As filed with the Securities and Exchange
Commission on February 28, 1996.
Registration No. 811-5670
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
AMENDMENT NO. 9 / X /
OPPENHEIMER MULTI-GOVERNMENT TRUST
(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
(Address of Principal Executive Offices)
212-323-0200
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
(Name and Address of Agent for Service)
<PAGE>
FORM N-2
OPPENHEIMER MULTI-GOVERNMENT TRUST
Cross Reference Sheet
Part A of
Form N-2
Item No. Prospectus Heading
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1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 General Description of the Registrant
9 Management
10 Capital Stock, Long-Term Debt, and Other Securities
11 *
12 *
13 See Item 15 of the Statement of Additional Information
Part B of
Form N-2
Item No. Heading In Statement of Additional Information
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14 Cover Page
15 Table of Contents
16 *
17 See Item 8 of the Prospectus
18 Management
19 Control Persons and Principal Holders of Securities
20 See Item 9 of the Prospectus
21 Brokerage Allocation and Other Practices
22 See Item 10 of the Prospectus
23 Financial Statements
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* Not applicable or negative answer.
<PAGE>
OPPENHEIMER MULTI-GOVERNMENT TRUST
PART A
INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover.
Inapplicable.
Item 2. Inside Front and Outside Back Cover Page.
Inapplicable.
Item 3. Fee Table and Synopsis.
Inapplicable.
Item 4. Financial Highlights.
Inapplicable.
Item 5. Plan of Distribution.
Inapplicable.
Item 6. Selling Shareholders.
Inapplicable.
Item 7. Use of Proceeds.
Inapplicable.
Item 8. General Description of the Registrant.
1. Organization. Oppenheimer Multi-Government Trust (the "Fund" or
"Registrant") is a closed-end diversified management investment company
organized as a Massachusetts business trust on October 5, 1988.
2, 3 and 4. Objectives. The Fund's primary investment objective is
high current income consistent with preservation of capital. Its
secondary objective is capital appreciation, which it may pursue by
seeking to take advantage of changes in currency exchange and interest
rates and by investing in convertible securities. The Fund's investment
policies and practices are not "fundamental" policies (as defined below)
unless a particular policy is identified as fundamental. The Fund's Board
of Trustees may change non-fundamental investment policies without
shareholder approval. The Fund's investment objectives are fundamental
policies.
Investment Policies and Strategies. In seeking its objectives, as a
matter of fundamental policy, the Fund will invest at least 65% of its
total assets in debt instruments issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government
Securities") or by foreign governments, or their political subdivisions,
agencies or instrumentalities, including supranational entities ("Foreign
Government Securities"). As a matter of non-fundamental policy, the Fund
will invest at least 30% of its total assets in U.S. Government Securities
and will not make any purchase that will cause 25% or more of its total
assets to be invested in Foreign Government Securities and foreign
corporate securities of any one country (other than the United States).
In addition to investment in U.S. Government Securities and Foreign
Government Securities, the Fund may invest in fixed-income securities of
domestic and foreign corporations, including short-term money market
instruments. Other securities and investments which may be held by the
Fund include put and call options, common stock acquired upon the exercise
of options or conversion of convertible securities, and futures contracts
and related options. The Fund is designed for long-term investment and
investors should not consider it as a trading vehicle although the Fund
itself may at times have a relatively high turnover rate.
At its meeting on February 22, 1996, the Board approved and
recommended the following investment policy changes that were proposed by
the Adviser: (1) subject to shareholder approval at a meeting scheduled
for April, 1996, removing the current fundamental policy that the Fund
shall invest at least 65% of its total assets in U.S. or foreign
government securities, (2) adopting a non-fundamental policy that the Fund
shall invest at least 65% of its total assets in bonds (defined, for
purposes of this non-fundamental investment policy, to be debt
securities), (3) removing the non-fundamental investment policy that the
Fund shall invest at least 30% of its total assets in U.S. Government
securities, and (4) adopting a non-fundamental policy that the Fund shall
invest at least 50% of its net assets in foreign securities. All such
investment policy changes would be effective concurrently with shareholder
approval of item (1), above, and this filing would be amended accordingly.
The Fund's investment adviser, OppenheimerFunds, Inc. (the
"Adviser"), will adjust the duration of the Fund's investment in debt
securities from time to time, depending on its assessment of relative
yields of securities of different maturities and its expectations of
future changes in interest rates. The Fund measures its portfolio
duration on a "dollar-weighted" basis. "Effective portfolio duration"
refers to the expected percentage change in the value of a bond resulting
from a change in general interest rates (measured by each 1% change in the
rates on U.S. Treasury securities). For example, if a bond has an
effective duration of three years, a 1% increase in general interest rates
would be expected to cause the bond to decline about 3%. It is a measure
of portfolio volatility.
U.S. Government Securities are considered among the most creditworthy
of fixed-income investments. Because of this, the yields available from
U.S. Government Securities are generally lower than the yields available
from corporate debt securities. Nevertheless, the values of U.S.
Government Securities (like those of fixed-income securities generally)
will change as interest rates fluctuate. Despite guarantees as to the
timely payment of principal and interest on U.S. Government Securities and
Foreign Government Securities, such guarantees do not extend to the value
or yield of such securities nor do they extend to the value of shares of
the Fund.
- Special Risks - High Yield Securities. The debt instruments in
which the Fund may invest may be unrated or, if rated, in any rating
category, provided, that, investments in securities rated lower than
investment grade ("Baa" by Moody's Investors Service, Inc. ("Moody's") or
"BBB" by Standard & Poor's Corporation ("Standard & Poor's")) may not
exceed 50% of the Fund's total assets, with no more than 30% of the Fund's
total assets being invested in non-investment grade: (1) Foreign
Government Securities, (2) securities issued by foreign corporations or
(3) securities denominated in non-U.S. currencies. Notwithstanding the
foregoing, the Fund may not invest more than 5% of its total assets,
measured at the time of purchase, in securities which are rated "C" or "D"
by either Moody's or Standard & Poor's. Those securities may be
considered highly speculative and may be in default. The Appendix to this
Prospectus describes these rating categories.
The primary advantage of lower-rated, high yield securities is their
relatively higher investment return. High yield bonds offer a higher
yield to maturity than bonds with higher ratings, as compensation for
holding an obligation that may be subject to greater risk. During periods
of falling interest rates, the values of outstanding fixed-income
securities generally rise. Conversely, during periods of rising interest
rates, the values of such securities generally decline. The magnitude of
these fluctuations will generally be greater for securities with longer
maturities. Those changes will affect the values of the Fund's portfolio
securities, and therefore its net asset value per share. Further, because
of their high coupon rates, high yield securities are generally less price
sensitive to changes in interest rates than U.S. Treasury Securities.
However, high yield securities, whether rated or unrated, may be subject
to greater market fluctuations and risks of loss of income and principal
and have less liquidity than lower yielding, higher-rated fixed-income
securities.
Some of the principal risks of high yield securities include: (i)
limited liquidity and secondary market support, (ii) substantial market
price volatility resulting from changes in prevailing interest rates,
(iii) subordination of the holder's claims to the prior claims of banks
and other senior lenders in bankruptcy proceedings, (iv) the operation of
mandatory sinking fund or call/redemption provisions during periods of
declining interest rates, whereby the holder might receive redemption
proceeds at times when only lower-yielding portfolio securities are
available for investment, (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. Some high yield bonds pay interest
in kind rather than in cash.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously
decided to sell them. A decline is also likely in the high yield bond
market during an economic downturn. An economic downturn or an increase
in interest rates could severely disrupt the market for high yield
securities and adversely affect the value of outstanding securities and
the ability of the issuers to repay principal and interest.
- Interest Rate Risks. In addition to credit risks, described below,
debt securities are subject to changes in value due to changes in
prevailing interest rates. When prevailing interest rates fall, the
values of outstanding debt securities generally rise. Conversely, when
interest rates rise, the values of outstanding debt securities generally
decline. The magnitude of these fluctuations will usually be greater when
the average maturity of the portfolio securities is longer.
- Credit Risks. Debt securities are also subject to credit risks.
Credit risk relates to the ability of the issuer of a debt security to
make interest or principal payments on the security as they become due.
Generally, higher-yielding, lower-rated bonds (which are some of the type
of bonds the Fund seeks to invest in) are subject to greater credit risk
than higher-rated bonds. Securities issued or guaranteed by the U.S.
Government are subject to little, if any, credit risk if they are backed
by the "full faith and credit of the U.S. Government," which in general
terms means that the U.S. Treasury stands behind the obligation to pay
interest and principal. While the Manager may rely to some extent on
credit ratings by nationally recognized rating agencies, including, but
not limited to Standard & Poor's or Moody's, in evaluating the credit risk
of securities selected for the Fund's portfolio, it may also use its own
research and analysis or that provided by other sources. However, many
factors affect an issuer's ability to make timely payments, and there can
be no assurance that the credit risks of a particular security will not
change over time or that the credit risk will be correctly analyzed by the
Manager, by nationally recognized rating agencies, or by other sources.
- Foreign Securities. The Fund may invest in equity and debt
securities (which may either be denominated in U.S. dollars or in 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 issued by U.S.
corporations denominated in non-U.S. currencies. All such securities are
referred to as "foreign securities."
Investing in foreign securities offers potential benefits not
available from investing 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 stock
markets that do not move in a manner parallel to U.S. markets. If the
Fund's portfolio securities are held abroad, the countries in which they
may be held and the sub-custodians or depositories holding them must be
approved by the Corporation's Board of Directors to the extent that
approval is required under applicable rules of the Securities and Exchange
Commission.
- Risks of Foreign Investing. Investments in foreign securities
present special 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 and obtaining
judgments in foreign courts; 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.
- Special Risks of Emerging Market Countries. Investments in
emerging market countries may involve further risks in addition to those
identified above for investments in foreign securities. Securities issued
by emerging market countries and by companies located in those countries
may be subject to extended settlement periods, whereby the Fund might not
receive principal and/or income on a timely basis and its net asset value
could be affected. There may be a lack of liquidity for emerging market
securities; interest rates and foreign currency exchange rates may be more
volatile; sovereign limitations on foreign investments may be more likely
to be imposed; there may be significant balance of payment deficits; and
their economies and markets may respond in a more volatile manner to
economic changes than those of developed countries.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S.
dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution. In addition,
although a portion of the Fund's investment income may be received or
realized in foreign currencies, the Fund will be required to compute and
distribute its income in U.S. dollars, and absorb the cost of currency
fluctuations. The Fund may engage in foreign currency exchange
transactions for hedging purposes to protect against changes in future
exchange rates.
- U.S. Government Securities.
U.S. Government Securities are debt obligations issued or guaranteed
by the United States Government or its agencies or instrumentalities.
Obligations of U.S. Government agencies or instrumentalities 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. 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 two 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 that are supported by any of the
following: (a) the full faith and credit of the U.S. Government, such as
Government National Mortgage Association ("Ginnie Mae") modified pass-
through certificates as described below, (b) the right of the issuer to
borrow an amount limited to a specific line of credit from the U.S.
Government such as bonds issued by Federal National Mortgage Association
("Fannie Mae"), (c) the discretionary authority of the U.S. Government to
purchase the obligations of the agency or instrumentality, or (d) the
credit of the instrumentality, such as obligations of Federal Home Loan
Mortgage Corporation ("Freddie Mac"). Agencies and instrumentalities the
securities of which are supported by the discretionary authority of the
U.S. Government to purchase such securities and which the Fund may
purchase under (c) above include: Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Freddie Mac and Fannie Mae.
- Zero Coupon Treasury Securities. "Zero coupon" Treasury
securities are: (i) U.S. Treasury notes or bonds which have been stripped
of their unmatured interest coupons and receipts; or (ii) certificates
representing interests in such stripped debt obligations or coupons. The
Fund will not invest in certificates which are issued by private issuers.
Because a zero coupon security pays no interest to its holder during its
life, the Fund will invest in such securities for capital appreciation
purposes. Such securities usually trade at a deep discount from their
face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of
comparable maturities which make current distribution of interest.
Current Federal tax law requires that a holder of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the holder received no interest payment in
cash on the security during the year. The Fund will not invest more than
10% of its total assets at the time of purchase in zero coupon Treasury
securities.
- Mortgage-Backed Securities and CMOs. The Fund's investment in
U.S. Government Securities may include securities which represent
participation interests in pools of residential mortgage loans which are
guaranteed by agencies or instrumentalities of the U.S. Government. 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 which are, in effect, a "pass-through"
of the monthly interest and principal payments (including any prepayment
made by the individual borrowers on the pooled mortgage loans). Principal
prepayments result from the sale of the underlying property or the
refinancing or foreclosure of underlying mortgages or other factors.
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.
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 by a private issuer), or that are collateralized by
a portfolio of mortgages or mortgage-related securities guaranteed by such
an agency or instrumentality (or by a private issuer). 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 may have different maturities and other different characteristics.
For example, 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 investment policy limiting investments in illiquid securities
to 10% of the Fund's assets.
The Fund may also enter into "forward roll" transactions with banks
or other buyers that provide for future delivery of the mortgage-backed
securities in which the Fund may invest. The Fund would be required to
deposit cash, U.S. Government securities or other high-grade debt
securities to its custodian bank in an amount equal to its purchase
payment obligation under the roll.
- GNMA Certificates. Certificates of the Government National
Mortgage Association ("GNMA Certificates") are mortgage-backed securities
which evidence an undivided interest in a pool or pools of mortgages. 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 payment.
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. Prepayment 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.
- 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 two types of
mortgage pass-through securities ("FHLMC Certificates"): mortgage
participation certificates ("PCs") and guaranteed mortgage certificates
("GMCs"). PCs resemble GNMA Certificates in that each PC represents a pro
rata share of all interest and principal payments made and owned on the
underlying pool. FHMLC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages.
However, these instruments pay interest semi-annually and return principal
once a year in guaranteed minimum payments. The expected average life of
these securities is approximately ten years. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
- 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 Certificates 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.
- Other Securities.
- Corporate Securities
The corporate fixed-income securities in which the Fund may invest
include securities issued by domestic and foreign corporations and issuers
and may be denominated in U.S. dollars or in non-U.S. currencies. These
investments may include non-convertible debt obligations such as bonds,
debentures and notes. The corporate fixed-income investments of the Fund
may also include preferred and convertible preferred stocks of domestic
corporations and issuers. Investment in foreign securities involves
considerations and risks not associated with investment in securities of
U.S. issuers.
- Preferred Stocks. Preferred stocks, like common stocks, represent
ownership interests in a corporation. However, unlike common stock,
preferred stock offers a stated dividend rate payable from a corporation's
earnings. Dividends on some preferred stocks may be "cumulative" if
stated dividends from prior periods have not been 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 are generally subordinate to rights associated with a corporation's
debt securities.
- Convertible Securities. Convertible fixed-income securities may
include convertible debt obligations and preferred stocks, and can provide
a potential for current income through interest and dividend payments and
at the same time provide an opportunity for capital appreciation by virtue
of their convertibility into common stock.
Convertible securities rank senior to common stock in a corporation's
capital structure and, therefore, may entail less risk than the
corporation's common stock. The value of a convertible security is a
function of its "investment value" (its value without considering its
conversion privilege) and its "conversion value" (the security's worth if
it were to be exchanged pursuant to its conversion privilege for the
underlying security at the market value of the underlying security).
Convertible securities generally offer lower interest or dividend yields
than non-convertible debt securities of similar quality.
To the extent that a convertible security's investment value is
greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely to
increase when interest rates fall and decrease when interest rates rise
as with other fixed-income securities (the credit standing of the issuer
and other factors may also have an effect on the convertible security's
value). If the conversion value exceeds the investment value, the price
of the convertible security will rise above its investment value and, in
addition, will sell at some premium over its conversion value, which
represents the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. At such times the price of
the convertible security will tend to fluctuate directly with the price
of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their investment
values and/or their conversion values in keeping with the Fund's
objectives.
- Money Market Instruments
The Fund may invest in U.S. dollar-denominated debt obligations
maturing in one year or less to maintain liquidity deemed necessary by the
Adviser for investment purposes. In addition, the Fund may invest in such
instruments for defensive purposes, to minimize the impact of fluctuating
interest rates on the net asset value of the Fund during periods of
adverse market conditions. These obligations include:
(1) U.S. Government Securities: Debt instruments of the type
described under "U.S. Government Securities" above. Instruments in money
market instruments will be viewed by the Fund as U.S. Government
Securities to the extent that the securities or, in the case of repurchase
agreements, the securities collateralizing the agreements, are U.S.
Government Securities.
(2) Bank Obligations and Instruments Secured Thereby: The bank
obligations the Fund may invest in 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) 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, time deposits that are subject to
withdrawal penalties, other than those maturing in seven days or less, are
subject to the limitation on investments by the Fund 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.
(3) Commercial Paper: Obligations rated "A-1", "A-2" or "A-3" by
Standard & Poor's or Prime-1, Prime-2 or Prime-3 by Moody's or if not
rated, issued by a corporation or a foreign government, subdivision,
agency or instrumentality having an existing debt security rated "A" or
better by Standard & Poor's or Moody's.
(4) Corporate Obligations: Corporate debt obligations (including
master demand notes but not including commercial paper) if they are issued
by domestic corporations and are rated "A" or better by Standard & Poor's
or Moody's or unrated securities which are of comparable quality in the
opinion of the Adviser.
(5) Other Obligations: Obligations other than those listed in (1)
through (4) above, but not satisfying the standards set forth therein, if
they are: (i) subject to repurchase agreements; or (ii) 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, subdivision, agency or
instrumentality having an existing debt security rated "A" or better by
Standard & Poor's or Moody's.
(6) Board Approved Instruments: Other short-term investments of a
type which the Board determines presents minimal credit risks and which
are of "high quality" as determined by any major rating service or, in the
case of an instrument that is not rated, of comparable qualify as
determined by the Board. Appendix B to the Prospectus dated November 23,
1988 contains a general description of securities ratings.
Bankers' 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.
Bank time deposits may be non-negotiable until expiration and may
impose penalties for early withdrawal. Master demand notes are corporate
obligations which 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 repay 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, and there is no secondary market for them, although
they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The Fund has no
limitations on the type of issuer from whom these notes will be purchased;
however, in connection with such purchase and on an ongoing basis, subject
to policies established by the Board of Trustees, the Adviser 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 15% investment limitation on securities that are not readily
marketable as set forth below.
- Asset-Backed Securities
The Fund may invest in securities that represent undivided fractional
interests in pools of consumer loans, similar in structure to the
mortgage-backed securities in which the Fund may invest described above.
Payments of principal and interest are passed through to holders of asset-
backed securities and 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
obligations. The degree of credit enhancement varies and generally
applies, until exhausted, to only a fraction of the asset-backed
security's par value. If the credit enhancement of any 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 then experience losses or delays in receiving payment
and a decrease in the value of the asset-backed security.
The value of asset-backed securities 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 is exhausted.
The risks of investing in asset-backed securities are ultimately dependent
upon payment of the underlying consumer loans by the individuals, and 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 that 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.
- Participation Interests
The Fund may acquire participation interests in loans that are made
to U.S. or foreign companies or to foreign governments (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 tha 5% of the Fund's net assets can be
invested in participation interest of the same borrower. 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.
Other Investment Techniques and Strategies. In pursuing its investment
objectives, the Fund may engage in the following special investment
techniques.
- Direct Placements and Other Illiquid Securities. The Fund may
invest up to 10% of its assets in illiquid securities, which are those
securities that are not readily marketable. These include securities
purchased in direct placements and securities subject to statutory or
contractual restrictions and delays on resale (restricted securities).
This policy does not limit the acquisition of restricted securities
eligible for resale pursuant to Rule 144A under the Securities Act of 1933
that are determined to be liquid by the Board of Trustees or the Adviser
under Board-approved guidelines. Such guidelines take into account
trading activity for such securities and the availability of reliable
pricing information, among other factors. If there is a lack of trading
interest in particular Rule 144A securities, the Fund's holdings of those
securities may be illiquid. Restricted securities may generally be resold
only in privately-negotiated transactions with a limited number of
purchasers or in a public offering registered under the Securities Act of
1933 and are, therefore, unlike securities which are traded in the open
market and can be expected to be sold immediately if the market demand is
adequate. If restricted securities are substantially comparable to
registered securities of the same issuer which are readily marketable, the
Fund may not purchase them unless they are offered at a discount from the
market price of the registered securities. No restricted securities will
be purchased unless the issuer has agreed to register the securities at
its expense within a specific time period. Adverse conditions in the
public securities market at certain times may preclude a public offering
of an issuer's unregistered securities. There may be undesirable delays
in selling restricted securities at prices representing fair value.
Other illiquid securities in which the Fund may invest include bank
time deposits, master demand notes and certain puts and calls which are
traded in the over-the-counter markets.
- Repurchase Agreements. In order to increase income, any of the
securities permissible for purchase may be acquired by the Fund subject
to repurchase agreements with commercial banks with total assets in excess
of $1 billion or securities dealers with a net worth in excess of $50
million. In a repurchase transaction, at the time the Fund acquires a
security, it simultaneously resells it to the vendor and must deliver that
security to the vendor on a specific future date. The repurchase 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. The Fund will not enter into a
repurchase transaction of more than seven days. Repurchase agreements are
considered "loans" under the Investment Company Act of 1940 (the "1940
Act"), collateralized by the underlying security. The Fund's repurchase
agreements will require that at all times while the repurchase agreement
is in effect, the collateral's value must equal or exceed the repurchase
price to collateralize the loan fully. The Adviser will monitor the
collateral daily and, in the event its value declines below the repurchase
price, will immediately demand additional collateral be deposited. If
such demand is not met within one day, the existing collateral will be
sold. Additionally, the Adviser will consider the creditworthiness of the
vendor. If the vendor fails to pay the agreed-upon resale price on the
delivery date, the Fund's risks in such event may include any decline in
value of the collateral to an amount which is less than 100% of the
repurchase price, any costs of disposing of such collateral, and loss from
any delay in foreclosing on the collateral. There is no limit on the
amount of the Fund's assets that may be subject to repurchase agreements.
- When-Issued and Delayed Delivery Transactions. The Fund may
purchase mortgage-backed securities, municipal bonds and other debt
securities on a "when-issued" basis, and may purchase or sell such
securities on a "delayed delivery" basis. "When-issued" or "delayed
delivery" refers to securities whose terms and indenture are available and
for which a market exists, but which are not available for immediate
delivery. Although the Fund will enter into such transactions for the
purpose of acquiring securities for its portfolio for delivery pursuant
to option contracts it has entered into, the Fund may dispose of a
commitment prior to settlement. The Fund does not intend to make such
purchases for speculative purposes. 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. During the period between
commitment by the Fund and settlement (generally between two months and
120 days), no payment is made for the securities purchased, and no
interest accrues to the Fund from the transaction. Such securities are
subject to market fluctuations; the value at delivery may be less than the
purchase price. The Fund will maintain a segregated account with its
custodian, consisting of cash, short-term U.S. Government Securities or
other high-grade debt obligations at least equal to the value of purchase
commitments until payment is made. 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, which risk is in addition to the
risk of decline of the Fund's other assets.
- Hedging. The Fund may use Interest Rate Futures; Bond Index
Futures (together with Interest Rate Futures, "Futures"); Forward
Contracts (defined below); call and put options on securities, Futures,
bond indices and foreign currencies; and enter into interest rate swap
agreements (all of the foregoing are referred to as "Hedging
Instruments"). Hedging Instruments may be used to attempt to protect
against possible declines in the market value of the Fund's portfolio from
downward trends in debt securities markets (generally due to a rise in
interest rates), to protect the Fund's unrealized gains in the value of
its debt securities which have appreciated, to facilitate selling debt
securities for investment reasons, to establish a position in the debt
securities markets as a temporary substitute for purchasing particular
debt securities, or to reduce the risk of adverse currency fluctuations.
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.
Covered calls and puts may also be written on debt securities to attempt
to increase the Fund's income. 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 Hedging
Instruments the Fund may use are described below. As of the date of this
Registration Statement, the Fund does not intend to enter into Futures,
Forward Contracts and options on Futures if after any such purchase, the
sum of margin deposits on Futures and premiums paid on Futures options
would exceed 5% of the value of the Fund's total assets.
- Interest Rate Futures and Bond Index Futures. The Fund may buy
and sell 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. That obligation may be satisfied by actual
delivery of the debt security or by entering into an offsetting contract.
A bond index assigns relative values to the bonds included in that index
and is used as a basis for trading long-term Bond Index Futures contracts.
Bond Index Futures reflect the price movements of bonds included in the
index. They differ from Interest Rate Futures in that settlement is made
in cash rather than by delivery; or settlement may be made by entering
into an offsetting contract.
- Calls on Securities and Futures. The Fund may write (i.e., sell)
or purchase call options ("calls") on securities that were traded on U.S.
and foreign securities and over-the-counter markets. 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 must be
covered by deliverable securities or by liquid assets segregated to
satisfy the Futures contract. If a call written by the Fund is exercised,
the Fund forgoes any possible profit from an increase in the market price
of the underlying security over the exercise price.
- Puts on Securities and Futures. The Fund may purchase put options
("puts") which relate to securities (whether or not it holds such
securities in its portfolio) or Futures. It may also write puts on
securities or Futures 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 assets would be required to be segregated liquid assets. In
writing puts, there is the risk that the Fund may be required to buy the
underlying security at a disadvantageous price.
- Foreign Currency Options. The Fund may purchase and write puts
and calls on foreign currencies that are traded on a securities or
commodities exchange or quoted by major recognized dealers in such
options, for the purpose of protecting against declines in the dollar
value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a rise is anticipated 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 either lose the premium it paid and incur
transaction costs, or purchase or sell the foreign currency at a
disadvantageous price.
- 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 foreign currency at a
specific future date for a fixed price. 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. Forward
contracts include standardized foreign currency futures contracts which
are traded on foreign 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 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 Adviser 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 will not speculate in foreign currency exchange contracts.
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 Adviser believes will
have price movements that tend to correlate closely with the currency.
- 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.
- Derivative Investments. The Fund can invest in a number of
different kinds of "derivative investments." 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. The risks of
investing in derivative investments include not only the ability of the
company issuing the instrument to pay the amount due on the maturity of
the instrument, but 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 this can mean that
the Fund will realize less principal and/or income than expected. Certain
derivative investments held by the Fund may trade in the over-the-counter
market and may be illiquid.
Examples of derivative investments the Fund may invest in include,
among others, "index-linked" notes which are debt securities of companies
that call for interest payments and/or payment on the maturity of the note
in different terms than the typical note where the borrower agrees to make
fixed interest payments and pay a fixed sum on the maturity of the note.
The principal and/or interest payments on maturity of an index-linked note
depends on the performance of one or more market indices, such as the S
& P 500 Index. Further examples of 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 principal
amount of the debt security is exchanged for common stock of the issuer
or is payable in an amount based on the issuer's common stock price 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.
The Fund may also invest in currency-indexed securities. Typically
these are short-term or intermediate-term debt securities having a value
at maturity, and/or interest rates determined by reference to one or more
specified foreign currencies. Certain currency-indexed securities
purchased by the Fund may have a payout factor tied to a multiple of the
movement of the U.S. dollar (or the foreign currency in which the security
is denominated) against the movement in the U.S. dollar, the foreign
currency, another currency, or an index. Such securities may be subject
to increased principal risk and increased volatility than comparable
securities without a payout factor in excess of one, but the Manager
believes the increased yield justifies the increased risk.
- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities if, after any loan, the value
of the securities loaned does not exceed 25% of the total value of its
assets. Under applicable regulatory requirements (which are subject to
change), the loan collateral must, on each business day, be at least equal
to the value of the loaned securities and must consist of cash, bank
letters of credit or U.S. Government Securities. 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. The Fund receives an
amount 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, or (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 certain tests under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code" or the "Code"), and permit the Fund
to reacquire loaned securities on five days' notice or in time to vote on
any important matter. The Fund will make such loans only to banks and
securities dealers with whom it may enter into repurchase transactions.
If the borrower fails to return the loaned security the Fund's risks
include: (1) any costs in disposing of the collateral; (2) loss from a
decline in value of the collateral to an amount less than 100% of the
securities loaned; (3) being unable to exercise its voting or consent
rights with respect to the security; and (4) any loss arising from the
Fund being unable to timely settle a sale of such securities.
- Borrowing. From time to time, the Fund may increase its ownership
of securities by borrowing up to 10% of the value of its net assets from
banks and investing the borrowed funds (on which the Fund will pay
interest), subject to compliance with the 300% asset coverage requirement
of the 1940 Act. Subject to the 10% limit (which is a fundamental
policy), the Fund may also borrow to finance repurchases and/or tenders
of its shares and may also borrow for temporary purposes in an amount not
exceeding 5% of the value of the Fund's total assets. Any investment
gains made with the proceeds obtained from borrowings in excess of
interest paid on the borrowings will cause the net income per share or the
net asset value per share of the Fund's Shares to be greater than would
otherwise be the case. On the other hand, if the investment performance
of the securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to the Fund, then the net income per
share or net asset value per share of the Fund's Shares will be less than
would otherwise have been the case. This speculative factor is known as
"leverage." Although such borrowings would therefore involve additional
risk to the Fund, the Fund will only borrow if such additional risk of
loss of principal is considered by the Adviser to be appropriate in
relation to the Fund's primary investment objective of high current income
consistent with preservation of capital. The Adviser will make this
determination by examining both the market for securities in which the
Fund invests and interest rates in general to ascertain that the climate
is sufficiently stable to warrant borrowing. Because the Fund will limit
its borrowings to finance repurchases of and/or tenders for its Shares to
10% of the value of its net assets, the Fund may not be able to purchase
as many Shares as it would have if its borrowing power extended to the
maximum limit allowed under the 1940 Act.
- Defensive Strategies. There may be times when, in the Adviser's
judgment, conditions in the securities markets would make pursuing the
Fund's primary investment strategy inconsistent with the best interests
of its shareholders. At such times, the Fund may employ alternative
strategies primarily seeking to reduce fluctuations in the value of the
Fund's assets. In implementing these defensive strategies, the Fund may
increase the portion of its assets invested in U.S. Government Securities
up to 100% and/or nonconvertible high-grade debt securities up to 35%.
The Fund may also hold up to 100% of its assets in cash or cash
equivalents. It is impossible to predict when, or for how long,
alternative strategies will be utilized.
Other Investment Restrictions. The Fund has adopted the following
investment restrictions, which together with its investment objective, are
fundamental policies changeable only with the approval of the holders of
a "majority" of the Fund's outstanding voting securities, defined in the
Investment Company Act of 1940 as the affirmative vote of the lesser of
(a) more than 50% of the outstanding Shares of the Fund, or (b) 67% or
more of the Shares present or represented by proxy at a meeting if more
than 50% of the Fund's outstanding Shares are represented at the meeting
in person or by proxy. The percentage limitations set forth below, as
well as those described elsewhere, apply only at the time of investment
and require no action by the Fund as a result of subsequent changes in
the value or size of the Fund. Under these restrictions, the Fund will
not:
- - As to 75% of its total assets, invest in securities of any one issuer
(other than the United States Government, its agencies or
instrumentalities) if after any such investment either (a) more than 5%
of the Fund's total assets would be invested in the securities of that
issuer, or (b) the Fund would then own more than 10% of the voting
securities of that issuer;
- - Concentrate investments to the extent of more than 25% of its total
assets in securities of issuers in the same industry; provided that this
limitation shall not apply with respect to investments in U.S. Government
Securities;
- - Make loans except through (a) the purchase of debt securities in
accordance with its investment objectives and policies; (b) the lending
of portfolio securities as described above; or (c) the acquisition of
securities subject to repurchase agreements;
- - Borrow money, except in conformity with the restrictions stated above
under "Borrowing";
- - Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure permitted borrowings or for the escrow arrangements contemplated
in connection with the use of Hedging Instruments;
- - Participate on a joint or joint and several basis in any securities
trading account;
- - Invest in companies for the purpose of exercising control or management
thereof;
- - 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 the securities sold short ("short sales against the box"); short sales
may be made to defer realization of gain or loss for Federal income tax
purposes;
- - Invest in (a) real estate, except that it may purchase and sell
securities of companies which deal in real estate or interests therein;
(b) commodities or commodity contracts (except that the Fund may purchase
and sell Hedging Instruments whether or not they are considered to be a
commodity or commodity contract); or (c) interests in oil, gas or other
mineral exploration or development programs;
- - Act as an underwriter of securities, except insofar as the Fund might
be deemed to be an underwriter for purposes of the Securities Act of 1933
in the resale of any securities held for its own portfolio; or
- Purchase securities on margin, except that the Fund may make margin
deposits in connection with any of the Hedging Instruments it may use.
5. The shares of beneficial interest of the Fund, $.01 par value per
share (the "Shares"), are listed and traded on The New York Stock Exchange
(the "NYSE"). The following table sets forth for the Shares for the
periods indicated: (a) the per Share high sales price on the NYSE, the net
asset value per Share as of the last day of the week immediately preceding
the day for which the high sales price on the NYSE is reported, and the
premium or discount (expressed as a percentage of net asset value)
represented by the difference between such high sales price and the
corresponding net asset value and (b) the per Share low sales price on the
NYSE, the net asset value per Share as of the last day of the week
immediately preceding the day for which the low sales price on the NYSE
is reported, and the premium or discount (expressed as a percentage of net
asset value) represented by the difference between such low sales price
and the corresponding net asset value.
<TABLE>
<CAPTION>
Market Price High;(1) Market Price Low; (1)
NAV and Premium/ NAV and Premium/
Quarter Ended (Discount) That Day (2) (Discount) That Day (2)
<S> <C> <C>
1/31/94 Market: $8.50 Market: $7.75
NAV: $8.57 NAV: $8.54
Premium/(Discount):(.82)% Premium/(Discount): (9.25)%
4/30/94 Market: $8.25 Market: $7.375
NAV: $8.61 NAV: $8.13
Premium/(Discount):(4.18)% Premium/(Discount): (9.29)%
7/31/94 Market: $7.875 Market: $7.25
NAV: $8.07 NAV: $8.01
Premium/(Discount):(2.42)% Premium/(Discount): (9.49)%
10/31/94 Market: $7.625 Market: $6.625
NAV: $8.05 NAV: $7.88
Premium/(Discount):(5.28)% Premium/(Discount): (15.93)%
1/31/95 Market: $7.25 Market: $6.625
NAV: $7.86 NAV: $7.84
Premium/(Discount): (7.76)% Premium/(Discount): (15.50)%
4/30/95 Market: $7.375 Market: $6.5
NAV: $7.58 NAV: $7.68
Premium/(Discount): (2.70)% Premium/(Discount): (15.36)%
7/31/95 Market: $7.25 Market: $6.5
NAV: $7.85 NAV: $7.84
Premium/(Discount): (7.64)% Premium/(Discount): (17.09)%
10/31/95 Market: $7.125 Market: $6.625
NAV: $7.87 NAV: $7.87
Premium/(Discount): (9.47)% Premium/(Discount): (15.82)%
1/31/96 Market: $7.375 Market: $6.75
NAV: $8.04 NAV: $7.91
Premium/(Discount): (8.27)% Premium/(Discount): (14.66)%
<FN>
_______________
1. As reported by the NYSE.
2. The Fund's computation of net asset value (NAV) is as of the close of
trading on the last day of the week immediately preceding the day for
which the high and low market price is reported and the premium or
discount (expressed as a percentage of net asset value) is calculated
based on the difference between the high or low market price and the
corresponding net asset value for that day, divided by the net asset
value.
</TABLE>
On February 2, 1996, the net asset value per share of the Fund was
$8.10, the closing sales price on the NYSE was $7.375 and the discount to
net asset value (expressed as a percentage) was 8.95%. Since the Fund's
inception in 1988, the Fund's shares have from time to time generally
traded for an amount less than the Fund's net asset value.
The Board of Trustees of the Fund has determined that it may be in the
interests of Fund shareholders for the Fund to take action to attempt to
reduce or eliminate a market value discount from net asset value. To that
end, the Fund may, from time to time, either repurchase Shares in the open
market or, subject to conditions imposed from time to time by the Board,
make a tender offer for a portion of the Fund's Shares at their net asset
value per Share. Subject to the Fund's fundamental policy with respect
to borrowings, the Fund may incur debt to finance repurchases and/or
tenders. Interest on any such borrowings will reduce the Fund's net
income. In addition, the acquisition of Shares by the Fund will decrease
the total assets of the Fund and therefore will have the effect of
increasing the Fund's expense ratio. If the Fund must liquidate portfolio
securities to purchase Shares tendered, the Fund may be required to sell
portfolio securities for other than investment purposes and may realize
gains and losses. Gains realized on securities held for less than three
months may affect the Fund's ability to retain its status as a regulated
investment company under the Internal Revenue Code.
In addition to open-market Share purchases and tender offers, the Board
could also seek shareholder approval to convert the Fund to an open-end
investment company if the Fund's Shares trade at a substantial discount.
If the Fund's Shares have traded on the NYSE at an average discount from
net asset value of more than 10%, determined on the basis of the discount
as of the end of the last trading day in each week during the period of
12 calendar weeks ending October 31 in such year, the Trustees will
consider recommending to shareholders a proposal to convert the Fund to
an open-end company. If during a year in which the Fund's Shares trade
at the average discount stated, and for the period described, in the
preceding sentence the Fund also receives written requests from the
holders of 10% or more of the Fund's outstanding Shares that a proposal
to convert to an open end company be submitted to the Fund's shareholders,
within six months the Trustees will submit a proposal to the Fund's
shareholders, to the extent consistent with the 1940 Act, to amend the
Fund's Declaration of Trust to convert the Fund from a closed-end to an
open-end investment company. If the Fund converted to an open-end
investment company, it would be able continuously to issue and offer its
Shares for sale, and each Share of the Fund could be tendered to the Fund
for redemption at the option of the shareholder, at a redemption price
equal to the current net asset value per Share. To meet such redemption
request, the Fund could be required to liquidate portfolio securities.
Its Shares would no longer be listed on the NYSE. The Fund cannot predict
whether any repurchase of Shares made while the Fund is a closed-end
investment company would decrease the discount from net asset value at
which the Shares trade. To the extent that any such repurchase decreased
the discount from net asset value to an amount below 10% during the
measurement period described above, the Fund would not be required to
submit to shareholders a proposal to convert the Fund to an open-end
investment company.
Item 9. Management
1(a). 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 Adviser. The Fund is required to hold annual shareholder
meetings for the election of trustees and the ratification of its
independent auditors. The Fund may also hold shareholder meetings from
time to time for other 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.
1(b). The Adviser, a Colorado corporation with its principal offices
at Two World Trade Center, New York, New York 10048-0203, acts as
investment manager for the Fund under an investment advisory agreement
(the "Advisory Agreement") under which it provides ongoing investment
advice and conducts the investment operations of the Fund, including
purchases and sales of its portfolio securities, under the general
supervision and control of the Trustees of the Fund. The Adviser also
acts as accounting agent for the Fund.
The Adviser has operated as an investment company adviser since April
30, 1959. It and its affiliates currently manage investment companies
with assets in excess of $40 billion as of December 31, 1995, and held in
more than 2.8 million shareholder accounts. The Adviser is owned by
Oppenheimer Acquisition Corp., a holding company owned in part by senior
management of the Adviser, and ultimately controlled by Massachusetts
Mutual Life Insurance Company.
The Adviser provides office space and investment advisory services for
the Fund and pays all compensation of those Trustees and officers of the
Fund who are affiliated persons of the Adviser. Under the Advisory
Agreement, the Fund pays the Adviser an advisory fee computed and paid
weekly at an annual rate of .65 of 1% of the net assets of the Fund at the
end of that week. The Fund also pays the Adviser an annual fee of
$18,000, plus out-of-pocket costs and expenses reasonably incurred, for
performing limited accounting services for the Fund. During the fiscal
years ended October 31, 1993, 1994 and 1995, the Fund paid management fees
to the Adviser of $363,058, $353,510, and $332,730, respectively. The
Fund incurred approximately $19,325 in expenses for the fiscal year ended
October 31, 1995 for services provided by Shareholder Financial Services,
Inc. ("SFSI").
Under the Advisory Agreement, the Fund pays certain of its other costs
not paid by the Adviser, including (a) brokerage and commission expenses,
(b) Federal, state, local and foreign taxes, including issue and transfer
taxes, incurred by or levied on the Fund, (c) interest charges on
borrowings, (d) the organizational and offering expenses of the Fund,
whether or not advanced by the Adviser, (e) fees and expenses of
registering the Shares of the Fund under the appropriate Federal
securities laws and of qualifying Shares of the Fund under applicable
state securities laws, (f) fees and expenses of listing and maintaining
the listings of the Fund's Shares on any national securities exchange, (g)
expenses of printing and distributing reports to shareholders, (h) costs
of shareholder meetings and proxy solicitation, (i) charges and expenses
of the Fund's Administrator, custodian and Registrar, Transfer and
Dividend Disbursing Agent, (j) compensation of the Fund's Trustees who are
not interested persons of the Adviser, (k) legal and auditing expenses,
(l) the cost of certificates representing the Fund's Shares, (m) costs of
stationery and supplies, and (n) insurance premiums. The Adviser has
advanced certain of the Fund's organizational and offering expenses, which
were repaid by the Fund. There is no expense limitation provision.
1(c). The Portfolio Managers of the Fund are Thomas Reedy, David
Rosenberg and Ashwin Vasan, who also serve as Vice Presidents of the Fund
and of the Adviser, and are officers of certain mutual funds managed by
the Adviser ("Oppenheimer Funds"). Messrs. Reedy, Rosenberg and Vasan
Have been the persons principally responsible for the day-to-day
management of the Fund's portfolio since August 1993, June 1994 and August
1993, respectively. During the past five years, Mr. Reedy served as a
securities analyst for the Adviser, and, prior to joining the Adviser, Mr.
Rosenberg served as an officer and portfolio manager for Delaware
Investment Advisors and one of its mutual funds and Mr. Vasan served as
a securities analyst for Citibank, N.A.
1(d). The Administrator for the Fund is Mitchell Hutchins Asset
Management Inc. (the "Administrator"), a Delaware corporation with
principal offices at 1285 Avenue of the Americas, New York, New York 10019
and an affiliate of PaineWebber Incorporated.
Because of the services rendered to the Fund by the Administrator and
the Adviser, the Fund itself requires no employees other than its
officers, none of whom receives compensation from the Fund and all of whom
are employed by the Adviser or the Administrator. In connection with its
responsibilities as Administrator and in consideration of its
administrative fee, subject to the supervision of the Board of Trustees
the Administrator will: (i) prepare all quarterly, semi-annual and annual
reports required to be sent to Fund shareholders, and arrange for the
printing and dissemination of such reports to shareholders; (ii) assemble
and file all reports required to be filed by the Fund with the Securities
and Exchange Commission ("SEC") on Form N-SAR, or such other form as the
SEC may substitute for Form N-SAR; (iii) review the provision of services
by the Fund's independent accountants, including but not limited to the
examination by such accountants of financial statements of the Fund and
the review of the Fund's Federal, state and local tax returns; and make
such reports and recommendations to the Board of Trustees concerning the
performance of the independent accountants as the Board reasonably
requests or as it deems appropriate; (iv) file with the appropriate
authorities all required Federal, state and local tax returns; (v) arrange
for the dissemination to shareholders of the Fund's proxy materials, and
oversee the tabulation of proxies by the Fund's transfer agent; (vi)
negotiate the terms and conditions under which custodian services will be
provided to the Fund and the fees to be paid by the Fund in connection
therewith; (vii) recommend an accounting agent (which may or may not be
the Fund's custodian or its affiliate) to the Board, which agent would be
responsible for computing the Fund's net asset value in accordance with
the Fund's registration statement under the 1940 Act and the Securities
Act of 1933, as amended; (vii) negotiate the terms and conditions under
which such accounting agent would compute the Fund's net asset value, and
the fees to be paid by the Fund in connection therewith; review the
provision of such accounting services to the Fund and make such reports
and recommendations to the Board concerning the provisions of such
services as the Board reasonably requests or the Administrator deems
appropriate; (ix) negotiate the terms and conditions under which the
transfer agency and dividend disbursing services will be provided to the
Fund, and the fees to be paid by the Fund in connection therewith; review
the provision of transfer agency and dividend disbursing services to the
Fund; and make such reports and recommendations to the Board concerning
the performance of the Fund's transfer and dividend disbursing agent as
the Board reasonably requests or the Administrator deems appropriate; (x)
establish the accounting policies of the Fund; reconcile accounting issues
which may arise with respect to the Fund's operations; consult with the
Fund's independent accountants, legal counsel, custodian, accounting agent
and transfer and dividend disbursing agent as necessary in connection
therewith; (xi) determine the amounts available for distribution as
dividends and distributions to shareholders; prepare and arrange for the
printing of dividend notices to the shareholders; and provide the Fund's
transfer and dividend disbursing agent and custodian with such information
as is required for such parties to effect the payment of dividends and
distributions and to implement the Fund's dividend reinvestment plan;
(xii) review the Fund's bills and authorize payments of such bills by the
Fund's custodian; and (xiii) if requested by the Board, designate one of
its employees to serve as an officer of the Fund, and such person shall
not be compensated by the Fund for so serving.
For the services rendered to the Fund and related expenses borne by
the Administrator, the Fund pays the Administrator a fee, calculated and
paid weekly, at the annualized rate of .20% of the Fund's net assets at
the end of that week. During the fiscal years ended October 31, 1993,
1994 and 1995, the Fund paid administration fees to the Administrator of
$111,769, $108,772 and $102,379, respectively.
1(e). The Bank of New York, 48 Wall Street, New York, New York, acts
as the custodian (the "Custodian") for the Fund's assets held in the
United States. The Adviser and its affiliates have banking relationships
with the Custodian. The Adviser has represented to the Fund that its
banking relationships with the Custodian have been and will continue to
be unrelated to and unaffected by the relationship between the Fund and
the Custodian. It will be the practice of the Fund to deal with the
Custodian in a manner uninfluenced by any banking relationship the
Custodian may have with the Adviser and its affiliates. Rules adopted
under the 1940 Act permit the Fund to maintain its securities and cash in
the custody of certain eligible banks and securities depositories.
Pursuant to those Rules, the Fund's portfolio of securities and cash, when
invested in foreign securities, will be held in foreign banks and
securities depositories approved by the Trustees of the Fund in accordance
with the rules of the Securities and Exchange Commission.
SFSI, a subsidiary of the Adviser, acts as primary transfer agent,
shareholder servicing agent and dividend paying agent for the Fund. Fees
paid to SFSI are based on the number of shareholder accounts and the
number of shareholder transactions, plus out-of-pocket costs and expenses.
United Missouri Trust Company of New York acts as co-transfer agent and
co-registrar with SFSI to provide such services as SFSI may request.
1(f). See 1(b) above.
1(g). Inapplicable.
2. Inapplicable.
3. None as of February 6, 1996.
Item 10. Capital Stock, Long-Term Debt, and Other Securities.
1. The Fund is authorized to issue an unlimited number of Shares of
beneficial interest, $.01 par value. The Fund's Shares have no
preemptive, conversion, exchange or redemption rights. Each Share has
equal voting, dividend, distribution and liquidation rights. All Shares
outstanding are, and, when issued, those offered hereby will be, fully
paid and nonassessable. Shareholders are entitled to one vote per Share.
All voting rights for the election of Trustees are noncumulative, which
means that the holders of more than 50% of the Shares can elect 100% of
the Trustees then nominated for election if they choose to do so and, in
such event, the holders of the remaining Shares will not be able to elect
any Trustees. Under the rules of the NYSE applicable to listed companies,
the Fund is required to hold an annual meeting of shareholders in each
year.
Under Massachusetts law, under certain circumstances shareholders could
be held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims shareholder liability for actions or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed
by the Fund. The Declaration of Trust provides for indemnification by the
Fund for all losses and expenses of any shareholder held personally liable
for obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations.
The likelihood of such circumstances is remote.
Pursuant to the Trust's Dividend Reinvestment and Cash Purchase Plan
(the "Plan"), all dividends and capital gains distributions
("Distributions") declared by the Trust will be automatically reinvested
in additional full and fractional shares of the Trust ("Shares") unless
(i) a shareholder elects to receive cash or (ii) Shares are held in
nominee name, in which event the nominee should be consulted as to
participation in the Plan. Shareholders that participate in the Plan
("Participants") may, at their option, make additional cash investments
in Shares, semi-annually in amounts of at least $100, through payment to
Shareholder Financial Services, Inc., the agent for the Plan (the
"Agent"), and a service fee of $.75.
Depending upon the circumstances hereinafter described, Plan Shares
will be acquired by the Agent for the Participant's account through
receipt of newly issued Shares or the purchase of outstanding Shares on
the open market. If the market price of Shares on the relevant date
(normally the payment date) equals or exceeds their net asset value, the
Agent will ask the Trust for payment of the Distribution in additional
Shares at the greater of the Trust's net asset value determined as of the
date of purchase or 95% of the then-current market price. If the market
price is lower than net asset value, the Distribution will be paid in
cash, which the Agent will use to buy Shares on The New York Stock
Exchange (the "NYSE"), or otherwise on the open market to the extent
available. If the market price exceeds the net asset value before the
Agent has completed its purchases, the average purchase price per Share
paid by the Agent may exceed the net asset value, resulting in fewer
Shares being acquired than if the Distribution had been paid in Shares
issued by the Trust.
Participants may elect to withdraw from the Plan at any time and
thereby receive cash in lieu of Shares by sending appropriate written
instructions to the Agent. Elections received by the Agent will be
effective only if received more than ten days prior to the record date for
any Distribution; otherwise, such termination will be effective shortly
after the investment of such Distribution with respect to any subsequent
Distribution. Upon withdrawal from or termination of the Plan, all Shares
acquired under the Plan will remain in the Participant's account unless
otherwise requested. For full Shares, the Participant may either: (1)
receive without charge a share certificate for such Shares; or (2) request
the Agent (after receipt by the Agent of signature guaranteed instructions
by all registered owners) to sell the Shares acquired under the Plan and
remit the proceeds less any brokerage commissions and a $2.50 service fee.
Fractional Shares may either remain in the Participant's account or be
reduced to cash by the Agent at the current market price with the proceeds
remitted to the Participant. Shareholders who have previously withdrawn
from the Plan may rejoin at any time by sending written instructions
signed by all registered owners to the Agent.
There is no direct charge for participation in the Plan; all fees of
the Agent are paid by the Trust. There are no brokerage charges for
Shares issued directly by the Trust. However, each Participant will pay
a pro rata share of brokerage commissions incurred with respect to open
market purchases of Shares to be issued under the Plan. Participants will
receive tax information annually for their personal records and to assist
in Federal income tax return preparation. The automatic reinvestment of
Distributions does not relieve Participants of any income tax that may be
payable on Distributions.
The Plan may be terminated or amended at any time upon 30 days' prior
written notice to Participants which, with respect to a Plan termination,
must precede the record date of any Distribution by the Trust. Additional
information concerning the Plan may be obtained by shareholders holding
Shares registered directly in their names by writing the Agent,
Shareholder Financial Services, Inc., P.O. Box 173673, Denver, CO, 80217-
3673 or by calling 1-800-647-7374. Shareholders holding Shares in nominee
name should contact their brokerage firm or other nominee for more
information.
The Fund presently has provisions in its Declaration of Trust and By-
Laws (together, the "Charter Documents") which could have the effect of
limiting (i) the ability of other entities or persons to acquire control
of the Fund, (ii) the Fund's freedom to engage in certain transactions or
(iii) the ability of the Fund's Trustees or shareholders to amend the
Charter Documents or effect changes in the Fund's management. Those
provisions of the Charter Documents may be regarded as "anti-takeover"
provisions. Specifically, under the Fund's Declaration of Trust, the
affirmative vote of the holders of not less than two thirds (66-2/3%) of
the Fund's Shares outstanding and entitled to vote is required to
authorize the consolidation of the Fund with another entity, a merger of
the Fund with or into another entity (except for certain mergers in which
the Fund is the successor), a sale or transfer of all or substantially all
of the Fund's assets, the dissolution of the Fund, the conversion of the
Fund to an open-end company, and any amendment of the Fund's Declaration
of Trust that would affect any of the other provisions requiring a two-
thirds vote. However, a "majority" shareholder vote, as defined in the
Charter Documents, shall be sufficient to approve any of the foregoing
transactions that have been recommended by two-thirds of the Trustees.
Notwithstanding the foregoing, if a corporation, person or entity is
directly, or indirectly through its affiliates, the beneficial owner of
more than 5% of the outstanding shares of the Fund, the affirmative vote
of 80% (which is higher than that required under the 1940 Act) of the
outstanding Shares of the Fund is required generally to authorize any of
the following transactions or to amend the provisions of the Declaration
of Trust relating to transactions involving: (i) a merge or consolidation
of the Fund with or into any such corporation or entity, (ii) the issuance
of any securities of the Fund to any such corporation, person or entity
for cash; (iii) the sale, lease or exchange of all or any substantial part
of the assets of the Fund to any such corporation, entity or person
(except assets having an aggregate market value of less than $1,000,000);
or (iv) the sale, lease or exchange to the Fund, in exchange for
securities of the Fund, of any assets of any such corporation, entity or
person (except assets having an aggregate fair market value of less than
$1,000,000). If two-thirds of the Board of Trustees has approved a
memorandum of understanding with such beneficial owner, however, a
majority shareholder vote will be sufficient to approve the foregoing
transactions. Reference is made to the Charter Documents of the Fund, on
file with the Securities and Exchange Commission, for the full text of
these provisions.
2. Inapplicable.
3. Inapplicable.
4. The Fund qualified for treatment as, and elected to be, a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code
for its taxable year ended October 31, 1994, and intends to continue to
qualify as a RIC for each subsequent taxable year. However, the Fund
reserves the right not to qualify under Subchapter M as a RIC in any year
or years.
For each taxable year that the Fund qualifies for treatment as a
RIC, the Fund (but not its shareholders) will not be required to pay
Federal income tax. Shareholders will normally have to pay Federal income
taxes, and any state income taxes, on the dividends and distributions they
receive from the Fund. Such dividends and distributions derived from net
investment income or short-term capital gains are taxable to the
shareholder as ordinary dividend income regardless of whether the
shareholder receives such distributions in additional Shares or in cash.
Since the Fund's income is expected to be derived primarily from interest
rather than dividends, only a small portion, if any, of such dividends and
distributions is expected to be eligible for the Federal dividends-
received deduction available to corporations. The Fund does not
anticipate that any portion of its dividends or distributions will qualify
for pass-through treatment as "exempt-interest dividends" since less than
50% of its assets is permitted to be invested in municipal obligations.
Long-term or short-term capital gains may be generated by the sale of
portfolio securities and by transactions in options and futures contracts.
Distributions of long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a
shareholder has held the Fund's shares and regardless of whether the
distribution is received in additional shares or in cash. For Federal
income tax purposes, if a capital gain distribution is received with
respect to Shares held for six months or less, any loss on a subsequent
sale or exchange of such Shares will be treated as long-term capital loss
to the extent of such long-term capital gain distribution. Capital gains
distributions are not eligible for the dividends-received deduction.
Any dividend or capital gains distribution received by a shareholder
from an investment company will have the effect of reducing the net asset
value of the shareholder's stock in that company by the exact amount of
the dividend or capital gains distribution. Furthermore, capital gains
distributions and dividends are subject to Federal income taxes. If the
net asset value of the Shares should be reduced below a shareholder's cost
as a result of the payment of dividends or realized long-term capital
gains, such payment would be a return of the shareholder's investment
capital to the extent of such reduction below the shareholder's cost, but
nonetheless could be fully taxable.
The tax treatment of listed put and call options written or purchased
by the Fund on debt securities and of future contracts entered into by the
Fund will be governed by Section 1256 of the Internal Revenue Code.
Absent a tax election to the contrary, each such position held by the Fund
will be marked-to-market (i.e., treated as if it were closed out) on the
last business day of each taxable year of the Fund, and all gain or loss
associated with transactions in such positions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss.
Positions of the Fund which consist of at least one debt security and at
least one option or futures contract which substantially diminishes the
Fund's risk of loss with respect of such debt security could be treated
as "mixed straddles" which are subject to the straddle rules of Section
1092 of the Code, the operation of which may cause deferral of losses,
adjustments in the holding periods of debt securities and conversion of
short-term capital losses into long-term capital losses. Certain tax
elections exist for mixed straddles which reduce or eliminate the
operation of the straddle rules. Furthermore, as a regulated investment
company, the Fund would be subject to the requirement that less than 30%
of its gross income be derived from gains on the sale or other disposition
of securities held for less than three months. This requirement may limit
the Fund's ability to engage in options and futures transactions. The
Fund will monitor its transactions in options and futures contracts and
may make certain tax elections in order to mitigate the effect of these
rules and prevent disqualification of the Fund as a regulated investment
company under Subchapter M of the Code. Such tax election may result in
an increase in distribution of ordinary income (relative to long-term
capital gains) 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, the Fund may be required to pay
out as an income distribution each year an amount which is greater than
the total amount of cash interest the Fund actually received. Such
distributions will be made from the cash assets of the Fund or by
liquidation of portfolio securities, if necessary. If a distribution of
cash necessitates the liquidation of portfolio securities, the Adviser
will select which securities to sell. 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 in the absence of such transactions.
It is the Fund's present policy, which may be changed by the Board of
Trustees, to pay monthly dividends to shareholders from net investment
income of the Fund. The Fund intends to distribute all of its net
investment income on an annual basis. The Fund will distribute all of its
net realized long-term and short-term capital gains, if any, at least once
per year. The Fund may, but is not required to, make such distributions
on a more frequent basis to the extent permitted by applicable law and
regulations.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute a specified minimum percentage (currently 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 that year, or else the
Fund must pay an excise tax on amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the
Fund's Board and the Adviser might determine in a particular year it would
be in the best interests of the Fund not to make such distributions at the
mandated level and to pay the excise tax which would reduce the amount
available for distributions to shareholders. If the Fund pays a dividend
in January which was declared in the previous December to shareholders of
record on a date in December, then such dividend or distribution will be
treated for tax purposes as being paid in December and will be taxable to
shareholders as if received in December.
Under the Plan, all of the Fund's dividends and distributions to
shareholders will be reinvested in full and fractional Shares. With
respect to distributions made in Shares issued by the Fund pursuant to the
Plan, the amount of the distribution for tax purposes is the fair market
value of the Shares issued on the reinvestment date. In the case of
Shares purchased on the open market, a participating shareholder's tax
basis in each Share is its cost. In the case of Shares issued by the
Fund, the shareholder's tax basis in each Share received is its fair
market value on the reinvestment date.
Distributions of investment company taxable income to shareholders who
are nonresident alien individuals or foreign corporations will generally
be subject to a 30% United States withholding tax under provisions of the
Internal Revenue Code applicable to foreign individuals and entities,
unless a reduced rate of withholding or a withholding exemption is
provided under an applicable treaty.
Under Section 988 of the Code, foreign currency gain or loss with
respect to foreign currency-denominated debt instruments and other foreign
currency-denominated positions held or entered into by the Fund will be
ordinary income or loss. In addition, foreign currency gain or loss
realized with respect to certain foreign currency "hedging" transactions
will be treated as ordinary income or loss.
5. The following information is provided as of February 6, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Amount
Amount Held Outstanding
by Registrant Exclusive of
Amount or for its Amount Shown
Title of Class Authorized Account Under (3)
<S> <C> <C> <C>
Shares of Unlimited None $6,615,505
Beneficial
Interest, $.01
par value
</TABLE>
Item 11. Defaults and Arrears on Senior Securities.
Inapplicable.
Item 12. Legal Proceedings.
Inapplicable.
Item 13. Table of Contents of the Statement of Additional Information.
Reference is made to Item 15 of the Statement of Additional
Information.
<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: The bond investments in which the Fund will principally invest
will be in the lower-rated categories, described below. 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 Multi-Government Trust
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 29, 1996
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 29, 1996. It should be read
together with the Prospectus, and the Registration Statement on Form N-2,
of which the Prospectus and this Statement of Additional Information are
a part, can be inspected and copied at public reference facilities
maintained by the Securities and Exchange Commission (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.
TABLE OF CONTENTS
Page
Investment Objective and Policies *
Management 36
Control Persons and Principal Holders of Securities 41
Investment Advisory and Other Services *
Brokerage Allocation and Other Practices 41
Tax Status *
Financial Statements 42
______________________
*See Prospectus
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page.
Reference is made to the preceding page.
Item 15. Table of Contents.
Reference is made to the preceding page and to Items 16 through 23
of the Statement of Additional Information set forth below.
Item 16. General Information and History.
Inapplicable.
Item 17. Investment Objective and Policies.
Reference is made to Item 8 of the Prospectus.
Item 18. Management.
1 and 2. The Fund's Trustees and officers and their principal
occupations and business affiliations during the past five years are
listed below. The address of each Trustee and officer is Two World Trade
Center, New York, New York 10048-0203, unless another address is listed
below. All of the Trustees are also trustees of Oppenheimer Fund,
Oppenheimer Global Fund, Oppenheimer Enterprise Fund, Oppenheimer Growth
Fund, Oppenheimer Target Fund, Oppenheimer Gold & Special Minerals Fund,
Oppenheimer Discovery Fund, Oppenheimer Global Growth & Income Fund,
Oppenheimer Global Emerging Growth Fund, Oppenheimer Tax-Free Bond Fund,
Oppenheimer New York Tax-Exempt Fund, Oppenheimer California Tax-Exempt
Fund, Oppenheimer Multi-State Tax-Exempt Trust, Oppenheimer Asset
Allocation Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer U.S.
Government Trust, Oppenheimer Multi-Sector Income Trust and Oppenheimer
Multi-Government Trust (collectively, the "New York-based Oppenheimer
funds"). Ms. Macaskill and Messrs. Bishop, Bowen, Donohue, Farrar and
Zack respectively hold the same offices with the other New York-based
Oppenheimer funds as with the Fund.
Leon Levy, Chairman of the Board of Trustees; Age: 69
General Partner of Odyssey Partners, L.P. (investment partnership) and
Chairman of Avatar Holdings, Inc. (real estate development).
Robert G. Galli, Trustee*; Age: 62
Vice Chairman of the Adviser and Vice President and Counsel of Oppenheimer
Acquisition Corp., the Adviser's parent holding company; formerly he held
the following positions: a director of the Adviser and OppenheimerFunds
Distributor, Inc. (the "Distributor"), Vice President and a director of
HarbourView Asset Management Corporation ("HarbourView") and Centennial
Asset Management Corporation ("Centennial"), investment advisory
subsidiaries of the Adviser, a director of Shareholder Financial Services,
Inc. ("SFSI") and Shareholder Services, Inc. ("SSI"), transfer agent
subsidiaries of the Adviser, an officer of other Oppenheimer funds and
Executive Vice President and General Counsel of the Adviser and the
Distributor.
Benjamin Lipstein, Trustee; Age: 72
591 Breezy Hill Road, Hillsdale, New York 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; Director of Sussex Publishers, Inc.
(Publishers of Psychology Today and Mother Earth News); and Director of
Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age: 47
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a Director of the Adviser; Chairman
and a Director of SSI; President and a Director of OAC, HarbourView, and
of Oppenheimer Partnership Holdings, Inc., the latter being a holding
company subsidiary of the Manager; formerly an Executive Vice President
of the Manager.
Elizabeth B. Moynihan, Trustee; Age: 66
801 Pennsylvania Avenue, N.W., Washington, DC 20004
Author and architectural historian; a trustee of the Freer Gallery of Art
(Smithsonian Institution), the Institute of Fine Arts (New York
University), National Building Museum; a member of the Trustees Council,
Preservation League of New York State; a member of the Indo-U.S. Sub-
Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 68
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil and gas producer), Enron-
Dominion Cogen Corp. (cogeneration company), Kemper Corporation (insurance
and financial services company), Fidelity Life Association (mutual life
insurance company); formerly Chairman of the Board of ICL, Inc.
(information systems) and President and Chief Executive Officer of the
Conference Board, Inc. (international economic and business research).
Edward V. Regan, Trustee; Age: 65
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York;
President of Jerome Levy Economics Institute; a member of the U.S.
Competitiveness Policy Council; a director or GranCare, Inc. (healthcare
provider); formerly New York State Comptroller and trustee, New York State
and Local Retirement Fund.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Russell S. Reynolds, Jr., Trustee; Age: 64
200 Park Avenue, New York, New York 10166
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directors Publication, Inc. (consulting and
publishing); a trustee of Mystic Seaport Museum, International House,
Greenwich Hospital and the Greenwich Historical Society.
Sidney M. Robbins, Trustee; Age: 83
50 Overlook Road, Ossining, New York 10562
Chase Manhattan Professor Emeritus of Financial Institutions, Graduate
School of Business, Columbia University; Visiting Professor of Finance,
University of Hawaii; a director of The Korea Fund, Inc. (closed-end
investment company); a member of the Board of Advisors, Olympus Private
Placement Fund, L.P.; Professor Emeritus of Finance, Adelphi University.
Donald W. Spiro, Trustee*; Age: 69
Chairman Emeritus and a director of the Adviser; formerly Chairman of the
Adviser and the Distributor.
Pauline Trigere, Trustee; Age: 83
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and sale of
women's fashions).
Clayton K. Yeutter, Trustee; Age: 65
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel to Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar, Inc.
(machinery), ConAgra, Inc. (food and agricultural products), Farmers
Insurance Company (insurance), FMC Corp. (chemicals and machinery),
Lindsay Manufacturing Co. (irrigation equipment), Texas Instruments, Inc.
(electronics) and The Vigoro Corporation (fertilizer manufacturer);
formerly (in descending chronological order) Counsellor to the President
(Bush) for Domestic Policy, Chairman of the Republican National Committee,
Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
Thomas P. Reedy, Vice President and Portfolio Manager; Age: 34
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly a Securities Analyst for the Adviser.
David Rosenberg, Vice President and Portfolio Manager; Age: 37
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly an officer and Portfolio Manager for Delaware Investment Advisors
and for one of its mutual funds.
Ashwin Vasan, Vice President and Portfolio Manager; Age: 33
Vice President of the Adviser; an officer of other Oppenheimer funds;
formerly a Securities Analyst for the Adviser, prior to which he was a
Securities Analyst for Citibank, N.A.
_____________________________________
* A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
Andrew J. Donohue, Secretary; Age: 45
Executive Vice President and General Counsel of the Adviser and the
Distributor; an officer of other Oppenheimer funds; formerly Senior Vice
President and Associate General Counsel of the Adviser and the
Distributor, prior to which he was a 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), and a director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
George C. Bowen, Treasurer; Age: 59
3410 South Galena Street, Denver, Colorado 80231
Senior Vice President and Treasurer of the Adviser; 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
Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 47
Senior Vice President and Associate General Counsel of the Adviser;
Assistant Secretary of SSI and SFSI; an officer of other OppenheimerFunds.
Robert Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Adviser/Mutual Fund Accounting; an officer
of other Oppenheimer funds; previously a Fund Controller for the Adviser,
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: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Adviser/Mutual Fund Accounting; an officer
of other Oppenheimer funds; previously a Fund Controller for the Adviser,
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.
The Board of Trustees does not have an executive or investment
committee. The Trustees of the Fund have appointed a study committee
consisting of Messrs. Robbins (Chairman) and Lipstein and Mrs. Moynihan,
none of whom is an "interested person" of the Adviser or the Fund. The
study committee's function is to report to the Board on matters that
include (i) legal and regulatory developments, (ii) periodic renewals of
the Advisory Agreement, (iii) review of the transfer agent and registrar
agreement, (iv) review of the administrative services provided by Mitchell
Hutchins Asset Management, Inc., (v) portfolio management, (vi) valuation
of portfolio securities, (vii) custodian relationships and use of foreign
subcustodians, (viii) code of ethics matters, policy on use of insider
information, (ix) consideration of tender offers and other repurchases of
fund shares and possible conversion to open-end status, and (x)
indemnification and insurance of the Fund's officers and trustees.
3. Inapplicable.
4. The officers of the Fund are affiliated with the Adviser; they
and the Trustees of the Fund who are affiliated with the Adviser (Ms.
Macaskill and Messrs. Galli and Spiro; Mr. Spiro is also an officer)
receive no salary or fee from the Fund. The Trustees of the Fund
(including Mr. Delaney, a former Trustee, but excluding Ms. Macaskill and
Messrs. Galli and Spiro) received the total amounts shown below from all
17 of the New York-based Oppenheimer funds (including the Fund) listed in
the first paragraph of Item 18, parts 1 and 2 (and from Oppenheimer Global
Environment Fund, Oppenheimer Time Fund and Oppenheimer Mortgage Income
Fund, which ceased operations following the acquisition of their assets
by other Oppenheimer funds), for services in the positions shown:
<TABLE>
<CAPTION>
Aggregate Retirement Benefits Total Compensation
Compensation As Accrued as Part of From All New York-based
Name and Position from Fund Fund Expenses Oppenheimer Funds1
<S> <C> <C>
Leon Levy $2,417 $4,482 $141,000
Chairman and Trustee
Benjamin Lipstein $1,478 $2,740 $ 86,200
Study Committee Member
and Trustee
Elizabeth B. Moynihan $1,478 $2,740 $ 86,200
Study Committee Member3
and Trustee
Kenneth A. Randall $1,344 $2,492 $ 78,400
Audit Committee Member
and Trustee
Edward V. Regan $1,179 $2,187 $ 68,800
Audit Committee Member3
and Trustee
Russell S. Reynolds, Jr. $ 893 $1,656 $ 52,100
Trustee
Sidney M. Robbins $2,093 $3,881 $122,100
Study Committee Chairman,
Audit Committee Vice-Chairman
and Trustee
Pauline Trigere $ 893 $1,656 $ 52,100
Trustee
Clayton K. Yeutter $ 893 $1,656 $ 52,100
Trustee
<FN>
_____________________
1 For the 1995 calendar year.
2 Board and committee positions held during a portion of the period shown.
3 Committee position held during a portion of the period shown.
</TABLE>
The Fund has adopted a retirement plan that provides for payment to
a retired Trustee of up to 80% of the average compensation paid during
that Trustee's five years of service in which the highest compensation was
received. A Trustee must serve in that capacity for any of the New York-
based Oppenheimer funds for at least 15 years to be eligible for the
maximum payment. During the fiscal year ended December 31, 1995, the Fund
made a payment of $507 to two retired trustees. The total accrual by all
the New York-based Oppenheimer funds referred to in the preceding
paragraph for their collective projected benefit obligations under the
plan was $2,560,500 for the 1995 calendar year.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of February 6, 1996, the only person owning of record or known
by the Fund to own beneficially 5% or more of the outstanding Shares was
Cede & Co., c/o Depository Trust Company ("DTC"), 7 Hanover Square, New
York, New York 10004, a nominee which owned of record 5,235,312.277 Shares
(approximately 79% of the Shares then outstanding).
3. As of February 6, 1996, the trustees and officers of the Fund as
a group owned less than 1% of the outstanding Shares.
Item 20. Investment Advisory and Other Services.
Reference is made to Item 9 of the Prospectus.
Item 21. Brokerage Allocation and Other Practices.
1 and 2. The Fund paid no brokerage commissions during the fiscal
year ended October 31, 1993 and paid $405 and $1,333 in brokerage
commissions during the fiscal year ended October 31, 1994 and 1995,
respectively. The Fund will not effect portfolio transactions through any
broker (i) which is an affiliated person of the Fund, (ii) which is an
affiliated person of such affiliated person or (iii) an affiliated person
of which is an affiliated person of the Fund or its Adviser. There is no
principal underwriter of shares of the Fund. As most purchases of
portfolio securities made by the Fund are principal transactions at net
prices, the Fund incurs little or no brokerage costs. The Fund deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless it is
determined that a better price or execution may be obtained by using the
services of a broker. Purchases of portfolio 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
price. Transactions in foreign securities markets generally involve the
payment of fixed brokerage commissions, which are usually higher than
those in the United States. The Fund seeks to obtain prompt execution of
orders at the most favorable net price.
3. The Advisory Agreement between the Fund and the Advisor (the
"Advisory Agreement") contains provisions relating to the selection of
brokers, dealers and futures commission merchants (collectively referred
to as "brokers") for the Fund's portfolio transactions. The Adviser is
authorized by the Advisory Agreement to employ brokers 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 Adviser need not seek competitive bidding but is
expected to minimize the commissions paid to the extent consistent with
the interests and policies of the Fund.
Certain other investment companies advised by the Adviser and its
affiliates have investment objectives and policies similar to those of the
Fund. If possible, concurrent orders to purchase or sell the same
security by more than one of the accounts managed by the Adviser 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. If
transactions on behalf of more than one fund during the same period
increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on price or
quantity. When the Fund engages in an option transaction, ordinarily the
same broker will be used for the purchase or sale of the option and any
transactions in the security to which the option relates.
Under the Advisory Agreement, if brokers are used for portfolio
transactions, the Adviser may select brokers for their execution and/or
research services, on which no dollar value can be placed. Information
received by the Adviser for those other accounts may or may not be useful
to the Fund. The commissions paid to such dealers may be higher than
another qualified dealer would have charged if a good faith determination
is made by the Adviser that the commission is reasonable in relation to
the services provided. Subject to applicable regulations, sales of shares
of the Fund and/or investment companies advised by the Adviser or its
affiliates may also be considered as a factor in directing transactions
to brokers, but only in conformity with the price, execution and other
considerations and practices discussed above.
Such research, which may be provided by a broker through a third
party, includes information on particular companies and industries as well
as market, economic or institutional activity areas. It serves to broaden
the scope and supplement the research activities of the Adviser, to make
available additional views for consideration and comparisons, and to
enable the Adviser to obtain market information for the valuation of
securities held in the Fund's portfolio or being considered for purchase.
4. During the fiscal year ended October 31, 1995, there were no
commissions related to brokerage transactions that were directed to
brokers because of research provided.
5. Inapplicable.
Item 22. Tax Status.
Reference is made to Item 10 of the Prospectus.
Item 23. Financial Statements.
1. Statement of Investments
2. Statement of Assets and Liabilities
3. Statement of Operations
4. Statements of Changes in Net Assets
5. Financial Highlights
6. Notes to Financial Statements
7. Independent Auditors' Report
8. Independent Auditors' Consent
<PAGE>
INDEPENDENT AUDITORS' REPORT
Oppenheimer Multi-Government Trust
The Board of Trustees and Shareholders of
Oppenheimer Multi-Government Trust:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Multi-Government Trust as of October 31, 1995, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the six-year period then
ended and the period from November 23, 1988 (commencement of operations) to
October 31, 1989. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer Multi-Government Trust as of October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the six-year period then ended and the period from November
23, 1988 (commencement of operations) to October 31, 1989, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1995
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 6.0%
Bank Pacific CD, Zero Coupon, 17.947%, 3/5/96 (IDR) (12)............ 500,000,000 $ 206,187
Citibank CD:
10.75%, 11/20/95 (CLP) (2)........................................ 172,621,262 416,306
29.50%, 12/22/95 (HUF) (2)........................................ 33,722,500 256,299
CS First Boston, Inc. CD:
15.75%, 6/11/96 (IDR) (2)(3)...................................... 556,000,000 244,826
12.50%, 12/21/95 (ARA) (2)(3)..................................... 500,000 500,064
Indonesia (Republic of) Bank Negara CD, Zero Coupon,
15.909%, 6/17/96 (IDR) (2)(12).................................... 1,000,000,000 395,641
Thai Military Bank Ltd. CD:
11%, 11/30/95 (THB) (2)........................................... 12,500,000 496,820
11%, 12/15/95 (THB) (2)........................................... 10,000,000 397,456
10%, 1/31/96 (THB) (2)............................................ 5,000,000 198,668
-----------
Total Certificates of Deposit (Cost $3,162,001)..................... 3,112,267
-----------
MORTGAGE-BACKED OBLIGATIONS -- 28.2%
GOVERNMENT AGENCY -- 26.9%
FHLMC/FNMA/Sponsored -- 18.6%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates, 6.65%, 4/15/21...................... 1,549,800 1,532,840
Mtg.-Backed Certificates, 11.50%, 1/1/18.......................... 161,686 181,493
Mtg.-Backed Certificates, 13%, 5/1/19............................. 609,699 710,300
Federal National Mortgage Assn.:
7%, 8/1/25........................................................ 5,366,809 5,321,513
Interest-Only Stripped Mtg.-Backed Security, Trust 222, Cl. 2,
9.176%, 6/1/23 (4).............................................. 6,514,447 1,951,281
Interest-Only Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
8.767%, 2/1/24 (4).............................................. 138,025 42,745
-----------
9,740,172
-----------
GNMA/Guaranteed -- 8.3%
Government National Mortgage Assn.:
7%, 1/15/24-5/15/24 (11).......................................... 3,783,473 3,757,446
7.50%, 11/15/23-5/15/24........................................... 587,271 594,978
-----------
4,352,424
-----------
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS (CONTINUED)
PRIVATE -- 1.3%
Commercial -- 0.9%
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1992-CHF, Cl. E, 8.25%, 12/25/20........................... $ 466,982 $ 449,251
-----------
Multi-Family -- 0.4%
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1995-C1, Cl. F, 6.90%, 2/25/07............................. 234,639 205,603
-----------
Total Mortgage-Backed Obligations (Cost $14,513,000)................ 14,747,450
-----------
U.S. GOVERNMENT OBLIGATIONS -- 3.5%
TREASURY -- 3.5%
U.S. Treasury Bonds, 10.75%, 8/15/05................................ 620,000 830,800
U.S. Treasury Nts., 8.50%, 7/15/97.................................. 950,000 994,234
-----------
Total U.S. Government Obligations (Cost $1,824,991)................. 1,825,034
-----------
FOREIGN GOVERNMENT OBLIGATIONS -- 35.0%
ARGENTINA -- 2.2%
Argentina (Republic of):
Medium-Term Nts., 8%, 8/9/97 (NLG)................................ 800,000 496,159
Sr. Unsec. Unsub. Bonds, 13.45%, 10/21/97 (ITL)................... 1,000,000,000 632,390
-----------
1,128,549
-----------
AUSTRALIA -- 3.4%
Australia (Commonwealth of) Bonds, 12.50%, 1/15/98 (AUD)............ 40,000 33,211
First Australia National Mortgage Acceptance Corp. Ltd. Bonds,
Series 22, 11.40%, 12/15/01 (AUD)................................. 1,548,400 1,267,420
South Australia Government Finance Gtd. Bonds, 12.50%, 10/15/00
(AUD)............................................................. 550,000 485,971
-----------
1,786,602
-----------
BRAZIL -- 2.5%
Banco do Estado de Sao Paulo SA, 9.25% Nts., 10/4/96................ 250,000 240,000
Banco Estado Minas Gerais, 8.25%, 2/10/00........................... 500,000 410,000
Brazil (Federal Republic of):
Bonds, Nota do Tesouro Nacional, 6%, 2/1/96....................... 100,000 96,380
Eligible Interest Bonds, 6.812%, 4/15/06 (5)...................... 850,000 565,250
-----------
1,311,630
-----------
</TABLE>
4
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
BULGARIA -- 1.9%
Bulgaria (Republic of) Interest Arrears Bonds, 6.75%, 7/28/11 (5)... $ 2,250,000 $ 998,438
-----------
COSTA RICA -- 0.7%
Central Bank of Costa Rica Principal Bonds, Series A, 6.25%,
5/21/10........................................................... 600,000 351,000
-----------
ECUADOR -- 0.5%
Ecuador (Republic of) Disc. Bonds, 6.812%, 2/28/25 (5).............. 500,000 250,000
-----------
GREAT BRITAIN -- 2.1%
United Kingdom Treasury Nts., 12.50%, 11/21/05 (GBP)................ 550,000 1,099,179
-----------
IRELAND -- 2.1%
National Treasury Management Agency (Irish Government) Bonds:
8%, 10/18/00 (IEP)................................................ 370,000 610,880
9%, 7/15/01 (IEP)................................................. 290,000 501,084
-----------
1,111,964
-----------
JAMAICA -- 0.4%
Jamaica (Government of) 1990 Refinancing Agreement Nts., Tranche A,
6.75%, 10/16/00 (5)(6)............................................ 204,166 182,729
-----------
JORDAN -- 0.5%
Hashemite Kingdom of Jordan Par Bonds, 4%, 12/23/23 (7)............. 500,000 233,750
-----------
MEXICO -- 3.7%
Banco Nacional de Comercio Exterior SNC International Finance BV
Gtd. Bonds, 12.65%, 6/21/98 (ESP)................................. 35,000,000 275,562
Banco Nacional de Comercio Exterior SNC, Zero Coupon,
11.310%, 12/5/95 (3)(12).......................................... 500,000 496,000
Banco Nacional de Obras y Servicios Publicos SA Nts.,
10.75%, 8/16/96................................................... 440,000 443,850
United Mexican States:
Combined Facility 3, Loan Participation Agreement, Tranche A,
6.75%, 9/20/97 (5)(6)........................................... 71,440 49,562
Nacional Financiera SNC Nts., 13.60%, 4/2/98 (ESP)................ 50,000,000 401,840
</TABLE>
5
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
MEXICO (CONTINUED)
Petroleos Mexicanos Gtd. Medium-Term Nts., 7.60%, 6/15/00......... $ 100,000 $ 86,250
Petroleos Mexicanos Gtd. Sr. Unsec. Nts., 6.875%, 3/8/99 (5)...... 200,000 177,000
-----------
1,930,064
-----------
MOROCCO -- 2.8%
Morocco (Kingdom of) Loan Participation Agreement:
Tranche A, 6.688%, 1/1/09 (5)..................................... 2,300,000 1,390,063
Tranche B, 6.688%, 1/1/04 (5)..................................... 100,000 67,625
-----------
1,457,688
-----------
NEW ZEALAND -- 0.5%
New Zealand (Republic of) Bonds, 10%, 7/15/97 (NZD)................. 395,000 271,240
-----------
NORWAY -- 2.3%
Norwegian Government Gtd. Bonds, 9.50%, 10/31/02 (NOK).............. 6,390,000 1,182,384
-----------
PANAMA -- 1.6%
Panama (Republic of) Debs., 7.25%, 5/10/02 (5)...................... 1,000,000 820,000
-----------
PHILIPPINES -- 0.1%
Philippines (Republic of) Front-Loaded Interest Reduction Bonds,
Series B, 5%, 6/1/08 (7).......................................... 100,000 76,563
-----------
POLAND -- 1.4%
Poland (Republic of):
Disc. Bonds, 6.875%, 10/27/24 (5)................................. 500,000 383,125
Treasury Bills, Zero Coupon, 24.957%, 4/17/96 (PLZ) (12).......... 1,000,000 364,614
-----------
747,739
-----------
PORTUGAL -- 1.3%
Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio Prazo,
11.875%, 2/23/00 (PTE)............................................ 100,000,000 697,447
-----------
SPAIN -- 2.3%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00 (ESP)............................................. 141,000,000 1,218,886
-----------
</TABLE>
6
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED)
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
SUPRANATIONAL -- 1.5%
International Bank for Reconstruction and Development Bonds, 12.50%,
7/25/97 (NZD)..................................................... 1,100,000 $ 785,947
-----------
SWEDEN -- 1.2%
Sweden (Kingdom of) Bonds, Series 1028, 11%, 1/21/99 (SEK).......... 4,100,000 653,832
-----------
Total Foreign Government Obligations (Cost $18,057,486)............. 18,295,631
-----------
CORPORATE BONDS AND NOTES -- 16.3%
BASIC INDUSTRY -- 1.2%
Metals/Mining -- 0.2%
Kaiser Aluminum & Chemical Corp., 9.875% Sr. Nts., 2/15/02.......... 100,000 102,750
UCAR Global Enterprises, Inc., 12% Sr. Sub. Nts., 1/15/05........... 25,000 28,188
-----------
130,938
-----------
Paper -- 1.0%
Gaylord Container Corp., 11.50% Sr. Nts., 5/15/01................... 100,000 103,000
QUNO Corp., 9.125% Sr. Nts., 5/15/05................................ 100,000 100,500
Repap New Brunswick, Inc., 9.25% First Priority Sr. Sec. Nts.,
7/15/00 (5)....................................................... 100,000 100,000
Repap Wisconsin, Inc., 9.25% First Priority Sr. Sec. Nts., 2/1/02... 100,000 97,000
Riverwood International Corp., 11.25% Sr. Sub. Nts., 6/15/02........ 100,000 107,000
-----------
507,500
-----------
CONSUMER RELATED -- 3.7%
Consumer Products -- 0.4%
Coleman Holdings, Inc., Zero Coupon Sr. Sec. Disc. Nts., Series B,
11.622%, 5/27/98 (12)............................................. 100,000 79,875
Revlon Consumer Products Corp., 10.50% Sr. Sub. Nts., Series B,
2/15/03........................................................... 100,000 103,375
-----------
183,250
-----------
Food/Beverages/Tobacco -- 0.6%
Pulsar Internacional SA de CV, 11.80% Nts., 9/19/96 (6)............. 250,000 250,625
Specialty Foods Corp., 11.125% Sr. Nts., Series A, 10/1/02 (3)...... 50,000 47,750
-----------
298,375
-----------
Healthcare -- 0.6%
Charter Medical Corp., 11.25% Sr. Sub. Nts., 4/15/04................ 100,000 108,750
</TABLE>
7
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
CONSUMER RELATED (CONTINUED)
Healthcare (Continued)
Quorum Health Group, Inc., 11.875% Sr. Sub. Nts., 12/15/02.......... $ 100,000 $ 110,000
Tenet Healthcare Corp., 10.125% Sr. Sub. Nts., 3/1/05............... 100,000 108,250
-----------
327,000
-----------
Hotel/Gaming -- 1.1%
Bally's Park Place Funding, Inc., 9.25% Gtd. First Mtg. Nts.,
3/15/04........................................................... 100,000 99,125
Boyd Gaming Corp., 10.75% Sr. Sub. Nts., 9/1/03..................... 100,000 105,750
Capital Gaming International, Inc. Promissory Nts................... 2,000 --
Empress River Casino Finance Corp., 10.75% Gtd. Sr. Nts., 4/1/02.... 100,000 101,000
HMH Properties, Inc., 9.50% Sr. Sec. Nts., 5/15/05 (3).............. 100,000 100,750
Rio Hotel & Casino, Inc., 10.625% Sr. Sub. Nts., 7/15/05 (3)........ 100,000 98,000
Trump Plaza Funding, Inc., 10.875% Gtd. Mtg. Nts., 6/15/01.......... 100,000 94,000
-----------
598,625
-----------
Textile/Apparel -- 1.0%
Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B, 10/1/03.... 100,000 94,500
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts., 17.899%,
10/23/96 (IDR) (12)............................................... 1,000,000,000 352,268
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05............ 100,000 100,500
-----------
547,268
-----------
ENERGY -- 1.1%
Chesapeake Energy Corp., 10.50% Sr. Nts., 6/1/02.................... 100,000 101,500
Kelley Oil & Gas Corp., 13.50% Sr. Nts., 6/15/99.................... 50,000 42,750
Moran Energy, Inc., 8.75% Cv. Sub. Debs., 1/15/08................... 200,000 148,000
Petroleum Heat & Power Co., Inc., 12.25% Sub. Debs., 2/1/05......... 100,000 110,500
Santa Fe Energy Resources, Inc., 11% Sr. Sub. Debs., 5/15/04........ 100,000 107,500
United Meridian Corp., 10.375% Sr. Sub. Nts., 10/15/05.............. 50,000 51,375
-----------
561,625
-----------
FINANCIAL SERVICES -- 5.7%
Banks & Thrifts -- 1.8%
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97............................................. 100,000 95,000
9% Unsub. Unsec. Bonds, 10/29/98.................................. 90,000 76,500
Banco Ganadero SA, Zero Coupon Sr. Unsub. Unsec. Nts., 9.928%,
6/15/96 (3) (12).................................................. 250,000 235,669
Banco Mexicano SA, 8% Sr. Unsub. Unsec. Exchangeable Medium-Term
Nts., 11/4/98..................................................... 100,000 86,125
</TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<S> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
Banks & Thrifts (Continued)
Market
Face Amount Value
(1) See Note 1
-------------- -----------
Morgan Stanley Group, 14.25% Indian Rupee Indexed Nts.,
6/26/96 (2) (INR)................................................. 3,141,000 $ 91,842
Rabobank Nederland, 11.05% Sr. Unsec. Debs., 12/12/97 (ITL)......... 575,000,000 363,399
-----------
948,535
-----------
Diversified Financial -- 3.7%
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98................... 450,000 375,750
KfW International Finance, Inc., 11.625% Gtd. Nts., 11/27/98
(ITL)............................................................. 825,000,000 528,514
Olympic Financial Ltd., 13% Sr. Nts., 5/1/00........................ 100,000 109,500
Swiss Bank Corp. (Jersey), 7% Sr. Unsub. Unsec. Medium-Term Nts.,
1/5/00 (DEM)...................................................... 1,250,000 937,546
-----------
1,951,310
-----------
Insurance -- 0.2%
American Life Holding Co., 11.25% Sr. Sub. Nts., 9/15/04............ 100,000 104,500
-----------
HOUSING RELATED -- 0.5%
Homebuilders/Real Estate -- 0.5%
NVR, Inc., 11% Gtd. Sr. Nts., 4/15/03............................... 100,000 97,500
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11 (3).... 250,000 190,000
-----------
287,500
-----------
MANUFACTURING -- 0.4%
Automotive -- 0.4%
Aftermarket Technology Corp., 12% Sr. Sub. Nts., Series B, 8/1/04... 100,000 106,250
JPS Automotive Products Corp., 11.125% Sr. Nts., 6/15/01............ 100,000 101,500
-----------
207,750
-----------
MEDIA -- 1.0%
Broadcasting -- 0.1%
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05.......... 50,000 51,625
-----------
Cable Television -- 0.8%
American Telecasting, Inc., 0%/14.50% Sr. Disc. Nts., 6/15/04 (8)... 107,579 70,195
Continental Cablevision, Inc., 9.50% Sr. Debs., 8/1/13.............. 100,000 105,500
PriCellular Wireless Corp., 0%/12.25% Sr. Sub. Disc. Nts., 10/1/03
(8)............................................................... 150,000 111,000
</TABLE>
9
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
MEDIA (CONTINUED)
Cable Television (Continued)
TeleWest Communications PLC, 0%/11% Sr. Disc. Debs., 10/1/07 (8).... $ 100,000 $ 58,500
Videotron Holdings PLC, 0%/11% Sr. Disc. Nts., 8/15/05 (8).......... 100,000 59,625
-----------
404,820
-----------
Diversified Media -- 0.1%
Panamsat LP/Panamsat Capital Corp., 0%/11.375% Sr. Sub. Disc. Nts.,
8/1/03 (8)........................................................ 50,000 40,125
-----------
OTHER -- 0.4%
Services -- 0.4%
Acetex Corp., 9.75% Sr. Sec. Nts., 10/1/03 (3)...................... 50,000 51,500
Protection One Alarm Monitoring, Inc., Units (each unit consists of
ten $1,000 principal amount of 0%/13.625% sr. sub. disc. nts.,
6/30/05 and 32 warrants, each warrant entitles holder to purchase
1 share of Protection One, Inc. common stock) (3)(9).............. 200,000 143,000
-----------
194,500
-----------
RETAIL -- 0.9%
Drug Stores -- 0.2%
Duane Reade, 12% Sr. Nts., Series B, 9/15/02........................ 100,000 92,250
-----------
Specialty Retailing -- 0.4%
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03................. 100,000 98,500
United Stationers Supply Co., 12.75% Sr. Sub. Nts., 5/1/05 (3)...... 100,000 107,500
-----------
206,000
-----------
Supermarkets -- 0.3%
Grand Union Co., 12% Sr. Nts., 9/1/04............................... 100,000 96,750
Penn Traffic Co., 9.625% Sr. Sub. Nts., 4/15/05..................... 100,000 73,000
-----------
169,750
-----------
TRANSPORTATION -- 0.4%
Railroads -- 0.2%
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr. Disc.
Nts., Series B, 12/15/03 (8)...................................... 200,000 131,000
-----------
</TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Face Amount Value
(1) See Note 1
-------------- -----------
<S> <C> <C>
CORPORATE BONDS AND NOTES (CONTINUED)
TRANSPORTATION (CONTINUED)
Shipping -- 0.2%
Trans Ocean Container Corp., 12.25% Sr. Sub. Nts., 7/1/04........... $ 100,000 $ 102,500
-----------
UTILITIES -- 1.0%
Telecommunications -- 1.0%
Cellular Communications International, Inc., Units (each unit
consists of $1,000 principal amount of zero coupon sr. disc. nts.,
8/15/00 and one warrant to purchase 1.126 shares of common stock)
(9)............................................................... 100,000 57,000
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03 (8)........... 150,000 117,000
Horizon Cellular Telephone LP/Horizon Finance Corp., 0%/11.375% Sr.
Sub. Disc. Nts., 10/1/00 (8)...................................... 150,000 128,250
IntelCom Group (USA), Inc. (ICG) and IntelCom Group, Inc., Units
(each unit consists of ten 0%/13.50% sr. disc. nts., 9/15/05 of
ICG and 33 warrants to purchase an equal number of common shares
of IntelCom at an exercise price equal to $12.51 per share)
(3)(8)(9)......................................................... 150,000 84,750
MFS Communications, Inc., 0%/9.375% Sr. Disc. Nts., 1/15/04 (8)..... 150,000 116,250
-----------
503,250
-----------
Total Corporate Bonds and Notes (Cost $8,456,872)................... 8,549,996
-----------
</TABLE>
<TABLE>
<CAPTION>
Shares
--------------
<S> <C> <C>
COMMON STOCKS -- 0.0%
Finlay Enterprises, Inc. (10)....................................... 333 4,579
Grand Union Co. (10)................................................ 1,767 18,995
-----------
Total Common Stocks (Cost $32,539).................................. 23,574
-----------
</TABLE>
<TABLE>
<CAPTION>
Units
--------------
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES -- 0.0%
American Telecasting, Inc. Wts., Exp. 6/99.......................... 500 1,625
Capital Gaming International, Inc. Wts., Exp. 2/99.................. 3,538 172
Terex Corp. Rts., Exp. 7/96 (3)..................................... 30 2
-----------
Total Rights, Warrants and Certificates (Cost $16,281).............. 1,799
-----------
</TABLE>
11
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Market
Value
Date Strike Contracts See Note 1
-------- ------ -------------- -----------
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED -- 0.1%
Brazil (Federal Republic of) Eligible Interest
Bonds, 6.812%, 4/15/06, Put Opt.............. Jan. 96 $64.75 850 $ 12,495
Morocco (Kingdom of) Loan Participation
Agreement, Tranche A, 6.688%, 1/1/09,
Put Opt...................................... Jan. 96 60.25 2,300 61,951
-----------
Total Put Options Purchased (Cost $60,275)..... 74,446
-----------
</TABLE>
<TABLE>
<CAPTION>
Face Amount
(1)
--------------
<S> <C> <C>
STRUCTURED INSTRUMENTS -- 2.4%
Canadian Imperial Bank, 10% Certificate of Deposit British Pound
Sterling Maximum Rate Linked Nts., 11/8/96 (indexed to the 3-month
GBP LIBOR, multiplied by 9) (6)................................... $ 250,000 254,100
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
13.471%, 12/14/95 (indexed to the Nota Do Tesouro Nacional, Zero
Coupon, 12/13/95)(12)............................................. 400,000 393,970
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.,
11.192%, 2/15/96 (indexed to the Nota Do Tesouro Nacional, Zero
Coupon, 2/15/96)(12).............................................. 630,000 610,340
-----------
Total Structured Instruments (Cost $1,254,310)...................... 1,258,410
-----------
REPURCHASE AGREEMENT -- 6.9%
Repurchase agreement with Paine Webber, Inc., 5.85%, dated 10/31/95,
to be repurchased at $3,600,585 on 11/1/95, collateralized by U.S.
Treasury Nts., 6%-7.875%, 7/15/96-5/31/99, with a value of
$3,675,176 (Cost $3,600,000)...................................... 3,600,000 3,600,000
-----------
Total Investments, at Value (Cost $50,977,755)...................... 98.4% 51,488,607
Assets Net of Liabilities........................................... 1.6 851,272
-------------- -----------
Net Assets.......................................................... 100.0% $52,339,879
============== ===========
</TABLE>
12
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1995 (Continued)
Oppenheimer Multi-Government Trust
(1) Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
<TABLE>
<S> <C> <C>
ARA -- Argentine Austral
AUD -- Australian Dollar
CLP -- Chilean Peso
DEM -- German Deutsche Mark
ESP -- Spanish Peseta
GBP -- British Pound Sterling
HUF -- Hungarian Forint
IDR -- Indonesian Rupiah
IEP -- Irish Punt
INR -- Indian Rupee
ITL -- Italian Lira
NLG -- Netherlands Guilder
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
PLZ -- Polish Zloty
PTE -- Portuguese Escudo
SEK -- Swedish Krona
THB -- Thai Baht
</TABLE>
(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) Represents a security sold under Rule 144A, which is exempt from
registration under the Securities Act of 1933, as amended. This security
has been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $2,299,811 or 4.39% of the Fund's
net assets, at October 31, 1995.
(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). Interest
rates disclosed represent current yields based upon the current cost basis
and estimated timing and amount of future cash flows.
(5) Represents the current interest rate for a variable rate security.
(6) Identifies issues considered to be illiquid -- See Note 6 of Notes to
Financial Statements.
(7) Represents the current interest rate for an increasing rate security.
(8) Denotes a step bond: a zero coupon bond that converts to a fixed rate of
interest at a designated future date.
(9) Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units
which represent debt securities, face amount disclosed represents total
underlying principal.
(10) Non-income producing security.
(11) A sufficient amount of liquid assets has been designated to cover
outstanding written call options, as follows:
<TABLE>
<CAPTION>
Face Amount Expiration Exercise Premium Market Value
Subject to Call Date Price Received See Note 1
--------------- --------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Call Option on Bulgaria
(Republic of) Interest Arrears
Bonds, 6.75%, 7/28/11.......... 2,250,000 1/22/96 $ 45.00 $32,175 $ 26,325
Call Option on Spain (Kingdom
of) Gtd. Bonds, Bonos y
Obligacion del Estado, 12.25%,
3/25/00........................ 71,000,000 ESP 11/24/95 105.47 ESP 3,353 4,472
-------- ------
$35,528 $ 30,797
======== ==========
</TABLE>
(12) For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
See accompanying Notes to Financial Statements.
13
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1995
Oppenheimer Multi-Government Trust
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $50,977,755) -- see accompanying statement................... $51,488,607
Cash..................................................................................... 40,891
Net unrealized appreciation on forward foreign currency exchange contracts -- Note 7..... 72,847
Receivables:
Interest and principal paydowns........................................................ 1,126,641
Investments sold and options written................................................... 341,376
Other.................................................................................... 15,415
-----------
Total assets....................................................................... 53,085,777
-----------
LIABILITIES:
Options written, at value (premiums received $35,528) -- Note 4.......................... 30,797
Payables and other liabilities:
Investments purchased.................................................................. 540,322
Dividends.............................................................................. 61,777
Deferred trustees' fees -- Note 1...................................................... 27,434
Management and administrative fees -- Note 5........................................... 10,726
Transfer agent and accounting services fees............................................ 5,957
Other.................................................................................. 68,885
-----------
Total liabilities.................................................................. 745,898
-----------
NET ASSETS............................................................................... $52,339,879
===========
COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest............................................... $ 66,155
Additional paid-in capital............................................................... 59,784,052
Overdistributed net investment income.................................................... (79,149)
Accumulated net realized loss from investment, written option and foreign currency
transactions........................................................................... (8,026,616)
Net unrealized appreciation on investments, written options and translation of assets and
liabilities denominated in foreign currencies.......................................... 595,437
-----------
NET ASSETS -- applicable to 6,615,505 shares of beneficial interest outstanding.......... $52,339,879
===========
NET ASSET VALUE PER SHARE................................................................ $7.91
======
</TABLE>
See accompanying Notes to Financial Statements.
14
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1995
Oppenheimer Multi-Government Trust
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $52,841)................................... $ 5,344,119
-----------
EXPENSES:
Management fees -- Note 5................................................................ 332,730
Administrative fees -- Note 5............................................................ 102,379
Custodian fees and expenses.............................................................. 49,736
Transfer agent and accounting services fees -- Note 5.................................... 37,325
Shareholder reports...................................................................... 32,253
Legal and auditing fees.................................................................. 26,499
Registration and filing fees............................................................. 15,176
Trustees' fees and expenses.............................................................. 7,790
Other.................................................................................... 29,737
-----------
Total expenses..................................................................... 633,625
-----------
NET INVESTMENT INCOME.................................................................... 4,710,494
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS WRITTEN AND FOREIGN CURRENCY:
Net realized loss on:
Investments............................................................................ (896,682)
Closing of futures contracts........................................................... (2,201)
Closing and expiration of options written -- Note 4.................................... (14,881)
Foreign currency transactions.......................................................... (367,515)
-----------
Net realized loss.................................................................. (1,281,279)
-----------
Net change in unrealized appreciation or depreciation on:
Investments and options written........................................................ 1,239,137
Translation of assets and liabilities denominated in foreign currencies................ (295,758)
-----------
Net change......................................................................... 943,379
-----------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS, OPTIONS WRITTEN AND FOREIGN CURRENCY....
(337,900)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS..................................... $ 4,372,594
===========
</TABLE>
See accompanying Notes to Financial Statements.
15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income....................................................... $ 4,710,494 $ 4,837,543
Net realized loss on investments, options written and foreign currency
transactions.............................................................. (1,281,279) (4,490,883)
Net change in unrealized appreciation or depreciation on investments,
options written and translation of assets and liabilities denominated in
foreign currencies........................................................ 943,379 137,568
----------- -----------
Net increase in net assets resulting from operations.................. 4,372,594 484,228
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income........................................ (4,472,033) (4,482,879)
Tax return of capital distribution.......................................... -- (88,446)
----------- -----------
Total decrease........................................................ (99,439) (4,087,097)
----------- -----------
NET ASSETS:
Beginning of period......................................................... 52,439,318 56,526,415
----------- -----------
End of period (including overdistributed net investment income of $79,149
and $33,177, respectively)................................................ $52,339,879 $52,439,318
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
16
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer Multi-Government Trust
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(1)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period... $ 7.93 $ 8.54 $ 8.55 $ 8.97 $ 8.66 $ 9.12 $ 9.30
------- ------- ------- ------- ------- ------- -------
Income (loss) from investment
operations:
Net investment income................ .71 .69 .82 .89 .97 .96 .82
Net realized and unrealized
gain (loss) ...................... (.05) (.61) -- (.39) .33 (.43) (.09)
------- ------- ------- ------- ------- ------- -------
Total income from investment
operations....................... .66 .08 .82 .50 1.30 .53 .73
------- ------- ------- ------- ------- ------- -------
Dividends and distributions to
shareholders:
Dividends from net investment income . (.68) (.68) (.75) (.92) (.99) (.94) (.80)
Distributions from net realized
gain............................... -- -- -- -- -- (.05) (.04)
Tax return of capital distribution... -- (.01) (.08) -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions
to shareholders.................. (.68) (.69) (.83) (.92) (.99) (.99) (.84)
Offering costs......................... -- -- -- -- -- -- (.07)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period......... $ 7.91 $ 7.93 $ 8.54 $ 8.55 $ 8.97 $ 8.66 $ 9.12
======= ======= ======= ======= =======
======= =======
Market value, end of period............ $ 7.00 $ 7.00 $ 8.00 $ 8.63 $ 9.50 $ 7.75 $ 9.00
TOTAL RETURN, AT MARKET VALUE(2)....... 9.09% (4.84)% 2.22% 0.70% 37.18% (3.27)%
0.47%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)........................... $52,340 $52,439 $56,526 $55,668 $57,208 $54,676 $57,418
Average net assets (in thousands)...... $51,207 $54,380 $55,877 $56,970 $55,604 $56,175 $57,012
Number of shares outstanding at end of
period (in thousands)................ 6,616 6,616 6,616 6,511 6,378 6,310 6,298
Ratios to average net assets:
Net investment income................ 9.20% 8.90% 9.59% 10.13% 11.06% 10.83% 9.85%(3)
Expenses............................. 1.24% 1.24% 1.22% 1.32% 1.21% 1.22% 1.34%(3)
Portfolio turnover rate(4)............. 344.2% 315.5% 112.5% 98.4% 59.9% 95.3% 98.7%
</TABLE>
(1) For the period from November 23, 1988 (commencement of operations) to
October 31, 1989.
(2) Assumes a hypothetical purchase at the current market price 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
a sale at the current market price on the last business day of the period.
Total return does not reflect sales charges or brokerage commissions. Total
returns are not annualized for periods of less than one full year.
(3) Annualized.
(4) 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 period ended October 31, 1995 were
$166,192,670 and $170,038,446, respectively.
See accompanying Notes to Financial Statements.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Oppenheimer Multi-Government Trust
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Multi-Government Trust (the Trust) is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Trust's investment advisor is Oppenheimer
Management Corporation (the Manager). The following is a summary of significant
accounting policies consistently followed by the Trust.
Investment Valuation -- Portfolio securities are valued at the close of the New
York Stock Exchange on the last day of each week on which day the New York Stock
Exchange is open. 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 are valued under consistently applied
procedures established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount. 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 Trust 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 Trust's Statement of Operations.
Repurchase Agreements -- The Trust 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 Trust may be delayed or limited.
Federal Taxes -- The Trust 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. At October 31, 1995, the
Trust had available for federal income tax purposes an unused capital loss
carryover of approximately $7,801,000, $1,293,000 of which will expire in 1998,
$1,042,000 in 1999, $435,000
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Government Trust
in 2001, $4,196,000 in 2002, and $835,000 in 2003.
Trustees' Fees and Expenses -- The Trust has adopted a nonfunded retirement plan
for the Trust's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 1995, the Trust's projected benefit obligations were reduced by
$7,005. In addition, one retired trustee is eligible for payments under the
Trust's retirement plan and a payment of $507 was made. The accumulated
liability for the Trust's projected benefit obligations was $27,434 at October
31, 1995.
Distributions to Shareholders -- The Trust intends to declare and pay dividends
from net investment income monthly. Distributions from net realized gains on
investments, if any, will be made 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 the recognition of paydown gains and losses and 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 Trust.
During the year ended October 31, 1995, the Trust 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, during the year ended October 31, 1995,
amounts have been reclassified to reflect a decrease in undistributed net
investment income of $284,433 and a decrease in accumulated net realized loss on
investments of $284,433.
Other -- Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. Dividends in kind are recognized as income
on the ex-dividend date, at the current market value of the underlying security.
Interest on payment-in-kind debt instruments is accrued as income at the coupon
rate and a market adjustment is made periodically.
2. SHARES OF BENEFICIAL INTEREST
The Trust has authorized an unlimited number of $.01 par value shares of
beneficial interest. There were no transactions in shares of beneficial interest
for the years ended October 31, 1995 and October 31, 1994.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1995 net unrealized depreciation on investments and options
written of $515,583 was composed of gross appreciation of $1,263,052, and gross
depreciation of $747,469.
4. OPTION ACTIVITY
The Trust may buy put and call options, or write covered call options on
portfolio securities and cash secured put options in order to produce
incremental earnings or protect against changes in the value of portfolio
securities.
The Trust 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 Trust receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Government Trust
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 Trust 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 Trust 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 Trust 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 Trust pays a premium whether or not the
option is exercised. The Trust 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 year ended October 31, 1995 was as follows:
<TABLE>
<CAPTION>
Put Options
------------------------
Number Amount
of Options of Premiums
---------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1994................ -- $ --
Options written.................. 171,233 1,770
Options closed................... (171,233) (1,770)
--------- ----------
Options outstanding at
October 31, 1995................ -- $ --
========= ==========
</TABLE>
<TABLE>
<CAPTION>
Call Options
------------------------
Number Amount
of Options of Premiums
---------- -----------
<S> <C> <C>
Options outstanding at
October 31, 1994................ -- $ --
Options written.................. 12,104 95,232
Options expired.................. (2,812) (9,052)
Options exercised................ (1,524) (10,588)
Options closed................... (4,931) (40,064)
--------- ----------
Options outstanding at
October 31, 1995................ 2,837 $ 35,528
========= ==========
</TABLE>
5. MANAGEMENT AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Trust which provides for an annual fee of .65% on
the Trust's average annual net assets.
Mitchell Hutchins Asset Management Inc. serves as the Trust's Administrator. The
Trust pays the Administrator an annual fee of .20% of the Trust's average annual
net assets.
The Manager acts as the accounting agent for the Trust at an annual fee of
$18,000, plus out-of-pocket costs and expenses reasonably incurred.
Shareholder Financial Services, Inc. (SFSI), a wholly-owned subsidiary of the
Manager, is the transfer agent and registrar for the Trust. Fees paid to SFSI
are based on the number of accounts and the number of shareholder transactions,
plus out-of-pocket costs and expenses.
6. ILLIQUID AND RESTRICTED SECURITIES
At October 31, 1995, investments in securities included issues that are illiquid
or restricted. The securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. The Trust intends to invest no more
than 10% of its net assets (determined at the time of purchase) in illiquid or
restricted securities. The aggregate value of these
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Government Trust
securities subject to this limitation at October 31, 1995 was $737,016 which
represents 1.4% of the Trust's net assets. Information concerning these
securities is as follows:
<TABLE>
<CAPTION>
Valuation
Cost Per Unit as
Acquisition Per of October
Security Date Unit 31, 1995
- ------------------- ----------------- ------- -----------
<S> <C> <C> <C>
Canadian Imperial
Bank, 10%
Certificate of
Deposit British
Pound Sterling
Maximum Rate
Linked Nts.,
11/8/96........... 4/28/95 $100.00 $101.64
Jamaica (Government
of) 1990
Refinancing
Agreement Nts.,
Tranche A, 6.75%,
10/16/00.......... 7/12/95-8/15/95 $ 88.68 $ 89.50
Pulsar
Internacional SA
de CV, 11.80%
Nts., 9/19/96..... 9/14/95 $100.00 $100.25
United Mexican
States, Combined
Facility 3, Loan
Participation
Agreement, Tranche
A, 6.75%,
9/20/97........... 10/25/94 $ 89.00 $ 69.38
</TABLE>
Pursuant to guidelines adopted by the Board of Trustees, certain unregistered
securities are determined to be liquid and are not included within the 10%
limitation specified above.
7. FORWARD FOREIGN CURRENCY EXCHANGE 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 Trust uses forward contracts to seek to manage foreign currency risks. They
may also be used to tactically shift portfolio currency risk. The Trust
generally enters into forward contracts as a hedge upon the purchase or sale of
a security denominated in a foreign currency. In addition, the Trust 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 Trust 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. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized and unrealized
gains and losses are reported with all other foreign currency gains and losses
in the Trust'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.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer Multi-Government Trust
At October 31, 1995, outstanding forward contracts to purchase and sell
currencies were as follows:
<TABLE>
<CAPTION>
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Purchase Exchange Date (000s) October 31, 1995 (Depreciation)
----------------------------------------- ----------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Canadian Dollar (CAD).................... 11/2/95 1,115 CAD $ 828,986 $ 3,253
German Deutsche Mark (DEM)............... 1/6/95-11/30/95 9,373 DEM 6,655,504 10,410
French Francs (FRF)...................... 11/10/95 4,915 FRF 1,004,518 16,040
Netherlands Guilder (NLG)................ 11/1/95 402 NLG 254,275 (668)
New Zealand Dollar (NZD)................. 11/3/95 3 NZD 1,747 (1)
Swedish Krone (SEK)...................... 11/2/95 45 SEK 6,727 (18)
----- ----------- ---------
15,853 $8,751,757 $ 29,016
======= ===========
=========
</TABLE>
<TABLE>
<CAPTION>
Contract Unrealized
Amount Valuation as of Appreciation
Contracts to Sell Exchange Date (000s) October 31, 1995 (Depreciation)
----------------------------------------- ----------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C> <C>
Canadian Dollar (CAD).................... 11/2/95 1,115 CAD $ 828,986 $ 15,265
German Deutsche Mark (DEM)............... 11/6/95-11/30/95 9,373 DEM 6,655,504 53,547
French Francs (FRF)...................... 11/10/95 4,915 FRF 1,004,518 (24,981)
----- ----------- ---------
15,403 $8,489,008 43,831
====== ===========
=========
Net Unrealized Appreciation.............. $ 72,847
=========
</TABLE>
8. QUARTERLY RESULTS OF OPERATIONS: (UNAUDITED)
<TABLE>
<CAPTION>
Net Realized and
Unrealized Gain
(Loss) on
Investments, Net Increase
Net Options and Foreign (Decrease) in Net
Investment Currency Assets Resulting
Income Transactions from Operations Market Price
------------------ ------------------- ------------------- on NYSE
Total Per Total Per Total Per -------------------
Quarter ended (000) Share (000) Share (000) Share High Low
---------------- ------ ----- ------- ----- ------- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
October 31, 1995........... $1,212 $.18 $ 71 $ .01 $ 1,283 $.19 $ 7.25 $ 6.50
July 31, 1995.............. 1,183 .18 1,319 .20 2,502 .38 7.125 6.625
April 30, 1995............. 1,144 .17 490 .08 1,634 .25 7.375 6.50
January 31, 1995........... 1,172 .18 (2,218) (.34) (1,046) (.16) 7.25 6.625
------ ---- ------- ----- ------- ----
Totals.................. $4,711 $.71 $ (338) $(.05) $ 4,373 $.66
====== ==== ======== ===== ======= ====
October 31, 1994........... $1,117 $.17 $ (867) $(.13) $ 250 $.04 $7.625 $6.625
July 31, 1994.............. 1,121 .17 (276) (.04) 845 .13 7.875 7.25
April 30, 1994............. 1,218 .18 (3,489) (.52) (2,271) (.34) 8.25 7.375
January 31, 1994........... 1,382 .17 278 .08 1,660 .25 8.50 7.75
------ ---- ------- ----- ------- -----
Totals.................. $4,838 $.69 $(4,354) $(.61) $ 484 $.08
====== ==== ======= ===== ======= ====
October 31, 1993........... $1,231 $.19 $ 57 $ .01 $ 1,288 $.20 $8.875 $ 8.00
July 31, 1993.............. 1,272 .19 211 .03 1,483 .22 8.875 8.50
April 30, 1993............. 1,397 .22 171 .03 1,568 .25 9.00 8.375
January 31, 1993........... 1,457 .22 (375) (.07) 1,082 .15 9.00 8.375
------ ---- ------- ----- ------- ----
Totals.................. $5,357 $.82 $ 64 $ .00 $ 5,421 $.82
====== ==== ======= ===== ======= ====
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements.
(a) Statement of Investments - (See Part B, Statement of
Additional Information): filed herewith.
(b) Statement of Assets and Liabilities - (See Part B, Statement
of Additional Information): filed herewith.
(c) Statement of Operations - (See Part B, Statement of
Additional Information): filed herewith.
(d) Statements of Changes in Net Assets - (See Part B, Statement
of Additional Information): filed herewith.
(e) Financial Highlights - (See Part B, Statement of Additional
Information): filed herewith.
(f) Notes to Financial Statements - (See Part B, Statement of
Additional Information): filed herewith.
(g) Independent Auditors' Report - (See Part B, Statement of
Additional Information): filed herewith.
(h) Independent Auditors' Consent - (See Part B, Statement of
Additional Information): filed herewith.
2. Exhibits:
(a) (1) Declaration of Trust of Registrant - Filed with
Registrant's Registration Statement, 10/7/88, and refiled with Post-
Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(2) Amendment No. 1 dated as of October 18, 1988 to
Declaration of Trust of Registrant - Filed with Pre-Effective Amendment
No. 2 to Registrant's Registration Statement, 11/12/88, and refiled with
Post-Effective Amendment No. 8 to Registrant's Registration Statement,
2/27/95, and incorporated herein by reference.
(3) Amendment No. 2 dated as of November 12, 1988 to
Declaration of Trust of Registrant - Filed with Post-Effective Amendment
No. 1 to Registrant's Registration Statement, 11/25/88, and refiled with
Post-Effective Amendment No. 8 to Registrant's Registration Statement,
2/27/95, and incorporated herein by reference.
(4) Amendment No. 3 dated November 6, 1989 to Declaration
of Trust of Registrant - Filed with Post-Effective Amendment No. 8 to
Registrant's Registration Statement, 2/27/95, and incorporated herein by
reference.
(b) (1) By-Laws of Registrant - Filed with Registrant's
Registration Statement, 10/7/88, and refiled with Post-Effective Amendment
No. 8 to Registrant's Registration Statement, 2/27/95, and incorporated
herein by reference.
(2) Amendment to By-Laws of Registrant - Filed with Post-
Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(c) Inapplicable
(d) Specimen certificate for Shares of Beneficial Interest,
$.01 par value - Filed with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement, 11/12/88, and refiled with Post-Effective
Amendment No. 8 to Registrant's Registration Statement, 2/27/95, and
incorporated herein by reference.
(e) See Exhibit (k)(2).
(f) Inapplicable
(g) (1) Investment Advisory Agreement with Oppenheimer
Management Corporation dated 10/22/90 - Filed with Post-Effective
Amendment No. 5 to Registrant's Registration Statement dated 2/28/91 and
refiled with Post-Effective Amendment No. 8 to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(2) Form of Administration Agreement with Mitchell
Hutchins Asset Management Inc. - Filed with Pre-Effective Amendment No.
2 to Registrant's Registration Statement, 11/12/88, and refiled with Post-
Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(h) Inapplicable
(i) Retirement Plan for Non-Interested Trustees or Directors
(adopted by Registrant on 6/7/90) - Filed with Post-Effective Amendment
No. 45 to the Registration Statement of Oppenheimer Special Fund (Reg. No.
2-14586) dated 10/21/94, and refiled with Post-Effective Amendment No. 8
to Registrant's Registration Statement, 2/27/95, and incorporated herein
by reference.
(j) Co-Custody Agreement - Filed with Post-Effective Amendment
No. 7 to Registrant's Registration Statement, dated 2/26/93, and refiled
with Post-Effective Amendment No. 8 to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(k) (1) Accounting Service Agreement - Filed with Post-
Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(k) (2)Registrar, Transfer Agency and Service Agreement - Filed
with Post-Effective Amendment No. 8 to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(k) (3) Co-Transfer Agent and Co-Registar Agreement - Filed
with Post-Effective Amendment No. 8 to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(l) Inapplicable.
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Inapplicable
(q) Inapplicable
(r) Financial Data Schedule - Filed herewith
Item 25. Marketing Arrangements.
Inapplicable.
Item 26. Other Expenses of Issuance and Distribution.
Inapplicable.
Item 27. Persons Controlled by or under Common Control.
None.
Item 28. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at February 1, 1996
Shares of Beneficial Interest, 1,114
$.01 par value
Item 29. Indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding)
is asserted against the Registrant by such trustee, officer or controlling
person, the 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 Act, and will be governed by
the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its By-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation therein of
Sections 17(h) and 17(i) of the Investment Company Act remains in effect.
Registrant, in conjunction with the Registrant's Trustees, and other
registered management investment companies managed by the Adviser,
generally maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant. However, in no event
will Registrant pay that portion of the premium, if any, for insurance to
indemnify any such person for any act for which Registrant itself is not
permitted to indemnify him.
Item 30. Business and Other Connections of Investment Adviser.
(a) OppenheimerFunds, Inc. is the investment adviser of the
Registrant; it and certain subsidiaries and affiliates act in the same
capacity to other registered investment companies as described in Parts
A and B hereof and listed in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
officer and director of OppenheimerFunds, Inc. is, or at any time during
the past two fiscal years has been, engaged for his/her own account or in
the capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- -------------------------------
<S> <C>
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Robert J. Bishop,
Assistant Vice President Treasurer of the Oppenheimer Funds
(listed below); previously a Fund
Controller for OppenheimerFunds,
Inc. (the "Adviser").
Bruce Bartlett,
Vice President Vice President and Portfolio
Manager of Oppenheimer Total Return
Fund, Inc., Oppenheimer Main Street
Funds, Inc. and Oppenheimer
Variable Account Funds; formerly a
Vice President and Senior Portfolio
Manager at First of America
Investment Corp.
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Secretary and Treasurer of the
Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc.
(the "Distributor") and HarbourView
Asset Management Corporation
("HarbourView"), an investment
adviser subsidiary of the Adviser;
Senior Vice President, Treasurer,
Assistant Secretary and a director
of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of
the Adviser; Vice President,
Treasurer and Secretary of
Shareholder Services, Inc. ("SSI")
and Shareholder Financial Services,
Inc. ("SFSI"), transfer agent
subsidiaries of the Adviser;
President, Treasurer and Director
of Centennial Capital Corporation;
Vice President and Treasurer of
Main Street Advisers.
Michael A. Carbuto,
Vice President Vice President and Portfolio
Manager of Centennial California
Tax Exempt Trust, Centennial New
York Tax Exempt Trust and
Centennial Tax Exempt Trust; Vice
President of Centennial.
William Colbourne,
Assistant Vice President Formerly, Director of Alternative
Staffing Resources, and Vice
President of Human Resources,
American Cancer Society.
Lynn Coluccy,
Vice President Formerly Vice President / Director
of Internal Audit of the Adviser.
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed
Income for State Street Research &
Management Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President Vice President and Portfolio
Manager of Oppenheimer Growth Fund,
Oppenheimer Variable Account Funds;
Senior Vice President and Portfolio
Manager of Oppenheimer Strategic
Income & Growth Fund; Vice
President of Oppenheimer Quest
Value Fund, Inc., Oppenheimer Quest
Officers Value Fund, Oppen-heimer
Quest For Value Funds and
Oppenheimer Quest Global Value
Fund, Inc.
John Doney,
Vice President Vice President and Portfolio
Manager of Oppenheimer Equity
Income Fund.
Andrew J. Donohue,
Executive Vice President
& General Counsel Secretary of the New York-
based Oppenheimer Funds; Vice
President of the Denver-based
Oppenheimer Funds; Executive Vice
President, Director and General
Counsel of the Distributor;
President and a director of
Centennial; formerly Senior Vice
President and Associate General
Counsel of the Adviser and the
Distributor.
Kenneth C. Eich,
Executive Vice President /
Chief Financial Officer Treasurer of Oppenheimer
Acquisition Corporation ("OAC").
George Evans,
Vice President Vice President and Portfolio
Manager of Oppenheimer Global
Emerging Growth Fund.
Scott Farrar,
Assistant Vice President Assistant Treasurer of the
Oppenheimer Funds; previously a
Fund Controller for the Manager.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor,; Secretary of
HarbourView, Main Street Advisers,
Inc. and Centennial; Secretary,
Vice President and Director of
Centennial Capital Corp.
Ronald H. Fielding,
Senior Vice President Chairman of the Board and Director
of Rochester Fund Distributors,
Inc. ("RFD"); President and
Director of Fielding Management
Company, Inc. ("FMC"); President
and Director of Rochester Capital
Advisors, Inc. ("RCAI"); President
and Director of Rochester Fund
Services, Inc. ("RFS"); President
and Director of Rochester Tax
Managed Fund, Inc.; Vice President
and Portfolio Manager of Rochester
Fund Municipals and Rochester
Portfolio Series - Limited Term New
York Municipal Fund.
Jon S. Fossel,
Chairman of the Board and Director Director of OAC, the Adviser's
parent holding company; director of
HarbourView; a director of SSI and
SFSI; President, Director, Trustee,
and Managing General Partner of the
Denver-based Oppenheimer Funds;
President and Chairman of the Board
of Main Street Advisers, Inc.;
formerly Chief Executive Officer of
the Adviser.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President
and Counsel of OAC; formerly he
held the following positions: a
director of the Distributor, Vice
President and a director of
HarbourView and Centennial, a
director of SFSI and SSI, an
officer of other Oppenheimer Funds
and Executive Vice President &
General Counsel of the Manager and
the Distributor.
Linda Gardner,
Assistant Vice President None.
Ginger Gonzalez,
Vice President Formerly 1st Vice President /
Director of Creative Services for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Dorothy Hirshman, None.
Assistant Vice President
Caryn Halbrecht,
Vice President Vice President and Portfolio
Manager of Oppenheimer Insured Tax-
Exempt Fund and Oppenheimer
Intermediate Tax Exempt Fund; an
officer of other Oppenheimer Funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Barbara Hennigar,
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Bennett Inkeles,
Assistant Vice President Formerly employed by Doremus &
Company, an advertising agency.
Frank Jennings,
Vice President Portfolio Manager of Oppenheimer
Global Growth & Income Fund.
Formerly a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Stephen Jobe,
Vice President None.
Heidi Kagan,
Assistant Vice President None.
Avram Kornberg,
Vice President Formerly a Vice President with
Bankers Trust.
Paul LaRocco,
Assistant Vice President Portfolio Manager of Oppenheimer
Variable Account Funds and
Oppenheimer Variable Account Funds;
Associate Portfolio Manager of
Oppenheimer Discovery Fund.
Formerly a Securities Analyst for
Columbus Circle Investors.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Senior Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of
the Oppenheimer Funds; President
and a Director of OAC, HarbourView
and Oppenheimer Partnership
Holdings, Inc.; Director of
HarbourView; Director of Main
Street Advisers, Inc.; and Chairman
of SSI.
Sally Marzouk,
Vice President None.
Marilyn Miller,
Vice President Formerly a Director of marketing
for TransAmerica Fund Management
Company.
Robert J. Milnamow,
Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc. Formerly a Portfolio
Manager with Phoenix Securities
Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Asset
Allocation Fund, Oppenheimer
Strategic Income Fund, Oppenheimer
Strategic Income & Growth Fund; an
officer of other Oppenheimer Funds.
Barbara Niederbrach,
Assistant Vice President None.
Stuart Novek,
Vice President Formerly a Director Account
Supervisor for J. Walter Thompson.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Main Street
Funds, Inc., Oppenheimer Multi-
State Tax-Exempt Trust, Oppenheimer
Tax-Exempt Fund, Oppenheimer
California Tax-Exempt Fund,
Oppenheimer New York Tax-Exempt
Fund and Oppenheimer Tax-Free Bond
Fund; Vice President of The New
York Tax-Exempt Income Fund, Inc.;
Vice President of Oppenheimer
Multi-Sector Income Trust.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President Associate Portfolio Manager of
Oppenheimer Growth Fund; Vice
President and Portfolio Manager of
Oppenheimer Target Fund and
Oppenheimer Variable Account Funds.
Formerly Senior Investment Officer
and Portfolio Manager with Chemical
Bank.
Russell Read,
Vice President Formerly an International Finance
Consultant for Dow Chemical.
Thomas Reedy,
Vice President Vice President of Oppenheimer
Multi-Sector Income Trust and
Oppenheimer Multi-Government Trust;
an officer of other Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Assistant Vice President Formerly a Product Manager for
Metropolitan Life Insurance
Company.
Michael S. Rosen
Vice President Vice President of RFS; President
and Director of RFD; Vice President
and Director of FMC; Vice President
and director of RCAI; General
Partner of RCA; Vice President and
Director of Rochester Tax Managed
Fund Inc.; Vice President and
Portfolio Manager of Rochester Fund
Series - The Bond Fund For Growth.
David Rosenberg,
Vice President Vice President and Portfolio
Manager of Oppenheimer Limited-Term
Government Fund, Oppenheimer U.S.
Government Trust and Oppenheimer
Integrity Funds. Formerly Vice
President and Senior Portfolio
Manager for Delaware Investment
Advisors.
Richard H. Rubinstein,
Vice President Vice President and Portfolio
Manager of Oppenheimer Asset
Allocation Fund, Oppenheimer Fund
and Oppenheimer Variable Account
Funds; an officer of other
Oppenheimer Funds; formerly Vice
President and Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Vice President Formerly Vice President of Dollar
Dry Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Diane Sobin,
Vice President Vice President and Portfolio
Manager of Oppenheimer Gold &
Special Minerals Fund, Oppenheimer
Total Return Fund, Inc. Oppenheimer
Main Street Funds, Inc. and
Oppenheimer Variable Account Funds;
formerly a Vice President and
Senior Portfolio Manager for Dean
Witter InterCapital, Inc.
Nancy Sperte,
Senior Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Trustee of the New York-based
Oppenheimer Funds; formerly
Chairman of the Adviser and the
Distributor.
Arthur Steinmetz,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Strategic
Income Fund, Oppenheimer Strategic
Income & Growth Fund; an officer of
other Oppenheimer Funds.
Ralph Stellmacher,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Champion
Income Fund and Oppenheimer High
Yield Fund; an officer of other
Oppenheimer Funds.
John Stoma,
Vice President Formerly Vice President of Pension
Marketing with Manulife Financial.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director
or Managing Partner of the Denver-
based Oppenheimer Funds; President
and a Director of Centennial;
formerly President and Director of
OAMC, and Chairman of the Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Adviser; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund
Oppenheimer Global Emerging Growth
Fund and Oppenheimer Enterprise
Fund. Formerly Managing Director
of Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Jeffrey Van Giesen,
Vice President Formerly employed by Kidder Peabody
Asset Management.
Ashwin Vasan,
Vice President Vice President and Portfolio
Manager of Oppenheimer Multi-Sector
Income Trust, Oppenheimer Multi-
Government Trust and Oppenheimer
International Bond Fund; an officer
of other Oppenheimer Funds.
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President Vice President and Portfolio
Manager of Daily Cash Accumulation
Fund, Inc., Oppenheimer Cash
Reserves, Centennial America Fund,
L.P., Centennial Government Trust
and Centennial Money Market Trust;
Vice President of Centennial.
Christine Wells,
Vice President None.
William L. Wilby,
Senior Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Oppenheimer Global
Fund and Oppenheimer Global Growth
& Income Fund; Vice President of
HarbourView; an officer of other
Oppenheimer Funds.
Susan Wilson-Perez,
Vice President None.
Carol Wolf,
Vice President Vice President and Portfolio
Manager of Oppenheimer Money Market
Fund, Inc., Centennial America
Fund, L.P., Centennial Government
Trust, Centennial Money Market
Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust; Vice President of
Centennial.
Robert G. Zack,
Senior Vice President and
Assistant Secretary Associate General Counsel of the
Adviser; Assistant Secretary of the
Oppenheimer Funds; Assistant
Secretary of SSI, SFSI; an officer
of other Oppenheimer Funds.
Eva A. Zeff,
Assistant Vice President An officer of certain Oppenheimer
Funds; formerly a Securities
Analyst for the Manager.
Arthur J. Zimmer,
Vice President Vice President and Portfolio
Manager of Oppenheimer Variable
Account Funds, Centennial America
Fund, L.P., Centennial Government
Trust, Centennial Money Market
Trust and Daily Cash Accumulation
Fund, Inc.; Vice President of
Oppenheimer Multi-Sector Income
Trust; Vice President of
Centennial; an officer of other
Oppenheimer Funds.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds
and the Denver-based Oppenheimer Funds set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Government Trust
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Tax-Exempt Trust
Oppenheimer New York Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest for Value Funds
Oppenheimer Target Fund
Oppenheimer Tax-Free Bond Fund
Oppenheimer U.S. Government Trust
Denver-based Oppenheimer Funds
- ------------------------------
Oppenheimer Cash Reserves
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Strategic Funds Trust
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Tax-Exempt Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Rochester-based Funds
- ---------------------
Rochester Fund Municipals
Rochester Fund Series - The Bond Fund For
Growth
Rochester Portfolio Series - Limited Term
New York Municipal Fund
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition
Corp. is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc., OppenheimerFunds
Services, Centennial Asset Management Corporation, Centennial Capital
Corp., and Main Street Advisers, Inc. is 3410 South Galena Street, Denver,
Colorado 80231.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625-2807.
Item 31. Location of Accounts and Records.
All accounts, books and other documents, required to be maintained by
the Registrant under Section 31(a) of the Investment Company Act of 1940
and the Rule thereunder are maintained by Oppenheimer Management
Corporation at its offices at 3410 South Galena Street, Denver, Colorado
80231.
Item 32. Management Services.
The Registrant is not a party to any management-related service
contract not discussed in Part A of this Registration Statement.
Item 33. Undertakings.
1. The Registrant undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the
effective date of this Registration Statement, its net asset value per
share declines more than 10 percent from its net asset value per share as
of the effective date of this Registration Statement, or (2) its net asset
value increases to an amount greater than its net proceeds as stated in
the prospectus.
2. Inapplicable
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Inapplicable
<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 New York and State of New York
on the 26th day of February, 1996.
OPPENHEIMER MULTI-GOVERNMENT TRUST
By: /s/ Donald W. Spiro
----------------------------
Donald W. Spiro, President
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:
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Leon Levy Chairman of the
- -------------- Board of Trustees February 26, 1996
Leon Levy
/s/ Donald W. Spiro President, Principal
- -------------------- Executive Officer
Donald W. Spiro and Trustee February 26, 1996
/s/ Bridget A. Macaskill Trustee February 26, 1996
- ------------------------
Bridget A. Macaskill
/s/ George Bowen Treasurer and
- ----------------- Principal Financial
George Bowen and Accounting Officer February 26, 1996
/s/ Leo Cherne Trustee February 26, 1996
- ---------------
Leo Cherne
/s/ Robert G. Galli Trustee February 26, 1996
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein Trustee February 26, 1996
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan Trustee February 26, 1996
- --------------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall Trustee February 26, 1996
- -----------------------
Kenneth A. Randall
/s/ Edward V. Regan Trustee February 26, 1996
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr. Trustee February 26, 1996
- -----------------------------
Russell S. Reynolds, Jr.
/s/ Sidney M. Robbins Trustee February 26, 1996
- ----------------------
Sidney M. Robbins
/s/ Pauline Trigere Trustee February 26, 1996
- --------------------
Pauline Trigere
/s/ Clayton K. Yeutter Trustee February 26, 1996
- -----------------------
Clayton K. Yeutter
</TABLE>
<PAGE>
OPPENHEIMER MULTI-GOVERNMENT TRUST
Registration No. 811-5670
Post-Effective Amendment No. 9
Index to Exhibits
Exhibit No. Description
- ----------- -----------
24(1)(h) Independent Auditor's Consent
24(2)(r) Financial Data Schedule
Consent of Independent Auditors
The Board of Trustees
Oppenheimer Multi-Government Trust
We consent to the use of our report dated November 21, 1995 included
herein.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 22, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 50,977,755
<INVESTMENTS-AT-VALUE> 51,488,607
<RECEIVABLES> 1,468,017
<ASSETS-OTHER> 15,415
<OTHER-ITEMS-ASSETS> 113,738
<TOTAL-ASSETS> 53,085,777
<PAYABLE-FOR-SECURITIES> 540,322
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205,576
<TOTAL-LIABILITIES> 745,898
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,850,207
<SHARES-COMMON-STOCK> 6,615,505
<SHARES-COMMON-PRIOR> 6,615,505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 79,149
<ACCUMULATED-NET-GAINS> (8,026,616)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 595,437
<NET-ASSETS> 52,339,879
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,344,119
<OTHER-INCOME> 0
<EXPENSES-NET> 633,625
<NET-INVESTMENT-INCOME> 4,710,494
<REALIZED-GAINS-CURRENT> (1,281,279)
<APPREC-INCREASE-CURRENT> 943,379
<NET-CHANGE-FROM-OPS> 4,372,594
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,472,033
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (99,439)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,029,770)
<OVERDISTRIB-NII-PRIOR> 33,177
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 332,730
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 633,625
<AVERAGE-NET-ASSETS> 51,207,000
<PER-SHARE-NAV-BEGIN> 7.93
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> (.05)
<PER-SHARE-DIVIDEND> .68
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.91
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
