Preliminary Copy
Registration No. 33-02769
File No. 811-4563
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
(Exact Name of Registrant as Specified in Charter)
3410 South Galena Street, Denver, Colorado 80231
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
Andrew J. Donohue, Esq.
Executive Vice President & General Counsel
Oppenheimer Management Corporation
Two World Trade Center, New York, New York 10048-0203
(212) 323-0256
(Name and Address of Agent for Service)
As soon as practicable after the Registration Statement becomes effective.
(Approximate Date of Proposed Public Offering)
It is proposed that this filing will become effective on July 17, 1995,
pursuant to Rule 488.
No filing fee is due because the Registrant has previously registered an
indefinite number of shares under Rule 24f-2; a Rule 24f-2 notice for the
year ended September 30, 1994 was filed on November 29, 1994.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Part A
Proxy Statement for Oppenheimer Strategic Short-Term Income Fund
and
Prospectus for Oppenheimer Limited-Term Government Fund
Part B
Statement of Additional Information
Part C
Other Information
Signatures
Exhibits
<PAGE>
FORM N-14
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Cross Reference Sheet
Part A of
Form N-14
Item No. Proxy Statement and Prospectus Heading and/or Title of Document
- -------- ----------------------------------------------------------------
1 (a) Cross Reference Sheet
(b) Front Cover Page
(c) *
2 (a) *
(b) Table of Contents
3 (a) Comparative Fee Table
(b) Synopsis
(c) Principal Risk Factors
4 (a) Synopsis; Approval of the Reorganization; Comparison between the
Fund and Strategic Income Fund; Method of Carrying Out the
Reorganization; Miscellaneous Information
(b) Approval of the Reorganization - Capitalization Table
(Unaudited)
5 (a) Registrant's Prospectus; Additional Information
(b) *
(c) *
(d) *
(e) Comparison between Strategic Short-Term Income Fund and Limited-
Term Government Fund
(f) Comparison between Strategic Short-Term Income Fund and Limited-
Term Government Fund
6 (a) Prospectus of Oppenheimer Strategic Short-Term Income Fund;
Front Cover Page
(b) Comparison between Strategic Short-Term Income Fund and Limited-
Term Government Fund
(c) *
(d) *
7 (a) Introduction; Synopsis
(b) *
(c) Introduction; Approval of the Reorganization
8 (a) Proxy Statement
(b) *
9 *
Part B of
Form N-14
Item No. Statement of Additional Information Heading
- --------- -------------------------------------------
10 Cover Page
11 Table of Contents
12 (a) Oppenheimer Limited-Term Government Fund's Statement of
Additional Information
(b) *
13 (a) Oppenheimer Strategic Short-Term Income Fund's Statement of
Additional Information
(b) *
14 Registrant's Statement of Additional Information; Statement of
Additional Information about Oppenheimer Strategic Short-Term
Income Fund; Annual Report of Oppenheimer Strategic Short-Term
Income Fund at 9/30/94; Semi-Annual Report of Oppenheimer
Strategic Short-Term Income Fund at 3/31/95; Oppenheimer
Limited-Term Government Fund Annual Report at 9/30/94 and Semi-
Annual Report of Oppenheimer Limited-Term Government Fund
(unaudited) at 3/31/95
Part C of
Form N-14
Item No. Other Information Heading
- --------- -------------------------
15 Indemnification
16 Exhibits
17 Undertakings
_______________
* Not Applicable or negative answer
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant / X /
Filed by a party other than the registrant / /
Check the appropriate box:
/ X / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Oppenheimer Limited-Term Government Fund
- ------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Oppenheimer Strategic Short-Term Income Fund
- ------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-
6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee Computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- ------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- ------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the form or schedule and the
date of its filing.
- ------------------------------------------------------------------
(1) Amount previously paid:
- ------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- ------------------------------------------------------------------
(3) Filing Party:
- ------------------------------------------------------------------
(4) Date Filed:
- -----------------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
July 1995
Dear Oppenheimer Strategic Short-Term Income Fund Shareholder:
One of the things we pride ourselves on at Oppenheimer Management
Corporation is our commitment to searching for new investment
opportunities for our shareholders. I am writing to you today to let you
know about one of those opportunities -- a positive change that has been
proposed for Oppenheimer Strategic Short-Term Income Fund.
After careful consideration, the Board of Trustees agreed that it
would be in the best interest of shareholders of Strategic Short-Term
Income Fund to reorganize into another Oppenheimer fund, Oppenheimer
Limited-Term Government Fund. A shareholder meeting has been scheduled
in August, and all shareholders of record on June 2nd are being asked to
vote either in person or by proxy. You will find a notice of the meeting,
a ballot card, a proxy statement detailing the proposal, an Oppenheimer
Limited-Term Government Fund prospectus and a postage-paid return envelope
enclosed for your use.
Why does the Board of Trustees recommend this change?
While both Strategic Short-Term Income Fund and Limited-Term
Government Fund seek high current income with stability of principal by
maintaining a relatively short-term portfolio maturity, the Investment
Adviser believes that Limited-Term Government Fund's management approach
can offer shareholders even better investment opportunities over the long
term.
Oppenheimer Limited-Term Government Fund's investment strategy has
achieved high income for shareholders while helping protect the share
value from significant price fluctuations due to changes in interest
rates. For example, in 1994, one of the most challenging periods the bond
markets have faced in more than six decades, Limited-Term Government
Fund's Class A shares delivered an attractive, dependable level of income
and a positive return at net asset value (assuming reinvestment of
dividends and distributions).
Another benefit for shareholders is the greater economies of scale
resulting from consolidation into a much larger fund. By merging into
Limited-Term Government Fund --which now has approximately $366 million
in assets -- former shareholders of Strategic Short-Term Income Fund may
benefit from a lower expense ratio as costs are spread among a larger
number of shareholders.
How do you vote?
No matter how large or small your investment, your vote is important,
so please review the proxy statement carefully. To cast your vote, simply
mark, sign and date the enclosed proxy ballot and return it in the
postage-paid envelope today. Remember, it can be expensive for the Fund -
- - and ultimately for you as a shareholder -- to remail ballots if not
enough responses are received to conduct the meeting.
If you have any questions about the proposal, please feel free to
contact your financial adviser, or call us at 1-800-525-7048.
As always, we appreciate your confidence in OppenheimerFunds and look
forward to serving you for many years to come.
Sincerely,
(JSF signature)
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 30, 1995
To the Shareholders of Oppenheimer Strategic Short-Term Income Fund:
Notice is hereby given that a Special Meeting of the Shareholders of
Oppenheimer Strategic Short-Term Income Fund ("Strategic Short-Term Income
Fund"), a registered management investment company, will be held at 3410
South Galena Street, Denver, Colorado 80231, at 10:00 A.M., Denver time,
on August 30, 1995, or any adjournments thereof (the "Meeting"), for the
following purposes:
1. To approve or disapprove an Agreement and Plan of Reorganization
between Strategic Short-Term Income Fund and Oppenheimer Limited-Term
Government Fund ("Limited-Term Government Fund"), and the transactions
contemplated thereby, including the transfer of substantially all the
assets of Strategic Short-Term Income Fund, in exchange for Class A and
Class B shares of Limited-Term Government Fund, the distribution of such
shares to the Class A and Class B shareholders of Strategic Short-Term
Income Fund in complete liquidation of Strategic Short-Term Income Fund,
the de-registration of Strategic Short-Term Income Fund as an investment
company under the Investment Company Act of 1940, as amended, and the
cancellation of the outstanding shares of Strategic Short-Term Income Fund
(the "Proposal").
2. To act upon such other matters as may properly come before the
Meeting.
Shareholders of record at the close of business on June 2, 1995 are
entitled to notice of, and to vote at, the Meeting. The Proposal is more
fully discussed in the Proxy Statement and Prospectus. Please read it
carefully before telling us, through your proxy or in person, how you wish
your shares to be voted. Strategic Short-Term Income Fund's Board of
Trustees recommends a vote in favor of the Proposal. WE URGE YOU TO SIGN,
DATE AND MAIL THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
George C. Bowen, Secretary
July 17, 1995
_______________________________________________________________________
Shareholders who do not expect to attend the Meeting are requested to
indicate voting instructions on the enclosed proxy and to date, sign and
return it in the accompanying postage-paid envelope. To avoid unnecessary
duplicate mailings, we ask your cooperation in promptly mailing your proxy
no matter how large or small your holdings may be.
295
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
This Proxy Statement of Strategic Short-Term Income Fund relating to the
Reorganization Agreement and the transactions contemplated thereby (the
"Reorganization") also constitutes a Prospectus of Limited-Term Government
Fund included in a Registration Statement on Form N-14 filed by Limited-
Term Government Fund with the Securities and Exchange Commission (the
"SEC"). Such Registration Statement relates to the registration of shares
of Limited-Term Government Fund to be offered to the shareholders of
Strategic Short-Term Income Fund pursuant to the Reorganization Agreement.
Strategic Short-Term Income Fund is located at 3410 South Galena Street,
Denver, Colorado 80231 (telephone 1-800-525-7048).
This Proxy Statement and Prospectus sets forth concisely information about
Limited-Term Government Fund that shareholders of Strategic Short-Term
Income Fund should know before voting on the Reorganization. A copy of
the Prospectus for Limited-Term Government Fund, dated February 1, 1995,
supplemented April 20, 1995 and further supplemented May 15, 1995, is
enclosed, and is incorporated herein by reference. The following
documents have been filed with the SEC and are available without charge
upon written request to Oppenheimer Shareholder Services ("OSS"), the
transfer and shareholder servicing agent for Limited-Term Government Fund
and Strategic Short-Term Income Fund, at P.O. Box 5270, Denver, Colorado
80217, or by calling the toll-free number shown above: (i) a Prospectus
for Strategic Short-Term Income Fund, dated January 27, 1995, supplemented
June 14, 1995; (ii) a Statement of Additional Information about Strategic
Short-Term Income Fund, dated January 27, 1995; and (iii) a Statement of
Additional Information about Limited-Term Government Fund, dated February
1, 1995 (the "Limited-Term Government Fund Additional Statement"). The
Limited-Term Government Fund Additional Statement, which is incorporated
herein by reference, contains more detailed information about Limited-Term
Government Fund and its management. A Statement of Additional Information
relating to the Reorganization, dated July 14, 1995, has been filed with
the SEC as part of the Limited-Term Government Fund Registration Statement
on Form N-14 and is incorporated by reference herein, and is available by
written request to OSS at the same address immediately above or by calling
the toll-free number shown above.
Investors are advised to read and retain this Proxy Statement and
Prospectus for future reference.
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 ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement and Prospectus is dated July 17, 1995.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS
Page
Introduction
General
Record Date; Vote Required; Share Information
Proxies
Costs of the Solicitation and the Reorganization
Comparative Fee Table
Synopsis
Parties to the Reorganization
Shares to be Issued
The Reorganization
Reasons for the Reorganization
Tax Consequences of the Reorganization
Investment Objectives and Policies
Investment Advisory and Distribution and Service Plan Fees
Purchases, Exchanges and Redemptions
Principal Risk Factors
Approval of the Reorganization (The Proposal)
Reasons for the Reorganization
The Reorganization
Tax Aspects of the Reorganization
Capitalization Table (Unaudited)
Comparison Between Strategic Short-Term Income Fund and Limited-Term
Government Fund
Investment Objectives and Policies
Permitted Investments by Strategic Short-Term Income Fund and
Limited-Term Government Fund
Additional Permitted Investments by Strategic Short-Term
Income Fund
Investment Restrictions
Portfolio Turnover
Description of Brokerage Practices
Expense Ratios and Performance
Shareholder Services
Rights of Shareholders
Management and Distribution Arrangements
Purchase of Additional Shares
Method of Carrying Out the Reorganization
Miscellaneous
Additional Information
Financial Information
Public Information
Other Business
Annex A - Agreement and Plan of Reorganization, dated
February 28, 1995, by and between Oppenheimer Strategic
Short-Term Income Fund and Oppenheimer Limited-Term
Government Fund A-1
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
PROXY STATEMENT AND PROSPECTUS
Special Meeting of Shareholders
to be held August 30, 1995
INTRODUCTION
General
This Proxy Statement and Prospectus is being furnished to the shareholders
of Oppenheimer Strategic Short-Term Income Fund ("Strategic Short-Term
Income Fund"), a registered management investment company, in connection
with the solicitation by the Board of Trustees (the "Board") of proxies
to be used at the Special Meeting of Shareholders of Strategic Short-Term
Income Fund to be held at 3410 South Galena Street, Denver, Colorado
80231, at 10:00 A.M., Denver time, on August 30, 1995, or any adjournments
thereof (the "Meeting"). It is expected that the mailing of this Proxy
Statement and Prospectus will commence on or about July 21, 1995.
At the Meeting, shareholders of Strategic Short-Term Income Fund will be
asked to approve an Agreement and Plan of Reorganization (the
"Reorganization Agreement") between Strategic Short-Term Income Fund and
Oppenheimer Limited-Term Government Fund ("Limited-Term Government Fund"),
and the transactions contemplated thereby (the "Reorganization"),
including the transfer of substantially all the assets of Strategic Short-
Term Income Fund, in exchange for Class A and Class B shares of Limited-
Term Government Fund, the distribution of such shares to the shareholders
of Strategic Short-Term Income Fund in complete liquidation of Strategic
Short-Term Income Fund, the de-registration of Strategic Short-Term Income
Fund as an investment company, under the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and the cancellation of the
outstanding shares of Strategic Short-Term Income Fund. Limited-Term
Government Fund currently offers Class A shares with a sales charge
imposed at the time of purchase and Class B and Class C shares without an
initial sales charge. There is no initial sales charge on purchases of
Class B or Class C shares, however a contingent deferred sales charge may
be imposed, depending on when the shares are sold. The Class A and Class
B shares issued pursuant to the Reorganization will be issued at net asset
value without a sales charge and without the imposition of the contingent
deferred sales charge. Additional information with respect to these
changes by Limited-Term Government Fund is set forth herein, in the
Prospectus of Limited-Term Government Fund accompanying this Proxy
Statement and Prospectus and in the Limited-Term Government Fund
Additional Statement which is incorporated herein by reference.
Record Date; Vote Required; Share Information
The Board has fixed the close of business on June 2, 1995 as the record
date (the "Record Date") for the determination of shareholders entitled
to notice of, and to vote at, the Meeting. An affirmative vote of the
holders of a majority of the outstanding voting securities of all of the
Class A and Class B shares in the aggregate of Strategic Short-Term Income
Fund is required to approve the Reorganization. That level of vote is
defined in the Investment Company Act of 1940 as the vote of the holders
of the lesser of: (i) 67% or more of the voting securities present or
represented by proxy at the shareholders meeting, if the holders of more
than 50% of the outstanding voting securities are present or represented
by proxy, or (ii) more than 50% of the outstanding voting securities.
Each shareholder will be entitled to one vote for each share and a
fractional vote for each fractional share held of record at the close of
business on the Record Date. Only shareholders of Strategic Short-Term
Income Fund will vote on the Reorganization. The vote of shareholders of
Limited-Term Government Fund is not being solicited.
At the close of business on the Record Date, there were approximately
4,369,138.369 Class A shares and 1,845,278.468 Class B shares of Strategic
Short-Term Income Fund issued and outstanding and 26,401,139.049 Class A
shares outstanding, 7,151,722.034 Class B shares outstanding and
272,773.870 Class C shares outstanding of Limited-Term Government Fund.
The presence in person or by proxy of the holders of a majority of the
shares of Strategic Short-Term Income Fund constitutes a quorum for the
transaction of business at the Meeting. To the knowledge of Strategic
Short-Term Income Fund, as of the Record Date, no person owned of record
or beneficially 5% or more of its outstanding shares except for
Oppenheimer Funds Distributor, Inc., P.O. Box 5061, Denver, Colorado
80217-5061, which owned of record 505,050,505 shares of Class B (11.55%
of the outstanding shares of Strategic Short-Term Income Fund as of such
date) and Smith Barney Shearson, 388 Greenwich Street, New York, New York
10013, which owned of record 109,802.070 outstanding shares of Strategic
Short-Term Income Fund (5.95% of the outstanding shares of Strategic
Short-Term Income Fund as of such date). To the knowledge of Limited-Term
Government Fund, as of the Record Date, no person owned of record or
beneficially owned 5% or more of its outstanding shares except for the
following: Charles R. Player, Jr., TR T. Tankersley Wolfe Chas. Rem. Unit
Trust For Lives of Donor & Steven John Wolfe UA Dec. 22 1994, P.O. Box
401, Bainesville, Maryland 20838-0401, who owned of record 19,210.889
shares of Class A (7.04% of the outstanding shares of Limited-Term
Government Fund as of such date), Vonda A. Webb, 208 Pine Ridge Road,
Jackson, Mississippi 39206, who owned of record 17,691.588 shares of Class
A (6.48% of the outstanding shares of Limited-Term Government Fund as of
such date) and David B. Jones, 2727 Fairview Avenue E, Seattle, Washington
98102-3147, who owned of record 14,665.066 Class A shares of Limited-Term
Government Fund (5.38% of the outstanding shares of Limited-Term
Government Fund as of such date). In addition, as of the record date, the
Trustees and officers of Strategic Short-Term Income Funds owned less than
1% of the outstanding shares of either Strategic Short-Term Income Fund
or Limited-Term Government Fund.
Proxies
The enclosed form of proxy, if properly executed and returned, will be
voted (or counted as an abstention or withheld from voting) in accordance
with the choices specified thereon, and will be included in determining
whether there is quorum to conduct the Meeting. The proxy will be voted
in favor of the Proposal unless a choice is indicated to vote against or
to abstain from voting on the Proposal.
Shares owned of record by broker-dealers for the benefit of their
customers ("street account shares") will be voted by the broker-dealer
based on instructions received from its customers. If no instructions are
received, the broker-dealer may (if permitted under applicable stock
exchange rules), as record holder, vote such shares on the Proposal in the
same proportion as that broker-dealer votes street account shares for
which voting instructions were received in time to be voted. If a
shareholder executes and returns a proxy but fails to indicate how the
votes should be cast, the proxy will be voted in favor of the Proposal.
The proxy may be revoked at any time prior to the voting thereof by: (i)
writing to the Secretary of Strategic Short-Term Income Fund at 3410 South
Galena Street, Denver, Colorado 80231; (ii) attending the Meeting and
voting in person; or (iii) signing and returning a new proxy (if returned
and received in time to be voted).
Costs of the Solicitation and the Reorganization
All expenses of this solicitation, including the cost of printing and
mailing this Proxy Statement and Prospectus, will be borne by Strategic
Short-Term Income Fund. Any documents such as existing prospectuses or
annual reports that are included in that mailing will be a cost of the
fund issuing the document. In addition to the solicitation of proxies by
mail, proxies may be solicited by officers of Strategic Short-Term Income
Fund or officers and employees of OSS, personally or by telephone or
telegraph; any expenses so incurred will be borne by OSS. Proxies may
also be solicited by a proxy solicitation firm hired at Strategic Short-
Term Income Fund's expense for such purpose. Brokerage houses, banks and
other fiduciaries may be requested to forward soliciting material to the
beneficial owners of shares of Strategic Short-Term Income Fund and to
obtain authorization for the execution of proxies. For those services,
if any, they will be reimbursed by Strategic Short-Term Income Fund for
their reasonable out-of-pocket expenses.
With respect to the Reorganization, Strategic Short-Term Income Fund and
Limited-Term Government Fund will bear the cost of their respective tax
opinions. Any other out-of-pocket expenses of Strategic Short-Term Income
Fund and Limited-Term Government Fund associated with the Reorganization,
including legal, accounting and transfer agent expenses, will be borne by
Strategic Short-Term Income Fund and Limited-Term Government Fund,
respectively, in the amounts so incurred by each.
COMPARATIVE FEE TABLE
Strategic Short-Term Income Fund and Limited-Term Government Fund each pay
a variety of expenses for management of their assets, administration,
distribution of their shares and other services, and those expenses are
reflected in net asset value per share. Shareholders pay other expenses
directly, such as sales charges. The following table is provided to help
you compare the direct expenses of investing in each class of Strategic
Short-Term Income Fund with the direct expenses of investing in each class
of Limited-Term Government Fund.
<TABLE>
<CAPTION>
Strategic Short-Term Limited-Term
Income Fund Government Fund
Class A Class B Class A Class B Class C
Shares Shares Shares Shares Shares
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales 3.50% None 3.50% None None
Charge on
Purchases (as a %
of offering price)
Sales Charge on None None None None None
Reinvested
Dividends
Deferred Sales None(1) 4% in the None(1) 4% in the 1% if
Charge (as a % first year, first year, shares are
of the lower declining declining redeemed
of the original to 1% in the to 1% in the within 12
purchase price fifth year and fifth year and months of
or redemption eliminated eliminated purchase
proceeds) thereafter thereafter
Exchange Fee None None None None None
Pro Forma Surviving
Limited-Term
Government Fund
Class A Class B Class C
Shares Shares Shares
Shareholder Transaction Expenses
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 andmonths of
or redemption eliminated purchase
proceeds) thereafter
Exchange Fee None None None
<FN>
- --------------------
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during which you purchased those shares.
</TABLE>
The following tables are projections of the business expenses of Class A
and Class B shares of Strategic Short-Term Income Fund and Class A and
Class B shares of Limited-Term Government Fund based on the expenses for
the six month period (annualized) ended March 31, 1995 (unaudited). The
pro forma information is an estimate of the business expenses of the
surviving Limited-Term Government Fund after giving effect to the
reorganization.
<TABLE>
<CAPTION>
Pro Forma
Strategic Surviving
Short-Term Limited-Term Limited-Term
Income Fund Government Fund Government Fund
Class A Class B Class A Class B Class A Class B
<S> <C> <C> <C> <C> <C> <C>
Annual Operating Expenses
as a % of Average Net Assets
Management Fees .65% .65% .46% .46% .46% .46%
12b-1 Distribution and
Service Plan Fees .22% 1.00% .24% 1.00% .24% 1.00%
Other Expenses .46% .46% .16% .22% .16% .22%
Total Fund Operating
Expenses 1.33% 2.11% .86% 1.68% .86% 1.68%
</TABLE>
The 12b-1 fees for Class A shares of Strategic Short-Term Income Fund and
Limited-Term Government Fund are service plan fees. The service fee is
a maximum of 0.25% of average annual net assets of Class A shares of each
fund. The 12b-1 fees for Class B shares of both funds are Distribution
and Service Plan fees which includes a service fee and an asset-based
sales charge of 0.75%.
Class C shares of Limited-Term Government Fund will not be issued to
shareholders of Strategic Short-Term Income Fund. The management fees for
Class C shares are .46%, 12b-1 Distribution and Service Plan Fees are
1.00%, other expenses are .16%, for total operating expenses of 1.62%.
These amounts shown are estimates based on amounts that would have been
payable assuming that Class C shares were existing during such fiscal
year.
Examples
To try and show the effect of the expenses in an investment over time, the
hypotheticals shown below have been created. Assume that you make a
$1,000 investment in each class of shares of Strategic Short-Term Income
Fund, or Class A or Class B shares of Limited-Term Government Fund, or
Class A or Class B of the pro forma surviving Limited-Term Government Fund
(Class C shares are shown for information purposes only since such shares
are not a part of the merger and will not be issued to shareholders of
Strategic Short-Term Income Fund) and that the annual return is 5% and
that the operating expenses for each fund 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
each period shown.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Oppenheimer Strategic
Short-Term Income Fund
Class A Shares $48 $76 $105 $190
Class B Shares $61 $86 $123 $206*
Oppenheimer Limited-Term
Government Fund
Class A Shares $43 $61 $81 $137
Class B Shares $57 $73 $101 $157*
Class C Shares $26 $51 $88 $192
Pro Forma Surviving Limited-Term
Government Fund
Class A Shares $43 $61 $81 $137
Class B Shares $57 $73 $101 $157*
Class C Shares $26 $51 $88 $192
If you did not redeem your investment, it would incur the following expenses:
1 year 3 years 5 years 10 years
Oppenheimer Strategic
Short-Term Income Fund
Class A Shares $48 $76 $105 $190
Class B Shares $21 $66 $113 $206*
Oppenheimer Limited-Term
Government Fund
Class A Shares $43 $61 $81 $137
Class B Shares $17 $53 $91 $157*
Class C Shares $16 $51 $88 $192
Pro Forma Surviving Limited-Term
Government Fund
Class A Shares $43 $61 $81 $137
Class B Shares $17 $53 $91 $157*
Class C Shares $16 $51 $88 $192
<FN>
- -------------------------
* The Class B expenses in years 7 through 10 are based on the Class A expenses shown above, because Strategic Short-Term
Income Fund automatically converts your Class B shares into Class A shares after 6 years. Long term Class B shareholders
could pay the economic equivalent of more than the maximum front-end sales charge allowed under applicable regulations,
because of the effect of the asset-based sales charge and contingent deferred sales charge. The automatic conversion of Class
B shares to Class A Shares is designed to minimize the likelihood that this will occur.
</TABLE>
SYNOPSIS
The following is a synopsis of certain information contained in or
incorporated by reference in this Proxy Statement and Prospectus and
presents key considerations for shareholders of Strategic Short-Term
Income Fund to assist them in determining whether to approve the
Reorganization. This synopsis is only a summary and is qualified in its
entirety by the more detailed information contained in or incorporated by
reference in this Proxy Statement and Prospectus and by the Reorganization
Agreement, a copy of which is attached as an Annex hereto. Shareholders
should carefully review this Proxy Statement and Prospectus and the
Reorganization Agreement in their entirety and, in particular, the current
Prospectus of Limited-Term Government Fund which accompanies this Proxy
Statement and Prospectus and is incorporated by reference herein.
Parties to the Reorganization
Strategic Short-Term Income Fund is a diversified, open-end management
investment company organized in 1991 as a Massachusetts business trust.
Limited-Term Government Fund is a diversified, open-end, management
investment company organized in 1986 as a Massachusetts business trust.
Strategic Short-Term Income Fund and Limited-Term Government Fund are each
located at 3410 South Galena Street, Denver, Colorado 80231. The members
of the Board of Trustees of Strategic Short-Term Income Fund and of the
Board of Trustees of Limited-Term Government Fund are the same.
Oppenheimer Management Corporation (the "Manager") whose address is Two
World Trade Center, New York, New York 10048-0203, acts as investment
adviser to Strategic Short-Term Income Fund and Limited-Term Government
Fund (collectively referred to herein as the "funds"). Additional
information about the parties is set forth below.
Shares to be Issued. All shareholders of Strategic Short-Term Income Fund
who own Class A shares will receive Class A shares of Limited-Term
Government Fund in exchange for their Class A shares of Strategic Short-
Term Income Fund. Shareholders of Strategic Short-Term Income Fund who
own Class B shares will receive Class B shares of Limited-Term Government
Fund in exchange for their Class B shares of Strategic Short-Term Income
Fund. All classes of shares vote together in the aggregate as to certain
matters, however shares of a particular class vote together on matters
that affect that class alone. The Class A and Class B shares of Strategic
Short-Term Income Fund, and Class A and Class B shares of Limited-Term
Government Fund to be issued in the reorganization are substantially
similar.
The Reorganization
The Reorganization Agreement provides for the transfer of substantially
all the assets of Strategic Short-Term Income Fund to Limited-Term
Government Fund in exchange for Class A and Class B shares of Limited-Term
Government Fund. Presently Strategic Short-Term Income Fund has two
classes of shares which are Class A and Class B shares. The net asset
value of Limited-Term Government Fund Class A and Class B shares issued
in the exchange will equal the value of the assets of Strategic Short-Term
Income Fund received by Limited-Term Government Fund. Following the
Closing of the Reorganization presently scheduled for September 8, 1995,
Strategic Short-Term Income Fund will distribute the Class A and Class B
shares of Limited-Term Government Fund received by Strategic Short-Term
Income Fund on the Closing Date to holders of Fund shares issued and
outstanding as of the Valuation Date (as hereinafter defined). As a
result of the Reorganization, each Class A or Class B Strategic Short-Term
Income Fund shareholder will receive that number of full and fractional
Limited-Term Government Fund Class A or Class B shares equal in value to
such shareholder's pro rata interest in the assets transferred to Limited-
Term Government Fund as of the Valuation Date. The Board has determined
that the interests of existing Fund shareholders will not be diluted as
a result of the Reorganization. For the reasons set forth below under
"The Reorganization - Reasons for the Reorganization," the Board,
including the trustees who are not "interested persons" of the Trust (the
"Independent Trustees'), as that term is defined in the Investment Company
Act, has concluded that the Reorganization is in the best interests of
Strategic Short-Term Income Fund and its shareholders and recommends
approval of the Reorganization by Fund shareholders. If the
Reorganization is not approved, Strategic Short-Term Income Fund will
continue in existence and the Board will determine whether to pursue
alternative actions.
Reasons for the Reorganization
The Manager proposed to the Board a reorganization of Strategic Short-Term
Income Fund with Limited-Term Government Fund so that Fund shareholders
may be shareholders of a larger fund, which after such reorganization,
allows such shareholders to experience a reduction in expenses as well as
a lower effective management fee. The Manager advised the Board that with
a Fund this small, diversification of investments is difficult and
Strategic Short-Term Income Fund is expensive to manage. Strategic Short-
Term Income Fund, while having the ability to invest in a broad scope of
securities, has not grown as anticipated. For the fiscal period ended
September 30, 1994, Strategic Short-Term Income Fund's management fee was
0.65% of average annual net assets for both Class A and Class B shares.
For the fiscal period ended September 30, 1994, Limited-Term Government
Fund's management fee was .47% of average annual net assets. On a pro
forma basis giving effect to the Reorganization, the management fee for
Limited-Term Government Fund as a percentage of average annual net assets
for the fiscal year ended September 30, 1994 would have been .47% for
Class A shares and .47% for Class B shares.
In addition, the Board considered that the investment performance of Class
A shares and Class B shares of Limited-Term Government Fund, including
average annual return and standardized yields were better than Class A and
Class B shares of Strategic Short-Term Income Fund. See "Expense Ratios
and Performance" on page __.
Tax Consequences of the Reorganization
In the opinion of Deloitte & Touche LLP, tax adviser to Strategic Short-
Term Income Fund, the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes. As a result, no gain or
loss will be recognized by, or the shareholders of either fund for Federal
income tax purposes as a result of the Reorganization. For further
information about the tax consequences of the Reorganization, see
"Approval of the Reorganization - Tax Aspects" below.
Investment Objectives and Policies
Strategic Short-Term Income Fund
Strategic Short-Term Income Funds' investment objective is to seek as high
a level of current income, consistent with stability of principal, as is
available from a portfolio of investment grade debt securities having a
remaining maturity of not more than three years. Under normal
circumstances at least 65% of Strategic Short-Term Income Funds' total
assets will be invested in investment grade securities that include the
following: (i) domestic bonds, notes and debentures of investment grade,
that is, rated "Baa" or better by Moody's Investors Service, Inc.
("Moody's") or "BBB" or better by Standard & Poor's Corporation ("Standard
& Poor's") or, if unrated, determined by Strategic Short-Term Income
Fund's investment adviser, Oppenheimer Management Corporation (the
"Manager"), to be comparable to securities meeting those rating
requirements; (ii) U.S. Government Securities; (iii) money market
instruments and (iv) investment grade foreign corporate and government
debt securities denominated in U.S. dollars or in selected foreign
currencies. Strategic Short-Term Income Fund may also invest in debt
securities which have been rated below investment grade. It may also
invest in other securities and use hedging instruments. Under normal
circumstances, Strategic Short-Term Income Fund will maintain a dollar
weighted average portfolio maturity of not more than three years.
Limited-Term Government Fund
Limited-Term Government Fund seeks high current return and safety of
principal. As a matter of fundamental policy, Strategic Short-Term Income
Fund seeks its objective by investing in any obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
("U.S. Government Securities"), and repurchase agreements on such
securities. Limited-Term Government Fund may also use hedging instruments
approved by its Board. Under normal circumstances, it anticipates that
it will maintain an average effective portfolio duration on a dollar-
weighted basis of not more than three years. Each of these funds may also
invest in other securities. See "Investment Objectives and Policies" on
page __.
Investment Advisory and Distribution and Service Plan Fees
The terms and conditions of each investment advisory agreement are the
same. The funds obtain investment management services from the Manager.
The management fee is payable monthly and computed on the net asset value
of each fund as of the close of business each day. Strategic Short-Term
Income Fund pays a management fee at the rate of 0.65% of the first $500
million of aggregate net assets, 0.62% of the next $500 million, 0.59% of
the next $500 million, and 0.50% of net assets in excess of $1.5 billion.
Limited-Term Government Fund pays a management fee at the rate of 0.500%
of the first $100 million of 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.
Strategic Short-Term Income Fund and Limited-Term Government Fund have
both adopted Service Plans for their respective Class A shares. Both
Service Plans provide for reimbursement to the Distributor for a portion
of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Under each plan,
reimbursement is made at an annual rate that may not exceed 0.25% of the
average annual net assets of Class A shares of Strategic Short-Term Income
Fund.
Strategic Short-Term Income Fund and Limited-Term Government Fund have
adopted a Distribution and Service Plans (the "Plans") for Class B shares
under which each fund pays the Distributor for its services in connection
with and costs in distributing Class B shares and servicing accounts.
Under each Plan, the funds pay the Distributor an asset-based sales charge
of 0.75% per annum of Class B shares outstanding for six years or less,
and also pays the Distributor a service fee of 0.25% per annum, each of
which is computed on the average annual net assets of Class B shares
determined as of the close of each regular business day of each fund. The
Plan for Strategic Short-Term Income Fund makes payments to reimburse the
Distributor for its distribution expenses. The Plan for Limited-Term
Government Fund is a compensation plan under which Limited-Term Government
Fund pays the Distributor for certain distribution services but Limited-
Term Government Fund payments are not tied to reimbursing the Distributor
for its expenses.
Purchases, Exchanges and Redemptions
Both Strategic Short-Term Income Fund and Limited-Term Government Fund are
part of the OppenheimerFunds complex of mutual funds. The procedures for
purchases, exchanges and redemptions of shares of the funds are
substantially the same. Shares of either fund may be exchanged only for
Class A or Class B shares of certain of other Oppenheimer Funds offering
such shares.
Both Strategic Short-Term Income Fund and Limited-Term Government Fund
have an initial sales charge of 3.50% on Class A shares. Investors who
purchase more than $1 million in Class A shares may have to pay a sales
charge of up to 1% if shares are sold within 18 calendar months from the
end of the calendar month during which shares are purchased. Each of the
funds has a contingent deferred sales charge imposed on the proceeds of
Class B shares redeemed within five years of buying them. The contingent
deferred sales charge ("CDSC") varies depending on how long you hold your
shares. Class A and Class B shares of Limited-Term Government Fund
received in the Reorganization will be issued at net asset value, without
a sales charge and no CDSC will be imposed as a result of the
Reorganization. Services available to shareholders of both funds include
purchase and redemption of shares through OppenheimerFunds AccountLink and
PhoneLink (an automated telephone system), telephone redemptions, and
exchanges by telephone to other OppenheimerFunds which offer Class A and
Class B shares, and reinvestment privileges. Please see "Shareholder
Services," and you should refer to Strategic Short-Term Income Fund's
prospectus and Limited-Term Government Fund's prospectus included with
this document for further information.
PRINCIPAL RISK FACTORS
In evaluating whether to approve the Reorganization and invest in Limited-
Term Government Fund, shareholders should carefully consider the following
risk factors, the information set forth in this Proxy Statement and
Prospectus and the more complete description of risk factors set forth in
the documents incorporated by reference herein, including the Prospectuses
of the funds and their respective Statements of Additional Information.
Strategic Short-Term Income Fund
Strategic Short-Term Income Fund in seeking its investment objectives as
described above, normally invests primarily in (i) investment grade
domestic debt securities, (ii) U.S. government securities, (iii) money
market instruments and (iv) foreign and government debt securities
denominated in U.S. dollars and selected foreign currencies. Strategic
Short-Term Income Fund may also use certain hedging instruments to try to
reduce the risk of market fluctuations. Foreign securities have special
risks. For example, foreign issuers are not subject to the same
accounting and disclosure requirements that U.S. companies are subject to.
The values of foreign securities investments may be affected by changes
in foreign currency rates, exchange control regulations, expropriation or
nationalization of a company's assets, foreign taxes, delays in settlement
of transactions, changes in governmental economic or monetary policy in
the U.S. or abroad, or other political and economic factors. Foreign
currency losses incurred by Strategic Short-Term Income Fund after it has
distributed income in a particular period may result in Strategic Short-
Term Income Fund having distributed more income than was available from
investment income, which could result in a return of capital to
shareholders. Additional costs may be incurred in connection with
investments in foreign securities because of generally higher foreign
brokerage commissions and the additional custodial costs associated with
holding foreign securities.
Strategic Short-Term Income Fund may also invest up to 35% of its assets
in lower-rated securities, common and preferred stocks, participation
interests, zero coupon securities and asset-backed securities, each of
which present special risks. High yield, lower-grade securities, whether
rated or unrated, often have speculative characteristics. Lower-grade
securities have special risks that make them riskier investments than
investment grade securities. They may be subject to greater market
fluctuations and risk of loss of income and principal than lower yielding,
investment grade securities. There may be less of a market for them and
therefore they may be harder to sell at an acceptable price. There is a
relatively greater possibility that the issuer's earnings may be
insufficient to make the payments of interest due on the bonds the
issuer's lower creditworthiness may increase the potential for its
insolvency. Strategic Short-Term Income Fund may also use some types of
"derivative investments" for hedging purposes, and may invest in other
derivatives because they offer the potential for increased income and
principal value.
Limited-Term Government Fund
Limited-Term Government Fund seek high current return and safety of
principal. As a matter of fundamental policy, Limited-Term Government
Fund seeks its objective by investing only in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities
("U.S. Government Securities"), and repurchase agreements on such
securities. A fundamental policy is one that may not be changed without
shareholder approval. This fund may also use hedging instruments approved
by its Board of Trustees. Its investment practices are generally more
conservative than the investment practices of Strategic Short-Term Income
Fund.
The investment in U.S. Government Securities involve little credit risk,
although their values will fluctuate depending on prevailing interest
rates. Limited-Term Government 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. Futures contracts,
exchange traded options and other hedging instruments that Limited-Term
Government Fund may use can be considered "derivative investments." The
types of securities each fund invests in, and the risks of investing in
them, are described below under "Investment Objectives and Policies."
APPROVAL OF THE REORGANIZATION
(The Proposal)
Reasons for the Reorganization
At a meeting of the Board of Trustees (the "Board") held February 28,
1995, the Trustees reviewed and discussed materials relevant to the
Reorganization. The Board, including the Independent Trustees,
unanimously approved and recommended to shareholders of Strategic Short-
Term Income Fund that they approve the Reorganization. The Board, in
reviewing the proposed reorganization, considered that while the
investment objectives of the two funds are not identical, they are
consistent. The Board also considered that the securities which Limited-
Term Government Fund invests are more conservative, as they are severely
limited to U.S. Government securities. The Board considered that both
funds were short-term type funds, although prior to 1994, Oppenheimer
Limited-Term Government Fund was called Oppenheimer Government Securities
Fund and had no limit on the maturity or duration of its portfolio.
Although Strategic Short-Term Income Fund has the ability to invest in a
broader scope of securities, Strategic Short-Term Income Fund which was
originally offered in 1992, has not grown and is significantly smaller
than Limited-Term Government Fund. As of March 31, 1995, Strategic Short-
Term Income Fund had net assets of $29,082,000 and Limited-Term Government
Fund had net assets of $348,955,000. The Manager advised the Board that
with a Fund this small it is difficult to achieve the appropriate
diversification of investments and Strategic Short-Term Income Fund is
expensive to manage. The Board, in reviewing financial information,
determined that if the Reorganization is approved, shareholders of
Strategic Short-Term Income Fund will experience a reduction in expenses
and in the effective management fee. At the same time shareholders of
Limited-Term Government Fund would benefit from a somewhat lower
management fee rate. The ratio of expenses to average net assets for
Strategic Short-Term Income Fund for the fiscal year ended September 30,
1994 was 1.17% for Class A shares and 1.97% for Class B shares,
respectively. For the six months ended March 31, 1995, the ratio of
expenses to average net assets was 1.33% for its Class A shares and 2.11%
for its Class B shares. The ratio of expenses to average net assets for
Limited-Term Government Fund for the fiscal year ended September 30, 1994
was .99% for its Class A shares and 1.79% for its Class B shares. For the
six months ended March 31, 1995, the ratio of expenses for its Class A
shares was .86% and 1.68% for its Class B shares. For the fiscal year
ended September 30, 1994 on a pro forma basis giving effect to the
Reorganization, the expense ratio of Limited-Term Government Fund, as a
percentage of average annual net assets would have been .97% for Class A
shares and 1.79% for Class B shares. For the six month period ended March
31, 1995, expenses on a pro forma basis giving effect to the
Reorganization, the expense ratio of the surviving Limited-Term Government
Fund, as a percentage of average annual net assets would have been .86%
for Class A shares and 1.68% for Class B shares.
For the fiscal period ended September 30, 1994, Strategic Short-Term
Income Fund's management fee was 0.65% of average annual net assets for
both Class A and Class B shares. For the fiscal period ended September
30, 1994, Limited-Term Government Fund's management fee was .47% of
average annual net assets for both Class A and Class B shares. On a pro
forma basis giving effect to the Reorganization, the management fee for
Limited-Term Government Fund as a percentage of average annual net assets
for the fiscal year ended September 30, 1994 would have been .47% for
Class A shares and .47% for Class B shares. For the six months ended
March 31, 1995 (annualized) Strategic Short-Term Income Fund's management
fee was .65% of average annual net assets for Class A shares and .65% for
Class B shares. For the six months ended March 31, 1995 (annualized)
Limited-Term Government Fund's management fee for Class A shares was .46%
and .46% for Class B shares and, after giving effect to the
Reorganization. The management fee for the six month period (annualized)
ended March 31, 1995 (unaudited) would have been .46% for Class A shares
and .46% for Class B shares.
In addition to the above, the Board also considered information with
respect to the investment performance of Strategic Short-Term Income Fund.
The Board compared the performance of Strategic Short-Term Income Fund to
the performance of Limited-Term Government Fund and determined that both
the average annual return and the standardized yield were better for Class
A and Class B shares of Limited-Term Government Fund. Although past
performance is not predictive of future results, shareholders of Strategic
Short-Term Income Fund would have an opportunity to become shareholders
of a fund with lower expenses.
The Board also considered that the Reorganization would be a tax-free
Reorganization. The Board concluded that the Reorganization would not
result in dilution to the shareholders of Strategic Short-Term Income Fund
and would not result in dilution to shareholders of Limited-Term
Government Fund.
The Reorganization
The Reorganization Agreement (a copy of which is set forth in full as
Annex A to this Proxy Statement and Prospectus) contemplates a
reorganization under which (i) all of the assets of Strategic Short-Term
Income Fund (other than the cash reserve described below (the "Cash
Reserve")) will be transferred to Limited-Term Government Fund in
exchange for Class A and Class B shares of Limited-Term Government Fund,
(ii) these shares will be distributed among the shareholders of Strategic
Short-Term Income Fund in complete liquidation of Strategic Short-Term
Income Fund, (iii) the outstanding shares of Strategic Short-Term Income
Fund will be cancelled. Limited-Term Government Fund will not assume any
of Strategic Short-Term Income Fund's liabilities except for portfolio
securities purchased which have not settled and outstanding shareholder
redemption and dividend checks.
The result of effectuating the Reorganization would be that: (i) Limited-
Term Government Fund will add to its gross assets all of the assets (net
of any liability for portfolio securities purchased but not settled and
outstanding shareholder redemption and dividend checks) of Strategic
Short-Term Income Fund other than its Cash Reserve; and (ii) the
shareholders of Strategic Short-Term Income Fund as of the close of
business on the Closing Date will become shareholders of either Class A
or Class B shares of Limited-Term Government Fund.
The effect of the Reorganization will be that shareholders of Strategic
Short-Term Income Fund who vote their shares in favor of the
Reorganization will be electing to redeem their shares of Strategic Short-
Term Income Fund (at net asset value on the Valuation Date referred to
below under "Method of Carrying Out the Reorganization Plan," calculated
after subtracting the Cash Reserve) and reinvest the proceeds in Class A
or Class B shares of Limited-Term Government Fund at net asset value
without sales charge and without recognition of taxable gain or loss for
Federal income tax purposes (see "Tax Aspects of the Reorganization"
below). The Cash Reserve is that amount retained by Strategic Short-Term
Income Fund which is sufficient in the discretion of the Board for the
payment of: (a) Strategic Short-Term Income Fund's expenses of
liquidation, and (b) its liabilities, other than those assumed by Limited-
Term Government Fund. Strategic Short-Term Income Fund and Limited-Term
Government Fund will bear all of their respective expenses associated with
the Reorganization, as set forth under "Costs of the Solicitation and the
Reorganization" above. Management estimates that such expenses associated
with the Reorganization to be borne by Strategic Short-Term Income Fund
will not exceed $30,000. Liabilities as of the date of the transfer of
assets will consist primarily of accrued but unpaid normal operating
expenses of Strategic Short-Term Income Fund, excluding the cost of any
portfolio securities purchased but not yet settled and outstanding
shareholder redemption and dividend checks. See "Method of Carrying Out
the Reorganization Plan" below.
The Reorganization Agreement provides for coordination between the funds
as to their respective portfolios so that, after the closing, Limited-Term
Government Fund will be in compliance with all of its investment policies
and restrictions. Strategic Short-Term Income Fund will recognize capital
gain or loss on any sales made pursuant to this paragraph. As noted in
"Tax Aspects of the Reorganization" below, if Strategic Short-Term Income
Fund realizes net gain from the sale of securities in 1995, such gain, to
the extent not offset by capital loss carry forward, will be distributed
to shareholders prior to the Closing Date and will be taxable to
shareholders as capital gain.
Tax Aspects of the Reorganization
Immediately prior to the Valuation Date referred to in the Reorganization
Agreement, Strategic Short-Term Income Fund will pay a dividend or
dividends which, together with all previous such dividends, will have the
effect of distributing to Strategic Short-Term Income Fund's shareholders
all of Strategic Short-Term Income Fund's investment company taxable
income for taxable years ending on or prior to the Closing Date (computed
without regard to any deduction for dividends paid) and all of its net
capital gain, if any, realized in taxable years ending on or prior to the
Closing Date (after reduction for any available capital loss carry-
forward). Such dividends will be included in the taxable income of
Strategic Short-Term Income Fund's shareholders as ordinary income and
capital gain, respectively.
The exchange of the assets of Strategic Short-Term Income Fund for Class
A and Class B shares of Limited-Term Government Fund and the assumption
by Limited-Term Government Fund of certain liabilities of Strategic Short-
Term Income Fund is intended to qualify for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"). Strategic Short-Term
Income Fund has represented to Deloitte & Touche LLP, tax adviser to
Strategic Short-Term Income Fund, that there is no plan or intention by
any Fund shareholder who owns 5% or more of Strategic Short-Term Income
Fund's outstanding shares, and, to Strategic Short-Term Income Fund's best
knowledge, there is no plan or intention on the part of the remaining Fund
shareholders, to redeem, sell, exchange or otherwise dispose of a number
of Limited-Term Government Fund Class A or Class B shares received in the
transaction that would reduce Strategic Short-Term Income Fund
shareholders' ownership of Limited-Term Government Fund shares to a number
of shares having a value, as of the Closing Date, of less than 50% of the
value of all the formerly outstanding Fund shares as of the same date.
Oppenheimer Limited-Term Government Fund has represented to Deloitte &
Touche LLP, that, as of the Closing Date, it will qualify as a regulated
investment company or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code.
As a condition to the closing of the Reorganization, Limited-Term
Government Fund and Strategic Short-Term Income Fund will receive the
opinion of Deloitte & Touche LLP to the effect that, based on the
Reorganization Agreement, the above representations, existing provisions
of the Code, Treasury Regulations issued thereunder, current Revenue
Rulings, Revenue Procedures and court decisions, for Federal income tax
purposes:
1. The transactions contemplated by the Reorganization Agreement will
qualify as a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Code.
2. Strategic Short-Term Income Fund and Limited-Term Government Fund will
each qualify as "a party to a reorganization" within the meaning of
Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders of Strategic
Short-Term Income Fund upon the distribution of Class A or Class B
shares of beneficial interest in Limited-Term Government Fund to the
shareholders of Strategic Short-Term Income Fund pursuant to Section
354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized
by Strategic Short-Term Income Fund by reason of the transfer of its
assets solely in exchange for Class A or Class B shares of Limited-
Term Government Fund.
5. Under Section 1032 of the Code no gain or loss will be recognized by
Limited-Term Government Fund by reason of the transfer of Strategic
Short-Term Income Fund's assets solely in exchange for Class A or
Class B shares of Limited-Term Government Fund.
6. The shareholders of Strategic Short-Term Income Fund will have the
same tax basis and holding period for the shares of beneficial
interest in Limited-Term Government Fund that they receive as they had
for Strategic Short-Term Income Fund stock that they previously held,
pursuant to Sections 358(a) and 1223(1) of the Code, respectively.
7. The securities transferred by Strategic Short-Term Income Fund to
Limited-Term Government Fund will have the same tax basis and holding
period in the hands of Limited-Term Government Fund as they had for
Strategic Short-Term Income Fund, pursuant to Sections 362(b) and
1223(1) of the Code, respectively.
Shareholders of Strategic Short-Term Income Fund should consult their tax
advisors regarding the effect, if any, of the Reorganization in light of
their individual circumstances. Since the foregoing discussion only
relates to the Federal income tax consequences of the Reorganization,
shareholders of Strategic Short-Term Income Fund should also consult their
tax advisers as to state and local tax consequences, if any, of the
Reorganization.
Capitalization Table (Unaudited)
The table below sets forth the capitalization of Strategic Short-Term
Income Fund and Limited-Term Government Fund and indicates the pro forma
combined capitalization as of March 31, 1995 as if the Reorganization had
occurred on such dates.
<TABLE>
<CAPTION>
March 31, 1995
Net Asset
Shares Value
Net Assets Outstanding Per Share
<S> <C> <C> <C>
Oppenheimer Strategic
Short-Term Income Fund
Class A $ 20,997,783 4,604,117 $4.56
Class B $ 8,084,465 1,775,203 $4.55
Oppenheimer Limited-Term
Government Fund
Class A $274,872,477 26,366,128 $10.43
Class B $ 72,130,147 6,917,484 $10.43
Class C $ 1,952,739 187,455 $10.42
Oppenheimer Limited-Term
Government Fund (Pro Forma
Surviving Fund)
Class A $295,870,260 28,379,338 $10.43
Class B $ 80,214,612 7,692,600 $10.43
Class C $ 1,952,739 187,455 $10.42
</TABLE>
Reflects issuance of 2,013,210 of Class A shares and 775,116 of Class B
shares of Limited-Term Government Fund in a tax-free exchange for the net
assets of Strategic Short-Term Income Fund, aggregating $29,082,248.
The pro forma ratio of expenses to average annual net assets of the Class
A shares at March 31, 1995 would have been .86%. The pro forma ratio of
expenses to average net assets of Class B shares at March 31, 1995 would
have been 1.68%. The pro forma ratio of expenses to average net assets
of Class C shares at March 31, 1995 would have been 1.62%.
COMPARISON BETWEEN STRATEGIC SHORT-TERM INCOME FUND
AND LIMITED-TERM GOVERNMENT FUND
Information about Strategic Short-Term Income Fund and Limited-Term
Government Fund is presented below. Additional information about Limited-
Term Government Fund is set forth in its Prospectus, accompanying this
Proxy Statement and Prospectus, and additional information about both
funds is set forth in documents that may be obtained upon request of the
transfer agent and upon review at the offices of the SEC. See
"Miscellaneous - Public Information."
Investment Objectives and Policies
Summary
Limited-Term Government Fund invests its assets in obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
repurchase agreements on those securities and certain hedging investments.
The U.S. Government securities in which Limited-Term Government Fund
invests include mortgage-backed pass-through obligations issued by the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation and the Federal National Mortgage Corporation. It may not
invest in lower rated, high yielding "junk" bonds nor in any foreign
securities. Limited-Term Government Fund may also lend its portfolio
securities, purchase when-issued and delayed delivery securities, reverse
repurchase agreements, illiquid and restricted securities, enter into swap
arrangements and purchase certain derivative securities.
Strategic Short-Term Income Fund has a broader range of securities in
which it may invest. It normally invests at least 65% of its total assets
in investment grade debt securities. Its remaining assets may be invested
in lower rated, high yielding "junk bonds." Strategic Short-Term Income
Fund may also invest in foreign investment grade and lower rated, high
yielding securities, mortgage-backed and asset-backed securities issued
by both the U.S. Government and by private companies, a broader range of
hedging investments, derivative investments and swaps. Strategic Short-
Term Income Fund may also invest in money market securities, lend its
portfolio securities, enter into repurchase agreements, purchase illiquid
and restricted securities, purchase and sell forward currency contracts,
make short sales against-the-box, buy participation interests and common
and preferred stocks. All debt securities, including U.S. Government
securities, are subject to changes in their value due to changes in
prevailing interest rates. During periods of falling interest rates, the
values of outstanding fixed-income securities generally rise. Conversely,
during periods of rising interest rates, the value of such securities
generally decline. The magnitude of these fluctuations will generally be
greater for securities with longer maturities.
The securities in which Limited-Term Government Fund and Strategic Short-
Term Income Fund invest are summarized below. Strategic Short-Term Income
Fund may use a number of securities which Limited-Term Government Fund
does not invest in, and these securities are mentioned below. For more
information on all of these securities, please refer to each fund's
prospectus and statement of additional information.
Strategic Short-Term Income Fund
Strategic Short-Term Income Fund seeks its objective principally by
investing in: (i) domestic bonds, notes and debentures of investment
grade, that is, rated "Baa" or better by Moody's Investors Service, Inc.
("Moody's") or "BBB" or better by Standard & Poor's Corporation ("Standard
& Poor's") or, if unrated, determined by Strategic Short-Term Income
Fund's investment adviser, Oppenheimer Management Corporation (the
"Manager"), to be comparable to securities meeting those rating
requirements; (ii) U.S. Government Securities; (iii) money market
instruments and (iv) investment grade foreign corporate and government
debt securities denominated in U.S. dollars or in selected foreign
currencies.
Under normal circumstances, at least 65% of Strategic Short-Term Income
Fund's total assets will be invested in investment grade debt securities
in the respective sectors described above. The remaining assets may be
invested in other securities.
Strategic Short-Term Income Fund's investments in investment grade
domestic fixed-income securities may include those issued by domestic
corporations in any industry (for example, industrial, financial or
utility) which may be denominated in U.S. dollars or in non-U.S.
currencies. These investments may include debt obligations such as bonds,
debentures and notes (including variable and floating rate instruments),
as well as sinking fund and callable bonds. Strategic Short-Term Income
Fund may also invest in municipal obligations issued by or on behalf of
states, territories, possessions or districts of the U.S. or their
political subdivisions, agencies, instrumentalities or authorities.
High yield, lower-grade securities, whether rated or unrated, often have
speculative characteristics. Lower-grade securities have special risks
that make them riskier investments than investment grade securities. They
may be subject to greater market fluctuations and risk of loss of income
and principal than lower yielding, investment grade securities. There may
be less of a market for them and therefore they may be harder to sell at
an acceptable price. There is a relatively greater possibility that the
issuer's earnings may be insufficient to make the payments of interest due
on the bonds. The issuer's low creditworthiness may increase the
potential for its insolvency.
These risks mean that Strategic Short-Term Income Fund may not achieve the
expected income from lower-grade securities, and that Strategic Short-Term
Income Fund's net asset value per share may be affected by declines in
value of these securities. However, Strategic Short-Term Income Fund's
limitations on investments in these types of securities may reduce some
of the risk, as will Strategic Short-Term Income Fund's policy of
diversifying its investments.
Under normal circumstances, Strategic Short-Term Income Fund will maintain
a dollar-weighted average portfolio maturity of not more than three years.
In calculating maturity, Strategic Short-Term Income Fund will consider
various factors, including anticipated payments of principal. Strategic
Short-Term Income Fund may hold securities with maturities of more than
three years if, under normal circumstances, it maintains a dollar-weighted
average maturity of not more than three years. See "Investment Objective
and Policies" in the Statement of Additional Information for more
information on Strategic Short-Term Income Fund's calculation of portfolio
maturity.
Limited-Term Government Fund
Oppenheimer Limited-Term Government Fund is a mutual fund that seeks high
current return and safety of principal. In seeking its objective,
Limited-Term Government Fund invests in obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, including
mortgage-backed securities issued by Government National Mortgage
Association ("GNMA").
While payments of principal and interest on certain U.S. Government
securities (including the GNMA certificates which Limited-Term Government
Fund may hold) are guaranteed by the U.S. Government or its agencies or
instrumentalities, neither the principal value of those securities nor the
net asset value of shares of Limited-Term Government Fund is guaranteed,
and therefore Limited-Term Government Fund's net asset values per share
are subject to fluctuations due to changes in the value of portfolio
securities. Limited-Term Government Fund also uses "hedging" instruments
to seek to reduce the risks of market and interest rate fluctuations that
affect the value of the securities Limited-Term Government Fund holds.
Under normal circumstances, Limited-Term Government Fund anticipates that
it will maintain an average effective portfolio duration on a dollar-
weighted basis of not more than three years. 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.) Please refer to "Investment Policies
and Strategies" in the Statement of Additional Information for more
information about the types of securities Limited-Term Government Fund
invests in and the risks of investing in Limited-Term Government Fund.
Permitted Investments by Both Strategic Short-Term Income Fund and
Limited-Term Government Fund
U.S. Government Securities
Both of the funds may invest in debt obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities ("U.S. Government
Securities"), however, with respect to Limited-Term Government Fund, as
a matter of fundamental policy it may invest only in these obligations.
Both of the funds may invest in obligations supported by the full faith
and credit of the U.S. Government such as mortgage-backed securities
guaranteed by the Government National Mortgage Association ("Ginnie Maes")
or they may invest in other securities, issued or guaranteed by federal
agencies or government-sponsored enterprises that are not supported by the
full faith and credit of the United States, and securities of agencies and
instrumentalities that are supported by the discretionary authority of the
U.S. Government to purchase such securities which include: Federal Land
Banks, Farmers Home Administration, Central Bank for Cooperatives, and
Federal Intermediate Credit Banks and Freddie Mac.
Both of the funds may invest in mortgaged-backed securities, including
collateralized mortgage-backed obligations ("CMOs"), however, Limited-Term
Government Fund may only invest in mortgage-backed securities of the
fully-modified pass-through type, such as GNMA certificates, which are
guaranteed as to timely payment of principal and interest by the full
faith and credit of the United States Government or which are issued or
guaranteed by agencies of the U.S. Government, such as Federal Home Loan
Mortgage Corporation ("Freddie Mac") or the Federal National Mortgage
Association ("Fannie Mae").
Limited-Term Government Fund may only invest in 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 such an agency or instrumentality. Strategic
Short-Term Income Fund has the ability to invest in mortgage-backed
securities, including CMO's that may be issued by private issuers, such
as commercial banks, savings and loan institutions and private mortgage
insurance companies and other secondary market issuers. There can be no
assurance that private issuers will be able to meet their obligations.
The effective maturity of a mortgage-backed security may be shortened by
unscheduled or early payment of principal and interest on the underlying
mortgages, which may affect the effective yield of such securities. The
principal that is returned may be invested in instruments having a higher
or lower yield than the prepaid instruments, depending on then-current
market conditions. Such securities therefore may be less effective as a
means of "locking in" attractive long-term interest rates and may have
less potential for appreciation during periods of declining interest rates
than conventional bonds with comparable stated maturities. Mortgage-
backed securities purchased at a premium, prepayments of principal and
foreclosures of mortgages may result in some loss of the principal
investment to the extent of the premium paid.
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
("tranches") that have different maturities. The principal value of
certain CMO tranches may be more volatile than other types of mortgage-
related securities, because of the possibility that 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.
Both funds 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 "I/O"), while the other class will
receive all of the principal value on maturity (and is known as a "P/O").
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, and they have the
additional risk that if the underlying mortgages are prepaid, a 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, a 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."
Zero Coupon Securities
While both funds may invest in zero coupon securities, Limited-Term
Government Fund must invest in zero coupon securities issued by the U.S.
Treasury. In general, zero coupon U.S. Treasury securities include (1)
U.S. Treasury notes or bonds that have been "stripped" of their interest
coupons, (2) U.S. Treasury bills issued without interest coupons, or (3)
certificates representing an interest in stripped securities. A zero
coupon Treasury security pays no current interest and trades at a deep
discount from its face value. It will be subject to greater market
fluctuations from changes in interest rates than interest-paying
securities. Either fund accrues interest on zero coupon securities
without receiving the actual cash. As a result of holding these
securities, either fund could possibly be forced to sell portfolio
securities to pay cash dividends or meet redemptions.
Strategic Short-Term Income Fund may invest in zero coupon securities
issued by corporations or private issuers. These zero coupon securities
are: (i) notes or debentures that do not pay current interest and are
issued at substantial discounts from par value, or (ii) notes or
debentures that pay no current interest until a stated date one or more
years into the future, after which the issuer is obligated to pay interest
until maturity, usually at a higher rate than if interest were payable
from the date of issuance. Such zero coupon securities are subject to
certain risks, in addition to the risks identified above for zero coupon
securities issued by the U.S. Treasury, such as the risk of the issuer's
failure to pay interest and repay principal in accordance with the terms
of the obligation.
When-Issued and Delayed Delivery Transactions
The funds 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 either fund if the value of the security declines prior to the
settlement date. With respect to Limited-Term Government Fund, it will
not, as a matter of fundamental policy, enter into when-issued or delayed
delivery transactions unless the acceptance and delivery of the securities
in Strategic Short-Term Income Fund is mandatory, occurs within 120 days
of the trade date and is settled in cash on the settlement date.
Repurchase Agreements
Each of the funds may enter into repurchase agreements. Strategic Short-
Term Income Fund has no limit on the amount of its net assets that may be
subject to repurchase agreements of seven days or less. However, Limited-
Term Government Fund, as a matter of fundamental policy, will not enter
into repurchase transactions that will cause more than 25% of Limited-Term
Government Fund's net assets to be subject to repurchase agreements, or
that will cause more than 5% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. Strategic Short-Term
Income Fund will not enter into a repurchase agreement that causes more
than 10% of its net assets to be subject to repurchase agreements having
a maturity beyond seven days. Also, as a matter of fundamental policy,
Limited-Term Government Fund will not enter into repurchase agreements
unless ownership and control of the securities subject to the agreement
are transferred to Limited-Term Government Fund. Repurchase agreements
must be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the funds may experience costs in
disposing of the collateral and losses if there is any delay in doing so.
Illiquid and Restricted Securities
Both of the funds may invest in illiquid and restricted securities.
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. Strategic Short-Term Income
Fund will not invest more than 10% of its net assets in illiquid or
restricted securities (that limit may increase to 15% if certain state
laws are changed or Strategic Short-Term Income Fund's shares are no
longer sold in those states). Strategic Short-Term Income Fund's
percentage limitation on these investments does not apply to certain
restricted securities that are eligible for resale to qualified
institutional purchasers. With respect to Limited-Term Government Fund,
as a matter of fundamental policy, Limited-Term Government Fund will not
invest more than 5% of its total assets in illiquid and restricted
securities.
Hedging
Both funds may use hedging investments although the types of hedging
investments which Limited-Term Government Fund makes are more limited than
the hedging investments of Strategic Short-Term Income Fund. The funds
may buy and sell options, futures and forward contracts for a number of
purposes. They may do so to try to manage their exposure to the
possibility that the prices of portfolio securities may decline, or to
establish a position in the securities market as a temporary substitute
for purchasing individual securities. Each 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, tend to increase the fund's exposure to
the securities market. Writing covered call options may also provide
income for liquidity purposes or defensive reasons, or to raise cash to
distribute to shareholders. The hedging investments which the funds may
use are summarized below and you should refer to each fund's prospectus
and statement of additional information for a more complete discussion of
these investments and their risks. Neither fund uses hedging investments
for speculative purposes.
Limited-Term Government Fund may buy covered call options on securities
and interest rate futures or to terminate its obligation on a previously
written call. Limited-Term Government Fund may purchase put options that
relate to securities it owns or interest rate futures. This fund may sell
these kinds of puts in an amount up to 50% of its total assets if the puts
are covered by segregated liquid assets. This fund may not buy a put
option on an interest rate future.
Limited-Term Government Fund may buy and sell puts and calls only as
follows: (1) if after a call is sold, not more than 25% of its total
assets are subject to calls; (2) calls must be listed on a securities or
commodities exchange or quoted on the Automated Quotation System of the
National Association of Securities Dealers or traded in the over-the-
counter market; (3) if the fund sells calls on futures contracts it owns,
these calls must be covered; and (4) a call or put option may not be
purchased if the value of all put and call options would exceed 5% of the
fund's total assets.
Strategic Short-Term Income Fund may use all of the hedging investments
which Limited-Term Government Fund may use and is subject to most of the
same limitations on their use. In addition, Strategic Short-Term Income
Fund may also: buy and sell futures contracts and options thereon that
relate to financial futures such as bond indexes; buy and sell foreign
currencies and forward contracts and options thereon; purchase put options
on futures whether or not the fund owns the future; and may enter into
cross-hedges.
Interest Rate Swaps. Both of the funds may enter into interest rate
swaps. The funds enter into swaps only on securities they own. The funds
may not enter into swaps with respect to more than 25% of their total
respective assets. Also, the funds will segregate liquid assets (such as
cash or U.S. Government securities or other appropriate high grade debt
obligations) 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. Interest rate swaps are subject to credit risks (if the other
party fails to meet its obligations) and also to interest rate risks. A
fund could be obligated to pay more under its swap agreements than it
receives under them, as a result of interest rate changes.
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 a fund's return. A 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 and they are addressed in each fund's prospectus and statement
of additional information.
Derivative Investments
Strategic Short-Term Income Fund and Limited-Term Government Fund can
invest in a number of different kinds of "derivative investments." Each
fund may use some types of derivatives for hedging purposes, and may
invest in others because they offer the potential for increased income.
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, index or currency. In the broadest
sense, derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," above).
One risk of investing in derivative investments is that the company
issuing 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 investments, which will
affect the fund's share price. Certain derivative investments held by a
fund may trade in the over-the-counter markets and may be illiquid.
Borrowing for Leverage
Both Limited-Term Government Fund and Strategic Short-Term Income Fund may
borrow money from banks to buy securities. Although both funds are
authorized to borrow money, neither fund has borrowed money in the past
or plans to borrow money for any purpose. Each fund's fundamental
investment policy on borrowing is different and is set forth under
"Investment Restrictions" on page __ of this Prospectus.
Additional Permitted Investments by Strategic Short-Term Income Fund
Strategic Short-Term Income Fund may also invest in a number of additional
securities which are mentioned briefly below. For more information on
these securities, please refer to the prospectus and statement of
additional information for Strategic Short-Term Income Fund.
Foreign Securities
Only Strategic Short-Term Income Fund may invest in foreign securities.
Strategic Short-Term Income Fund may invest in equity or debt obligations
issued or guaranteed by foreign corporations, certain supranational
entities and foreign governments or their agencies or instrumentalities,
and debt obligations issued by U.S. corporations denominated in non-U.S.
currencies.
Strategic Short-Term Income Fund's portfolio of foreign securities may
include those of a number of foreign countries or, depending upon market
conditions, those of a single foreign country. No more than 25% of
Strategic Short-Term Income Fund's total assets will be invested in
government securities of any one foreign country or in securities issued
by companies organized under the laws of any one foreign country.
Foreign securities have special risks. For example, the values of foreign
securities investments may be affected by changes in foreign currency
rates, exchange control regulations, expropriation or nationalization of
a company's assets, foreign taxes, delays in settlement of transactions,
changes in governmental economic or monetary policy in the U.S. or abroad,
or other political and economic factors.
Money Market Instruments
Strategic Short-Term Income Fund may invest in the following money market
instruments (which are debt obligations generally having a maturity of one
year or less); U.S. Government securities, bank obligations, commercial
paper, corporate obligations, and other money market instruments if they
are (a) subject to repurchase agreements or (b) guaranteed as to principal
and interest by a domestic or foreign bank having total assets in excess
of $1 billion, by a corporation whose commercial paper may be purchased
by Strategic Short-Term Income Fund, or by a foreign government having an
existing debt security rated at least "A" by a NRSRO.
Board-Approved Instruments. Other short-term investments of a type that
Strategic Short-Term Income Fund's Board of Trustees, or the Manager under
guidelines established by the Board, determines present minimal credit
risks and that are of "high quality."
Common and Preferred Stocks
Strategic Short-Term Income Fund may invest in common and preferred stock
issued by domestic or foreign corporations.
Participation Interests
Strategic Short-Term Income Fund may acquire participation interests in
loans that are made to U.S. or foreign companies (the "borrower"). They
may be interests in, or assignments of, the loan and are acquired from
banks or brokers that have made the loan or are members of the lending
syndicate. No more than 5% of Strategic Short-Term Income Fund's net
assets can be invested in participation interest of the same issuer. See
"Illiquid and Restricted Securities."
Corporate Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities. They are issued by trusts and special
purpose corporations. They are backed by a pool of assets, such as credit
card or auto loan receivables, which are the obligations of a number of
different parties.
Investment Restrictions
Strategic Short-Term Income Fund and Limited-Term Government Fund have
certain investment restrictions that, together with their investment
objectives, are fundamental policies, changeable only by shareholder
approval. Set forth below is a summary of these investment restrictions
which are different for each fund. Other investment restrictions for each
fund are substantially the same.
Under these fundamental policies, the funds cannot do any of the
following: (1) with respect to Strategic Short-Term Income Fund, purchase
securities issued or guaranteed by any one issuer (except the U.S.
Government or its agencies or instrumentalities), if, with respect to 75%
of its total assets, more than 5% of Strategic Short-Term Income Fund's
total assets would be invested in securities of that issuer or Strategic
Short-Term Income Fund would then own more than 10% of that issuer's
voting securities; with respect to Limited-Term Government Fund, this
limitation applies to 100% of its total assets; (2) with respect to
Limited-Term Government Fund, it may not (a) invest in any security other
than U.S. Government Securities, including repurchase agreements therein;
Limited-Term Government Fund may write covered calls and use hedging
instruments approved by the Board; (b) borrow money, except from banks for
temporary purposes in amounts not in excess of 5% of the value of its
assets; no assets of Limited-Term Government Fund may be pledged,
mortgaged or hypothecated other than to secure a borrowing, and then in
amounts not exceeding 7.5% of Limited-Term Government 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, Limited-Term
Government Fund may enter into reverse repurchase agreements and when-
issued and delayed delivery transactions; such prohibition against
pledging, mortgaging or hypothecating assets does not bar Limited-Term
Government Fund from escrow arrangements for options trading or collateral
or margin arrangements in connection with hedging instruments approved by
the Board; Strategic Short-Term Income Fund may also borrow money from
banks on an unsecured basis and invest the borrowed funds in securities;
borrowing by Strategic Short-Term Income Fund is limited only by the
provisions of the Investment Company Act of 1940; (3) with respect to
Strategic Short-Term Income Fund, buy securities of an issuer which,
together with any predecessor, has been in operation for less than three
years, if as a result, the aggregate of such investments would exceed 5%
of the value of Strategic Short-Term Income Fund's total assets; Limited-
Term Government Fund is prohibited from buying any such securities; (4)
with respect to Strategic Short-Term Income Fund, make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or by virtue
of ownership of other securities has the right, without payment of any
further consideration, to obtain an equal amount of securities sold short
("short sales against-the-box"); with respect to Limited-Term Government
Fund, it may not make short sales of securities.
Portfolio Turnover
Holding a portfolio security for any particular length of time is not
generally a consideration in investment decisions. As a result of each
fund's investment policies and market factors, their portfolio securities
are actively traded to try to benefit from short-term yield differences
among debt securities. As a result, portfolio turnover of each of the
funds may be higher than other mutual funds. This strategy may involve
greater transaction costs from brokerage commissions and dealer mark-ups.
Neither fund however, incurs significant brokerage costs for U.S.
Government Securities. Additionally, high portfolio turnover may result
in increased short-term capital gains and affect the ability of each of
the funds to qualify for tax deductions for payments made to shareholders
as a "regulated investment company" under the Internal Revenue Code.
Strategic Short-Term Income Fund and Limited-Term Government Fund each
qualified in their last fiscal year and intend to do so in the coming
year, although they reserve the right not to qualify.
For the fiscal year ended September 30, 1994, the portfolio turnover rate
for Strategic Short-Term Income Fund and Limited-Term Government Fund was
57.8% and 226%, respectively. For the six months ended March 31, 1995
(unaudited), the portfolio turnover rate for Strategic Short-Term Income
Fund and Limited-Term Government Fund was 20.9% and 102%, respectively.
Description of Brokerage Practices
The brokerage practices of the two funds are substantially similar and are
conducted in accordance with the terms and conditions of each fund's
investment advisory agreement and other brokerage policies of the Manager.
Purchases of U.S. Government Securities, money market instruments and debt
obligations by both funds are normally principal transactions at net
prices and each fund incurs little or no brokerage costs for these
transactions. Principal transactions include purchases of securities from
underwriters, which include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers which include a spread
between the bid and asked price.
When brokers are used, the Manager is permitted to select qualified
brokers to obtain best execution. Brokerage is allocated among brokers
under the supervision of the Manager's executive officers and the Manager
is permitted to consider brokers which have sold shares of the funds and
other OppenheimerFunds in selecting brokers for fund transactions.
Commissions paid to such brokers may be higher than commissions charged
by other qualified brokers. The Manager is also permitted to allocate
brokerage commissions from fund transactions to brokers to obtain research
services to assist the Manager in the investment-making decision process.
Please refer to the Statement of Additional Information for each fund for
further information on each fund's brokerage practices.
Expense Ratios and Performance
The ratio of expenses to average net assets for Strategic Short-Term
Income Fund for the fiscal year ended September 30, 1994 was 1.17% for
Class A shares and 1.97% for Class B shares. The ratio of expenses to
average net assets for Limited-Term Government Fund for the fiscal year
ended September 30, 1994, for its Class A and Class B shares was .99% and
1.79%, respectively. For the six months ended March 31, 1995 (unaudited)
(annualized) the ratio of expenses to average net assets for Strategic
Short-Term Income Fund for its Class A and Class B shares was 1.33% and
2.11%, respectively. For the six months ended March 31, 1995, the ratio
of expenses to average net assets for Limited-Term Government Fund was
.86% for its Class A shares and 1.68% for its Class B shares. Further
details are set forth under "Fund Expenses" and "Financial Highlights" in
Strategic Short-Term Income Fund's Prospectus dated January 27, 1995,
supplemented June 14, 1995, which accompanies this Proxy Statement and
Prospectus, and in Strategic Short-Term Income Fund's Annual Report as of
September 30, 1994 and financial statement (unaudited) as of March 31,
1995, and Limited-Term Government Fund's Annual Report as of September 30,
1994 and financial statement (unaudited) as of March 31, 1995, which are
included in the Statement of Additional Information.
The standardized yield for Strategic Short-Term Income Fund for the 30 day
period ended March 31, 1995 was 6.76% for Class A shares and 6.21% for
Class B shares. The average annual total return on an investment in Class
A and Class B shares of Strategic Short-Term Income Fund for the one year
period ended March 31, 1995 was 3.67% and 2.88%, respectively. The
average annual return on an investment in Class A shares for the period
from August 4, 1992 to March 31, 1995 was 3.11%. The average annual
return on an investment in Class B shares for the period from November 30,
1992 to March 31, 1995 was 4.07%.
For the 30 day period ended March 31, 1995, the standardized yield for
Limited-Term Government Fund's Class A and Class B shares were 6.56% and
5.98%, respectively. The average annual total return on an investment in
Class A shares of Limited-Term Government Fund for the one and five year
periods ended March 31, 1995 were 3.90% and 8.41%, respectively. For the
period ended March 31, 1995 and the period from May 3, 1993 (the date
Class B shares of Limited-Term Government Fund were publicly offered)
through March 31, 1995, the average annual return on an investment in
Class B shares of Limited-Term Government Fund was 2.94% and 3.25%,
respectively. The average annual return for Strategic Short-Term Income
Fund from the period June 30, 1993 to March 31, 1995 was 3.23% for Class
A shares and 2.32% for Class B shares. The average annual return for
Limited-Term Government Fund for the same time period was 3.67% for Class
A shares and 2.79% for Class B shares. For more information on
performance of each fund as compared to the market, please refer to the
section "Comparing the Fund's Performance To the Market" in the respective
prospectus of each fund.
Shareholder Services
The policies of Strategic Short-Term Income Fund and Limited-Term
Government Fund with respect to minimum initial investments and subsequent
investments by its shareholders are substantially the same. Both
Strategic Short-Term Income Fund and Limited-Term Government Fund offer
the following privileges: (i) Right of Accumulation, (ii) Letter of
Intent, (iii) reinvestment of dividends and distributions at net asset
value, (iv) net asset value purchases by certain individuals and entities,
(v) Asset Builder (automatic investment) Plans, (vi) Automatic Withdrawal
and Exchange Plans for shareholders who own shares of the fund valued at
$5,000 or more, (vii) reinvestment of net redemption proceeds at net asset
value within six months of a redemption, (viii) AccountLink and PhoneLink
arrangements, (ix) exchanges of shares for shares of the same class of
certain other funds at net asset value, and (x) telephone redemption and
exchange privileges.
Shareholders may purchase shares through OppenheimerFunds AccountLink,
which links a shareholder account to an account at a bank or financial
institution and enables shareholders to send money electronically between
those accounts to perform a number of types of account transactions. This
includes the purchase of shares through the automated telephone system
(PhoneLink). Exchanges can also be made by telephone, or automatically
through PhoneLink. After AccountLink privileges have been established
with a bank account, shares may be purchased by telephone up to $100,000.
Shares of either Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share, however, shares of a
particular class may be exchanged only for shares of the same class in
other OppenheimerFunds. At present, not all of the OppenheimerFunds offer
the same class of shares. Shareholders of the funds may redeem their
shares by written request or by telephone request in an amount up to
$50,000 in any seven-day period. Shareholders may arrange to have share
redemption proceeds wired to a pre-designated account at a U.S. bank or
other financial institution that is an ACH member, through ("AccountLink
redemption"). There is no dollar limit on telephone redemption proceeds
sent to a bank account when an AccountLink has been established.
Shareholders may also redeem shares automatically by telephone by using
PhoneLink. Shareholders may also have the Transfer Agent send redemption
proceeds of $2,500 or more by Federal Funds wire to a designated
commercial bank, which is a member of the Federal Reserve wire system.
Shareholders of the funds have up to six months to reinvest redemption
proceeds of their Class A shares in Class A shares of the funds or other
OppenheimerFunds without paying a sales charge. Strategic Short-Term
Income Fund and Limited-Term Government Fund may redeem accounts valued
at less than $200 if the account has fallen below such stated amount for
reasons other than market value fluctuations. Both funds offer Automatic
Withdrawal and Automatic Exchange Plans under certain conditions.
Rights of Shareholders
Class A shares of Strategic Short-Term Income Fund and Class A shares of
Limited-Term Government Fund are each sold at an initial sales charge of
3.50% on purchases of less than $100,000. The reduced front-end sales
loads on larger purchases are the same for each fund. If Class A shares
of either fund are purchased as part of an investment of at least $1
million in shares of one or more OppenheimerFunds, there is no initial
sales charge, but if shares are sold within 18 months after the purchase,
there may be imposed a contingent deferred sales charge ("CDSC") which
will vary, depending on the amount invested. Class B shares of Strategic
Short-Term Income Fund, and Class B shares of Limited-Term Government Fund
are sold at net asset value per share, without an initial sales charge.
However, if Class B shares are sold within five years of purchase, there
is a CDSC, depending on how long the shares are owned. Both of the funds
have the same CDSC with respect to their Class B shares. The shares of
each such fund, including shareholders of each class, entitle the holder
to one vote per share on the election of trustees and all other matters
submitted to shareholders of the fund. Class A and Class B shares of
Strategic Short-Term Income Fund and the Class A and Class B shares of
Limited-Term Government Fund which Strategic Short-Term Income Fund
shareholders will receive in the Reorganization participate equally in the
fund's dividends and distributions and in the fund's net assets upon
liquidation, after taking into account the different expenses paid by each
class. Distributions and dividends for each class will be different and
Class B dividends and distributions will be lower than Class A dividends.
Class A and Class B shares of Strategic Short-Term Income Fund and, Class
A and Class B shares of Limited-Term Government Fund, when issued, are
fully paid and non-assessable. It is not contemplated that Strategic
Short-Term Income Fund or Limited-Term Government Fund will hold regular
annual meetings of shareholders. Under the Investment Company Act,
shareholders of Strategic Short-Term Income Fund do not have rights of
appraisal as a result of the transactions contemplated by the
Reorganization Agreement. However, they have the right at any time prior
to the consummation of such transaction to redeem their shares at net
asset value. Shareholders of both of the funds have the right, under
certain circumstances, to remove a Trustee and will be assisted in
communicating with other shareholders for such purpose.
Strategic Short-Term Income Fund was organized in 1991 as a Massachusetts
business trust and Limited-Term Government Fund was organized in 1986,
also as a Massachusetts business trust. Both of the funds are open-end,
diversified management investment companies, with an unlimited number of
authorized shares of beneficial interest. Each of the funds is governed
by the same Board of Trustees (the "Board") which has the power, without
shareholder approval, to establish and designate one or more series and
to divide unissued shares of Strategic Short-Term Income Fund or Limited-
Term Government Fund into two or more classes. With respect to Strategic
Short-Term Income Fund, the Board has done so, and it presently has two
classes of shares, Class A and Class B. The Board has established three
classes of shares with respect to Limited-Term Government Fund, Class A,
Class B and Class C. With respect to Strategic Short-Term Income Fund and
Limited-Term Government Fund, each class has its own dividends and
distributions and pays certain expenses which will 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
proportionately. Shares of a particular class vote together on matters
that affect that class. Most Amendments to the Declaration of Trust
require the approval of a "majority" (as defined in the Investment Company
Act) of a fund's shareholders. Under certain circumstances, shareholders
of the funds may be held personally liable as partners for the funds'
obligations, and under each Declaration of Trust such a shareholder is
entitled to indemnification rights by the funds; the risk of a shareholder
incurring any such loss is limited to the remote circumstances in which
the fund is unable to meet its obligations.
Management and Distribution Arrangements
The Manager, located at Two World Trade Center, New York, New York 10048-
0203, acts as the investment adviser for Strategic Short-Term Income Fund
and also acts as the investment adviser to Limited-Term Government Fund.
The terms and conditions of the investment advisory agreement for each
fund are substantially the same. The monthly management fee payable to
the Manager by each fund is set forth under "Synopsis - Investment
Advisory and Service Plan Fees." The 12b-1 Distribution and Service Plan
fees paid by Strategic Short-Term Income Fund with respect to Class A and
Class B shares and paid by Limited-Term Government Fund with respect to
its Class A and Class B shares of Limited-Term Government Fund are set
forth above under "Synopsis - Investment Advisory and Service Plan Fees."
Pursuant to each investment advisory agreement, the Manager supervises the
investment operations of the funds and the composition of their portfolios
and furnishes advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. Both
investment advisory agreements require the Manager to provide Strategic
Short-Term Income Fund and Limited-Term Government Fund with adequate
office space, facilities and equipment and to provide and supervise the
activities of all administrative and clerical personnel required to
provide effective administration for the funds, including the compilation
and maintenance of records with respect to its operations, the preparation
and filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of each fund.
For the fiscal year ended September 30, 1994, Strategic Short-Term Income
Fund's management fee for its Class A and Class B shares was .65% and
.65%, respectively. The management fee paid by Strategic Short-Term
Income Fund for the six months ended March 31, 1995 with respect to its
Class A shares and Class B shares were .65% and .65%, respectively. For
the fiscal year ended September 30, 1994, the management fee paid by
Limited-Term Government Fund to the Manager was $976,513. For the six
months ended March 31, 1995, the management fees paid by Limited-Term
Government Fund were $694,013. However, independently of the advisory
agreement with Strategic Short-Term Income Fund, the Manager has
undertaken that the total expenses of Strategic Short-Term Income Fund in
any fiscal year (including the management fee but exclusive of taxes,
interest, brokerage commissions, distribution plan payments and any
extraordinary non-recurring expenses, including litigation) shall not
exceed the most stringent state regulatory limitation on fund expenses
applicable to the funds. The Manager has made the same undertaking with
respect to Limited-Term Government Fund. At present, that limitation is
imposed by California and limits expenses (with specified exclusions) to
2.5% of the first $30 million of average annual net assets, 2% of the next
$70 million and 1.5% of average annual net assets in excess of $100
million. Until December 1, 1993, the Manager had also taken to assume
Strategic Short-Term Income Fund's expenses (other than extraordinary non-
recurring expenses) to enable the Fund to pay a dividend of $.3056 per
share per annum, with the limitation that the dividend could not exceed
Strategic Short-Term Income Fund's annual gross earnings per share. The
undertaking terminated December 1, 1993. Any assumption of either fund's
expense, would lower Strategic Short-Term Income Fund's or Limited-Term
Government Fund's overall expense ratio and increase its total return
during each period in which expenses are limited. The Manager reserves
the right to change or eliminate the expense limitations at any time and
there can be no assurance as to the duration of the expense limitation by
either fund. Since July 1, 1994, Limited-Term Government Fund has
attempted to pay dividends on Class A shares at a constant level. It is
not expected that Limited-Term Government Fund will maintain a fixed
dividend rate for Class B shares and there can be no assurance as to the
payment of any dividends or the realization of any capital gains by either
fund.
The Manager is controlled by OAC, a holding company owned in part by
senior management of the Manager and ultimately controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company that also advises pension plans and investment companies. The
Manager has operated as an investment company adviser since 1959. The
Manager and its affiliates currently advise investment companies with
combined net assets aggregating over $32 billion as of March 31, 1995,
with more than ___ million shareholder accounts. Oppenheimer Shareholder
Services, a division of the Manager, acts as transfer and shareholder
servicing agent on an at-cost basis for Strategic Short-Term Income Fund
and Limited-Term Government Fund and for certain other open-end funds
managed by the Manager and its affiliates.
The Distributor, under a General Distributor's Agreement for each of the
funds, acts as the principal underwriter in the continuous public offering
of Strategic Short-Term Income Fund's Class A and Class B shares, and
Limited-Term Government Fund's Class A, Class B and Class C shares.
During Strategic Short-Term Income Fund's fiscal years ended September 30,
1994, the aggregate sales charges on sales of Strategic Short-Term Income
Fund's Class A shares was $448,316, respectively, of which the Distributor
and an affiliated broker-dealer retained in the aggregate $154,348.
During Strategic Short-Term Income Fund's fiscal year ended September 30,
1994, the contingent deferred sales charges collected on Strategic Short-
Term Income Fund's Class B shares totalled $21,256. For the fiscal year
ended September 30, 1994, the aggregate amount of sales charges on sales
of Limited-Term Government Fund's Class A shares was $1,006,962, of which
$310,375 was retained by the Distributor and an affiliated broker-dealer.
Contingent deferred sales charges collected by the Distributor on the
redemption of Class B shares and for the fiscal year ended September 30,
1994 totaled $36,866.
Purchase of Additional Shares
Class A shares of Strategic Short-Term Income Fund and Class A shares of
Limited-Term Government Fund may be sold with an initial sales charge of
3.50% for purchases of less than $100,000. The sales charge of 3.50% is
reduced for purchases of either fund's Class A shares of $100,000 or more
or Class B shares of Strategic Short-Term Income Fund and Limited-Term
Government Fund are sold at net asset value without an initial sales
charge, however, if Class B shares of either fund are redeemed within five
years of the end of the calendar month of their purchase, a contingent
deferred sales charge may be deducted.
The contingent deferred sales charge on Class A shares of Limited-Term
Government Fund and Class B shares will only affect shareholders of
Strategic Short-Term Income Fund to the extent that they desire to make
additional purchases of shares of Limited-Term Government Fund in addition
to the shares which they will receive as a result of the Reorganization.
The Class A and Class B shares to be issued under the Reorganization
Agreement will be issued by Limited-Term Government Fund at net asset
value without a sales charge. Future dividends and capital gain
distributions of Limited-Term Government Fund, if any, may be reinvested
without sales charge. Any Strategic Short-Term Income Fund shareholder
who is entitled to a reduced sales charge on additional purchases by
reason of a Letter of Intent or Rights of Accumulation based upon holdings
of shares of Strategic Short-Term Income Fund will continue to be entitled
to a reduced sales charge on any future purchase of shares of Limited-Term
Government Fund.
METHOD OF CARRYING OUT THE REORGANIZATION
The consummation of the transactions contemplated by the Reorganization
Agreement is contingent upon the approval of the Reorganization by the
shareholders of Strategic Short-Term Income Fund and the receipt of the
opinions and certificates set forth in Sections 10 and 11 of the
Reorganization Agreement and the occurrence of the events described in
those Sections. Under the Reorganization Agreement, all the assets of
Strategic Short-Term Income Fund, excluding the Cash Reserve, will be
delivered to Limited-Term Government Fund in exchange for Class A and
Class B shares of Limited-Term Government Fund. The Cash Reserve to be
retained by Strategic Short-Term Income Fund will be sufficient in the
discretion of the Board for the payment of Strategic Short-Term Income
Fund's liabilities, and Strategic Short-Term Income Fund's expenses of
liquidation.
Assuming the shareholders of Strategic Short-Term Income Fund approve the
Reorganization, the actual exchange of assets is expected to take place
on September 8, 1995 or as soon thereafter as is practicable (the "Closing
Date") on the basis of net asset values as of the close of business on the
business day preceding the Closing Date (the "Valuation Date"). Under the
Reorganization Agreement, all redemptions of shares of Strategic Short-
Term Income Fund shall be permanently suspended on the Valuation Date;
only redemption requests received in proper form on or prior to the close
of business on that date shall be fulfilled by it; redemption requests
received by Strategic Short-Term Income Fund after that date will be
treated as requests for redemptions of Class A or Class B shares of
Limited-Term Government Fund to be distributed to the shareholders
requesting redemption. The exchange of assets for shares will be done on
the basis of the per share net asset value of the Class A and Class B
shares of Limited-Term Government Fund, and the value of the assets of
Strategic Short-Term Income Fund to be transferred as of the close of
business on the Valuation Date, in the manner used by Limited-Term
Government Fund in the valuation of assets. Limited-Term Government Fund
is not assuming any of the liabilities of Strategic Short-Term Income
Fund, except for portfolio securities purchased which have not settled and
outstanding shareholder redemption and dividend checks.
The net asset value of the shares transferred by Limited-Term Government
Fund to Strategic Short-Term Income Fund will be the same as the value of
the assets of the portfolio received by Limited-Term Government Fund. For
example, if, on the Valuation Date, Strategic Short-Term Income Fund were
to have securities with a market value of $95,000 and cash in the amount
of $10,000 (of which $5,000 was to be retained by it as the Cash Reserve),
the value of the assets which would be transferred to Limited-Term
Government Fund would be $100,000. If the net asset value per share of
Limited-Term Government Fund were $10 per share at the close of business
on the Valuation Date, the number of shares to be issued would be 10,000
($100,000 divided by $10). These 10,000 shares of Limited-Term Government Fund
would be distributed to the former shareholders of Strategic Short-Term
Income Fund. This example is given for illustration purposes only and
does not bear any relationship to the dollar amounts or shares expected
to be involved in the Reorganization.
After the Closing Date, Strategic Short-Term Income Fund will distribute
on a pro rata basis to its shareholders of record on the Valuation Date
the Class A and Class B shares of Limited-Term Government Fund received
by Strategic Short-Term Income Fund at the closing, in liquidation of the
outstanding shares of Strategic Short-Term Income Fund, and the
outstanding shares of Strategic Short-Term Income Fund will be cancelled.
To assist Strategic Short-Term Income Fund in this distribution, Limited-
Term Government Fund will, in accordance with a shareholder list supplied
by Strategic Short-Term Income Fund, cause its transfer agent to credit
and confirm an appropriate number of shares of Limited-Term Government
Fund to each shareholder of Strategic Short-Term Income Fund.
Certificates for Class A and Class B shares of Limited-Term Government
Fund will be issued upon written request of a former shareholder of
Strategic Short-Term Income Fund but only for whole shares with fractional
shares credited to the name of the shareholder on the books of Limited-
Term Government Fund. Former shareholders of Strategic Short-Term Income
Fund who wish certificates representing their shares of Limited-Term
Government Fund must, after receipt of their confirmations, make a written
request to OSS, P.O. Box 5270, Denver, Colorado 80217. Shareholders of
Strategic Short-Term Income Fund holding certificates representing their
shares will not be required to surrender their certificates to anyone in
connection with the Reorganization. After the Reorganization, however,
it will be necessary for such shareholders to surrender such certificates
in order to redeem, transfer, pledge or exchange any shares of Limited-
Term Government Fund.
Under the Reorganization Agreement, within one year after the Closing
Date, Strategic Short-Term Income Fund shall: (a) either pay or make
provision for all of its debts and taxes; and (b) either (i) transfer any
remaining amount of the Cash Reserve to Limited-Term Government Fund, if
such remaining amount is not material (as defined below) or (ii)
distribute such remaining amount to the shareholders of Strategic Short-
Term Income Fund who were such on the Valuation Date. Such remaining
amount shall be deemed to be material if the amount to be distributed,
after deducting the estimated expenses of the distribution, equals or
exceeds one cent per share of the number of Fund shares outstanding on the
Valuation Date. Within one year after the Closing Date, Strategic Short-
Term Income Fund will complete its liquidation.
Under the Reorganization Agreement, either Strategic Short-Term Income
Fund or Limited-Term Government Fund may abandon and terminate the
Reorganization Agreement without liability if the other party breaches any
material provision of the Reorganization Agreement or, if prior to the
closing, any legal, administrative or other proceeding shall be instituted
or threatened (i) seeking to restrain or otherwise prohibit the
transactions contemplated by the Reorganization Agreement and/or (ii)
asserting a material liability of either party, which proceeding or
liability has not been terminated or the threat thereto removed prior to
the Closing Date.
In the event that the Reorganization Agreement is not consummated for any
reason, the Board will consider and may submit to the shareholders other
alternatives.
MISCELLANEOUS
Additional Information
Financial Information
The Reorganization will be accounted for by the surviving fund in its
financial statements similar to a pooling. Further financial information
as to Strategic Short-Term Income Fund is contained in its current
Prospectus, which is available without charge from Oppenheimer Shareholder
Services, the Transfer Agent, P.O. Box 5270, Denver, Colorado 80217, and
is incorporated herein, and in its audited financial statements as of
September 30, 1994, and unaudited financial statements as of March 31,
1995, which are included in the Additional Statement. Financial
information for Limited-Term Government Fund is contained in its current
Prospectus accompanying this Proxy Statement and Prospectus and
incorporated herein, and in its audited financial statements as of
September 30, 1994 and unaudited financial statements as of March 31,
1995, which are included in the Additional Statement.
Public Information
Additional information about Strategic Short-Term Income Fund and Limited-
Term Government Fund is available, as applicable, in the following
documents which are incorporated herein by reference: (i) Limited-Term
Government Fund's Prospectus dated February 1, 1995, accompanying this
Proxy Statement and Prospectus and incorporated herein; (ii) Strategic
Short-Term Income Fund's Prospectus dated January 27, 1995, supplemented
June 14, 1995, which may be obtained without charge by writing to OSS,
P.O. Box 5270, Denver, Colorado 80217; (iii) Limited-Term Government
Fund's Annual Report as of September 30, 1994 and unaudited Semi-Annual
Report as of March 31, 1995, which may be obtained without charge by
writing to OSS at the address indicated above; and (iv) Strategic Short-
Term Income Fund's Annual Report as of September 30, 1994 and unaudited
Semi-Annual Report as of March 31, 1995, which may be obtained without
charge by writing to OSS at the address indicated above. All of the
foregoing documents may be obtained by calling the toll-free number on the
cover of this Proxy Statement and Prospectus.
Additional information about the following matters is contained in the
Additional Statement, which incorporates by reference the Limited-Term
Government Fund Statement of Additional Information dated February 1,
1995, supplemented April 20, 1995 and further supplemented May 15, 1995,
and Strategic Short-Term Income Fund's Prospectus dated January 27, 1995,
supplemented June 14, 1995, and Statement of Additional Information dated
January 27, 1995: the organization and operation of Limited-Term
Government Fund and Strategic Short-Term Income Fund; more information on
investment policies, practices and risks; information about Strategic
Short-Term Income Fund's and Limited-Term Government Fund's Boards of
Trustees and their responsibilities; a further description of the services
provided by Limited-Term Government Fund's and Strategic Short-Term Income
Fund's investment adviser, distributor, and transfer and shareholder
servicing agent; dividend policies; tax matters; an explanation of the
method of determining the offering price of the shares and/or contingent
deferred sales charges, as applicable of Class A, B and C shares of
Limited-Term Government Fund and Class A and Class B shares of Strategic
Short-Term Income Fund; purchase, redemption and exchange programs; the
different expenses paid by each class of shares; and distribution
arrangements.
Strategic Short-Term Income Fund and Limited-Term Government Fund are
subject to the informational requirements of the Securities Exchange Act
of 1934, as amended, and in accordance therewith, file reports and other
information with the SEC. Proxy material, reports and other information
about Strategic Short-Term Income Fund and Limited-Term Government Fund
which are of public record can be inspected and copied at public reference
facilities maintained by the SEC in Washington, D.C. and certain of its
regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer
Affairs and Information Services, SEC, Washington, D.C. 20549.
OTHER BUSINESS
Management of Strategic Short-Term Income Fund knows of no business other
than the matters specified above which will be presented at the Meeting.
Since matters not known at the time of the solicitation may come before
the Meeting, the proxy as solicited confers discretionary authority with
respect to such matters as properly come before the Meeting, including any
adjournment or adjournments thereof, and it is the intention of the
persons named as attorneys-in-fact in the proxy to vote this proxy in
accordance with their judgment on such matters.
By Order of the Board of Trustees
George C. Bowen, Secretary
July 17, 1995 295
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") dated as of
February 28, 1995 by and between Oppenheimer Strategic Short-Term Income
Fund (the "Fund"), a Massachusetts business trust, and Oppenheimer
Limited-Term Government Fund ("Limited-Term Government Fund"), a
Massachusetts business trust.
W I T N E S S E T H:
WHEREAS, the parties are each open-end investment companies of the
management type; and
WHEREAS, the parties hereto desire to provide for the reorganization
pursuant to Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"), of Strategic Short-Term Income Fund through the
acquisition by Limited-Term Government Fund of substantially all of the
assets of Strategic Short-Term Income Fund in exchange for the voting
shares of beneficial interest ("shares") of Class A and Class B shares of
Limited-Term Government Fund and the assumption by Limited-Term Government
Fund of certain liabilities of Strategic Short-Term Income Fund, which
Class A and Class B shares of Limited-Term Government Fund are thereafter
to be distributed by Strategic Short-Term Income Fund pro rata to its
shareholders in complete liquidation of Strategic Short-Term Income Fund
and complete cancellation of its shares;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. The parties hereto hereby adopt a Plan of Reorganization
pursuant to Section 368(a)(1) of the Code as follows: The reorganization
will be comprised of the acquisition by Limited-Term Government Fund of
substantially all of the properties and assets of Strategic Short-Term
Income Fund in exchange for Class A and Class B shares of Limited-Term
Government Fund and the assumption by Limited-Term Government Fund of
certain liabilities of Strategic Short-Term Income Fund, followed by the
distribution of such Class A and Class B shares of Limited-Term Government
Fund shares to the Class A and Class B shareholders of Strategic Short-
Term Income Fund in exchange for their Class A and Class B shares of
Strategic Short-Term Income Fund, all upon and subject to the terms of the
Agreement hereinafter set forth.
The share transfer books of Strategic Short-Term Income Fund
will be permanently closed at the close of business on the Valuation Date
(as hereinafter defined) and only redemption requests received in proper
form on or prior to the close of business on the Valuation Date shall be
fulfilled by Strategic Short-Term Income Fund; redemption requests
received by Strategic Short-Term Income Fund after that date shall be
treated as requests for the redemption of the shares of Limited-Term
Government Fund to be distributed to the shareholder in question as
provided in Section 5.
2. On the Closing Date (as hereinafter defined), all of the assets
of Strategic Short-Term Income Fund on that date, excluding a cash reserve
(the "Cash Reserve") to be retained by Strategic Short-Term Income Fund
sufficient in its discretion for the payment of the expenses of Strategic
Short-Term Income Fund's dissolution and its liabilities, but not in
excess of the amount contemplated by Section 10E, shall be delivered as
provided in Section 8 to Limited-Term Government Fund, in exchange for and
against delivery to Strategic Short-Term Income Fund on the Closing Date
of a number of shares of Limited-Term Government Fund having an aggregate
net asset value equal to the value of the assets of Strategic Short-Term
Income Fund so transferred and delivered.
3. The net asset value of Class A and Class B shares of Limited-
Term Government Fund and the value of the assets of Strategic Short-Term
Income Fund to be transferred shall in each case be determined as of the
close of business of the New York Stock Exchange on the Valuation Date.
The computation of the net asset value of the Class A and Class B shares
of Limited-Term Government Fund and the Class A and Class B shares of
Strategic Short-Term Income Fund shall be done in the manner used by
Limited-Term Government Fund and Strategic Short-Term Income Fund,
respectively, in the computation of such net asset value per share as set
forth in their respective prospectuses. The methods used by Limited-Term
Government Fund in such computation shall be applied to the valuation of
the assets of Strategic Short-Term Income Fund to be transferred to
Limited-Term Government Fund.
Strategic Short-Term Income Fund shall declare and pay,
immediately prior to the Valuation Date, a dividend or dividends which,
together with all previous such dividends, shall have the effect of
distributing to Strategic Short-Term Income Fund's shareholders all of
Strategic Short-Term Income Fund's investment company taxable income for
taxable years ending on or prior to the Closing Date (computed without
regard to any dividends paid) and all of its net capital gain, if any,
realized in taxable years ending on or prior to the Closing Date (after
reduction for any capital loss carry-forward).
4. The closing (the "Closing") shall be at the office of
Oppenheimer Management Corporation (the "Agent"), Two World Trade Center,
Suite 3400, New York, New York 10048, at 4:00 P.M. New York time on
September 8, 1995, or at such other time or place as the parties may
designate or as provided below (the "Closing Date"). The business day
preceding the Closing Date is herein referred to as the "Valuation Date."
In the event that on the Valuation Date either party has,
pursuant to the Investment Company Act of 1940, as amended (the "Act"),
or any rule, regulation or order thereunder, suspended the redemption of
its shares or postponed payment therefor, the Closing Date shall be
postponed until the first business day after the date when both parties
have ceased such suspension or postponement; provided, however, that if
such suspension shall continue for a period of 60 days beyond the
Valuation Date, then the other party to the Agreement shall be permitted
to terminate the Agreement without liability to either party for such
termination.
5. As soon as practicable after the closing, Strategic Short-Term
Income Fund shall distribute on a pro rata basis to the shareholders of
Strategic Short-Term Income Fund on the Valuation Date the Class A and
Class B shares of Limited-Term Government Fund received by Strategic
Short-Term Income Fund on the Closing Date in exchange for the assets of
Strategic Short-Term Income Fund in complete liquidation of Strategic
Short-Term Income Fund; for the purpose of the distribution by Strategic
Short-Term Income Fund of Class A and Class B shares of Limited-Term
Government Fund to its shareholders, Limited-Term Government Fund will
promptly cause its transfer agent to: (a) credit an appropriate number of
Class A and Class B shares of Limited-Term Government Fund on the books
of Limited-Term Government Fund to each Class A and Class B shareholder,
respectively of Strategic Short-Term Income Fund in accordance with a list
(the "Shareholder List") of its shareholders received from Strategic
Short-Term Income Fund; and (b) confirm an appropriate number of Class A
and Class B shares of Limited-Term Government Fund to each shareholder of
Strategic Short-Term Income Fund; certificates for Class A and Class B
shares of Limited-Term Government Fund will be issued upon written request
of a former shareholder of Strategic Short-Term Income Fund but only for
whole shares with fractional shares credited to the name of the
shareholder on the books of Limited-Term Government Fund.
The Shareholder List shall indicate, as of the close of business
on the Valuation Date, the name and address of each shareholder of
Strategic Short-Term Income Fund, indicating his or her share balance.
Strategic Short-Term Income Fund agrees to supply the Shareholder List to
Limited-Term Government Fund not later than the Closing Date.
Shareholders of Strategic Short-Term Income Fund holding certificates
representing their shares shall not be required to surrender their
certificates to anyone in connection with the reorganization. After the
Closing Date, however, it will be necessary for such shareholders to
surrender their certificates in order to redeem, transfer or pledge the
shares of Limited-Term Government Fund which they received.
6. Within one year after the Closing Date, Strategic Short-Term
Income Fund shall (a) either pay or make provision for payment of all of
its liabilities and taxes, and (b) either (i) transfer any remaining
amount of the Cash Reserve to Limited-Term Government Fund, if such
remaining amount (as reduced by the estimated cost of distributing it to
shareholders) is not material (as defined below) or (ii) distribute such
remaining amount to the shareholders of Strategic Short-Term Income Fund
on the Valuation Date. Such remaining amount shall be deemed to be
material if the amount to be distributed, after deduction of the estimated
expenses of the distribution, equals or exceeds one cent per share of
Strategic Short-Term Income Fund outstanding on the Valuation Date.
7. Prior to the Closing Date, there shall be coordination between
the parties as to their respective portfolios so that, after the closing,
Limited-Term Government Fund will be in compliance with all of its
investment policies and restrictions. At the Closing, Strategic Short-
Term Income Fund shall deliver to Limited-Term Government Fund two copies
of a list setting forth the securities then owned by Strategic Short-Term
Income Fund. Promptly after the Closing, Strategic Short-Term Income Fund
shall provide Limited-Term Government Fund a list setting forth the
respective federal income tax bases thereof.
8. Portfolio securities or written evidence acceptable to Limited-
Term Government Fund of record ownership thereof by The Depository Trust
Company or through the Federal Reserve Book Entry System or any other
depository approved by Strategic Short-Term Income Fund pursuant to Rule
17f-4 under the Act shall be endorsed and delivered, or transferred by
appropriate transfer or assignment documents, by Strategic Short-Term
Income Fund on the Closing Date to Limited-Term Government Fund, or at its
direction, to its custodian bank, in proper form for transfer in such
condition as to constitute good delivery thereof in accordance with the
custom of brokers and shall be accompanied by all necessary state transfer
stamps, if any. The cash delivered shall be in the form of certified or
bank cashiers' checks or by bank wire or intra-bank transfer payable to
the order of Limited-Term Government Fund for the account of Limited-Term
Government Fund. Shares of Limited-Term Government Fund representing the
number of shares of Limited-Term Government Fund being delivered against
the assets of Strategic Short-Term Income Fund, registered in the name of
Strategic Short-Term Income Fund, shall be transferred to Strategic Short-
Term Income Fund on the Closing Date. Such shares shall thereupon be
assigned by Strategic Short-Term Income Fund to its shareholders so that
the shares of Limited-Term Government Fund may be distributed as provided
in Section 5.
If, at the Closing Date, Strategic Short-Term Income Fund is
unable to make delivery under this Section 8 to Limited-Term Government
Fund of any of its portfolio securities or cash for the reason that any
of such securities purchased by Strategic Short-Term Income Fund, or the
cash proceeds of a sale of portfolio securities, prior to the Closing Date
have not yet been delivered to it or Strategic Short-Term Income Fund's
custodian, then the delivery requirements of this Section 8 with respect
to said undelivered securities or cash will be waived and Strategic Short-
Term Income Fund will deliver to Limited-Term Government Fund by or on the
Closing Date and with respect to said undelivered securities or cash
executed copies of an agreement or agreements of assignment in a form
reasonably satisfactory to Limited-Term Government Fund, together with
such other documents, including a due bill or due bills and brokers'
confirmation slips as may reasonably be required by Limited-Term
Government Fund.
9. Limited-Term Government Fund shall not assume the liabilities
(except for portfolio securities purchased which have not settled and for
shareholder redemption and dividend checks outstanding) of Strategic
Short-Term Income Fund, but Strategic Short-Term Income Fund will,
nevertheless, use its best efforts to discharge all known liabilities, so
far as may be possible, prior to the Closing Date. The cost of printing
and mailing the proxies and proxy statements will be borne by Strategic
Short-Term Income Fund. Strategic Short-Term Income Fund and Limited-Term
Government Fund will bear the cost of their respective tax opinion. Any
documents such as existing prospectuses or annual reports that are
included in that mailing will be a cost of the fund issuing the document.
Any other out-of-pocket expenses of Limited-Term Government Fund and
Strategic Short-Term Income Fund associated with this reorganization,
including legal, accounting and transfer agent expenses, will be borne by
Strategic Short-Term Income Fund and Limited-Term Government Fund,
respectively, in the amounts so incurred by each.
10. The obligations of Limited-Term Government Fund hereunder shall
be subject to the following conditions:
A. The Board of Trustees of the Trust shall have authorized
the execution of the Agreement, and the shareholders of Strategic Short-
Term Income Fund shall have approved the Agreement and the transactions
contemplated thereby, and Strategic Short-Term Income Fund shall have
furnished to Limited-Term Government Fund copies of resolutions to that
effect certified by the Secretary or an Assistant Secretary of Strategic
Short-Term Income Fund; such shareholder approval shall have been by the
affirmative vote of "a majority of the outstanding voting securities" (as
defined in the Act) of Strategic Short-Term Income Fund at a meeting for
which proxies have been solicited by the Proxy Statement and Prospectus
(as hereinafter defined).
B. Limited-Term Government Fund shall have received an opinion
dated the Closing Date of counsel to Strategic Short-Term Income Fund, to
the effect that (i) Strategic Short-Term Income Fund is a business trust
duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts with full powers to carry on its
business as then being conducted and to enter into and perform the
Agreement; and (ii) that all action necessary to make the Agreement,
according to its terms, valid, binding and enforceable on Strategic Short-
Term Income Fund and to authorize effectively the transactions
contemplated by the Agreement have been taken by Strategic Short-Term
Income Fund.
C. The representations and warranties of Strategic Short-Term
Income Fund contained herein shall be true and correct at and as of the
Closing Date, and Limited-Term Government Fund shall have been furnished
with a certificate of the President, or a Vice President, or the Secretary
or the Assistant Secretary or the Treasurer of Strategic Short-Term Income
Fund, dated the Closing Date, to that effect.
D. On the Closing Date, Strategic Short-Term Income Fund shall
have furnished to Limited-Term Government Fund a certificate of the
Treasurer or Assistant Treasurer of Strategic Short-Term Income Fund as
to the amount of the capital loss carry-over and net unrealized
appreciation or depreciation, if any, with respect to Strategic Short-Term
Income Fund as of the Closing Date.
E. The Cash Reserve shall not exceed 10% of the value of the
net assets, nor 30% in value of the gross assets, of Strategic Short-Term
Income Fund at the close of business on the Valuation Date.
F. A Registration Statement on Form N-14 filed by Strategic
Funds Trust under the Securities Act of 1933, as amended (the "1933 Act"),
containing a preliminary form of the Proxy Statement and Prospectus, shall
have become effective under the 1933 Act not later than June __, 1995.
G. On the Closing Date, Limited-Term Government Fund shall
have received a letter of Andrew J. Donohue or other senior executive
officer of Oppenheimer Management Corporation acceptable to Limited-Term
Government Fund, stating that nothing has come to his or her attention
which in his or her judgment would indicate that as of the Closing Date
there were any material actual or contingent liabilities of Strategic
Short-Term Income Fund arising out of litigation brought against Strategic
Short-Term Income Fund or claims asserted against it, or pending or to the
best of his or her knowledge threatened claims or litigation not reflected
in or apparent from the most recent audited financial statements and
footnotes thereto of Strategic Short-Term Income Fund delivered to
Limited-Term Government Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by
such person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
H. Limited-Term Government Fund shall have received an
opinion, dated the Closing Date, of Deloitte & Touche LLP, to the same
effect as the opinion contemplated by Section 11.E. of the Agreement.
I. Limited-Term Government Fund shall have received at the
closing all of the assets of Strategic Short-Term Income Fund to be
conveyed hereunder, which assets shall be free and clear of all liens,
encumbrances, security interests, restrictions and limitations whatsoever.
11. The obligations of Strategic Short-Term Income Fund hereunder
shall be subject to the following conditions:
A. The Board of Trustees of Limited-Term Government Fund shall
have authorized the execution of the Agreement, and the transactions
contemplated thereby, and Limited-Term Government Fund shall have
furnished to Strategic Short-Term Income Fund copies of resolutions to
that effect certified by the Secretary or an Assistant Secretary of
Limited-Term Government Fund.
B. Strategic Short-Term Income Fund's shareholders shall have
approved the Agreement and the transactions contemplated hereby, by an
affirmative vote of "a majority of the outstanding voting securities" (as
defined in the Act) of Strategic Short-Term Income Fund, and Strategic
Short-Term Income Fund shall have furnished Limited-Term Government Fund
copies of resolutions to that effect certified by the Secretary or an
Assistant Secretary of Strategic Short-Term Income Fund.
C. Strategic Short-Term Income Fund shall have received an
opinion dated the Closing Date of counsel to Limited-Term Government Fund,
to the effect that (i) Limited-Term Government Fund is a business trust
duly organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts with full powers to carry on its
business as then being conducted and to enter into and perform the
Agreement; (ii) all action necessary to make the Agreement, according to
its terms, valid, binding and enforceable upon Limited-Term Government
Fund and to authorize effectively the transactions contemplated by the
Agreement have been taken by Limited-Term Government Fund, and (iii) the
shares of Limited-Term Government Fund to be issued hereunder are duly
authorized and when issued will be validly issued, fully-paid and non-
assessable, except as set forth in Limited-Term Government Fund's then
current Prospectus and Statement of Additional Information.
D. The representations and warranties of Limited-Term Government
Fund contained herein shall be true and correct at and as of the Closing
Date, and Strategic Short-Term Income Fund shall have been furnished with
a certificate of the President, a Vice President or the Secretary or an
Assistant Secretary or the Treasurer of Limited-Term Government Fund to
that effect dated the Closing Date.
E. Strategic Short-Term Income Fund shall have received an
opinion of Deloitte & Touche LLP to the effect that the Federal tax
consequences of the transaction, if carried out in the manner outlined in
this Plan of Reorganization and in accordance with (i) Strategic Short-
Term Income Fund's representation that there is no plan or intention by
any Fund shareholder who owns 5% or more of Strategic Short-Term Income
Fund's outstanding shares, and, to Strategic Short-Term Income Fund's best
knowledge, there is no plan or intention on the part of the remaining Fund
shareholders, to redeem, sell, exchange or otherwise dispose of a number
of Limited-Term Government Fund shares received in the transaction that
would reduce Strategic Short-Term Income Fund shareholders' ownership of
Limited-Term Government Fund shares to a number of shares having a value,
as of the Closing Date, of less than 50% of the value of all of the
formerly outstanding Fund shares as of the same date, and (ii) the
representation by each of Strategic Short-Term Income Fund and Limited-
Term Government Fund that, as of the Closing Date, Strategic Short-Term
Income Fund and Limited-Term Government Fund will qualify as regulated
investment companies or will meet the diversification test of Section
368(a)(2)(F)(ii) of the Code, will be as follows:
1. The transactions contemplated by the Agreement will
qualify as a tax-free "reorganization" within the meaning of Section
368(a)(1) of the Code, and under the regulations promulgated thereunder.
2. Strategic Short-Term Income Fund and Limited-Term
Government Fund will each qualify as a "party to a reorganization" within
the meaning of Section 368(b)(2) of the Code.
3. No gain or loss will be recognized by the shareholders
of Strategic Short-Term Income Fund upon the distribution of shares of
beneficial interest in Limited-Term Government Fund to the shareholders
of Strategic Short-Term Income Fund pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will
be recognized by Strategic Short-Term Income Fund by reason of the
transfer of substantially all its assets in exchange for shares of
Limited-Term Government Fund.
5. Under Section 1032 of the Code no gain or loss will
be recognized by Limited-Term Government Fund by reason of the transfer
of substantially all Strategic Short-Term Income Fund's assets in exchange
for Class A and Class B shares of Limited-Term Government Fund and
Limited-Term Government Fund's assumption of certain liabilities of
Strategic Short-Term Income Fund.
6. The shareholders of Strategic Short-Term Income Fund
will have the same tax basis and holding period for the Class A or Class
B shares of beneficial interest in Limited-Term Government Fund that they
receive as they had for Strategic Short-Term Income Fund shares that they
previously held, pursuant to Section 358(a) and 1223(1), respectively, of
the Code.
7. The securities transferred by Strategic Short-Term
Income Fund to Limited-Term Government Fund will have the same tax basis
and holding period in the hands of Limited-Term Government Fund as they
had for Strategic Short-Term Income Fund, pursuant to Section 362(b) and
1223(1), respectively, of the Code.
F. The Cash Reserve shall not exceed 10% of the value of the
net assets, nor 30% in value of the gross assets, of Strategic Short-Term
Income Fund at the close of business on the Valuation Date.
G. A Registration Statement on Form N-14 filed by Oppenheimer
Limited-Term Government Fund under the 1933 Act, containing a preliminary
form of the Proxy Statement and Prospectus, shall have become effective
under the 1933 Act not later than July 17, 1995.
H. On the Closing Date, Strategic Short-Term Income Fund shall
have received a letter of Andrew J. Donohue or other senior executive
officer of Oppenheimer Management Corporation acceptable to Strategic
Short-Term Income Fund, stating that nothing has come to his or her
attention which in his or her judgment would indicate that as of the
Closing Date there were any material actual or contingent liabilities of
Limited-Term Government Fund arising out of litigation brought against
Limited-Term Government Fund or claims asserted against it, or pending or,
to the best of his or her knowledge, threatened claims or litigation not
reflected in or apparent by the most recent audited financial statements
and footnotes thereto of Limited-Term Government Fund delivered to
Strategic Short-Term Income Fund. Such letter may also include such
additional statements relating to the scope of the review conducted by
such person and his or her responsibilities and liabilities as are not
unreasonable under the circumstances.
I. Strategic Short-Term Income Fund shall acknowledge receipt
of the shares of Limited-Term Government Fund.
12. Strategic Short-Term Income Fund hereby represents and warrants
that:
A. The financial statements of Strategic Short-Term Income
Fund as at September 30, 1994 (audited) and March 31, 1995 (unaudited)
heretofore furnished to Limited-Term Government Fund, present fairly the
financial position, results of operations, and changes in net assets of
Strategic Short-Term Income Fund as of that date, in conformity with
generally accepted accounting principles applied on a basis consistent
with the preceding year; and that from September 30, 1994 through the date
hereof there have not been, and through the Closing Date there will not
be, any material adverse change in the business or financial condition of
Strategic Short-Term Income Fund, it being agreed that a decrease in the
size of Strategic Short-Term Income Fund due to a diminution in the value
of its portfolio and/or redemption of its shares shall not be considered
a material adverse change;
B. Contingent upon approval of the Agreement and the
transactions contemplated thereby by Strategic Short-Term Income Fund's
shareholders, Strategic Short-Term Income Fund has authority to transfer
all of the assets of Strategic Short-Term Income Fund to be conveyed
hereunder free and clear of all liens, encumbrances, security interests,
restrictions and limitations whatsoever;
C. The Prospectus, as amended and supplemented, contained in
Strategic Short-Term Income Fund's Registration Statement under the 1933
Act, as amended, is true, correct and complete, conforms to the
requirements of the 1933 Act and does not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Registration Statement, as amended, was, as of the date of the filing of
the last Post-Effective Amendment, true, correct and complete, conformed
to the requirements of the 1933 Act and did not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading;
D. There is no material contingent liability of Strategic
Short-Term Income Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Strategic Short-Term Income Fund, threatened against Strategic Short-Term
Income Fund, not reflected in such Prospectus;
E. There are no material contracts outstanding to which
Strategic Short-Term Income Fund is a party other than those ordinary in
the conduct of its business;
F. Strategic Short-Term Income Fund is a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; and has all necessary and material Federal
and state authorizations to own all of its assets and to carry on its
business as now being conducted; and Strategic Short-Term Income Fund is
duly registered under the Act and such registration has not been rescinded
or revoked and is in full force and effect;
G. All Federal and other tax returns and reports of Strategic
Short-Term Income Fund required by law to be filed have been filed, and
all Federal and other taxes shown due on said returns and reports have
been paid or provision shall have been made for the payment thereof and
to the best of the knowledge of Strategic Short-Term Income Fund no such
return is currently under audit and no assessment has been asserted with
respect to such returns and to the extent such tax returns with respect
to the taxable year of Strategic Short-Term Income Fund ended September
30, 1994 have not been filed, such returns will be filed when required and
the amount of tax shown as due thereon shall be paid when due; and
H. Strategic Short-Term Income Fund has elected to be treated
as a regulated investment company and, for each fiscal year of its
operations, Strategic Short-Term Income Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company and Strategic Short-Term Income Fund intends to meet
such requirements with respect to its current taxable year.
13. Limited-Term Government Fund hereby represents and warrants
that:
A. The financial statements of Limited-Term Government Fund
as at September 30, 1994 (audited) and March 31, 1995 (unaudited)
heretofore furnished to Strategic Short-Term Income Fund, present fairly
the financial position, results of operations, and changes in net assets
of Limited-Term Government Fund, as of that date, in conformity with
generally accepted accounting principles applied on a basis consistent
with the preceding year; and that from September 30, 1993 through the date
hereof there have not been, and through the Closing Date there will not
be, any material adverse changes in the business or financial condition
of Limited-Term Government Fund, it being understood that a decrease in
the size of Limited-Term Government Fund due to a diminution in the value
of its portfolio and/or redemption of its shares shall not be considered
a material or adverse change;
B. The Prospectus, as amended and supplemented, contained in
Oppenheimer Strategic Funds Trust's Registration Statement under the 1933
Act, is true, correct and complete, conforms to the requirements of the
1933 Act and does not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Registration
Statement, as amended, was, as of the date of the filing of the last Post-
Effective Amendment, true, correct and complete, conformed to the
requirements of the 1933 Act and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
C. There is no material contingent liability of Limited-Term
Government Fund and no material claim and no material legal,
administrative or other proceedings pending or, to the knowledge of
Limited-Term Government Fund, threatened against Limited-Term Government
Fund, not reflected in such Prospectus;
D. There are no material contracts outstanding to which
Limited-Term Government Fund is a party other than those ordinary in the
conduct of its business;
E. Limited-Term Government Fund is a business trust duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts; has all necessary and material Federal and
state authorizations to own all its properties and assets and to carry on
its business as now being conducted; the shares of Limited-Term Government
Fund which it issues to Strategic Short-Term Income Fund pursuant to the
Agreement will be duly authorized, validly issued, fully-paid and non-
assessable, except as otherwise set forth in Limited-Term Government
Fund's Registration Statement; and will conform to the description thereof
contained in Limited-Term Government Fund's Registration Statement, will
be duly registered under the 1933 Act and in the states where registration
is required; and Limited-Term Government Fund is duly registered under the
Act and such registration has not been revoked or rescinded and is in full
force and effect;
F. All Federal and other tax returns and reports of Limited-
Term Government Fund required by law to be filed have been filed, and all
Federal and other taxes shown due on said returns and reports have been
paid or provision shall have been made for the payment thereof and to the
best of the knowledge of Limited-Term Government Fund no such return is
currently under audit and no assessment has been asserted with respect to
such returns and to the extent such tax returns with respect to the
taxable year of Limited-Term Government Fund ended September 30, 1993 have
not been filed, such returns will be filed when required and the amount
of tax shown as due thereon shall be paid when due;
G. Limited-Term Government Fund has elected to be treated as
a regulated investment company and, for each fiscal year of its
operations, Limited-Term Government Fund has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company and Limited-Term Government Fund intends to meet such
requirements with respect to its current taxable year;
H. Limited-Term Government Fund has no plan or intention (i)
to dispose of any of the assets transferred by Strategic Short-Term Income
Fund, other than in the ordinary course of business, or (ii) to redeem or
reacquire any of the shares issued by it in the reorganization other than
pursuant to valid requests of shareholders; and
I. After consummation of the transactions contemplated by the
Agreement, Limited-Term Government Fund intends to operate its business
in a substantially unchanged manner.
14. Each party hereby represents to the other that no broker or
finder has been employed by it with respect to the Agreement or the
transactions contemplated hereby. Each party also represents and warrants
to the other that the information concerning it in the Proxy Statement and
Prospectus will not as of its date contain any untrue statement of a
material fact or omit to state a fact necessary to make the statements
concerning it therein not misleading and that the financial statements
concerning it will present the information shown fairly in accordance with
generally accepted accounting principles applied on a basis consistent
with the preceding year. Each party also represents and warrants to the
other that the Agreement is valid, binding and enforceable in accordance
with its terms and that the execution, delivery and performance of the
Agreement will not result in any violation of, or be in conflict with, any
provision of any charter, by-laws, contract, agreement, judgment, decree
or order to which it is subject or to which it is a party. Limited-Term
Government Fund hereby represents to and covenants with Strategic Short-
Term Income Fund that, if the reorganization becomes effective, Limited-
Term Government Fund will treat each shareholder of Strategic Short-Term
Income Fund who received any of Limited-Term Government Fund's shares as
a result of the reorganization as having made the minimum initial purchase
of shares of Limited-Term Government Fund received by such shareholder for
the purpose of making additional investments in shares of Limited-Term
Government Fund, regardless of the value of the shares of Limited-Term
Government Fund received.
15. Limited-Term Government Fund agrees that it will prepare and
file a Registration Statement on Form N-14 under the 1933 Act which shall
contain a preliminary form of proxy statement and prospectus contemplated
by Rule 145 under the 1933 Act. The final form of such proxy statement
and prospectus is referred to in the Agreement as the "Proxy Statement and
Prospectus." Each party agrees that it will use its best efforts to have
such Registration Statement declared effective and to supply such
information concerning itself for inclusion in the Proxy Statement and
Prospectus as may be necessary or desirable in this connection. Limited-
Term Government Fund covenants and agrees to deregister as an investment
company under the Investment Company Act of 1940, as amended, as soon as
practicable and, thereafter, to cause the cancellation of its outstanding
shares.
16. The obligations of the parties under the Agreement shall be
subject to the right of either party to abandon and terminate the
Agreement without liability if the other party breaches any material
provision of the Agreement or if any material legal, administrative or
other proceeding shall be instituted or threatened between the date of the
Agreement and the Closing Date (i) seeking to restrain or otherwise
prohibit the transactions contemplated hereby and/or (ii) asserting a
material liability of either party, which proceeding has not been
terminated or the threat thereof removed prior to the Closing Date.
17. The Agreement may be executed in several counterparts, each of
which shall be deemed an original, but all taken together shall constitute
one Agreement. The rights and obligations of each party pursuant to the
Agreement shall not be assignable.
18. All prior or contemporaneous agreements and representations are
merged into the Agreement, which constitutes the entire contract between
the parties hereto. No amendment or modification hereof shall be of any
force and effect unless in writing and signed by the parties and no party
shall be deemed to have waived any provision herein for its benefit unless
it executes a written acknowledgement of such waiver.
19. Strategic Short-Term Income Fund understands that the
obligations of Limited-Term Government Fund under the Agreement are not
binding upon any Trustee or shareholder of Limited-Term Government Fund
personally, but bind only Limited-Term Government Fund and Limited-Term
Government Fund's property. Strategic Short-Term Income Fund represents
that it has notice of the provisions of the Declaration of Trust of
Limited-Term Government Fund disclaiming shareholder and Trustee liability
for acts or obligations of Limited-Term Government Fund.
20. Limited-Term Government Fund understands that the obligations
of Strategic Short-Term Income Fund under the Agreement are not binding
upon any Trustee or shareholder of Strategic Short-Term Income Fund
personally, but bind only Strategic Short-Term Income Fund and Strategic
Short-Term Income Fund's property. Limited-Term Government Fund
represents that it has notice of the provisions of the Declaration of
Trust of Strategic Short-Term Income Fund disclaiming shareholder and
Trustee liability for acts or obligations of Strategic Short-Term Income
Fund.
IN WITNESS WHEREOF, each of the parties has caused the Agreement to
be executed and attested by its officers thereunto duly authorized on the
date first set forth above.
Attest: OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
__________________________ By:__________________________________
Robert G. Zack George C. Bowen
Assistant Secretary Treasurer
Attest: OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
__________________________ By:_________________________________
Robert G. Zack Andrew J. Donohue
Assistant Secretary Vice President
<PAGE>
Preliminary Copy - For the Information of the Securities and Exchange
Commission Only
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
PROXY FOR SPECIAL SHAREHOLDERS MEETING
TO BE HELD AUGUST 30, 1995
The undersigned shareholder of Oppenheimer Strategic Short-Term Income
Fund (the "Fund"), does hereby appoint George C. Bowen, Andrew J. Donohue,
Robert Bishop and Scott Farrar, and each of them, as attorneys-in-fact and
proxies of the undersigned, with full power of substitution, to attend the
Special Meeting of Shareholders of Strategic Short-Term Income Fund to be
held on August 30, 1995, at 3410 South Galena Street, Denver, Colorado at
10:00 A.M., Denver time, and at all adjournments thereof, and to vote the
shares held in the name of the undersigned on the record date for said
meeting on the Proposal specified on the reverse side. Said attorneys-in-
fact shall vote in accordance with their best judgment as to any other
matter.
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, WHO RECOMMENDS A VOTE
FOR THE PROPOSAL ON THE REVERSE SIDE. THE SHARES REPRESENTED HEREBY WILL
BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO CHOICE IS
INDICATED.
Please mark your proxy, date and sign it on the reverse side and return
it promptly in the accompanying envelope, which requires no postage if
mailed in the United States.
The Proposal:
To approve an Agreement and Plan of Reorganization between Strategic
Short-Term Income Fund and Oppenheimer Limited-Term Government Fund
("Limited-Term Government Fund"), and the transactions contemplated
thereby, including the transfer of substantially all the assets of
Strategic Short-Term Income Fund, in exchange for Class A and Class
B shares of Limited-Term Government Fund. The distribution of such
shares to the Class A and Class B shareholders of Strategic Short-
Term Income Fund in complete liquidation of Strategic Short-Term
Income Fund, the de-registration of Strategic Short-Term Income Fund
as an investment company under the Investment Company Act of 1940,
as amended, and the cancellation of the outstanding shares of
Strategic Short-Term Income Fund (the "Proposal").
FOR____ AGAINST____ ABSTAIN____
Dated: ___________________________, 1995
(Month) (Day)
___________________________________
Signature(s)
___________________________________
Signature(s)
Please read both sides of this ballot.
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEAR HEREON. When signing
as custodian, attorney, executor, administrator, trustee, etc., please
give your full title as such. All joint owners should sign this proxy.
If the account is registered in the name of a corporation, partnership or
other entity, a duly authorized individual must sign on its behalf and
give his or her title.
295
<PAGE>
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
PART B
STATEMENT OF ADDITIONAL INFORMATION
July __, 1995
___________________________________
This Statement of Additional Information of Oppenheimer Limited-Term
Government Fund consists of this cover page and the following documents:
1. Prospectus of Oppenheimer Limited-Term Government Fund dated February
1, 1995, supplemented April 20, 1995, and further supplemented May 15,
1995, filed herewith and is incorporated herein by reference.
2. Statement of Additional Information of Oppenheimer Limited-Term
Government Fund dated February 1, 1995, filed herewith and is incorporated
herein by reference.
3. Prospectus of Oppenheimer Strategic Short-Term Income Fund dated
January 27, 1995, supplemented June 14, 1995, filed herewith and is
incorporated herein by reference.
4. Statement of Additional Information of Oppenheimer Strategic Short-Term
Income Fund dated January 27, 1995, filed herewith and is incorporated
herein by reference.
5. Limited-Term Government Fund's Annual Report as of September 30, 1994,
filed herewith and is incorporated herein by reference.
6. Limited-Term Government Fund's Semi-Annual Report as of March 31, 1995,
filed herewith and is incorporated herein by reference.
7. Strategic Short-Term Income Fund's Annual Report as of September 30,
1994, filed herewith and is incorporated herein by reference.
8. Strategic Short-Term Income Fund's Semi-Annual Report (unaudited) as
of March 31, 1995, filed herewith and is incorporated herein by reference.
This Statement of Additional Information is not a Prospectus. This
Statement of Additional Information should be read in conjunction with the
Proxy Statement and Prospectus, which may be obtained by written request
to Oppenheimer Shareholder Services ("OSS"), P.O. Box 5270, Denver,
Colorado 80217, or by calling OSS at the toll-free number shown above.
<PAGE>
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
Supplement dated June 14, 1995
to the Prospectus dated January 27, 1995
The Prospectus is amended as follows:
1. The following paragraphs are added at the end of "How the Fund is
Managed" on page 17:
The Board of Trustees of Oppenheimer Strategic Short-Term
Income Fund (referred to as "Strategic Short-Term Income
Fund" or the "Fund") has determined that it is in the best
interest of the Fund's shareholders that the Fund
reorganize with and into Oppenheimer Limited-Term
Government Fund ("Limited-Term Government Fund"). The
Board unanimously approved the terms of an agreement and
plan of reorganization to be entered into between these
funds (the "reorganization plan") and the transactions
contemplated (the transactions are referred to as the
"reorganization"). The Board further determined that the
reorganization should be submitted to the Fund's
shareholders for approval, and recommended that
shareholders approve the reorganization.
Pursuant to the reorganization plan, (i) substantially all
of the assets of the Fund would be exchanged for Class A
and Class B shares of Limited-Term Government Fund, (ii)
these shares of Limited-Term Government Fund would be
distributed to the shareholders of the Fund, (iii)
Strategic Short-Term Income Fund would be liquidated, and
(iv) the outstanding shares of Strategic Short-Term Income
Fund would be cancelled. It is expected that the
reorganization will be tax-free, pursuant to Section
368(a)(1) of the Internal Revenue Code of 1986, as
amended, and the Fund will request an opinion of tax
counsel to that effect.
A meeting of the shareholders of Strategic Short-Term
Income Fund is expected to be held on or about August 30,
1995 to vote on the reorganization. Approval of the
reorganization requires the affirmative vote of a majority
of the outstanding shares of the Fund (the term "majority"
is defined in the Investment Company Act as a special
majority. It is also explained in the Statement of
Additional Information). There is no assurance that
Strategic Short-Term Income Fund's shareholders will
approve the reorganization. Details about the proposed
reorganization will be contained in a proxy statement and
other soliciting materials sent to Strategic Short-Term
Income Fund's shareholders of record on June 2, 1995.
Persons who become shareholders of the Fund after the
record date for the shareholder meeting will not be
entitled to vote on the reorganization.
June 14, 1995
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
Prospectus dated January 27, 1995
Oppenheimer Strategic Short-Term Income Fund (the Fund") is a mutual
fund with the investment objective of seeking as high a level of current
income, consistent with stability of principal, as is available from a
portfolio of investment grade debt securities having a remaining maturity
of not more than three years. To seek its objective, the Fund normally
invests primarily in: (i) investment grade domestic bonds, (ii) U.S.
government securities, (iii) money market instruments and (iv) foreign
corporate and government debt securities denominated in U.S. dollars and
selected foreign currencies. The Fund may also use certain hedging
instruments to try to reduce the risks of market fluctuations that affect
the value of the securities the Fund holds. The securities the Fund
invests in are described more completely in "Investment Objective and
Policies." That section of the Prospectus also explains some of the risks
of those investments.
The Fund offers two classes of shares: (1) Class A shares, which are
sold at a public offering price that includes a front-end sales charge,
and (2) Class B shares, which are sold without a front-end sales charge,
although you may pay a sales charge when you redeem your shares, depending
on how long you hold them. Class B shares are also subject to an annual
"asset-based sales charge." Each class of shares bears different
expenses. In deciding which class of shares to buy, you should consider
how much you plan to purchase, how long you plan to keep your shares, and
other factors discussed in "How to Buy Shares" starting on page __.
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 January 27, 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 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, and 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
Page
ABOUT THE FUND
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objective and Policies
How the Fund is Managed
Performance of the Fund
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reimbursement Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
CheckWriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix: Description of Ratings
<PAGE>
ABOUT THE FUND
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 last 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," from
pages 18 through 29, for an explanation of how and when these charges
apply.
Class A Shares Class B Shares
-------------- --------------
Maximum Sales Charge on Purchases
(as a % of offering price) 3.50% None
Sales Charge on Reinvested Dividends None None
Deferred Sales Charge
(as a % of the lower of the original
purchase price or redemption proceeds) None(1) 4%(2)
Exchange Fee $5.00(3) $5.00(3)
(1) If you invest more than $1 million in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
(2) A contingent deferred sales charge is imposed on the proceeds of
Class B shares redeemed within five years of the end of the calendar month
of their purchase, subject to certain exceptions. That charge is imposed
as a percentage of net asset value at the time of purchase or redemption,
whichever is less, and declines from 4.0% in the first year that shares
are held, to 3.0% in the second year, 2.0% in the third and fourth years,
1.0% in the fifth year and eliminated thereafter. There is no charge on
Class B shares held for more than five years. See "How To Buy Shares -
Class B Contingent Deferred Sales Charge."
(3) Fee is waived for automated exchanges, as described in "How to
Exchange 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 last fiscal year. These
amounts are shown as a percentage of the 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 Service Plan Fees. For Class B shares, the 12b-1 Fees
are the Distribution and Service Plan Fees. The service fee is a maximum
of 0.25% of average annual net assets of the class and the asset-based
sales charge is 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 value of the Fund's assets represented by
each class of shares.
Class A Shares Class B Shares
-------------- --------------
Management Fees .65% .65%
12b-1 Distribution Plan Fees .22% 1.00%
Other Expenses .30% .32%
Total Fund Operating Expenses 1.17% 1.97%
- 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 Annual Fund Operating
Expenses 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 $ 47 $ 71 $ 97 $ 172
Class B Shares $ 60 $ 82 $ 116 $ 190
If you did not redeem your investment, it would incur the following
expenses:
Class A Shares $ 47 $ 71 $ 97 $ 172
Class B Shares $ 20 $ 62 $ 106 $ 190
* The Class B expenses in years 7 through 10 are based on the Class A
expenses shown above, because the Fund automatically converts your Class
B shares into Class A shares after 6 years. Long term Class B
shareholders could pay the economic equivalent of more than the maximum
front-end sales charge allowed under applicable regulations, because of
the effect of the asset-based sales charge and contingent deferred sales
charge. The automatic conversion of Class B shares to Class A Shares is
designed to minimize the likelihood that this will occur. Please refer
to "How to Buy Shares - Class B 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 as high a level of current income consistent with the
stability of principal, as is available from a portfolio of investment
grade debt securities having a remaining maturity of not more than three
years.
- What Does the Fund Invest In? To seek its objective, the Fund
primarily invests in investment grade domestic bonds, U.S. government
securities, money market instruments, and foreign corporate and government
debt securities denominated in U.S. dollars and selected foreign
currencies. The Fund may also write covered calls and use derivative
investments to enhance income, and may use hedging instruments and some
derivative investments to try to manage investment risks. These
investments are more fully explained in "Investment Objective and
Policies," starting on page ___.
- Who Manages the Fund? The Fund's investment advisor is
Oppenheimer Management Corporation, which (including a subsidiary) advises
investment company portfolios having over $28 billion in assets. The
Fund's portfolio managers, who are primarily responsible for the selection
of the Fund's securities, are Arthur P. Steinmetz and David Negri. The
Manager is paid an advisory fee by the Fund, based on its assets. The
Fund's Board of Trustees, elected by shareholders, oversees the investment
advisor and the portfolio managers. Please refer to "How the Fund is
Managed," starting on page ___ for more information about the Manager and
its fees.
- How Risky is the Fund? All investments carry risks to some
degree. The Fund's investments in bonds and other fixed-income securities
are subject to changes in their value from a number of factors such as
changes in general bond market movements, the change in value of
particular bonds because of an event affecting the issuer, or changes in
interest rates. These changes affect the value of the Fund's investments
and its price per share. In the OppenheimerFunds spectrum, the Fund is
generally more conservative than high yield bond funds, but more
aggressive than money market funds. While the Manager tries to reduce
risks by diversifying investments, by carefully researching securities
before they are purchased for the portfolio, 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 ___ 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"
on page ___ for more details.
- Will I Pay a Sales Charge to Buy Shares? The Fund has two classes
of shares. Class A shares are offered with a front-end sales charge,
starting at 3.50%, and reduced for larger purchases. Class B shares are
offered without a front-end sales charge, but may be subject to a
contingent deferred sales charge (starting at 4% and declining as shares
are held longer) if redeemed within 5 years of purchase. There is also
an annual asset-based sales charge on Class B shares. Please review "How
To Buy Shares" starting on page ___ 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. Please refer to "How To Sell Shares" on page ___.
- How Has the Fund Performed? The Fund measures its performance by
quoting its yield, average annual total return and cumulative total
return, which measure historical performance. Those yields and returns
can be compared to the yields and 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 broad
market indices, which we have done on page ___. 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. This information 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.
<PAGE>
Investment Objective and Policies
Objective. The Fund's investment objective is to seek as high a level of
current income, consistent with stability of principal, as is available
from a portfolio of investment grade debt securities having a remaining
maturity of not more than three years.
Investment Policies and Strategies. The Fund seeks its objective
principally by investing in: (i) domestic bonds, notes and debentures of
investment grade, that is, rated "Baa" or better by Moody's Investors
Service, Inc. ("Moody's") or "BBB" or better by Standard & Poor's
Corporation ("Standard & Poor's") or, if unrated, determined by the Fund's
investment adviser, Oppenheimer Management Corporation (the "Manager"),
to be comparable to securities meeting those rating requirements; (ii)
U.S. Government Securities; (iii) money market instruments and (iv)
investment grade foreign corporate and government debt securities
denominated in U.S. dollars or in selected foreign currencies.
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in investment grade debt securities in the respective
sectors described above. The remaining assets may be invested in other
securities, including domestic and foreign equity securities (described
below).
The Manager will not rely solely on the ratings assigned by rating
services and may invest, without limitation, in unrated securities that
offer, in the opinion of the Manager, comparable yields and risks as those
rated securities in which the Fund may invest. The Fund is not obligated
to dispose of securities that fall below the above-stated ratings
subsequent to purchase. However, no more than 35% of the Fund's total
assets will be invested in bonds which have been downgraded below
investment grade. If the ratings of securities held by the Fund fall
below those listed above, the Manager will determine what action, if any,
is appropriate.
In addition to credit risks, described under "Lower-Rated Securities
and their Special Risks" below, debt securities are subject to changes in
their value due to changes in prevailing interest rates. During periods
of falling interest rates, the values of outstanding fixed-income
securities generally rise. Conversely, during periods of rising interest
rates, the value of such securities generally decline. The magnitude of
these fluctuations will generally be greater for securities with longer
maturities.
Under normal circumstances, the Fund will maintain a dollar-weighted
average portfolio maturity of not more than three years. In calculating
maturity, the Fund will consider various factors, including anticipated
payments of principal. The Fund may hold securities with maturities of
more than three years if, under normal circumstances, it maintains a
dollar-weighted average maturity of not more than three years. See
"Investment Objective and Policies" in the Statement of Additional
Information for more information on the Fund's calculation of portfolio
maturity.
In the future, the Fund may invest in instruments that are not
presently contemplated but which may be developed, if such investments are
consistent with the Fund's investment objective and their use is
disclosed. The allocation of the Fund's assets among the respective
sectors will vary according to the Manager's assessment of various market
conditions. The Fund's distributable income will fluctuate as the Fund
shifts its assets among the four sectors and other investments. There can
be no assurance that the Fund will achieve its investment objective.
- 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 investment policies. The Fund's investment policies and techniques
are not "fundamental" unless this Prospectus or the Statement of
Additional Information says that a particular policy is "fundamental."
The Fund's investment objective is a fundamental policy.
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. 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).
- Investment Grade Bonds and Debentures. The Fund's investments in
investment grade domestic fixed-income securities may include those issued
by domestic corporations in any industry (for example, industrial,
financial or utility) which may be denominated in U.S. dollars or in non-
U.S. currencies. There is no requirement that the issuer be of a
particular size, although it is expected that, for the most part, the Fund
will invest in securities of issuers that have total assets in excess of
$100 million. These investments may include debt obligations such as
bonds, debentures (i.e., unsecured bonds) and notes (including variable
and floating rate instruments), as well as sinking fund and callable
bonds. The Fund may also invest in municipal obligations issued by or on
behalf of states, territories, possessions or districts of the U.S. or
their political subdivisions, agencies, instrumentalities or authorities.
- U.S. Government Securities. The Fund may invest in debt
obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities ("U.S. Government Securities"). Although U.S.
Government Securities are considered among the most creditworthy of fixed-
income investments, the values of U.S. Government Securities (and of most
fixed-income securities generally) will vary inversely to changes in
prevailing domestic interest rates. Yields on U.S. Government securities
are generally lower than the yields on corporate debt securities.
Certain U.S. Government Securities, including U.S. Treasury notes and
bonds, and mortgage-backed securities guaranteed by Government National
Mortgage Association ("Ginnie Maes"), are supported by the full faith and
credit of the United States. Certain other U.S. Government Securities,
issued or guaranteed by Federal agencies or government-sponsored
enterprises, are not supported by the full faith and credit of the United
States. These latter securities may include obligations supported by the
ability of the issuer to borrow from the U.S. Treasury (which is not under
a legal obligation to make such loans), such as Federal Home Loan Mortgage
Corporation obligations ("Freddie Macs"), and obligations supported by the
credit of the instrumentality, such as Federal National Mortgage
Association bonds ("Fannie Maes"). Among other U.S. Government Securities
in which the Fund may invest are zero coupon U.S. Treasury securities,
mortgage-backed securities and money market instruments.
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury. In general, zero coupon U.S.
Treasury securities include (1) U.S. Treasury notes or bonds that have
been "stripped" of their interest coupons, (2) U.S. Treasury bills issued
without interest coupons, or (3) certificates representing an interest in
stripped securities. A zero coupon Treasury security pays no current
interest and trades at a deep discount from its face value. It will be
subject to greater market fluctuations from changes in interest rates than
interest-paying securities. The Fund accrues interest on zero coupon
securities without receiving the actual cash. As a result of holding
these securities, the Fund could possibly be forced to sell portfolio
securities to pay cash dividends or meet redemptions.
Mortgage-Backed Securities and CMOs. The Fund's investments may
include securities that represent participation interests in pools of
residential mortgage loans, including collateralized mortgage-backed
obligations ("CMOs"), which may be issued or guaranteed by (i) agencies
or instrumentalities of the U.S. Government (e.g. Ginnie Maes, Freddie
Macs and Fannie Maes), or (ii) private issuers. Such securities differ
from conventional debt securities which provide for periodic payment of
interest in fixed amounts (usually semi-annually) with principal payments
at maturity or specified call dates. Mortgage-backed securities provide
monthly payments that are, in effect, a "pass-through" of the monthly
interest and principal payments (including any prepayments) made by the
individual borrowers on the pooled mortgage loans. The Fund's
reinvestment of scheduled principal payments and unscheduled prepayments
it receives may occur at lower rates than the original investment, thus
reducing the yield of the Fund. The issuer's obligation to make interest
and principal payments is secured by the underlying portfolio of mortgages
or mortgage-backed securities. Mortgage-backed securities created by
private issuers (such as commercial banks, savings and loan institutions,
private mortgage insurance companies, mortgage bankers and other secondary
market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance,
and letters of credit, which may be issued by governmental entities,
private insurers or the mortgage poolers. There can be no assurance that
private issuers of such securities will be able to meet their obligations.
The Fund may invest in CMOs that are "stripped"; that is, the security is
divided into two parts, one of which receives some or all of the principal
payments and the other which receives some or all of the interest.
Stripped securities that receive interest only are subject to increased
volatility due to interest rate changes, and have the additional risk that
if the principal underlying the CMO is prepaid, which is more likely to
happen if interest rates fall, the Fund will lose the anticipated cash
flow from the interest on the mortgages that were prepaid, and might
receive back less than its investment. See "Mortgage-backed Securities"
in the Statement of Additional Information for more details.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease, as do the values of other debt securities,
but when prevailing interest rates decline, the values of pass-through
securities may not be as likely to rise to the same degree as the values
of other debt securities because of the pre-payment feature of pass-
through securities.
The Fund may also enter into "forward roll" transactions with banks
with respect to the mortgage-backed securities in which it can invest.
These require the Fund to secure its obligation in the transaction by
segregating assets with its custodian bank equal in amount to its
obligation under the roll. As new types of mortgage-related securities
are developed and offered to investors, the Manager will, subject to the
direction of the Fund's Board of Trustees and consistent with the Fund's
investment objective and policies, consider making investment in such new
types of mortgage-related securities.
- Foreign Securities. The Fund may invest in equity or debt
obligations (which may be denominated in U.S. dollars or in non-U.S.
currencies) issued or guaranteed by foreign corporations, certain
supranational entities (such as the World Bank) and foreign governments
(including their political subdivisions having taxing authority) or their
agencies or instrumentalities, and debt obligations issued by U.S.
corporations denominated in non-U.S. currencies. These investments may
include debt obligations such as bonds (including sinking fund and
callable bonds), debentures and notes (including variable and floating
rate instruments). The Manager will consider an issuer's relationship
with a foreign government as one of the factors in determining what
foreign securities to purchase. See "Other Investments," below, and
"Investment Objective and Policies" in the Statement of Additional
Information for further details about these investments.
The Fund's portfolio of foreign securities may include those of a
number of foreign countries or, depending upon market conditions, those
of a single foreign country. No more than 25% of the Fund's total assets
will be invested in government securities of any one foreign country or
in securities issued by companies organized under the laws of any one
foreign country. The percentage of the Fund's assets that will be
allocated to foreign securities will vary, depending on, among other
things, the relative yields of foreign and U.S. securities, the economies
of foreign countries, the condition of such countries' financial markets,
the interest rate climates of such countries and the relationship of such
countries' currencies to the U.S. dollar. The Manager evaluates
fundamental economic criteria (e.g., relative inflation levels and trends,
growth rate forecasts, balance of payments status, and economic policies)
as well as technical and political data.
Other than as set forth above, the Fund has no other restrictions on
the amount of its assets that may be invested in foreign securities and
may purchase securities issued in any country, developed or
underdeveloped. Investments in securities of issuers in non-
industrialized countries generally involve more risk and may be considered
highly speculative. Securities of foreign issuers that are represented
by American Depositary Receipts, or that are listed on a U.S. securities
exchange, or are traded in the U.S. over-the-counter market are not
considered "foreign securities" because they are not subject to many of
the special considerations and risks (discussed below and in the Statement
of Additional Information) that apply to foreign securities traded and
held abroad. If the Fund's securities are held abroad, the countries in
which such securities may be held and the sub-custodians holding them, in
most cases, must be approved by the Fund's Board of Trustees under
applicable SEC rules.
Foreign securities have special risks. For example, foreign issuers
are not subject to the same accounting and disclosure requirements that
U.S. companies are subject to. The values of foreign securities
investments may be affected by changes in foreign currency rates, exchange
control regulations, expropriation or nationalization of a company's
assets, foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors. Foreign currency losses incurred by the
Fund after it has distributed income in a particular period may result in
the Fund having distributed more income than was available from investment
income, which could result in a return of capital to shareholders.
Additional costs may be incurred in connection with investments in foreign
securities because of generally higher foreign brokerage commissions and
the additional custodial costs associated with holding foreign securities.
More information about the risks and potential rewards of investing in
foreign securities is contained in the Statement of Additional
Information.
- Money Market Instruments. The Fund may invest in the following
types of money market instruments (which are debt obligations generally
having a maturity of one year or less):
U.S. Government Securities. Obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities.
Bank Obligations. Certificates of deposit, bankers' acceptances,
time deposits, and letters of credit if they are payable in the United
States or London, England, and are issued or guaranteed by a domestic or
foreign bank having total assets in excess of $1 billion and which the
Manager has determined to be creditworthy, considering, among other
factors, ratings assigned to such securities by one or more "nationally-
recognized statistical rating organizations" ("NRSROs"), as such term is
defined in Rule 2a-7 under the Investment Company Act of 1940 (the
"Investment Company Act"), if rated.
Commercial Paper. Commercial paper is short-term, unsecured
promissory notes of a domestic or foreign company. The Fund's purchase
of commercial paper is limited to obligations rated by at least one Rating
Organization in one of the two highest rating categories for short-term
debt securities, or if unrated, issued by a corporation having an existing
debt security that meets such rating requirement or that is judged by the
Manager to be of comparable quality to obligations so rated.
Corporate Obligations. Corporate debt obligations (including master
demand notes and obligations other than commercial paper) if they are
issued by domestic corporations and are rated at least "A" by Standard &
Poor's or Moody's, or unrated securities that are of comparable quality
as determined by the Manager.
Other Obligations. Money market instruments other than those listed
above, if they are (a) subject to repurchase agreements or (b) guaranteed
as to principal and interest by a domestic or foreign bank having total
assets in excess of $1 billion, by a corporation whose commercial paper
may be purchased by the Fund, or by a foreign government having an
existing debt security rated at least "A" by a NRSRO.
Board-Approved Instruments. Other short-term investments of a type
that the Fund's Board of Trustees, or the Manager under guidelines
established by the Board, determines present minimal credit risks and that
are of "high quality" as determined by any NRSRO or, in the case of an
instrument that is not rated, of comparable quality as determined by the
Board, or by the Manager under guidelines established by the Board.
- Other Investments. The Fund may invest up to 35% of its assets
that are not invested in the four sectors described above in the following
types of securities:
- Lower-Rated Securities and Their Special Risks. The Manager may
select high-yield, "lower-grade" debt securities (or high-yielding unrated
securities) for investment, subject to the limits described above, because
they generally offer higher income potential than investment grade
securities. "Lower-grade" securities are those rated below "investment
grade," which means they have a rating below "BBB" by Standard & Poor's
Corporation or "Baa" by Moody's Investors Service, Inc. or similar ratings
by other rating organizations. "Lower-grade" debt securities the Fund may
invest in also include securities that are not rated by a nationally-
recognized rating organization like Standard & Poor's or Moody's, but
which the Manager judges to be comparable to lower-rated securities. For
a description of these securities ratings, please refer to the Appendix
in the Prospectus.
High yield, lower-grade securities, whether rated or unrated, often
have speculative characteristics. Lower-grade securities have special
risks that make them riskier investments than investment grade securities.
They may be subject to greater market fluctuations and risk of loss of
income and principal than lower yielding, investment grade securities.
There may be less of a market for them and therefore they may be harder
to sell at an acceptable price. There is a relatively greater possibility
that the issuer's earnings may be insufficient to make the payments of
interest due on the bonds. The issuer's low creditworthiness may increase
the potential for its insolvency.
These risks mean that the Fund may not achieve the expected income
from lower-grade securities, and that the Fund's net asset value per share
may be affected by declines in value of these securities. However, the
Fund's limitations on investments in these types of securities may reduce
some of the risk, as will the Fund's policy of diversifying its
investments.
Common and Preferred Stocks. The Fund may invest in common and
preferred stock issued by domestic or foreign corporations. Common stock
represents an equity interest in a corporation and may pay dividends.
Preferred stock, unlike common stock, generally offers a stated dividend
rate payable from the corporation's earnings. Preferred stock dividends
may be cumulative or non-cumulative, fixed, participating, auction rate
or other. If interest rates rise, a fixed dividend on preferred stocks
may be less attractive, causing the price of preferred stocks to decline
either absolutely or relative to alternative investments. Preferred stock
may have mandatory sinking fund provisions, as well as provisions for call
or redemption prior to maturity, generally a negative feature when
interest rates decline. The rights to payment of dividends on preferred
stocks are generally subordinate to rights associated with a corporation's
debt securities. No more than 25% of the Fund's assets, will be invested
in debt securities and in common and preferred stock of companies
organized under the laws of any one foreign country.
Participation Interests. The Fund may acquire participation
interests in loans that are made to U.S. or foreign companies (the
"borrower"). They may be interests in, or assignments of, the loan and
are acquired from banks or brokers that have made the loan or are members
of the lending syndicate. No more than 5% of the Fund's net assets can
be invested in participation interest of the same issuer. The Manager
has set certain creditworthiness standards for issuers of loan
participations, and monitors their creditworthiness. The value of loan
participation interests depends primarily upon the creditworthiness of the
borrower, and its ability to pay interest and principal. Borrowers may
have difficulty making payments. If a borrower fails to make scheduled
interest or principal payments, the Fund could experience a decline in the
net asset value of its shares. Some borrowers may have senior securities
rated as low as "C" by Moody's or "D" by Standard & Poor's, but may be
deemed acceptable credit risks. Participation interests are subject to
the Fund's limitations on investments in illiquid securities. See
"Illiquid and Restricted Securities."
Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by corporations or private issuers. These zero coupon
securities are: (i) notes or debentures that do not pay current interest
and are issued at substantial discounts from par value, or (ii) notes or
debentures that pay no current interest until a stated date one or more
years into the future, after which the issuer is obligated to pay interest
until maturity, usually at a higher rate than if interest were payable
from the date of issuance. Investment in zero coupon securities helps the
Fund in seeking its objective of current income because the Fund accrues
interest income on such securities from the date of settlement. Such zero
coupon securities are subject to certain risks, in addition to the risks
identified above under "U.S. Government Securities - Zero Coupon
Securities," such as the risk of the issuer's failure to pay interest and
repay principal in accordance with the terms of the obligation.
Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of consumer loans and other trade receivables, similar
to mortgage-backed securities described above. They are issued by trusts
and special purpose corporations. They are backed by a pool of assets,
such as credit card or auto loan receivables, which are the obligations
of a number of different parties. The income from the underlying pool is
passed through to holders, such as the Fund. These securities are
frequently supported by a credit enhancement, such as a letter of credit,
a guarantee or a preference right. However, the extent of the credit
enhancement may be different for different securities and generally
applies to only a fraction of the security's value. These securities
present special risks. For example, in the case of credit card
receivables, the issuer of the security may have no security interest in
the related collateral.
- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." Because the Fund will actively trade
its portfolio to benefit from short-term yield disparities among different
issues of fixed-income securities or otherwise to increase its income, the
Fund may be subject to a greater degree of portfolio turnover than might
be expected from investment companies that invest substantially all of
their assets on a long-term basis. The portfolio turnover rate cannot be
predicted, but it is anticipated that its annual turnover rate generally
will not exceed 200% (excluding turnover of securities having a maturity
of one year or less).
Portfolio turnover affects brokerage costs, as well as a fund's
ability to qualify as a "regulated investment company" under the Internal
Revenue Code for tax deductions for dividends and capital gains
distributions the Fund pays to shareholders. The Fund qualified in its
last fiscal year and intends to do so in the coming year, although it
reserves the right not to qualify.
During periods of falling interest rates, the values of outstanding
fixed-income securities generally rise. Conversely, during periods of
rising interest rates, the value of such securities generally decline.
The magnitude of these fluctuations will generally be greater for
securities with longer maturities.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that are designed to reduce some of the risks.
- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures and broadly-based bond indices, 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
"Other Investment Techniques and Strategies" in the Statement of
Additional Information.
The Fund may buy and sell options, futures and forward contracts 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,
tend to increase the Fund's exposure to the securities market. Forward
contracts are used to try to manage foreign currency risks on the Fund's
foreign investments. Foreign currency options are used to try to protect
against declines in the dollar value of foreign securities the Fund owns,
or to protect against an increase in the dollar cost of buying foreign
securities. Writing covered call options may also provide income to the
Fund for liquidity purposes or defensive reasons, or to raise cash to
distribute to shareholders.
Futures. The Fund may buy and sell futures contracts that relate to
(1) interest rates (these are referred to as Interest Rate Futures), and
(2) other fixed-income securities indices (these are referred to as
Financial Futures). These types of Futures are described in "Hedging With
Options and Futures Contracts" 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).
The Fund may buy calls only on securities, broadly-based bond
indices, foreign currencies, Financial Futures and 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).
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 (1) securities that the Fund owns, (2) Financial Futures, (3) Interest
Rate Futures, (4)broadly-based bond indices or (5) foreign currencies.
The Fund can buy a put on a Future whether or not the Fund owns the
particular Future in its portfolio. The Fund may sell a put other than
a put that it previously purchased on debt securities or Futures but only
if as a result of the escrow requirements described below, less than 50%
of the Fund's net assets would be required to be segregated liquid assets.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the
Fund's total assets may be subject to calls; (2) calls the Fund buys or
sells must be listed on a national or foreign securities or commodities
exchange, or quoted on the Automated Quotation System of the National
Association of Securities Dealers, Inc. (NASDAQ) or, in the case of calls
on debt securities, traded in the national or foreign over-the-counter
markets; (3) in the case of puts and calls on foreign currency, they must
be traded on a securities or commodities exchange, or in the over-the-
counter market, or are quoted by recognized dealers in those options; (4)
each call or put 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 or puts; (5) 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; (6) 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.
Forward Contracts. Forward Contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future
delivery at a fixed price. The Fund uses them to "lock-in" the U.S.
dollar price of a security denominated in a foreign currency that the Fund
has bought or sold, or to protect against losses from changes in the
relative values of the U.S. dollar and a foreign currency. The Fund may
also use "cross hedging," where the Fund hedges against changes in
currencies other than the currency in which a security it holds is
denominated.
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 or other appropriate
high grade debt obligations) 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.
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 a
security that has increased in value, the Fund will be required to sell
the security at the call price and will not be able to realize any profit
if the security has increased in value above the call price. For example,
the use of forward contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a
foreign currency. To limit its exposure in foreign currency exchange
contracts, the Fund limits its exposure to the amount of its assets
denominated in the foreign currency. 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, index or currency. In the broadest
sense, derivative investments include exchange-traded options and futures
contracts (please refer to "Hedging," above).
One risk of investing in derivative investments is that the company
issuing 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 investments, which will
affect the Fund's share price. Certain derivative investments held by the
Fund may 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 in "Illiquid and Restricted Securities," below.
Another type of derivative the Fund may invest in is an "index-
linked" note. On the maturity of this type of debt security, payment is
made based on the performance of an underlying index, rather than based
on a set principal amount for a typical note. Another derivative
investment the Fund may invest in is a currency-indexed security. These
are typically short-term or intermediate-term debt securities. Their
value at maturity or the interest rates at which they pay income are
determined by the change in value of the U.S. dollar against one or more
foreign currencies or an index. In some cases, these securities may pay
an amount at maturity based on a multiple of the amount of the relative
currency movements. This variety of index security offers the potential
for greater income but at a greater risk of loss.
Other derivative investments the Fund may invest in include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer. At maturity, the debt security is exchanged for
common stock of the issuer or is payable in an amount based on the price
of the issuer's common stock at the time of maturity. In either case
there is a risk that the amount payable at maturity will be less than the
principal amount of the debt (because the price of the issuer's common
stock is not as high as was expected).
- Special Risks - Borrowing for Leverage. The Fund may borrow
money from banks to buy securities. "Forward roll" transactions,
discussed under "Mortgage-Backed Securities and CMOs" are also considered
to be a form of borrowing by the Fund. The Fund will borrow only if it
can do so without putting up assets as security for a loan. This is a
speculative investment method known as "leverage." This investing
technique may subject the Fund to greater risks and costs than funds that
do not borrow. These risks may include the possibility that the Fund's net
asset value per share will fluctuate more than funds that don't borrow,
since the Fund pays interest on borrowings and interest expense affects
the Fund's share price. Borrowing for leverage is subject to limits under
the Investment Company Act, described in more detail in "Borrowing for
Leverage" in the Statement of Additional Information.
- 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 net 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 its total assets.
- Repurchase Agreements. The Fund may enter into repurchase
agreements. In a repurchase transaction, the Fund buys a security and
simultaneously sells it to the vendor for delivery at a future date.
There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements of seven days or less. Repurchase
agreements must be fully collateralized. However, if the vendor fails to
pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any
delay in its ability to do so. The Fund will not enter into a repurchase
agreement that causes more than 10% of its net assets to be subject to
repurchase agreements having a maturity beyond seven days.
- Illiquid and Restricted Securities. Under the policies and
procedures 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. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
- "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.
- Short Sales "Against-the-Box." In a short sale, the seller does
not own the security that is sold, but normally borrows the security to
fulfill its delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. The Fund may not
sell securities short except in collateralized transactions referred to
as short sales "against-the-box," where the Fund owns an equivalent amount
of the securities sold short. This technique is primarily used for tax
purposes. No more than 15% of the Fund's net assets will be held as
collateral for short sales at any one time.
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: (1) purchase securities issued or
guaranteed by any one issuer (except the U.S. Government or its agencies
or instrumentalities), if, with respect to 75% of its total assets, more
than 5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would then own more than 10% of that issuer's voting
securities; (2) concentrate investments to the extent that 25% or more of
the value of its total assets is invested in securities of issuers in the
same industry (excluding the U.S. Government, its agencies and
instrumentalities); for purposes of this limitation, utilities will be
divided according to their services; for example, gas, gas transmission,
electric and telephone each will be considered a separate industry; (3)
make loans, except by purchasing debt obligations in accordance with its
investment objective and policies, or by entering into repurchase
agreements, or as described in "Loans of Portfolio Securities"; (4) buy
securities of an issuer which, together with any predecessor, has been in
operation for less than three years, if as a result, the aggregate of such
investments would exceed 5% of the value of the Fund's total assets; or
(5) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or by virtue of ownership of other securities has the right,
without payment of any further consideration, to obtain an equal amount
of securities sold short ("short sales against-the-box").
All of the percentage restrictions described above and elsewhere in
the Prospectus and in the Statement of Additional Information apply only
at the time of investment and require no action by the Fund as a result
of subsequent changes in value of the investment or 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 1991 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.
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 provides more information about them
and the officers of the Fund. Although the Fund is not required by law
to hold annual meetings, it may hold 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 two classes of shares, Class A and
Class B. 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 together on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Agreement sets forth the fees paid by the
Fund to the Manager and describes the expenses that the Fund is
responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $28 billion as
of September 30, 1994, and with more than 1.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company, a mutual
life insurance company.
- Portfolio Manager. The Portfolio Managers of the Fund are Arthur
P. Steinmetz, a Senior Vice President of the Manager, and David P. Negri,
a Vice President of the Manager. Each serves as a Portfolio Manager and
as Vice President of the Fund. They have been the persons principally
responsible for the day-to-day management of the Fund's portfolio since
the Fund's inception in November, 1992. During the past five years,
Messrs. Steinmetz and Negri have also served as officers and portfolio
managers for other OppenheimerFunds.
- 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: 0.65% of the first $500 million of
aggregate net assets, 0.62% of the next $500 million, 0.59% of the next
$500 million, and 0.50% of net assets in excess of $1.5 billion. The
Fund's management fee for its last fiscal year was 0.65% of average annual
net assets for both its Class A and Class B shares, which may be higher
than the rate paid by some other mutual funds.
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 and
practices 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. 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 Fund's Distributor.
The Distributor also distributes the shares of other mutual funds managed
by the Manager (the "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries about their
accounts 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," "average annual 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 well your investment has done and to compare it to other funds or
market indices, as we have done below.
It is important to understand that the Fund's yields and total
returns represent past performance and should not be considered to be
predictions of future returns or performance. This performance data is
described below, but more detailed information about how total returns and
yields are calculated is contained in the Statement of Additional
Information, which also contains information about 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. Total returns may also be
quoted "at net asset value," without considering the effect of the sales
charge, and those returns would be reduced if sales charges were deducted.
When total returns are shown for Class B shares, they reflect the effect
of the contingent deferred sales charge. They may also be shown based on
the change in net asset value, without considering the effect of the
contingent deferred sales charge.
- Yield. Each Class of shares calculates its yield by dividing the
annualized net investment income per share on the portfolio during a
30-day period by the maximum offering price on the last day of the period.
The yield of each Class will differ because of the different expenses of
each Class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a Class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B shares do not
reflect the deduction of the contingent deferred sales charge.
How Has the Fund Performed? Below is a discussion by the Manager of the
Fund's performance during its last fiscal year ended September 30, 1994,
followed by a graphical comparison of the Fund's performance to
appropriate broad-based market indices.
- Management's Discussion of Performance. During the past fiscal
year, the Fund's performance was affected by aggressive increases in
short-term interest rates by the Federal Reserve Board, which caused a
decline in the overall price of fixed-income securities. The Manager
added to the Fund's holdings in corporate bonds issued by larger
industrial companies, notably in chemicals, mining, metals, and forest
products sectors. As interest rates rose off-shore and the dollar
weakened against major currencies, the Manager added to the Fund's
holdings of European government bonds and larger European industrial
companies. Positions were reduced in U.S. Government securities as well
as in corporate bonds issued by consumer durable and financial service
companies, whose earnings are often sensitive to interest rate changes.
- Comparing the Fund's Performance of the Market. The chart below
shows the performance of a hypothetical $10,000 investment in each class
of shares of the Fund held until September 30, 1994. In the case of Class
A shares, performance is measured from the commencement of operations on
August 4, 1992, and in the case of Class B shares, from the inception of
the Class on November 30, 1992, with all dividends and capital gains
distributions reinvested in additional shares. The graph reflects the
deduction of the 3.5% maximum initial sales charge on Class A shares and
the maximum 4.0% contingent deferred sales charge on Class B shares.
The Fund's performance is compared to the performance of the Lehman
Brothers Aggregate Bond Index and the Lehman Brothers Intermediate
Government/Corporate Bond Index. The Lehman Brothers Aggregate Bond Index
is an unmanaged index of investment grade debt securities with a maturity
of at least one year, consisting of treasury securities, agency issues,
corporate bond issues and mortgage-backed securities, and is widely
regarded as a measure of the performance of the general fixed-rate
investment grade debt market. The Lehman Brothers Intermediate
Government/Corporate Bond Index includes the government and corporate bond
indices, including U.S. government treasury and agency securities,
corporate and yankee bonds. Index performance reflects the 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 either index. Moreover,
the index data does not reflect any assessment of the risk of the
investments included in the indexes.
Oppenheimer Strategic Short-Term Income Fund
Comparison of Change in Value
of $10,000 Hypothetical Investments to the
The Lehman Aggregate Bond Index and
The Lehman Intermediate Government/Corporate Bond Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer Strategic Short-Term Income Fund
Average Annual Total Returns
of the Fund at 9/30/94
A Shares 1-Year Life(1) B Shares 1-Year Life(2)
(2.91)% 0.54% (4.15)% 1.96%
_____________________
(1) Inception date of the Fund (Class A shares) was 8/4/92.
(2) Class B shares were first publicly offered on 11/30/92.
ABOUT YOUR ACCOUNT
How to Buy Shares
Classes of Shares. The Fund offers investors two different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices and dividends.
- Class A Shares. If you buy Class A shares, you pay an initial
sales charge (on investments up to $1 million). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, 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, which will vary depending on
the amount you invested. Sales charges are described 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, you will normally pay a contingent deferred sales charge that
varies depending on how long you own your shares. It is described below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial 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, how long you plan to hold your investment, and whether you
anticipate exchanging your shares for shares of other OppenheimerFunds
(not all of which currently offer Class B shares). 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 Class A and B, considering the effect of
the annual asset-based sales charge on Class B expenses (which, like all
expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
the 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 you invest in. The factors discussed below are
not intended to be investment advice or recommendations, because each
investor's financial considerations are different.
- How Long Do You Expect to Hold Your Investment? The Fund is
designed for long-term 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. Because of the effect of class-
based expenses, your choice will also depend on how much you invest.
- How Much Do You Plan to Invest? If you plan to invest a
substantial amount over the long term, the reduced sales charges available
for larger purchases of Class A shares may offset the effect of paying an
initial sales charge on your investment (which reduces the amount of your
investment dollars used to buy shares for your account), compared to the
effect over time of higher expenses on Class B, for which no initial sales
charge is paid. Additionally, dividends payable to Class B shareholders
will be reduced by the additional expenses borne solely by Class B, such
as the asset-based sales charge described below.
In general, if you expect shares to be substantially higher in value
at the time of redemption, Class B shares may be appropriate for small,
long-term investments. However, if you plan to invest more than $100,000
(not only in the Fund, but possibly in other OppenheimerFunds as well),
then Class A shares generally will be more advantageous than Class B,
because of the effect of the reduction of initial sales charges on larger
purchases of Class A shares (described in "Reduced Sales Charges for Class
A Share Purchases," below). That is also the case because the annual
asset-based sales charge on Class B shares will have a greater impact on
larger investments than the initial sales charge on Class A shares because
of the reductions of initial sales charge available for larger purchases.
And for investors who invest $1 million or more, in most cases Class
A shares will be the most advantageous choice, no matter how long you
intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B shares
from a single investor.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumptions stated above. Therefore, these examples
should not be relied on as rigid guidelines.
- Are There Differences in Account Features That Matter to You?
Because some account features (such as CheckWriting) may not be available
to Class B shareholders, or other features (such as Automatic Withdrawal
Plans) might not be advisable (because of the effect of contingent
deferred sales charge) in non-retirement accounts for Class B
shareholders, you should carefully review how you plan to use your
investment account before deciding which class of shares to buy. Also,
because not all OppenheimerFunds currently offer Class B shares, and
because exchanges are permitted only to the same class of shares in other
OppenheimerFunds, you should consider how important the exchange privilege
is likely to be for you.
- 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 one
class than another class. It is important that investors understand that
the purpose of the Class B contingent deferred sales charge and asset-
based sales charge is the same as the purpose of the front-end sales
charge on sales of Class A shares: to compensate the Distributor for
commissions it pays to dealers and financial institutions for selling
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 of as little as $25; and subsequent purchases of
at least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically through an Asset Builder Plan under the OppenheimerFunds
AccountLink service. When you buy shares, be sure to specify Class A or
Class B shares. If you do not choose, your investment will be made in
Class A shares.
- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, we
recommend that you discuss your investment first with a financial advisor,
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 send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on AccountLink 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 Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver. 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.
Class A Shares. Class A shares are sold at their offering price, which
is normally net asset value plus an initial sales charge. However, in
some cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be the net asset value. In 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. 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 Percentage as Percentage as Percentage
of Offering of Amount of Offering
Amount of Purchase Price Invested 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%
<FN>
- -------------------
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.
</TABLE>
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") may be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
the aggregate net asset value of either (1) the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all OppenheimerFunds you purchased subject to the
Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. 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 charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A shares you purchase for your individual
accounts, or jointly, or on behalf of your children who are minors, under
trust or custodial accounts. 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
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase
Class A shares of the Fund and other OppenheimerFunds during a 13-month
period at the reduced sales charge rate that applies to the total amount
of the intended purchases. This can include purchases made up to 90 days
before the date of the Letter. More information is contained in the
Application and in "Reduced Sales Charges" in the Statement of Additional
Information.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and 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); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administration services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party, or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The contingent deferred sales charge does not apply to purchases of
Class A shares at net asset value described above and is also waived if
shares are redeemed in the following cases: (1) retirement distributions
or loans to participants or beneficiaries from qualified retirement plans,
deferred compensation plans or other employee benefit plans ("Retirement
Plans"), (2) returns of excess contributions made to Retirement Plans, (3)
Automatic Withdrawal Plan payments that are limited to no more than 12%
of the original account value annually, (4) involuntary redemptions of
shares by operation of law or under the procedures set forth in the Fund's
Declaration of Trust or adopted by the Board of Trustees, and (5) if, at
the time an order is placed for Class A shares that would otherwise be
subject to the Class A contingent deferred sales charge, the dealer agrees
to accept the dealer's portion of the commission payable on the sale in
installments of 1/18th of the commission per month (with no further
commission payable if the shares are redeemed within 18 months of
purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 5 years of the end of the calendar month of their purchase, a
contingent deferred sales charge will be deducted from the redemption
proceeds. That sales charge will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions. The charge will
be assessed on the lesser of the net asset value of the shares at the time
of redemption or the original purchase price. The contingent deferred
sales charge is not imposed on the amount of your account value
represented by the increase in net asset value over the initial purchase
price (including increases due to the reinvestment of dividends and
capital gains distributions). The Class B contingent deferred sales charge
is paid to the Distributor to reimburse its expenses of providing
distribution-related services to the Fund in connection with the sale of
Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 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:
Contingent Deferred Sales Charge
Years Since Beginning of Month In on Redemptions in that Year
Which 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.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (the disability must have occurred after the account was
established and you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans, and (4) distributions from IRAs
(including SEP-IRAs and SAR/SEP accounts) before the participant is age
591/2, and distributions from 403(b)(7) custodial plans or pension or
profit sharing plans before the participant is age 591/2 but only after
the participant has separated from service, if the distributions are made
in substantially equal periodic payments 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 and may not exceed 10%
of the account value annually, measured from the date the Transfer Agent
receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution Plan, described below. The conversion is based on the
relative net asset value of the two classes, and no sales load or other
charge is imposed. When Class B shares convert, any other Class B shares
that were acquired by the reinvestment of dividends and distributions on
the converted shares will also convert to Class A shares. The conversion
feature is subject to the continued availability of a tax ruling described
in "Alternative Sales Arrangements - Class A and Class B Shares" in the
Statement of Additional Information.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 2.75% of the
purchase price to dealers from its own resources at the time of sale. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, its
financing costs and other expenses.
The Distributor's actual expenses in selling Class B 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 Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September 30, 1994, the end of the Plan
year, the Distributor had incurred unreimbursed expenses under the Plan
of $274,471 (equal to 3.60% 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 the Plan is terminated by the Fund, the Board of Trustees may
allow the Fund to continue payments of the asset-based sales charge to the
Distributor for expenses it incurred before the Plan was terminated.
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. These include 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 worth $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
automatically to exchange an amount you establish in advance for shares
of up to five other OppenheimerFunds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each OppenheimerFunds account is $25. These exchanges are subject to
the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying a
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge. It also applies to shares on which you paid
a contingent deferred sales charge when you redeemed them. You must be
sure to ask the Distributor for this privilege when you send your payment.
Please consult the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
other employers
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 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
- A redemption check is not payable to all shareholders listed on
the account statement
- A redemption 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 by 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 on behalf of a corporation, partnership or other business,
or as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
- Your name
- The Fund's name
- Your Fund account number (from your statement)
- The dollar amount or number of shares to be redeemed
- Any special payment instructions
- Any share certificates for the shares you are selling, and
- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
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 statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds wired to that bank
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 statement. This service is not available within 30 days of
changing the address on an account.
- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH wire to your bank is
initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be wired.
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 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.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, or (4) the check was written for less than
$100.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for
sale in your state of residence
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
- You must meet the minimum purchase requirements for the fund you
purchase by exchange
- Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. Certain
OppenheimerFunds offer Class A shares and Class B or Class C shares, and
a list can be obtained by calling the Distributor at 1-800-525-7048. 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 name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of OppenheimerFunds 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 that is 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 portfolio 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 it will not be liable for losses or expenses
arising out of telephone instructions reasonably believed to be genuine.
If you are unable to reach the Transfer Agent during periods of unusual
market activity, you may not be able to complete a telephone transaction
and should consider placing your order by mail.
- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A and Class B shares. Therefore, the redemption
value of your shares may be more or less than their original cost.
- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. The Transfer Agent may
delay forwarding a check or processing a payment via AccountLink for
recently purchased shares, but only until the purchase payment has
cleared. That delay may be as much as 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 "How to Sell
Shares" in 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 Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of dividends.
- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A and Class B 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 surname 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 and Class
B shares from net investment income on each regular business day, and pays
such dividends to shareholders monthly on or about the fourth Wednesday
of each month, but the Board of Trustees can change that date. In
addition, distributions may be made monthly out of any net short-term
capital gains realized from the sale of securities. It is expected that
distributions paid with respect to Class A shares will generally be higher
than for Class B shares because expenses allocable to Class B shares will
generally be higher.
Daily dividends on newly purchased shares will not be declared or
paid until such time as Federal Funds (funds credited to a member bank's
account at the Federal Reserve Bank) are available from the purchase
payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day.
Dividends will be declared on shares repurchased by a dealer or broker for
four business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
During the Fund's fiscal year ended September 30, 1994, the Fund
sought to pay dividends on its Class A shares at a constant level. That
was done keeping in mind the amount of net investment income and other
distributable income available from the Fund's portfolio investments.
However, the amount of each dividend can change from time to time (or
there might not be a dividend at all on either class) depending on market
conditions, the Fund's expenses, and the composition of the Fund's
portfolio. Attempting to pay dividends at a constant level required the
Manager to monitor the Fund's income stream from its investments to
maintain income at the required level. This practice did not affect the
net asset values of either class of shares. The Board of Trustees may
change or end the Fund's targeted dividend level for Class A shares at any
time. There is no targeted dividend level for Class B shares.
Capital Gains. The Fund may make distributions annually in December out
of any net short-term or long-term capital gains, and the Fund may make
supplemental distributions of dividends and capital gains following the
end of its fiscal year. Long-term capital gains will be separately
identified in the tax information the Fund sends you after the end of the
year. Short-term capital gains are treated as dividends 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 Long-Term 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. It does not matter how long you held your
shares. 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 STRATEGIC SHORT-TERM INCOME FUND
Graphic material included in Prospectus of Oppenheimer Strategic
Short-Term Income Fund: "Comparison of Total Return of Oppenheimer
Strategic Short-Term Income Fund with The Lehman Aggregate Bond Index and
The Lehman Intermediate Government/Corporate Bond Index - Change in Value
of a $10,000 Hypothetical Investment"
A linear graph will be included in the Prospectus of Oppenheimer
Strategic Short-Term Income Fund (the "Fund") depicting the initial
account value and subsequent account value of a hypothetical $10,000
investment in the Fund. In the case of the Fund's Class A shares, that
graph will cover the period from commencement of operations (August 4,
1992) through 9/30/94 and in the case of the Fund's Class B shares will
cover the period from the inception of the class (November 30, 1992)
through 9/30/94. The graph will compare such values with hypothetical
$10,000 investments over the same time periods in The Lehman Aggregate
Bond Index and The Lehman Intermediate Government/Corporate Bond Index.
Set forth below are the relevant data points that will appear on the
linear graph. Additional information with respect to the foregoing,
including a description of The Lehman Aggregate Bond Index and The Lehman
Intermediate Government/Corporate Bond Index, is set forth in the
Prospectus under "How Has the Fund Performed - Comparing the Fund's
Performance to the Market."
<TABLE>
<CAPTION>
Lehman
Oppenheimer Intermediate
Strategic Lehman Government/
Fiscal Year Short-Term Aggregate Corporate
Period Ended Income A Bond Index Bond Index
- ------------ ----------- ---------- -----------
<S> <C> <C> <C>
08/4/92 $9,650 $10,000 $10,000
09/30/92 $9,603 $10,119 $10,127
11/30/92 $9,316 $ 9,998 $ 9,931
09/30/93 $10,043 $11,128 $11,181
09/30/94 $10,121 $10,770 $10,926
Oppenheimer Intermediate
Strategic Lehman Government/
Fiscal Year Short-Term Aggregate Corporate
Period Ended Income B Bond Index Bond Index
- ------------ ----------- ---------- -----------
<S> <C> <C> <C>
11/30/92 $10,000 $10,000 $10,000
9/30/93 $10,681 $11,141 $11,259
9/30/94 $10,366 $10,782 $11,002
</TABLE>
<PAGE>
Appendix
Description of Ratings
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds which are rated "Aaa" are judged to be the best quality and to
carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal
is secure. While the various protective elements are likely to change,
the changes that can be expected are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than those of "Aaa" securities.
A: Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated "Baa" are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.
Ba: Bonds which are rated "Ba" are judged to have speculative elements;
their future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds which are rated "B" generally lack characteristics of desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated "Caa" are of poor standing and may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated "Ca" represent obligations which are
speculative in a high degree and are often in default or have other marked
shortcomings.
C: Bonds which are rated "C" can be regarded as having extremely poor
prospects of ever retaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change
in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal
is in arrears.
<PAGE>
Oppenheimer Strategic Short-Term Income 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.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent OPPENHEIMER
Oppenheimer Shareholder Services Strategic Short-Term Income Fund
P.O. Box 5270 Prospectus
Denver, Colorado 80217 Effective January 27, 1995
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
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 representation 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 offer in such
state.
PR295.0195.N* Printed on recycled paper
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated January 27, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 27, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free
number shown above.
TABLE OF CONTENTS
Page
About the Fund
Investment Objective and Policies 2
Investment Policies and Strategies 2
Other Investment Techniques and Strategies 10
Other Investment Restrictions 22
How the Fund is Managed 22
Organization and History 22
Trustees and Officers of the Fund 23
The Manager and Its Affiliates 26
Brokerage Policies of the Fund 28
Performance of the Fund 30
Distribution and Service Plans 33
About Your Account 35
How To Buy Shares 35
How To Sell Shares 42
How To Exchange Shares 46
Dividends, Capital Gains and Taxes 48
Additional Information About the Fund 49
Financial Information About the Fund 50
Independent Auditors' Report 50
Financial Statements 51
Appendix A: (Industry Classifications) A-1
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ABOUT THE FUND
Investment Objective and Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as strategies the Fund may use to try
to achieve its objective. Capitalized terms used in this Statement of
Additional Information have the same meaning as those terms in the
Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment manager, Oppenheimer Management Corporation (the "Manager"),
evaluates the investment merits of fixed-income securities primarily
through the exercise of its own investment analysis. This may include,
among other things, consideration of the financial strength of an issuer,
including its historic and current financial condition, the trading
activity in its securities, present and anticipated cash flow, estimated
current value of its assets in relation to their historical cost, the
issuer's experience and managerial expertise, responsiveness to changes
in interest rates and business conditions, debt maturity schedules,
current and future borrowing requirements, and any change in the financial
condition of an issuer and the issuer's continuing ability to meet its
future obligations. The Manager also may consider anticipated changes in
business conditions, levels of interest rates of bonds as contrasted with
levels of cash dividends, industry and regional prospects, the
availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and
the world.
- Investment Risks of Fixed-Income Securities. All fixed-income
securities are subject to two types of risks: credit risk and interest
rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. Generally,
higher yielding lower-grade bonds are subject to credit risk to a greater
extent than lower yielding higher quality bonds. Interest rate risk
refers to the fluctuations in value of fixed-income securities resulting
solely from the inverse relationship between price and yield of fixed-
income securities. An increase in prevailing interest rates will
generally reduce the market value of outstanding fixed-income investments,
and a decline in interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in
the market value of fixed-income securities after the Fund buys them will
not affect the interest payable on those securities, and thus the cash
income received by the Fund from such securities. However, those price
fluctuations will be reflected in the valuations of those securities used
to compute the Fund's net asset value.
If the ratings of securities held by the Fund fall lower than "Baa"
by Moody's or "BBB" by Standard & Poors, and if the Fund retains those
securities, it may be subject to greater risks. Obligations rated as low
as "C" by Moody's or "D" by Standard & Poor's indicate that the
obligations are speculative in a high degree and may be in default. Risks
of high yield securities may include: (i) limited liquidity and secondary
market support, (ii) substantial market price volatility resulting from
changes in prevailing interest rates, (iii) subordination to the prior
claims of banks and other senior lenders, (iv) the operation of mandatory
sinking fund or call/redemption provisions during periods of declining
interest rates whereby the Fund may be able to reinvest the premature
redemption proceeds of those securities only in lower-yielding securities,
(v) the possibility that earnings of the issuer may be insufficient to
meet its debt service, and (vi) the issuer's low creditworthiness and
potential for insolvency during periods of rising interest rates and
economic downturn.
As stated in the Prospectus, under normal circumstances the Fund will
maintain a dollar-weighted average portfolio maturity of not more than
three years. The Manager will in good faith determine the maturity of
debt obligations purchased by the Fund and will consider various factors
applicable to each type of debt obligation, including those set forth
below. With respect to corporate debt obligations, the Manager will
consider sinking fund and call provisions as well as the current price of
the obligation and the relationship between the price and estimated
likelihood that the obligation will be called. In determining the
maturity of mortgage-backed securities, the Manager reviews the prepayment
history of the obligation and similar securities, current interest rates
and median estimates of maturity for the obligation available from
dealers. With respect to hedging instruments, the Manager looks at the
term of both the hedging instrument and the underlying security and the
relationship between the instruments. Subject to the requirement that the
dollar weighted average portfolio maturity will not exceed three years,
the Fund may invest in individual debt obligations of any maturity,
including obligations with a remaining stated maturity of more than three
years.
- Domestic Securities. The Fund's investments in investment grade
fixed-income securities and other securities issued by domestic
corporations may include, among others, debt obligations (bonds,
debentures and notes), money market instruments, common stocks and
preferred stocks.
Preferred Stocks. Dividends on some preferred stocks may be
"cumulative," requiring all or a portion of prior unpaid dividends to be
paid. Preferred stock also generally has a preference over common stock
on the distribution of a corporation's assets in the event of liquidation
of the corporation, and may be "participating," which means that it may
be entitled to a dividend exceeding the stated dividend in certain cases.
The rights of preferred stocks on distribution of a corporation's assets
in the event of a liquidation are generally subordinate to the rights
associated with a corporation's debt securities.
Participation Interests. The Fund may invest in participation
interests, subject to the limit, described in "Restricted and Illiquid
Securities" in the Prospectus, that no more than 10% of the Fund's net
assets may be held in illiquid investments. Participation interests
represent an undivided interest in or assignment of a loan made by the
issuing financial institution. Participation interests are primarily
dependent upon the financial strength of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the net asset value of its shares. In the event
of a failure by the financial institution to perform its obligation in
connection with the participation agreement, the Fund might incur certain
costs and delays in realizing payment or may suffer a loss of principal
and/or interest. The Manager has set certain creditworthiness standards
for issuers of loan participation interests and monitors their
creditworthiness.
- Collateralized Mortgage-Backed Obligations ("CMO's"). CMO's are
fully-collateralized bonds which are general obligations of the issuer
thereof, either a private issuer, the U.S. Government or a U.S. Government
instrumentality. See "Investment Objective and Policies - U.S. Government
Securities" immediately below for further details.
- Asset-Backed Securities. These securities, issued by trusts and
special purpose corporations, are backed by pools of assets, primarily
automobile and credit-card receivables and home equity loans, which pass
through the payments on the underlying obligations to the security holders
(less servicing fees paid to the originator or fees for any credit
enhancement). The value of an asset-backed security is affected by
changes in the market's perception of the asset backing the security, the
creditworthiness of the servicing agent for the loan pool, the originator
of the loans, or the financial institution providing any credit
enhancement, and is also affected if any credit enhancement has been
exhausted. Payments of principal and interest passed through to holders
of asset-backed securities are typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guarantee
by another entity or having a priority to certain of the borrower's other
securities. The degree of credit enhancement varies, and generally
applies to only a fraction of the asset-backed security's par value until
exhausted. If the credit enhancement of an asset-backed security held by
the Fund has been exhausted, and if any required payments of principal and
interest are not made with respect to the underlying loans, the Fund may
experience losses or delays in receiving payment. The risks of investing
in asset-backed securities are ultimately dependent upon payment of
consumer loans by the individual borrowers. As a purchaser of an asset-
backed security, the Fund would generally have no recourse to the entity
that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments, which shorten the weighted
average life of asset-backed securities and may lower their return, in the
same manner as described above for prepayments of a pool of mortgage loans
underlying mortgage-backed securities. However, asset-backed securities
do not have the benefit of the same security interest in the underlying
collateral as do mortgage backed securities.
- Municipal Securities. Because municipal securities are generally
exempt from federal income taxation, they generally yield less than
taxable fixed-income securities of the same rating. The Fund does not
invest in municipal securities for tax-exempt income, as any income earned
by the Fund on such securities is treated as taxable income when
distributed to shareholders. Rather, the Fund seeks to take advantage of
yield differentials with other debt securities, which may be reflected in
bond prices, and thus reflect potential for capital appreciation.
- U.S. Government Securities. U.S. Government Securities are debt
obligations issued or guaranteed by the U.S. Government or one of its
agencies or instrumentalities, and include "zero coupon" Treasury
securities, mortgage-backed securities and money market instruments.
- Mortgage-Backed Securities. These securities represent
participation interests in pools of residential mortgage loans which may
or may not be guaranteed by agencies or instrumentalities of the U.S.
Government. Such securities differ from conventional debt securities
which generally provide for periodic payment of interest in fixed or
determinable amounts (usually semi-annually) with principal payments at
maturity or specified call dates. The mortgage-backed securities in which
the Fund may invest may be backed by the full faith and credit of the U.S.
Treasury (e.g., direct pass-through certificates of Government National
Mortgage Association); some are supported by the ability of the issuer to
borrow from the U.S. Government (e.g., obligations of Federal Home Loan
Mortgage Corporation); and some are backed by only the credit of the
issuer itself. Any such guarantees do not extend to the value or yield
of the mortgage-backed securities themselves or to the net asset value of
the Fund's shares. Any of those government agencies may also issue
collateralized mortgage-backed obligations ("CMO's"), discussed below.
The yield on mortgage-backed securities is based on the average
expected life of the underlying pool of mortgage loans. The actual life
of any particular pool will be shortened by any unscheduled or early
payments of principal and interest. Principal prepayments generally
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages. The occurrence of prepayments is
affected by a wide range of economic, demographic and social factors and,
accordingly, it is not possible to predict accurately the average life of
a particular pool. Yield on such pools is usually computed by using the
historical record of prepayments for that pool, or, in the case of newly-
issued mortgages, the prepayment history of similar pools. The actual
prepayment experience of a pool of mortgage loans may cause the yield
realized by the Fund to differ from the yield calculated on the basis of
the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security may not be as likely to rise to the extent that the values of
other debt securities rise, because of the prepayment feature of pass-
through securities. The Fund's reinvestment of scheduled principal
payments and unscheduled prepayments it receives may occur at higher or
lower rates than the original investment, thus affecting the yield of the
Fund. Monthly interest payments received by the Fund have a compounding
effect which may increase the yield to the Fund more than debt obligations
that pay interest semi-annually. Because of those factors, mortgage-
backed securities may be less effective than Treasury bonds of similar
maturity at maintaining yields during periods of declining interest rates.
The Fund may purchase mortgage-backed securities at par or at a premium
or a discount. Accelerated prepayments adversely affect yields for pass-
through securities purchased at a premium (i.e., at a price in excess of
their principal amount) and may involve additional risk of loss of
principal because the premium may not have been fully amortized at the
time the obligation is repaid. The opposite is true for pass-through
securities purchased at a discount.
The Fund may invest in "stripped" mortgage backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-
only" or "IO" class), while the other class will receive all of the
principal (the "principal-only" or "PO" class). Interest only securities
are extremely sensitive to interest rate changes, and prepayments of
principal on the underlying mortgage assets. Unlike most other fixed-
income securities, IO securities typically decline in price when interest
rates decline. An increase in principal payments or prepayments will
reduce the income available to the IO security. In other types of CMOs,
the underlying principal payments may apply to various classes in a
particular order, and therefore the value of certain classes or "tranches"
of such securities may be more volatile than the value of the pool as a
whole, and losses may be more severe than on other classes.
- GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). The GNMA Certificates that the Fund may purchase are of
the "modified pass-through" type, which entitle the holder to receive
timely payment of all interest and principal payments due on the mortgage
pool, net of fees paid to the "issuer" and GNMA, regardless of whether the
mortgagor actually makes the payments.
The National Housing Act authorizes GNMA to guarantee the timely
payment of principal and interest on securities backed by a pool of
mortgages insured by the Federal Housing Administration ("FHA") or
guaranteed by the Veterans Administration ("VA"). The GNMA guarantee is
backed by the full faith and credit of the U.S. Government. GNMA is also
empowered to borrow without limitation from the U.S. Treasury if necessary
to make any payments required under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the
securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of
principal investment long before the maturity of the mortgages in the
pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee, except to the extent that the Fund has purchased the
certificates at a premium in the secondary market.
- FNMA Securities. The Federal National Mortgage Association
("FNMA") was established to create a secondary market in mortgages insured
by the FHA. FNMA issues guaranteed mortgage pass-through certificates
("FNMA Certificates"). FNMA Certificates resemble GNMA Certificates in
that each FNMA Certificate represents a pro rata share of all interest and
principal payments made and owed on the underlying pool. FNMA guarantees
timely payment of interest and principal on FNMA Certificates. The FNMA
guarantee is not backed by the full faith and credit of the U.S.
Government.
- FHLMC Securities. The Federal Home Loan Mortgage Corporation
("FHLMC") was created to promote development of a nationwide secondary
market for conventional residential mortgages. FHLMC issues mortgage
pass-through certificates ("PCs"). PCs resemble GNMA Certificates in that
each PC represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FHLMC guarantees timely monthly
payment of interest on Freddie Macs and the ultimate payment of principal.
The FHLMC guarantee is not backed by the full faith and credit of the U.S.
government.
- Zero Coupon Securities. Because the Fund accrues taxable income
from zero coupon securities issued by either the U.S. Treasury or
corporations without receiving cash, the Fund may be required to sell
portfolio securities in order to pay a dividend that includes such accrued
income, depending, among other things, upon the number of shareholders who
elect to receive dividends in cash rather than reinvesting dividends in
additional shares of the Fund. The Fund might also sell portfolio
securities to maintain portfolio liquidity.
- Collateralized Mortgage-Backed Obligations ("CMOs"). CMOs are
fully-collateralized bonds that are the general obligations of the issuer
thereof, either the U.S. Government, a U.S. Government instrumentality,
or a private issuer. Such bonds generally are secured by an assignment
to a trustee (under the indenture pursuant to which the bonds are issued)
of collateral consisting of a pool of mortgages. Payments with respect
to the underlying mortgages generally are made to the trustee under the
indenture. Payments of principal and interest on the underlying mortgages
are not passed through to the holders of the CMOs as such (i.e., the
character of payments of principal and interest is not passed through, and
therefore payments to holders of CMOs attributable to interest paid and
principal repaid on the underlying mortgages do not necessarily constitute
income and return of capital, respectively, to such holders), but such
payments are dedicated to payment of interest on and repayment of
principal of the CMOs. CMOs often are issued in two or more classes with
different characteristics such as varying maturities and stated rates of
interest. Because interest and principal payments on the underlying
mortgages are not passed through to holders of CMOs, CMOs of varying
maturities may be secured by the same pool of mortgages, the payments on
which are used to pay interest on each class and to retire successive
maturities in sequence. Unlike other mortgage-backed securities
(discussed above), CMOs are designed to be retired as the underlying
mortgages are repaid. In the event of prepayment on such mortgages, the
class of CMO first to mature generally will be paid down. Therefore,
although in most cases the issuer of CMOs will not supply additional
collateral in the event of such prepayment, there will be sufficient
collateral to secure CMOs that remain outstanding.
- Mortgage-Backed Security Rolls. The Fund may enter into "forward
roll" transactions with respect to mortgage-backed securities issued by
GNMA, FNMA or FHLMC. In a forward roll transaction, which is considered
to be a borrowing by the Fund, the Fund will sell a mortgage security to
a bank or other permitted entity and simultaneously agree to repurchase
a similar security from the institution at a later date at an agreed upon
price. The mortgage-backed securities that are repurchased will bear the
same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories than
those sold. Risks of mortgage-backed security rolls include: (i) the risk
of prepayment prior to maturity, (ii) the possibility that the Fund may
not be entitled to receive interest and principal payments on the
securities sold and that the proceeds of the sale may have to be invested
in money market instruments (typically repurchase agreements) maturing not
later than the expiration of the roll, and (iii) the risk that the market
value of the securities sold by the Fund may decline below the price at
which the Fund is obligated to purchase the securities. Upon entering
into a mortgage-backed security roll, the Fund will be required to place
cash, U.S. Government Securities or other high-grade debt securities in
a segregated account with its Custodian in an amount equal to its
obligation under the roll.
- Foreign Securities. As noted in the Prospectus, the Fund may
invest in debt obligations and other securities (which may be denominated
in U.S. dollars or non-U.S. currencies) issued or guaranteed by foreign
corporations, certain supranational entities (described below) and foreign
governments or their agencies or instrumentalities, and in debt
obligations and other securities issued by U.S. corporations denominated
in non-U.S. currencies. The types of foreign debt obligations and other
securities in which the Fund may invest are the same types of debt
obligations and other securities identified under "Domestic Securities,"
above.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the
supranational entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable to repay its
borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital"
contributed by members at the entity's call), reserves and net income.
There is no assurance that foreign governments will be able or willing to
honor their commitments.
The Fund may invest in U.S. dollar-denominated foreign debt
obligations known as "Brady Bonds," which are issued for the exchange of
existing commercial bank loans to foreign entities for new obligations and
are generally collateralized in full as to principal due at maturity by
U.S. Treasury zero coupon obligations that have the same maturity. Brady
Bonds are often viewed as having three or four valuation components: (i)
the collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the
event of a default with respect to collateralized Brady Bonds as a result
of which the payment obligations of the issuer are accelerated, the zero
coupon Treasury securities held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be sold
and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds,
which will continue to be outstanding, at which time the face amount of
the collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In addition, in light
of the residual risk of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
to be viewed as speculative.
Investing in foreign securities offers potential benefits not
available from investments solely in securities of domestic issuers,
including the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign bond or
other markets that do not move in a manner parallel to U.S. markets.
Investments in foreign securities present additional risks and
considerations not typically associated with investments in domestic
securities: reduction of income by foreign taxes; fluctuation in value
of foreign portfolio investments due to changes in currency rates and
control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack
of uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic issuers; less volume on foreign
exchanges than on U.S. exchanges; greater volatility and less liquidity
on foreign markets than in the U.S.; less regulation of foreign issuers,
stock exchanges and brokers than in the U.S.; greater difficulties in
commencing lawsuits; higher brokerage commission rates than in the U.S.;
increased risks of delays in settlement of portfolio transactions or loss
of certificates for portfolio securities; possibilities in some countries
of expropriation, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and unfavorable
differences between the U.S. economy and foreign economies. In the past,
U.S. Government policies have discouraged certain investments abroad by
U.S. investors, through taxation or other restrictions, and it is possible
that such restrictions could be re-imposed.
Money Market Instruments. The money market instruments in which the Fund
may invest include the following:
- Bank Obligations and Instruments Secured Thereby. These include
time deposits, certificates of deposit and bankers' acceptances if they
are: (i) obligations of a domestic bank with total assets of at least $1
billion or (ii) U.S. dollar-denominated obligations of a foreign bank with
total assets of at least U.S. $1 billion. The Fund may also invest in
instruments secured by such obligations (e.g., debt which is guaranteed
by the bank). For purposes of this section, the term "bank" includes
commercial banks, savings banks, and savings and loan associations which
may or may not be members of the Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate, whether or not subject to
withdrawal penalties. However, such deposits which are subject to
withdrawal penalties, other than those maturing in seven days or less, are
subject to the 10% limitation on the Fund's net assets that may be
invested in illiquid investments, set forth in the Prospectus under
"Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit instruments
used to finance the import, export, transfer or storage of goods. They
are deemed "accepted" when a bank guarantees their payment at maturity.
- Commercial Paper. The Fund's commercial paper investments in
addition to those described in the Prospectus include the following.
Variable Amount Master Demand Notes. Master demand notes are
corporate obligations that permit the investment of fluctuating amounts
by the Fund at varying rates of interest pursuant to direct arrangements
between the Fund, as lender, and the borrower. They permit daily changes
in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to
the full amount of the note without penalty. These notes may or may not
be backed by bank letters of credit. Because these notes are direct
lending arrangements between the lender and borrower, it is not generally
contemplated that they will be traded. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem is dependent upon the ability of
the borrower to pay principal and interest on demand. The Fund has no
limitations on the type of issuer from whom these notes will be purchased.
The Manager will consider the earning power, cash flow and other liquidity
ratios of the issuer, and its ability to pay principal and interest on
demand, including a situation in which all holders of such notes made
demand simultaneously. Investments in bank time deposits and master
demand notes are subject to the 10% of total assets limitation on illiquid
securities.
Floating Rate/Variable Rate Notes. Some of the notes the Fund
may purchase may have variable or floating interest rates. Variable rates
are adjustable at stated periodic intervals. Floating rates are
automatically adjusted according to a specified market rate for such
investments, such as the percentage of the prime rate of a bank, or the
91-day U.S. Treasury Bill rate. Such obligations may be secured by bank
letters of credit or other credit support arrangements.
Other Investment Techniques and Strategies
- Writing Covered Calls. As described in the Prospectus, the Fund
may write covered calls. When the Fund writes a call on an investment, it
receives a premium and agrees to sell the callable investment to a
purchaser of a corresponding call during the call period (usually not more
than 9 months) at a fixed exercise price (which may differ from the market
price of the underlying investment) regardless of market price changes
during the call period. To terminate its obligation on a call it has
written, the Fund may purchase a corresponding call in a "closing
purchase transaction." A profit or loss will be realized, depending upon
whether the net of the amount of option transaction costs and the premium
received on the call the Fund has written is more or less than the price
of the call the Fund subsequently purchased. A profit may also be
realized if the call lapses unexercised, because the Fund retains the
underlying investment and the premium received. Those profits are
considered short-term capital gains for Federal income tax purposes, as
are premiums on lapsed calls, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to the lack of a market, it would have to hold the
callable investment until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or deliverable bonds, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar value of deliverable securities or liquid assets. The Fund will
segregate additional liquid assets if the value of the escrowed assets
drops below 100% of the current value of the Future. In no circumstances
would an exercise notice as to a Future put the Fund in a short futures
position.
The Fund's Custodian, or a securities depository acting for the
Custodian, will act as the Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which
the Fund has written options that are traded on exchanges, or as to other
acceptable escrow securities, so that no margin will be required from the
Fund for such option transactions. OCC will release the securities
covering a call on the expiration of the call or when the Fund enters into
a closing purchase transaction. Call writing affects the Fund's turnover
rate and the brokerage commissions it pays. Commissions, normally higher
than on general securities transactions, are payable on writing or
purchasing a call.
- Hedging With Options and Futures Contracts. The Fund may use
hedging instruments for the purposes described in the Prospectus. When
hedging to attempt to protect against declines in the market value of the
Fund's portfolio, or to permit the Fund to retain unrealized gains in the
value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons, the Fund may: (i) sell Futures,
(ii) buy puts on such Futures or securities, or (iii) write calls on
securities held by it or on Futures. When hedging to protect against the
possibility that portfolio securities are not fully included in a rise in
value of the debt securities market, the Fund may: (i) buy Futures, or
(ii) buy calls on such Futures or on securities. When hedging to protect
against declines in the dollar value of a foreign currency-denominated
security, the Fund may: (a) buy puts on that foreign currency and on
foreign currency Futures, (b) write calls on that currency or on such
Futures, or (c) enter into Forward Contracts at a higher or lower rate
than the spot ("cash") rate.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's investment activities in the underlying
cash market. In the future, the Fund may employ hedging instruments and
strategies that are not presently contemplated but which may be developed,
to the extent such investment methods are consistent with the Fund's
investment objective, and are legally permissible and disclosed in the
Prospectus. Additional information about the hedging instruments the Fund
may use is provided below.
- Financial Futures and Interest Rate Futures. The Fund may buy
and sell futures contracts relating to a securities index ("Financial
Futures"). Financial futures are contracts based on the future value of
the basket of securities that comprise the underlying index. The
contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transaction or to enter into an offsetting contract.
No physical delivery of the securities underlying the index is made on
settling the futures obligation. No monetary amount is paid or received
by the Fund on the purchase or sale of a Financial Future.
The Fund may also buy Futures relating to debt securities ("Interest
Rate Futures"). An Interest Rate Future obligates the seller to deliver
and the purchaser to take a specific type of debt security at a specific
future date for a fixed price to settle the futures transaction, or to
enter into an offsetting contract. As with Financial Futures, no monetary
amount is paid or received by the Fund on the purchase of an Interest Rate
Future.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment, in cash or U.S. Treasury bills, with
the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however, the futures broker can
gain access to that account only under certain specified conditions. As
the Future is marked to market (that is, its value on the Fund's books is
changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures
broker on a daily basis.
At any time prior to the expiration of the Future, the Fund may elect
to close out its position by taking an opposite position, at which time
a final determination of variation margin is made and additional cash is
required to be paid by or released to the Fund. Any gain or loss is then
realized by the Fund on the Future for tax purposes. Although Financial
Futures by their terms call for settlement by the delivery of cash, and
Interest Rate Futures call for the delivery of a specific debt security,
in most cases the settlement obligation is fulfilled without such delivery
by entering into an offsetting transaction. All Futures transactions are
effected through a clearing house associated with the exchange on which
the contracts are traded.
- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put lapses
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price,
which will usually exceed the market value of the investment at that time.
In that case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
- Purchasing Puts and Calls. The Fund may purchase calls to
protect against the possibility that the Fund's portfolio will not
participate in an anticipated rise in the securities market. When the Fund
purchases a call (other than in a closing purchase transaction) it pays
a premium and, except as to calls on indices or Financial Futures, has the
right to buy the underlying investment from a seller of a corresponding
call on the same investment during the call period at a fixed exercise
price. In purchasing a call, the Fund benefits only if the call is sold
at a profit or if, during the call period, the market price of the
underlying investment is above the sum of the call price, transaction
costs, and the premium paid, and the call is exercised. If the call is
not exercised or sold (whether or not at a profit), it will become
worthless at its expiration date and the Fund will lose its premium
payment and the right to purchase the underlying investment. When the
Fund purchases a call on an Index or Financial Future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund.
When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period
at a fixed exercise price. Buying a put on an investment the Fund owns
(a "protective put") enables the Fund to attempt to protect itself during
the put period against a decline in the value of the underlying investment
below the exercise price by selling the underlying investment at the
exercise price to a seller of a corresponding put. If the market price
of the underlying investment is equal to or above the exercise price and
as a result the put is not exercised or resold, the put will become
worthless at its expiration and the Fund will lose the premium payment and
the right to sell the underlying investment. However, the put may be sold
prior to expiration (whether or not at a profit).
Buying a put on an investment it does not own, either a put on an
index or a put on a Future not held by the Fund, permits the Fund either
to resell the put or buy the underlying investment and sell it at the
exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price, and as a result the put is not
exercised, the put will become worthless on the expiration date. In the
event of a decline in price of the underlying investment, the Fund could
exercise or sell the put at a profit to attempt to offset some or all of
its loss on its portfolio securities.
The Fund's option activities may affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate. The exercise by the Fund of puts on securities will cause
the sale of underlying investments, increasing portfolio turnover.
Although the decision whether to exercise a put it holds is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons that would not exist in the absence of the put.
The Fund will pay a brokerage commission each time it buys or sells a
call, put or an underlying investment in connection with the exercise of
a put or call. Those commissions may be higher than the commissions for
direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value
of the underlying investments and, consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in
options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
- Options on Foreign Currency. The Fund intends to write and
purchase calls on foreign currencies. The Fund may purchase and write
puts and calls on foreign currencies that are traded on a securities or
commodities exchange or over-the-counter markets or are quoted by major
recognized dealers in such options. It does so to protect against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If the Manager
anticipates a rise in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such
securities may be partially offset by purchasing calls or writing puts on
that foreign currency. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by writing calls or
purchasing puts on that foreign currency. However, in the event of
currency rate fluctuations adverse to the Fund's position, it would lose
the premium it paid and transactions costs.
A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline due
to an expected adverse change in the exchange rate in the U.S. dollar
value of a security which the Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. This is a
cross-hedging strategy. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
custodian, cash or U.S. Government Securities in an amount not less than
the value of the underlying foreign currency in U.S. dollars marked-to-
market daily.
- Forward Contracts. The Fund may enter into foreign currency
exchange contracts ("Forward Contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of foreign currency
at a specific future date for a fixed price. A Forward Contract involves
bilateral obligations of one party to purchase, and another party to sell,
a specific currency at a future date (which may be any fixed number of
days from the date of the contract agreed upon by the parties), at a price
set at the time the contract is entered into. These contracts are traded
in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Fund may enter
into a Forward Contract in order to "lock in" the U.S. dollar price of a
security denominated in a foreign currency which it has purchased or sold
but which has not yet settled, or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S.
dollar and a foreign currency.
There is a risk that use of Forward Contracts may reduce the gain
that would otherwise result from a change in the relationship between the
U.S. dollar and a foreign currency. To attempt to limit its exposure to
loss under Forward Contracts in a particular currency, the Fund limits its
use of these contracts to the amount of its net assets denominated in that
currency or denominated in a closely-correlated foreign currency. Forward
contracts include standardized foreign currency futures contracts which
are traded on exchanges and are subject to procedures and regulations
applicable to other Futures. The Fund may also enter into a forward
contract to sell a foreign currency denominated in a currency other than
that in which the underlying security is denominated. This is done in the
expectation that there is a greater correlation between the foreign
currency of the forward contract and the foreign currency of the
underlying investment than between the U.S. dollar and the foreign
currency of the underlying investment. This technique is referred to as
"cross hedging." The success of cross hedging is dependent on many
factors, including the ability of the Manager to correctly identify and
monitor the correlation between foreign currencies and the U.S. dollar.
To the extent that the correlation is not identical, the Fund may
experience losses or gains on both the underlying security and the cross
currency hedge.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
There is no limitation as to the percentage of the Fund's assets that
may be committed to foreign currency exchange contracts. The Fund does
not enter into such forward contracts or maintain a net exposure in such
contracts to the extent that the Fund would be obligated to deliver an
amount of foreign currency in excess of the value of the Fund's assets
denominated in that currency, or enter into a "cross hedge," unless it is
denominated in a currency or currencies that the Manager believes will
have price movements that tend to correlate closely with the currency in
which the investment being hedged is denominated. See "Tax Aspects of
Covered Calls and Hedging Instruments" below for a discussion of the tax
treatment of foreign currency exchange contracts.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment by entering into a Forward
Contract, for a fixed amount of U.S. dollars per unit of foreign currency,
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction ("transaction hedge"). The Fund will thereby be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the currency exchange rates during the
period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are
made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In this situation the Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed
U.S. dollar amount where the Fund believes that the U.S. dollar value of
the currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in
which portfolio securities of the Fund are denominated ("cross hedge").
The Fund's Custodian will place cash or U.S. Government securities
or other liquid high-quality debt securities in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts to cover its short positions. If the
value of the securities placed in the separate account declines,
additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts. As an alternative to
maintaining all or part of the separate account, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency
being hedged by a forward sale contract at a price no higher than the
forward contract price, or the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward
purchase contract at a price as high or higher than the forward contract
price. Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such
contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one part, the measure of that part's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
initial futures margin and related option premiums to no more than 5% of
the Fund's net assets for hedging strategies that are not considered bona
fide hedging strategies under the Rule. Under the Rule, the Fund also
must use short Futures and Futures options positions solely for "bona fide
hedging purposes" within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser). The exchanges also impose
position limits on Futures transactions. An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
purchases a Future, the Fund will maintain, in a segregated account or
accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
market value of the securities underlying such Future, less the margin
deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months, whether
or not they were purchased on the exercise of a call held by the Fund;
(ii) purchasing options which expire in less than three months; (iii)
effecting closing transactions with respect to calls or puts written or
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held less than three months.
Certain foreign currency exchange contracts (Forward Contracts) in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a
position(s) making up a straddle is allowed only to the extent such loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle. Disallowed loss is generally allowed at the point where there
is no unrecognized gain in the offsetting positions making up the
straddle, or the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as an ordinary gain or loss. Currency gains and losses are
offset against market gains and losses before determining a net "section
988" gain or loss under the Internal Revenue Code, which may increase or
decrease the amount of the Fund's investment company income available for
distribution to its shareholders.
- Risks of Hedging With Options and Futures. An option position
may be closed out only on a market that provides secondary trading for
options of the same series, and there is no assurance that a liquid
secondary market will exist for any particular option. In addition to the
risks associated with hedging that are discussed in the Prospectus and
above, there is a risk in using short hedging by selling Futures to
protect against declines in the value of the Fund's portfolio securities
(due to an increase in interest rates). The risk is that the prices of
Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions,
due to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets depends
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the portfolio securities being hedged and movements in the price
of the hedging instruments, the Fund may use hedging instruments in a
greater dollar amount than the dollar amount of portfolio securities being
hedged if the historical volatility of the prices of the portfolio
securities being hedged is more than the historical volatility of the
applicable index. It is also possible that if the Fund has used hedging
instruments in a short hedge, the market may advance and the value of
equity securities held in the Fund's portfolio may decline. If that
occurred, the Fund would lose money on the hedging instruments and also
experience a decline in value in its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over
time the value of a diversified portfolio of equity securities will tend
to move in the same direction as the indices upon which the hedging
instruments are based.
If the Fund uses hedging instruments to establish a position in the
equities markets as a temporary substitute for the purchase of individual
debt securities (long hedging) by buying Futures and/or calls on such
Futures or on debt securities, it is possible that the market may decline.
If the Fund then concludes not to invest in equity securities at that time
because of concerns as to a possible further market decline or for other
reasons, the Fund will realize a loss on the hedging instruments that is
not offset by a reduction in the price of the debt securities purchased.
- Repurchase Agreements. The Fund may acquire securities subject
to repurchase agreements for liquidity purposes to meet anticipated
redemptions, or pending the investment of the proceeds from sales of Fund
shares, or pending the settlement of purchases of portfolio securities.
In a repurchase transaction, the Fund acquires a security from, and
simultaneously resells it to, an approved vendor. An "approved vendor"
is a U.S. commercial bank or the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in government
securities, which must meet credit requirements set by the Fund's Board
of Trustees from time to time. The resale price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective
for the period during which the repurchase agreement is in effect. The
majority of these transactions run from day to day, and delivery pursuant
to the resale typically will occur within one to five days of the
purchase. Repurchase agreements are considered "loans" under the
Investment Company Act, collateralized by the underlying security. The
Fund's repurchase agreements require that at all times while the
repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral on each business day must at least equal the market value of
the loaned securities and must consist of cash, bank letters of credit or
securities of the U.S. Government (or its agencies or instrumentalities).
To be acceptable as collateral, letters of credit must obligate a bank to
pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the dividends
or interest on loaned securities and also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and
(c) interest on short-term debt securities purchased with such loan
collateral. Either type of interest may be shared with the borrower. The
Fund may also pay reasonable finder's, custodian and administrative fees.
The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned
securities on five days' notice or in time to vote on any important
matter.
- Borrowing for Leverage. From time to time, the Fund may borrow
from banks on an unsecured basis to invest the borrowed funds in portfolio
securities. Borrowing is subject to the restrictions stated in the
Prospectus. Pursuant to the requirements of the Investment Company Act
of 1940 (the "Investment Company Act"), any borrowing for this purpose
will only be made if the value of the Fund's assets, less its liabilities
other than borrowings, is equal to at least 300% of all borrowings
including the proposed borrowing. If the value of the Fund's assets, when
computed in that manner, should fail to meet the 300% asset coverage
requirement, the Fund is required to reduce its bank debt within three
days to the extent necessary to meet that coverage requirement. To do so,
the Fund may have to sell a portion of its investments at a time when it
would otherwise not want to sell the securities. Interest on money the
Fund borrows is an expense the Fund would not otherwise incur, so that
during periods of substantial borrowings, its expenses may increase more
than the expenses of funds that do not borrow.
- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. The commitment to purchase a security
for which payment will be made on a future date may be deemed a separate
security and involve a risk of loss if the value of the security declines
prior to the settlement date. During the period between commitment by the
Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser,
and no interest accrues to the purchaser from the transaction. Such
securities are subject to market fluctuation; the value at delivery may
be less than the purchase price. The Fund will maintain a segregated
account with its Custodian, consisting of cash, U.S. Government securities
or other high grade debt obligations at least equal to the value of
purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments provide the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objective cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of: (i) 67% or more of the shares present or
represented by proxy at such meeting, if the holders of more than 50% of
the outstanding shares are present, or (ii) more than 50% of the
outstanding shares.
Under these additional restrictions, the Fund cannot: (1) buy or sell
real estate, or commodities or commodity contracts, including futures
contracts; however, the Fund may invest in debt securities secured by real
estate or interests therein or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein and
the Fund may buy and sell any of the Hedging Instruments which it may use
as approved by the Fund's Board, whether or not such Hedging Instrument
is considered to be a commodity or commodity contract; (2) buy securities
on margin, except that the Fund may make margin deposits in connection
with any of the Hedging Instruments which it may use; (3) underwrite
securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter for purposes of the Securities Act of 1933;
(4) buy and retain securities of any issuer if those officers, Trustees
or Directors of the Fund or the Manager who beneficially own more than .5%
of the securities of such issuer together own more than 5% of the
securities of such issuer; (5) invest in oil, gas, or other mineral
exploration or development programs; or (6) buy the securities of any
company for the purpose of exercising management control.
For purposes of the Fund's policy not to concentrate described under
investment restriction number two of the Prospectus, the Fund has adopted
the Industry Classifications set forth in Appendix A to this Statement of
Additional Information.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees And Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Integrity Funds, Oppenheimer Cash Reserves, Oppenheimer Tax-Exempt Bond
Fund, Oppenheimer Limited-Term Government Fund, The New York Tax-Exempt
Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer
Strategic Income & Growth Fund, Oppenheimer Strategic Investment Grade
Bond Fund, and Oppenheimer Variable Account Funds; as well as the
following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial America Fund, L.P., Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax
Exempt Trust and Centennial California Tax Exempt Trust, (all of the
foregoing funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver-based OppenheimerFunds. As of December 30, 1994, the Trustees
and officers of the Fund as a group owned of record or beneficially less
than 1% of each class of shares of the Fund. The foregoing statement does
not reflect ownership of shares held of record by an employee benefit plan
for employees of the Manager (for which plan, two of the officers listed
above, Messrs. Fossel and Donohue, are trustees), other than the shares
beneficially owned under that plan by the officers of the Fund listed
above.
Robert G. Avis, Trustee; Age 63.*
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 80.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 64.
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly associated
with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee; Age 52.*
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager; President
and a director of Oppenheimer Acquisition Corp. ("OAC"), the Manager's
parent holding company; President and a director of HarbourView Asset
Management Corporation ("HarbourView"), a subsidiary of the Manager; a
director of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President of the Manager.
Raymond J. Kalinowski, Trustee; Age 65.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice Chairman
and a director of A.G. Edwards, Inc., parent holding company of A.G.
Edwards & Sons, Inc. (a broker-dealer), of which he was a Senior Vice
President.
C. Howard Kast, Trustee; Age 73.
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; Age 73.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age 79.
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting Nurse
Corporation of Colorado; formerly Senior Vice President and a director of
Van Gilder Insurance Corp. (insurance brokers).
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
James C. Swain, Chairman and Trustee; Age 61.*
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and Director of
Centennial Asset Management Corporation, an investment adviser subsidiary
of the Manager ("Centennial"); formerly Chairman of the Board of SSI.
Andrew J. Donohue, Vice President; Age 44.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and
Oppenheimer Funds Distributor, Inc. (the "Distributor"); an officer of
other OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; Partner in Kraft &
McManimon (a law firm), prior to which he was an officer of First
Investors Corporation (a broker-dealer) and First Investors Management
Company, Inc. (broker-dealer and investment adviser) and a director and
an officer of the First Investors Family of Funds and First Investors Life
Insurance Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age 58.
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President and
Treasurer of the Distributor and HarbourView; Senior Vice President,
Treasurer, Assistant Secretary and a director of Centennial; Vice
President, Treasurer and Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
David P. Negri, Vice President and Portfolio Manager; Age 36.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds.
Arthur P. Steinmetz, Vice President and Portfolio Manager; Age 40.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager; an officer of other
OppenheimerFunds.
Robert G. Zack, Assistant Secretary; Age 46.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert J. Bishop, Assistant Treasurer; Age 36.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an officer
of other OppenheimerFunds; previously a Fund Controller of the Manager,
prior to which he was an Accountant for Resolution Trust Corporation and
previously an Accountant and Commissions Supervisor for Stuart James
Company Inc., a broker-dealer.
__________________
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Scott Farrar, Assistant Treasurer; Age 29.
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an officer
of other OppenheimerFunds; previously a Fund Controller for the Manager,
prior to which he was an International Mutual Fund Supervisor for Brown
Brothers Harriman & Co. (a bank) and previously a Senior Fund Accountant
for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are
affiliated with the Manager; they and the Trustees of the Fund who are
affiliated with the Manager (Messrs. Fossel and Swain, who are both
officers and Trustees) receive no salary or fee from the Fund. The
Trustees of the Fund (excluding Messrs. Fossel and Swain) received the
total amounts shown below from all 22 of the Denver-based OppenheimerFunds
(including the Fund) listed in the first paragraph of this section, for
services in the positions shown:
<TABLE>
<CAPTION>
Total Compensation From All
Name Position Denver-based OppenheimerFunds1
<S> <C> <C>
Robert G. Avis Trustee $53,000.00
William A. Baker Study and Audit Committee $73,257.01
Chairman and Trustee
Charles Conrad, Jr. Study and Audit Committee $68,293.67
Member and Trustee
Raymond J. Kalinowski Trustee $53,000.00
C. Howard Kast Trustee $53,000.00
Robert M. Kirchner Study and Audit Committee $68,293.67
Member and Trustee
Ned M. Steel Trustee $53,000.00
<FN>
______________________
1 For the 1994 calendar year.
</TABLE>
- Major Shareholders. As of December 30, 1994, Oppenheimer Funds
Distributor, Inc. (the Fund's Distributor), P.O. Box 5061, Denver,
Colorado 80217, beneficially owned 505,050.505 Class A shares (10.4% of
the Class A shares of the Fund). As of December 30, 1994, no person owned
of record or was known by the Fund to own beneficially 5% or more of the
Class B shares of the Fund or of the Fund as a whole.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Fossel and Mr. Swain)
serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain
printing and registration costs and non-recurring expenses, including
litigation costs. The Fund also pays its organizational and start-up
expenses. For the fiscal years ended September 30, 1994 and 1993, and for
the fiscal period from August 4, 1992 (commencement of operations) through
September 30, 1992, the management fees payable by the Fund to the Manager
were $222,890, $142,053 and $8,903, respectively. Because of the $12,964
of Fund expenses assumed by the Manager during the fiscal period ended
September 30, 1992 under a voluntary expense reimbursement undertaking
similar to that described below, no management fees were effectively paid
to the Manager for that period. During the year ended September 30, 1993,
the Manager assumed $34,955 of Fund Expenses.
The advisory agreement contains no provision limiting the Fund's
expenses. However, independently of the advisory agreement, the Manager
has undertaken that total expenses of the Fund in any fiscal year
(including the management fee but excluding taxes, interest, brokerage
commissions, distribution assistance payments and extraordinary expenses,
such as litigation costs) shall not exceed the most stringent expense
limitation imposed under state law applicable to the Fund. Pursuant to
the undertaking, the Manager's fee will be reduced at the end of the month
so that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits expenses (with specified exclusions) to
2.5% of the first $30 million of average annual net assets, 2% of the next
$70 million of average net assets and 1.5% of average net assets in excess
of $100 million. The Manager reserves the right to amend or terminate
that undertaking at any time. Until December 1, 1993, the Manager had
also undertaken to assume the Fund's expenses (other than extraordinary
non-recurring expenses) to enable the Fund to pay a dividend of $.3036 per
share per annum, with the limitation that the dividend could not exceed
the Fund's annual gross earnings per share. That undertaking terminated
December 1, 1993.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and
duties under the Agreement, the Manager is not liable for any loss
sustained by reason of good faith errors or omissions in connection with
any matters to which the Agreement relates. The Agreement permits the
Manager to act as investment adviser for any other person, firm or
corporation and to use the name "Oppenheimer" in connection with other
investment companies for which it may act as investment adviser or general
distributor. If the Manager or one of its affiliates shall no longer act
as investment adviser to the Fund, the right of the Fund to use the name
"Oppenheimer" as part of its name may be withdrawn.
- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A and Class B shares but
is not obligated to sell a specific number of shares. Expenses normally
attributable to sales, (excluding payments under the Distribution and
Service Plans but including advertising and the cost of printing and
mailing prospectuses, other than those furnished to existing
shareholders), are borne by the Distributor. During the fiscal period
from August 4, 1992 (commencement of operations) through September 30,
1992, the aggregate amount of sales charges on sales of the Fund's Class
A shares were $114,661, of which the Distributor and an affiliated broker-
dealer retained in the aggregate $19,878. During the Fund's fiscal years
ended September 30, 1993 and 1994, the aggregate sales charges on sales
of the Fund's Class A shares were $466,995 and $448,316, respectively, of
which the Distributor and an affiliated broker-dealer retained in the
aggregate $153,037 and $154,348 in those respective years. During the
Fund's fiscal period ended September 30, 1993 and during the fiscal year
ended September 30, 1994, the contingent deferred sales charges collected
on the Fund's Class B shares totalled $5,424 and $21,256, respectively,
all of which the Distributor retained. For additional information about
distribution of the Fund's shares and the expenses connected with such
activities, please refer to "Distribution and Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable
price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above.
Regardless, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and are otherwise paid only if it
appears likely that a better price or execution can be obtained. When the
Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates are combined. The transactions
effected pursuant to such combined orders are averaged as to price and
allocated in accordance with the purchase or sale orders actually placed
for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter, and purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of such orders at the most favorable net price.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broaden the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement, the Distribution Plans described
below, or in any agreements related thereto) annually reviews information
furnished by the Manager as to the commissions paid to brokers furnishing
such services so that the Board may ascertain whether the amount of such
commissions was reasonably related to the value or benefit of such
services.
During the Fund's fiscal year ended September 30, 1994, total
brokerage commissions paid by the Fund (not including spreads or
concessions on principal transactions on a net trade basis) were $54, all
of which was paid to brokers as commissions in return for research
services; the aggregate dollar amount of those transactions was $16,576.
The transactions giving rise to those commissions were allocated in
accordance with the Manager's internal allocation procedures.
Performance of the Fund
As described in the Prospectus, from time to time the "standardized
yield," "dividend yield," "average annual total return," "total return"
and "total return at net asset value" of an investment in each class of
Fund shares may be advertised. An explanation of how standardized yield,
dividend yield, average annual total return and total return are
calculated for each class and the components of those calculations is set
forth below.
- Standardized Yields.
- Yield. The Fund's "yield" (referred to as "standardized yield") for
a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Yield = 2 ((---- + 1) -1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the yield for a 30-day period occurs at a constant rate for a six-month
period and is annualized at the end of the six-month period. This
standardized yield is not based on actual distributions paid by the Fund
to shareholders in the 30-day period, but is a hypothetical yield based
on the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 6.16% and 5.61%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A or Class B share dividends derived
from net investment income during a stated period. Distribution return
includes dividends derived from net investment income and from realized
capital gains declared during a stated period. Under those calculations,
the dividends and/or distributions for that class declared during a stated
period of one year or less (for example, 30 days) are added together, and
the sum is divided by the maximum offering price per share of that class
on the last day of the period. When the result is annualized for a period
of less than one year, the "dividend yield" is calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B shares, the maximum offering price
is the net asset value per share, without considering the effect of
contingent deferred sales charges.
From time to time, similar calculations may also be made using the
Class A net asset value (instead of its respective maximum offering price)
at the end of the period. The dividend yields on Class A shares for the
30-day period ended September 30, 1994 were 6.42% and 6.66% when
calculated at maximum offering price and net asset value, respectively.
The dividend yield on Class B shares for the 30-day period ended September
30, 1994 was 5.91% when calculated at net asset value.
- Total Return Information.
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
The "average annual total return" on an investment in Class A and
Class B shares of the Fund for the one year period ended September 30,
1994 was (2.91)% and (4.15)%, respectively.
- Cumulative Total Return. The "cumulative total return" calculation
measures the change in the value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same
factors as average annual total return, but it does not average the rate
of return on an annual basis. Cumulative total return is determined as
follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, the payment of the
contingent deferred sales charge of 4.0% in the first year, 3.0% in the
second year, 2.0% in the third and fourth years, 1.0% in the fifth year
and none thereafter is applied, as described in the Prospectus. Total
returns also assume that all dividends and capital gains distributions
during the period are reinvested to buy additional shares at net asset
value per share, and that the investment is redeemed at the end of the
period. The "total return" on an investment in Class A shares of the Fund
(using the method described above) for the fiscal year ended September 30,
1994, was 1.18%. The cumulative total return on Class B shares for the
period from November 30, 1993 (inception of the class) through September
30, 1994 was 3.63%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote total return at net asset value for Class A or Class B shares.
Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred
sales charges) and takes into consideration the reinvestment of dividends
and capital gains distributions. The "total return at net asset value"
on the Fund's Class A and Class B shares for the one-year period ended
September 30, 1994 was 0.61% and (0.39)%, respectively.
- Other Performance Comparisons. From time to time, the Fund may
publish the ranking of the performance of its Class A or Class B shares
by Lipper Analytical Services, Inc. ("Lipper"), a widely-recognized
independent service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund is ranked against (i) all other funds, other
than money market funds, and (ii) all other short-term investment grade
bond funds. The Lipper performance analysis includes the reinvestment of
capital gain distributions and income dividends but does not take sales
charge or taxes into consideration. From time to time the Fund may
include in its advertisement and sales literature performance information
about the Fund cited in other newspapers and periodicals such as The New
York Times, which may include performance quotations from other sources,
including Lipper and Morningstar.
From time to time, the Fund may publish the ranking of the
performance of its Class A or Class B shares by Morningstar, Inc.
("Morningstar"), an independent mutual fund monitoring service that ranks
various mutual funds, including the Fund, monthly in broad investment
categories (equity, taxable bond, municipal bond and hybrid) based upon
the funds' three, five and ten-year average annual total returns (when
available) and a risk factor that reflects fund performances relative to
three-month U.S. Treasury bill monthly returns. Such returns are adjusted
for fees and sales loads. There are five ranking categories with a
corresponding number of stars: highest (5), above average (4), neutral
(3), below average (2) and lowest (1). The top ten percent of the funds,
series or classes in an investment category receive five stars; 22.5%
receive four stars; 35% receive three stars; 22.5% receive two stars; and
the bottom 10% receive one star. Morningstar ranks the Fund in relation
to other general corporate bond funds.
The total return on an investment made in shares of the Fund may be
compared with the performance for the same period of one or more of the
following indices: the Consumer Price Index, the Salomon Brothers World
Government Bond Index, the Salomon Brothers High Grade Corporate Bond
Index, the Lehman Brothers Aggregate Bond Index, the Lehman Brothers
Government/Corporate Bond Index and the J.P. Morgan Government Bond Index.
The Consumer Price Index is generally considered to be a measure of
inflation. The Salomon Brothers World Government Bond Index generally
represents the performance of government debt securities of various
markets throughout the world, including the United States. The Salomon
Brothers High Grade Corporate Bond Index generally represents the
performance of high grade long-term corporate bonds, the Lehman Brothers
Aggregate Bond Index generally represents the performance of investment
grade debt securities with a maturity of at least one year and the Lehman
Brothers Government/Corporate Bond Index generally represents the
performance of intermediate and long-term government and investment grade
corporate debt securities. The J.P. Morgan Government Bond Index
generally represents the performance of government bonds issued by various
countries including the United States. The foregoing bond indices are
unmanaged, do not reflect reinvestment of capital gains or take sales
charges into consideration, as these items are not applicable to indices.
Investors may also wish to compare the Fund's Class A or Class B
yields and returns to the yields and returns on fixed income investments
available from banks and thrift institutions, such as certificates of
deposit, ordinary interest-paying checking and savings accounts, and other
forms of fixed or variable time deposits, and various other instruments
such as Treasury bills. However, the Fund's returns and share price are
not guaranteed and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return, and
Treasury bills are guaranteed as to principal and interest by the U.S.
government.
When redeemed, an investor's shares may be worth more or less than
their original cost. Returns for any given past period will not be a
predication or representation by the Fund of future returns. The returns
of the Class A and Class B shares of the Fund are affected by portfolio
quality, the type of investments the Fund holds and its operating expenses
allocated to a particular class.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and a
Distribution and Service Plan for Class B shares under Rule 12b-1 of the
Investment Company Act pursuant to which the Fund will reimburse the
Distributor quarterly for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class.
In addition, under the Plans the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as its continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Either Plan may be terminated at
any time by the vote of a majority of the Independent Trustees or by the
vote of the holders of a "majority" (as defined in the Investment Company
Act) of the outstanding shares of that class. Neither Plan may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. All material amendments must be approved by the Independent
Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any payment. The report for the Class B Plan shall also
include the distribution costs for that quarter, and such costs for
previous fiscal periods that have been carried forward, as explained in
the Prospectus and below. Those reports, including the allocations on
which they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on selection or nomination is approved by a majority of the
Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers, did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate and set no requirement for a minimum amount of
the assets.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totalled $61,864, all of which was paid by the Distributor
to Recipients, including $13,353 paid to MML Investor Services, Inc., an
affiliate of the Distributor. Any unreimbursed expenses incurred by the
Distributor with respect to Class A shares for any fiscal year may not be
recovered in subsequent years. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charge, or other financial costs, or allocation of overhead by
the Distributor.
The Class B Plan allows the service fee payment to be paid by the
Distributor to Recipients in advance for the first year Class B shares are
outstanding, and thereafter on a quarterly basis, as described in the
Prospectus. Service fee payments by the Distributor to Recipients will
be made (i) in advance for the first year Class B shares are outstanding,
following the purchase of shares, in an amount equal to 0.25% of the net
asset value of the shares purchased by the Recipient or its customers and
(ii) thereafter, on a quarterly basis, computed as of the close of
business each day at an annual rate of .25% of the average daily net asset
value of Class B shares held in accounts of the Recipient or its
customers. An exchange of shares does not entitle the Recipient to an
advance service fee payment. In the event Class B shares are redeemed
during the first year that the shares are outstanding, the Recipient will
be obligated to repay a pro rata portion of the advance payment for those
shares to the Distributor. Payments made under the Class B Plan during the
fiscal year ended September 30, 1994 totalled $60,156, all paid by the
Distributor to Recipients, including $191 paid to a dealer affiliated with
the Distributor.
Although the Class B Plan permits the Distributor to retain both the
asset-based sales charges and the service fee on Class B shares, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor intends to pay the service fee to Recipients in
the manner described above. A minimum holding period may be established
from time to time under the Class B Plan by the Board. Initially, the
Board has set no minimum holding period. All payments under the Class B
Plan are subject to the limitations imposed by the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. on payments of
asset-based sales charges and service fees. The Distributor anticipates
that it will take a number of years for it to recoup (from the Fund's
payments to the Distributor under the Class B Plan and recoveries of the
contingent deferred sales charge) the sales commissions paid to authorized
brokers or dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B shares of the Fund. The
Distributor's actual distribution expenses for any given year may exceed
the aggregate of payments received pursuant to the Class B Plan and from
contingent deferred sales charges, and such expenses will be carried
forward and paid in future years. The Fund will be charged only for
interest expenses, carrying charges or other financial costs that are
directly related to the carry-forward of actual distribution expenses.
For example, if the Distributor incurred distribution expenses of $4
million in a given fiscal year, of which $2,000,000 was recovered in the
form of contingent deferred sales charges paid by investors and $1,600,000
was reimbursed in the form of payments made by the Fund to the Distributor
under the Class B Plan, the balance of $400,000 (plus interest) would be
subject to recovery in future fiscal years from such sources.
The Class B Plan allows for the carry-forward of distribution
expenses, to be recovered from asset-based sales charges in subsequent
fiscal periods, as described in the Prospectus. The asset-based sales
charge paid to the Distributor by the Fund under the Class B Plan is
intended to allow the Distributor to recoup the cost of sales commissions
paid to authorized brokers and dealers at the time of sale, plus financing
costs, as described in the Prospectus. Such payments may also be used to
pay for the following expenses in connection with the distribution of
Class B shares: (i) financing the advance of the service fee payment to
Recipients under the Class B Plan, (ii) compensation and expenses of
personnel employed by the Distributor to support distribution of Class B
shares, and (iii) costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue sky"
registration fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A and Class B Shares. The
availability of two classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B shares are the same as
those of the initial sales charge with respect to Class A shares. Any
salesperson or other person entitled to receive compensation for selling
Fund shares may receive different compensation with respect to one class
of shares than the other. The Distributor will not accept any order for
$1 million or more of Class B shares on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it
will be more advantageous for that investor to purchase Class A shares of
the Fund instead.
The two classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B shares and the dividends payable on Class B shares will be reduced by
incremental expenses borne solely by that class, including the asset-based
sales charge to which Class B shares are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of B shares does not constitute a taxable
event for the holder under Federal income tax law. If such a revenue
ruling or opinion is no longer available, the automatic conversion feature
may be suspended, in which event no further conversions of Class B shares
would occur while such suspension remained in effect. Although Class B
shares could then be exchanged for Class A shares on the basis of relative
net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the
holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A and Class B shares recognizes two
types of expenses. General expenses that do not pertain specifically to
either class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (i) Distribution Plan
fees, (ii) incremental transfer and shareholder servicing agent fees and
expenses, (iii) registration fees and (iv) shareholder meeting expenses,
to the extent that such expenses pertain to a specific class rather than
to the Fund as a whole.
Determination of Net Asset Values Per Share. The net asset values per
share of Class A and Class B shares of the Fund are determined as of the
close of business of the New York Stock Exchange on each day that the
Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual announcement (which is subject to change) states that it
will close on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It may
also close on other days. The Fund may invest a substantial portion of
its assets in debt securities and foreign securities at times which the
Exchange is closed (including weekends and holidays or after 4:00 P.M.,
New York time, on a regular business day). Because the Fund's net asset
value will not be calculated on those days, the Fund's net asset values
per share may be significantly affected on such days when shareholders may
not purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale price on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sale
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) unlisted debt securities having
a maturity in excess of 60 days are valued at the mean between the bid and
asked prices determined by a portfolio pricing service approved by the
Board or obtained from active market makers on the basis of reasonable
inquiry; (iv) short-term debt securities having a remaining maturity of
60 days or less are valued at cost, adjusted for amortization of premiums
and accretion of discounts; (v) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; and (vi) securities traded on
foreign exchanges or foreign over-the-counter markets are valued at the
closing or last sales prices reported on a principal exchange, or, if
none, at the mean between closing bid and asked prices and reflect
prevailing rates of exchange taken from the closing price on the London
foreign exchange market that day.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of the Exchange.
Events affecting the values of foreign securities traded in stock markets
that occur between the time their prices are determined and the close of
the NYSE will not be reflected in the Fund's calculation of net asset
value unless the Board of Trustees or the Manager, under procedures
established by the Board of Trustees, determines that the particular event
would materially affect the Fund's net asset value, in which case an
adjustment would be made. Foreign currency will be valued as close to the
time fixed for the valuation date as is reasonably practicable. The
values of securities denominated in foreign currency will be converted to
U.S. dollars at the prevailing rates of exchange at the time of valuation.
In the case of U.S. Government Securities, mortgage-backed
securities, foreign securities, and corporate bonds, when last sale
information is not generally available, such pricing procedures may
include "matrix" comparisons to the prices for comparable instruments on
the basis of quality, yield, maturity, and other special factors involved.
The Fund's Board of Trustees has authorized the Manager to employ a
pricing service to price U.S. Government Securities, mortgage-backed
securities, foreign government securities and corporate bonds. The
Trustees will monitor the accuracy of such pricing services by comparing
prices used for portfolio evaluation to actual sales prices of selected
securities.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i),
above. Forward currency contracts are valued at the closing price on the
London foreign exchange market. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is "marked-to-market" to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call written by the
Fund is exercised, the proceeds are increased by the premium received.
If a call or put written by the Fund expires, the Fund has a gain in the
amount of the premium; if the Fund enters into a closing purchase
transaction, it will have a gain or loss depending on whether the premium
was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for such purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If the Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A shares of the Fund
(and other eligible OppenheimerFunds) sold with a front-end sales charge
during the 13-month period from the investor's first purchase pursuant to
the Letter (the "Letter of Intent period"), which may, at the investor's
request, include purchases made up to 90 days prior to the date of the
Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestments of
dividends or distributions or purchases made at net asset value without
sales charge), which together with the investor's holdings of such funds
(calculated at their respective public offering prices calculated on the
date of the Letter) will equal or exceed the amount specified in the
Letter. This enables the investor to obtain the reduced sales charge rate
(as set forth in the Prospectus) applicable to purchases of shares in that
amount (the "intended purchase amount"). Each purchase under the Letter
will be made at the public offering price applicable to a single lump-sum
purchase of shares in the intended purchase amount, as described in the
Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of certain
OppenheimerFunds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the Shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under the
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as
described below, at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the
Distributor for that privilege at the time of reinvestment. Any capital
gain that was realized when the shares were redeemed is taxable, and
reinvestment will not alter any capital gains tax payable on that gain.
If there has been a capital loss on the redemption, some or all of the
loss may not be tax deductible, depending on the timing and amount of the
reinvestment. Under the Internal Revenue Code, if the redemption proceeds
of Fund shares on which a sales charge was paid are reinvested in shares
of the Fund or another of the OppenheimerFunds within 90 days of payment
of the sales charge, the shareholder's basis in the shares of the Fund
that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption. However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption
proceeds. The Fund may amend, suspend or cease offering this reinvestment
privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B contingent deferred
sales charge will be followed in determining the order in which shares are
transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the
plan and the Fund's other redemption requirements. Participants (other
than self-employed persons) in OppenheimerFunds-sponsored pension or
profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if such order was received by the dealer or broker
from its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be made
within seven days after the Distributor's receipt of the required
redemption documents, with signature(s) guaranteed as described in the
Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B shareholders should not establish withdrawal
plans that would require the redemption of shares purchased subject to a
contingent deferred sales charge and held less than 6 years, because of
the imposition of the Class B contingent deferred sales charge on such
withdrawals (except where the Class B contingent deferred sales charge is
waived as described in the Prospectus under "Class B Contingent Deferred
Sales Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the
Transfer Agent (on the OppenheimerFunds Application or signature-
guaranteed instructions) to exchange a pre-determined amount of shares of
the Fund for shares (of the same class) of other OppenheimerFunds
automatically on a monthly, quarterly, semi-annual or annual basis under
an Automatic Exchange Plan. The minimum amount that may be exchanged to
each other fund account is $25. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How
to Exchange Shares" in the Prospectus and below in this Statement of
Additional Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. Neither the Transfer Agent nor the Fund shall incur any
liability to the Planholder for any action taken or omitted by the
Transfer Agent in good faith to administer the Plan. Certificates will
not be issued for shares of the Fund purchased for and held under the
Plan, but the Transfer Agent will credit all such shares to the account
of the Planholder on the records of the Fund. Any share certificates held
by a Planholder may be surrendered unendorsed to the Transfer Agent with
the Plan application so that the shares represented by the certificate may
be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
OppenheimerFunds having more than one class of shares may be exchanged
only for shares of the same class of other OppenheimerFunds. Shares of
the OppenheimerFunds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All OppenheimerFunds offer
Class A shares (except for Oppenheimer Strategic Diversified Income Fund),
but only the following other OppenheimerFunds currently offer Class B
shares:
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Equity Income Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer Value Stock Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only
available by exchange)
Oppenheimer Growth Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
OppenheimerFunds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). Shares
of this Fund acquired by reinvestment of dividends or distributions from
any other of the OppenheimerFunds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may
be exchanged at net asset value for shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares of
either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other OppenheimerFunds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares (see
"Class A Contingent Deferred Sales Charge" in the Prospectus). The Class
B contingent deferred sales charge is imposed on Class B shares acquired
by exchange if they are redeemed within 6 years of the initial purchase
of the exchanged Class B shares.
When Class B shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B contingent deferred sales charge will be
followed in determining the order in which the shares are exchanged.
Shareholders should take into account the effect of any exchange on the
applicability and rate of any contingent deferred sales charge that might
be imposed in the subsequent redemption of remaining shares. Shareholders
owning shares of both classes must specify whether they intend to exchange
Class A or Class B shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction. It is expected that for the most part, the Fund's
dividends will not qualify, because of the nature of the investments held
by the Fund in its portfolio.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund receives
no interest payment in cash on the security during the year. As an
investment company, the Fund must pay out substantially all of its net
investment income each year. Accordingly, when the Fund holds zero coupon
securities, the Fund may be required to pay out as an income distribution
each year an amount which is greater than the total amount of interest the
Fund actually received in cash. Such distributions will be made from the
cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize a gain or loss from such sales. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they
would have had in the absence of such transactions.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. Class B
shareholders should be aware that as of the date of this Statement of
Additional Information, not all of the OppenheimerFunds offer Class B
shares. To elect this option, a shareholder must notify the Transfer
Agent in writing and either have an existing account in the fund selected
for reinvestment or must obtain a prospectus for that fund and an
application from the Distributor to establish an account. The investment
will be made at the net asset value per share in effect at the close of
business on the payable date of the dividend or distribution. Dividends
and/or distributions from shares of other OppenheimerFunds may be invested
in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities, collecting income on the
portfolio securities and handling the delivery of such securities to and
from the Fund. The Manager has represented to the Fund that the banking
relationships between the Manager and the Custodian have been and will
continue to be unrelated to and unaffected by the relationship between the
Fund and the Custodian. It will be the practice of the Fund to deal with
the Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities*
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
______________________________
* For purposes of the Fund's investment policy not to concentrate in
securities of issuers in the same industry, gas utilities and gas
transmission utilities each will be considered a separate industry.
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Supplement Dated April 20, 1995 to the
Prospectus Dated February 1, 1995
The Prospectus is amended as follows:
1. The supplement dated March 31, 1995, to the Prospectus is corrected
and replaced by this supplement.
2. Under "Expenses" on page 3, the chart "Shareholder Transaction
Expenses" is amended by deleting the references to the $5.00 fee for
"Exchanges" and inserting "None" on that line under the headings for
Class A Shares, Class B Shares and Class C Shares; existing footnote 3 is
deleted from that chart. A new line, entitled "Redemption Fee" is added
to the chart with the word "None" under the headings for Class A, B and
C shares, with a reference to a new footnote (3) after each, and the
footnote is added under the chart as follows: "(3) There is a $10
transaction fee for redemptions paid by Federal Funds wire, but not for
redemptions paid by check or by ACH wire through AccountLink, or for which
checkwriting privileges are used (see 'How To Sell Shares')."
3. Under "How Long Do You Expect to Hold Your Investment?" in "How to
Buy Shares" on page 16, the third paragraph replaced by the following:
For investors who invest $500,000 or more, in most cases Class
A shares will be the more 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 for 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.
4. Under "Waivers of Class A Sales Charges" in "Reduced Sales Charges
for Class A Share Purchases," the first sentence in the first full
paragraph of that subsection on page 20 is amended by adding a new section
(d) after section (c) as follows:
. . . . or (d) purchased and paid for with the proceeds of
shares redeemed in the prior 12 months from a mutual fund on
which an initial sales charge or contingent deferred sales
charge was paid (other than a fund managed by the Manager or any
of its affiliates) (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).
5. A new final paragraph is added to "Distribution and Service Plan for
Class B Shares" on page 22 as follows:
The Fund's Board of Trustees has determined that it is in
the best interest of the Fund's shareholders to adopt a new
Distribution and Service Plan for Class B shares to compensate
the Distributor for its services and costs in distributing Class
B shares and servicing accounts. Under the new plan, the
Distributor would be compensated with a fixed fee (0.25% of
average annual net assets, which is the maximum rate under the
current Plan). The new plan is not expected to increase Fund
expenses materially under normal circumstances. Distribution
costs in excess of the fee will be borne by the Distributor.
Details about the proposed plan will be contained in a proxy
statement to be sent to the Fund's shareholders of record as of
April 13, 1995, the record date for the shareholder meeting to
vote on the proposed plan.
6. A new final paragraph is added to "Distribution and Service Plan for
Class C Shares" on page 23 as follows:
The Fund's Board of Trustees has determined that it is in
the best interest of the Fund's shareholders to adopt a new
Distribution and Service Plan for Class C shares to compensate
the Distributor for its services and costs in distributing Class
C shares and servicing accounts. Under the new plan, the
Distributor would be compensated with a fixed fee (0.25% of
average annual net assets, which is the maximum rate under the
current Plan). The new plan is not expected to increase Fund
expenses materially under normal circumstances. Distribution
costs in excess of the fee will be borne by the Distributor.
Details about the proposed plan will be contained in a proxy
statement to be sent to the Fund's shareholders of record as of
April 13, 1995, the record date for the shareholder meeting to
vote on the proposed plan.
7. Under "Reinvestment Privilege" on page 24, the second sentence is
revised to read as follows: "This privilege applies only to redemptions
of Class A shares, or to the redemptions of Class B shares of the Fund
that you purchased by reinvesting dividends or distributions or on which
you paid a contingent deferred sales charge when you redeemed them."
8. Under the subheading "Telephone Redemptions Through AccountLink or
By Wire," the last sentence of the second paragraph of that subsection,
which appears on page 26, is revised to read: "There is a $10 fee for each
Federal Funds wire."
9. Under "Checkwriting" on page 26, the last paragraph in that
subsection is deleted.
10. The second and third sentences in the first paragraph of "How To
Exchange Shares" on page 26 are deleted.
April 20, 1995 PS0855.003
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Supplement dated May 15, 1995 to the
Prospectus dated February 1, 1995
The Prospectus is amended by adding the following text to the
paragraph immediately below the sales charge table in "Class A Shares" on
page 18 of 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 commission for sales of Class B shares
described in the third paragraph in "Distribution and Service
Plan for Class B Shares" on page 22 of this Prospectus, the
Distributor will pay additional commission to participating
brokers, dealers or financial institutions that have a sales
agreement with the Distributor (these are referred to as
"participating firms") for shares of the Fund sold in
"qualifying transactions" from May 15, 1995, through August 18,
1995 under the following conditions. The Distributor will pay
(1) 0.75% of the offering price of Class A shares sold by a
registered representative or sales representative of a
participating firm, and (2) .50% of the offering price of Class
B shares 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 $150,000
or more (calculated at offering price) of Class A and/or Class
B shares (if offered) of any one or more of the following
OppenheimerFunds: the Fund, Oppenheimer Global Fund,
Oppenheimer Total Return Fund, Inc., Oppenheimer Champion High
Yield Fund, Oppenheimer High Yield Fund, Oppenheimer Growth
Fund, Oppenheimer Main Street Income & Growth Fund and
Oppenheimer Strategic Income 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 OppenheimerFunds listed above are purchased at net
asset value without sales charge from May 15, 1995, through
August 18, 1995, with the proceeds of shares redeemed within the
prior 12 months from another mutual fund (other than a fund
managed by the Manager or one of its affiliates) on which an
initial sales charge or contingent deferred sales charge was
paid, the amount of that purchase will count toward the $150,000
qualifying amount described above (but not for the payment of
additional commission).
May 15, 1995 PS0855.004
<PAGE>
Oppenheimer
Limited-Term Government Fund
Prospectus dated February 1, 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").
While payments of principal and interest on certain U.S. Government
securities (including the GNMA certificates which the Fund may hold) are
guaranteed by the U.S. Government or its agencies or instrumentalities,
neither the principal value of those securities nor the net asset value
of shares of the Fund is guaranteed, and therefore the Fund's net asset
values per share are subject to fluctuations due to changes in the value
of portfolio securities. 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.
Under normal circumstances, the Fund anticipates that it will
maintain an average effective portfolio duration 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.
The Fund offers three classes of shares: (1) Class A shares, which
are sold at a public offering price that includes a front-end sales
charge, and (2) Class B and Class C shares, which are sold without a
front-end sales charge, although you may pay a sales charge when you
redeem your shares, depending on how long you own them. A contingent
deferred sales charge is imposed on most Class B shares redeemed within
five years of purchase. A contingent deferred sales charge is imposed on
most Class C shares redeemed within 12 months of purchase. Class B and
Class C shares are also subject to an annual "asset-based sales charge."
Each class of shares bears different expenses. In deciding which class of
shares to buy, you should consider how much you plan to purchase, how long
you plan to keep your shares, and other factors discussed in "How to Buy
Shares" starting on page 15.
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
principal.
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 last 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 $5.00(3) $5.00(3) $5.00(3)
<FN>
____________________
(1) If you invest more than $1 million in Class A shares, you may have to pay a sales charge of up to 1% if you sell your shares
within 18 calendar months from the end of the calendar month during which you purchased those shares. See "How to Buy
Shares," below.
(2) See "How to Buy Shares," below, for more information on the contingent deferred sales charges.
(3) Fee is waived for automated exchanges, described in "How to Exchange Shares."
</TABLE>
- 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 last fiscal year. 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.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- -------------------------------------------------------------------
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
</TABLE>
- 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:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------
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
<FN>
_________________
* 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.
</TABLE>
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. The
Fund anticipates that under normal circumstances, it will maintain an
average effective portfolio duration on a dollar-weighted basis of not
more than three years.
- What Does the Fund Invest In? 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") whose payment
of principal and interest generated by the pool of mortgages is passed
through to the Fund. CMO's may be issued in a variety of classes or
series ("tranches") that have different maturities and levels of
volatility. The Fund may also invest in "stripped" CMO's or mortgage-
backed securities. Stripped mortgage-backed securities usually have two
classes that receive different proportions of the interest and principal
payments. In certain cases, one class will receive all of the interest
payments, while the other class will receive all of the principal value
on maturity. 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 $29 billion in assets at December 31, 1994.
The Fund's portfolio manager, who is primarily responsible for the
selection of the Fund's securities, is David A. Rosenberg. The Manager
is paid an advisory fee by the Fund, based on its net assets. 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 depending on prevailing
interest rates. When prevailing interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise,
the values of already-issued debt securities generally decline. The
magnitude of these fluctuations will often be greater for longer-term debt
securities than shorter-term securities. While the Manager tries to
reduce risks by diversifying investments, by carefully researching
securities before they are purchased for the portfolio, 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. Class B shares
and Class C shares are offered without a front-end sales charge, but may
be subject to a contingent deferred sales charge if redeemed within 5
years or 12 months, respectively, 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. 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 return and
cumulative total return, 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, 1991, 1992, 1993 and 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.
<PAGE>
Investment Objective and Policies
Objective. The Fund seeks high current return and safety of principal.
As a matter of fundamental policy the Fund seeks its objective by
investing only in obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities ("U.S. Government Securities"), and
repurchase agreements on such securities. The Fund may also use hedging
instruments approved by its Board of Trustees (the "Board"). U.S.
Government Securities include the following:
- U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less when issued), Treasury Notes (which have
maturities of one to ten years when issued) and Treasury Bonds (which have
maturities generally greater than ten years when issued). U.S. Treasury
obligations are backed by the full faith and credit of the United States.
- Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These are obligations supported by any of the
following: (a) the full faith and credit of the U.S. Government, such as
GNMA modified pass-through certificates; (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S.
Government, such as bonds issued by Federal National Mortgage Association
("Fannie Mae"); (c) the discretionary authority of the U.S. Government to
purchase the obligations of the agency or instrumentality; or (d) the
credit of the instrumentality, such as obligations of Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Securities of agencies and
instrumentalities that are supported by the discretionary authority of the
U.S. Government to purchase such securities and which the Fund may
purchase under (c) above include: Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and Freddie Mac.
- Mortgage-Backed Securities. The Fund will invest in GNMA
certificates only of the "fully-modified pass-through" type, which are
guaranteed as to timely payment of principal and interest by the full
faith and credit of the United States Government. GNMA certificates are
debt securities that represent an interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration, or are guaranteed by the Veterans Administration. The
Fund may also invest in other mortgage-backed securities that are issued
or guaranteed by agencies or instrumentalities of the U.S. Government,
such as Freddie Mac and Fannie Mae.
The effective maturity of a mortgage-backed security may be shortened
by unscheduled or early payment of principal and interest on the
underlying mortgages, which may affect the effective yield of such
securities. The principal that is returned may be invested in instruments
having a higher or lower yield than the prepaid instruments, depending on
then-current market conditions. Such securities therefore may be less
effective as a means of "locking in" attractive long-term interest rates
and may have less potential for appreciation during periods of declining
interest rates than conventional bonds with comparable stated maturities.
If the Fund buys mortgage-backed securities at a premium, prepayments of
principal and foreclosures of mortgages may result in some loss of the
Fund's principal investment to the extent of the premium paid.
Maturity differs from effective duration, which is a volatility
measure. See "Investment Policies and Strategies" on page 8.
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 such an 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 ("tranches") that have different maturities. The
principal value of certain CMO tranches may be more volatile than other
types of mortgage-related securities, because of the possibility that 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.
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 "I/O"), while the other class will
receive all of the principal value on maturity (and is known as a "P/O").
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, and 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." If the Fund holds
illiquid stripped securities, the amount it can hold will be subject to
the Fund's fundamental investment policy limiting investments in illiquid
securities to 5% of the Fund's assets.
Investment Policies and Strategies. The Fund anticipates that under
normal circumstances, it will maintain an average effective portfolio
duration of not more than three years. That duration will be measured on
the Fund's portfolio 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 fundamental
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 considered
or 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 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 of unanticipated changes that may occur to change the
effective duration of securities subsequent to their acquisition by the
Fund, there can be no assurance that the Fund will achieve its targeted
effective duration at all times. Subject to the requirement 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. See "Investment Objective and Policies" in the Statement
of Additional Information for more information on the Fund's calculation
of effective portfolio duration.
- Risk Factors. Although U.S. Government Securities involve little
credit risk, their values will fluctuate depending on prevailing interest
rates. 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 will be achieved. The magnitude of those fluctuations
generally will be greater when the average maturity of the Fund's
portfolio securities is longer. See "Investment Objective and Policies"
in the Statement of Additional Information for further information on U.S.
Government Securities. Because the yields on U.S. Government Securities
are generally lower than on corporate debt securities, the Fund may
attempt to increase the income it can earn from U.S. Government Securities
by writing covered call options against them, when market conditions are
appropriate. Writing covered calls is explained below, under "Other
Investment Techniques and Strategies."
- Can the Fund's Investment Objective and Policies Change? The Fund
has an investment objective, 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."
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. The Fund may buy or sell U.S. Government
Securities without regard to the length of time they have been held. The
Manager attempts to 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. 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. 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 last fiscal year end intends to do so in the coming year,
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. 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. For
further information, see "Other Investment Techniques and Strategies -
Reverse Repurchase Agreements" in the Statement of Additional Information.
- 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 "Other Investment Techniques and
Strategies" 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.
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 "Hedging With Options and Futures Contracts"
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).
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).
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 (1) securities that the Fund owns, or (2) 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. In
writing puts, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price.
The Fund may buy and sell puts and calls only if certain conditions
are met: (1) after the Fund writes a call, not more than 25% of the Fund's
total assets may be subject to calls; (2) 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; (3) 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; (4) 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; (5) 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.
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. In the broadest sense, exchange-traded options and futures
contracts and other hedging instruments the Fund can use may be defined
as "derivative" investments. In general, a derivative investment is a
specially-designed investment whose performance is linked to the
performance of another investment or security. 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.
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.
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: (a) invest in any security other than U.S. Government
Securities, including repurchase agreements thereon; the Fund may write
covered calls and use hedging instruments approved by the Board; (b)
borrow money, except from banks for temporary purposes in amounts not in
excess of 5% of the value of its assets; no assets of the Fund may be
pledged, mortgaged or hypothecated other than to secure a borrowing, and
then in amounts not exceeding 7.5% of the Fund's total assets; borrowings
may not be made for leverage, but only for liquidity purposes to satisfy
redemption requests when liquidation of portfolio securities is considered
inconvenient or disadvantageous; however, the Fund may enter into reverse
repurchase agreements and when-issued and delayed delivery transactions
as described herein; such prohibition against pledging, mortgaging or
hypothecating assets does not bar the Fund from escrow arrangements for
options trading or collateral or margin arrangements in connection with
hedging instruments approved by the Board; (c) enter into a repurchase
transaction that will cause more than 25% of the Fund's total assets to
be subject to such agreements; (d) make loans, except that the Fund may
purchase or hold debt obligations and enter into repurchase transactions
and may lend its portfolio securities in amounts not exceeding 25% of the
total assets of the Fund if such loans are collateralized by cash or U.S.
Government Securities in amounts equal at all times to at least 100% of
the value of the securities loaned, including accrued interest; (e)
purchase restricted or illiquid securities (including repurchase
agreements of more than seven days' duration and other securities that are
not readily marketable) if more than 5% of the Fund's total assets would
be invested in such securities; (f) purchase any securities (other than
U.S. Government Securities) that would cause more than 5% of the Fund's
total assets to be invested in securities of a single issuer, or purchase
more than 10% of the outstanding voting securities of an issuer; or (g)
deviate from its other fundamental policies described in "Investment
Objective and Policies" 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 together 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 and its affiliates currently manage investment companies,
including other OppenheimerFunds, with assets of more than $29 billion as
of December 31, 1994, and with more than 1.8 million shareholder accounts.
The Manager is owned by Oppenheimer Acquisition Corp., a holding company
that is owned in part by senior officers of the Manager and controlled by
Massachusetts Mutual Life Insurance Company, a mutual life insurance
company.
- Portfolio Manager. The Portfolio Manager of the Fund (who is also
a Vice President of the Fund) is David A. Rosenberg, a Vice President of
the Manager. He has been responsible for the day-to-day management of the
Fund's portfolio since January, 1994. Mr. Rosenberg also serves as a
portfolio manager of other OppenheimerFunds. Previously he was an officer
and portfolio manager for Delaware Investment Advisors and for one of its
mutual funds.
- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which decline on
additional assets as the Fund grows: 0.500% of the first $100 million of
the Fund's average annual net assets, 0.450% of the next $150 million,
0.425% of the next $250 million and 0.400% of net assets in excess of $500
million. The Fund's management fee for its last fiscal year was 0.47% of
average annual net assets for Class A shares and 0.47% for Class B shares.
The Fund pays expenses related to its daily operations, such as
custodian fees, 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 "OppenheimerFunds") and is sub-distributor for funds
managed by a subsidiary of the Manager.
- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund and the other OppenheimerFunds
on an "at-cost" basis. Shareholders should direct inquiries 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 last 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 past fiscal
year ended September 30, 1994, the Fund's performance was affected by
changes in the direction of the bond markets from the prior year. The
Federal Reserve Board aggressively increased short-term interest rates
from very low levels. As interest rates rose, the bond markets declined.
To enhance income as interest rates rose, the Fund shifted investments
away from traditional short-term U.S. Treasury securities, adding
significantly to investments in mortgage-backed securities issued by U.S.
Government agencies or instrumentalities, which generally offer
significant yield advantages over U.S. Treasury securities. The Fund will
continue to seek opportunities to enhance the Fund's yield while
conservatively managing risk to limit the impact if interest rates go
higher.
- Comparing the Fund's Performance to the Market. The chart below
shows the performance of a hypothetical $10,000 investment in Class A and
Class B shares of the Fund held until September 30, 1994; in the case of
Class A shares, since March 10, 1986 (inception of the Fund), and in the
case of Class B shares, from the inception of the Class on May 3, 1993.
In both cases, all dividends and capital gains distributions were
reinvested in additional shares. The graph reflects the deduction of the
current 3.50% maximum initial sales charge on Class A shares and the
current 4% maximum contingent deferred sales charge on Class B shares.
Class C shares were not publicly offered during the fiscal year ended
September 30, 1994. Accordingly, no information is presented on Class C
shares in the graph below.
The performance graph below compares 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, which is widely used to measure the performance of
the U.S. Government securities market. The performance graph below also
compares 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, sector index comparison
is included to reflect the adoption by the Fund, effective August 4, 1994,
of a non-fundamental investment policy that the Fund will, under normal
circumstances, 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.
Comparison of Change in Value
of $10,000 Hypothetical Investments in:
Oppenheimer Limited-Term Government Fund,
Lehman Brothers U.S. Government Bond Index and
Lehman Brothers 1-3 Year Government Bond Index
(Graph)
Past performance is not predictive of future performance.
Oppenheimer Limited-Term Government Fund
Average Annual Total
Returns at 9/30/94
A Shares 1-Year 5-Year Life*
-2.78% 7.55% 7.81%
B Shares 1-Year Life:**
-3.94% -0.14%
- ----------------------
*The inception of the Fund (Class A shares) was 3/10/86.
**Class B shares of the Fund were first publicly offered on 5/3/93.
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). If you purchase Class A
shares as part of an investment of at least $1 million in shares of one
or more OppenheimerFunds, 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, which will vary depending on
the amount you invested.
- Class B Shares. If you buy Class B shares, you pay no sales charge
at the time of purchase, but if you sell your shares within five years of
buying them, you will normally pay a contingent deferred sales charge that
varies depending on how long you owned your shares.
- 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%.
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, how long you
plan to hold your investment, and whether you anticipate exchanging your
shares for shares of other OppenheimerFunds (not all of which offer
Class B or Class C shares). 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.
- 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 $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $1 million or more of Class B or 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.
Also, because not all of the OppenheimerFunds currently offer Class
B and Class C shares, and because exchanges are permitted only to the same
class of shares in another of the OppenheimerFunds, you should consider
how important the exchange privilege is likely to be for you.
- 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 OppenheimerFunds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure to
specify Class A, 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 send redemption proceeds, and to transmit dividends and distributions.
Shares are purchased for your account on the regular business day the
Distributor is instructed by you to initiate the ACH transfer to buy
shares. You can provide those instructions automatically, under an Asset
Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. You must 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.
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 Sales Charge Commission as
As a Percentage of: Percentage of:
Offering Amount Offering
Amount of Purchase Price Invested 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%
_____________________
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.
</TABLE>
- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more
OppenheimerFunds aggregating $1 million or more. However, the Distributor
pays dealers of record commissions on such purchases in an amount equal
to the sum of 1.0% of the first $2.5 million, plus 0.50% of the next $2.5
million, plus 0.25% of share purchases over $5 million. That commission
will be paid only on the amount of those purchases in excess of $1 million
that were not previously subject to a front-end sales charge and dealer
commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") will be deducted
from the redemption proceeds. That sales charge 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 OppenheimerFunds you purchased subject to the Class A contingent
deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
- Special Arrangements With Dealers. The Distributor may advance up
to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. 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 shares you purchase for your own accounts,
or jointly, or on behalf of your children who are minors, under trust or
custodial accounts. A fiduciary can 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
shares of the Fund and other OppenheimerFunds. You can also include Class
A shares of OppenheimerFunds you previously purchased subject to a sales
charge, provided that you still hold your investment in one of the
OppenheimerFunds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The OppenheimerFunds are listed in "Reduced Sales Charges" in the
Statement of Additional Information, or a list can be obtained from the
Transfer Agent. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
- Letter of Intent. Under a Letter of Intent, you may purchase Class
A shares of the Fund and other OppenheimerFunds during a 13-month period
at the reduced sales charge rate that applies to the aggregate amount of
the intended purchases, including purchases made up to 90 days before the
date of the Letter. More information is contained in the Application and
in "Reduced Sales Charges" in the Statement of Additional Information.
- Group Programs. Reduced sales charges are available to
participants in a group sales program if the administrator of the program
has entered into an agreement with the Distributor providing, among other
things, that all participants' purchases are made by a single group order
and payment for each investment period and that requisite data about such
participants and purchases be provided to the Transfer Agent in acceptable
computer format. The sales charge for such purchases will be at the rate
in the table above that applies to combined current purchases (minimum $25
per participant per period) of shares of the Fund, Oppenheimer
Intermediate Tax-Exempt Bond Fund and Oppenheimer Insured Tax-Exempt Bond
Fund by all participants in such program based upon the current value (at
offering price) of shares of such funds held by all participants in such
program at the time of purchase.
No certificates will be issued for shares held by program
participants and dividends and distributions must be reinvested in
accounts held by such participants. Automatic Withdrawal Plans (described
below) may not be used for such accounts. The Fund and the Distributor
reserve the right to amend, suspend or cease offering such programs at any
time without prior notice.
- Waivers of Class A Sales Charges. No sales charge is imposed on
sales of Class A shares to the following investors: (1) the Manager or its
affiliates; (2) present or former officers, directors, trustees and
employees (and their "immediate families" as defined in "Reduced Sales
Charges" in the Statement of Additional Information) of the Fund, the
Manager and its affiliates, and retirement plans established by them for
their employees; (3) registered management investment companies, or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; (4) dealers or brokers that
have a sales agreement with the Distributor, if they purchase shares for
their own accounts or for retirement plans for their employees; (5)
employees and 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); (6) dealers, brokers or registered investment advisers
that have entered into an agreement with the Distributor providing
specifically for the use of shares of the Fund in particular investment
products made available to their clients; and (7) dealers, brokers or
registered investment advisers that have entered into an agreement with
the Distributor to sell shares to defined contribution employee retirement
plans for which the dealer, broker or investment adviser provides
administrative services.
Additionally, no sales charge is imposed on shares that are (a)
issued in plans of reorganization, such as mergers, asset acquisitions and
exchange offers, to which the Fund is a party or (b) purchased by the
reinvestment of loan repayments by a participant in a retirement plan for
which the Manager or its affiliates acts as sponsor, or (c) purchased by
the reinvestment of dividends or other distributions reinvested from the
Fund or other OppenheimerFunds (other than Oppenheimer Cash Reserves) or
unit investment trusts for which reinvestment arrangements have been made
with the Distributor. There is a further discussion of this policy in
"Reduced Sales Charges" in the Statement of Additional Information.
The Class A contingent deferred sales charge does not apply to
purchases of Class A shares at net asset value described above and is also
waived if shares are redeemed in the following cases: (1) retirement
distributions or loans to participants or beneficiaries from qualified
retirement plans, deferred compensation plans or other employee benefit
plans ("Retirement Plans"), (2) returns of excess contributions made to
Retirement Plans, (3) Automatic Withdrawal Plan payments that are limited
to no more than 12% of the original account value annually, (4)
involuntary redemptions of shares by operation of law or under the
procedures set forth in the Fund's Declaration of Trust or adopted by the
Board of Trustees, and (5) if at the time an order is placed for Class A
shares that would otherwise be subject to the Class A contingent deferred
sales charge, the dealer agrees to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (with no further commission payable if the shares are redeemed
within 18 months of purchase).
- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Class B Shares. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed
within 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 reimburse
its expenses of providing distribution-related services to the Fund in
connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 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:
<TABLE>
<CAPTION>
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)
- ------------------------------------------------------------------
<S> <C>
0-1 4.0%
- ------------------------------------------------------------------
1-2 3.0%
- ------------------------------------------------------------------
2-3 2.0%
- ------------------------------------------------------------------
3-4 2.0%
- ------------------------------------------------------------------
4-5 1.0%
- ------------------------------------------------------------------
5 and following None
</TABLE>
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.
- Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will be waived if the shareholder requests it for any of the
following redemptions: (1) distributions to participants or beneficiaries
from Retirement Plans, if the distributions are made (a) under an
Automatic Withdrawal Plan after the participant reaches age 59-1/2, as
long as the payments are no more than 10% of the account value annually
(measured from the date the Transfer Agent receives the request), or (b)
following the death or disability (as defined in the Internal Revenue
Code) of the participant or beneficiary; (2) redemptions from accounts
other than Retirement Plans following the death or disability of the
shareholder (you must provide evidence of a determination of disability
by the Social Security Administration), (3) returns of excess
contributions to Retirement Plans; and (4) 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 over the life (or life
expectancy) of the participant or the joint lives (or joint and last
survivor expectancy) of the participant and the participant's designated
beneficiary (and the distributions must comply with the other requirements
for such distributions under the Internal Revenue Code and may not exceed
10 % of the account value annually, measured from the date the Transfer
Agent receives the request).
The contingent deferred sales charge is also waived on Class B shares
in the following cases: (i) shares sold to the Manager or its affiliates;
(ii) shares sold to registered management investment companies or separate
accounts of insurance companies having an agreement with the Manager or
the Distributor for that purpose; (iii) shares issued in plans of
reorganization to which the Fund is a party; and (iv) shares redeemed in
involuntary redemptions as described below. Further details about this
policy are contained in "Reduced Sales Charges" in the Statement of
Additional Information.
- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution 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.
- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to reimburse
the Distributor for its services and costs in distributing Class B shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class B shares that
are outstanding for 6 years or less. The Distributor also receives a
service fee of 0.25% per year. Both fees are computed on the average
annual net assets of Class B shares, determined as of the close of each
regular business day. The asset-based sales charge allows investors to buy
Class B shares without a front-end sales charge while allowing the
Distributor to compensate dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer 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 fee on a
quarterly basis. The Distributor currently pays sales commissions of 2.75%
of the purchase price to dealers from its own resources at the time of
sale. The total up-front commission paid by the Distributor to the dealer
at the time of sale of Class B shares is 3.00% of the purchase price. The
Distributor retains the asset-based sales charge to recoup the sales
commissions it pays, the advances of service fee payments it makes, and
its financing costs.
The Distributor's actual expenses in selling Class B 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 Plan for Class B shares. Therefore, those expenses may be carried
over and paid in future years. At September 30, 1994, the end of the 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 the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for certain expenses it incurred before the Plan
was terminated.
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.
- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B
Sales Charge."
- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to reimburse
the Distributor for its services and costs in distributing Class C shares
and servicing accounts. Under the Plan, the Fund pays the Distributor an
annual "asset-based sales charge" of 0.75% per year on Class C shares.
The Distributor also receives a service fee of 0.25% per year. Both fees
are computed on the average annual net assets of Class C shares,
determined as of the close of each regular business day. The asset-based
sales charge allows investors to buy Class C shares without a front-end
sales charge while allowing the Distributor to compensate dealers that
sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class 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 fee on a
quarterly basis. The Distributor pays sales commissions of 0.75% of the
purchase price to dealers from its own resources at the time of sale. The
total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The
Distributor retains the asset-based sales charge during the first year
shares are outstanding to recoup the sales commissions it pays, the
advances of service fee payments it makes, and its financing costs. 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.
Because the Distributor's actual expenses in selling Class 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 Plan for Class C shares, those expenses may be
carried over and paid in future years. If the 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 certain expenses it
incurred before the plan was terminated.
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 OppenheimerFunds on a monthly, quarterly, semi-annual or
annual basis under an Automatic Exchange Plan. The minimum purchase for
each other OppenheimerFunds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Fund shares,
you have up to 6 months to reinvest all or part of the redemption proceeds
in Class A shares of the Fund or other OppenheimerFunds without paying
sales charge. This privilege applies to Fund shares that you purchased
with an initial sales charge or on which you paid a contingent deferred
sales charge when you redeemed them. You must be sure to ask the
Distributor for this privilege when you send your payment. Please consult
the Statement of Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
- Pension and Profit-Sharing Plans for self-employed persons and
small business owners
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account on any regular
business day by selling (redeeming) some or all of your shares. Your
shares will be sold at the next net asset value calculated after your
order is received and accepted by the Transfer Agent. The Fund offers you
a number of ways to sell your shares: in writing, 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, 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 wire to your
bank is initiated on the business day after the redemption. You do not
receive dividends on the proceeds of the shares you redeemed while they
are waiting to be wired.
Shareholders may also request wires of redemption proceeds of $2,500
or more in Federal Funds to a designated commercial bank account if the
bank is a member of the Federal Reserve wire system. To place a wire
redemption request, call the Transfer Agent at 1-800-852-8457. There is
a $15 fee for each Federal Funds wire.
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.
The Fund will charge a $10 fee for any check that is not paid because
(1) the owners of the account told the Fund not to pay the check, or (2)
the check was for more than the account balance, or (3) the check did not
have the proper signatures, (4) or the check was written for less than
$100.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain
OppenheimerFunds at net asset value per share at the time of exchange,
without sales charge. A $5 service fee will be deducted from the fund
account you are exchanging into to help defray administrative costs. That
charge is waived for automated exchanges made by brokers on Fund/SERV and
for automated exchanges between already established accounts on PhoneLink
described below. To exchange shares, you must meet several conditions:
- Shares of the fund selected for exchange must be available for sale
in your state of residence.
- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege.
- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day.
- You must meet the minimum purchase requirements for the fund you
purchase by exchange.
- Before exchanging into a fund, you should obtain and read its
prospectus.
Shares of a particular class may be exchanged only for shares of the
same class in the other OppenheimerFunds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, not all of the OppenheimerFunds offer the same classes of shares.
If a fund has only one class of shares that does not have a class
designation, they are "Class A" shares for exchange purposes. In some
cases, sales charges may be imposed on exchange transactions. Certain
OppenheimerFunds offer Class A shares and either Class B or Class C
shares, and a list can be obtained by calling the Distributor at 1-800-
525-7048. 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 OppenheimerFunds 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 and
updated prospectus 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."
A linear graph will be included in the Prospectus of Oppenheimer
Limited-Term Government Fund (the "Fund") depicting the initial account
value and subsequent account value of a hypothetical $10,000 investment
in (i) Class A shares of the Fund 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 graph. 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
Oppenheimer Lehman Bros. Lehman Bros.
Limited-Term U.S. Govt. 1-3 Yr Govt.
Government: B Bond Index Bond Index
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
Citibank, N.A. February 1, 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
<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 and
New Account Application
Custodian of Portfolio Securities Effective February 1, 1995
Citibank, N.A.
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)
PR855.0894.N *Printed on recycled paper
<PAGE>
Oppenheimer Limited-Term Government Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated February 1, 1995.
This Statement of Additional Information of Oppenheimer Limited-Term
Government Fund is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus
dated February 1, 1995. It should be read together with the Prospectus
which may be obtained by writing to the Fund's Transfer Agent, Oppenheimer
Shareholder Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
Contents
Page
About the Fund
Investment Objective and Policies 2
Other Investment Techniques and Strategies 4
Other Investment Restrictions 13
How the Fund is Managed 13
Organization and History 13
Trustees and Officers of the Fund 14
The Manager and Its Affiliates 17
Brokerage Policies of the Fund 18
Performance of the Fund 20
Distribution and Service Plans 24
About Your Account
How to Buy Shares 26
How to Sell Shares 32
How to Exchange Shares 36
Dividends, Capital Gains and Taxes 38
Additional Information about the Fund 39
Financial Information About the Fund
Independent Auditors' Report 41
Financial Statements 42
Appendix: Industry Classifications A-1
<PAGE>
ABOUT THE FUND
Investment Objective And Policies
Investment Policies and Strategies. The investment objective and policies
of the Fund are described in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as the strategies the Fund may use to
try to achieve its objective. Capitalized terms used in this Statement
of Additional Information have the same meaning as those terms have in the
Prospectus.
The obligations of U.S. Government agencies or instrumentalities in
which the Fund may invest may or may not be guaranteed or supported by the
"full faith and credit" of the United States. Some are backed by the
right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full
faith and credit of the United States. If the securities are not backed
by the full faith and credit of the United States, the owner of the
securities must look principally to the agency issuing the obligation for
repayment and may not be able to assert a claim against the United States
in the event that the agency or instrumentality does not meet its
commitment. The Fund will invest in U.S. Government Securities of such
agencies and instrumentalities only when the Fund's investment manager,
Oppenheimer Management Corporation (the "Manager") is satisfied that the
credit risk with respect to such instrumentality is minimal.
General changes in prevailing interest rates will affect the values
of the Fund's portfolio securities. The value will vary inversely to
changes in such rates. For example, if such rates go up after a security
is purchased, the value of the security will generally decline. A
decrease in interest rates may affect the maturity and yield of mortgage-
backed securities by increasing unscheduled prepayments of the underlying
mortgages. With its objective of seeking high current return and safety
of principal, the Fund may purchase or sell securities without regard to
the length of time the security has been held, to take advantage of short-
term differentials in yields. While short-term trading increases the
portfolio turnover, the execution cost for U.S. Government Securities is
substantially less than for equivalent dollar values of equity securities
(see "Brokerage Provisions of the Investment Advisory Agreement," below).
Under normal circumstances, the Fund anticipates that it will
maintain a dollar-weighted average portfolio effective duration of not
more than three years. Subject to that limitation, the Fund may invest
in individual debt obligations of any maturity or duration. The Manager
will in good faith determine the effective duration of debt obligations
purchased by the Fund and will consider various factors applicable to each
type of debt obligation, including those set forth below. Duration
incorporates a bond's yield, coupon interest payments, final maturity and
call features into one measure. For generic fixed-income securities,
duration is calculated as the average time of present-value-weighted cash
flows divided by a small adjustment factor, pursuant to a calculation
known as modified Macaulay duration. Thus, for any generic fixed-income
security with interest payments occurring prior to the payment of
principal, duration is also less than maturity. Also, all other factors
being equal, the lower the stated or coupon rate of interest of a fixed-
income security, the longer the duration of the security; conversely, the
higher the stated or coupon rate of interest of a fixed-income security,
the shorter the duration of the security.
Futures, options and options on futures have durations which, in
general, are closely related to the duration of the securities which
underlie them. Holding long futures or call option positions (backed by
segregated liquid assets) will lengthen the portfolio's duration. There
are some situations, however, where the standard modified Macaulay
duration calculation does not properly reflect the interest rate exposure
of a security. For example, the interest rate exposure is not properly
captured by modified Macaulay duration in the case of mortgage pass-though
securities. The stated final maturity of such securities is generally 30
years, but changes in prepayment rates are more critical in determining
the securities' price exposure to interest rates. Indeed, the modified
Macaulay calculation even falls short in calculating the price sensitivity
of callable bonds to interest rates. In these and other similar
situations, the Manager will use more sophisticated analytical techniques
that incorporate the economic life of a security as well as relevant
macroeconomic factors (e.g., mortgage prepayment rates) into the
determination of the Fund's effective duration.
The U.S. Government Securities in which the Fund may invest include
the following:
- GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's
principal programs involve its guarantees of privately-issued securities
backed by pools of mortgages. GNMA Certificates are debt securities
representing an interest in one or a pool of mortgages that are insured
by the Federal Housing Administration ("FHA") or the Farmers Home
Administration ("FMHA") or guaranteed by the Veterans Administration
("VA").
The GNMA Certificates in which the Fund invests are of the "fully
modified pass-through" type, that is, they provide that the registered
holders of the Certificates will receive timely monthly payments of the
pro-rata share of the scheduled principal payments on the underlying
mortgages, whether or not those amounts are collected by the issuers.
Amounts paid include, on a pro rata basis, any prepayment of principal of
such mortgages and interest (net of servicing and other charges) on the
aggregate unpaid principal balance of such GNMA Certificates, whether or
not the interest on the underlying mortgages has been collected by the
issuers.
The GNMA Certificates purchased by the Fund are guaranteed as to
timely payment of principal and interest by GNMA. It is expected that
payments received by the issuers of GNMA Certificates on account of the
mortgages backing the Certificates will be sufficient to make the required
payments of principal of and interest on such GNMA Certificates, but if
such payments are insufficient for that purpose, the guaranty agreements
between the issuers of the Certificates and GNMA require the issuers to
make advances sufficient for such payments. If the issuers fail to make
such payments, GNMA will do so.
Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts which may be required to be paid
under any guaranty issued by GNMA as to such mortgage pools. An opinion
of an Assistant Attorney General of the United States, dated December 9,
1969, states that such guaranties "constitute general obligations of the
United States backed by its full faith and credit." GNMA is empowered to
borrow from the United States Treasury to the extent necessary to make any
payments of principal and interest required under such guaranties.
GNMA Certificates are backed by the aggregate indebtedness secured
by the underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages
and, except to the extent of payments received by the issuers on account
of such mortgages, GNMA Certificates do not constitute a liability of, nor
evidence any recourse against, such issuers, but recourse is solely
against GNMA. Holders of GNMA Certificates (such as the Fund) have no
security interest in or lien on the underlying mortgages.
Monthly payments of principal will be made, and additional
prepayments of principal may be made, to the Fund with respect to the
mortgages underlying the GNMA Certificates held by the Fund. All of the
mortgages in the pools relating to the GNMA Certificates in the Fund are
subject to prepayment without any significant premium or penalty, at the
option of the mortgagors. While the mortgages on 1-to-4-family dwellings
underlying certain GNMA Certificates have a stated maturity of up to 30
years, it has been the experience of the mortgage industry that the
average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less. Periods
of dropping interest rates may spur refinancing of existing mortgages,
accelerating the rate of prepayments. Prepayments on such mortgages
received by the Fund will be reinvested in additional GNMA Certificates
or other U.S. Government Securities. The yields on such additional
securities may not necessarily be the same as (and may be lower than) the
yields on the prepaid securities, which will affect the income the Fund
receives and pays to its shareholders.
- Federal Home Loan Mortgage Corporation ("FHLMC") Certificates.
FHLMC, a corporate instrumentality of the United States, issues FHLMC
Certificates representing interests in mortgage loans. FHLMC guarantees
to each registered holder of a FHLMC Certificate timely payment of the
amounts representing a holder's proportionate share in (i) interest
payments less servicing and guarantee fees, (ii) principal prepayments and
(iii) the ultimate collection of amounts representing such holder's
proportionate interest in principal payments on the mortgage loans in the
pool represented by such FHLMC Certificate, in each case whether or not
such amounts are actually received. The obligations of FHLMC under its
guarantees are obligations solely of FHLMC and are not backed by the full
faith and credit of the United States.
- Federal National Mortgage Association ("FNMA") Certificates. FNMA,
a federally-chartered and privately-owned corporation, issues FNMA
Certificates which are backed by a pool of mortgage loans. FNMA
guarantees to each registered holder of a FNMA Certificate that the holder
will receive amounts representing such holder's proportionate interest in
scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such FNMA Certificate,
less servicing and guarantee fees, and such holder's proportionate
interest in the full principal amount of any foreclosed or other
liquidated mortgage loan, in each case whether or not such amounts are
actually received. The obligations of FNMA under its guarantees are
obligations solely of FNMA and are not backed by the full faith and credit
of the United States or any agency or instrumentality thereof other than
FNMA.
Other Investment Techniques And Strategies
- Repurchase Agreements. The Fund may acquire securities that are
subject to repurchase agreements, in order to generate income while
providing liquidity. In a repurchase transaction, the Fund acquires a
security from, and simultaneously resells it to, an approved vendor (a
U.S. commercial bank, U.S. branch of a foreign bank or a broker-dealer
which has been designated a primary dealer in government securities, which
must meet the credit requirements set by the Fund's Board of Trustees from
time to time), for delivery on an agreed upon future date. The sale price
exceeds the purchase price by an amount that reflects an agreed-upon
interest rate effective for the period during which the repurchase
agreement is in effect. The majority of these transactions run from day
to day, and delivery pursuant to resale typically will occur within one
to five days of the purchase. Repurchase agreements are considered
"loans" under the Investment Company Act, collateralized by the underlying
security. The Fund's repurchase agreements will require that at all times
while the repurchase agreement is in effect, the collateral's value must
equal or exceed the repurchase price to collateralize the repayment
obligation. Additionally, the Manager will impose creditworthiness
requirements to confirm that the vendor is financially sound and will
continuously monitor the collateral's value. If the vendor of a
repurchase agreement fails to pay the agreed-upon resale price on the
delivery date, the Fund's risks in such event may include any costs of
disposing of the collateral, and any loss from any delay in foreclosing
on the collateral.
- Reverse Repurchase Agreements. The Fund will maintain, in a
segregated account with its Custodian, cash, Treasury bills or other U.S.
Government Securities having an aggregate value equal to the amount of
such commitment to repurchase, including accrued interest, until payment
is made. The Fund will use reverse repurchase agreements as a source of
funds on a short-term basis (and not for leverage). As a fundamental
policy, the Fund will not enter into reverse repurchase agreements in
amounts exceeding 25% of the total assets of the Fund. In determining
whether to enter into a reverse repurchase agreement with a bank or
broker-dealer, the Fund will take into account the creditworthiness of
such party. As a matter of fundamental policy, the Fund will not enter
into a reverse repurchase transaction unless the securities
collateralizing the transaction have a maturity date not later than the
settlement date for the transaction.
- Restricted and Illiquid Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund,
if such registration is required before such securities may be sold
publicly. When registration must be arranged because the Fund wishes to
sell the security, a considerable period may elapse between the time the
decision is made to sell the securities and the time the Fund would be
permitted to sell them. The Fund would bear the risks of any downward
price fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
- Loans of Portfolio Securities. The Fund may lend its portfolio
securities (other than in repurchase transactions) to brokers, dealers and
other financial institutions subject to the restrictions stated in the
Prospectus. Under applicable regulatory requirements (which are subject
to change), the loan collateral must, on each business day, at least equal
the market value of the loaned securities and must consist of cash, bank
letters of credit, U.S. Government Securities, or other cash equivalents
in which the Fund is permitted to invest. To be acceptable as collateral,
letters of credit must obligate a bank to pay amounts demanded by the Fund
if the demand meets the terms of the letter. Such terms and the issuing
bank must be satisfactory to the Fund. In a portfolio securities lending
transaction, the Fund receives from the borrower an amount equal to the
interest paid or the dividends declared on the loaned securities during
the term of the loan as well as the interest on the collateral securities,
less any finders' or administrative fees the Fund pays in arranging the
loan. The Fund may share the interest it receives on the collateral
securities with the borrower as long as it realizes at least a minimum
amount of interest required by the lending guidelines established by its
Board of Trustees. In connection with securities lending, the Fund might
experience risks of delay in receiving additional collateral, or risks of
delay in recovery of the securities, or loss of rights in the collateral
should the borrower fail financially. The Fund will not lend its
portfolio securities to any officer, trustee, employee or affiliate of
the Fund or its Manager. The terms of the Fund's loans must meet certain
tests under the Internal Revenue Code and permit the Fund to reacquire
loaned securities on five business days' notice or in time to vote on any
important matter.
- "When-Issued" and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "When-
issued" or "delayed delivery" refers to securities whose terms and
indenture are available and for which a market exists, but which are not
available for immediate delivery. When such transactions are negotiated,
the price (which is generally expressed in yield terms) is fixed at the
time the commitment is made, but delivery and payment for the securities
take place at a later date. The Fund does not intend to make such
purchases for speculative purposes. Such securities may bear interest at
a lower rate than longer-term securities. The commitment to purchase a
security for which payment will be made on a future date may be deemed a
separate security and involve a risk of loss if the value of the security
declines prior to the settlement date. During the period between
commitment by the Fund and settlement (generally within two months but not
to exceed 120 days), no payment is made for the securities purchased by
the purchaser, and no interest accrues to the purchaser from the
transaction. Such securities are subject to market fluctuation; the value
at delivery may be less than the purchase price. The Fund will maintain
a segregated account with its Custodian, consisting of cash, U.S.
Government securities or other high grade debt obligations at least equal
to the value of purchase commitments until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objective and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although (as noted above), when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
- Hedging with Options and Futures Contracts. As described in the
Prospectus, the Fund may employ one or more types of Hedging Instruments
to manage its exposure to changing interest rates and securities prices.
The Fund's strategy of hedging with Futures and options on Futures will
be incidental to the Fund's activities in the underlying cash market.
Puts and covered calls may also be written on U.S. Government Securities
to attempt to increase the Fund's income. For hedging purposes, the Fund
may use Interest Rate Futures and call and put options on debt securities
and Interest Rate Futures (all of the foregoing are referred to as
"Hedging Instruments"). Hedging Instruments may be used to attempt to:
(i) protect against possible declines in the market value of the Fund's
portfolio resulting from downward trends in the debt securities markets
(generally due to a rise in interest rates), (ii) protect unrealized gains
in the value of the Fund's debt securities which have appreciated, (iii)
facilitate selling debt securities for investment reasons, (iv) establish
a position in the debt securities markets as a temporary substitute for
purchasing particular debt securities, or (v) reduce the risk of adverse
currency fluctuations. A call or put may be purchased only if, after such
purchase, the value of all call and put options held by the Fund would not
exceed 5% of the Fund's total assets. The Fund will not use Futures and
options on Futures for speculation. The Hedging Instruments the Fund may
use are described below.
When hedging to attempt to protect against declines in the market
value of the Fund's portfolio, to permit the Fund to retain unrealized
gains in the value of portfolio securities which have appreciated, or to
facilitate selling securities for investment reasons, the Fund may: (i)
sell Interest Rate Futures, (ii) purchase puts on such Futures or U.S.
Government Securities, or (iii) write calls on securities held by it or
on Futures. When hedging to attempt to protect against the possibility
that portfolio securities are not fully included in a rise in value of the
debt securities market, the Fund may: (i) purchase Futures, or (ii)
purchase calls on such Futures or on U.S. Government Securities. Covered
calls and puts may also be written on debt securities to attempt to
increase the Fund's income.
The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
Additional Information about the Hedging Instruments the Fund may use is
provided below. At present, the Fund does not intend to enter into
Futures and options on Futures if, after any such purchase, the sum of
margin deposits on Futures and premiums paid on Futures options exceeds
5% of the value of the Fund's total assets. In the future, the Fund may
employ Hedging Instruments and strategies that are not presently
contemplated but which may be developed, to the extent such investment
methods are consistent with the Fund's investment objective, legally
permissible and adequately disclosed.
- Writing Covered Calls. The Fund may write (i.e. sell) call options
("calls") on U.S. Government Securities to enhance income through the
receipt of premiums from expired calls and any net profits from closing
purchase transactions, subject to the limitations stated in the
Prospectus. All such calls written by the Fund must be "covered" while
the call is outstanding (i.e. the Fund must own the securities subject to
the call or other securities acceptable for applicable escrow
requirements). Calls on Futures (discussed below) must be covered by
deliverable securities or by liquid assets segregated to satisfy the
Futures contract. When the Fund writes a call on a security, it receives
a premium and agrees to sell the callable investment to a purchaser of a
corresponding call on the same security during the call period (usually
not more than 9 months) at a fixed exercise price (which may differ from
the market price of the underlying security), regardless of market price
changes during the call period. The Fund has retained the risk of loss
should the price of the underlying security decline during the call
period, which may be offset to some extent by the premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written was more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. If the Fund could not effect a closing purchase
transaction due to lack of a market, it would have to hold the callable
investments until the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable bond, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the current
value of the Future. In no circumstances would an exercise notice require
the Fund to deliver a futures contract; it would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging
policies.
- Writing Put Options. The Fund may write put options on U.S.
Government securities or Interest Rate Futures but only if such puts are
covered by segregated liquid assets. The Fund will not write puts if, as
a result, more than 50% of the Fund's net assets would be required to be
segregated to cover such put obligations. In writing puts, there is the
risk that the Fund may be required to buy the underlying security at a
disadvantageous price. A put option on securities gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying
investment at the exercise price during the option period. Writing a put
covered by segregated liquid assets equal to the exercise price of the put
has the same economic effect to the Fund as writing a covered call. The
premium the Fund receives from writing a put option represents a profit,
as long as the price of the underlying investment remains above the
exercise price. However, the Fund has also assumed the obligation during
the option period to buy the underlying investment from the buyer of the
put at the exercise price, even though the value of the investment may
fall below the exercise price. If the put lapses unexercised, the Fund
(as the writer of the put) realizes a gain in the amount of the premium.
If the put is exercised, the Fund must fulfill its obligation to purchase
the underlying investment at the exercise price, which will usually exceed
the market value of the investment at that time. In that case, the Fund
may incur a loss, equal to the sum of the current market value of the
underlying investment and the premium received minus the sum of the
exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing a put of the same series as that previously
sold. Once the Fund has been assigned an exercise notice, it is
thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
- Purchasing Calls and Puts. The Fund may purchase calls on U.S.
Government Securities or on Interest Rate Futures, in order to protect
against the possibility that the Fund's portfolio will not fully
participate in an anticipated rise in value of the long-term debt
securities market. The value of U.S. Government Securities underlying
calls purchased by the Fund will not exceed the value of the portion of
the Fund's portfolio invested in cash or cash equivalents (i.e. securities
with maturities of less than one year). When the Fund purchases a call
(other than in a closing purchase transaction), it pays a premium and,
except as to calls on indices or Futures, has the right to buy the
underlying investment from a seller of a corresponding call on the same
investment during the call period at a fixed exercise price. When the
Fund purchases a call on a Future, it pays a premium, but settlement is
in cash rather than by delivery of the underlying investment to the Fund.
In purchasing a call, the Fund benefits only if the call is sold at a
profit or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price, transaction costs and
the premium paid, and the call is exercised. If the call is not exercised
or sold (whether or not at a profit), it will become worthless at its
expiration date and the Fund will lose its premium payment and the right
to purchase the underlying investment.
The Fund may purchase put options ("puts") which relate to U.S.
Government Securities (whether or not it holds such securities in its
portfolio) or Futures. When the Fund purchases a put, it pays a premium
and, except as to puts on indices, has the right to sell the underlying
investment to a seller of a corresponding put on the same investment
during the put period at a fixed exercise price. Buying a put on an
investment the Fund owns enables the Fund to protect itself during the put
period against a decline in the value of the underlying investment below
the exercise price by selling such underlying investment at the exercise
price to a seller of a corresponding put. If the market price of the
underlying investment is equal to or above the exercise price and as a
result the put is not exercised or resold, the put will become worthless
at its expiration date, and the Fund will lose its premium payment and the
right to sell the underlying investment. The put may, however, be sold
prior to expiration (whether or not at a profit.)
Buying a put on Interest Rate Futures or U.S. Government Securities
permits the Fund either to resell the put or buy the underlying investment
and sell it at the exercise price. The resale price of the put will vary
inversely with the price of the underlying investment. If the market
price of the underlying investment is above the exercise price and as a
result the put is not exercised, the put will become worthless on its
expiration date. In the event of a decline in the bond market, the Fund
could exercise or sell the put at a profit to attempt to offset some or
all of its loss on its portfolio securities. When the Fund purchases a
put on Interest Rate Futures or U.S. Government Securities not held by it,
the put protects the Fund to the extent that the prices of the underlying
Future or U.S. Government Security move in a similar pattern to the prices
of the U.S. Government Securities in the Fund's portfolio.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund may pay a brokerage commission each time
it buys a put or call, sells a call, or buys or sells an underlying
investment in connection with the exercise of a put or call. Such
commissions may be higher than those which would apply to direct purchases
or sales of such underlying investments. Premiums paid for options are
small in relation to the market value of the related investments, and
consequently, put and call options offer large amounts of leverage. The
leverage offered by trading in options could result in the Fund's net
asset value being more sensitive to changes in the value of the underlying
investments.
- Interest Rate Futures. The Fund may buy and sell Interest Rate
Futures. No price is paid or received upon the purchase or sale of an
Interest Rate Future. An Interest Rate Future obligates the seller to
deliver and the purchaser to take a specific type of debt security at a
specific future date for a fixed price. That obligation may be satisfied
by actual delivery of the debt security or by entering into an offsetting
contract.
Upon entering into a Futures transaction, the Fund will be required
to deposit an initial margin payment in cash or U.S. Treasury bills with
the futures commission merchant (the "futures broker"). The initial
margin will be deposited with the Fund's Custodian in an account
registered in the futures broker's name; however the futures broker can
gain access to that account only under specified conditions. As the
Future is marked to market to reflect changes in its market value,
subsequent margin payments, called variation margin, will be made to or
by the futures broker on a daily basis. Prior to expiration of the
Future, if the Fund elects to close out its position by taking an opposite
position, a final determination of variation margin is made, additional
cash is required to be paid by or released to the Fund, and any loss or
gain is realized for tax purposes. Although Interest Rate Futures by
their terms call for settlement by delivery or acquisition of debt
securities, in most cases the obligation is fulfilled by entering into an
offsetting position. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are
traded.
- Interest Rate Swap Transactions. Swap agreements entail both
interest rate risk and credit risk. There is a risk that, based on
movements of interest rates in the future, the payments made by the Fund
under a swap agreement will have been greater than those received by it.
Credit risk arises from the possibility that the counterparty will
default. If the counterparty to an interest rate swap defaults, the
Fund's loss will consist of the net amount of contractual interest
payments that the Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Fund's interest rate swap
transactions on an ongoing basis. The Fund may engage in interest rate
swaps only with respect to securities it holds, and not in excess of 25%
of its total assets.
The Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements. A master netting
agreement provides that all swaps done between the Fund and that
counterparty under that master agreement shall be regarded as parts of an
integral agreement. If on any date amounts are payable in the same
currency in respect of one or more swap transactions, the net amount
payable on that date in that currency shall be paid. In addition, the
master netting agreement may provide that if one party defaults generally
or on one swap, the counterparty may terminate the swaps with that party.
Under such agreements, if there is a default resulting in a loss to one
party, the measure of that party's damages is calculated by reference to
the average cost of a replacement swap with respect to each swap (i.e.,
the mark-to-market value at the time of the termination of each swap).
The gains and losses on all swaps are then netted, and the result is the
counterparty's gain or loss on termination. The termination of all swaps
and the netting of gains and losses on termination is generally referred
to as "aggregation".
- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter ("OTC") option, it will
enter into an arrangement with a primary U.S. Government securities
dealer, which would establish a formula price at which the Fund would have
the absolute right to repurchase that OTC option. That formula price
would generally be based on a multiple of the premium received for the
option, plus the amount by which the option is exercisable below the
market price of the underlying security (that is, the extent to which the
option "is in-the-money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of the limit on its assets that may be
invested in illiquid securities, stated in the Prospectus) the mark-to-
market value of any OTC option held by it. The Securities and Exchange
Commission ("SEC") is evaluating whether OTC options should be considered
liquid securities, and the procedure described above could be affected by
the outcome of that evaluation.
- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of futures and options thereon as established by the Commodities
Futures Trading Commission ("CFTC"). In particular, the Fund is excluded
from registration as a "commodity pool operator" if it complies with the
requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the
percentage of the Fund's assets that may be used for Futures margin and
related options premiums for a bona fide hedging position. However, under
the Rule the Fund must limit its aggregate initial futures margin and
related option premiums to no more than 5% of the Fund's net assets for
hedging strategies that are not considered bona fide hedging strategies
under the Rule.
Transactions in options by the Fund are subject to limitations
established by each of the exchanges governing the maximum number of
options which may be written or held by a single investor or group of
investors acting in concert, regardless of whether the options were
written or purchased on the same or different exchanges or are held in one
or more accounts or through one or more different exchanges through one
or more or brokers. Thus, the number of options which the Fund may write
or hold may be affected by options written or held by other entities,
including other investment companies having the same or an affiliated
investment adviser. Position limits also apply to Futures. An exchange
may order the liquidation of positions found to be in violation of those
limits and may impose certain other sanctions. Due to requirements under
the Investment Company Act, when the Fund purchases a Future, the Fund
will maintain, in a segregated account or accounts with its Custodian,
cash or readily-marketable, short-term (maturing in one year or less) debt
instruments in an amount equal to the market value of the securities
underlying such Future, less the margin deposit applicable to it.
- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code. That qualification enables the Fund to "pass through" its
income and realized capital gains to shareholders without the Fund having
to pay tax on them. This avoids a "double tax" on that income and capital
gains, since shareholders will be taxed on the dividends and capital gains
they receive from the Fund. One of the tests for the Fund's qualification
is that less than 30% of its gross income (irrespective of losses) must
be derived from gains realized on the sale of securities held for less
than three months. To comply with that 30% cap, the Fund will limit the
extent to which it engages in the following activities, but will not be
precluded from them: (i) selling investments, including Futures, held for
less than three months, whether or not they were purchased on the exercise
of a call held by the Fund; (ii) purchasing calls or puts which expire in
less than three months; (iii) effecting closing transactions with respect
to calls or puts written or purchased less than three months previously;
(iv) exercising puts or calls held by the Fund for less than three months;
or (v) writing calls on investments held for less than three months.
- Risks Of Hedging With Options and Futures. In addition to the
risks with respect to hedging discussed in the Prospectus and above, there
is a risk in using short hedging by selling Futures to attempt to protect
against decline in value of the Fund's portfolio securities (due to an
increase in interest rates) that the prices of such Futures will correlate
imperfectly with the behavior of the cash (i.e., market value) prices of
the Fund's securities. The ordinary spreads between prices in the cash
and futures markets are subject to distortions due to differences in the
natures of those markets. First, all participants in the futures markets
are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close out
futures contracts through offsetting transactions which could distort the
normal relationship between the cash and futures markets. Second, the
liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the
futures markets could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures
markets are less onerous than margin requirements in the securities
markets. Therefore, increased participation by speculators in the futures
markets may cause temporary price distortions.
If the Fund uses Hedging Instruments to establish a position in the
U.S. Government Securities markets as a temporary substitute for the
purchase of individual U.S. Government Securities (long hedging) by buying
Interest Rate Futures and/or calls on such Futures or on U.S. Government
Securities, it is possible that the market may decline; if the Fund then
concludes not to invest in such securities at that time because of
concerns as to possible further market decline or for other reasons, the
Fund will realize a loss on the Hedging Instruments that is not offset by
a reduction in the price of the U.S. Government Securities purchased.
Other Investment Restrictions
The Fund's significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund
must follow that are also fundamental policies. Fundamental policies and
the Fund's investment objective, cannot be changed without the vote of
a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of (i) 67% or more of the shares present or
represented by proxy at a shareholders meeting, if the holders of more
than 50% of the outstanding shares are present, or (ii) more than 50% of
the outstanding shares.
Under these additional restrictions, the Fund may not: (1) purchase
or sell real estate, commodities or commodity contracts; however, the Fund
may use hedging instruments approved by its Board whether or not such
hedging instruments are considered commodities or commodity contracts; (2)
invest in interests in oil, gas, or other mineral exploration or
development programs; (3) purchase securities on margin or make short
sales of securities; however the Fund may make margin deposits in
connection with its use of hedging instruments approved by its Board; (4)
underwrite securities except to the extent the Fund may be deemed to be
an underwriter in connection with the sale of securities held in its
portfolio; (5) invest in securities of other investment companies, except
as they may be acquired as part of a merger, consolidation or other
acquisition; (6) enter into reverse repurchase agreements that will cause
more than 25% of the Fund's total assets to be subject to such agreements;
(7) make investments for the purpose of exercising control of management;
(8) purchase or retain securities of any company if, to the knowledge of
the Fund, its officers and trustees and officers and directors of the
Manager who individually own more than 0.5% of the securities of such
company together own beneficially more than 5% of such securities; (9)
purchase or retain securities of issuers having a record of less than
three years' continuous operation (such period may include the operation
of predecessor companies or enterprises if the issuer came into existence
as a result of a merger, consolidation or reorganization, or the purchase
of substantially all of the assets of the predecessor companies or
enterprises); (10) purchase or sell standby commitments; or (11) invest
more than 25% of its assets in a single industry (neither the U.S.
Government nor any of its agencies or instrumentalities are considered an
industry for the purposes of this restriction).
For purposes of the Fund's policy not to concentrate its assets,
described in restriction number (11) above, the Fund has adopted the
industry classifications set forth in the Appendix to this Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was established in 1986 as First Trust
Fund-U.S. Government Series and changed its name to Oppenheimer Government
Securities Fund on July 10, 1992, and on May 1, 1994 to Oppenheimer
Limited-Term Government Fund.
As a Massachusetts business Trust, the Fund is not required to hold,
and does not plan to hold, regular annual meetings of shareholders. The
Fund will hold meetings when required to do so by the Investment Company
Act or other applicable law, or when a shareholder meeting is called by
the Trustees or upon proper request of the shareholders. Shareholders
have the right, upon the declaration in writing or vote of two-thirds of
the outstanding shares of the Fund, to remove a Trustee. The Trustees
will call a meeting of shareholders to vote on the removal of a Trustee
upon the written request of the record holders of at least 10% of its
outstanding shares. In addition, if the Trustees receive a request from
at least 10 shareholders (who have been shareholders for at least six
months) holding shares of the Fund valued at $25,000 or more or holding
at least 1% of the Fund's outstanding shares, whichever is less, stating
that they wish to communicate with other shareholders to request a meeting
to remove a Trustee, the Trustees will then either make the Fund's
shareholder list available to the applicants or mail their communication
to all other shareholders at the applicants' expense, or the Trustees may
take such other action as set forth under Section 16(c) of the Investment
Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Fund, and any
shareholder of the Fund, agrees under the Fund's Declaration of Trust to
look solely to the assets of the Fund for satisfaction of any claim or
demand which may arise out of any dealings with the Fund, and the Trustees
shall have no personal liability to any such person, to the extent
permitted by law.
Trustees And Officers Of The Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. All of the Trustees are also trustees, directors
or managing general partners of Oppenheimer Total Return Fund, Inc.,
Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Cash Reserves, Oppenheimer Tax-Exempt Bond Fund, The New York Tax-Exempt
Income Fund, Inc., Oppenheimer Champion High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Funds Trust, Oppenheimer
Integrity Funds, Oppenheimer Strategic Income & Growth Fund, Oppenheimer
Strategic Investment Grade Bond Fund, Oppenheimer Strategic Short-Term
Income Fund and Oppenheimer Variable Account Funds; as well as the
following "Centennial Funds": Daily Cash Accumulation Fund, Inc.,
Centennial Money Market Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial Tax Exempt Trust, Centennial California
Tax Exempt Trust and Centennial America Fund, L.P. (all of the foregoing
funds are collectively referred to as the "Denver-based
OppenheimerFunds"). Mr. Fossel is President and Mr. Swain is Chairman of
the Denver OppenheimerFunds. As of January 10, 1995, the Trustees and
officers of the Fund as a group owned less than 1% of the Fund's
outstanding Class A shares and less than 1% of the Fund's outstanding
Class B shares. As of that date, no Class C shares were outstanding. The
foregoing statement does not reflect ownership of shares held of record
by an employee benefit plan for employees of the Manager (for which plan
two of the officers listed below, Messrs. Fossel and Swain, are trustees),
other than the shares beneficially owned under that plan by the officers
of the Fund listed below.
Robert G. Avis, Trustee; Age 63
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age 64
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*; Age 52
Two World Trade Center, New York, New York 10048-0203
Chairman, Chief Executive Officer and a director of the Manager;
President and a director of Oppenheimer Acquisition Corp. ("OAC"),
the Manager's parent holding company; President and a director of
HarbourView Asset Management Corporation, a subsidiary of the Manager
("HarbourView"); a director of Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of the Manager; formerly President of the Manager.
Raymond J. Kalinowski, Trustee; Age 65
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International Inc.; formerly Vice
Chairman and a director of A.G. Edwards, Inc., parent holding company
of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was a
Senior Vice President.
C. Howard Kast, Trustee; Age 73
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting
firm).
Robert M. Kirchner, Trustee; 73
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; age 79
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and a
director of Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee; Age 61
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a Director of the Manager; President and a Director
of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); formerly Chairman of the
Board of SSI.
Andrew J. Donohue, Vice President; Age 44
Executive Vice President and General Counsel of Oppenheimer
Management Corporation ("OMC") (the "Manager") and Oppenheimer Funds
Distributor, Inc. (the "Distributor"); an officer of other
OppenheimerFunds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor; Partner in, Kraft
& McManimon (a law firm); an officer of First Investors Corporation
(a broker-dealer) and First Investors Management Company, Inc.
(broker-dealer and investment adviser); director and an officer of
First Investors Family of Funds and First Investors Life Insurance
Company.
George C. Bowen, Vice President, Secretary and Treasurer; Age 58
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other OppenheimerFunds.
David Rosenberg, Vice President and Portfolio Manager; Age 36
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager; an officer of other OppenheimerFunds;
formerly an officer and portfolio manager for Delaware Investment
Advisors and for one of its mutual funds.
Robert G. Zack, Assistant Secretary; Age 46
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager,
Assistant Secretary of SSI and SFSI; an officer of other
OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age 36
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an Accountant for Yale & Seffinger,
P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; age 29
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other OppenheimerFunds; formerly a Fund Controller for the
Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co., a bank, and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below from all 22 of the Denver-based OppenheimerFunds (including the
Fund) listed in the first paragraph of this section, for services in the
positions shown:
<TABLE>
<CAPTION> Total Compensation
From All
Denver-based
Name Position OppenheimerFunds1
<S> <C> <C>
Robert G. Avis Trustee $53,000.00
William A. Baker Study and Audit Committee Chairman $73,257.01
and Trustee
Charles Conrad, Jr. Study and Audit Committee Member $68,293.67
and Trustee
Raymond J. Kalinowski Trustee $53,000.00
C. Howard Kast Trustee $53,000.00
Robert M. Kirchner Study and Audit Committee Member $68,293.67
and Trustee
Ned M. Steel Trustee $53,000.00
<FN>
______________________
1 For the 1994 calendar year.
</TABLE>
Major Shareholders. As January 10, 1995, no person owned of record or was
known by the Fund to own beneficially 5% or more of the Fund's outstanding
Class A or Class B shares. As of that date, no Class C shares were
outstanding.
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corporation ("OAC"), a holding company controlled
by Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Jon S. Fossel and Mr.
James C. Swain) serve as Trustees of the Fund.
- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the Distribution Agreement are paid
by the Fund. The advisory agreement lists examples of expenses paid by
the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal, and audit
expenses, custodian and transfer agent expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation. For the Fund's fiscal years ended September 30,
1992, 1993, and 1994 the management fees paid by the Fund to the Manager
were $773,822, $781,718, and $976,513, respectively.
Under the advisory agreement, the Manager has undertaken that if the
total expenses of the Fund in any fiscal year should exceed the most
stringent state regulatory requirements on expense limitations applicable
to the Fund, the Manager's compensation under the advisory agreement will
be reduced by the amount of such excess. For the purpose of such
calculation, there shall be excluded any expense borne directly or
indirectly by the Fund which is permitted to be excluded from the
computation of such limitation by such statute or state regulatory
authority. At present, that limitation is imposed by California, and
limits expenses (with specific exclusions) to 2.5% of the first $30
million of average net assets, 2% of the next $70 million of average net
assets and 1.5% of average net assets in excess of $100 million. Any
assumption of the Fund's expenses under this limitation would lower the
Fund's overall expense ratio and increase its total return during any
period in which expenses are limited.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties,
or reckless disregard of its obligations and duties under the advisory
agreement, the Manager is not liable for any loss resulting from any good
faith errors or omissions in connection with any matters to which the
Agreement relates. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation.
- The Distributor. Under its Distribution Agreement with the Fund,
the Distributor acts as the Fund's principal underwriter in the continuous
public offering of the Fund's Class A, Class B and Class C shares but is
not obligated to sell a specific number of shares. Expenses normally
attributable to sales (other than those paid under the Distribution and
Service Plans, but including advertising and the cost of printing and
mailing prospectuses other than those furnished to existing shareholders),
are borne by the Distributor. For the fiscal year ended September 30,
1992, 1993, and 1994, the aggregate amount of sales charges on sales of
the Fund's Class A shares were $192,406, $289,261 and $1,006,962,
respectively, of which $28,268, $85,929 and $310,375 was retained by the
Distributor and an affiliated broker-dealer during those respective years.
Contingent deferred sales charges collected by the Distributor on the
redemption of Class B shares for the period May 3, 1993 (the commencement
of the offering of those shares) through September 30, 1993 and for the
fiscal year ended September 30, 1994 totaled $361 and $36,866,
respectively. For additional information about distribution of the Fund's
shares and the expenses connected with such activities, please refer to
"Distribution and Service Plans," below.
- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
transfer agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies Of The Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, as may, in its best judgment based on all relevant factors, implement
the policy of the Fund to obtain, at reasonable expense, the "best
execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Manager need not seek competitive
commission bidding, but is expected to minimize the commissions paid to
the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged, if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Most
purchases made by the Fund are principal transactions at net prices, and
the Fund incurs little or no brokerage costs. Subject to the provisions
of the advisory agreement, the procedures and rules described above,
allocations of brokerage are generally made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers.
In certain instances, portfolio managers may directly place trades and
allocate brokerage, also subject to the provisions of the advisory
agreement and the procedures and rules described above. In each case,
brokerage is allocated under the supervision of the Manager's executive
officers. Transactions in securities other than those for which an
exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities and otherwise only if it appears likely
that a better price or execution can be obtained.
When the Fund engages in an option transaction, ordinarily the same
broker will be used for the purchase or sale of the option and any
transaction in the securities to which the option relates. When possible,
concurrent orders to purchase or sell the same security by more than one
of the accounts managed by the Manager and its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged
as to price and allocated in accordance with the purchase or sale orders
actually placed for each account.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed price offerings to obtain research, in the same
manner as is permitted for agency transactions.
The research services provided by brokers broadens the scope and
supplement the research activities of the Manager, by making available
additional views for consideration and comparisons, and enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
Yield and Total Return Information. From time to time the "standardized
yield," "dividend yield," "average annual total return", "total return,"
and "total return at net asset value" of an investment in a class of the
Fund may be advertised. An explanation of how yields and total returns
are calculated for each class and the components of those calculations is
set forth below. No total return and yield calculations are presented
below for Class C shares because no shares of that class were publicly
issued during the fiscal year ended September 30, 1994. The Fund's
maximum sales charge rate on Class A shares was higher prior to April 1,
1994, and actual investment performance would be affected by that change.
The Fund's advertisement of its performance must, under applicable
rules of the Securities and Exchange Commission, include the average
annual total returns for each class of shares of the Fund for the 1, 5 and
10-year periods (or the life of the class, if less) as of the most
recently ended calendar quarter prior to the publication of the
advertisement. This enables an investor to compare the Fund's performance
to the performance of other funds for the same periods. However, a number
of factors should be considered before using such information as a basis
for comparison with other investments. An investment in the Fund is not
insured; its yields and total returns and share prices are not guaranteed
and normally will fluctuate on a daily basis. When redeemed, an
investor's shares may be worth more or less than their original cost.
Yields and total returns for any given past period are not a prediction
or representation by the Fund of future yields or rates of return on its
shares. The yields and total returns of Class A, Class B and Class C
shares of the Fund are affected by portfolio quality, the type of
investments the Fund holds and its operating expenses allocated to a
particular class.
- - Standardized Yields
- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds that quote yields:
a-b 6
Yield = 2 ((---- + 1) -1)
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of the class on the last day
of the period, using the current maximum sales charge rate adjusted
for undistributed net investment income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1994, the standardized yields for
the Fund's Class A and Class B shares were 6.14% and 5.55%, respectively.
- Dividend Yield and Distribution Return. From time to time the Fund
may quote a "dividend yield" or a "distribution return" for each class.
Dividend yield is based on the Class A, Class B or Class C share dividends
derived from net investment income during a stated period. Distribution
return includes dividends derived from net investment income and from
realized capital gains declared during a stated period. Under those
calculations, the dividends and/or distributions for that class declared
during a stated period of one year or less (for example, 30 days) are
added together, and the sum is divided by the maximum offering price per
share of that class) on the last day of the period. When the result is
annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
- ----------------------------------------------------
Max Offering Price of the Class (last day of period)
Divided by number of days (accrual period) x 365
The maximum offering price for Class A shares includes the current
maximum front-end sales charge. For Class B or Class C shares, the
maximum offering price is the net asset value per share, without
considering the effect of contingent deferred sales charges. From time
to time similar yield or distribution return calculations may also be made
using the Class A net asset value (instead of its respective maximum
offering price) at the end of the period.
The dividend yields on Class A shares for the 30-day period ended
September 30, 1994, were 6.51% and 6.75% when calculated at maximum
offering price and at net asset value, respectively. The dividend yield
on Class B shares for the 30-day period ended September 30, 1994, was
6.08% when calculated at net asset value. Distribution returns for the
30-day period ended September 30, 1994 are the same as the above-quoted
dividend yields. No portion of the Class A or Class B dividends for the
fiscal year ended September 30, 1994 were derived from realized capital
gains.
- - Total Return Information
- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV"), according to the following formula:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return, but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
- ------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 3.50% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as discussed below). For Class B shares, the payment of the
current contingent deferred sales charge (4.0% for the first year, 3.0%
for the second year, 2.0% for the third and fourth years, 1.0% in the
fifth year and none thereafter) is applied to the investment result for
the time period shown (unless the total return is shown at net asset
value, as described below). Total returns also assume that all dividends
and capital gains distributions during the period are reinvested to buy
additional shares at net asset value per share, and that the investment
is redeemed at the end of the period.
The "average annual total returns" on an investment in Class A shares
of the Fund for the one year and five year periods ended September 30,
1994 were -2.78% and 7.55%, respectively, and for the period from March
10, 1986 (inception of the Fund) to September 30, 1994, was 7.81%. The
cumulative "total return" on Class A shares for the period from March 10,
1986 through September 30, 1994 was 90.37%. For the fiscal year ended
September 30, 1994 and the period from May 3, 1993 (the date Class B
shares were first publicly offered) through September 30, 1994, the
average annual total returns on an investment in Class B shares of the
Fund were -3.94% and -0.14%, respectively. The cumulative total return
on an investment in Class B shares of the Fund for the period from May 3,
1993 through September 30, 1994 was -0.20%.
- Total Returns at Net Asset Value. From time to time the Fund may
also quote an "average annual total return at net asset value" or a
cumulative "total return at net asset value" for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions.
The average annual total returns at net asset value on an investment
in Class A shares of the Fund for the one and five-year periods ended
September 30, 1994 and for the period from March 10, 1986 to September 30,
1994 were 0.74%, 8.32% and 8.27%, respectively. The average annual total
returns at net asset value on an investment in Class B shares of the Fund
for the fiscal year ended September 30, 1994 and for the period from May
3, 1993 to September 30, 1994 were -0.17% and 1.87%, respectively. The
cumulative "total returns at net asset value" on the Fund's Class A shares
for the period from March 10, 1986 to September 30, 1994, was 97.27%. The
cumulative total return at net asset value on the Fund's Class B shares
for the period from May 3, 1993 through September 30, 1994 was 2.65%.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund's classes is ranked against (i) all other
funds, excluding money market funds, and (ii) all other short-term U.S.
Government funds. The Lipper performance rankings are based on total
return that includes the reinvestment of capital gains distributions and
income dividends but does not take sales charges or taxes into
consideration.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service that ranks mutual funds,
including the Fund, monthly, in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S.
Treasury bill returns after considering sales charges and expenses. Risk
reflects fund performance below 90-day Treasury bill returns. Risk and
return are combined to produce star rankings reflecting performance
relative to the average fund in a fund's category. Five stars is the
"highest" ranking (top 10%), four stars is "above average" (next 22.5%),
three stars is "average" (next 35%), two stars is "below average" (next
22.5%) and one star is "lowest" (bottom 10%). Morningstar ranks the
Fund's Class A, Class B and Class C shares in relation to other taxable
bond funds. Rankings are subject to change.
The total return on an investment made in Class A, Class B or Class
C shares of the Fund may also be compared with the performance for the
same period of: (1) the Lehman Brothers U.S. Government Bond Index, an
unmanaged index including all U.S. Treasury issues, publicly- issued debt
of U.S. Government agencies and quasi-public corporations and U.S.
Government-guaranteed corporate debt that is widely regarded as a measure
of the performance of the U.S. Government bond market, (2) 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 U.S. Government-guaranteed corporate debt
with maturities of one to three years, and (3) the Consumer Price Index,
which is generally considered to be a measure of inflation. The foregoing
bond indices include a factor for the reinvestment of interest but do not
reflect expenses or taxes. Other indices may be used from time to time.
From time to time the Fund may also include in its advertisements and
sales literature performance information about the Fund or rankings of the
Fund's performance cited in newspapers or periodicals, such as The New
York Times. These articles may include quotations of performance from
other sources, such as Lipper or Morningstar.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager (or the Transfer Agent), by independent third-parties, on
the investor services provided by them to shareholders of the
OppenheimerFunds, other than the performance rankings of the
OppenheimerFunds themselves. These ratings or rankings of
shareholder/investor services may compare the OppenheimerFunds services
to those of other mutual fund families selected by the rating or ranking
services, and may be based upon the opinions of the rating or ranking
service itself, using its own research or judgment, or based upon surveys
of investors, brokers, shareholders or others. in relation to other equity
funds.
When comparing yield, total return and investment risk of an
investment in Class A, Class B or Class C shares of the Fund with other
investments, investors should understand that certain other investments
have different risk characteristics than an investment in shares of the
Fund. For example, certificates of deposit may have fixed rates of return
and may be insured as to principal and interest by the FDIC, while the
Fund's returns will fluctuate and its share values and returns are not
guaranteed. U.S. Treasury securities are guaranteed as to principal and
interest by the full faith and credit of the U.S. government.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A Shares and
Distribution and Service Plans for Class B and Class C shares of the Fund
under Rule 12b-1 of the Investment Company Act, pursuant to which the Fund
will reimburse the Distributor for all or a portion of its costs incurred
in connection with the distribution and/or servicing of the shares of that
class, as described in the Prospectus. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for the Class B and Class C shares, the
votes were cast by the Manager as the then-sole initial holder of Class
B and Class C shares of the Fund, respectively.
In addition, under the Plans, the Manager and the Distributor, in
their sole discretion, from time to time may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund) to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion
increase or decrease the amount of payments they make to Recipients from
their own resources.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Any Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. No Plan may be amended to
increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund is required by an
exemptive order issued by the Securities and Exchange Commission to obtain
the approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which the payment was made and the identity of each Recipient
that received any such payment. The report for the Class B Plan and Class
C Plan shall also include the Distributor's distribution costs for that
quarter, and such costs for previous fiscal periods that are carried
forward, as explained in the Prospectus and below. Those reports,
including the allocations on which they are based, will be subject to the
review and approval of the Independent Trustees in the exercise of their
fiduciary duty. Each Plan further provides that while it is in effect,
the selection and nomination of those Trustees of the Fund who are not
"interested persons" of the Fund is committed to the discretion of the
Independent Trustees. This does not prevent the involvement of others in
such selection and nomination if the final decision on any such selection
or nomination is approved by a majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fee at the maximum rate and set no minimum amount. Any unreimbursed
expenses incurred with respect to Class A shares for any fiscal quarter
by the Distributor may not be recovered under the Class A Plan in
subsequent fiscal quarters. Payments received by the Distributor under
the Plan for Class A shares will not be used to pay any interest expense,
carrying charges, or other financial costs, or allocation of overhead by
the Distributor.
For the fiscal year ended September 30, 1994, payments under the
Class A Plan totaled $450,597, all of which was paid by the Distributor
to Recipients, including $4,697 paid to an affiliate of the Distributor.
The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year Class
B and Class C shares are outstanding, and thereafter on a quarterly basis,
as described in the Prospectus. The advance payment is based on the net
asset value of the Class B and Class C shares sold. An exchange of shares
does not entitle the Recipient to an advance payment of the service fee.
In the event Class B or Class C shares are redeemed during the first year
such shares are outstanding, the Recipient will be obligated to repay a
pro rata portion of the advance of the service fee payment to the
Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan and the Class C
Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan and the Class C Plan are
subject to the limitations imposed by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. The Distributor
anticipates that it will take a number of years for it to recoup (from the
Fund's payments to the Distributor under the Class B or Class C Plan and
from contingent deferred sales charges collected on redeemed Class B or
Class C shares) the sales commissions paid to authorized brokers or
dealers. For the fiscal year ended September 30, 1994, payments under the
Class B plan totaled $156,771 (including $246 paid to an affiliate of the
Distributor), of which the Distributor retained $154,274.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without the assessment of a front-end sales
load and at the same time permit the Distributor to compensate brokers and
dealers in connection with the sale of Class B and Class C shares of the
Fund. The Distributor's actual distribution expenses for any given year
may exceed the aggregate of payments received pursuant to the Class B or
Class C Plan and from contingent deferred sales charges, and such expenses
will be carried forward into future fiscal years, to be recovered from
asset-based sales charges in subsequent fiscal periods, as described in
the Prospectus. The asset-based sales charge paid to the Distributor by
the Fund under the Class B Plan and the Class C Plan are intended to allow
the Distributor to recoup the cost of sales commissions paid to authorized
brokers and dealers at the time of sale, plus financing costs, as
described in the Prospectus. Such payments may also be used to pay for
the following expenses of the Distributor in connection with the
distribution of Class B and Class C shares: (i) financing the advance of
the service fee payment to Recipients under the Class B Plan and the Class
C Plan, (ii) compensation and expenses of personnel employed by the
Distributor to support distribution of Class B and Class C shares, and
(iii) costs of sales literature, advertising and prospectuses (other than
those furnished to current shareholders) and state "blue sky" registration
fees.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits an investor to choose the
method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor
expects to hold shares and other relevant circumstances. Investors should
understand that the purpose and function of the deferred sales charge and
asset-based sales charge with respect to Class B and Class C shares are
the same as those of the initial sales charge with respect to Class A
shares. Any salesperson or other person entitled to receive compensation
for selling Fund shares may receive different compensation with respect
to one class of shares than the other. The Distributor will not accept
any order for $1 million or more of Class B or Class C shares on behalf
of a single investor (not including dealer "street name" or omnibus
accounts) because generally it will be more advantageous for that investor
to purchase Class A shares of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares is subject to the
continuing availability of a private letter ruling from the Internal
Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event
for the holder under Federal income tax law. If such a revenue ruling or
opinion is no longer available, the automatic conversion feature may be
suspended, in which event no further conversions of Class B shares would
occur while such suspension remained in effect. Although Class B shares
could then be exchanged for Class A shares on the basis of relative net
asset value of the two classes, without the imposition of a sales charge
or fee, such exchange could constitute a taxable event for the holder, and
absent such exchange, Class B shares might continue to be subject to the
asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to any class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total net
assets, and then equally to each outstanding share within a given class.
Such general expenses include (i) management fees, (ii) legal, bookkeeping
and audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Additional Statements and other materials for current
shareholders, (iv) fees to unaffiliated Trustees, (v) custodian expenses,
(vi) share issuance costs, (vii) organization and start-up costs, (viii)
interest, taxes and brokerage commissions, and (ix) non-recurring
expenses, such as litigation costs. Other expenses that are directly
attributable to a class are allocated equally to each outstanding share
within that class. Such expenses include (i) Distribution and/or Service
Plan fees, (ii) incremental transfer and shareholder servicing agent fees
and expenses, (iii) registration fees and (iv) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange on each day the
Exchange is open by dividing the value of the Fund's net assets
attributable to that class by the number of shares of that class
outstanding. The Exchange normally closes at 4:00 P.M., New York time,
but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states that
it will close New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day; it may
also close on other days. Trading may occur in U.S. Government Securities
at times when the Exchange is closed (including weekends and holidays or
after 4:00 P.M., on a regular business day). Because the net asset values
of the Fund will not be calculated at such times, if securities held in
the Fund's portfolio are traded at such times, the net asset values per
share of Class A, Class B and Class C shares of the Fund may be
significantly affected on such days when shareholders do not have the
ability to purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a securities exchange or on NASDAQ for which last
sale information is regularly reported are valued at the last reported
sale prices on their primary exchange or NASDAQ that day (or, in the
absence of sales that day, at values based on the last sales prices of the
preceding trading day, or closing bid and asked prices); (ii) securities
traded on NASDAQ and other unlisted equity securities for which last sales
prices are not regularly reported but for which over-the-counter market
quotations are readily available are valued at the highest closing bid
price at the time of valuation, or, if no closing bid price is reported,
on the basis of a closing bid price obtained from a dealer who maintains
an active market in that security; (iii) securities (including restricted
securities) not having readily-available market quotations are valued at
fair value under the Board's procedures; (iv) debt securities having a
maturity in excess of 60 days are valued at the mean between the bid and
asked prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; and (v) short-term debt
securities having a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts.
In the case of U.S. Government Securities and mortgage-backed
securities, when last sale information is not generally available, such
pricing procedures may include "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield, maturity, and other
special factors involved. The Fund's Board of Trustees has authorized the
Manager to employ a pricing service to price U.S. Government Securities
for which last sale information is not generally available. The Trustees
will monitor the accuracy of such pricing services by comparing prices
used for portfolio evaluation to actual sales prices of selected
securities.
Calls, puts and Futures held by the Fund are valued at the last sale
prices on the principal exchanges on which they are traded, or on NASDAQ,
as applicable, or, if there are no sales that day, in accordance with (i)
above. When the Fund writes an option, an amount equal to the premium
received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset, and an equivalent deferred credit is included in
the liability section. The deferred credit is "marked-to-market" to
reflect the current market value of the option.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
transfer to buy the shares. Dividends will begin to accrue on such shares
on the day the Fund receives Federal Funds for such purchase through the
ACH system before the close of The New York Stock Exchange. The Exchange
normally closes at 4:00 P.M., but may close earlier on certain days. If
the Federal Funds are received on a business day after the close of the
Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular business day. The proceeds of ACH transfers are
normally received by the Fund three days after the transfers are
initiated. The Distributor and the Fund are not responsible for any
delays.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse
and a spouse's siblings.
- The OppenheimerFunds. The OppenheimerFunds are those mutual funds
for which the Distributor acts as the distributor or the sub-Distributor
and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Time Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion High Yield Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Diversified Income Fund
the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
There is an initial sales charge on the purchase of Class A shares
of each of the OppenheimerFunds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a CDSC).
- Letters of Intent. A Letter of Intent ("Letter") is the investor's
statement of intention to purchase Class A shares of the Fund (and other
eligible OppenheimerFunds) sold with a front-end sales charge during the
13-month period from the investor's first purchase pursuant to the Letter
(the "Letter of Intent period"), which may, at the investor's request,
include purchases made up to 90 days prior to the date of the Letter. The
Letter states the investor's intention to make the aggregate amount of
purchases (excluding any purchases made by reinvestments of dividends or
distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at
their respective public offering prices calculated on the date of the
Letter) will equal or exceed the amount specified in the Letter to obtain
the reduced sales charge rate (as set forth in the Prospectus) applicable
to purchases of shares in that amount (the "intended amount"). Each
purchase under the Letter will be made at the public offering price
applicable to a single lump-sum purchase of shares in the intended amount,
as described in the Prospectus.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended amount, the investor agrees to pay the additional
amount of sales charge applicable to such purchases, as set forth in
"Terms of Escrow," below (as those terms may be amended from time to
time). The investor agrees that shares equal in value to 5% of the
intended amount will be held in escrow by the Transfer Agent subject to
the Terms of Escrow. Also, the investor agrees to be bound by the terms
of the Prospectus, this Statement of Additional Information and the
Application used for such Letter of Intent, and if such terms are amended,
as they may be from time to time by the Fund, that those amendments will
apply automatically to existing Letters of Intent.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended amount, the commissions
previously paid to the dealer of record for the account and the amount of
sales charge retained by the Distributor will be adjusted to the rates
applicable to actual total purchases. If total eligible purchases during
the Letter of Intent period exceed the intended amount and exceed the
amount needed to qualify for the next sales charge rate reduction set
forth in the applicable prospectus, the sales charges paid will be
adjusted to the lower rate, but only if and when the dealer returns to the
Distributor the excess of the amount of commissions allowed or paid to the
dealer over the amount of commissions that apply to the actual amount of
purchases. The excess commissions returned to the Distributor will be
used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly
after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value to 5% of the
intended amount specified in the Letter shall be held in escrow by the
Transfer Agent. For example, if the intended amount specified under the
Letter is $50,000, the escrow shall be shares valued in the amount of
$2,500 (computed at the public offering price adjusted for a $50,000
purchase). Any dividends and capital gains distributions on the escrowed
shares will be credited to the investor's account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended amount
specified in the Letter, the investor must remit to the Distributor an
amount equal to the difference between the dollar amount of sales charges
actually paid and the amount of sales charges which would have been paid
if the total amount purchased had been made at a single time. Such sales
charge adjustment will apply to any shares redeemed prior to the
completion of the Letter. If such difference in sales charges is not paid
within twenty days after a request from the Distributor or the dealer, the
Distributor will, within sixty days of the expiration of the Letter,
redeem the number of escrowed shares necessary to realize such difference
in sales charges. Full and fractional shares remaining after such
redemption will be released from escrow. If a request is received to
redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of the Letter) do not include
any shares sold without a front-end sales charge or without being subject
to a Class A contingent deferred sales charge unless (for the purpose of
determining completion of the obligation to purchase shares under the
Letter) the shares were acquired in exchange for shares of one of the
OppenheimerFunds whose shares were acquired by payment of a sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "Exchange Privilege," and the
escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
OppenheimerFunds.
There is a front-end sales charge on the purchase of Class A shares
of certain OppenheimerFunds, or a contingent deferred sales charge may
apply to shares purchased by Asset Builder payments. An application
should be obtained from the Transfer Agent, completed and returned, and
a prospectus of the selected fund(s) should be obtained from the
Distributor or your financial advisor before initiating Asset Builder
payments. The amount of the Asset Builder investment may be changed or
the automatic investments may be terminated at any time by writing to the
Transfer Agent. A reasonable period (approximately 15 days) is required
after the Transfer Agent's receipt of such instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering
such plans at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
- Checkwriting. When a check is presented to the Bank for clearance,
the Bank will ask the Fund to redeem a sufficient number of full and
fractional shares in the shareholder's account to cover the amount of the
check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's Custodian.
This limitation does not affect the use of checks for the payment of bills
or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time
without prior notice.
- Involuntary Redemptions. The Fund's Board of Trustees has the right
to cause the involuntary redemption of the shares held in any account if
the aggregate net asset value of such shares is less than $200 or such
lesser amount as the Board may fix. The Board of Trustees will not cause
the involuntary redemption of shares in an account if the aggregate net
asset value of such shares has fallen below the stated minimum solely as
a result of market fluctuations. Should the Board elect to exercise this
right, it may also fix, in accordance with the Investment Company Act, the
requirements for any notice to be given to the shareholders in question
(not less than 30 days), or may set requirements for permission to
increase the investment, and other terms and conditions so that the shares
would not be involuntarily redeemed.
- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, if the Board
of Trustees of the Fund determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash, the Fund may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the portfolio of the Fund, in lieu of cash, in conformity
with applicable rules of the Securities and Exchange Commission. The Fund
has elected to be governed by Rule 18f-1 under the Investment Company Act,
pursuant to which the Fund is obligated to redeem shares solely in cash
up to the lesser of $250,000 or 1% of the net assets of the Fund during
any 90-day period for any one shareholder. If shares are redeemed in kind,
the redeeming shareholder might incur brokerage or other costs in selling
the securities for cash. The method of valuing securities used to make
redemptions in kind will be the same as the method the Fund uses to value
its portfolio securities described above under "Determination of Net Asset
Value Per Share" and such valuation will be made as of the time the
redemption price is determined.
- Wire Redemption Procedures. Under the Wire Redemption Procedure
discussed in the Prospectus, the Federal Funds wire of redemption proceeds
may be delayed if the Fund's Custodian bank is not open for business on
a day when the Fund would normally authorize the wire to be made, which
is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next
bank business day on which the Fund's custodian bank is open for business.
No dividends will be paid on the proceeds of redeemed shares awaiting
transfer by wire.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
(ii) Class B shares that were subject to the Class B contingent deferred
sales charge when redeemed or (iii) Class C shares that were subject to
the Class C contingent deferred sales charge when redeemed. The
reinvestment may be made without sales charge only in Class A shares of
the Fund or any of the other OppenheimerFunds into which shares of the
Fund are exchangeable as described below, at the net asset value next
computed after receipt by the Transfer Agent of the reinvestment order.
The shareholder must ask the Distributor for such privilege at the time
of reinvestment. Any capital gain that was realized when the shares were
redeemed is taxable, and reinvestment will not alter any capital gains tax
payable on that gain. If there has been a capital loss on the redemption,
some or all of the loss may not be tax deductible, depending on the timing
and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the OppenheimerFunds within
90 days of payment of the sales charge, the shareholder's basis in the
shares of the Fund that were redeemed may not include the amount of the
sales charge paid. That would reduce the loss or increase the gain
recognized from the redemption. However, in that case, the sales charge
would be added to the basis of the shares acquired by the reinvestment of
the redemption proceeds. The Fund may amend, suspend or cease offering
this reinvestment privilege at any time as to shares redeemed after the
date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of either class at the time of transfer
to the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, or pension or
profit-sharing plans should be addressed to "Trustee, OppenheimerFunds
Retirement Plans," c/o the Transfer Agent at its address listed in "How
To Sell Shares" in the Prospectus. The request must: (i) state the reason
for the distribution; (ii) state the owner's awareness of tax penalties
if the distribution is premature; and (iii) conform to the requirements
of the plan and the Fund's other redemption requirements. Participants
(other than self-employed persons) in OppenheimerFunds-sponsored pension
or profit-sharing plans may not directly request redemption of their
accounts. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents
(available from the Transfer Agent) must be completed before the
distribution may be made. Distributions from retirement plans are subject
to withholding requirements under the Internal Revenue Code, and IRS Form
W-4P (available from the Transfer Agent) must be submitted to the Transfer
Agent with the distribution request, or the distribution may be delayed.
Unless the shareholder has provided the Transfer Agent with a certified
tax identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customer prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Payment ordinarily will be made
within seven days after the Distributor's receipt of the required
documents, with signature(s) guaranteed as described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are by check
payable to all shareholders of record and sent to the address of record
for the account (and if the address has not been changed within the prior
30 days). Required minimum distributions from OppenheimerFunds-sponsored
retirement plans may not be arranged on this basis. Payments are normally
made by check, but shareholders having AccountLink privileges (see "How
To Buy Shares") may arrange to have Automatic Withdrawal Plan payments
transferred to the bank account designated on the OppenheimerFunds New
Account Application or signature-guaranteed instructions. The Fund cannot
guarantee receipt of the payment on the date requested and reserves the
right to amend, suspend or discontinue offering such plans at any time
without prior notice. Because of the sales charge assessed on Class A
share purchases, shareholders should not make regular additional Class A
purchases while participating in an Automatic Withdrawal Plan. Class B
and Class C shareholders should not establish withdrawal plans, because
of the imposition of the contingent deferred sales charges on such
withdrawals (except where the Class B and Class C contingent deferred
sales charge is waived as described in the Prospectus under "Class B
Contingent Deferred Sales Charge" and "Class C Contingent Deferred Sales
Charge").
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as the Prospectus. These provisions may
be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other OppenheimerFunds automatically on
a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and thereafter shares acquired with
reinvested dividends and capital gains distributions will be redeemed
next, followed by shares acquired with a sales charge, to the extent
necessary to make withdrawal payments. Depending upon the amount
withdrawn, the investor's principal may be depleted. Payments made under
such plans should not be considered as a yield or income on your
investment.
The transfer agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or AccountLink payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How to Exchange Shares. As stated in the Prospectus, shares of a
particular class of OppenheimerFunds having more than one class of shares
may be exchanged only for shares of the same class of other
OppenheimerFunds. Shares of the OppenheimerFunds that have a single class
without a class designation are deemed "Class A" shares for this purpose.
All of the OppenheimerFunds offer Class A shares (except for Oppenheimer
Strategic Diversified Income Fund), but only the following
OppenheimerFunds offer Class C shares:
Oppenheimer Limited-Term Government Fund
Oppenheimer Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Champion High Yield Fund
Oppenheimer U.S. Government Trust
Oppenheimer Intermediate Tax-Exempt Bond Fund
Oppenheimer Target Fund
Oppenheimer Cash Reserves (Class C shares are available only by
exchange)
Oppenheimer Strategic Diversified Income Fund
Oppenheimer Main Street Income & Growth Fund
The following OppenheimerFunds offer Class B shares:
Oppenheimer Limited-Term Government Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Investment Grade Bond Fund
Oppenheimer Strategic Short-Term Income Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Bond Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Value Stock Fund
Oppenheimer Investment Grade Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Mortgage Income Fund
Oppenheimer Cash Reserves (Class B shares are only available by
exchange)
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Global Fund
Oppenheimer Discovery Fund
Class A shares of OppenheimerFunds may be exchanged for shares of any
Money Market Fund; shares of any Money Market Fund purchased without a
sales charge may be exchanged for shares of OppenheimerFunds offered with
a sales charge upon payment of the sales charge (or, if applicable, may
be used to purchase shares of OppenheimerFunds subject to a contingent
deferred sales charge); and shares of this Fund acquired by reinvestment
of dividends or distributions from any other of the OppenheimerFunds or
from any unit investment trust for which reinvestment arrangements have
been made with the Distributor may be exchanged at net asset value for
shares of any of the OppenheimerFunds.
No contingent deferred sales charge is imposed on exchanges of shares
of either class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares
purchased subject to a Class A contingent deferred sales charge are
redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred
sales charge is imposed on the redeemed shares (see "Class A Contingent
Deferred Sales Charge" in the Prospectus). The Class B contingent
deferred sales charge is imposed on Class B shares redeemed within five
years of the initial purchase of the exchanged Class B shares. The Class
C contingent deferred sales charge is imposed on Class C shares acquired
by exchange if they are redeemed within 12 months of the initial purchase
of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B and Class C contingent deferred sales charge
will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or shares covered by a share
certificate that is not tendered with the request. In those cases, only
the shares available for exchange without restriction will be exchanged.
When exchanging shares by telephone, the shareholder must either have
an existing account in, or acknowledge receipt of a prospectus of, the
fund to which the exchange is to be made. For full or partial exchanges
of an account made by telephone, any special account features such as
Asset Builder Plans, Automatic Withdrawal Plans and retirement plan
contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
request from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different OppenheimerFunds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value, or
as otherwise described in "How to Buy Shares." Daily dividends on newly
purchased shares will not be declared or paid until such time as Federal
Funds (funds credited to a member bank's account at the Federal Reserve
Bank) are available from the purchase payment for such shares. Normally,
purchase checks received from investors are converted to Federal Funds on
the next business day. Dividends will be declared on shares repurchased
by a dealer or broker for four business days following the trade date
(i.e., to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares
of the same class in the account will be paid together with the redemption
proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and
Class C," above. Dividends are calculated in the same manner, at the same
time and on the same day for shares of each class. However, dividends on
Class B and Class C shares are expected to be lower than dividends on
Class A shares as a result of the asset-based sales charges on Class B and
Class C shares, and will also differ in amount as a consequence of any
difference in net asset value between the classes.
Distributions may be made annually in December out of any net short-
term or long-term capital gains realized from the sale of securities,
premiums from expired calls written by the Fund and net profits from
Hedging Instruments and closing purchase transactions realized in the
twelve months ending on October 31 of the current year. Any difference
between the net asset value of Class A, Class B and Class C shares will
be reflected in such distributions. Distributions from net short-term
capital gains are taxable to shareholders as ordinary income and when paid
by the Fund are considered "dividends." The Fund may make a supplemental
distribution of capital gains and ordinary income following the end of its
fiscal year. Any long-term capital gains distributions will be identified
separately when paid and when tax information is distributed by the Fund.
If prior distributions must be re-characterized at the end of the fiscal
year as a result of the effect of the Fund's investment policies,
shareholders may have a non-taxable return of capital, which will be
identified in notices to shareholders. There is no fixed dividend rate
(although the Fund may have a targeted dividend rate for Class A shares)
and there can be no assurance as to the payment of any dividends or the
realization of any capital gains.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified as
a regulated investment company in its last fiscal year and intends to
qualify in future years, but reserves the right not to qualify. The
Internal Revenue Code contains a number of complex tests to determine
whether the Fund will qualify, and the Fund might not meet those tests in
a particular year. For example, if the Fund derives 30% or more of its
gross income from the sale of securities held less than three months, it
may fail to qualify (see "Tax Aspects of Covered Calls and Hedging
Instruments," above). If it does not qualify, the Fund will be treated for
tax purposes as an ordinary corporation and will receive no tax deduction
for payments of dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year the Fund
must distribute 98% of its taxable investment income earned from January
1 through December 31 of that year and 98% of its capital gains realized
in the period from November 1 of the prior year through October 31 of the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board and the Manager might determine in
a particular year that it would be in the best interest of shareholders
for the Fund not to make such distributions at the required levels and to
pay the excise tax on the undistributed amounts. That would reduce the
amount of income or capital gains available for distribution to
shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other OppenheimerFunds listed in "Reduced
Sales Charges" above, at net asset value without sales charge. Class B
and Class C shareholders should be aware that as of the date of this
Statement of Additional Information, not all of the OppenheimerFunds offer
Class B and Class C shares. To elect this option, the shareholder must
notify the Transfer Agent in writing and either have an existing account
in the fund selected for reinvestment or must obtain a prospectus for that
fund and an application from the Distributor to establish an account. The
investment will be made at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from certain of the OppenheimerFunds may
be invested in shares of this Fund on the same basis.
Additional Information About The Fund
The Custodian. Citibank, N.A. is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the
Fund's portfolio securities, collecting income on the portfolio securities
and handling the delivery of such securities to and from the Fund. The
Manager has represented to the Fund that the banking relationships between
the Manager and with the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Manager and its affiliates.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for certain other funds advised by the Manager
and its affiliates.
<PAGE>
Appendix A
Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Independent Auditors
Deloitte & Touche LLP
1560 Broadway
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
<PAGE>
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
ANNUAL REPORT SEPTEMBER 30, 1994
[LOGO] OppenheimerFunds.
<PAGE>
FUND FACTS
- --------------------------------------------------------------------------------
IN THIS REPORT:
ANSWERS TO TIMELY QUESTIONS YOU SHOULD ASK YOUR FUND'S MANAGERS.
- - HOW DID THE FUND RESPOND TO RISING INTEREST RATES IN THE U.S. AND OVERSEAS?
- - WHAT'S THE OUTLOOK FOR THE CORPORATE BOND MARKET?
- - WHERE ARE YOU FINDING THE MOST ATTRACTIVE INVESTMENT OPPORTUNITIES TODAY?
- --------------------------------------------------------------------------------
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
1 The Fund's objective is high current income with safety of principal
from a portfolio of investment-grade securities including domestic
corporate bonds, U.S. government issues, foreign fixed income
securities, and money market instruments. The Fund normally maintains
an average portfolio maturity of three years.
- --------------------------------------------------------------------------------
2 Standardized yield for the 30 days ended September 30, 1994 was 6.16%
for Class A shares and 5.61% for Class B shares.(1)
- --------------------------------------------------------------------------------
3 Total return at net asset value for the 12 months ended September 30,
1994 was 0.61% for Class A shares and -0.39% for Class B shares.(2)
- --------------------------------------------------------------------------------
4 Average annual total returns for Class A shares for the 1-year period
ended September 30, 1994 and since inception of the Fund on August 4,
1992 were -2.91% and 0.54%, respectively. For Class B shares, average
annual total return for the 1-year period ended September 30, 1994 and
since inception of the Class on November 30, 1992 were -4.37% and
1.90%, respectively.(3)
- --------------------------------------------------------------------------------
5 "The Fund's flexibility to shift assets strategically among bond
market sectors is a major plus for shareholders in the current
investment environment."
PORTFOLIO MANAGERS DAVID NEGRI AND ART STEINMETZ, SEPTEMBER 30, 1994
1. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 9/30/94, divided by the maximum offering price
at the end of the period, compounded semi-annually and then annualized. Falling
net asset values will tend to artificially raise yields.
2. Based on the change in net asset value per share from 9/30/93 to 9/30/94,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
3. Average annual total returns are based on a hypothetical investment held
until 9/30/94, after deducting the current maximum initial sales charge of 3.50%
for Class A shares and the contingent deferred sales charge of 4% (1-year) and
3% (since inception) for Class B shares.
The Fund's portfolio is subject to change.
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
2 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
REPORT TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Oppenheimer Strategic Short-Term Income Fund continued to provide shareholders
an attractive level of income for the 12 months ended September 30, 1994. At
that date, the Fund's standardized 30-day yield was 6.16% for Class A shares and
5.61% for Class B shares.(4)
Once again, your managers' ability to shift assets strategically among
four sectors"U.S. government securities, investment-grade corporate bonds,
foreign fixed income securities, and money market instruments"played an
important role in the Fund's performance over the year.
As the Federal Reserve and central banks worldwide moved aggressively
to raise short-term interest rates to fend off inflation, your managers were
able to capture rising yields while limiting the portfolio's price volatility.
As U.S. interest rates began to rise, your managers reduced the Fund's exposure
to U.S. government securities, as well as to corporate bonds issued by
consumer-durable and financial services companies, whose earnings are sensitive
to interest rate changes.
The proceeds were used to add to holdings in corporate bonds issued by
larger industrial companies, notably in chemicals, mining, metals, and forest
products sectors. These companies' earnings tend to rise in the middle-to-late
stages of an economic expansion.
As interest rates rose offshore and the dollar weakened against major
currencies, your managers emphasized investments in Europe. In addition to
increasing the portfolio's holdings of foreign government bonds, your managers
focused more attention on large European industrial companies positioned to
benefit from economic growth.
Looking ahead, your managers don't anticipate major changes in the
portfolio's composition in the near term. The Fund's allocations will, of
course, be adjusted should the economic expansion appear to be ending, but all
signs currently are pointing to continued gradual growth"and your Fund is
well-positioned to provide attractive returns.
We appreciate the confidence you have placed in Oppenheimer Strategic
Short-Term Income Fund, and we look forward to continuing to help you reach your
investment goals.
James C. Swain Jon S. Fossel
Chairman President
Oppenheimer Strategic Oppenheimer Strategic
Short-Term Income Fund Short-Term Income Fund
October 21, 1994
4. See footnote 1, page 2.
3 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS September 30, 1994
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS--9.0%
- ----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 4.95%,
dated 9/30/94, to be repurchased at $3,201,320 on 10/3/94,
collateralized by U.S. Treasury Nts., 4.25%--8.50%, 4/15/95--
7/15/98, with a value of $1,809,492 and U.S. Treasury Bills, 0%,
3/16/95--3/23/95, with a value of $1,457,477 (Cost $3,200,000) $ 3,200,000 $ 3,200,000
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS--50.0%
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM GOVERNMENT OBLIGATIONS--3.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion:
0%, 12/08/94 125,000 123,403
0%, 1/12/95 1,000,000 980,179
-----------
1,103,582
- ----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM GOVERNMENT OBLIGATIONS--46.9%
- ----------------------------------------------------------------------------------------------------------------------------------
Czechoslovakia National Bank Bonds, 7%, 4/16/96(3) 500,000 498,750
------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Bonds:
9%, 11/15/98 1,980,000(1) 328,194
6%, 12/10/99 1,300,000(1) 189,849
------------------------------------------------------------------------------------------------------
Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98(3) 450,000 431,167
------------------------------------------------------------------------------------------------------
First Australia National Mortgage Acceptance Corp. Ltd.
Bonds, Series 22, 11.40%, 12/15/01 437,340 329,109
------------------------------------------------------------------------------------------------------
Indonesia (Republic of) CD, Bank Negara, 0%, 4/24/95 1,500,000,000(1) 632,333
------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni Poliennali del Tes:
12%, 1/1/96 50,000,000(1) 32,452
12%, 5/1/97 350,000,000(1) 227,388
12.50%, 6/16/97 350,000,000(1) 229,766
------------------------------------------------------------------------------------------------------
Small Business Administration, 8.125%--9.375%, 8/25/01--11/25/06(2) 2,589,138 2,589,138
------------------------------------------------------------------------------------------------------
South Australia Government Finance Authority Bonds, 10%, 1/15/03 350,000(1) 248,501
------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Bonds, 11.45%, 8/30/98 74,500,000(1) 586,671
------------------------------------------------------------------------------------------------------
Treasury Corp. of Victoria Gtd. Bonds:
12%, 10/22/98 350,000(1) 278,164
8.25%, 10/15/03 620,000(1) 394,827
------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts.:
12%, 11/20/98 195,000(1) 340,957
12.25%, 3/26/99 200,000(1) 354,530
------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.25%, 8/15/23(5) 600,000 487,312
------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
4.375%, 8/15/96 5,000,000 4,814,059
5.125%, 2/28/96 300,000 283,031
8.50%, 5/15/19 3,200,000 3,328,998
------------------------------------------------------------------------------------------------------
16,605,196
-----------
Total Government Obligations (Cost $18,285,809) 17,708,778
4 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MORTGAGE/ASSET-BACKED OBLIGATIONS--19.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 7%, Series 1548, Cl. C, 4/15/21 $3,000,000 $2,625,930
------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Interest-Only Stripped Mtg.-
Backed Security, Trust 240, Class 2, 7%, 9/25/23(4) 1,977,811 747,860
------------------------------------------------------------------------------------------------------
First Boston Corp. Mtg. Securities,
7.06%, Series 1993-AFC-1, 10/25/02 741,071 682,944
------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
10.50%, 12/15/17 324,386 353,789
10.50%, 7/15/19 15,353 16,753
10.50%, 10/15/20 51,963 56,711
10.50%, 1/15/21 66,281 72,351
10.50%, 3/15/21 39,289 42,886
10.50%, 7/15/21 448,609 489,684
10.50%, 10/15/21 48,544 52,989
------------------------------------------------------------------------------------------------------
Resolution Trust Corp. Commercial Mtg. Pass-Through Certificates:
9%, Series 1991--M5, Cl. A, 3/25/17 746,789 750,290
8.75%, Series 1993--C1, Cl. B, 5/25/24 600,000 594,000
10.6403%, Series 1992--16, Cl. B3, 5/25/24(2) 500,000 506,562
-----------
Total Mortgage/Asset-Backed Obligations (Cost $7,379,412) 6,992,749
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--2.4%
- ----------------------------------------------------------------------------------------------------------------------------------
Connecticut State Taxable General Obligation
Bonds, 6.625%, 12/15/97 350,000 347,669
New York State Environmental Facilities Corp.
State Service Contract Taxable Revenue Bonds, Series B, 7.30%, 3/15/97 500,000 499,312
-----------
Total Municipal Bonds and Notes (Cost $848,691) 846,981
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM CORPORATE BONDS AND NOTES--14.5%
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC MATERIALS--1.3%
- ----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.3%
Quantum Chemical Corp., 10.375% Fst. Mtg. Nts., 6/1/03 400,000 443,863
------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.7%
------------------------------------------------------------------------------------------------------
Consumer Goods and
Services--0.8%
Mattel, Inc., 6.875% Sr. Nts., 8/1/97 300,000 294,746
- ----------------------------------------------------------------------------------------------------------------------------------
HOTELS/LODGING--0.8%
- ----------------------------------------------------------------------------------------------------------------------------------
Host Marriott Hospitality, Inc., 10.625% Sr. Nts., Series B, 2/1/00 265,000 266,987
------------------------------------------------------------------------------------------------------
Retail--1.1%
Sears Canada, Inc., 11.70% Debs., 7/10/00 500,000(1) 403,513
- ----------------------------------------------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--2.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Food--2.1%
RJR Nabisco, Inc., 10.50% Sr. Nts., 4/15/98 700,000 740,899
- ----------------------------------------------------------------------------------------------------------------------------------
ENERGY--0.7%
- ----------------------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co., 10.375% Nts., 7/15/95 250,000 257,508
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--6.0%
- ----------------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 100,000 100,806
------------------------------------------------------------------------------------------------------
Corporacion Andina de Formento Nts., 7.25%, 4/30/98(3) 750,000 714,844
------------------------------------------------------------------------------------------------------
First Chicago Corp., 9% Sub. Nts., 6/15/99 150,000 156,604
------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Nts., 10/1/96 200,000 202,664
------------------------------------------------------------------------------------------------------
Heller Financial, Inc., 7.75% Nts., 5/15/97 225,000 227,566
------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds,
12.50%, 7/25/97 580,000(1) 377,441
------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 350,000 353,546
-----------
2,133,471
5 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (Continued)
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY--1.1%
- ----------------------------------------------------------------------------------------------------------------------------------
Cable Television--1.1%
Time Warner, Inc., 7.45% Nts., 2/1/98 $400,000 $393,500
- ----------------------------------------------------------------------------------------------------------------------------------
Utilities--0.6%
- ----------------------------------------------------------------------------------------------------------------------------------
Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 217,551
-----------
Total Long-Term Corporate Bonds and Notes (Cost $5,367,845) 5,152,038
<CAPTION>
DATE/PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0%
- ----------------------------------------------------------------------------------------------------------------------------------
European OTC Deutsche Mark/U.S. Dollar Put Nov. 2/1.60 DEM 2,006,202(1) 4,138
European OTC Deutsche Mark/U.S. Dollar Put Nov. 4/1.60 DEM 1,003,101(1) 2,263
European OTC Deutsche Mark/U.S. Dollar Put Nov. 8/1.60 DEM 1,003,101(1) 2,635
-----------
Total Put Options Purchased (Cost $43,719) 9,036
- ----------------------------------------------------------------------------------------------------------------------------------
STRUCTURED INSTRUMENTS--2.5%
- ----------------------------------------------------------------------------------------------------------------------------------
Citibank 10.50%--16% CD, 5/3/95--8/17/95 126,153,140(1) 455,638
------------------------------------------------------------------------------------------------------
Goldman Sachs International Limited, 5.10%, 2/28/95 80,000 77,808
------------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc.,
10% CD Sterling Rate Linked Nts., 7/3/95 370,000 364,968
----------- -----------
Total Structured Instruments (Cost $900,298) 898,414
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $36,025,774) 98.1%
34,807,996
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.9 667,646
----- -----------
NET ASSETS 100.0% $35,475,642
----- -----------
----- -----------
<FN>
1. Face amount is reported in foreign currency.
2. Represents the current interest rate for a
variable rate security.
3. Restricted security-See Note 6 of Notes to
Financial Statements.
4. Interest-Only Strips represent the right to
receive the monthly interest payments on an
underlying pool of mortgage loans. These securities
typically decline in price as interest rates
decline. Most other fixed- income securities
increase in price when interest rates decline. The
principal amount of the underlying pool represents
the notional amount on which current interest is
calculated. The price of these securities is
typically more sensitive to changes in prepayment
rates than traditional mortgage backed securities
(for example, GNMA pass-throughs).
5. Securities with an aggregate market value of
$103,148 are held in escrow to cover outstanding
call options, as follows:
FACE EXPIRATION EXERCISE PREMIUM MARKET
VALUE
SUBJECT TO CALL DATE PRICE RECEIVED SEE NOTE
1
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
European OTC Deutsche Mark/U.S. Dollar 875,537 11/02/94 1.50 DEM $ 4,067 $
2,309
European OTC Deutsche Mark/U.S. Dollar 393,357 11/02/94 1.60 DEM 10,260
13,109
European OTC Deutsche Mark/U.S. Dollar 437,768 11/04/94 1.50 DEM 2,107 1,293
European OTC Deutsche Mark/U.S. Dollar 196,679 11/04/94 1.60 DEM 5,168 6,496
European OTC Deutsche Mark/U.S. Dollar 437,768 11/08/94 1.54 DEM 5,223 5,382
European OTC Deutsche Mark/U.S. Dollar 196,679 11/08/94 1.60 DEM 5,348 6,729
-------- --------
$32,173 $35,318
</TABLE>
See accompanying Notes to Financial Statements.
6 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS Investments, at value (cost $36,025,774)--see accompanying statement $34,807,996
------------------------------------------------------------------------------------------------------
Cash 270,078
------------------------------------------------------------------------------------------------------
Receivables:
Interest 599,315
Investments sold 113,526
Shares of beneficial interest sold 106,156
------------------------------------------------------------------------------------------------------
Deferred organization costs 4,827
------------------------------------------------------------------------------------------------------
Other 3,338
-----------
Total assets 35,905,236
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES Options written, at value (premiums received $32,173)--Note 4 35,318
------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 229,533
Investments purchased 63,418
Distribution and service plan fees--Note 5 21,588
Dividends 47,899
Other 31,838
-----------
Total liabilities 429,594
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $35,475,642
-----------
-----------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF Paid-in capital $37,179,293
NET ASSETS ------------------------------------------------------------------------------------------------------
Overdistributed net investment income (254,041)
------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment, written option and foreign
currency transactions (229,651)
------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments, options written and translation of assets
and liabilities denominated in foreign currencies (1,219,959)
-----------
Net assets $35,475,642
-----------
-----------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets of
$27,849,628 and 6,111,573 shares of beneficial interest outstanding) $4.56
Maximum offering price per share (net asset value plus sales charge of 3.50% of offering price) $4.73
------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $7,626,014 and 1,675,212 shares of beneficial interest outstanding) $4.55
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME Interest (net of withholding taxes of $13,941) $2,507,029
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES Management fees--Note 5 222,890
------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 5 61,864
Class B--Note 5 60,156
------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 5 33,947
------------------------------------------------------------------------------------------------------
Shareholder reports 29,847
------------------------------------------------------------------------------------------------------
Custodian fees and expenses 12,727
------------------------------------------------------------------------------------------------------
Legal and auditing fees 9,524
------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,667
Class B 1,508
------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,963
-----------
Other 13,957
-----------
Total expenses 450,050
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,056,979
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED Net realized gain (loss) from:
GAIN (LOSS) ON INVESTMENTS, Investments and options written (526,738)
OPTIONS WRITTEN AND Expiration and closing of option contracts written--Note 4 3,047
FOREIGN CURRENCY Foreign currency transactions (110,362)
TRANSACTIONS -----------
Net realized loss (634,053)
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written (1,591,568)
Translation of assets and liabilities denominated in foreign currencies 229,322
-----------
Net change (1,362,246)
-----------
Net realized and unrealized loss on investments, options written
and foreign currency transactions (1,996,299)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$60,680
-----------
-----------
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED SEPTEMBER 30,
1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS Net investment income $2,056,979 $1,481,320
------------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and foreign
currency transactions (634,053) (511,099)
------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated in
foreign currencies (1,362,246) 238,294
----------- -----------
Net increase in net assets resulting from operations 60,680 1,208,515
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.205 and $.305 per share, respectively) (1,087,188)
(1,297,637)
SHAREHOLDERS Class B ($.167 and $.212 per share, respectively) (297,053) (61,188)
------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.012 per share) (73,587)
Class B ($.012 per share) (20,106)
------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on investments
and foreign currency transactions:
Class A ($.005 and $.0007 per share, respectively) (29,391) (3,024)
Class B ($.005 and $.0007 per share, respectively) (8,031) (36)
------------------------------------------------------------------------------------------------------
Tax return of capital:
Class A ($.088 per share) (540,571) --
Class B ($.088 per share) (147,701) --
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 4,289,799 12,801,641
------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 4,593,588 3,416,849
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS Total increase 6,740,439 16,065,120
------------------------------------------------------------------------------------------------------
Beginning of year 28,735,203 12,670,083
----------- -----------
End of year [including undistributed (overdistributed) net investment
income of ($254,041) and $122,495, respectively] $35,475,642 $28,735,203
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B
------------------------------ ------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1992(2) 1994 1993(1)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $4.84 $4.93 $5.00 $4.84 $4.75
-----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .33 .05 .34 .22
Net realized and unrealized gain (loss)
on investments and foreign currencies (.30) (.11) (.07) (.36) .08
------ ------ ------ ------ ------
Total income (loss) from investment
operations .03 .22 (.02) (.02) .30
-----------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.20) (.31) (.05) (.16) (.21)
Dividends in excess of investment income (.01) -- -- (.01) --
Distributions in excess of net realized gain
on investments (.01) -- -- (.01) --
Tax return of capital (.09) -- -- (.09) --
------ ------ ------ ------ ------
Total dividends and distributions to
shareholders (.31) (.31) (.05) (.27) (.21)
-----------------------------------------------------------------------------------------------------
Net asset value, end of period $4.56 $4.84 $4.93 $4.55 $4.84
------ ------ ------ ------ ------
------ ------ ------ ------ ------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3) .61% 4.58% (.27)% (.39)% 6.48%
-----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $27,850 $25,314 $12,670 $7,626 $3,421
-----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $28,284 $20,663 $8,643 $6,020 $1,428
-----------------------------------------------------------------------------------------------------
Number of shares outstanding at end of
period (in thousands) 6,112 5,231 2,572 1,675 707
-----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.11% 6.83% 6.38%(4) 5.46% 5.88%(4)
-----------------------------------------------------------------------------------------------------
Expenses, before voluntary reimbursement
by the Manager 1.17% 1.38% 1.87%(4) 1.97% 2.22%(4)
-----------------------------------------------------------------------------------------------------
Expenses, net of voluntary reimbursement
by the Manager -- 1.21% .92%(4) -- 2.21%(4)
-----------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 57.8% 104.0% 11.2% 57.8% 104.0%
<FN>
1. For the period from November 30, 1992 (inception of offering) to
September 30, 1993.
2. For the period from August 4, 1992 (commencement of operations) to
September 30, 1992.
3. 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.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the year
ended September 30, 1994 were $28,239,652 and $16,278,532, respectively.
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT Oppenheimer Strategic Short-Term Income Fund (the Fund) is
ACCOUNTING POLICIES registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment
company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers both
Class A and Class B shares. Class A shares are sold with a
front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares
have identical rights to earnings, assets and voting
privileges, except that each class has its own
distribution and/or service plan, expenses directly
attributable to a particular class and exclusive voting
rights with respect to matters affecting a single class.
Class B shares will automatically convert to Class A
shares six years after the date of purchase. The following
is a summary of significant accounting policies
consistently followed by the Fund.
----------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at
4:00 p.m. (New York time) on each trading day. Listed and
unlisted securities for which such information is
regularly reported are valued at the last sale price of
the day or, in the absence of sales, at values based on
the closing bid or asked price or the last sale price on
the prior trading day. Long-term debt securities are
valued by a portfolio pricing service approved by the
Board of Trustees. Long-term debt securities which cannot
be valued by the approved portfolio pricing service are
valued by averaging the mean between the bid and asked
prices obtained from two active market makers in such
securities. Short-term debt securities having a remaining
maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to
maturity of any premium or discount. Securities for which
market quotes are not readily available are valued under
procedures established by the Board of Trustees to
determine fair value in good faith.
----------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of
the Fund are maintained in U.S. dollars. Prices of
securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of
securities and investment income are translated at the
rates of exchange prevailing on the respective dates of
such transactions.
The Fund generally enters into forward foreign
currency exchange contracts as a hedge, upon the purchase
or sale of a security denominated in a foreign currency.
In addition, the Fund may enter into such contracts as a
hedge against changes in foreign currency exchange rates
on portfolio positions. A forward exchange contract is a
commitment to purchase or sell a foreign currency at a
future date, at a negotiated rate. Risks may arise from
the potential inability of the counterparty to meet the
terms of the contract and from unanticipated movements in
the value of a foreign currency relative to the U.S.
dollar.
The effect of changes in foreign currency exchange
rates on investments is separately identified from the
fluctuations arising from changes in market values of
securities held and reported with all other foreign
currency gains and losses in the Fund's results of
operations.
----------------------------------------------------------
OPTIONS WRITTEN. The Fund may write covered put and call
options. When an option is written, the Fund receives a
premium and becomes obligated to sell or purchase the
underlying security at a fixed price, upon exercise of the
option. In writing an option, the Fund bears the market
risk of an unfavorable change in the price of the security
underlying the written option. Exercise of an option
written by the Fund could result in the Fund selling or
purchasing a security at a price different from the
current market value. All securities covering call options
written are held in escrow by the custodian bank and the
Fund maintains liquid assets sufficient to cover written
put options in the event of exercise by the holder.
----------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to
take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the
custodian's vault, all securities held as collateral for
repurchase agreements. If the seller of the agreement
defaults and the value of the collateral declines, or if
the seller enters an insolvency proceeding, realization of
the value of the collateral by the Fund may be delayed or
limited.
----------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
Income, expenses (other than those attributable to a
specific class) and gains and losses are allocated daily
to each class of shares based upon the relative proportion
of net assets represented by such class. Operating
expenses directly attributable to a specific class are
charged against the operations of that class.
----------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to
comply with provisions of the Internal Revenue Code
applicable to regulated investment companies and to
distribute all of its taxable income, including any net
realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income
tax provision is required. At September 30, 1994, the Fund
had available for federal income tax purposes an unused
capital loss carryover of approximately $10,000, which
will expire in 2002.
11 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ORGANIZATION COSTS. The Manager advanced $16,395 for
ACCOUNTING POLICIES organization and start-up costs of the Fund. Such expenses
(CONTINUED) are being amortized over a five-year period from the date
operations commenced. In the event that all or part of the
Manager's initial investment in shares of the Fund is
withdrawn during the amortization period, the redemption
proceeds will be reduced to reimburse the Fund for any
unamortized expenses, in the same ratio as the number of
shares redeemed bears to the number of initial shares
outstanding at the time of such redemption.
----------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A and Class B
shares from net investment income each day the New York
Stock Exchange is open for business and pay such dividends
monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each
year.
----------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS.
Effective October 1, 1993, the Fund adopted Statement of
Position 93-2: Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies. As a
result, the Fund changed the classification of
distributions to shareholders to better disclose the
differences between financial statement amounts and
distributions determined in accordance with income tax
regulations. Accordingly, subsequent to September 30,
1993, amounts have been reclassified to reflect a decrease
in undistributed net investment loss of $539,989, and an
increase in undistributed capital loss on investments of
$539,989. During the year ended September 30, 1994, in
accordance with Statement of Position 93-2, paid-in
capital was decreased by $688,272, undistributed net
investment income was increased by $267,692 and
undistributed capital loss was decreased by $420,580.
----------------------------------------------------------
OTHER. Investment transactions are accounted for on the
date the investments are purchased or sold (trade date).
Discount on securities purchased is amortized over the
life of the respective securities, in accordance with
federal income tax requirements. Realized gains and losses
on investments and unrealized appreciation and
depreciation are determined on an identified cost basis,
which is the same basis used for federal income tax
purposes.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL INTEREST value shares of beneficial interest of each class.
Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
----------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 5,840,432 $27,782,705 6,914,934 $33,354,845
Dividends and distributions reinvested 307,224 1,445,537 164,208 792,992
Redeemed (5,266,746) (24,938,443) (4,420,557) (21,346,196)
---------- ----------- ----------- -----------
Net increase 880,910 $4,289,799 2,658,585 $12,801,641
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
--------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,435,285 $6,786,147 870,393 $4,204,678
Dividends and distributions reinvested 55,275 258,470 9,152 44,291
Redeemed (522,740) (2,451,029) (172,153) (832,120)
---------- ----------- ----------- -----------
Net increase 967,820 $4,593,588 707,392 $3,416,849
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
<FN>
1. For the year ended September 30, 1993 for Class A shares and for the period
from November 30, 1992 (inception of offering) to September 30, 1993 for Class B
shares.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS At September 30, 1994, net unrealized depreciation on
AND LOSSES ON investments of $1,220,923 was composed of gross
INVESTMENTS appreciation of $218,427, and gross depreciation of
$1,439,350.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. OPTION ACTIVITY Option activity for the year ended September 30, 1994 was
as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
-------------------------- --------------------------
NUMBER AMOUNT NUMBER AMOUNT
OF OPTIONS OF PREMIUMS OF OPTIONS OF
PREMIUMS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1993 -- $ -- -- $ --
-----------------------------------------------------------------------------------------------------------
Options written 2,537,788 32,173 780 3,047
-----------------------------------------------------------------------------------------------------------
Options expired prior to exercise -- -- (780) (3,047)
--------- ------- ------- -------
Options outstanding at September 30, 1994 2,537,788 $32,173 -- $--
--------- ------- ------- -------
--------- ------- ------- -------
</TABLE>
12 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. MANAGEMENT FEES Management fees paid to the Manager were in accordance
AND OTHER with the investment advisory agreement with the Fund which
TRANSACTIONS WITH provides for an annual fee of .65% on the first $500
AFFILIATES million of net assets with a reduction of .03% on each
$500 million thereafter to $1.5 billion, and .50% on net
assets in excess of $1.5 billion. The Manager has agreed
to reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent applicable
regulatory limit on Fund expenses. A voluntary undertaking
to reimburse Fund expenses to the level needed to maintain
a stable dividend was terminated December 1, 1993.
For the year ended September 30, 1994, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $448,316, of which $154,348 was retained by
Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an
affiliated broker/dealer. During the year ended
September 30, 1994, OFDI received contingent deferred
sales charges of $21,256 upon redemption of Class B
shares, as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of
the Manager, is the transfer and shareholder servicing
agent for the Fund and for other registered investment
companies. OSS's total costs of providing such services
are allocated ratably to these companies.
Under separate approved plans, each class may expend
up to .25% of its net assets annually to reimburse OFDI
for costs incurred in connection with the personal service
and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and
other institutions. In addition, Class B shares are
subject to an asset-based sales charge of .75% of net
assets annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and
associated financing costs. In the event of termination or
discontinuance of the Class B plan, the Board of Trustees
may allow the Fund to continue payment of the asset-based
sales charge to OFDI for distribution expenses incurred on
Class B shares sold prior to termination or discontinuance
of the plan. During the year ended September 30, 1994,
OFDI paid $13,353 and $191, respectively, to an affiliated
broker/dealer as reimbursement for Class A and Class B
personal service and maintenance expenses and retained
$57,531 as reimbursement for Class B sales commissions and
service fee advances, as well as financing costs.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. RESTRICTED The Fund owns securities purchased in private placement
SECURITIES transactions, without registration under the Securities
Act of 1933 (the Act). The securities are valued under
methods approved by the Board of Trustees as reflecting
fair value. The Fund intends to invest no more than 10% of
its net assets (determined at the time of purchase) in
restricted and illiquid securities, excluding securities
eligible for resale pursuant to Rule 144A of the Act that
are determined to be liquid by the Board of Trustees or by
the Manager under Board-approved guidelines. At
September 30, 1994, all restricted and illiquid securities
were transferable under Rule 144A of the Act. They are:
<TABLE>
<CAPTION>
VALUATION PER
UNIT AS OF
SECURITY ACQUISITION DATE COST PER UNIT SEPTEMBER
30, 1994
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporacion Andina de Formento Nts., 7.25%, 4/30/98(1) 4/15/93 $99.38 $95.31
-----------------------------------------------------------------------------------------------------------
Czechoslovakia National Bank Bonds, 7%, 4/16/96(1) 3/11/93 $99.70 $99.75
-----------------------------------------------------------------------------------------------------------
Empresa Columbiana de Petroleos Nts., 7.25%, 7/8/98(1) 6/24/93 $99.63 $95.82
<FN>
1. Transferable under Rule 144A of the Act.
</TABLE>
----------------------------------------------------------
----------------------------------------------------------
FEDERAL INCOME TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 1995, shareholders will receive information
regarding all dividends and distributions paid to them by
the Fund during calendar year 1994. Regulations of the
U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
None of the dividends paid by the Fund during the
fiscal year ended September 30, 1994 are eligible for the
corporate dividend-received deduction.
The foregoing information is presented to assist
shareholders in reporting distributions received from the
Fund to the Internal Revenue Service. Because of the
complexity of the federal regulations which may affect
your individual tax return and the many variations in
state and local tax regulations, we recommend that you
consult your tax advisor for specific guidance.
13 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer
Strategic Short-Term Income Fund:
We have audited the accompanying statement of assets and
liabilities, including the statement of investments, of
Oppenheimer Strategic Short-Term Income Fund as of
September 30, 1994, the related statement of operations
for the year then ended, the statements of changes in net
assets for the years ended September 30, 1994 and 1993 and
the financial highlights for the period August 4, 1992
(commencement of operations) to September 30, 1994. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures
included confirmation of securities owned at September 30,
1994, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed
other auditing procedures. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer Strategic
Short-Term Income Fund at September 30, 1994, the results
of its operations, the changes in its net assets and the
financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1994
14 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
----------------------------------------------------------
----------------------------------------------------------
OPPENHEIMER STRATEGIC SHORT-TERM INCOME FUND
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
George C. Bowen, Vice President, Secretary and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR Oppenheimer Management Corporation
- --------------------------------------------------------------------------------
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
- --------------------------------------------------------------------------------
TRANSFER AND Oppenheimer Shareholder Services
SHAREHOLDER SERVICING
AGENT
- --------------------------------------------------------------------------------
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS Deloitte & Touche LLP
- --------------------------------------------------------------------------------
LEGAL COUNSEL Myer, Swanson & Adams, P.C.
This is a copy of a report to shareholders of Oppenheimer
Strategic Short-Term Income Fund. This report must be
preceded or accompanied by a Prospectus of Oppenheimer
Strategic Short-Term Income Fund. For material
information concerning the Fund, see the Prospectus.
15 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
"HOW MAY I HELP YOU?"
- --------------------------------------------------------------------------------
GENERAL INFORMATION
1-800-525-7048
Talk to a Customer Service Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m., and Saturday from 10:00 a.m.
to 2:00 p.m. ET.
TELEPHONE TRANSACTIONS
1-800-852-8457
Make account transactions with a Customer Service Representative.
Monday through Friday from
8:30 a.m. to 8:00 p.m. ET.
PHONELINK
1-800-533-3310
Get automated information or make automated transactions.
24 hours a day, 7 days a week.
TELECOMMUNICATION PHOTO BH
DEVICE FOR THE DEAF ICSA LOGO
1-800-843-4461
Service for the hearing impaired.
Monday through Friday from
8:30 a.m. to 8:00 p.m. ET.
OPPENHEIMERFUNDS
INFORMATION HOTLINE
1-800-835-3104
Hear timely and insightful messages on the economy and issues that affect your
finances. 24 hours a day, 7 days a week.
"Just as OppenheimerFunds offers over 35 different mutual funds designed to
help meet virtually every investment need, Oppenheimer Shareholder Services
offers a variety of services to satisfy your individual needs. Whenever you
require help, we're only a toll-free phone call away.
"For personalized assistance and account information, call our General
Information number to speak with our knowledgeable Customer Service
Representatives and get the help you need.
"When you want to make account transactions, it's easy for you to
redeem shares, exchange shares, or conduct AccountLink transactions, simply by
calling our Telephone Transactions number.
"And for added convenience, OppenheimerFunds' PhoneLink, an automated
voice response system is available 24 hours a day, 7 days a week. PhoneLink
gives you access to a variety of fund, account, and market information. You can
even make purchases, exchanges and redemptions using your touch-tone phone. Of
course, PhoneLink will always give you the option to speak with a Customer
Service Representative during the hours shown to the left.
"When you invest in OppenheimerFunds, you know you'll receive a high
level of customer service. The International Customer Service Association knows
it, too, as it awarded Oppenheimer Shareholder Services a 1993 Award of
Excellence for consistently demonstrating superior customer service.
"Whatever your needs, we're ready to assist you."
[LOGO] OppenheimerFunds Bulk Rate
Oppenheimer Funds Distributor, Inc. U.S. Postage
P.O. Box 5270 PAID
Denver, CO 80217-5270 Permit No. 469
Denver, CO
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
ANNUAL REPORT SEPTEMBER 30, 1994
(OPPENHEIMER FUNDS(R) LOGO)
[PHOTO OF COUPLE STROLLING ARM-IN-ARM]
"WE NEED STEADY INCOME WITHOUT A LOT OF RISK.
BUT WE WERE WORRIED ABOUT THE IMPACT CHANGING
INTEREST RATES WOULD HAVE ON OUR INVESTMENT.
"OUR FINANCIAL ADVISOR RECOMMENDED THIS FUND
BECAUSE OF ITS SHORTER-TERM AVERAGE MATURITY,
WHICH MEANS IT IS LESS AFFECTED BY INTEREST
RATE CHANGES THAN LONGER-TERM BOND FUNDS."
<PAGE> 2
FUND FACTS
IN THIS REPORT:
ANSWERS TO TIMELY
QUESTIONS YOU
SHOULD ASK YOUR
FUND'S MANAGERS.
* HOW DID THE FUND RESPOND TO RISING INTEREST RATES IN 1994?
* WHY ARE YOU EMPHASIZING MORTGAGE-BACKED SECURITIES?
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- ----------------------------------------------------------------------------
1 The Fund seeks high current return with safety of
principal by investing in shorter-term government
securities, including U.S. Treasury bonds and notes, GNMAs
and other mortgage-backed securities.
- ----------------------------------------------------------------------------
2 The Fund's standardized yield for the 30 days ended
9/30/94 was 6.14% for Class A shares and 5.55% for Class B
shares.(1)
- ----------------------------------------------------------------------------
3 Total return at net asset value for the 12-month period
ended September 30, 1994 for Class A shares was 0.74% and
-0.17% for Class B shares.(2)
- ----------------------------------------------------------------------------
4 Average annual total returns for Class A shares for the 1-
and 5-year periods ended 9/30/94 and since inception of
the Fund on 3/10/86 were -2.78%, 7.55% and 7.81%,
respectively. Average annual total returns for Class B
shares for the 1-year period ended 9/30/94 and since
inception of the Class on 5/3/93 were -4.16% and -0.25%,
respectively.(3)
- ----------------------------------------------------------------------------
5 "While the Fund's focus on shorter-term government
securities is always important to conservative,
quality-conscious investors, it really paid off in 1994's
turbulent bond markets. The Fund combined a very
attractive level of income compared to money market funds
and other short-term investments, with much greater
principal stability than investments in longer-term
bonds."
Portfolio Manager David Rosenberg, September 30, 1994
(1) Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 9/30/94, divided by the
maximum offering price for Class A shares at the end of the period,
compounded semiannually and then annualized. Falling net asset values will
tend to artificially raise yields.
(2) Based on the change in net asset value per share for the periods shown,
without deducting any sales charges. Such performance would have been lower
if sales charges were taken into account.
(3) Average annual total returns are based on a hypothetical investment
held until 9/30/94, after deducting the current maximum initial sales
charge of 3.50% for Class A shares and the contingent deferred sales charge
of 4% (1-year) and 3% (since inception) for Class B shares. The Fund's
maximum sales charge rate for Class A shares was lower during a portion of
some of the periods shown, and actual investment results will be different
as a result of the change.
All figures assume reinvestment of dividends and capital gains
distributions.
Past performance is not indicative of future results. Investment and
principal value on an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the
original cost.
2 Oppenheimer Limited-Term Government Fund
<PAGE> 3
REPORT TO SHAREHOLDERS
ABOVE AVERAGE
TOTAL RETURN
Total return for the 1-year
period ended 9/30/94
- --------------------------------
Oppenheimer 0.74%
Limited-Term
Government Fund
Class A (at NAV)(5)
- --------------------------------
Oppenheimer -0.17%
Limited-Term
Government Fund
Class B (at NAV)(5)
- --------------------------------
Lipper short-term -1.23%
U.S. government
funds average(6)
The year ended September 30, 1994 was a challenging period for the nation's
bond markets, and it is a pleasure to report that Oppenheimer Limited-Term
Government Fund met its objectives well, providing an attractive yield from
a conservative portfolio of government securities. As of September 30, the
Fund's 30-day standardized yield was 6.14% for Class A shares and 5.55% for
Class B shares.(4)
Over the past six months, your managers have taken steps that
should benefit the Fund's performance in the future. Most importantly, they
shifted investments away from traditional short-term U.S. Treasury
securities, adding significantly to investments in mortgage-backed
securities issued by agencies or instrumentalities of the U.S. government.
Mortgage-backed securities, which made up 67.5% of the portfolio on
September 30, offer significant yield advantages over Treasuries.
As was announced several months ago, the Fund's dividend rate was
fixed for its Class A shares. While that dividend rate may be subject to
change in the future, as market conditions change, shareholders can look
forward to an income stream to help them meet their objectives.
Looking ahead, your managers believe the Fed's moves to fend off
inflation have been successful, and that the economy will continue to grow
at a steady, sustainable pace. In this environment, your managers continue
to look for opportunities to enhance the Fund's yield while conservatively
managing risk to limit the impact if interest rates go higher.
We appreciate the confidence you have placed in Oppenheimer
Limited-Term Government Fund, and we look forward to continuing to help you
meet your investment objectives in the future.
/s/ JAMES C. SWAIN /s/ JON. S. FOSSEL
- ----------------------------- -------------------------------
James C. Swain Jon S. Fossel
Chairman President
Oppenheimer Limited-Term Oppenheimer Limited-Term
Government Fund Government Fund
October 21, 1994
(4) See footnote 1, page 2.
(5) See footnote 2, page 2.
(6) Source: Lipper Analytical Services, an independent mutual fund
monitoring service, 9/30/94. The Lipper total return average for the period
shown was for 100 short-term U.S. government funds. The average is shown
for comparative purposes only. Lipper performance rankings do not take
sales charges into consideration.
3 Oppenheimer Limited-Term Government Fund
<PAGE> 4
STATEMENT OF INVESTMENTS September 30, 1994
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================
==========================================================
===
U.S. GOVERNMENT OBLIGATIONS--99.1%
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGENCY: FULL FAITH Government National Mortgage Assn.:
AND CREDIT--16.3% 11%, 2/15/98 $ 58,509 $ 62,030
11%, 3/15/98 100,782 106,847
11%, 8/15/98 43,306 45,913
11%, 10/15/98 17,506 18,560
11%, 12/15/98 66,927 70,955
11%, 3/15/99 674 721
11%, 5/15/99 46,370 49,580
11%, 3/15/00 19,695 21,208
11%, 5/15/00 146,308 157,539
11%, 6/15/00 91,860 98,912
11%, 7/15/00 24,680 26,576
11%, 8/15/00 145,105 156,243
11%, 9/15/00 212,134 228,417
11%, 10/15/00 183,069 197,120
11%, 11/15/00 530,952 571,709
11%, 12/15/00 288,273 310,401
11%, 1/15/01 198,715 215,255
11%, 2/15/01 34,701 37,590
8%, 9/15/07 219,347 219,111
13%, 2/15/11 77,733 89,520
13%, 10/15/12 17,741 20,452
13%, 9/15/14 18,351 21,189
10.50%, 1/15/16 53,935 58,811
10.50%, 2/15/16 731,073 797,148
10.50%, 3/15/16 73,376 80,008
10.50%, 4/15/16 137,348 149,762
10.50%, 5/15/16 213,014 232,266
10.50%, 6/15/16 162,002 176,644
10.50%, 10/15/16 18,571 20,250
9%, 11/15/16 3,411,426 3,535,670
10.50%, 12/15/16 51,868 56,556
10.50%, 7/15/17 227,351 247,959
10.50%, 8/15/17 142,284 155,181
9.50%, 9/15/17 252,265 266,410
10.50%, 10/15/17 20,002 21,816
10.50%, 11/15/17 305,386 333,069
10.50%, 12/15/17 412,422 449,807
10.50%, 2/15/18 271,894 296,607
10.50%, 4/15/18 16,902 18,439
10.50%, 6/15/18 103,003 112,366
10.50%, 10/15/18 62,262 67,922
10.50%, 11/15/18 381,374 416,038
10.50%, 12/15/18 182,940 199,568
10.50%, 3/15/19 349,512 381,365
10.50%, 5/15/19 217,354 237,162
10.50%, 6/15/19 175,563 191,563
10.50%, 7/15/19 388,539 423,948
8.50%, 9/15/21 98,377 99,650
8%, 6/15/22 522,247 508,586
8.50%, 11/15/22 552,770 553,694
8%, 12/15/22 357,932 348,569
</TABLE>
4 Oppenheimer Limited-Term Government Fund
<PAGE> 5
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AGENCY: FULL FAITH 8%, 7/15/23 $ 492,526 $ 479,292
AND CREDIT (CONTINUED) 8%, 8/15/24 1,011,632 983,813
8%, 9/15/24 29,589,266 28,760,847
------------
43,386,634
- -----------------------------------------------------------------------------------------------------------------------------
AGENCY: GOVERNMENT Federal Home Loan Mortgage Corp.
SPONSORED--50.6% Collateralized Mtg. Obligations:
8.60%, 2/15/06 3,000,000 3,040,110
9.25%, 11/1/08 549,414 567,567
11.75%, 1/1/16 1,220,932 1,338,814
9.50%, 12/15/18 2,884,956 2,958,437
8.20%, 7/15/19 1,486,723 1,513,811
8.50%, 10/15/19 20,287,989 20,784,639
10%, 11/15/19 14,136,921 14,730,106
8%, 3/15/21 7,370,553 7,423,694
6.65%, 4/15/21 12,500,000 11,259,499
8.50%, 6/15/21 15,000,000 15,156,299
8%, 8/1/21 1,582,755 1,685,366
10%, 8/1/21 2,845,112 3,030,044
------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
STRIPS, 11.50%, 3/1/09 3,481,182 3,845,620
13%, 8/1/10-6/1/15 67,080 75,662
13%, 6/1/15 100,266 113,159
8%, 7/25/19 8,000,000 7,927,279
9%, 8/1/19 1,240,316 1,278,940
8%, 10/25/21 595,000 575,454
Principal-Only Stripped Mtg.-Backed
Security, Trust 157, Class E, 0%, 5/25/22(1) 8,229,466 5,588,383
8%, 1/1/23 378,172 369,781
Interest-Only Stripped Mtg.-Backed
Security, Trust 221, Class 2, 7.50%, 5/25/23(2) 24,914,713 9,335,232
Principal-Only Stripped Mtg.-Backed
Security, Trust 148, Class G, 0%, 8/25/23(1) 8,891,258 4,238,453
Interest-Only Stripped Mtg.-Backed
Security, Trust 240, Class 2, 7%, 9/25/23(2) 6,005,462 2,270,815
Interest-Only Stripped Mtg.-Backed
Security, Trust 252, Class 2, 7.50%, 11/30/23(2) 13,305,289 5,051,852
Interest-Only Stripped Mtg.-Backed
Security, Trust 252, Class 2, 7%, 2/25/24(2) 28,309,954 10,863,945
------------
135,022,961
- -----------------------------------------------------------------------------------------------------------------------------
TREASURY--32.2% U.S. Treasury Bonds:
8.50%, 11/15/95 18,100,000 18,569,458
------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
9.25%, 1/15/96 32,505,000 33,693,444
9.375%, 4/15/96(3) 25,300,000 26,406,875
7.625%, 5/31/96 7,000,000 7,133,433
------------
85,803,210
------------
Total U.S. Government Obligations (Cost $269,913,018) $264,212,805
</TABLE>
5 Oppenheimer Limited-Term Government Fund
<PAGE> 6
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
DATE/PRICE UNITS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PUT OPTIONS PURCHASED--0.0% U.S. Treasury Nt., 7.50% (Cost $95,313) Oct./$96.67 10,000 $
98,438
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $270,008,331) 99.1%
264,311,243
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES .9 2,424,414
------ ------------
NET ASSETS 100.0% $266,735,657
====== ============
</TABLE>
(1) Principal-Only Strips represent the
right to receive the monthly principal
payments on an underlying pool of
mortgage loans. The value of these
securities generally increases as
interest rates decline and prepayment
rates rise. The price of these securities
is typically more volatile than that of
coupon-bearing bonds of the same
maturity.
(2) Interest-Only Strips represent the
right to receive the monthly interest
payments on an underlying pool of
mortgage loans. These securities
typically decline in price as interest
rates decline. Most other fixed-income
securities increase in price when
interest rates decline. The principal
amount of the underlying pool represents
the notional amount on which current
interest is calculated. The price of
these securities is typically more
sensitive to changes in prepayment rates
than traditional mortgage-backed
securities (for example, GNMA
pass-throughs).
(3) Securities with an aggregate market
value of $5,218,750 are held in escrow to
cover initial margin requirements on open
interest rate futures sales contracts, as
follows:
<TABLE>
<CAPTION>
Number of
Type of Contract Contracts Face Amount
--------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 12/94 50 $5,000,000
</TABLE>
The market value of the open contracts
was $5,073,438 at September 30, 1994,
with a net unrealized gain of $17,188.
See accompanying Notes to Financial
Statements.
6 Oppenheimer Limited-Term Government Fund
<PAGE> 7
STATEMENT OF ASSETS AND LIABILITIES September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
=======
ASSETS Investments, at value (cost $270,008,331)--see accompanying statement $264,311,243
----------------------------------------------------------------------------------------------------
Unrealized appreciation on forward contracts 17,188
----------------------------------------------------------------------------------------------------
Receivables:
Interest and principal paydowns 4,767,307
Shares of beneficial interest sold 3,114,491
----------------------------------------------------------------------------------------------------
Other 10,905
------------
Total assets 272,221,134
==========================================================
==========================================================
======
LIABILITIES Bank overdraft 1,327,374
----------------------------------------------------------------------------------------------------
Options written at value (premiums received $121,875)--
see accompanying statement--Note 6 187,500
----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 3,627,877
Distribution and service plan fees--Note 4 152,606
Other 190,120
------------
Total liabilities 5,485,477
==========================================================
==========================================================
======
NET ASSETS $266,735,657
------------
==========================================================
==========================================================
======
COMPOSITION OF Paid-in capital $279,146,214
NET ASSETS ----------------------------------------------------------------------------------------------------
Overdistributed net investment income (107,542)
----------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (6,557,490)
----------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and options written--Note 3 (5,745,525)
------------
Net assets $266,735,657
============
==========================================================
==========================================================
======
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $227,858,341 and 21,906,028 shares of beneficial interest outstanding) $10.40
Maximum offering price per share (net asset
value plus sales charge of 3.50% of offering price) $10.78
----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $38,877,316 and 3,734,115 shares of beneficial interest outstanding) $10.41
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Limited-Term Government Fund
<PAGE> 8
STATEMENT OF OPERATIONS For the Year Ended September 30, 1994
<TABLE>
<S> <C> <C>
==========================================================
==========================================================
=====
INVESTMENT INCOME Interest $15,966,654
==========================================================
==========================================================
=====
EXPENSES Management fees--Note 4 976,513
-------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 450,597
Class B--Note 4 156,771
-------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 181,126
Class B 12,815
-------------------------------------------------------------------------------------------
Shareholder reports 154,767
-------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 121,480
-------------------------------------------------------------------------------------------
Custodian fees and expenses 37,490
-------------------------------------------------------------------------------------------
Legal and auditing fees 21,052
-------------------------------------------------------------------------------------------
Trustees' fees and expenses 6,654
-------------------------------------------------------------------------------------------
Other 59,341
-----------
Total expenses 2,178,606
==========================================================
==========================================================
=====
NET INVESTMENT INCOME 13,788,048
==========================================================
==========================================================
=====
REALIZED AND UNREALIZED Net realized gain on investments and options written 787,066
GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
and options written (12,973,109)
-----------
Net realized and unrealized loss on investments and options written (12,186,043)
==========================================================
==========================================================
=====
NET INCREASE IN NET ASSETS $ 1,602,005
RESULTING FROM OPERATIONS ===========
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Limited-Term Government Fund
<PAGE> 9
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1994 1993
==========================================================
==========================================================
=======
<S> <C> <C> <C>
OPERATIONS Net investment income $ 13,788,048 $ 10,852,752
----------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options written 787,066 (1,271,113)
----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments and options written (12,973,109) 2,440,150
------------ ------------
Net increase in net assets resulting from operations 1,602,005 12,021,789
==========================================================
==========================================================
=======
DIVIDENDS AND Dividends from net investment income:
DISTRIBUTIONS TO Class A ($.709 and $.734 per share, respectively) (12,491,113) (10,773,584)
SHAREHOLDERS Class B ($.62 and $.226 per share, respectively) (900,631) (79,168)
----------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.002 per share) (44,628) --
Class B ($.002 per share) (7,614) --
----------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A ($.01 per share) (213,840) --
Class B ($.01 per share) (36,486) --
==========================================================
==========================================================
=======
BENEFICIAL INTEREST Net increase in net assets resulting from Class A
TRANSACTIONS beneficial interest transactions--Note 2 60,069,439 19,721,192
----------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions--Note 2 34,737,604 5,062,554
==========================================================
==========================================================
=======
NET ASSETS Total increase 82,714,736 25,952,783
----------------------------------------------------------------------------------------------
Beginning of year 184,020,921 158,068,138
------------ ------------
End of year (including overdistributed net
investment income of $107,542 in 1994) $266,735,657 $184,020,921
------------ ------------
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Limited-Term Government Fund
<PAGE> 10
FINANCIAL HIGHLIGHTS
<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.
See accompanying Notes to Financial Statements.
10 Oppenheimer Limited-Term Government Fund
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
==========================================================
==========================================================
==========
1. SIGNIFICANT Oppenheimer Limited-Term Government Fund (the Fund), formerly named Oppenheimer
ACCOUNTING POLICIES Government Securities Fund, is registered under the Investment Company Act of
1940, as
amended, as a diversified, open-end management investment company. The Fund's investment
advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class
A and Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares may be subject to a contingent deferred sales charge. Both classes of shares have
identical rights to earnings, assets and voting privileges, except that each class has its
own distribution and/or service plan, expenses directly attributable to a particular class
and exclusive voting rights with respect to matters affecting a single class. Class B
shares will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies consistently
followed by the Fund.
-------------------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at 4:00 p.m. (New York time)
on each
trading day. Long-term debt securities are valued by a portfolio pricing service approved
by the Board of Trustees. Long-term debt securities which cannot be valued by the
approved portfolio pricing service are valued by averaging the mean between the bid and
asked prices obtained from two active market makers in such securities. Short-term debt
securities having a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any premium or
discount. Securities for which market quotes are not readily available are valued under
procedures established by the Board of Trustees to determine fair value in good faith. An
option is valued based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value is based upon
the last sale on the prior trading date if it is within the spread between the closing
bid and asked prices. If the last sale price is outside the spread, the closing bid or
asked price closest to the last reported sale price is used.
-----------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses
(other than
those attributable to a specific class) and gains and losses are allocated daily to each
class of shares based upon the relative proportion of net assets represented by such class.
Operating expenses directly attributable to a specific class are charged against the
operations of that class.
-----------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to distribute all of
its taxable income, including any net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income tax provision is required. At
September 30, 1994, the Fund had available for federal income tax purposes an unused
capital loss carryover of approximately $6,558,000, $3,182,000 of which will expire in
1996, $3,040,000 in 1997, $40,000 in 2001 and $296,000 in 2002.
-----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately
for
Class A and Class B shares from net investment income each day the New York Stock Exchange
is open for business and pay such dividends monthly. Distributions from net realized gains
on investments, if any, will be declared at least once each year.
-----------------------------------------------------------------------------
CHANGE IN ACCOUNTING FOR DISTRIBUTIONS TO SHAREHOLDERS. Effective
October 1, 1993,
the Fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial
Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by
Investment Companies. As a result, the Fund changed the classification of distributions to
shareholders to better disclose the differences between financial statement amounts and
distributions determined in accordance with income tax regulations. Accordingly, subsequent
to September 30, 1993, amounts have been reclassified to reflect an increase in paid-in
capital of $102,759, a decrease in undistributed net investment income of $55,299, and a
decrease in undistributed capital loss on investments of $47,460. During the year ended
September 30, 1994, in accordance with Statement of Position 93-2, undistributed net
investment income was decreased by $145,791, paid-in capital was decreased by $250,326 and
undistributed capital loss was decreased by $396,117.
----------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Discount on securities purchased is amortized over the
life of the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal income tax
purposes.
</TABLE>
11 Oppenheimer Limited-Term Government Fund
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (Continued)
<TABLE>
<S> <C>
==========================================================
==========================================================
=============
2. SHARES OF The Fund has authorized an unlimited number of no par value shares of beneficial interest
BENEFICIAL INTEREST of each class. Transactions in shares of beneficial interest were as follows:
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994 YEAR ENDED SEPTEMBER
30, 1993(1)
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A:
Sold 11,073,786 $117,379,950 3,635,741 $39,788,867
Dividends reinvested 817,206 8,727,397 653,622 7,145,654
Issued in connection with the
acquisition of Main Street
Government Securities Fund--Note 5 -- -- 898,047 9,977,301
Redeemed (6,191,329) (66,037,908) (3,396,764) (37,190,630)
========== ============
========== ===========
Net increase 5,699,663 $ 60,069,439 1,790,646 $19,721,192
========== ============
========== ===========
-------------------------------------------------------------------------------------------------
CLASS B:
Sold 3,707,813 $ 39,327,532 462,985 $ 5,104,320
Dividends reinvested 68,487 725,648 3,699 40,944
Redeemed (501,397) (5,315,576) (7,472) (82,710)
========= ============ ==========
===========
Net increase 3,274,903 $ 34,737,604 459,212 $ 5,062,554
========= ============ ==========
===========
</TABLE>
(1) For the year ended September 30, 1993 for
Class A shares and for the period from May 3,
1993 (inception of offering) to September 30,
1993 for Class B shares.
<TABLE>
<S> <C>
==========================================================
==========================================================
=============
3. UNREALIZED GAINS AND At September 30, 1994, net unrealized depreciation on investments and options written
of
LOSSES ON INVESTMENTS $5,745,525 was composed of gross appreciation of $2,598,784, and gross depreciation
of
$8,344,309.
==========================================================
==========================================================
=============
4. MANAGEMENT FEES Management fees paid to the Manager were in accordance with the investment advisory
AND OTHER agreement with the Fund which provides for an annual fee of .50% on the first
TRANSACTIONS $100 million of net assets, .45% on the next $150 million, .425% on the next $250 million
WITH AFFILIATES and .40% on net assets in excess of $500 million. The Manager has agreed to reimburse the
Fund if aggregate expenses (with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses.
The Manager acts as the accounting agent for the Fund at an annual
fee of $12,000, plus out-of-pocket costs and expenses reasonably incurred.
For the year ended September 30, 1994, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,006,962, of which $310,375
was retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the Manager,
as general distributor, and by an affiliated broker/dealer. During the year ended
September 30, 1994, OFDI received contingent deferred sales charges of $36,866 upon
redemption of Class B shares as reimbursement for sales commissions advanced by OFDI at
the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated ratably
to these companies.
Under separate approved plans, each class may expend up to .25% of
its net assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund, including
amounts paid to brokers, dealers, banks and other financial institutions. In addition,
Class B shares are subject to an asset-based sales charge of .75% of net assets annually,
to reimburse OFDI for sales commissions paid from its own resources at the time of sale
and associated financing costs. In the event of termination or discontinuance of the Class
B plan, the Board of Trustees may allow the Fund to continue payment of the asset-based
sales charge to OFDI for distribution expenses incurred on Class B shares sold prior to
termination or discontinuance of the plan. During the year ended September 30, 1994, OFDI
paid $4,697 and $246, respectively, to an affiliated broker/dealer as reimbursement for
Class A and Class B personal service and maintenance expenses and retained $154,274 as
reimbursement for Class B sales commissions and service plan advances, as well as
financing costs.
</TABLE>
12 Oppenheimer Limited-Term Government Fund
<PAGE> 13
<TABLE>
<S> <C>
==========================================================
==========================================================
=============
5. ACQUISITION OF On August 27, 1993, the Fund acquired all of the net assets of Main Street Government
MAIN STREET Securities Fund (MSGSF), pursuant to an Agreement and Plan of Reorganization
GOVERNMENT approved by the MSGSF shareholders on August 26, 1993. The Fund issued 898,047 shares
SECURITIES FUND of beneficial interest, valued at $9,977,301, in exchange for the net assets, resulting
in combined net assets of $182,832,580 on August 27, 1993. The net assets acquired
included net unrealized appreciation of $402,810 and capital loss carryovers for federal
income tax purposes of $39,537. The exchange was tax-free.
==========================================================
==========================================================
=============
6. OPTION ACTIVITY Option activity for the year ended September 30, 1994 was as follows:
<CAPTION>
CALL OPTIONS PUT OPTIONS
------------------------ --------------------------
NUMBER AMOUNT OF NUMBER AMOUNT
OF
OF OPTIONS PREMIUMS OF OPTIONS PREMIUMS
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1993 -- $ -- -- $ --
Options written 25,800 120,938 95,000 262,500
Options expired prior to exercise -- -- -- --
Options exercised -- -- -- --
Options closed (25,800) (120,938) (35,000) (140,625)
========= ========= =======
=========
Options outstanding at September 30, 1994 -- $ -- 60,000 $ 121,875
========= ========= =======
=========
</TABLE>
At September 30, 1994, the Fund had outstanding
put options written with an expiration date of
10/12/94 and an exercise price of 100.018. The
market value was $187,500.
<TABLE>
<S> <C>
==========================================================
==========================================
FEDERAL INCOME TAX INFORMATION (Unaudited)
==========================================================
==========================================================
=============
In early 1995, shareholders will receive information regarding all dividends and distributions paid to
them by the Fund during calendar year 1994. Regulations of the U.S. Treasury Department require the
Fund to report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended September 30,
1994 are eligible for the corporate dividend-received deduction.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of the complexity of
the federal regulations which may affect your individual tax return and the many variations in state
and local tax regulations, we recommend that you consult your tax advisor for specific guidance.
</TABLE>
13 Oppenheimer Limited-Term Government Fund
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Oppenheimer Limited-Term
Government Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Limited-Term Government
Fund as of September 30, 1994, the related statement of operations for the year
then ended, the statements of changes in net assets for the years ended
September 30, 1994 and 1993, and the financial highlights for the period
October 1, 1989 to September 30, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights (except for total return) for the
period March 10, 1986 (commencement of operations) to September 30, 1989 were
audited by other auditors whose report dated November 2, 1989, expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities owned
at September 30, 1994 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Limited-Term Government Fund at September 30, 1994, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1994
14 Oppenheimer Limited-Term Government Fund
<PAGE> 15
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
<TABLE>
<S> <C>
==========================================================
==========================================================
==========
OFFICERS AND TRUSTEES James C. Swain, Chairman and Chief Executive
Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David A. Rosenberg, Vice President
George C. Bowen, Vice President, Secretary and
Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
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==========================================================
==========
INVESTMENT ADVISOR Oppenheimer Management Corporation
==========================================================
==========================================================
==========
DISTRIBUTOR Oppenheimer Funds Distributor, Inc.
==========================================================
==========================================================
==========
TRANSFER AND SHAREHOLDER Oppenheimer Shareholder Services
SERVICING AGENT
==========================================================
==========================================================
==========
CUSTODIAN OF Citibank, N.A.
PORTFOLIO SECURITIES
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INDEPENDENT AUDITORS Deloitte & Touche LLP
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LEGAL COUNSEL Myer, Swanson & Adams, P.C.
This is a copy of a report to shareholders of Oppenheimer Limited-Term Government Fund.
This report must be preceded or accompanied by a Prospectus of Oppenheimer Limited-Term
Government Fund. For material information concerning the Fund, see the Prospectus.
</TABLE>
15 Oppenheimer Limited-Term Government Fund
<PAGE> 16
'Talk to a Customer Service
Representative.
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our Telephone Transactions number.
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1 9 9 3 course, PhoneLink will always give you the option to
AWARD of speak with a Customer Service Representative during the hours
EXCELLENCE shown to the left.
[LOGO] icsa "When you invest in OppenheimerFunds, you know
- ------------ you'll receive a high level of customer service. The
International International Customer Service Association knows it, too, as
Customer it awarded Oppenheimer Shareholder Services a 1993 Award of
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Association service.
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--------------------
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Semiannual Report March 31, 1995
"We need
our money
to work hard
[PHOTO] and we
need to feel
comfortable
about how
it's invested."
[LOGO] OPPENHEIMER FUNDS
<PAGE> 2
This Fund is for people who want higher returns than traditional short-term
investments, without giving up the comfort.(1)
NEWS
STANDARDIZED YIELD
For the 30 Days Ended 3/31/95(2)
Class A
6.56%
Class B
5.98%
Class C
5.96%
THE FUND'S CLASS A SHARES
ARE RANKED **** AMONG
680 TAXABLE BOND FUNDS AS
OF 3/31/95.(3)
- -------------------------------------------------------------------------------
HOW YOUR FUND IS MANAGED
- -------------------------------------------------------------------------------
Oppenheimer Limited-Term Government Fund seeks high current return by investing
in a portfolio of fixed income securities, emphasizing securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, and
mortgage-backed certificates. The Fund also invests in collateralized mortgage
obligations and mortgage-backed stripped securities.(4) The Fund is designed to
offer a greater degree of stability than longer-term fixed income investments
because it intends to maintain an average effective portfolio duration of not
more than three years.
- -------------------------------------------------------------------------------
PERFORMANCE
- -------------------------------------------------------------------------------
Total returns at net asset value for the 6 months ended 3/31/95 for Class A and
B shares were 4.01% and 3.56%, respectively.(5)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1- and 5-year periods ended 3/31/95 and since inception
of the Class on 3/10/86 were 0.26%, 7.64% and 7.84%, respectively. For Class B
shares, average annual total returns for the 1-year period ended 3/31/95 and
since inception of the Class on 5/3/93 were -0.92% and 1.79%, respectively.(6)
- -------------------------------------------------------------------------------
OUTLOOK
- -------------------------------------------------------------------------------
"The investments on which this Fund focuses historically have provided high
risk-adjusted returns in the government market, and the past year was no
exception. In the most turbulent bond markets in decades, the Fund produced a
positive return, and is positioned to perform well going forward."
David Rosenberg, Portfolio Manager
March 31, 1995
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund is not guaranteed and will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than the original
cost.
1. The Fund may be more volatile than certain short-term investments and may not
have the return potential of longer-term investments.
2. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 3/31/95, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
3. Source: Morningstar Mutual Funds, 3/31/95. Morningstar, Inc., an independent
mutual fund monitoring service, produces proprietary monthly rankings of funds
in broad investment categories (equity, taxable bond, tax-exempt bond or
"hybrid") based on risk-adjusted investment return, after considering sales
charges and expenses. Investment return measures a fund's (or class's) 3-, 5-
and 10-year (depending on the inception of the class or fund) average annual
total returns in excess of 90-day U.S. Treasury bill returns. Risk measures a
fund's (or class's) performance below 90-day U.S. Treasury bill returns. Risk
and returns are combined to produce star rankings, reflecting performance
relative to the average fund in a fund's category. Five stars is the highest
ranking (top 10%), 4 stars is above average and 1 star is the lowest (bottom
1%). The current 4-star ranking is a weighted average of the 3- and 5-year
rankings for the class, which were both 4 stars, weighted 40%/60%. The Fund was
ranked among 680 taxable bond funds. Rankings are subject to change. The Fund's
Class A, B and C shares have the same portfolio.
4. These securities involve risks from early prepayment of underlying mortgages
that can affect the Fund's income and principal value.
5. Based on the change in net asset value per share from 9/30/94 to 3/31/95,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
6. Class A returns show hypothetical investments on 4/1/94, 3/31/90 and 3/10/86
(inception of class), after deducting the current maximum initial sales charge
of 3.50%. Prior to 2/1/94, the maximum Class A sales charge was higher, and
actual account performance would have been less. Class B returns show
hypothetical investments on 4/1/94 and 5/3/93 (inception of class) and the
deduction of the applicable contingent deferred sales charge of 5% (1-year) and
4% (since inception). Certain Class C share performance data is not yet
available because Class C shares were first publicly offered on 2/1/95. The
Fund's investment policy of limiting average portfolio duration was adopted on
5/1/94, and the Fund had a different advisor prior to 4/7/90. An explanation of
the different total returns is in the Fund's prospectus.
2 Oppenheimer Limited-Term Government Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Limited-Term
Government Fund
[PHOTO]
Jon S. Fossel
President
Oppenheimer
Limited-Term
Government Fund
Dear OppenheimerFunds Shareholder,
1994 was marked by one of the greatest tests the bond markets faced in more than
six decades. As the U.S. Federal Reserve undertook the most aggressive moves in
its history to raise interest rates, bond prices and bond mutual funds declined
across the board. Changing interest rates are a fact of life and they affect the
short-term performance of all bond markets. That is why we believe the best
measure of any fixed income mutual fund is its performance over the long term.
And we believe the long-term outlook for the bond markets is very positive.
To see how greatly the U.S. bond market has improved since last fall, we
need look no further than the market's reaction to the Fed's most recent
short-term rate increase in February. While the markets had already anticipated
this move, unlike previous rate increases, long-term interest rates continued to
decline and bonds rallied further. Although the Fed could raise rates again, we
believe that this positive environment will prove more than momentary as a
result of several factors.
First, concerns about the effects of inflation on bond prices are fading
fast. By most indicators, economic growth is slowing to a pace that can be
sustained without reigniting inflation or causing a recession. Second, at
current prices, bonds are producing some of the best inflation-adjusted returns
in years. With the actual inflation rate running just over 3 percent today, many
fixed income investors are clearly being rewarded in the current yield
environment. Attracted by the strong, real returns bonds offer, investors are
returning to bonds in a significant way. This rising demand is providing solid
support for bond prices. Third, as the Fed concludes its tightening efforts--and
recent reports suggest that point is near--long-term interest rates will likely
stay within their current range, and could decline further. Of course, rates
could rise later this year if future reports indicate that the economy isn't
slowing as quickly as it seems to be today; however, we believe that over the
longer term, the downward trend of rates will continue.
Two uncertainties affecting the fixed income markets are foreign investors'
attitudes toward U.S. debt and the weakness of the U.S. dollar abroad relative
to other major currencies. But investors' attitudes overseas and the dollar's
decline, in our view, should prove temporary. Both have been driven by the
government's moves to support the Mexican peso, a widening trade deficit, and
Congress's apparent inability to limit the Federal budget deficit.
We believe the trade deficit will narrow with increasing U.S. exports as
European economies come out of recession and emerging world markets stabilize.
Additionally, the need to support the peso has begun to decline as Mexico's
tough domestic economic policy has gained credibility. Finally, we are confident
that Congress will be able to get the budget deficit issue dealt with because
Americans are demanding it.
Of course, no one can predict the future with perfect clarity. The bond
markets are always subject to fluctuations and, as we saw in 1994, the shifts
can sometimes be sharp. Overall, however, we believe the outlook for the bond
markets today appears positive.
Your portfolio manager discusses the outlook for your Fund on the following
pages. We appreciate your trust, and we'll continue to do our best to help you
meet your long-term investment objectives.
/s/ James C. Swain /s/ Jon S. Fossell
- ------------------ ------------------
James C. Swain Jon S. Fossel
April 24, 1995
3 Oppenheimer Limited-Term Government Fund
<PAGE> 4
Q+A [PHOTO]
Q Can you sum up this Fund's goal?
An interview with your Fund's manager.
THE FUND PERFORMED WELL OVER THE PAST SIX MONTHS. WHAT ACCOUNTS FOR THAT
PERFORMANCE?
It's partly due to the nature of the Fund's portfolio and partly to our
management approach.
Looking first at the portfolio, the Fund seeks to maintain an average
effective duration of no more than three years. As you know, in 1994's rocky
interest rate environment, short-term securities performed well.
[PHOTO]
At the same time--and just as important--we don't overreach for return in
managing the Fund. Instead of stretching for yield or taking unnecessary risks,
our goal is to produce a competitive level of income while holding price
volatility to below-market levels.
Shareholders expect an attractive yield and relative stability in a
government fund, and that is precisely what we intend to deliver.
DOESN'T LIMITING RISK LIMIT RETURNS OVER THE LONG TERM?
Not necessarily. In favorable bond markets, this Fund may modestly underperform
other government securities funds that take on higher risks. But when interest
rates are rising, as they were in 1994, the Fund tends to hold its principal
value better than many other government bond funds. This approach has produced
superior returns in the past, and we believe that it will continue to do so.
ARE YOU FINDING OPPORTUNITIES TO IMPROVE YIELD AND REDUCE RISK TODAY?
Yes, and we're taking full advantage of them in three ways:
First, we're carefully controlling the portfolio's duration--a technical
measure of a bond portfolio's sensitivity to changing interest rates. The
Federal Reserve may be nearing the end of its tightening, but we don't have a
crystal ball
4 Oppenheimer Limited-Term Government Fund
<PAGE> 5
FACING PAGE
Top left: David Rosenberg,
Portfolio Manager
Top right: Art Steinmetz, Senior
VP, Fixed Income Investments,
Portfolio Management Team
Bottom left: Len Darling, Executive
VP, Director of Fixed Income Invest-
ments, consults with Jon Fossel
THIS PAGE
Right: David Rosenberg with
Gina Palmieri, Mortgage Analyst
Below: Eva Zeff, Assistant VP
Fixed Income Investments
Portfolio Management Team
A We aim
to produce
competitive
income
while holding
price volatility
to below-
market levels.
that tells us where interest rates are heading. We're still taking a cautious
approach.
Second, we're focusing on market sectors that carry lower risk in the
current economic and interest-rate environment.
Third, we're taking a "barbell" approach to portfolio construction,
focusing our investments heavily on bonds with shorter maturities, to take
advantage of their relative price stability, and longer maturities, which offer
attractive real rates of return over inflation. The combined effect is a
portfolio whose average effective duration is not more than three years.
[PHOTO]
HOW DO THOSE APPROACHES TRANSLATE INTO SPECIFIC INVESTMENT STRATEGIES?
We're deemphasizing our holdings in mortgage-backed securities, which tend to
have higher prepayment uncertainties as interest-rate volatility increases. And
we've increased our position in U.S. Treasury securities, which have no credit
risk. We're also watching a number of technical factors closely, including
changing relationships between bond yields and maturities, so we can identify
the best relative values in the market.(1)
WHAT'S YOUR OUTLOOK FOR THE FUND AND THE GOVERNMENT SECURITIES MARKET?
In the near term, we remain cautious, given the uncertainties in the economy.
Looking out longer, however, we're extremely optimistic. It's difficult to
remember a time when this sector of the market offered better real,
inflation-adjusted returns or more opportunities, and we feel the Fund is well
positioned to take advantage of the opportunities the market offers. / /
[PHOTO]
(1.) The Fund's portfolio is subject to change.
5 Oppenheimer Limited-Term Government Fund
<PAGE> 6
- ------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS March 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================
==================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--69.1%
- ------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--69.1%
- ------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--48.3%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations, Gtd.
Multiclass Mtg. Participation Certificates:
10%, 11/15/19 $11,716,590 $ 12,109,797
8.20%, 7/15/19 1,227,001 1,244,265
9.25%, 11/1/08 498,076 514,010
10%, 6/15/20 8,000,000 8,862,319
6.65%, 4/15/21 12,500,000 11,573,374
8.50%, 10/15/19 17,543,184 17,901,415
9%, 12/15/20 14,750,000 15,078,924
Series 1057, Cl. C, 8%, 3/15/21 4,263,553 4,273,189
Series 1092, Cl. K, 8.50%, 6/15/21 15,000,000 15,567,300
Series 1097, Cl. L, 8.60%, 2/15/06 3,000,000 3,075,030
Series F, 9.50%, 12/15/18 2,226,528 2,268,989
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg.
Participation Certificates:
10%, 8/1/21 2,822,130 3,017,168
10%, 8/1/21 1,575,556 1,684,428
11.75%, 1/1/16 1,124,517 1,243,294
11.75%, 4/1/19 3,592,842 3,972,337
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
12.50%, 12/1/15 5,193,738 5,859,187
13%, 6/1/15 66,547 75,107
13%, 8/1/10 53,654 60,319
8%, 1/1/23 375,113 374,498
9%, 8/1/19 1,147,767 1,188,593
10.50%, 11/25/20 10,000,000 11,337,399
8%, 7/25/19 8,000,000 8,078,879
Series 1991-169, Cl. PK, 8%, 10/25/21 595,000 594,637
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:
Trust 218, Cl. 2, 7.50%, 4/25/23(1) 5,900,129 2,102,843
Trust 222, Cl. 2, 7%, 6/25/23(1) 67,937,606 24,181,542
Trust 257, Cl. 2, 7%, 2/25/24(1) 13,371,689 4,893,203
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped Mtg.-Backed
Security, Trust 148, Cl. G, Zero Coupon, 8/25/23(2) 8,891,258 3,734,329
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., STRIPS, Series G, Cl. 2, 11.50%, 3/1/09 3,191,271 3,548,794
------------
168,415,169
- ------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--20.8%
Government National Mortgage Assn.:
10.50%, 1/15/16-7/15/19 4,164,994 4,594,536
11%, 2/15/98-2/15/01 1,913,436 2,028,961
11.50%, 1/15/13-5/15/13 1,291,378 1,427,293
11.75%, 1/15/14(3) 960,892 1,050,976
13%, 2/15/11-9/15/14 108,806 124,885
7.50%, 4/1/25-5/1/25(3) 40,000,000 40,837,501
8%, 9/15/07-7/15/23 1,534,966 1,534,104
8.50%, 9/15/21-12/15/24 17,240,088 17,521,593
9%, 11/15/16 3,119,397 3,244,391
9.50%, 9/15/17 219,521 231,038
------------
72,595,278
------------
Total Mortgage-Backed Obligations (Cost $242,609,770) 241,010,447
</TABLE>
6 Oppenheimer Limited-Term Government Fund
<PAGE> 7
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
==========================================================
==================================================
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--39.4%
- ------------------------------------------------------------------------------------------------------------
TREASURY--39.4%
U.S. Treasury Bonds, 11.625%, 11/15/02 $ 2,000,000 $ 2,515,000
U.S. Treasury Bonds, 8.125%, 8/15/19 3,933,000 4,170,207
U.S. Treasury Nts.:
10.50%, 8/15/95 3,000,000 3,046,875
7.625%, 5/31/96 19,300,000 19,517,125
8%, 10/15/96 8,240,000 8,394,500
8.25%, 7/15/98 5,000,000 5,187,500
8.50%, 4/15/97 10,500,000 10,837,962
8.875%, 11/15/97 11,500,000 12,039,063
9.25%, 1/15/96 32,505,000 33,185,554
9.375%, 4/15/96(4) 37,797,000 38,848,246
------------
Total U.S. Government Obligations (Cost $139,698,430) 137,742,032
</TABLE>
<TABLE>
<CAPTION>
SHARES
==========================================================
==================================================
<S> <C> <C>
PUT OPTIONS PURCHASED--0.0%
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.50% (Cost $51,563) 20,000 9,375
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
==========================================================
==================================================
<S> <C> <C>
REPURCHASE AGREEMENTS--1.0%
Repurchase agreement with First Chicago Capital Markets,
6.25%, dated 3/31/95, to be repurchased at $3,501,823 on 4/3/95,
collateralized by U.S. Treasury Nts., 7.25%, 11/30/96, with a
value of $3,573,930 (Cost $3,500,000) $ 3,500,000 3,500,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $385,859,763) 109.5% 382,261,854
- ------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (9.5) (33,306,491)
----------- ------------
NET ASSETS 100.0% $348,955,363
=========== ============
</TABLE>
1. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed-income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs).
2. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity.
3. When-issued security to be delivered and settled after March 31, 1995.
4. Securities with an aggregate market value of $421,403 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts, as follows:
<TABLE>
<CAPTION>
NUMBER OF
TYPE OF CONTRACT CONTRACTS FACE AMOUNT
- --------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Nts., 6/95 403 $40,300,000
</TABLE>
The market value of the open contracts was $41,571,969 at March 31, 1995, with a
net unrealized loss of $156,281.
See accompanying Notes to Financial Statements.
7 Oppenheimer Limited-Term Government Fund
<PAGE> 8
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES March 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================
==================================================
<S> <C>
ASSETS
Investments, at value (cost $385,859,763)--see accompanying statement $382,261,854
- ------------------------------------------------------------------------------------------------------------
Cash 215,366
- ------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 20,738,693
Interest and principal paydowns 5,761,365
Shares of beneficial interest sold 3,404,991
Receivable for daily variation on futures contracts 68,462
- ------------------------------------------------------------------------------------------------------------
Other 44,969
------------
Total assets 412,495,700
==========================================================
==================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 61,598,458
Shares of beneficial interest redeemed 1,089,849
Dividends 584,209
Distribution and service plan fees--Note 4 192,707
Transfer and shareholder servicing agent fees--Note 4 3,785
Trustees' fees 139
Other 71,190
------------
Total liabilities 63,540,337
==========================================================
==================================================
NET ASSETS $348,955,363
============
==========================================================
==================================================
COMPOSITION OF NET ASSETS
Paid-in capital $360,107,511
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income 421,286
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (7,819,244)
- ------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Note 3 (3,754,190)
------------
Net assets $348,955,363
============
==========================================================
==================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $274,872,477 and 26,366,128 shares of beneficial interest outstanding) $10.43
Maximum offering price per share (net asset value plus sales charge
of 3.50% of offering price) $10.81
- ------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $72,130,147 and 6,917,484 shares of beneficial interest outstanding) $10.43
- ------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $1,952,739 and 187,455 shares of beneficial interest outstanding) $10.42
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Limited-Term Government Fund
<PAGE> 9
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended March 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
==========================================================
==================================================
<S> <C>
INVESTMENT INCOME
Interest $12,852,786
==========================================================
==================================================
EXPENSES
Management fees--Note 4 694,013
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A--Note 4 294,152
Class B--Note 4 262,746
Class C--Note 4 1,388
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 165,222
- ------------------------------------------------------------------------------------------------------------
Shareholder reports 37,306
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 27,441
- ------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,478
Class B 12,837
Class C 34
- ------------------------------------------------------------------------------------------------------------
Legal and auditing fees 10,367
- ------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 227
- ------------------------------------------------------------------------------------------------------------
Other 7,358
-----------
Total expenses 1,514,569
==========================================================
==================================================
NET INVESTMENT INCOME 11,338,217
==========================================================
==================================================
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS WRITTEN
Net realized gain on:
Investments (1,466,570)
Closing of futures contracts 300,141
Closing of options written (95,325)
-----------
Net realized loss (1,261,754)
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 1,991,335
-----------
Net realized and unrealized gain on investments and options written 729,581
==========================================================
==================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,067,798
===========
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Limited-Term Government Fund
<PAGE> 10
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30,
(UNAUDITED) 1994
==========================================================
========================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 11,338,217 $ 13,788,048
- ------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and options written (1,261,754) 787,066
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 1,991,335 (12,973,109)
------------ ------------
Net increase in net assets resulting from operations 12,067,798 1,602,005
==========================================================
========================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A ($.379 and $.709 per share, respectively) (9,070,381) (12,491,113)
Class B ($.344 and $.62 per share, respectively) (1,730,732) (900,631)
Class C ($.10 per share) (8,276) --
- ------------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.002 per share) -- (44,628)
Class B ($.002 per share) -- (7,614)
- ------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A ($.01 per share) -- (213,840)
Class B ($.01 per share) -- (36,486)
==========================================================
========================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from Class A beneficial
interest transactions--Note 2 46,078,914 60,069,439
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B beneficial
interest transactions--Note 2 32,933,453 34,737,604
- ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class C beneficial
interest transactions--Note 2 1,948,930 --
==========================================================
========================================================
NET ASSETS
Total increase 82,219,706 82,714,736
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 266,735,657 184,020,921
------------ ------------
End of period [including undistributed (overdistributed)
net investment income of $421,286 and ($107,542), respectively] $348,955,363 $266,735,657
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Limited-Term Government Fund
<PAGE> 11
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31,
1995 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1994 1993 1992 1991 1990(3)
==========================================================
===========================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.40 $11.04 $10.97 $10.75 $10.18 $10.17
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .72 .73 .81 .87 .89
Net realized and unrealized gain (loss)
on investments and options written .01 (.64) .07 .22 .57 .01
-------- -------- -------- -------- -------- --------
Total income (loss) from investment
operations .41 .08 .80 1.03 1.44 .90
- ---------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.38) (.71) (.73) (.81) (.87) (.89)
Dividends in excess of net
investment income -- --(4) -- -- -- --
Tax return of capital distribution -- (.01) -- -- -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.38) (.72) (.73) (.81) (.87) (.89)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.43 $10.40 $11.04 $10.97 $10.75 $10.18
======== ======== ======== ========
======== ========
==========================================================
===========================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 4.01% .74% 7.61% 9.88% 14.69%
9.15%
==========================================================
===========================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $274,872 $227,858 $178,944 $158,068 $167,974 $213,391
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $248,389 $190,829 $161,318 $160,830 $192,404 $218,528
- ---------------------------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 26,366 21,906 16,206 14,416 15,624 20,964
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.70%(6) 6.74% 6.70% 7.44% 8.27% 8.77%
Expenses .86%(6) .99% 1.02% .97% .98% .90%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 102% 226% 74% 154% 112% 60%
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
------------------------------------- -----------
Six Months Period
Ended Year Ended
March 31, Ended March 31,
1995 Sept. 30, 1995(1)
(Unaudited) 1994 1993(2) (Unaudited)
==========================================================
===========================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.41 $11.06 $10.96 $10.32
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .36 .62 .23 .10
Net realized and unrealized gain (loss)
on investments and options written -- (.64) .10 .10
------- ------- ------ ------
Total income (loss) from investment
operations .36 (.02) .33 .20
- -----------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.34) (.62) (.23) (.10)
Dividends in excess of net
investment income -- --(4) -- --
Tax return of capital distribution -- (.01) -- --
------- ------- ------ ------
Total dividends and distributions
to shareholders (.34) (.63) (.23) (.10)
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period $10.43 $10.41 $11.06 $10.42
======= ======= ====== ======
==========================================================
===========================================
TOTAL RETURN, AT NET ASSET VALUE(5) 3.56% (.17)% 3.02% 1.97%
==========================================================
===========================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $72,130 $38,877 $5,077 $1,953
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $52,779 $15,801 $2,561 $ 861
- -----------------------------------------------------------------------------------------------------
Number of shares outstanding
at end of period (in thousands) 6,917 3,734 459 187
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.84%(6) 5.91% 4.81%(6) 6.09%(6)
Expenses 1.68%(6) 1.79% 1.87%(6) 1.62%(6)
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 102% 226% 74% 102%
</TABLE>
1. For the period from February 1, 1995 (inception of offering) to March 31,
1995.
2. For the period from May 3, 1993 (inception of offering) to September 30,
1993.
3. On April 7, 1990, Oppenheimer Management Corporation became the investment
advisor to the Fund.
4. Less than $.001 per share.
5. 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. Total returns are not annualized for
periods of less than one full year.
6. Annualized.
7. 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 six
months ended March 31, 1995 were $109,348,621 and $76,299,622, respectively.
See accompanying Notes to Financial Statements.
11 Oppenheimer Limited-Term Government Fund
<PAGE> 12
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- -------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Limited-Term Government Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment advisor is Oppenheimer
Management Corporation (the Manager). The Fund offers Class A, Class B and Class
C shares. Class A shares are sold with a front-end sales charge. Class B and
Class C shares may be subject to a contingent deferred sales charge. All three
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive voting rights
with respect to matters affecting a single class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- -------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term ''non-money market'' debt securities are valued by a portfolio
pricing service approved by the Board of Trustees. Such securities which cannot
be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or under consistently applied procedures established by the Board of
Trustees to determine fair value in good faith. Short-term ``money market type''
debt securities having a remaining maturity of 60 days or less are valued at
cost (or last determined market value) adjusted for amortization to maturity
of any premium or discount. Forward contracts are valued based on the closing
prices of the forward currency contract rates in the London foreign exchange
markets on a daily basis as provided by a reliable bank or dealer. Options are
valued based upon the last sale price on the principal exchange on which the
option is traded or, in the absence of any transactions that day, the value is
based upon the last sale price on the prior trading date if it is within the
spread between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid or asked price closest to the last
reported sale price is used.
- -------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- -------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- -------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses. The character of the
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund. Effective October 1, 1993, the
Fund adopted Statement of Position 93-2: Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions
determined in accordance with income tax regulations.
- -------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date). Discount on securities purchased is
amortized over the life of the respective securities, in accordance with federal
income tax requirements. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
12 Oppenheimer Limited-Term Government Fund
<PAGE> 13
==========================================================
=====================
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1995(1) YEAR ENDED SEPTEMBER 30, 1994
---------------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 8,523,018 $88,061,524 11,073,786 $117,379,950
Dividends reinvested 631,491 6,531,231 817,206 8,727,397
Redeemed (4,694,409) (48,513,841) (6,191,329) (66,037,908)
---------- ----------- ---------- ------------
Net increase 4,460,100 $46,078,914 5,699,663 $ 60,069,439
========== =========== ==========
============
- -------------------------------------------------------------------------------------------
Class B:
Sold 3,841,229 $39,730,443 3,707,813 $ 39,327,532
Dividends reinvested 116,445 1,205,459 68,487 725,648
Redeemed (774,305) (8,002,449) (501,397) (5,315,576)
---------- ----------- ---------- ------------
Net increase 3,183,369 $32,933,453 3,274,903 $ 34,737,604
========== =========== ==========
============
- -------------------------------------------------------------------------------------------
Class C:
Sold 186,711 $ 1,941,181 -- $ --
Dividends reinvested 769 8,014 -- --
Redeemed (25) (265) -- --
---------- ----------- ---------- ------------
Net increase 187,455 $ 1,948,930 -- $ --
========== =========== ==========
============
</TABLE>
1. For the six months ended March 31, 1995 for Class A and Class B shares and
for the period from February 1, 1995 (inception of offering) to March 31, 1995
for Class C shares.
==========================================================
=====================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At March 31, 1995, net unrealized depreciation on investments of $3,754,190 was
composed of gross appreciation of $4,001,595, and gross depreciation of
$7,755,785.
==========================================================
=====================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of .50% on the
first $100 million of net assets, .45% on the next $150 million, .425% on the
next $250 million and .40% on net assets in excess of $500 million. The Manager
has agreed to reimburse the Fund if aggregate expenses (with specified
exceptions) exceed the most stringent state regulatory limit on Fund expenses.
The Manager acts as the accounting agent for the Fund at an annual fee of
$12,000, plus out-of-pocket costs and expenses reasonably incurred.
For the six months ended March 31, 1995, commissions (sales charges paid by
investors) on sales of Class A shares totaled $882,227, of which $258,589 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager, as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class B shares
totaled $856,585, of which $62,265 was paid to an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class C
shares totaled $17,357, of which $752 was paid to an affiliated broker/dealer.
During the six months ended March 31, 1995, OFDI received contingent deferred
sales charges of $69,808 upon redemption of Class B shares as reimbursement for
sales commissions advanced by OFDI at the time of sale of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net
assets annually to reimburse OFDI for costs incurred in connection with the
personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other institutions. In
addition, Class B and Class C shares are subject to an asset-based sales charge
of .75% of net assets annually, to reimburse OFDI for sales commissions paid
from its own resources at the time of sale and associated financing costs. In
the event of termination or discontinuance of the Class B or Class C plan, the
Board of Trustees may allow the Fund to continue payment of the asset-based
sales charge to OFDI for distribution expenses incurred on Class B or Class C
shares sold prior to termination or discontinuance of the plan. During the six
months ended March 31, 1995, OFDI paid $9,480 and $1,541, respectively, to an
affiliated broker/dealer as reimbursement for Class A and Class B personal
service and maintenance expenses and retained $251,086 and $1,388, respectively,
as reimbursement for Class B and Class C sales commissions and service fee
advances, as well as financing costs.
13 Oppenheimer Limited-Term Government Fund
<PAGE> 14
- -------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited) (Continued)
- -------------------------------------------------------------------------------
5. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write covered call options
onportfolio securities in order to produce incremental earnings or protect
against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a
written put option, or the cost of the security for a purchased put or call
option is adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments. Shares subject to call, expiration date, exercise
price, premium received and market value are detailed in a footnote to the
Statement of Investments. Options written are reported as a liability in the
Statement of Assets and Liabilities. Gains and losses are reported in the
Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may
incur a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market
does not exist.
Written option activity for the six months ended March 31, 1995, was as
follows:
<TABLE>
<CAPTION>
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
- ----------------------------------------------------------------------------
<S> <C> <C>
Put Option Activity
Options outstanding at September 30, 1994 60,000 $121,875
Options written -- --
Options expired prior to exercise -- --
Options closed (60,000) (121,875)
------- --------
Options outstanding at March 31, 1995 -- --
======= ========
</TABLE>
==========================================================
=====================
6. FUTURES CONTRACTS
The Fund may buy andsell futures contracts in order to gain exposure to or
protect against changes in interest rates. The Fund may also buy or write put
or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities. The Fund will segregate
assets to cover its commitments under futures contracts.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities in an amount (initial margin) equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At March 31, 1995, the Fund had outstanding futures contracts to sell debt
securities as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
SECURITY DATE FUTURES CONTRACTS MARCH 31, 1995 DEPRECIATION
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 6/95 403 $41,571,969 $(156,281)
</TABLE>
14 Oppenheimer Limited-Term Government Fund
<PAGE> 15
- -------------------------------------------------------------------------------
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- -------------------------------------------------------------------------------
==========================================================
=====================
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David A. Rosenberg, Vice President
George C. Bowen, Vice President, Secretary and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
==========================================================
=====================
INVESTMENT ADVISOR
Oppenheimer Management Corporation
==========================================================
=====================
DISTRIBUTOR
Oppenheimer Funds Distributor, Inc.
==========================================================
=====================
TRANSFER AND SHAREHOLDER SERVICING AGENT
Oppenheimer Shareholder Services
==========================================================
=====================
CUSTODIAN OF PORTFOLIO SECURITIES
Citibank, N.A.
==========================================================
=====================
INDEPENDENT AUDITORS
Deloitte & Touche LLP
==========================================================
=====================
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors. This is a copy of a report
to shareholders of Oppenheimer Limited-Term Government Fund. This report must be
preceded or accompanied by a Prospectus of Oppenheimer Limited-Term Government
Fund. For material information concerning the Fund, see the Prospectus.
15 Oppenheimer Limited-Term Government Fund
<PAGE> 16
==========================================================
=====================
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-8 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RS0855.001.0595 May 31, 1995
"How may I help you?"
As an OppenheimerFunds shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get auto-mated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
[PHOTO]
Jennifer Leonard, Customer Service Representative
Oppenheimer Shareholder Services
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the OppenheimerFunds' transfer agent,
Oppenheimer Shareholder Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
- -------------------------------------------------------------------------------
[LOGO] OPPENHEIMERFUNDS(R)
----------------
Oppenheimer Funds Distributor, Inc. Bulk Rate
P.O. Box 5270 U.S. Postage
Denver, CO 80217-5270 PAID
Permit No. 11
Philadelphia, PA
----------------
<PAGE>
Oppenheimer Strategic Short-Term Income Fund
Semiannual Report March 31, 1995
[LOGO]
<PAGE>
Yield
- ---------------------------------
Standardized Yield
- ---------------------------------
For the 30 Days Ended 3/31/95:(1)
Class A
- ---------------------------------
6.76%
- ---------------------------------
Class B
- ---------------------------------
6.21%
- ---------------------------------
This Fund is for people who want high income from an investment that's
strategically designed to lower risk.
- --------------------------------------------------------------------------------
How Your Fund Is Managed
- --------------------------------------------------------------------------------
Oppenheimer Strategic Short-Term Income Fund seeks high current income and
stability of principal by strategically allocating its assets among four
sectors: U.S. government issues, foreign fixed income securities, corporate
bonds, and money market instruments. At least 65% of the Fund's portfolio is
invested in securities with a maximum remaining maturity of not more than 3
years because shorter-term securities are less subject to price fluctuations
than longer-term securities.
Strategic investing gives the Fund's managers the flexibility to shift
assets among fixed income sectors to capitalize on worldwide investment
opportunities. At the same time, allocating the Fund's assets among distinct
fixed income sectors provides the diversification necessary to lower risk.
- --------------------------------------------------------------------------------
Performance
- --------------------------------------------------------------------------------
Total returns at net asset value for the 6 months ended 3/31/95 for Class A and
B shares were 3.40% and 3.01%, respectively.(2)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-year period ended 3/31/95 and since inception of the
Class on 8/4/92 were 0.04% and 1.73%, respectively. For Class B shares, average
annual total returns for the 1-year period ended 3/31/95 and since inception of
the Class on 11/30/92 were -1.00% and 3.28%, respectively.(3)
- --------------------------------------------------------------------------------
Outlook
- --------------------------------------------------------------------------------
"The outlook for the bond market is more positive today than it has been in some
time, both in terms of income and potential total returns. The Fund's ability to
shift assets strategically among bond market sectors worldwide remains a major
advantage for shareholders in the current environment. It has allowed us to seek
high yields, while seeking to keep portfolio risks under careful control."
David Negri and Art Steinmetz, Portfolio Managers
March 31, 1995
All figures assume reinvestment of dividends and capital gains distributions.
Past performance is not indicative of future results. Investment and principal
value on an investment in the Fund will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than the original cost.
1. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 3/31/95, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
2. Based on the change in net asset value per share from 9/30/94 to 3/31/95,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
3. Class A returns show results of hypothetical investments on 4/1/94 and 8/4/92
(inception of class), after deducting the current maximum initial sales charge
of 3.50%. Class B returns show results of hypothetical investments on 4/1/94 and
11/30/92 (inception of class) and the deduction of the applicable contingent
deferred sales charge of 4% (1-year) and 3% (since inception). An explanation of
the different total returns is in the Fund's prospectus.
2 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
James C. Swain
Chairman
Oppenheimer
Strategic Short-Term
Income Fund
Jon S. Fossel
President
Oppenheimer
Strategic Short-Term
Income Fund
Dear OppenheimerFunds Shareholder,
1994 was marked by one of the greatest tests the bond markets faced in more than
six decades. As the U.S. Federal Reserve undertook the most aggressive moves in
its history to raise interest rates, bond prices and bond mutual funds declined
across the board. Changing interest rates are a fact of life and they affect the
short-term performance of all bond markets. That is why we believe the best
measure of any fixed income mutual fund is its performance over the long term.
And we believe the long-term outlook for the bond markets is very positive.
To see how greatly the U.S. bond market has improved since last fall, we
need look no further than the market's reaction to the Fed's most recent
short-term rate increase in February. While the markets had already anticipated
this move, unlike previous rate increases, long-term interest rates continued to
decline and bonds rallied further. Although the Fed could raise rates again, we
believe that this positive environment will prove more than momentary as a
result of several factors.
First, concerns about the effects of inflation on bond prices are fading
fast. By most indicators, economic growth is slowing to a pace that can be
sustained without reigniting inflation or causing a recession. Second, at
current prices, intermediate and long-term bonds are producing some of the best
inflation-adjusted returns in years. With the actual inflation rate running just
over 3 percent today, many fixed income investors are clearly being rewarded.
Attracted by the strong, real returns intermediate and long-term bonds offer,
investors are returning to bonds in a significant way. This rising demand is
providing solid support for bond prices. Third, as the Fed concludes its
tightening efforts--and recent reports suggest that point is near--long-term
interest rates will likely stay within their current range, and could decline
further. Of course, rates could rise later this year if future reports indicate
that the economy isn't slowing as quickly as it seems to be today; however, we
believe that over the longer term, the downward trend of rates will continue.
Two uncertainties affecting the fixed income markets are foreign investors'
attitudes toward U.S. debt and the weakness of the U.S. dollar abroad relative
to other major currencies. But investors' attitudes overseas and the dollar's
decline, in our view, should prove temporary. Both have been driven by the
government's moves to support the Mexican peso, a widening trade deficit, and
Congress's apparent inability to limit the Federal budget deficit.
We believe the trade deficit will narrow with increasing U.S. exports as
European economies come out of recession and emerging world markets stabilize.
Additionally, the need to support the peso has begun to decline as Mexico's
tough domestic economic policy has gained credibility. Finally, we are confident
that Congress will be able to get the budget deficit issue dealt with because
Americans are demanding it.
Of course, no one can predict the future with perfect clarity. The bond
markets are always subject to fluctuations and, as we saw in 1994, the shifts
can sometimes be sharp. Overall, however, we believe the outlook for the bond
markets today appears positive.
Your portfolio manager discusses the outlook for your Fund on the following
pages. We appreciate your trust, and we'll continue to do our best to help you
meet your long-term investment objectives.
James C. Swain Jon S. Fossel
April 24, 1995
3 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
David Negri and Art Steinmetz
Portfolio Managers
Q+A
An interview with your Fund's managers.
Investments in emerging markets historically have played an important role in
the Fund's portfolio. Did the devaluation of the peso affect your strategy?
It certainly did with regard to Mexico itself, where we have drastically reduced
our positions. In other emerging markets, however, we think the perception of
risk has been exaggerated. These markets don't, of course, develop in straight
lines. Foreign investments are always subject to adverse market changes due to
currency fluctuations, and sometimes the shifts can be sharp. But the Fund's
focus on shorter-maturity bonds helps mitigate those risks, as does the Fund's
diversified portfolio.(1)
There also are signs of political and economic uncertainty in some established
markets in Europe. How have these developments affected your approach?
We've taken several steps to adjust our European holdings. For example, we've
redirected our assets in Spain and Italy, which are running large deficits, to
the United Kingdom. Bonds in these countries are beginning to benefit from
strengthening economies, which are pushing up yields, as well as from the
weakness of the U.S. dollar.
Has the recent weakness of the dollar affected the Fund?
It has to some extent. The dollar's decline was driven largely by the U.S.
government's attempt to support Mexico by buying peso-denominated securities. As
our government pumped U.S. dollars into the system, and as the supply of dollars
rose, their value fell. But as investors sought stability, other markets and
currencies, notably Germany and the mark, benefitted--thus, currency declines
affecting one sector of the Fund were largely offset by currency gains in
Europe.
These developments demonstrate the benefit of investing in a
geographically diverse portfolio. Each sector of the bond market is affected
differently by economic events, and setbacks in one area often are offset by
higher performance in others.
What's your outlook for the Fund?
The Fund's flexibility and diversification should continue to help us manage
risk and seek solid returns. And now that prospects for the bond markets in
general are positive, we believe that the Fund is positioned to perform well. //
1. The Fund's portfolio is subject to change.
4 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Statement of Investments March 31, 1995 (Unaudited)
Face Market Value
Amount (1) See Note 1
<S> <C> <C> <C>
==========================================================
==========================================================
================
Certificates of Deposit -- 3.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Citibank CD:
10.50%, 7/14/95 (2) ARA $ 150,000 $ 150,037
16%, 5/3/95 (2) CLP 43,000,000 106,554
16%, 8/17/95 (2) CLP 83,003,140 205,682
--------------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) CD, Bank Negara, Zero Coupon, 4/24/95 IDR 1,500,000,000
663,371
---------------
Total Certificates of Deposit (Cost $1,162,222) 1,125,644
==========================================================
==========================================================
================
Mortgage-Backed Obligations -- 19.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Government Agency -- 15.0%
- ------------------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored -- 11.8%
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Series 1548, Cl. C, 7%, 4/15/21 3,000,000 2,728,230
--------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security, Trust 240, Cl. 2, 7%, 9/25/23 (3) 1,935,879 701,151
---------------
3,429,381
- ------------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed -- 3.2%
--------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 10.50%, 12/15/17-10/15/21 832,850 919,239
- ------------------------------------------------------------------------------------------------------------------------------------
Private -- 4.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial -- 2.0%
--------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates, Series 1993-C1, Cl. B, 8.75%, 5/25/24 600,000 599,438
- ------------------------------------------------------------------------------------------------------------------------------------
Multi-Family -- 2.5%
--------------------------------------------------------------------------------------------------------------------------
Resolution Trust Corp., Commercial Mtg. Pass-Through
Certificates:
Series 1991-M5, Cl. A, 9%, 3/25/17 645,065 657,563
Series 1991-M6, Cl. B4, 6.45%, 6/25/21 (4) 66,789 64,431
---------------
721,994
---------------
Total Mortgage-Backed Obligations (Cost $5,869,176) 5,670,052
==========================================================
==========================================================
================
U.S. Government Obligations -- 48.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Agency -- 8.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Government Agency/Full Faith -- 8.1%
--------------------------------------------------------------------------------------------------------------------------
Small Business Administration, 9.375%-10.675%, 4/1/95 (5) 2,218,343 2,349,357
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury -- 40.7%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
10.375%, 5/15/95 2,070,000 2,080,350
6.25%, 8/15/23 600,000 513,187
--------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
10.50%, 8/15/95 800,000 812,500
4.375%, 8/15/96 5,000,000 4,854,684
5.125%, 2/28/98 300,000 285,844
8.50%, 5/15/97 3,200,000 3,304,998
---------------
11,851,563
---------------
Total U.S. Government Obligations (Cost $14,646,617) 14,200,920
==========================================================
==========================================================
================
Foreign Government Obligations -- 12.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Corporacion Andina de Fomento Sr. Unsec. Debs., 7.25%, 4/30/98 70,000 64,750
</TABLE>
5 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign Government Obligations -- (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
First Australia National Mortgage Acceptance Corp. Ltd. Bonds,
Series 22, 11.40%, 12/15/01 AUD $ 391,830 $ 303,211
--------------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development Bonds,
12.50%, 7/25/97 NZD 580,000 412,023
--------------------------------------------------------------------------------------------------------------------------
New South Wales Treasury Corp. Gtd. Exch. Bonds, 12%, 12/1/01 AUD 330,000
265,743
--------------------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds:
10%, 7/15/97 NZD 119,000 80,434
8%, 11/15/95 NZD 750,000 487,148
--------------------------------------------------------------------------------------------------------------------------
Queensland Treasury Corp. Gtd. Nts., 8%, 8/14/01 AUD 921,000 612,894
--------------------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
10.25%, 11/30/98 ESP 40,000,000 301,746
--------------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts.:
12%, 11/20/98 GBP 195,000 352,951
12.25%, 3/26/99 GBP 200,000 367,193
13%, 7/14/00 GBP 196,000 378,505
---------------
Total Foreign Government Obligations (Cost $3,555,767) 3,626,598
==========================================================
==========================================================
================
Municipal Bonds and Notes -- 2.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut State Taxable General Obligation Bonds, 6.625%,
12/15/97 350,000 344,788
--------------------------------------------------------------------------------------------------------------------------
New York State Environmental Facilities Corp. State Service
Contract Taxable Revenue Bonds, Series B, 7.30%, 3/15/97 500,000 494,897
---------------
Total Municipal Bonds and Notes (Cost $848,937) 839,685
==========================================================
==========================================================
================
Corporate Bonds and Notes -- 11.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Industry -- 1.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals -- 1.5%
--------------------------------------------------------------------------------------------------------------------------
Quantum Chemical Corp., 10.375% Fst. Mtg. Nts., 6/1/03 400,000 442,149
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Related -- 2.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Food/Beverages/Tobacco -- 0.9%
--------------------------------------------------------------------------------------------------------------------------
Dr. Pepper/Seven-Up Cos., Inc., 0%/11.50% Sr. Sub. Disc. Nts.,
11/1/02 (6) 300,000 261,000
- ------------------------------------------------------------------------------------------------------------------------------------
Hotel/Gaming -- 0.9%
--------------------------------------------------------------------------------------------------------------------------
Host Marriott Hospitality, Inc., 10.625% Sr. Nts., Series B, 2/1/00 241,000 247,628
- ------------------------------------------------------------------------------------------------------------------------------------
Toys -- 1.0%
--------------------------------------------------------------------------------------------------------------------------
Mattel, Inc., 6.875% Sr. Nts., 8/1/97 300,000 296,446
- ------------------------------------------------------------------------------------------------------------------------------------
Energy -- 0.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Atlantic Richfield Co., 10.375% Nts., 7/15/95 250,000 252,634
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Services -- 3.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Banks and Thrifts -- 0.8%
--------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp., 7.50% Sr. Nts., 3/15/97 100,000 100,253
--------------------------------------------------------------------------------------------------------------------------
First Chicago Corp., 9% Sub. Nts., 6/15/99 150,000 157,111
---------------
257,364
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial -- 2.7%
--------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Nts., 10/1/96 200,000 201,962
--------------------------------------------------------------------------------------------------------------------------
Heller Financial, Inc., 7.75% Nts., 5/15/97 225,000 226,848
--------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.375% Nts., 2/15/99 350,000 349,142
---------------
777,952
- ------------------------------------------------------------------------------------------------------------------------------------
Retail -- 2.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Department Stores -- 1.3%
--------------------------------------------------------------------------------------------------------------------------
Sears Canada, Inc., 11.70% Debs., 7/10/00 CAD 500,000 391,196
</TABLE>
6 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Statement of Investments (Unaudited)(Continued) Face Market Value
Amount (1) See Note 1
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Retail -- (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Specialty Retailing -- 1.1%
--------------------------------------------------------------------------------------------------------------------------
Caldor Corp., 15% Sr. Sub. Nts., 6/1/00 $ 290,000 $ 311,750
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities -- 0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities -- 0.8%
--------------------------------------------------------------------------------------------------------------------------
Commonwealth Edison Co., 6.50% Nts., 7/15/97 225,000 218,817
---------------
Total Corporate Bonds and Notes (Cost $3,595,027) 3,456,936
- ------------------------------------------------------------------------------------------------------------------------------------
Structured Instruments -- 1.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp. Investment Banking, Inc., 10% CD Sterling
Rate Linked Nts., 7/3/95 (Cost $370,000) (2) 370,000 364,080
--------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $30,047,746) 100.7% 29,283,915
--------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (0.7) (201,667)
---------------- ---------------
Net Assets 100.0% $ 29,082,248
================
===============
</TABLE>
1. Face amount is reported in local currency. Foreign currency
abbreviations are as follows:
ARA - Argentine Austral ESP - Spanish Peseta
AUD - Australian Dollar GBP - British Pound Sterling
CAD - Canadian Dollar IDR - Indonesian Rupiah
CLP - Chilean Peso NZD - New Zealand Dollar
DEM - German Deutsche Mark USD - U.S. Dollar
2. Indexed instrument for which the principal amount and/or interest
due at maturity is affected by the relative value of a foreign
currency.
3. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline.
Most other fixed-income securities increase in price when
interest rates decline. The principal amount of the underlying
pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more
sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs).
4. Represents the current interest rate for a variable rate
security.
5. Floating or variable rate obligation maturing in more than one
year. The interest rate, which is based on specific, or an index
of, market interest rates, is subject to change periodically and
is the effective rate on March 31, 1995. This instrument may also
have a demand feature which allows the recovery of principal at
any time, or at specified intervals not exceeding one year, on up
to 30 days' notice. Maturity date shown represents effective
maturity based on variable rate and, if applicable, demand
feature.
6. Represents a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
7. A sufficient amount of securities is segregated to collateralize
outstanding forward foreign currency exchange contracts. See Note
5 of Notes to Financial Statements.
8. A sufficient amount of liquid assets has been designated to cover
outstanding call and put options, as follows:
<TABLE>
<CAPTION>
Face Subject Expiration Exercise Premium Market Value
to Call/Put Date Price Received See Note 1
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Call Option on Australian Dollar 400,000 AUD 4/20/95 0.74 USD/AUD $ 692 $
1,184
Call Option on New South Wales
Treasury Corp. Gtd. Exch. Bonds,
12%, 12/1/01 50,000 AUD 4/28/95 109.056 AUD 339 440
Call Option on Pound Sterling 325,000 GBP 5/8/95 1.60 USD/DEM 3,210 12,584
Call Option on Spanish Peseta/
Deutsche Mark 10,000,000 ESP 5/4/95 89.00 ESP/DEM 558 328
Put Option on Deutsche Mark 100,000 DEM 6/6/95 1.46 DEM/USD 708
500
----------- -----------
$ 5,507 $ 15,036
===========
===========
</TABLE>
See accompanying Notes to Financial Statements.
7 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities March 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets Investments, at value (cost $30,047,746) -- see accompanying statement $29,283,915
---------------------------------------------------------------------------------------------------------
Receivables:
Interest and principal paydowns 556,022
Investments sold 59,683
Shares of beneficial interest sold 5,822
Deferred organization costs 3,756
---------------------------------------------------------------------------------------------------------
Other 3,515
-------------
Total assets 29,912,713
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities Bank overdraft 605,866
---------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $5,507) -- Note 4 15,036
---------------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency exchange
contracts -- Note 5 410
---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 107,812
Dividends 52,076
Distribution and service plan fees -- Note 6 17,366
Transfer and shareholder servicing agent fees 4,313
Trustees' fees 1,258
Other 26,328
-------------
Total liabilities 830,465
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets $29,082,248
=============
- ------------------------------------------------------------------------------------------------------------------------------------
Composition of Paid-in capital $30,815,439
Net Assets
---------------------------------------------------------------------------------------------------------
Overdistributed net investment income (288,618)
---------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investments, written options
and foreign currency transactions (672,939)
---------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments, options written and
translation of assets and liabilities denominated in foreign currencies (771,634)
-------------
Net assets $29,082,248
=============
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets
of $20,997,783 and 4,604,117 shares of beneficial interest outstanding) $ 4.56
Maximum offering price per share (net asset value plus sales charge of
3.50% of offering price) $ 4.73
---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $8,084,465 and 1,775,203 shares of beneficial interest outstanding) $ 4.55
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Statement of Operations For the Six Months Ended March 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income Interest (net of foreign withholding taxes of $2,930) $ 1,217,785
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses Management fees -- Note 6 101,024
---------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A -- Note 6 25,488
Class B -- Note 6 40,424
---------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees -- Note 6 22,100
---------------------------------------------------------------------------------------------------------
Custodian fees and expenses 20,352
---------------------------------------------------------------------------------------------------------
Shareholder reports 14,815
---------------------------------------------------------------------------------------------------------
Legal and auditing fees 6,494
---------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,740
---------------------------------------------------------------------------------------------------------
Registration and filing fees -- Class B 363
---------------------------------------------------------------------------------------------------------
Other 5,491
-------------
Total expenses 238,291
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income 979,494
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Net realized gain (loss) from:
Unrealized Gain Investments and options written (410,447)
(Loss) on Closing of option contracts written -- Note 4 (48,046)
Investments, Options Foreign currency transactions 15,205
Written and Foreign -------------
Currency Transactions Net realized loss (443,288)
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written 533,286
Translation of assets and liabilities denominated in foreign
currencies (84,961)
-------------
Net change 448,325
------------
Net realized and unrealized gain on investments, options written
and foreign currency transactions 5,037
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting From Operations $ 984,531
===========
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
Six Months Ended
March 31, Year Ended
1995 September 30,
(Unaudited) 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <S> <C> <C>
Operations Net investment income $ 979,494 $ 2,056,979
Net realized loss on investments, options written and
foreign currency transactions (443,288) (634,053)
---------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments, options written and translation of assets
and liabilities denominated in foreign currencies 448,325 (1,362,246)
---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 984,531 60,680
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income:
Distributions to Class A ($.151 and $.205 per share, respectively) (773,158) (1,087,188)
Shareholders Class B ($.134 and $.167 per share, respectively) (240,913) (297,053)
---------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A ($.012 per share) -- (73,587)
Class B ($.012 per share) -- (20,106)
---------------------------------------------------------------------------------------------------------
Distributions in excess of net realized gain on
investments and foreign currency transactions:
Class A ($.005 per share) -- (29,391)
Class B ($.005 per share) -- (8,031)
---------------------------------------------------------------------------------------------------------
Tax return of capital:
Class A ($.088 per share) -- (540,571)
Class B ($.088 per share) -- (147,701)
- ------------------------------------------------------------------------------------------------------------------------------------
Beneficial Interest Net increase (decrease) in net assets resulting from Class A
Transactions beneficial interest transactions -- Note 2 (6,809,100) 4,289,799
---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from Class B
beneficial interest transactions -- Note 2 445,246 4,593,588
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Total increase (decrease) (6,393,394) 6,740,439
---------------------------------------------------------------------------------------------------------
Beginning of period 35,475,642 28,735,203
------------ -----------
End of period (including overdistributed net
investment income of $288,618 and
$254,041, respectively) $29,082,248 $35,475,642
============
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
---------------------------------------------------------------------------------------------------------------------------
Class A Class B
----------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1995 September 30, March 31, 1995 September 30,
(Unaudited) 1994 1993 1992(2) (Unaudited) 1994 1993(1)
<S> <C> <C> <C> <C> <C> <C>
<C>
Per Share Operating Data:
Net asset value, beginning of period $ 4.56 $ 4.84 $ 4.93 $ 5.00 $ 4.55 $ 4.84 $ 4.75
Income (loss) from investment operations:
Net investment income .13 .33 .33 .05 .13 .34 .22
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions .02 (.30) (.11) (.07) -- (.36) .08
------ ------ ------- ------ ------- ------ -------
Total income (loss) from investment
operations .15 .03 .22 (.02) .13 (.02) .30
------ ------ ------- ------ ------- ------ -------
Dividends and distributions to
shareholders:
Dividends from net investment income (.15) (.20) (.31) (.05) (.13) (.16) (.21)
Dividends in excess of net investment
income -- (.01) -- -- -- (.01) --
Distributions in excess of net realized
gain on investments -- (.01) -- -- -- (.01) --
Tax return of capital -- (.09) -- -- -- (.09) --
------ ------ ------- ------ ------- ------ -------
Total dividends and distributions to
shareholders (.15) (.31) (.31) (.05) (.13) (.27) (.21)
------ ------ ------- ------ ------- ------ -------
Net asset value, end of period $ 4.56 $ 4.56 $ 4.84 $ 4.93 $ 4.55 $ 4.55 $ 4.84
====== ====== ======= ====== =======
====== =======
Total Return, at Net Asset Value(3) 3.40% .61% 4.58% (.27)% 3.01% (.39)% 6.48%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $20,998 $27,850 $25,314 $12,670 $ 8,084 $7,626 $3,421
Average net assets (in thousands) $23,044 $28,284 $20,663 $ 8,643 $ 8,093 $6,020 $1,428
Number of shares outstanding at end of
period (in thousands) 4,604 6,112 5,231 2,572 1,775 1,675 707
Ratios to average net assets:
Net investment income 6.50%(4) 6.11% 6.83% 6.38%(4) 5.76%(4) 5.46%
5.88%(4)
Expenses, before voluntary reimbursement
by the Manager 1.33%(4) 1.17% 1.38% 1.87%(4) 2.11%(4) 1.97% 2.22%(4)
Expenses, net of voluntary reimbursement
by the Manager N/A N/A 1.21% .92%(4) N/A N/A 2.21%(4)
Portfolio turnover rate(5) 20.9% 57.8% 104.0% 11.2% 20.9% 57.8% 104.0%
</TABLE>
1. For the period from November 30, 1992 (inception of offering) to September
30, 1993.
2. For the period from August 4, 1992 (commencement of operations) to
September 30, 1992.
3. 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. Total returns
are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended March 31, 1995 were
$5,448,835 and $8,214,825, respectively.
See accompanying Notes to Financial Statements.
11 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Significant Oppenheimer Strategic Short-Term Income Fund (the Fund) is registered under the Investment Company
Act
Accounting Policies of 1940, as amended, as a diversified, open-end management investment company. The Fund's
investment
advisor is Oppenheimer Management Corporation (the Manager). The Fund offers both Class A and Class
B
shares. Class A shares are sold with a front-end sales charge. Class B shares may be subject to a
contingent deferred sales charge. Both classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own distribution and/or service plan, expenses
directly attributable to a particular class and exclusive voting rights with respect to matters
affecting a single class. Class B shares will automatically convert to Class A shares six years after
the date of purchase. The following is a summary of significant accounting policies consistently
followed by the Fund.
--------------------------------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New York Stock Exchange on
each trading day. Listed and unlisted securities for which such information is regularly reported are
valued at the last sale price of the day or, in the absence of sales, at values based on the closing bid
or asked price or the last sale price on the prior trading day. Long-term and short-term "non-money
market" debt securities are valued by a portfolio pricing service approved by the Board of Trustees.
Such securities which cannot be valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm rendering the quotes is
reliable and that the quotes reflect current market value, or under consistently applied procedures
established by the Board of Trustees to determine fair value in good faith. Short-term "money-market
type" debt securities having a remaining maturity of 60 days or less are valued at cost (or last
determined market value) adjusted for amortization to maturity of any premium or discount. Forward
contracts are valued based on the closing prices of the forward currency contract rates in the London
foreign exchange markets on a daily basis as provided by a reliable bank or dealer. Options are valued
based upon the last sale price on the principal exchange on which the option is traded or, in the
absence of any transactions that day, the value is based upon the last sale price on the prior trading
date if it is within the spread between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid or asked price closest to the last reported sale price is used.
--------------------------------------------------------------------------------------------------------
Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices
of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and investment income are translated at
the rates of exchange prevailing on the respective dates of such transactions.
The effect of changes in foreign currency exchange rates on investments is separately identified from
the fluctuations arising from changes in market values of securities held and reported with all other
foreign currency gains and losses in the Fund's results of operations.
--------------------------------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to have legally segregated
in
the Federal Reserve Book Entry System or to have segregated within the custodian's vault, all securities
held as collateral for repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults
and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization
of the value of the collateral by the Fund may be delayed or limited.
--------------------------------------------------------------------------------------------------------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other than those attributable
to
a specific class) and gains and losses are allocated daily to each class of shares based upon the
relative proportion of net assets represented by such class. Operating expenses directly attributable to
a specific class are charged against the operations of that class.
</TABLE>
12 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Significant Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code
Accounting Policies applicable to regulated investment companies and to distribute all of its taxable income, including any
(continued) net realized gain on investments not offset by loss carryovers, to shareholders. Therefore, no federal
income or excise tax provision is required.
--------------------------------------------------------------------------------------------------------
Organization Costs. The Manager advanced $16,395 for organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period from the date operations commenced. In the event
that all or part of the Manager's initial investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the Fund for any unamortized
expenses, in the same ratio as the number of shares redeemed bears to the number of initial shares
outstanding at the time of such redemption.
--------------------------------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately for Class A and Class B
shares from net investment income each day the New York Stock Exchange is open for business and pay
such
dividends monthly. Distributions from net realized gains on investments, if any, will be declared at
least once each year.
--------------------------------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss) and net realized gain
(loss) may differ for financial statement and tax purposes primarily because of paydown gains and losses
and the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax
purposes. The character of the distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which amounts are distributed may differ
from the year that the income or realized gain (loss) was recorded by the Fund. Effective October 1,
1993, the Fund adopted Statement of Position 93-2: Determination, Disclosure, and Financial Statement
Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. As
a
result, the Fund changed the classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in accordance with income
tax regulations.
--------------------------------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are purchased or sold
(trade date). Discount on securities purchased is amortized over the life of the respective securities,
in accordance with federal income tax requirements. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified cost basis, which is the same
basis used for federal income tax purposes.
</TABLE>
13 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
2. Shares of The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class.
Beneficial Interest Transactions in shares of beneficial interest were as follows:
<CAPTION>
Six Months Ended Year Ended
March 31, 1995 September 30, 1994
-------------------------------- -----------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Class A:
Sold 713,060 $ 3,223,200 5,840,432 $27,782,705
Dividends and distributions
reinvested 121,107 546,539 307,224 1,445,537
Redeemed (2,341,623) (10,578,839) (5,266,746) (24,938,443)
----------- ------------- ------------ ------------
Net increase (decrease) (1,507,456) $ (6,809,100) 880,910 $ 4,289,799
=========== =============
============ ===========
Class B:
Sold 498,663 $ 2,244,304 1,435,285 $ 6,786,147
Dividends and distributions
reinvested 35,691 160,907 55,275 258,470
Redeemed (434,363) (1,959,965) (522,740) (2,451,029)
----------- ------------- ------------ ------------
Net increase 99,991 $ 445,246 967,820 $ 4,593,588
=========== =============
============ ===========
- -----------------------------------------------------------------------------------------------------------------------------------
3. Unrealized Gains At March 31, 1995, net unrealized depreciation on investments of $773,360 was composed of
gross
And Losses on appreciation of $273,628, and gross depreciation of $1,046,988.
Investments
--------------------------------------------------------------------------------------------------------
4. Option Activity The Fund may buy and sell put and call options, or write covered call options on portfolio securities
in
order to produce incremental earnings or protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to hedge against adverse
movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and
becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the principal exchange on which the option is
traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss
upon the expiration or closing of the option transaction. When an option is exercised, the proceeds on
sales for a written call option, the purchase cost for a written put option, or the cost of the security
for a purchased put or call option is adjusted by the amount of premium received or paid.
In this report, securities designated to cover outstanding call options are noted in the Statement of
Investments. Shares subject to call, expiration date, exercise price, premium received and market value
are detailed in a footnote to the Statement of Investments. Options written are reported as a liability
in the Statement of Assets and Liabilities. Gains and losses are reported in the Statement of
Operations.
The risk in writing a call option is that the Fund gives up the opportunity for profit if the market
price of the security increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to enter into a closing transaction if a liquid
secondary market does not exist.
</TABLE>
14 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
4. Option Activity Written option activity for the six months ended March 31, 1995 was as follows:
(continued)
<CAPTION>
Call Options Put Options
--------------------------- --------------------------
Number Amount Number Amount
of Options of Premiums of Options of Premiums
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1994 2,537,788 $32,173 -- $ --
Options written 1,594 6,980 68,493 708
Options canceled in closing transactions (2,538,404) (34,353) -- --
----------- -------- -------- -----
Options outstanding at March 31, 1995 978 $ 4,800 68,493 $ 708
=========== ======== ========
=====
- -----------------------------------------------------------------------------------------------------------------------------------
5. Forward Contracts A forward foreign currency exchange contract (forward contract) is a commitment to purchase or
sell a
foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They may also be used
to
tactically shift portfolio currency risk. The Fund generally enters into forward contracts as a hedge
upon the purchase or sale of a security denominated in a foreign currency. In addition, the Fund may
enter into such contracts as a hedge against changes in foreign currency exchange rates on portfolio
positions.
Forward contracts are valued based on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a reliable bank or dealer. The Fund will
realize a gain or loss upon the closing or settlement of the forward transaction.
In this report, securities held in segregated accounts to cover net exposure on outstanding forward
contracts are noted in the Statement of Investments where applicable. Gains and losses on outstanding
contracts (unrealized appreciation or depreciation on forward contracts) are reported in the Statement
of Assets and Liabilities. Realized gains and losses are reported with all other foreign currency gains
and losses in the Fund's Statement of Operations.
Risks include the potential inability of the counterparty to meet the terms of the contract and
unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
At March 31, 1995, the Fund had outstanding forward contracts to purchase and sell foreign currencies
as
follows:
<CAPTION>
Valuation Unrealized
Expiration Number of as of Appreciation
Contracts to Purchase Date Contracts March 31, 1995 (Depreciation)
--------------------- ----------------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Deutsche Mark 4/10/95-5/16/95 270,014 $ 276,852 $ 6,838
New Zealand Dollar 5/4/95 146,600 146,770 170
---------- ---------- -------
416,614 $ 423,622 $ 7,008
========== ==========
=======
Contracts to Sell
-----------------
Australian Dollar 5/4/95 146,600 $ 146,812 $ 212
Spanish Peseta 4/10/95-5/16/95 270,014 277,220 7,206
---------- ---------- -------
416,614 $ 424,032 $ 7,418
========== ==========
=======
</TABLE>
15 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Notes to Financial Statements (Unaudited)(Continued)
- -----------------------------------------------------------------------------------------------------------------------------------
6. Management Fees Management fees paid to the Manager were in accordance with the investment advisory agreement
with the
And Other Fund which provides for an annual fee of .65% on the first $500 million of net assets with a reduction
Transactions With of .03% on each $500 million thereafter to $1.5 billion, and .50% on net assets in excess of $1.5
Affiliates billion. The Manager has agreed to reimburse the Fund if aggregate expenses (with specified exceptions)
exceed the most stringent state regulatory limit on Fund expenses.
For the six months ended March 31, 1995, commissions (sales charge paid by investors) on sales of Class
A shares totaled $46,588, of which $15,870 was retained by Oppenheimer Funds Distributor, Inc. (OFDI),
a
subsidiary of the Manager, as general distributor, and by an affiliated broker/dealer. Sales charges
advanced to broker/dealers by OFDI on sales of the Fund's Class B shares totaled $30,878, of which
$9,637 was paid to an affiliated broker/dealer. During the six months ended March 31, 1995, OFDI
received contingent deferred sales charges of $8,847 upon redemption of Class B shares, as reimbursement
for sales commissions advanced by OFDI at the time of sales of such shares.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the transfer and shareholder
servicing agent for the Fund and for other registered investment companies. OSS's total costs of
providing such services are allocated ratably to these companies.
Under separate approved plans, each class may expend up to .25% of its net assets annually to reimburse
OFDI for costs incurred in connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and other institutions. In
addition, Class B shares are subject to an asset-based sales charge of .75% of net assets annually, to
reimburse OFDI for sales commissions paid from its own resources at the time of sale and associated
financing costs. In the event of termination or discontinuance of the Class B plan, the Board of
Trustees may allow the Fund to continue payment of the asset-based sales charge to OFDI for distribution
expenses incurred on class B shares sold prior to termination or discontinuance of the plan. During the
six months ended March 31, 1995, OFDI paid $5,737 and $202, respectively, to an affiliated broker/dealer
as reimbursement for Class A and Class B personal service and maintenance expenses and retained $35,200
as reimbursement for Class B sales commissions and service fee advances, as well as financing costs.
</TABLE>
16 Oppenheimer Strategic Short-Term Income Fund
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Short-Term Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
Officers and Trustees
James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee and President
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
Andrew J. Donohue, Vice President
David P. Negri, Vice President
Arthur P. Steinmetz, Vice President
George C. Bowen, Vice President, Secretary and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
Investment Advisor Oppenheimer Management Corporation
Distributor Oppenheimer Funds Distributor, Inc.
Transfer and Oppenheimer Shareholder Services
Shareholder
Servicing Agent
Custodian of The Bank of New York
Portfolio Securities
Independent Auditors Deloitte & Touche LLP
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been taken from the records of the Fund without
examination by the independent auditors.
This is a copy of a report to shareholders of Oppenheimer Strategic Short-Term Income Fund. This report
must be preceded or accompanied by a Prospectus of Oppenheimer Strategic Short-Term Income Fund.
For
material information concerning the Fund, see the Prospectus.
</TABLE>
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
Reference is made to Article VIII of Registrant's Agreement and
Declaration of Trust filed as Exhibit 24(b)(1) to Registrant's
Registration Statement and incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 16. Exhibits
(1) Amended and Restated Declaration of Trust dated January 16,
1995: Filed with Registrant's Post-Effective Amendment No. 20, 2/1/95.
(2) Amended By-Laws as of August, 1990: Previously filed with
Post-Effective Amendment No. 8 to Registrant's Registration Statement,
2/1/91, and refiled with Post-Effective Amendment No. 20, filed 2/1/95.
(3) Not applicable.
(4) Agreement and Plan of Reorganization: See Annex A to Part A
of this Registration Statement.
(5) (i) Class A Specimen Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 20, 2/1/95, and incorporated
herein by reference.
(ii) Class B Specimen Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 20, 2/1/95, and incorporated
herein by reference.
(iii) Class C Specimen Share Certificate: Filed with
Registrant's Post-Effective Amendment No. 20, 2/1/95, and incorporated
herein by reference.
(6) Investment Advisory Agreement dated October 22, 1990: Filed
with Post-Effective Amendment No. 7 to Registrant's Registration
Statement, 12/3/90, refiled with Registrant's Post-Effective Amendment No.
19, 12/2/94, pursuant to Item 102 of Regulation S-T, and incorporated
herein by reference.
(7) (i) General Distributor's Agreement dated October 13, 1992,
with Oppenheimer Fund Management, Inc.: Filed with Post-Effective
Amendment No. 12 of the Registrant's Registration Statement, 12/2/92, and
refiled with Registrant's Post-Effective Amendment No. 19, 12/2/94,
pursuant to Item 102 of Regulation S-T, and incorporated herein by
reference.
(ii) Form of Dealer Agreement of Oppenheimer Funds
Distributor, Inc.: Filed with Post-Effective Amendment No. 14 Oppenheimer
Main Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(iii) Form of Oppenheimer Funds Distributor, Inc. Broker
Agreement: Filed with Post-Effective Amendment No. 14 Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc. Agency
Agreement: Filed with Post-Effective Amendment No. 14 Oppenheimer Main
Street Funds, Inc. (Reg. No. 33-17850), 9/30/94, and incorporated herein
by reference.
(v) Broker Agreement between Oppenheimer Fund Management,
Inc. and Newbridge Securities, dated 10/1/86: Previously filed with Post-
Effective Amendment No. 25 of Oppenheimer Growth Fund (Reg. No. 2-45272),
11/1/86, refiled with Post-Effective Amendment No. 47 of Oppenheimer
Growth Fund (Reg. No. 2-45272), 10/21/94, pursuant to Item 102 of
Regulation S-T, and incorporated herein by reference.
(8) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant - 6/7/90): Previously filed with Post-Effective
Amendment No. 97 of Oppenheimer Fund (Reg. No. 2-14586), 8/30/90, refiled
with Post-Effective Amendment No. 45 of Oppenheimer Growth Fund (Reg. No.
2-45272), 8/22/94, pursuant to Item 102 of Regulation S-T, and
incorporated herein by reference.
(9) Custodian Agreement dated 6/1/90 with Citibank, N.A.: Filed
with Registrant's Post-Effective Amendment No. 8, 2/1/91, refiled with
Registrant's Post-Effective Amendment No. 19, 12/2/94 pursuant to Item 102
of Regulation S-T, and incorporated herein by reference.
(10) (i) Service Plan and Agreement for Class A shares dated
6/22/93 pursuant to Rule 12b-1: Previously filed with Registrant's Post-
Effective Amendment No. 16, 1/27/94, and incorporated herein by reference.
(ii) Distribution and Service Plan and Agreement for Class B
shares filed with Proxy Statement of Registrant on 5/__/__, pursuant to
Rule 12b-1: Previously filed with Registrant's Post-Effective Amendment
No. 19, 12/2/94, and incorporated herein by reference.
(iii) Distribution and Service Plan and Agreement for Class C
shares dated 2/1/95: Previously filed with Registrant's Post-Effective
Amendment No. 19, 12/2/94, and incorporated herein by reference.
(11) Opinion and Consent of Counsel dated February 26, 1986:
Previously filed with Registrant's Registration Statement, and refiled
herewith pursuant to Item 102 of Regulation S-T.
(12) Tax Opinion Relating to the Reorganization: Draft Opinion
filed herewith.
(13) Not applicable.
(14) Consent of Deloitte & Touche LLP: Filed herewith.
(15) Not applicable.
(16) Not applicable
(17) Declaration of Registrant under Rule 24f-2: Filed herewith.
(18) Powers of Attorney (including certified Board Resolutions):
Filed with Registrant's Post-Effective Amendment No. 15,
12/3/93, and incorporated herein by reference.
Item 17. Undertakings
(1) Not applicable.
(2) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver and State of Colorado on
the 13th day of June, 1995.
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
By: /s/ James C. Swain*
----------------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities on the dates indicated:
Signatures Title Date
/s/ James C. Swain* Chairman of the
- ------------------ Board of Trustees June 13, 1995
James C. Swain
/s/ Jon S. Fossel* Chief Executive
- -------------------- Officer and June 13, 1995
Jon S. Fossel Trustee
/s/ George C. Bowen* Chief Financial
- ------------------- and Accounting June 13, 1995
George C. Bowen Officer
/s/ Robert G. Avis* Trustee June 13, 1995
- ------------------
Robert G. Avis
/s/ William A. Baker* Trustee June 13, 1995
- --------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee June 13, 1995
- -----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee June 13, 1995
- -------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee June 13, 1995
- ------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee June 13, 1995
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee June 13, 1995
- ----------------
Ned M. Steel
*By: /s/ Robert G. Zack
- --------------------------------
Robert G. Zack, Attorney-in-Fact
<PAGE>
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
EXHIBIT INDEX
Exhibit Description
- ------- -----------
16(12) Tax Opinion in Draft Form
16(14) Independent Auditors' Consent
16(17) Declaration of the Registrant under Rule 24f-2
Independent Auditors' Consent
We consent to the incorporation by reference in this Post-Effective
Amendment No. 21 to Registration Statement No. 33-02769 of Oppenheimer
Limited-Term Government Fund on Form N-14 of our report dated October 21,
1994, appearing in the Annual Report of Oppenheimer Strategic Short-Term
Income Fund for the year ended September 30, 1994 and our report dated
October 21, 1994, appearing in the Annual Report of Oppenheimer Limited-
Term Government Fund for the year ended September 30, 1994 and to the
references to us under the headings "Tax Consequences of the
Reorganization" and "Tax Aspects of the Reorganization" appearing in the
Prospectus, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
- --------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
June 13, 1995
MERGE/295CON
DRAFT
[Letterhead of Deloitte & Touche LLP]
______________, 1995
Oppenheimer Limited-Term Government Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Oppenheimer Strategic Short-Term Income Fund
Two World Trade Center 34th floor
New York, New York 10048-0203
Dear Sirs:
We have reviewed the Agreement and Plan of Reorganization between
Oppenheimer Strategic Short-Term Income Fund (the "Fund") and Oppenheimer
Limited-Term Government Fund ("Limited-Term Government Fund") which is
attached as Annex A to the Proxy Statement and Prospectus of the Fund
included as part of Oppenheimer Limited-Term Government Fund's
Registration Statement on Form N-14 filed under the Securities Act of
1933, as amended, with the Securities and Exchange Commission on June 15,
1995 (the "Agreement"), concerning the acquisition by Limited-Term
Government Fund of substantially all of the assets of the Fund solely for
voting Class A and Class B shares of beneficial interest in Limited-Term
Government Fund, followed by the distribution of Limited-Term Government
Fund Class A and Class B shares to the shareholders of the Fund in
complete liquidation of the Fund.
In connection with the rendering of this opinion, we have reviewed the
Agreement, the most recent audited financial statements and related
documents and other materials as we deemed relevant to the rendering of
this opinion. Based upon all of the foregoing and the representations
made by the Fund and Limited-Term Government Fund, attached hereto, in our
opinion, the federal tax consequences of the transaction will be as
follows:
1. The transactions contemplated by the Agreement will qualify as a tax-
free "reorganization" within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
2. The Fund and Limited-Term Government Fund will each qualify as a
"party to a reorganization" within the meaning of Section 368(b)(2)
of the Code.
3. No gain or loss will be recognized by the shareholders of the Fund
upon the distribution of Class A and Class B shares of beneficial
interest in Limited-Term Government Fund to the shareholders of the
Fund, pursuant to Section 354 of the Code.
4. Under Section 361(a) of the Code no gain or loss will be recognized
by the Fund by reason of the transfer of its assets solely in
exchange for Class A and Class B shares of Limited-Term Government
Fund.
5. Under Section 1032 of the Code no gain or loss will be recognized by
Limited-Term Government Fund by reason of the transfer of the Fund's
assets solely in exchange for Class A and Class B shares of Limited-
Term Government Fund.
6. The stockholders of the Fund will have the same tax basis and holding
period for the Class A and Class B shares of beneficial interest in
Limited-Term Government Fund that they receive as they had for the
stock of the Fund that they previously held, pursuant to Sections
358(a) and 1223(1), respectively, of the Code.
7. The securities transferred by the Fund to Limited-Term Government
Fund will have the same tax basis and holding period in the hands of
Limited-Term Government Fund as they had for the Fund, pursuant to
Sections 362(b) and 1223(1), respectively, of the Code.
Very truly yours
Rule 24f-2 Notice for Oppenheimer Limited-Term Government Fund
3410 S. Galena Street, Denver, Colorado 80231
(Registration No. 33-02769, File No. 811-4563)
NOTICE IS HEREBY GIVEN that Oppenheimer Limited-Term Government Fund
having previously filed in its registration statement a declaration that
an indefinite number of its shares of beneficial interest were being
registered pursuant to Rule 24f-2 of the Investment Company Act of 1940,
now elects to continue such indefinite registration.
(i) This Notice is being filed for the fiscal year ended September
30, 1994.
(ii) 11,803,633 Class A shares which had been registered other than
pursuant to this Rule remained unsold at the beginning of the
above fiscal year.
(iii) No shares were registered other than pursuant to this Rule
during the above fiscal year.
(iv) The number of shares sold during the above fiscal year was as
follows(1):
Class A 11,073,786
Class B 3,707,813
(v) Shares sold during the above fiscal year in reliance upon
registration pursuant to this Rule were as follows:
Class A 6,191,329
Class B 3,707,813
Pursuant to the requirements of the Investment Company Act of 1940,
the undersigned registrant has caused this Notice to be signed on its
behalf this 28th day of November, 1994.
Oppenheimer Limited-Term Government Fund
By:_____________________________________
Andrew J. Donohue, Vice President
_________________
(1)The calculation of the aggregate sales price is made pursuant to Rule
24f-2 of the Investment Company Act of 1940, as follows:
Value of
Value of Shares Filing
Shares Sold Redeemed Net Fee
Class A $118,386,912 $(66,037,908) $52,349,004 $ 0*
Class B $ 39,327,532 $( 5,315,576) $34,011,956 $11,728
*Using 4,882,457 Class A shares previously registered valued at
$52,349,004, no filing fee is payable as to Class A shares. Class A
shares previously registered remaining in inventory at 9/30/94 total
6,921,176.
<PAGE>
Myer, Swanson & Adams, P.C.
Attorneys At Law
The Colorado State Bank Building
Rendle Myer 1600 Broadway - Suite 1850 of counsel
Allan B. Adams Denver, Colorado 80202-4918 Robert Swanson
Robert K. Swanson Telephone (303) 866-9800 ----
Thomas J. Wolf* Facsimile (303) 866-9818 Fredd E. Neef
*Board Certified Civil (1910-1986)
Trial Advocate by the
National Board of Trial
Advocacy
November 28, 1994
Oppenheimer Limited-Term Government Fund
3410 South Galena Street
Denver, Colorado 80231
Gentlemen:
In connection with the public offering of the no par value Class A and
Class B shares of the Oppenheimer Limited-Term Government Fund, a business
trust organized under the laws of the Commonwealth of Massachusetts (the
"Trust"), (formerly known as Oppenheimer Government Secutities Fund), as
counsel for the Trust, we have examined such records and documents and
have made such further investigation and examination as we deem necessary
for the purposes of this opinion.
We are advised that during the fiscal period ended September 30, 1994,
6,191,329 Class A shares of beneficial interest and 3,707,813 Class B
shares of beneficial interest of the Trust were sold in reliance on the
registration of an indefinite number of shares pursuant to Rule 24f-2 of
the Investment Company Act of 1940.
It is our opinion that the said shares of beneficial interest of each
class of the Trust sold in reliance on Rule 24f-2 of the Investment
Company Act of 1940 are legally issued and, subject to the matters
mentioned in the next paragraph, fully paid and nonassessable by the
Trust.
Under Massachusetts law, shareholders of the Trust may, under certain
circumstances, be held personally liable as partners for the obligations
of the Trust. The Declaration of Trust does, however, contain an express
disclaimer of shareholder liability for acts or obligations of the Trust
and requires that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of
the Trust property of any shareholder held personally liable for the
obligations of the Trust. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon.
Sincerely,
MYER, SWANSON & ADAMS, P.C.
By /s/ Allan B. Adams
----------------------------
Allan B. Adams
SEC\855
