of the Fund's outstanding shares, whichever is
less, that they wish to communicate with other shareholders to request a
meeting to remove a Trustee, the Trustees will then either give the
applicants access to the Fund's shareholder list, mail their communication
to all other shareholders at the applicants' expense, or take alternative
action as set forth in Section 16(c) of the Investment Company Act.
Information About the Custodian of the Fund's Portfolio Securities. The
Custodian of the assets of the Fund is Citibank, N.A. The Custodian's
responsibilities include safeguarding and controlling the Fund's portfolio
securities, collecting income on the portfolio securities and handling the
delivery of such securities to and from the Fund. The Manager and its
affiliates have banking relationships with the Custodian. The Manager has
represented to the Fund that its banking relationships with the Custodian
have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. 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. Such uninsured
balances may at times be substantial.
The Distributor. Under the General Distributor's Agreement between the
Fund and the Distributor, the Distributor acts as the Fund's principal
underwriter in the continuous public offering of the Fund's Class A and
Class B shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (other than those paid under the
Class B Distribution and Service Plan), including advertising and the cost
of printing and mailing prospectuses (other than those furnished to
existing shareholders), are borne by the Distributor. In the fiscal year
ended September 30, 1991, Clayton Brown, as distributor, retained
commissions in the amount of $40,260 for selling shares of the Fund and
reallowed $150,908 in that year to other dealers. In the fiscal year
ended September 30, 1991, the Distributor, which served as sub-
distributor, received no reallowance of commissions from Clayton Brown.
For the fiscal year ended September 30, 1992 and 1993, commissions (sales
charges paid by investors) on sales of Fund shares totaled $192,406 and
$289,261, respectively, of which $28,268 and $67,922 was retained by the
Distributor and an affiliated broker-dealer during those respective years.
Independent Auditors. The independent auditors of the Fund examine the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson & Adams, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(formerly named "Oppenheimer Government Securities Fund")
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Highlights (see Part A)*
(2) Independent Auditors' Report (see Part B)*
(3) Statement of Investments (see Part B)*
(4) Statement of Assets and Liabilities (see Part B)*
(5) Statement of Operations (see Part B)*
(6) Statements of Changes in Net Assets (see Part B)*
(7) Notes to Financial Statements (see Part B)*
(8) Independent Auditors' Consent*
(b) Exhibits
(1) Amended and Restated Agreement and Declaration of Trust
dated April 29, 1993 - Previously filed with Post-Effective
Amendment No. 15 to Registrant's Registration Statement,
12/3/93, and incorporated herein by reference.
(i) Amended and Restated Agreement and Declaration of
Trust dated May 1, 1994*
(2) Amended By-Laws as of August, 1990 - Previously filed
with Post-Effective Amendment No. 8 to Registrant's
Registration Statement, 2/1/91, and incorporated
herein by reference.
_____________________
*To be filed by Amendment.
(3) Not applicable.
(4)(i) Class A Specimen Share Certificate - Previously filed with Post-
Effective Amendment No. 15 to Registrant's Registration Statement,
12/3/93, and incorporated herein by reference.
(ii) Class B Specimen Share Certificate - Previously filed with Post-
Effective Amendment No. 15 to Registrant's Registration Statement,
12/3/93, and incorporated herein by reference.
(5) Investment Advisory Agreement dated October 22, 1990 - Filed with
Post-Effective Amendment No. 7 to Registrant's Registration Statement,
12/3/90, and incorporated herein by reference.
(6)(a) General Distributor's Agreement dated October 13, 1992, with
Oppenheimer Fund Management, Inc. - Filed with Post-Effective Amendment
No. 12 of the Registrant's Registration Statement, 12/2/92, and
incorporated herein by reference.
(b) Form of Dealer Agreement of Oppenheimer Fund Management, Inc. - Filed
with Post-Effective Amendment No. 12 of the Registrant's Registration
Statement, 12/2/92, and incorporated herein by reference.
(c) Form of Oppenheimer Fund Management, Inc. Broker Agreement - Filed
with Post-Effective Amendment No. 12 of the Registrant's Registration
Statement, 12/2/92, and incorporated herein by reference.
(d) Form of Oppenheimer Fund Management, Inc. Agency Agreement - Filed
with Post-Effective Amendment No. 12 of the Registrant's Registration
Statement, 12/2/92, and incorporated herein by reference.
(7) Not applicable.
(8) Custodian Agreement dated 6/1/90 with Citibank, N.A. - Filed with
Post-Effective Amendment No. 8, 2/1/91, to Registrant's Registration
Statement and incorporated herein by reference.
(9) Agreement and Plan of Reorganization dated 4/28/93 between Registrant
and Main Street Funds, Inc. - Government Securities Fund - Filed with
Post-Effective Amendment no. 11 to Registration Statement of Oppenheimer
Main Street Funds, Inc., 8/25/93, and incorporated herein by reference.
(10) Opinion and Consent of Counsel - Filed with Registrant's
Registration Statement and incorporated herein by reference.
(11) Not applicable.
(12) Not applicable.
(13) Subscription Agreement and Investment letter - Filed with
Registrant's Registration Statement and incorporated herein by reference.
(14)(a) Form of Prototype Standardized and Non-Standardized Profit
Sharing Plans and Money Purchase Pension Plans for self-employed persons
and corporations - Filed with Post-Effective Amendment No. 3 to the
Registration Statement of Oppenheimer Global Growth & Income Fund (File
No. 33-23799), 1/31/92, and incorporated herein by reference.
(b) Form of Individual Retirement Account Trust Agreement -Filed with
Post-Effective Amendment No. 21 to the Registration Statement of
Oppenheimer U.S. Government Trust (Reg. No. 2-76645), 8/25/93, and
incorporated herein by reference.
(c) Form of SEP-IRA - Filed with Post-Effective Amendment No. 36 to the
Registration Statement of Oppenheimer Equity Income Fund (Registration
No. 2-33043), 10/23/91, and incorporated herein by reference.
(d) Form of Tax-Sheltered Retirement Plan and Custody Agreement for
employees of public schools and tax-exempt organizations - Filed with
Post-Effective Amendment No. 22 of Oppenheimer Directors Fund (File No.
2-62240), and incorporated herein by reference.
(15)(a) Service Plan and Agreement for Class A shares dated 6/22/93
pursuant to Rule 12b-1 - Previously filed with Post-Effective Amendment
No. 16, 1/27/94 to Registrant's Registration Statement and incorporated
herein by reference.
(b) Distribution and Service Plan and Agreement for Class B shares dated
6/22/93 pursuant to Rule 12b-1 - Previously filed with Post-Effective
Amendment No. 16, 1/27/94 to Registrant's Registration Statement and
incorporated herein by reference.
(16) Performance Data Computation Schedule - To be filed by Amendment.
- -- Powers of Attorney (including certified Board resolutions) - Filed with
Post-Effective Amendment No. 15 to Registrant's Registration Statement,
12/3/93, and incorporated herein by reference.
ITEM 25. Persons Controlled by or under Common Control with
Registrant
None
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of February 18, 1994
Shares of Beneficial Interest
of Class A Shares 8,758
Shares of Beneficial Interest
of Class B Shares 435
ITEM 27. Indemnification
Reference is made to Article VIII of Registrant's Agreement
and Declaration of Trust filed as Exhibit 24(b)(1) 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 28. Business and Other Connections of Investment Adviser
(a) Oppenheimer Management Corporation is the investment
adviser of the Registrant; it and certain subsidiaries act in the same
capacity to other registered investment companies as described in Parts
A and B of this Registration Statement.
(b) For information as to the business, profession,
vocation or employment of a substantial nature of each of the officers and
directors of Oppenheimer Management Corporation, reference is made to Part
B of this Registration Statement and to the registration on Form ADV by
Oppenheimer Management Corporation filed under the Investment Advisers Act
of 1940, which is incorporated herein by reference.
ITEM 29. Principal Underwriters
(a) Oppenheimer Funds Distributor, Inc. is the General
Distributor of the Registrant's shares and is also the general distributor
of certain of the other open-end registered investment companies for which
Oppenheimer Management Corporation is the investment adviser, as described
in Parts A and B of the Registration Statement.
(b) The information contained in Form BD of Oppenheimer
Funds Distributor, Inc., filed under the Securities Exchange Act of 1934,
is incorporated herein by reference.
(c) Not applicable.
ITEM 30. 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 Oppenheimer Management Corporation at its offices at 3410 South Galena
Street, Denver, Colorado 80231.
ITEM 31. Management Services
Not applicable.
ITEM 32. 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 has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 23rd day of February, 1994.
OPPENHEIMER GOVERNMENT SECURITIES FUND
/s/ James C. Swain *
by: -----------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signatures: Title Date
- ----------- ----------------- --------------
/s/ James C. Swain* Chairman of the Board February 23, 1994
- --------------------- of Trustees and
James C. Swain Principal Executive
Officer
/s/ Jon S. Fossel* President and Trustee February 23, 1994
- ----------------------
Jon S. Fossel
/s/ George Bowen* Treasurer and February 23, 1994
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis* Trustee February 23, 1994
- ----------------------
Robert G. Avis
/s/ William A. Baker* Trustee February 23, 1994
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee February 23, 1994
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee February 23, 1994
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee February 23, 1994
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee February 23, 1994
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee February 23, 1994
- ---------------------------
Ned M. Steel
*By: /s/ Robert G. Zack
-------------------------------------
Robert G. Zack, Attorney-in-Fact
