OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Supplement dated October 30, 1995, to the
Prospectus dated February 1, 1995, Revised October 30, 1995
The following text is added to the paragraph immediately following
the Class A sales charge table in the Prospectus:
In addition to paying dealers the regular commission for
sales of Class A shares stated in the sales charge table in
"Class A Shares," and the commissions for Class B shares
described in the third paragraph in "Distribution and Service
Plan for Class B Shares" on page 21 of this Prospectus, the
Distributor will pay additional commission to each participating
broker, dealer and financial institution that has a sales
agreement with the Distributor (these are referred to as
"participating firms") for shares of the Fund sold in
"qualifying transactions" from September 1, 1995, through
November 30, 1995 (that period is referred to as the
"promotion"). The additional commission will be 0.50% of the
offering price of Class A shares and 0.50% of the offering price
of Class B shares of the Fund sold by a registered
representative or sales representative of a participating firm.
"Qualifying transactions" are sales by a registered
representative or sales representative in the amount of $100,000
or more (calculated at offering price) of Class A and/or Class
B shares (if offered) of any one or more of the following funds:
the Fund, Oppenheimer Global Fund, Oppenheimer Global Growth &
Income Fund, Oppenheimer Global Emerging Growth Fund,
Oppenheimer Growth Fund, Oppenheimer International Bond Fund,
Oppenheimer Main Street Income & Growth Fund, and Oppenheimer
Strategic Income Fund. The amount of additional commissions paid
on sales of shares of some of the other Oppenheimer funds listed
is different than the additional commissions paid for sales of
shares of the Fund. "Qualifying transactions" do not include
sales of Class A shares (a) at net asset value without sales
charge, or (b) subject to a contingent deferred sales charge,
or (c) intended but not yet transacted under a Letter of Intent.
However, if Class A shares of the Fund or any of the other
Oppenheimer funds listed above are purchased at net asset
value without sales charge during the promotion with the
proceeds of shares redeemed within the prior 12 months from
another mutual fund (other than a fund managed by Oppenheimer
Management Corporation or one of its subsidiaries) on which an
initial sales charge or contingent sales charge was paid, the
amount of the purchase will count toward the $100,000 qualifying
amount described above (but not for the payment of additional
commission).
October 30, 1995
<PAGE>
Oppenheimer
Limited-Term Government Fund
Prospectus dated February 1, 1995, Revised October 30, 1995.
Oppenheimer Limited-Term Government Fund (the "Fund") is a mutual fund
that seeks high current return and safety of principal. In seeking its
objective, 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"). The Fund also uses "hedging" instruments
to seek to reduce the risks of market and interest rate fluctuations that
affect the value of the securities the Fund holds.
While payments of principal and interest on certain U.S. Government
securities are guaranteed by the U.S. Government or its agencies or
instrumentalities, the net asset values of shares of the Fund and the
Fund's dividends are not guaranteed, and will fluctuate.
Under normal circumstances, the Fund seeks to maintain an average
effective portfolio duration (measured on a dollar-weighted basis) of not
more than three years. Please refer to "Investment Policies and
Strategies" for more information about the types of securities the Fund
invests in and the risks of investing in the Fund.
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the February 1, 1995 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 of Additional Information 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, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
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.
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C 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
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset value per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
will bear indirectly. The numbers below are based on the Fund's expenses
during its fiscal year ended September 30, 1994.
- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account" on pages
15 through 29 for an explanation of how and when these charges apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- ----------------------------------------------------------------------
Maximum Sales 3.50% None None
Charge on
Purchases (as a %
of offering price)
- ----------------------------------------------------------------------
Sales Charge on None None None
Reinvested
Dividends
- ----------------------------------------------------------------------
Deferred Sales None(1) 4% in the 1% if
Charge (as a % first year, shares are
of the lower declining redeemed
of the original to 1% in the within 12
purchase price fifth year and months of
or redemption eliminated purchase(2)
proceeds) thereafter(2)
- ----------------------------------------------------------------------
Exchange Fee None None None
- ----------------------------------------------------------------------
Redemption Fee None(3) None(3) None(3)
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) 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," below.
(2) See "How to Buy Shares," below, for more information on the contingent
deferred sales charges.
(3) There is a $10 transaction fee for redemptions paid by Federal Funds
wire, but not for redemptions paid by check or ACH transfer through
AccountLink, or for which checkwriting privileges are used (see "How to
Sell Shares").
- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the chart below are projections of the Fund's business
expenses based on the Fund's expenses in its fiscal year ended September
30, 1994. These amounts are shown as a percentage of average net assets
of each class of the Fund's shares for that year. The "12b-1 Distribution
Plan Fees" for Class A shares are the Service Plan Fees (which can be up
to a maximum of 0.25% of average annual net assets of that class), and for
Class B and Class C shares, are the Service Plan Fees (which can be up to
a maximum of 0.25%) and the asset-based sales charges of 0.75%. These
plans are described in greater detail in "How to Buy Shares."
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual amount of the Fund's assets represented by
each class of shares. Class C shares were not publicly offered during the
fiscal year ended September 30, 1994. Therefore, the Annual Fund
Operating Expenses shown for Class C shares are estimates based on amounts
that would have been payable in that period assuming that Class C shares
were outstanding during such fiscal year.
Class A Class B Class C
Shares Shares Shares
- --------------------------------------------------------------------
Management Fees 0.47% 0.47% 0.47%
- --------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.25% 1.00% 1.00%
- --------------------------------------------------------------------
Other Expenses 0.27% 0.32% 0.32%
- --------------------------------------------------------------------
Total Fund Operating 0.99% 1.79% 1.79%
Expenses
- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make a $1,000 investment in each class of shares
of the Fund, and the Fund's annual return is 5%, and that its operating
expenses for each class are the ones shown in the chart above. If you
were to redeem your shares at the end of each period shown below, your
investment would incur the following expenses by the end of 1, 3, 5 and
10 years:
1 year 3 years 5 years 10 years*
- -----------------------------------------------------------------
Class A Shares $45 $65 $ 88 $152
- -----------------------------------------------------------------
Class B Shares $68 $86 $117 $170
- -----------------------------------------------------------------
Class C Shares $28 $56 $ 97 $211
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $45 $65 $88 $152
- -----------------------------------------------------------------
Class B Shares $18 $56 $97 $170
- -----------------------------------------------------------------
Class C Shares $18 $56 $97 $211
*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. Because of the asset-based
sales charge and the contingent deferred sales charge on Class B and Class
C shares, long-term Class B and Class C shareholders could pay the
economic equivalent of an amount greater than the maximum front-end sales
charge allowed under applicable regulatory requirements. The automatic
conversion of Class B shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing. Keep the Prospectus for
reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
- What is The Fund's Investment Objective? The Fund's investment
objective is to seek high current return and safety of principal.
- What Does the Fund Invest In? The Fund anticipates that under
normal circumstances, it will maintain an average effective portfolio
duration (measured on a dollar-weighted basis) of not more than three
years. Portfolio "duration" is explained in "Investment Policies and
Strategies." The Fund invests only in obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (these are
called "U.S. Government Securities"), and repurchase agreements on such
securities. The Fund may also use hedging instruments approved by its
Board of Trustees to try to manage its investment risks. The Fund's
investments in U.S. Government Securities may include collateralized
mortgage obligations ("CMO's"). The Fund may also invest in "stripped"
CMO's or mortgage-backed securities. These investments are more fully
explained in "Investment Objectives and Policies," starting on page 7.
- Who Manages the Fund? The Fund's investment advisor is Oppenheimer
Management Corporation, which (including a subsidiary) advises investment
company portfolios having over $38 billion in assets at September 30,
1995. The Manager is paid an advisory fee by the Fund, based on its net
assets. The Fund's portfolio manager, who is primarily responsible for
the selection of the Fund's securities, is David A. Rosenberg. The Fund's
Board of Trustees, elected by shareholders, oversees the investment
advisor and the portfolio manager. Please refer to "How the Fund is
Managed," starting on page 12 for more information about the Manager and
its fees.
- How Risky is the Fund? Although U.S. Government Securities involve
little credit risk, their values will fluctuate (until maturity) depending
on prevailing interest rates. The magnitude of these fluctuations will
often be greater for longer-term debt securities than shorter-term
securities. While the Manager tries to reduce that risk by seeking to
limit the average portfolio duration, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's
objective and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Objective and
Policies" starting on page 7 for a more complete discussion.
- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How To Buy Shares"
beginning on page 15 for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has three
classes of shares. Class A shares are offered with a front-end sales
charge, starting at 3.5% and reduced for larger purchases. While Class
B and C shares are offered without a front-end sales charge, a contingent
deferred sales charge may apply to Class B shares redeemed within 5 years
of purchase and Class C shares redeemed within 12 months of purchase.
Please review "How To Buy Shares" starting on page 15 for more details,
including a discussion about which class may be appropriate for you.
- How Can I Sell My Shares? Shares can be redeemed by mail or by
telephone call to the Transfer Agent on any business day, or through your
dealer, or by Checkwriting. Please refer to "How To Sell Shares" on page
24.
- How Has the Fund Performed? The Fund measures its performance by
quoting a yield, dividend yield, average annual total returns and
cumulative total returns, which measure historical performance. Those
returns can be compared to the yields and total returns (over similar
periods) of other funds. Of course, other funds may have different
objectives, investments, and levels of risk. The Fund's performance can
also be compared to U.S. Government bond indices, which we have done on
pages 14 and 15. Please remember that past performance does not guarantee
future results.
<PAGE>
Financial Highlights
The table on this page presents selected financial information about
the Fund, including per share data and expense ratios and other data based
on the Fund's average net assets. The information for the fiscal years
ended September 30, 1990, through 1994, has been audited by Deloitte &
Touche LLP, the Fund's independent auditors, whose report on the Fund's
Financial Statements for the fiscal year ended September 30, 1994 is
included in the Statement of Additional Information. The information in
the table for the fiscal periods prior to October 1, 1989 (except for
total return) was audited by the Fund's previous independent auditors.
Class C shares were not publicly offered during the fiscal year ended
September 30, 1994. Accordingly, no information on Class C shares is
reflected in the table below or in the Fund's other financial statements.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30,
1994 1993 1992 1991 1990(3) 1989 1988
==========================================================
================================================
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $11.04 $10.97 $10.75 $10.18 $10.17 $10.14 $9.72
- ----------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .72 .73 .81 .87 .89 .90 .89
Net realized and unrealized
gain (loss) on investments
and options written (.64) .07 .22 .57 .01 .03 .42
------ ------ ----- ------ ------ ------ -----
Total income (loss) from
investment operations .08 .80 1.03 1.44 .90 .93 1.31
- ----------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net
investment income (.71) (.73) (.81) (.87) (.89) (.90) (.89)
Dividends in excess
of net investment income --(5) -- -- -- -- -- --
Tax return of capital distribution (.01) -- -- -- -- -- --
Distributions from net
realized gain on investments
and options written -- -- -- -- -- -- --
------ ------ ----- ------ ------ ------ -----
Total dividends and
distributions to shareholders (.72) (.73) (.81) (.87) (.89) (.90) (.89)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.40 $11.04 $10.97 $10.75 $10.18 $10.17 $10.14
====== ====== ===== ====== ====== ======
=====
==========================================================
================================================
TOTAL RETURN, AT NET ASSET VALUE(6) .74% 7.61% 9.88% 14.69% 9.15% 9.65% 13.86%
==========================================================
================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $227,858 $178,944 $158,068 $167,974 $213,391 $237,819 $251,794
- ----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $190,829 $161,318 $160,830 $192,404 $218,528 $243,863 $267,557
- ----------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 21,906 16,206 14,416 15,624 20,964 23,395 24,834
- ----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.74% 6.70% 7.44% 8.27% 8.77% 8.96% 8.75%
Expenses .99% 1.02% .97% .98% .90% .93% .96%
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(8) 226% 74% 154% 112% 60% 61% 78%
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
--------------- -------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1987 1986(2) 1994 1993(1)
============================================================
===================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.51 $10.56 $11.06 $10.96
- ----------------------------------------------------------- ------------------
Income (loss) from investment
operations:
Net investment income .86(4) .57(4) .62 .23
Net realized and unrealized
gain (loss) on investments
and options written (.74) (.05) (.64) .10
------ ------ ------ ------
Total income (loss) from
investment operations .12 .52 (.02) .33
- ----------------------------------------------------------- -------------------
Dividends and distributions to
shareholders:
Dividends from net
investment income (.86) (.57) (.62) (.23)
Dividends in excess
of net investment income -- -- --(5) --
Tax return of capital distribution -- -- (.01) --
Distributions from net
realized gain on investments
and options written (.05) -- -- --
------ ------ ------ ------
Total dividends and
distributions to shareholders (.91) (.57) (.63) (.23)
- ----------------------------------------------------------- -------------------
Net asset value, end of period $9.72 $10.51 $10.41 $11.06
====== ====== ====== ======
===========================================================
===================
TOTAL RETURN, AT NET ASSET VALUE(6) .95% 4.97% (.17)% 3.02%
===========================================================
===================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $287,181 $127,797 $38,877 $5,077
- ----------------------------------------------------------- -------------------
Average net assets (in thousands) $242,181 $105,123 $15,801 $2,561
- ----------------------------------------------------------- -------------------
Number of shares outstanding
at end of period (in thousands) 29,560 12,162 3,734 459
- ----------------------------------------------------------- -------------------
Ratios to average net assets:
Net investment income 8.22% 7.93%(7) 5.91% 4.81%(7)
Expenses .56%(4) .08%(4)(7) 1.79% 1.87%(7)
- ----------------------------------------------------------- -------------------
Portfolio turnover rate(8) 73% 471% 226% 74%
</TABLE>
(1) For the period from May 3, 1993 (inception of offering) to September
30, 1993.
(2) For the period from March 10, 1986 (commencement of operations) to
September 30, 1986.
(3) On April 7, 1990, Oppenheimer Management Corporation became the
investment advisor to the Fund.
(4) Net investment income would have been $.84 and $.52 absent the
voluntary reimbursement or waiver of expenses, resulting in an expense
ratio of 1.00% and 1.07% for 1987 and 1986, respectively.
(5) Less than $.001 per share.
(6) Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption
at the net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in the total returns.
(7) Annualized.
(8) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio
securities owned during the period. Securities with a maturity or
expiration date at the time of acquisition of one year or less are
excluded from the calculation. Purchases and sales of investment
securities (excluding short-term securities) for the year ended September
30, 1994 were $526,239,879 and $445,474,809, respectively.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high current return and safety of principal.
Investment Policies and Strategies. 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"), repurchase agreements on such securities,
and hedging instruments approved by its Board of Trustees.
U.S. Government Securities include the following types of securities:
- U.S. Treasury Obligations. Treasury Bills have maturities of one
year or less when issued. Treasury Notes have maturities of one to ten
years when issued. Treasury Bonds have maturities generally greater than
ten years when issued. The payment of interest and repayment of principal
at the maturity of U.S. Treasury obligations are backed by the full faith
and credit of the United States. That means that the taxing power of the
U.S. government is pledged to the payment of interest and principal on
those securities.
- Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. Debt securities issued or guaranteed by U.S.
Government agencies or instrumentalities have different levels of credit
protection. Some are supported by the full faith and credit of the U.S.
Government, such as GNMA modified pass-through certificates. Some are
backed by 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"). Others are
backed by the discretionary authority of the U.S. Government to purchase
the obligations of the agency or instrumentality. Still others are backed
by the credit of the instrumentality, such as obligations of Federal Home
Loan Mortgage Corporation ("Freddie Mac"), Federal Land Banks, Farmers
Home Administration, Central Bank for Cooperatives, and Federal
Intermediate Credit Banks, all of which the Fund can buy.
- Mortgage-Backed Securities. The Fund will invest in GNMA
certificates only of the "fully-modified pass-through" type. These 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 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 scheduled 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 these
securities. If principal is returned, it may be invested in instruments
having a higher or lower yield than the prepaid instruments, depending on
then-current market conditions. These securities therefore may not be
completely effective as a means of "locking in" attractive long-term
interest rates. They may also 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.
Maturity differs from effective duration, which is a volatility
measure. Please refer to "Investment Policies and Strategies" on page 8
for an explanation of duration.
- Collateralized Mortgage Obligations. The Fund may invest in
collateralized mortgage obligations ("CMOs") that are issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, or that are
collateralized by a portfolio of mortgages or mortgage-related securities
guaranteed by a U.S. Government agency or instrumentality. Payment of the
interest and principal generated by the pool of mortgages is passed
through to the holders as the payments are received by the issuer of the
CMO.
CMOs may be issued in a variety of classes or series that have
different maturities. The principal value of these CMO's may be more
volatile than other types of mortgage-related securities. That is because
the principal value of the CMO may be prepaid earlier than the maturity
of the CMO as a result of prepayments of the underlying mortgage loans by
the borrowers.
- "Principal-Only" and "Interest-Only" Securities. The Fund may
invest in "stripped" mortgage-backed securities or CMOs or other
securities issued by agencies or instrumentalities of the U.S. Government.
Stripped mortgage-backed securities usually have two classes. The classes
receive different proportions of the interest and principal distributions
on the pool of mortgage assets that act as collateral for the security.
In certain cases, one class will receive all of the interest payments (and
is known as an "interest-only" security), while the other class will
receive all of the principal value on maturity (and is known as a
"principal-only" security).
The yield to maturity on the class that receives only interest is
extremely sensitive to the rate of payment of the principal on the
underlying mortgages. Principal prepayments increase that sensitivity.
Stripped securities that pay "interest only" are therefore subject to
greater price volatility when interest rates change. They have the
additional risk that if the underlying mortgages are prepaid, the Fund
will lose the anticipated cash flow from the interest on the prepaid
mortgages. That risk is increased when general interest rates fall, and
in times of rapidly falling interest rates, the Fund might receive back
less than its investment.
The value of "principal only" securities generally increases as
interest rates decline and prepayment rates rise. The price of these
securities is typically more volatile than that of coupon-bearing bonds
of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established
trading markets have not yet developed for these securities. Therefore,
some stripped securities may be deemed "illiquid." The amount of illiquid
stripped securities the Fund can hold will be subject to the Fund's
fundamental investment policy limiting investments in illiquid securities
to 5% of the Fund's assets, described below.
- What Does the "Duration" of the Fund's Portfolio Mean? The Fund
anticipates that under normal market conditions, it will maintain an
average effective portfolio duration of not more than three years. The
Fund measures its portfolio duration on a "dollar-weighted" basis.
"Effective portfolio duration" refers to the expected percentage change
in the value of a bond resulting from a change in general interest rates
(measured by each 1% change in the rates on U.S. Treasury securities).
For example, if a bond has an effective duration of three years, a 1%
increase in general interest rates would be expected to cause the bond to
decline about 3%. It is a measure of portfolio volatility, and is one of
the basic tools used by the Manager in selecting securities for the Fund's
portfolio.
However, the calculation of a bond's duration (or the duration of the
entire portfolio of bonds, in the case of the Fund) cannot be relied on
as an exact prediction of future volatility. Duration is calculated by
using a number of variables and assumptions based on the historical
performance of similar bonds, and duration can be affected by unexpected
economic changes or other events affecting a security. For example, in
the case of CMOs, duration calculations are based on historical rates of
prepayments of underlying mortgages, and if these mortgages are prepaid
more rapidly than expected, the calculation of duration for a particular
CMO may not be correct.
Because unanticipated events may change the effective duration of
securities after the Fund buys them, there can be no assurance that the
Fund will achieve its targeted effective duration at all times. Even
though the Fund intends that its dollar-weighted average effective
portfolio duration will generally not exceed three years, the Fund may
invest in individual debt obligations of any maturity. "Investment
Objective and Policies" in the Statement of Additional Information
contains more information on the Fund's calculation of effective portfolio
duration.
- Interest Rate Risks. Although U.S. Government Securities involve
little credit risk, their market values will fluctuate until they mature,
depending on prevailing interest rates. When prevailing interest rates
go up, the market value of already issued debt securities tends to go
down. When interest rates go down, the market value of already issued
debt securities tends to go up. The magnitude of those fluctuations
generally will be greater when the average maturity of the Fund's
portfolio securities is longer. Because of this factor, the Fund's share
value and yield are not guaranteed and will fluctuate, and there can be
no assurance that the Fund's objective of seeking high current income and
conservation of principal will be achieved.
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, described above, as well as investment
policies it follows to try to achieve its objective. Additionally, the
Fund uses certain investment techniques and strategies in carrying out
those policies. The Fund's investment policies and practices are not
"fundamental" unless the Prospectus or Statement of Additional Information
says that a particular policy is "fundamental." The Fund's objective is
a fundamental policy.
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 percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." While short-term trading increases
portfolio turnover, the Fund incurs little or no brokerage costs for U.S.
Government Securities. The Fund may sell U.S. Government Securities
without regard to the length of time the Fund has held them. The Manager
may take advantage of short-term differentials in yields when short-term
trading is consistent with the objective of seeking high current return
and safety of principal.
High portfolio turnover may affect the ability of the Fund to qualify
as a "regulated investment company" under the Internal Revenue Code to
enable the Fund to obtain tax deductions for dividends and capital gains
distributions paid to shareholders. The Fund qualified in its fiscal year
ended September 30, 1994 intends to do so in the future, although it
reserves the right not to qualify.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below, which involve
certain risks. Under the same headings as below, the Statement of
Additional Information contains more detailed information about these
practices, including limitations on their use that are designed to reduce
some of the risks.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. These loans are limited to not more than 25% of
the Fund's total assets and are subject to other 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 the Fund's
total assets in the coming year.
- "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. As a matter of fundamental
policy, 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. Also 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.
- Illiquid and Restricted Securities. Under the policies established
by the Fund's Board of Trustees, the Manager determines the liquidity of
certain of the Fund's investments. Investments may be illiquid because
of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable price. A restricted
security is one that has a contractual restriction on its resale or which
cannot be sold publicly until it is registered under the Securities Act
of 1933. As a fundamental policy, the Fund will not invest more than 5%
of its total assets in illiquid or restricted securities.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, and options on
futures, or enter into interest rate swap agreements. These are all
referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are described
below and in greater detail in the Statement of Additional Information.
The Fund may buy and sell options and futures for a number of
purposes. It may do so to try to manage its exposure to the possibility
that the prices of its portfolio securities may decline, or to establish
a position in the securities market as a temporary substitute for
purchasing individual securities. It may do so to try to manage its
exposure to changing interest rates. Some of these strategies, such as
selling futures, buying puts and writing covered calls, hedge the Fund's
portfolio against price fluctuations.
Other hedging strategies, such as buying futures and call options and
writing put options, tend to increase the Fund's exposure to the
securities market. Writing put options or covered call options may also
provide income to the Fund for liquidity purposes or raise cash for the
Fund to distribute to shareholders. 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.
- Futures. The Fund may buy and sell futures contracts that relate
to interest rates (these are referred to as Interest Rate Futures).
Interest Rate Futures are described in the Statement of Additional
Information.
- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls). Calls the Fund buys or sells
must be listed on a securities or commodities exchange, or quoted on the
Automated Quotation System of the National Association of Securities
Dealers, Inc. (NASDAQ), or traded in the over-the-counter market. A call
or put option may not be purchased if the value of all of the Fund's put
and call options would exceed 5% of the Fund's total assets.
The Fund may buy calls only on securities or Interest Rate Futures,
or to terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) covered call options.
When the Fund writes a call, it receives cash (called a premium).
The call gives the buyer the ability to buy the investment on which the
call was written from the Fund at the call price during the period in
which the call may be exercised. If the value of the investment does not
rise above the call price, it is likely that the call will lapse without
being exercised, while the Fund keeps the cash premium (and the
investment). After the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls. Each call the Fund writes
must be "covered" while it is outstanding. That means the Fund must own
the investment on which the call was written or it must own other
securities that are acceptable for the escrow arrangements required for
calls. The Fund may write calls on Futures contracts it owns, but these
calls must be covered by securities or other liquid assets the Fund owns
and segregates to enable it to satisfy its obligations if the call is
exercised.
The Fund may purchase put options. Buying a put on an investment
gives the Fund the right to sell the investment at a set price to a seller
of a put on that investment. The Fund can buy only those puts that relate
to securities that the Fund owns, or Interest Rate Futures. The Fund can
buy a put on an Interest Rate Future whether or not the Fund owns the
particular Future in its portfolio. The Fund may write puts on securities
or Interest Rate Futures in an amount up to 50% of its total assets only
if such puts are covered by segregated liquid assets.
- Interest Rate Swaps. In an interest rate swap, the Fund and
another party exchange their right to receive or their obligation to pay
interest on a security. For example, they may swap a right to receive
floating rate payments for fixed rate payments. The Fund enters into
swaps only on securities it owns. The Fund may not enter into swaps with
respect to more than 25% of its total assets. Also, the Fund will
segregate liquid assets (such as cash or U.S. Government securities) to
cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.
Income from interest rate swaps may be taxable.
- Hedging instruments can be volatile investments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different than what is
required for normal portfolio management. If the Manager uses a hedging
instrument at the wrong time or judges market conditions incorrectly,
hedging strategies may reduce the Fund's return. The Fund could also
experience losses if the prices of its futures and options positions were
not correlated with its other investments or if it could not close out a
position because of an illiquid market for the future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on an
investment that has increased in value, the Fund will be required to sell
the investment at the call price and will not be able to realize any
profit if the investment has increased in value above the call price. In
writing puts, there is a 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. 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 are described in greater detail in the
Statement of Additional Information.
- - Derivative Investments. The Fund can invest in a number of different
kinds of "derivative investments." The Fund may use some types of
derivatives for hedging purposes and may invest in others because they
offer the potential for increased income and principal value. In general,
a "derivative investment" is a specially-designed investment whose
performance is linked to the performance of another investment or
security, such as an option, future or index. In the broadest sense,
derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," above). CMO's, interest rate swaps,
and "interest-only" and "principal-only" securities may also be considered
derivative investments.
One risk of investing in derivative investments is that the issuer
of the instrument might not pay the amount due on the maturity of the
instrument. There is also the risk that the underlying investment or
security might not perform the way the Manager expected it to perform.
The performance of derivative investments may also be influenced by
interest rate changes in the U.S. and abroad. All of these risks can mean
that the Fund will realize less income than expected from its investments,
or that it can lose part of the value of its investment, which will affect
the Fund's share price. Certain derivative investments held by the Fund
trade in the over-the-counter markets and may be illiquid. If that is the
case, the Fund's investment in them will be limited as discussed above.
Other Investment Restrictions. The Fund has other investment restrictions
which are "fundamental" policies. Under these fundamental policies, the
Fund cannot do any of the following:
- The Fund cannot 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. The 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 Fund's
Board of Trustees.
- The Fund cannot enter into a repurchase transaction that will cause
more than 25% of the Fund's total assets to be subject to such agreements.
- The Fund cannot 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. Such loans must be 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.
- The Fund cannot 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.
- The Fund cannot 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.
- The Fund cannot deviate from its other fundamental policies
described in "Investment Objective and Policies" and "Other Investment
Techniques and Strategies" in the Statement of Additional Information.
All of the percentage restrictions described above and elsewhere in
this Prospectus apply only at the time the Fund purchases 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 the
Statement of Additional Information.
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 Fund is governed by a Board of Trustees, which is responsible
under Massachusetts law for protecting the interests of shareholders. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
important matters, and shareholders have the right to call a meeting to
remove a Trustee or to take other action described in the Fund's
Declaration of Trust.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into two or more classes. The Board
has done so, and the Fund currently has three classes of shares, Class A,
Class B and Class C. Each class has its own dividends and distributions,
and pays certain expenses which may be different for the different
classes. Each class may have a different net asset value. Each share
has one vote at shareholder meetings, with fractional shares voting
proportionally. Only shares of a particular class vote as a class on
matters that affect that class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager, which
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 (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $38 billion
as of September 30, 1995, and with more than 2.8 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.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is David A. Rosenberg. He is a Vice
President of the Manager and 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 other Oppenheimer funds. 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 fiscal year ended September
30, 1994, was 0.47% of average annual net assets for both Class A and B
shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' 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 reduce 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 in
"Brokerage Policies of the Fund" in the Statement of Additional
Information. That section discusses how brokers and dealers are selected
for the Fund's portfolio transactions. 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, the Manager is permitted by the
investment advisory agreement to consider whether brokers have sold shares
of the Fund or any other funds for which the Manager serves as investment
adviser.
- The Distributor. The Fund's shares are sold through dealers and
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 "Oppenheimer funds") 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 on an "at-cost" basis and is the
transfer agent for the other Oppenheimer funds. Shareholders should
direct inquiries about their account to the Transfer Agent at the address
and toll-free numbers shown below in this Prospectus and 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 useful to help you see how 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 other ways to measure
and 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. 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.
When total returns are shown for a one-year period for Class C shares,
they reflect the effect of the contingent deferred sales charge. Total
returns may also be shown based on the change in net asset value, without
considering the effect of either the front-end or the contingent deferred
sales charge, as applicable, and those returns would be reduced if sales
charges were deducted.
- 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 and
Class C 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 fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to an
appropriate broad-based market index.
- Management's Discussion of Performance. During the fiscal year
ended September 30, 1994, the Fund's performance was affected by changes
in the bond markets resulting from actions by the Federal Reserve Board
to increase short-term interest rates. As interest rates rose, the bond
markets declined. To enhance income as interest rates rose, the Fund
shifted investments away from short-term U.S. Treasury securities, and
made new investments in mortgage-backed securities issued by U.S.
Government agencies or instrumentalities. They generally offered yield
advantages over U.S. Treasury securities. These changes in investment
strategy and the Fund's practice of seeking to pay dividends on Class A
shares at a constant level (to the extent possible) did not have a
material effect on the Fund's net asset values per share.
- Comparing the Fund's Performance to the Market. The charts below
show the performance of hypothetical $10,000 investments in Class A and
Class B shares of the Fund held until September 30, 1994. The Fund had
a different investment adviser prior to April 7, 1990. Class C shares
were not publicly offered during the fiscal year ended September 30, 1994.
Accordingly, no performance information is presented for Class C shares.
The Fund's maximum initial sales charge for Class A shares and contingent
deferred sales charges for Class B shares were reduced effective April 1,
1994, so that actual results for prior periods would have been less.
The graphs below compare the Fund's performance against the Lehman
Brothers U.S. Government Bond Index, a broad-based unmanaged index of U.S.
Treasury issues, publicly-issued debt of U.S. Government agencies and
quasi-public corporations and corporate debt guaranteed by the U.S.
Government. That index is widely used to measure the performance of the
U.S. Government securities market. The graphs below also compare the
Fund's performance against the Lehman Brothers 1 - 3 Year Government Bond
Index, an unmanaged sector index of U.S. Treasury issues, publicly-issued
debt of U.S. Government agencies and quasi-public corporations and
corporate debt guaranteed by the U.S. Government with maturities of one
to three years. This secondary index comparison is included to reflect
the adoption by the Fund, effective May 1, 1994, of the investment policy
that the Fund will, under normal circumstances, seek to maintain a dollar-
weighted average portfolio effective duration of not more than three
years.
Index performance reflects reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the
data below shows the effect of taxes. Also, the Fund's performance
reflects the effect of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited
to the securities in any one index and the index data does not reflect any
assessment of the risk of the investments included in the index.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Limited-Term Government Fund, Lehman Bros. U.S. Government
Bond Index and Lehman Bros. 1-3 Year Government Bond Index
(Graph)
Average Annual Total Returns of Class A Shares of the Fund at 9/30/941
1 Year 5 Year Life
- -2.78% 7.55% 7.81%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Limited-Term Government Fund, Lehman Bros. U.S. Government
Bond Index and Lehman Bros. 1-3 Year Government Bond Index
(Graph)
Average Annual Total Returns of Class B Shares of the Fund at 9/30/942
1 Year Life
- -3.94% -0.14%
1 The inception date of the Fund (Class A shares) was 3/10/86. The
average annual total returns and the ending account value for Class A
shares in the graph reflect reinvestment of all dividends and capital
gains distributions and are shown net of the current 3.50% maximum initial
sales charge.
2 Class B shares of the Fund were first publicly offered on 5/3/93. The
average annual total returns reflect reinvestment of all dividends and
capital gains distributions and are shown net of the applicable 4% and 3%
contingent deferred sales charges, respectively, for the one year period
and life of the class. The ending account value for Class B shares in the
graph is net of the applicable 3% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three 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. When you buy Class A shares, you pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months after your purchase, you may pay
a contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. Class A sales charge rates are
described in "Buying Class A Shares," below.
- 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 five years of
buying them, you will normally pay a contingent deferred sales charge that
varies depending on how long you owned your shares, as described in
"Buying Class B Shares," below.
- Class C Shares. If you buy Class C shares, you pay no sales charge
at the time of purchase, but if you sell your shares within 12 months of
buying them, you will normally pay a contingent deferred sales charge of
1%, as discussed in "Buying Class C Shares," below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, deciding which class of shares is
best suited to your needs depends on a number of factors which you should
discuss with your financial advisor. The Fund's operating costs that
apply to a class of shares and the effect of the different types of sales
charges on your investment will vary your investment results over time.
The most important factors are how much you plan to invest and how long
you plan to hold your investment. If your goals and objectives change
over time and you plan to purchase additional shares, you should re-
evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, and considered the effect of
the asset-based sales charges on Class B and Class C expenses (which will
affect your investment return). For the sake of comparison, we have
assumed that there is a 10% rate of appreciation in your investment each
year. Of course, the actual performance of your investment cannot be
predicted and will vary, based on the Fund's actual investment returns,
and the operating expenses borne by each class of shares, and which class
of shares you invest in.
The factors discussed below are not intended to be investment advice,
guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to
consider in purchasing a particular class of shares assumes that you will
purchase only one class of shares and not a combination of shares of
different classes.
- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. The effect of the sales charge over time,
using our assumptions, will generally depend on the amount invested. The
effect of class-based expenses will also depend on how much you invest.
- Investing for the Short Term. If you have a short term
investment horizon (that is, you plan to hold your shares less than five
years), you should probably consider purchasing Class C shares rather than
Class A or Class B shares. This is because there is no initial sales
charge on Class C shares, and the contingent deferred sales charge does
not apply to amounts you sell after holding them one year.
However, if you plan to invest more than $250,000 for the shorter
term, Class C shares might not be as advantageous as Class A shares. This
is because the annual asset-based sales charge on Class C shares will have
a greater impact on your account over the longer term than the reduced
sales charge available for larger purchases of Class A shares.
And for most investors who invest $500,000 or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or more of Class B shares from
a single investor. For similar reasons, the Distributor normally will not
accept purchase orders of $1 million or more for Class C shares from a
single investor.
- Investing for the Longer Term. If you are investing for the
longer term, for example, for retirement, and do not expect to need access
to your money for six years or more, Class A shares will likely be more
advantageous than Class B or Class C shares. This is because of the
effect of expected lower expenses for Class A shares and the reduced
initial sales charges available for larger investments in Class A shares
under the Fund's Right of Accumulation. Class B shares may be appropriate
for smaller investments held for the longer term because there is no
initial sales charge on Class B shares, and Class B shares held six years
following their purchase convert into Class A shares.
Of course all of these examples are based on approximations of the
effect of current sales charges and expenses on a hypothetical investment
over time, using the assumed annual performance return stated above, and
you should analyze your options carefully.
- Are There Differences in Account Features That Matter To You?
Because some features (such as checkwriting) may not be available to Class
B or C shareholders, or other features (such as Automatic Withdrawal
Plans) may not be advisable (because of the effect of the contingent
deferred sales charge in non-retirement accounts) for Class B or Class C
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy.
Additionally, dividends payable to Class B and Class C shareholders will
be reduced by the additional expenses borne by those classes that are not
borne by Class A, such as the Class B and Class C asset-based sales
charges described below and in the Statement of Additional Information.
- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares, may receive different compensation for selling or
servicing one class of shares than another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charges is the same as the purpose of the front-
end sales charge on Class A shares: to reimburse the Distributor for
commissions it pays to dealers and financial institutions for sales of
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 Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or 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, Class B or Class C 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. However, we
recommend that you discuss your investment first with a financial adviser,
to be sure it is appropriate for you.
- 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. You can then transmit funds electronically to purchase shares,
to have the Transfer Agent send redemption proceeds, or 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 should request
AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink," below for more details.
- 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.
- At What Prices Are Shares Sold? 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, Colorado. In most
cases, to enable you to receive that day's offering price, the Distributor
must receive your order by the time of day The New York Stock Exchange
closes, which is normally 4:00 P.M., New York time, but may be earlier on
some days (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 the close of The New York Stock Exchange 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.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be net asset value. In some
cases, reduced sales charges may be available, as described below. Out of
the amount you invest, the Fund receives the net asset value to invest for
your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer as commission. Different sales
charge rates and commissions applied to sales of Class A shares prior to
April 1, 1994. The current sales charge rates and commissions paid to
dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Front-End
Sales Charge Sales Charge Commission as
As Percentage of As Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
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%
</TABLE>
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 of the
Oppenheimer funds in the following cases:
- purchases aggregating $1 million or more, or
- purchases by an OppenheimerFunds prototype 401(k) plan that: (1)
buys shares costing $500,000 or more or (2) has, at the time of purchase,
100 or more eligible participants, or (3) certifies that it projects to
have annual plan purchases of $200,000 or more.
The Distributor pays dealers of record commissions on those 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 purchases over $5 million.
That commission will be paid only on the amount of those purchases in
excess of $1 million ($500,000 for purchases by OppenheimerFunds 401(k)
prototype plans) 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 may 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.
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 Oppenheimer funds 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. Dealers whose sales of Class A shares of OppenheimerFunds (other
than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
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.
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. To qualify for the lower sales charges
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A and Class B shares you purchase for your
own accounts, or jointly, or for trust or custodial accounts on behalf of
your children who are minors. A fiduciary can count all shares purchased
for a trust, estate or other fiduciary account (including one or more
employee benefit plans of the same employer) that has multiple accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also include Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
Oppenheimer funds. 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 Oppenheimer funds 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, if you purchase Class
A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge rate for the Class A shares purchased during that
period. 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 Fund and Oppenheimer Insured Tax-Exempt 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. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
- the Manager or its affiliates;
- 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;
- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and 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);
- 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 or to sell shares to defined contribution
employee retirement plans for which the dealer, broker or investment
adviser provides administrative services.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges.
- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor; and
- shares purchased and paid for with the proceeds of shares redeemed
in the past 12 months from a mutual fund (other than a fund managed by the
Manager or any of its subsidiaries) on which an initial sales charge or
contingent deferred sales charge was paid (this waiver also applies to
shares purchased by exchange of shares of Oppenheimer Money Market Fund,
Inc. that were purchased and paid for in this manner); this waiver must
be requested when the purchase order is placed for your shares of the
Fund, and the Distributor may require evidence of your qualification for
this waiver.
Waivers of the Class A Contingent Deferred Sales Charge. The Class
A contingent deferred sales charge does not apply if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed
in the following cases, if the Transfer Agent is notified that these
conditions apply to the redemption:
- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans"); or
- to return excess contributions made to Retirement Plans; or
- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value; or
- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below); or
- if, at the time a purchase order is placed for Class A shares
that would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees in writing to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if the shares are
redeemed within 18 months of purchase); or
- for distributions from OppenheimerFunds prototype 401(k) plans
for any of the following cases or purposes: (1) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must occur after the participant's
account was established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
- 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.
Buying 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 five 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
compensate it for 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 5 years, and (3) shares held the longest during the
5-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:
Years Since Beginning of Contingent Deferred Sales Charge
Month in which On Redemptions in That Year
Purchase Order Was Accepted (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. Different contingent deferred sales
charges applied to redemptions of Class B shares prior to April 1, 1994.
- 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 and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When 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, Class B and
Class C Shares" in the Statement of Additional Information.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. 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 C 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 C 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 12 months, and (3) shares held the longest during the
12-month period.
- Distribution and Service Plans for Class B and Class C Shares. The
Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate the Distributor for its services and costs in
distributing Class B and C shares and servicing accounts. Under the Plans,
the Fund pays the Distributor an annual "asset-based sales charge" of
0.75% per year on Class B shares that are outstanding for 6 years or less
and on Class C shares. The Distributor also receives a service fee of
0.25% per year.
Under each Plan, both fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close
of each regular business day during the period. The asset-based sales
charge allows investors to buy Class B or C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell those shares. The asset-based sales charge and service fees increase
Class B and Class C expenses by up to 1.00% of average net assets per
year.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or C shares.
Those services are similar to those provided under the Class A Service
Plan, described above. The Distributor pays the 0.25% service fees to
dealers in advance for the first year after Class B or Class C shares have
been sold by the dealer and retains the service fee paid by the Fund in
that year. After the shares have been held for a year, the Distributor
pays the service fees to dealers on a quarterly basis.
The Distributor currently pays sales commissions of 2.75% of the
purchase price of Class B shares to dealers from its own resources at the
time of sale. The total amount paid by the Distributor to the dealer at
the time of sales of Class B shares is therefore 3.00% of the purchase
price. The Fund pays the asset-based sales charge to the Distributor for
its services rendered in distributing Class B shares. Those payments are
retained by the Distributor, and are at a fixed rate that is not related
to the Distributor's expenses. The services rendered by the Distributor
include paying and financing the payment of sales commissions, service
fees and other costs of distributing and selling Class B shares.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the
time of sale. The total amount paid by the Distributor to the dealer at
the time of sale of Class C shares is therefore 1.00% of the purchase
price. The Distributor retains the asset-based sales charge during the
first year Class C shares are outstanding to recoup the sales commissions
it has paid, the advances of service fee payments it has made, and its
financing costs and other expenses. The Distributor plans to pay the
asset-based sales charge as an ongoing commission to the dealer on Class
C shares that have been outstanding for a year or more.
The Distributor's actual expenses in selling Class B and C shares may
be more than the payments it receives from contingent deferred sales
charges collected on redeemed shares and from the Fund under the
Distribution and Service Plans for Class B and C shares. Therefore, those
expenses may be carried over and paid in future years. At September 30,
1994, the end of the Class B Plan year, the Distributor had incurred
unreimbursed expenses under the Plan of $1,289,388 (equal to 3.32% of the
Fund's net assets represented by Class B shares on that date), which have
been carried over into the present Plan year. If either Plan is
terminated by the Fund, the Board of Directors may allow the Fund to
continue payments of the asset-based sales charge to the Distributor for
distributing shares before the Plan was terminated.
- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to Class B
and Class C shares redeemed in certain circumstances as described below.
The reasons for this policy are in "Reduced Sales Charges" in the
Statement of Additional Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases, if the Transfer Agent is notified that these
conditions apply to the redemption:
- 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 (the death or disability must have occurred after the
account was established);
- redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by
the Social Security Administration);
- to make returns of excess contributions to Retirement Plans;
- to make distributions from IRAs (including SEP-IRAs and SAR/SEP
accounts) before the participant is age 59-1/2, and distributions from
403(b)(7) custodial plans or pension or profit sharing plans before the
participant is age 59-1/2 but only after the participant has separated
from service, if the distributions are made in substantially equal
periodic payments; those payments must be made over the life (or life
expectancy) of the participant or the joint lives (or joint life and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with other requirements for
such distributions under the Internal Revenue Code; the payments may not
exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request);
- shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," below; or
- for distributions from OppenheimerFunds prototype 401(k) plans (1)
for hardship withdrawals; (2) under a Qualified Domestic Relations Order,
as defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
- shares sold to the Manager or its affiliates;
- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; and
- shares issued in plans of reorganization to which the Fund is
a party.
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 "How
to Exchange Shares," 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 Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each other Oppenheimer funds 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 Class A or B
shares of the Fund, you have up to 6 months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer
funds without paying a sales charge. This privilege applies to Class A
shares that you purchased subject to an initial sales charge or Class A
or B shares on which you paid a contingent deferred sales charge when you
redeemed them. It does not apply to Class C shares. 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, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
- 401(k) prototype retirement plans for businesses
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, or 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 by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by 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 account statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling
- The signatures of all registered owners exactly as the account is
registered, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
Use the following address for requests by mail:
Oppenheimer Shareholder Services
P.O. Box 5270, Denver, Colorado 80217
Send courier or Express Mail requests to:
Oppenheimer 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 the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan 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, in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account. This service is not available within 30 days of changing the
address on an account.
- Telephone Redemptions Through AccountLink or Wire. There are no
dollar limits on telephone redemption proceeds sent to a bank account
designated when you establish AccountLink. Normally the ACH transfer to
your bank is initiated on the business day after the redemption. You do
not receive dividends on the proceeds of the shares you redeemed while
they are waiting to be transferred.
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 $10 fee for each Federal Funds wire.
Checkwriting. 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 C 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 10 days.
- Don't use your checks if you changed your Fund account number.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. 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 Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares, which are considered "Class A" shares for exchange purposes. In
some cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
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 find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or by calling a
service representative 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 in proper form
by the close of The New York Stock Exchange that day, which is normally
4:00 P.M. but may be earlier on some days. However, either fund may delay
the purchase of shares of the fund you are exchanging into 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 the close of The New York Stock Exchange on each regular business
day 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, 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 neither it nor the Fund will 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, Class B and Class C 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 10 days from the date the shares
were purchased. That delay may be avoided if you purchase shares by
certified check or arrange with your bank to provide telephone or written
assurance to the Transfer Agent that your purchase payment has cleared.
- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, 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 income.
- 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, Class B and Class C shares.
- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays those dividends to shareholders monthly. Normally, dividends are paid
on the last business day 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. Dividends paid on
Class A shares generally are expected to be higher than for Class B and
Class C shares because expenses allocable to Class B and Class C shares
will generally be higher.
Commencing with the Fund's fiscal quarter beginning July 1, 1994, the
Fund adopted the practice, to the extent consistent with the amount of the
Fund's net investment income and other distributable income, of attempting
to pay dividends on Class A shares at a constant level, although the
amount of such dividends are subject to change 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 that Class.
The practice of attempting to pay dividends on Class A shares at a
constant level requires the Manager, consistent with the Fund's investment
objective and investment restrictions, to monitor the Fund's portfolio and
select higher yielding securities when deemed appropriate to maintain
necessary net investment income levels. The Fund anticipates paying
dividends at the targeted dividend level from net investment income and
other distributable income without any impact on the Fund's net asset
value per share.
The Board of Trustees may change the Fund's targeted dividend level
at any time, without prior notice to shareholders. The Fund does not
otherwise have a fixed dividend rate and there can be no assurance as to
the payment of any dividends or the realization of any capital gains.
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, which is September 30th. 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 for tax purposes. There can be no assurance that the Fund will
pay any capital gains distributions in a particular year.
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, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
- 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. In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A
non-taxable return of capital may reduce your tax basis in your Fund
shares.
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
adviser 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 Lehman Brothers U.S. Government Bond Index and Lehman
Brothers 1-3 Year Government Bond Index - Change in Value of a $10,000
Hypothetical Investment."
Linear graphs 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 from inception of the Fund (March 10,
1986) to fiscal year-end September 30, 1994 and (ii) Class B shares of the
Fund during the period May 3, 1993 (first public offering of Class B
shares) to September 30, 1994, in each case comparing such values with the
same investments over the same time periods with the Lehman Brothers U.S.
Government Bond Index and the Lehman Brothers 1-3 Year Government Bond
Index. No performance information is set forth on the Fund's Class C
shares because they were not publicly-offered during the fiscal year ended
September 30, 1994. Set forth below are the relevant data points that
will appear on the linear graphs. Additional information with respect to
the foregoing, including a description of the Lehman Brothers U.S.
Government Bond Index and the Lehman Brothers 1-3 Year Government Bond
Index, is set forth in the Prospectus under "Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Oppenheimer Lehman Bros. Lehman Bros.
Limited-Term U.S. Govt. 1-3 Yr Govt.
Government: A Bond Index Bond Index
<S> <C> <C> <C>
03/10/86 $ 9,650 $10,000 $10,000
09/30/86 $10,130 $10,330 $10,463
09/30/87 $10,226 $10,266 $10,880
09/30/88 $11,643 $11,500 $11,833
09/30/89 $12,767 $12,780 $12,884
09/30/90 $13,935 $13,666 $14,085
09/30/91 $15,982 $15,778 $15,671
09/30/92 $17,560 $17,817 $17,226
05/03/93 $18,312 $18,752 $17,700
09/30/93 $18,896 $19,791 $18,077
09/30/94 $19,037 $18,991 $18,284
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Lehman Bros. Lehman Bros.
Limited-Term U.S. Govt. 1-3 Yr Govt.
Government: B Bond Index Bond Index
<S> <C> <C> <C>
05/03/93 $10,000 $10,000 $10,000
09/30/93 $10,282 $10,554 $10,213
09/30/94 $ 9,980 $10,128 $10,330
</TABLE>
<PAGE>
Oppenheimer Limited-Term Government Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Advisor
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
New York, New York 10048-0203 Government
Fund
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Prospectus
Custodian of Portfolio Securities Effective February 1, 1995
Citibank, N.A. Revised October 30, 1995
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, 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.
(OppenheimerFunds Logo)
PR856.0894.N *Printed on recycled paper
