UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-03430
OPPENHEIMER U.S. GOVERNMENT TRUST
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
498 Seventh Avenue, New York, New York 10018
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: August 31
Date of reporting period: September 1, 2002 - August 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
FUND PERFORMANCE DISCUSSION
How has the Fund performed? Below is a discussion by OppenheimerFunds, Inc., of
the Fund's performance during its fiscal year ended August 31, 2003, followed by
a graphical comparison of the Fund's performance to an appropriate broad-based
market index.
Management's Discussion of Fund Performance. For the fiscal year that ended
August 31, 2003, two key factors positively impacted Oppenheimer U.S. Government
Trust's performance, specifically during the last few months of the period.
First, our decision to maintain slightly less duration, or interest-rate
sensitivity, than many of our peers, proved to significantly benefit performance
once rates began rising in June.
Second, the fact that we maintained our overweighted exposure to
higher-coupon mortgage-backed securities (MBSs) through the end of the period
also boosted performance. As rates began to increase, MBSs as a whole--which
were generally comprised of lower-coupon mortgages at that time--underperformed
other non-Treasury securities significantly because the market expected these
lower-coupon securities to prepay much more slowly. As a result, the duration of
lower-coupon MBSs increased, which means that their sensitivity and risk to
interest rates increased, making them less attractive overall to investors.
All of these conditions made higher-coupon mortgage-backed securities more
appealing to investors, and demand increased, helping them outperform their
lower-coupon counterparts. Since we maintained our relative overweighted
exposure to these securities, Fund performance benefited substantially.
Finally, we achieved a modest addition to performance throughout the bulk of
the period by our overall exposure to non-Treasury securities, such as agencies
and asset-backed securities. Specifically, we had exposure to very short-term,
high quality asset-backed securities with durations of a year or less. These
"spread products," which generally tend to offer a yield advantage over
Treasuries, outperformed Treasuries during the first half of the Fund's fiscal
year and, consequently, our holdings in this area added to performance. In
particular, the fact that we favored Fannie Mae securities within the mortgage
arena also helped, as these securities slightly outperformed Freddie Mac
securities. 1
1. Freddie Mac (Federal Home Loan Mortgage Corporation) is a Congressionally
chartered corporation that purchases residential mortgages in the secondary
market from S&Ls, banks, and mortgage bankers and securitizes these mortgages
for sale in the capital markets. Federal National Mortgage Association (Fannie
Mae) is publicly owned, government-sponsored corporation chartered to purchase
mortgages from lenders and resell them to investors. Known by the nickname
Fannie Mae, it packages mortgages backed by the Federal Housing Administration,
but also sells some nongovernment-backed mortgages.
5 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
Conversely, one of the very same factors that added to performance at the end
of the period actually proved to significantly detract from it throughout the
first half of the year. The fact that we held less interest-rate sensitivity
than many peer funds hurt the Fund's performance as rates continued to slide
until June. The good news was that once rates reversed direction in June, the
rebound was so significant, we generally regained the performance we lost up
until that point. Likewise, while our emphasis on higher-coupon mortgage
securities substantially added to performance in the last few months of the
period, it somewhat detracted from returns in the beginning of the year.
Fortunately, once again, the gains we enjoyed in the last few months of the
fiscal year from our higher-coupon mortgage-backed holdings were substantial
enough to balance out the losses we suffered earlier in the year. The Fund's
holdings, strategies and management are subject to change.
Comparing the Fund's Performance to the Market. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until August 31, 2003. In the case of Class A shares, performance is
measured over a ten-year period. In the case of Class B shares, performance is
measured from the inception of the Class on July 21, 1995, and in the case of
Class C shares, from the inception of the Class on December 1, 1993. In the case
of Class N shares, performance is measured from inception of the Class on March
1, 2001. In the case of Class Y shares, performance is measured from the
inception of the Class on May 18, 1998. The Fund's performance reflects the
deduction of the current maximum initial sales charge on Class A shares, the
applicable contingent deferred sales charge for Class B, Class C and Class N
shares, and reinvestment of all dividends and capital gains distributions. Class
Y shares are offered only to certain institutional shareholders under special
arrangement with the Distributor and are not subject to a sales charge.
The Fund's performance is compared to that of the Lehman Brothers U.S.
Government Bond Index, an unmanaged index including all U.S. Treasury issues,
publicly-issued debt of U.S. Government agencies and quasi-public corporations
and U.S. Government guaranteed corporate debt, and is widely regarded as a
general measurement of the performance of the U.S. Government bond market. Index
performance reflects the reinvestment of dividends but does not consider the
effect of capital gains or transaction costs, and none of the data shows the
effect of taxes. Also, the Fund's performance reflects the effect of Fund
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the securities in any one index.
6 | OPPENHEIMER U.S. GOVERNMENT TRUST
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class A)
Lehman Brothers U.S. Government Bond Index
[LINE CHART]
Value of Investment Lehman Brothers U.S.
Date In Fund Government Bond Index
06/30/1993 9,525 10,000
09/30/1993 9,719 10,325
12/31/1993 9,709 10,290
03/31/1994 9,509 9,980
06/30/1994 9,413 9,866
09/30/1994 9,514 9,908
12/31/1994 9,585 9,943
03/31/1995 10,103 10,411
06/30/1995 10,470 11,056
09/30/1995 10,657 11,252
12/31/1995 11,016 11,766
03/31/1996 10,918 11,500
06/30/1996 10,983 11,555
08/31/1996 1 11,029 11,558
11/30/1996 11,582 12,217
02/28/1997 11,606 12,122
05/31/1997 11,834 12,272
08/31/1997 12,181 12,636
11/30/1997 12,590 13,115
02/28/1998 12,858 13,413
05/31/1998 13,020 13,651
08/31/1998 13,309 14,187
11/30/1998 13,433 14,525
02/28/1999 13,354 14,293
05/31/1999 13,339 14,256
08/31/1999 13,256 14,206
11/30/1999 13,435 14,325
02/29/2000 13,506 14,455
05/31/2000 13,709 14,677
08/31/2000 14,188 15,307
11/30/2000 14,587 15,802
02/28/2001 15,022 16,464
05/31/2001 15,014 16,407
08/31/2001 15,571 17,088
11/30/2001 15,952 17,434
02/28/2002 16,135 17,555
05/31/2002 16,276 17,688
08/31/2002 17,088 18,692
11/30/2002 17,175 18,813
02/28/2003 17,670 19,531
05/31/2003 17,905 20,073
08/31/2003 17,404 19,250
Average Annual Total Returns of Class A Shares of the Fund at 8/31/03 2
1-Year -2.99% 5-Year 4.49% 10-Year 5.50%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class B)
Lehman Brothers U.S. Government Bond Index
[LINE CHART]
Value of Investment Lehman Brothers U.S.
Date In Fund Government Bond Index
07/21/1995 10,000 10,000
09/30/1995 10,230 10,215
12/31/1995 10,563 10,681
03/31/1996 10,438 10,440
06/30/1996 10,480 10,490
08/31/1996 1 10,509 10,492
11/30/1996 11,015 11,091
02/28/1997 11,018 11,005
05/31/1997 11,214 11,141
08/31/1997 11,521 11,471
11/30/1997 11,886 11,906
02/28/1998 12,116 12,177
05/31/1998 12,246 12,392
08/31/1998 12,494 12,879
11/30/1998 12,587 13,186
02/28/1999 12,489 12,976
05/31/1999 12,451 12,942
08/31/1999 12,350 12,897
11/30/1999 12,493 13,004
02/29/2000 12,535 13,122
05/31/2000 12,700 13,324
08/31/2000 13,119 13,896
11/30/2000 13,448 14,345
02/28/2001 13,839 14,946
05/31/2001 13,805 14,895
08/31/2001 14,308 15,513
11/30/2001 14,658 15,827
02/28/2002 14,826 15,937
05/31/2002 14,955 16,057
08/31/2002 15,702 16,969
11/30/2002 15,781 17,079
02/28/2003 16,236 17,730
05/31/2003 16,452 18,223
08/31/2003 15,992 17,475
Average Annual Total Returns of Class B Shares of the Fund at 8/31/03 2
1-Year -3.87% 5-Year 4.38% Since Inception 5.96%
1. The Fund changed its fiscal year end from June 30 to August 31.
2. See Notes on page 10 for further details.
The performance information for the Lehman Brothers U.S. Government Bond Index
in the graphs begins on 6/30/93 for Class A, 7/31/95 for Class B, 11/30/93 for
Class C, 2/28/01 for Class N and 5/31/98 for Class Y.
Past performance cannot guarantee future results. Graphs are not drawn to same
scale.
7 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class C)
Lehman Brothers U.S. Government Bond Index
[LINE CHART]
Value of Investment Lehman Brothers U.S.
Date In Fund Government Bond Index
12/01/1993 10,000 10,000
12/31/1993 10,040 10,039
03/31/1994 9,787 9,737
06/30/1994 9,678 9,625
09/30/1994 9,761 9,666
12/31/1994 9,815 9,700
03/31/1995 10,323 10,156
06/30/1995 10,676 10,786
09/30/1995 10,835 10,978
12/31/1995 11,190 11,479
03/31/1996 11,057 11,220
06/30/1996 11,114 11,273
08/31/1996 1 11,146 11,276
11/30/1996 11,684 11,919
02/28/1997 11,687 11,826
05/31/1997 11,896 11,972
08/31/1997 12,222 12,327
11/30/1997 12,610 12,794
02/28/1998 12,853 13,086
05/31/1998 12,991 13,317
08/31/1998 13,241 13,841
11/30/1998 13,353 14,170
02/28/1999 13,234 13,944
05/31/1999 13,209 13,908
08/31/1999 13,101 13,859
11/30/1999 13,237 13,975
02/29/2000 13,295 14,102
05/31/2000 13,471 14,319
08/31/2000 13,915 14,933
11/30/2000 14,264 15,416
02/28/2001 14,663 16,062
05/31/2001 14,643 16,007
08/31/2001 15,141 16,671
11/30/2001 15,483 17,008
02/28/2002 15,632 17,126
05/31/2002 15,754 17,256
08/31/2002 16,511 18,236
11/30/2002 16,549 18,354
02/28/2003 16,998 19,054
05/31/2003 17,211 19,583
08/31/2003 16,696 18,780
Average Annual Total Returns of Class C Shares of the Fund at 8/31/03 2
1-Year 0.13% 5-Year 4.75% Since Inception 5.40%
Class N Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class N)
Lehman Brothers U.S. Government Bond Index
[LINE CHART]
Value of Investment Lehman Brothers U.S.
Date In Fund Government Bond Index
03/01/2001 10,000 10,000
05/31/2001 9,980 9,965
08/31/2001 10,350 10,379
11/30/2001 10,590 10,589
02/28/2002 10,726 10,662
05/31/2002 10,812 10,743
08/31/2002 11,346 11,353
11/30/2002 11,391 11,427
02/28/2003 11,713 11,863
05/31/2003 11,854 12,192
08/31/2003 11,511 11,692
Average Annual Total Returns of Class N Shares of the Fund at 8/31/03 2
1-Year 0.47% Since Inception 5.79%
1. The Fund changed its fiscal year end from June 30 to August 31.
2. See Notes on page 10 for further details.
8 | OPPENHEIMER U.S. GOVERNMENT TRUST
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer U.S. Government Trust (Class Y)
Lehman Brothers U.S. Government Bond Index
[LINE CHART]
Value of Investment Lehman Brothers U.S.
Date In Fund Government Bond Index
05/18/1998 10,000 10,000
05/31/1998 10,041 10,000
08/31/1998 10,282 10,393
11/30/1998 10,316 10,640
02/28/1999 10,238 10,471
05/31/1999 10,235 10,443
08/31/1999 10,198 10,407
11/30/1999 10,342 10,494
02/29/2000 10,400 10,589
05/31/2000 10,570 10,752
08/31/2000 10,951 11,213
11/30/2000 11,255 11,576
02/28/2001 11,612 12,061
05/31/2001 11,613 12,019
08/31/2001 12,056 12,518
11/30/2001 12,356 12,772
02/28/2002 12,490 12,860
05/31/2002 12,623 12,957
08/31/2002 13,268 13,693
11/30/2002 13,363 13,782
02/28/2003 13,746 14,307
05/31/2003 13,958 14,705
08/31/2003 13,582 14,102
Average Annual Total Returns of Class Y Shares of the Fund at 8/31/03 2
1-Year 2.37% 5-Year 5.72% Since Inception 5.96%
The performance information for the Lehman Brothers U.S. Government Bond Index
in the graphs begins on 6/30/93 for Class A, 7/31/95 for Class B, 11/30/93 for
Class C, 2/28/01 for Class N and 5/31/98 for Class Y.
Past performance cannot guarantee future results. Graphs are not drawn to same
scale.
9 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES
In reviewing performance and rankings, please remember that past performance
cannot guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
fluctuations, and current performance may be more or less than the results
shown. For updates on the Fund's performance, visit our website at
www.oppenheimerfunds.com.
Total returns and the ending account values in the graph includes changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares. For more complete information
about the Fund, including charges, expenses and risks, please refer to the
prospectus. To obtain a copy, call your financial advisor, call OppenheimerFunds
Distributor, Inc. at 1.800.CALL OPP (1.800.225.5677). Read the prospectus
carefully before you invest or send money.
Class A shares of the Fund were first publicly offered on 8/16/85. Class A
returns include the current maximum initial sales charge of 4.75%.
Class B shares of the Fund were first publicly offered on 7/21/95. Class B
returns include the applicable contingent deferred sales charge of 5% (1-year)
and 2% (5-year). Class B shares are subject to an annual 0.75% asset-based sales
charge. Because Class B shares convert to Class A shares 72 months after
purchase, Class B performance does not include contingent deferred sales charge
and uses Class A performance for the period after conversion.
Class C shares of the Fund were first publicly offered on 12/1/93. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
Class N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
Class Y shares of the Fund were first publicly offered on 5/18/98. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
10 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS August 31, 2003
Principal Market Value
Amount See Note 1
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Asset-Backed Securities--12.3%
Ameriquest Mortgage Securities, Inc., Home Equity
Mtg. Obligations, Series 2001-3, Cl. M1, 2.09%, 2/25/32 1 $ 4,000,000 $ 4,030,846
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AQ Finance NIM Trust, Home Equity Collateralized Mtg. Obligations:
Series 2001-3A, Cl. Note, 8.835%, 2/25/32 2 214,952 215,513
Series 2002-1, Cl. Note, 9.50%, 6/25/32 3 482,605 479,589
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Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2002-4, Cl. A2B, 1.74%, 1/17/05 3 5,726,054 5,737,523
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Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2002-A, Cl. MF2, 6.54%, 1/25/32 5,000,000 5,213,502
Series 2003-B, Cl. AF1, 1.64%, 2/25/18 3 3,814,271 3,809,981
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Chase Funding Mortgage Loan Asset-Backed Certificates, Home
Equity Mtg. Obligations, Series 2003-4, Cl. 1A1, 1.23%, 9/25/17 1 11,480,000 11,477,130
- ------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2003-B, Cl. A2, 1.287%, 3/15/06 5,160,000 5,148,700
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CitiFinancial Mortgage Securities, Inc., Home Equity Collateralized
Mtg. Obligations:
Series 2002-1, Cl. AF1, 2.474%, 9/25/32 3,761,807 3,777,876
Series 2003-2, Cl. AF1, 1.21%, 5/25/33 1,3 7,001,436 6,999,216
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Conseco Finance Securitizations Corp., Home Equity Loan Pass-Through
Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32 3 5,000,000 1,653,125
- ------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates,
Series 2002-B, Cl. A2, 2.20%, 4/6/05 3,626,063 3,636,963
- ------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Collateral Obligations,
Series 2000-A, Cl. B, 2.21%, 8/15/25 1,3,8 4,550,157 22,751
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Ford Credit Auto Owner Trust, Automobile Loan Certificates,
Series 2002-D, Cl. A2A, 2.10%, 3/15/05 8,793,113 8,822,647
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Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.:
Series 2002-2, Cl. A1, 1.91%, 4/16/07 9,217,398 9,249,346
Series 2003-3, Cl. A1, 1.50%, 1/15/08 15,030,000 15,006,516
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Honda Auto Receivables Owner Trust, Automobile Receivables
Obligations, Series 2002-3, Cl. A2, 2.26%, 12/18/04 4,650,531 4,663,326
- ------------------------------------------------------------------------------------------------------------
Household Automotive Trust, Automobile Loan Certificates,
Series 2002-2, Cl. A2, 2.15%, 12/19/05 4,320,315 4,333,339
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Lehman ABS Manufactured Housing Contract, Commercial Mtg.
Pass-Through Certificates, Series 2001-B, Cl. A4, 5.27%, 9/15/18 6,578,757 6,821,612
- ------------------------------------------------------------------------------------------------------------
M&I Auto Loan Trust, Automobile Loan Certificates, Series 2002-1,
Cl. A2, 1.95%, 7/20/05 3,071,968 3,078,641
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MMCA Auto Lease Trust, Auto Retail Installment Contracts,
Series 2002-A, Cl. A2, 1.28%, 5/16/05 1,2 5,462,206 5,466,565
- ------------------------------------------------------------------------------------------------------------
MSF Funding LLC, Collateralized Mtg. Obligations, Series 2000-1,
Cl. A, 3.61%, 7/25/07 1,3 1,477,644 1,108,233
- ------------------------------------------------------------------------------------------------------------
NC Finance Trust, Collateralized Mtg. Obligations, Series 2002-I,
Cl. ECFD, 9.25%, 3/25/32 3 574,123 568,740
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Nissan Auto Receivables Owner Trust, Auto Receivable Nts.:
Series 2002-C, Cl. A2, 1.94%, 9/15/04 5,965,245 5,974,553
Series 2003-B, Cl. A2, 1.20%, 11/15/05 16,000,000 15,980,526
11 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
Principal Market Value
Amount See Note 1
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Asset-Backed Securities Continued
Providian Master Trust, Sub. Collateralized Mtg. Obligations,
Series 2000-2, Cl. C, 7.98%, 4/15/09 2 $ 3,000,000 $ 3,013,758
- ------------------------------------------------------------------------------------------------------------
Residential Funding Mortgage Securities II, Inc., Home Equity Loan
Pass-Through Certificates, Series 2002-HS1, Cl. M2,
6.46%, 1/25/27 3 3,000,000 3,067,319
- ------------------------------------------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed
Obligations, Series 2002-B, Cl. A3, 3.76%, 6/15/06 4,545,000 4,626,115
- ------------------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A2, 1.95%, 3/15/05 1,501,685 1,504,203
Series 2003-1, Cl. A2, 1.22%, 4/17/06 9,600,000 9,585,070
- ------------------------------------------------------------------------------------------------------------
Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivables,
Series 2003-1, Cl. A2, 1.11%, 12/20/05 20,000,000 19,956,008
-----------------
Total Asset-Backed Securities (Cost $182,681,849) 175,029,232
- ------------------------------------------------------------------------------------------------------------
Mortgage-Backed Obligations--70.7%
- ------------------------------------------------------------------------------------------------------------
Government Agency--63.6%
- ------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--62.5%
FHLMC Structured Pass-Through Securities, Collateralized Mtg. Obligations:
Series H003, Cl. A2, 1.88%, 1/15/07 8,154,032 8,196,276
Series H006, Cl. A1, 1.724%, 4/15/08 3 5,573,624 5,487,463
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
7.50%, 9/1/12-2/1/32 4,205,725 4,480,428
8%, 4/1/16 6,076,616 6,572,209
9%, 8/1/22-5/1/25 1,355,904 1,510,125
9.50%, 10/1/03-11/1/03 111 113
11.50%, 6/1/20 111,142 125,692
12.50%, 7/1/19 329,990 376,569
13%, 8/1/15 294,005 337,554
14%, 1/1/11 78,478 90,625
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Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through
Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 347,933 352,143
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 2368, Cl. PN, 6.50%, 7/15/28 8,021,138 8,096,846
Series 2368, Cl. PR, 6.50%, 10/15/31 10,000,000 10,301,026
Series 2392, Cl. PV, 6%, 12/15/20 9,952,000 10,099,630
Series 2410, Cl. NE, 6.50%, 9/15/30 7,850,000 8,255,407
Series 2420, Cl. BC, 6.50%, 7/15/26 1,248,846 1,250,119
Series 2423, Cl. PD, 6.50%, 11/15/30 10,000,000 10,243,059
Series 2500, Cl. FD, 1.607%, 6/15/32 1 5,183,952 5,219,591
Series 2526, Cl. FE, 1.51%, 6/15/29 1 5,816,129 5,855,861
Series 2551, Cl. FD, 1.51%, 1/15/33 1 5,166,786 5,183,722
- ------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 206, Cl. IO, (24.008)%, 12/15/29 4 4,815,905 896,927
Series 2410, Cl. PI, (99.99)%, 2/15/26 3,4 99,134 319
12 | OPPENHEIMER U.S. GOVERNMENT TRUST
Principal Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored Continued
Federal Home Loan Mortgage Corp./Government National Mortgage
Assn., Gtd. Multiclass Mtg. Participation Certificates, Series 28, Cl. PG,
6.875%, 2/25/23 $ 5,712,000 $ 6,058,795
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
5%, 9/1/33 5 20,298,000 19,644,648
5.50%, 9/1/33 5 93,890,000 93,508,619
6%, 9/25/33 5 94,602,000 96,198,409
6.50%, 11/1/28-5/1/31 11,278,132 11,683,188
6.50%, 9/1/33 5 128,913,000 133,304,035
7%, 8/1/29-4/1/30 1,925,896 2,032,041
7%, 9/25/33 5 359,038,000 378,224,273
8%, 12/1/22 235,769 256,297
8.50%, 7/1/32 1,994,878 2,147,136
11%, 7/1/16 163,360 183,972
11.50%, 11/1/15-11/17/20 842,047 954,569
13%, 11/1/12 13,333 14,985
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, Commercial Mtg.
Obligations, Trust 2001-T6, Cl. B, 6.088%, 5/25/11 10,000,000 10,866,601
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22 589,589 625,830
Trust 1993-202, Cl. PH, 6.50%, 2/25/22 888,421 896,901
Trust 1994-27, Cl. PH, 6.50%, 9/25/22 2,412,021 2,453,697
Trust 2001-38, Cl. CD, 6.50%, 5/25/29 6,024,587 6,046,903
Trust 2001-44, Cl. ML, 6.50%, 6/25/29 4,300,818 4,330,452
Trust 2001-50, Cl. LD, 6.50%, 5/25/30 10,000,000 10,247,041
Trust 2002-52, Cl. FD, 1.61%, 9/25/32 1 6,991,869 7,015,311
Trust 2002-77, Cl. WF, 1.51%, 12/18/32 1 8,703,053 8,728,155
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates Interest-Only Stripped Mtg.-Backed
Security, Trust 2001-T4, Cl. IO, (14.211)%, 7/25/28 3,4 22,567,073 507,759
-----------------
888,861,321
- ------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--1.1%
Government National Mortgage Assn.:
4.375%, 4/20/17 87,463 89,847
6.50%, 11/15/23-12/15/23 473,869 495,438
7%, 1/15/28-1/20/30 4,209,838 4,448,092
7.25%, 12/15/05 2,666 2,767
7.50%, 10/15/06-11/15/26 3,614,010 3,865,015
8%, 3/15/05-8/15/28 1,238,409 1,336,062
8.25%, 4/15/08 24,351 26,251
8.50%, 1/15/06-12/15/17 1,964,984 2,165,048
9%, 9/15/08-5/15/09 57,185 62,231
9.50%, 7/15/18-12/15/19 148,966 165,562
10%, 8/15/17-8/15/19 281,105 315,819
10.50%, 2/15/13-5/15/21 1,073,649 1,212,052
11%, 10/20/19-7/20/20 648,948 732,667
11.50%, 2/15/13 18,014 20,359
12%, 12/15/12-3/15/14 7,658 8,805
12.50%, 1/15/14-6/15/19 171,033 197,030
13%, 4/15/11-12/15/14 34,899 40,325
13 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
Principal Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed Continued
Government National Mortgage Assn.: Continued
13.50%, 5/15/11-1/15/13 $ 19,156 $ 22,369
14%, 6/15/11 12,531 14,699
-----------------
15,220,438
- ------------------------------------------------------------------------------------------------------------
Private--7.1%
- ------------------------------------------------------------------------------------------------------------
Commercial--4.6%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-MD6, Cl. A2, 7.312%, 11/13/29 1 3,000,000 3,264,275
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30 5,000,000 5,438,559
- ------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 9.227%,
6/22/24 2,4 55,920,624 2,041,209
- ------------------------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 53.541%,
12/25/20 3,4 5,077,472 793
- ------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Commercial Mtg. Pass-Through
Certificates, Series 2001-SPGA, Cl. B, 6.662%, 8/13/18 3 10,767,000 11,540,415
- ------------------------------------------------------------------------------------------------------------
Heller Financial Commercial Mortgage Asset Corp., Interest-Only
Commercial Mtg. Obligations, Series 2000-PH1, Cl. X, 9.244%,
1/17/34 3,4 190,408,284 3,818,600
- ------------------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 10,000,000 11,552,905
- ------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., Collateralized Mtg. Obligations,
Series 2002-GE1, Cl. A, 2.514%, 7/26/24 1,3 1,864,242 1,826,957
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through Certificates,
Series 1996-WF1, Cl. A2, 7.385%, 11/15/28 1,2 2,565,829 2,581,429
- ------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34 10,000,000 10,886,811
- ------------------------------------------------------------------------------------------------------------
Prudential Mortgage Capital Co. II LLC, Commercial Mtg. Pass-Through
Certificates, Series PRU-HTG 2000-C1, Cl. A2, 7.306%, 10/6/15 8,181,000 9,246,151
- ------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Collateralized Mtg. Obligations,
Interest-Only Mtg. Pass-Through Certificates, Series 2002-AL1, Cl. AIO,
7.631%, 3/25/33 3,4 30,127,187 3,613,536
-----------------
65,811,640
- ------------------------------------------------------------------------------------------------------------
Residential--2.5%
ARC Net Interest Margin Trust, Collateralized Mtg. Obligations,
Series 2001-6A, Cl. A, 7.25%, 10/27/31 3 227,940 225,661
- ------------------------------------------------------------------------------------------------------------
Citicorp Mortgage Securities, Inc., Collateralized Mtg. Obligations,
Series 2002-2, Cl. 2A3, 6%, 2/25/32 10,000,000 10,234,119
- ------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1993-12, Cl. B1, 6.625%, 2/25/24 6 521,194 521,117
- ------------------------------------------------------------------------------------------------------------
Granite Mortgages plc, Mtg.-Backed Obligations, Series 2002-2,
Cl. 1A1, 1.479%, 1/21/17 1,3 1,805,135 1,805,063
- ------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18 3 2,500,000 2,545,735
- ------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Collateralized Mtg. Obligations
Pass-Through Certificates, Series 2002-AL1, Cl. B2, 3.45%,
2/25/32 4,628,807 4,136,433
- ------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
Series 1995-2B, Cl. 2IO, (13.586)%, 6/15/25 4 30,524,926 505,645
14 | OPPENHEIMER U.S. GOVERNMENT TRUST
Principal Market Value
Amount See Note 1
- ------------------------------------------------------------------------------------------------------------
Residential Continued
Washington Mutual Finance Corp., Collateralized Mtg. Obligations,
Series 2000-1, Cl. M3, 2.86%, 1/25/40 1 $ 2,738,944 $ 2,837,803
- ------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
Obligations Pass-Through Certificates:
Series 2003-AR3, Cl. A1A, 1.675%, 4/25/33 1 364,891 365,104
Series 2003-AR7, Cl. A1, 1.507%, 8/25/33 1 12,665,096 12,654,297
-----------------
35,830,977
-----------------
Total Mortgage-Backed Obligations (Cost $996,458,493) 1,005,724,376
- ------------------------------------------------------------------------------------------------------------
U.S. Government Obligations--67.2%
Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.375%, 4/15/06 29,000,000 28,824,608
4.875%, 3/15/07 4,800,000 5,073,264
6.25%, 7/15/32 26,650,000 28,029,058
- ------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.25%, 7/15/07 72,770,000 75,154,018
5.25%, 6/15/06 46,200,000 49,390,988
5.50%, 2/15/06 54,180,000 58,069,636
6.375%, 6/15/09 57,600,000 64,224,058
7.25%, 1/15/10 41,900,000 48,695,929
7.25%, 5/15/30 6 25,715,000 30,469,523
- ------------------------------------------------------------------------------------------------------------
Freddie Mac Unsec. Reference Nts., 6.25%, 1/15/06 72,000,000 76,697,856
- ------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. Federal Book Entry Principal Strips,
6.28%, 1/15/21 7 18,500,000 6,740,974
- ------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.75%, 7/15/04 1,680,000 1,725,059
5.375%, 11/13/08 16,600,000 17,727,671
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.50%, 8/15/28 33,922,000 34,520,961
6.125%, 11/15/27 12,448,000 13,705,447
6.25%, 5/15/30 11,699,000 13,207,995
6.875%, 8/15/25 82,940,000 99,054,993
9.25%, 2/15/16 49,850,000 70,411,181
11.25%, 2/15/15 1,450,000 2,292,021
STRIPS, 4.90%, 2/15/16 7 24,460,000 12,795,980
STRIPS, 5.91%, 11/15/24 7 14,690,000 4,406,075
- ------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.625%, 3/31/05 41,534,000 41,525,901
2.625%, 5/15/08 15,822,000 15,328,812
3%, 11/15/07 11,010,000 10,957,967
5%, 2/15/11 8,450,000 8,926,969
5.75%, 8/15/10 11,626,000 12,859,449
6%, 8/15/09 48,400,000 54,230,700
6.50%, 2/15/10 61,785,000 71,031,063
-----------------
Total U.S. Government Obligations (Cost $956,840,287) 956,078,156
- ------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $2,135,980,629) 150.2% 2,136,831,764
- ------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (50.2) (714,492,552)
------------------------------
Net Assets 100.0% $1,422,339,212
==============================
15 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
Footnotes to Statement of Investments
1. Represents the current interest rate for a variable or increasing rate
security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $13,318,474 or 0.94% of the Fund's net
assets as of August 31, 2003.
3. Identifies issues considered to be illiquid. See Note 6 of Notes to Financial
Statements.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $11,384,788 or 0.80% of the Fund's net assets
as of August 31, 2003.
5. When-issued security to be delivered and settled after August 31, 2003. See
Note 1 of Notes to Financial Statements.
6. Securities with an aggregate market value of $7,924,171 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. Issuer is in default.
See accompanying Notes to Financial Statements.
16 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES August 31, 2003
- --------------------------------------------------------------------------------
Assets
Investments, at value (cost $2,135,980,629)--see
accompanying statement $2,136,831,764
- --------------------------------------------------------------------------------
Receivables and other assets:
Interest and principal paydowns 17,438,923
Shares of beneficial interest sold 1,557,471
Futures margins 573,829
Other 5,720
---------------
Total assets 2,156,407,707
- --------------------------------------------------------------------------------
Liabilities
Bank overdraft 5,292,344
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis 722,237,842
Shares of beneficial interest redeemed 4,830,596
Distribution and service plan fees 624,327
Dividends 342,800
Transfer and shareholder servicing agent fees 276,926
Trustees' compensation 173,150
Shareholder reports 172,958
Other 117,552
---------------
Total liabilities 734,068,495
- --------------------------------------------------------------------------------
Net Assets $1,422,339,212
===============
- --------------------------------------------------------------------------------
Composition of Net Assets
Par value of shares of beneficial interest $ 145,742
- --------------------------------------------------------------------------------
Additional paid-in capital 1,418,948,164
- --------------------------------------------------------------------------------
Undistributed net investment income 3,381,556
- --------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions 762,190
- --------------------------------------------------------------------------------
Net unrealized depreciation on investments (898,440)
---------------
Net Assets $1,422,339,212
===============
17 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $830,310,463 and 85,032,140
shares of beneficial interest outstanding) $ 9.76
Maximum offering price per share (net asset value
plus sales charge of 4.75% of offering price) $10.25
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$370,984,247 and 38,041,367 shares of beneficial
interest outstanding) $ 9.75
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$192,496,345 and 19,745,025 shares of beneficial
interest outstanding) $ 9.75
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes
applicable contingent deferred sales charge) and
offering price per share (based on net assets of
$25,946,615 and 2,657,324 shares of beneficial
interest outstanding) $ 9.76
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price
per share (based on net assets of $2,601,542 and
266,465 shares of beneficial interest outstanding) $ 9.76
See accompanying Notes to Financial Statements.
18 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF OPERATIONS For the Year Ended August 31, 2003
- -------------------------------------------------------------------------------
Investment Income
Interest $ 60,269,842
Fee income 722,820
--------------
Total income 60,992,662
- -------------------------------------------------------------------------------
Expenses
Management fees 8,708,123
- -------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,198,600
Class B 4,311,570
Class C 2,169,872
Class N 109,966
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,664,519
Class B 834,852
Class C 314,973
Class N 93,875
- -------------------------------------------------------------------------------
Shareholder reports 312,830
- -------------------------------------------------------------------------------
Trustees' compensation 79,804
- -------------------------------------------------------------------------------
Custodian fees and expenses 18,410
- -------------------------------------------------------------------------------
Other 126,609
--------------
Total expenses 20,944,003
Less reduction to custodian expenses (15,780)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Class N (21,853)
--------------
Net expenses 20,906,370
- -------------------------------------------------------------------------------
Net Investment Income 40,086,292
- -------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 27,674,865
Closing of futures contracts (729,797)
--------------
Net realized gain 26,945,068
- -------------------------------------------------------------------------------
Net change in unrealized depreciation on:
Investments (40,547,040)
Futures contracts (1,594,255)
--------------
Net change in unrealized depreciation (42,141,295)
- -------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $24,890,065
==============
See accompanying Notes to Financial Statements.
19 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended August 31, 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Operations
Net investment income $ 40,086,292 $ 57,818,683
- ------------------------------------------------------------------------------------------------------------------
Net realized gain 26,945,068 21,432,038
- ------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (42,141,295) 25,431,490
--------------------------------------
Net increase in net assets resulting from operations 24,890,065 104,682,211
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Dividends from net investment income:
Class A (25,847,338) (37,850,699)
Class B (8,971,265) (12,641,929)
Class C (4,631,361) (6,896,952)
Class N (530,810) (317,090)
Class Y (105,183) (112,098)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (1,948,171) --
Class B (936,453) --
Class C (466,417) --
Class N (45,634) --
Class Y (6,797) --
- ------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from beneficial interest
transactions:
Class A (12,386,022) 225,972,091
Class B (17,645,395) 177,038,753
Class C (10,392,807) 74,202,150
Class N 12,896,822 12,553,724
Class Y (224,999) 1,249,048
- ------------------------------------------------------------------------------------------------------------------
Net Assets
Total increase (decrease) (46,351,765) 537,879,209
- ------------------------------------------------------------------------------------------------------------------
Beginning of period 1,468,690,977 930,811,768
--------------------------------------
End of period [including undistributed net investment income
of $3,381,556 and $1,176,928, respectively] $1,422,339,212 $1,468,690,977
======================================
See accompanying Notes to Financial Statements.
20 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS
Class A August 31 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 9.88 $ 9.52 $ 9.19 $ 9.15 $ 9.74
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .54 .51 .58 .56
Net realized and unrealized gain (loss) (.10) .36 .36 .04 (.59)
-------------------------------------------------------------
Total from investment operations .18 .90 .87 .62 (.03)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.28) (.54) (.54) (.57) (.55)
Distributions from net realized gain (.02) -- -- -- --
Tax return of capital distribution -- -- -- (.01) (.01)
-------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.30) (.54) (.54) (.58) (.56)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.76 $9.88 $9.52 $9.19 $9.15
=============================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 1.85% 9.75% 9.75% 7.03% (0.40)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $830,310 $853,671 $599,659 $559,194 $579,064
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $906,353 $679,657 $580,177 $542,931 $591,229
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.85% 5.57% 5.46% 6.37% 5.85%
Total expenses 1.01% 3 1.06% 3 0.91% 3 1.12% 3 1.06% 3
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 72% 121% 215% 181% 199%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
See accompanying Notes to Financial Statements.
21 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS Continued
Class B August 31 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 9.87 $ 9.51 $ 9.18 $ 9.14 $ 9.73
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 .46 .45 .51 .48
Net realized and unrealized gain (loss) (.10) .36 .35 .04 (.59)
-------------------------------------------------------------
Total from investment operations .11 .82 .80 .55 (.11)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.46) (.47) (.50) (.47)
Distributions from net realized gain (.02) -- -- -- --
Tax return of capital distribution -- -- -- (.01) (.01)
-------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.23) (.46) (.47) (.51) (.48)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.75 $9.87 $9.51 $9.18 $9.14
=============================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 1.07% 8.93% 8.92% 6.22% (1.15)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $370,984 $393,355 $204,576 $140,512 $174,622
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $431,102 $266,559 $169,440 $151,770 $160,782
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.08% 4.74% 4.67% 5.60% 5.09%
Total expenses 1.78% 3 1.82% 3 1.67% 3 1.87% 3 1.81% 3
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 72% 121% 215% 181% 199%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
See accompanying Notes to Financial Statements.
22 | OPPENHEIMER U.S. GOVERNMENT TRUST
Class C August 31 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 9.87 $ 9.50 $ 9.18 $ 9.14 $ 9.72
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .21 .46 .45 .51 .48
Net realized and unrealized gain (loss) (.10) .37 .34 .04 (.58)
-------------------------------------------------------------
Total from investment operations .11 .83 .79 .55 (.10)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.21) (.46) (.47) (.50) (.47)
Distributions from net realized gain (.02) -- -- -- --
Tax return of capital distribution -- -- -- (.01) (.01)
-------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.23) (.46) (.47) (.51) (.48)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.75 $9.87 $9.50 $9.18 $9.14
=============================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 1 1.12% 9.05% 8.81% 6.21% (1.05)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $192,496 $205,349 $124,542 $91,496 $67,691
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $216,954 $144,852 $109,060 $77,875 $56,943
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.13% 4.76% 4.69% 5.61% 5.11%
Total expenses 1.74% 3 1.81% 3 1.67% 3 1.88% 3 1.81% 3
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 72% 121% 215% 181% 199%
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
See accompanying Notes to Financial Statements.
23 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS Continued
Class N August 31 2003 2002 2001 1
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 9.88 $ 9.52 $ 9.45
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .24 .50 .25
Net realized and unrealized gain (loss) (.10) .39 .07
-----------------------------------
Total from investment operations .14 .89 .32
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.24) (.53) (.25)
Distributions from net realized gain (.02) -- --
Tax return of capital distribution -- -- --
-----------------------------------
Total dividends and/or distributions to shareholders (.26) (.53) (.25)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.76 $9.88 $9.52
===================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 1.45% 9.62% 3.50%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $25,947 $13,453 $513
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $22,027 $ 6,092 $ 90
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.41% 5.21% 5.54%
Total expenses 1.52% 1.31% 0.85%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 1.42% N/A 4 N/A 4
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 72% 121% 215%
1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
See accompanying Notes to Financial Statements.
24 | OPPENHEIMER U.S. GOVERNMENT TRUST
Class Y August 31 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 9.88 $ 9.52 $ 9.19 $ 9.15 $ 9.74
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .56 .56 .62 .51
Net realized and unrealized gain (loss) (.10) .36 .34 .03 (.59)
-------------------------------------------------------------
Total from investment operations .23 .92 .90 .65 (.08)
- -------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.33) (.56) (.57) (.61) (.50)
Distributions from net realized gain (.02) -- -- -- --
Tax return of capital distribution -- -- -- -- 1 (.01)
-------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.35) (.56) (.57) (.61) (.51)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.76 $9.88 $9.52 $9.19 $9.15
=============================================================
- -------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value 2 2.37% 10.05% 10.10% 7.39% (0.83)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $2,602 $2,861 $1,522 $333 $1
- -------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $3,133 $1,933 $ 464 $ 27 $1
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.36% 5.80% 5.83% 6.51% 6.19%
Total expenses 0.59% 0.83% 1.06% 4 0.83% 0.69%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses N/A 5 0.81% 0.61% N/A 5 N/A 5
- -------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 72% 121% 215% 181% 199%
1. Less than $0.005 per share.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Added since August 31, 2001 to reflect expenses before reduction to custodian
expenses and voluntary waiver of transfer agent fees.
5. Reduction to custodian expenses less than 0.01%.
See accompanying Notes to Financial Statements.
25 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer U.S. Government Trust (the Fund) is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek high current income consistent with
preservation of capital. The Fund's investment advisor is OppenheimerFunds,
Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares are sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights and voting privileges. Earnings, net assets and net asset value per
share may differ by minor amounts due to each class having its own expenses
directly attributable to that class. Classes A, B, C and N have separate
distribution and/or service plans. No such plan has been adopted for Class Y
shares. Class B shares will automatically convert to Class A shares six years
after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued.
In the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing bid and asked
prices, and if not, at the closing bid price. Securities (including restricted
securities) for which quotations are not readily available are valued primarily
using dealer-supplied valuations, a portfolio pricing service authorized by the
Board of Trustees, or at their fair value. Fair value is determined in good
faith using consistently applied procedures under the supervision of the Board
of Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
- --------------------------------------------------------------------------------
Securities on a When-Issued Basis. Delivery and payment for securities that
have been purchased by the Fund on a when-issued basis can take place a month
or more after the trade date. Normally the settlement date occurs within six
months after the trade date; however, the Fund may, from time to time, purchase
securities whose settlement date extends six months or more beyond trade date.
During this period, such securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to their delivery. The
Fund maintains segregated assets with a market value equal to or greater than
the amount of its purchase commitments. The purchase of securities on a
when-issued basis may increase the volatility of the Fund's net asset value to
the extent
26 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
the Fund makes such purchases while remaining substantially fully invested. As
of August 31, 2003, the Fund had entered into when-issued purchase commitments
of $722,237,842.
In connection with its ability to purchase securities on a when-issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The forward roll may
not extend for a period of greater than one year. The Fund records the
incremental difference between the forward purchase and sale of each forward
roll as interest income.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities to what was sold to the counterparty
at redelivery; counterparty credit risk; and the potential pay down speed
variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
Security Credit Risk. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of August 31, 2003, securities with an
aggregate market value of $22,751, representing less than 0.01% of the Fund's
net assets, were in default.
- --------------------------------------------------------------------------------
Joint Repurchase Agreements. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
27 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years
and unrealized appreciation or depreciation of investment for federal income
tax purposes.
Net Unrealized
Appreciation
Undistributed Undistributed Accumulated Based on Cost of
Net Investment Long-Term Loss Securities for Federal
Income Gain Carryforward 1,2 Income Tax Purposes
-------------------------------------------------------------------------------------------
$2,887,599 $-- $1,135,763 $833,576
1. As of August 31, 2003, the Fund had $1,135,763 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of August 31, 2003,
details of the capital loss carryforward were as follows:
Expiring
------------------------------
2011 $1,135,763
2. During the fiscal year August 31, 2003, the Fund did not utilize any capital
loss carryforwards. During the fiscal year August 31, 2002, the Fund utilized
$32,569,144 of capital loss carryforward to offset capital gains realized in
that fiscal year.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal 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 dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly,
the following amounts have been reclassified for August 31, 2003. Net assets of
the Fund were unaffected by the reclassifications.
To From Net
Ordinary Capital Tax Return Investment
Income Gain of Capital Loss
--------------------------------------------------------------------
$2,204,293 $2,204,293 $-- $--
The tax character of distributions paid during the years ended August 31, 2003
and August 31, 2002 was as follows:
Year Ended Year Ended
August 31, 2003 August 31, 2002
-------------------------------------------------------------------------
Distributions paid from:
Ordinary income $40,085,957 $57,818,768
Long-term capital gain 3,403,472 --
-------------------------------------
Total $43,489,429 $57,818,768
=====================================
The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investments for federal income tax purposes as
of August 31, 2003 are noted below. The primary difference between book and tax
appreciation or depreciation of investments, if applicable, is attributable to
the tax deferral of losses or tax realization of financial statement unrealized
gain or loss.
28 | OPPENHEIMER U.S. GOVERNMENT TRUST
Federal tax cost $2,134,248,613
==============
Gross unrealized appreciation $ 29,392,854
Gross unrealized depreciation (28,559,278)
--------------
Net unrealized appreciation $ 833,576
==============
- --------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted an unfunded retirement plan for
the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 2003, the Fund's projected benefit obligations were increased by
$15,707 and payments of $12,126 were made to retired trustees, resulting in an
accumulated liability of $162,298 as of August 31, 2003.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or
a portion of the annual compensation they are entitled to receive from the
Fund. Under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or are invested in other
selected Oppenheimer funds. Deferral of trustees' fees under the plan will not
affect the net assets of the Fund, and will not materially affect the Fund's
assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are
declared daily and paid monthly. Capital gain distributions, if any, are
declared and paid annually.
- --------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
Expense Offset Arrangement. The reduction of custodian fees represents earnings
on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
Security Transactions. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
29 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
2. Shares of Beneficial Interest
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
Year Ended August 31, 2003 Year Ended August 31, 2002
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------
Class A
Sold 56,652,571 $ 564,246,786 51,158,977 $ 492,319,270
Dividends and/or
distributions reinvested 2,381,759 23,695,252 3,285,846 31,517,309
Redeemed (60,388,778) (600,328,060) (31,048,388) (297,864,488)
---------------------------------------------------------------------
Net increase (decrease) (1,354,448) $ (12,386,022) 23,396,435 $ 225,972,091
=====================================================================
- ------------------------------------------------------------------------------------------------------------
Class B
Sold 20,228,243 $ 201,205,017 28,240,126 $ 271,878,767
Dividends and/or
distributions reinvested 805,769 8,009,852 1,009,466 9,672,641
Redeemed (22,848,238) (226,860,264) (10,910,447) (104,512,655)
---------------------------------------------------------------------
Net increase (decrease) (1,814,226) $ (17,645,395) 18,339,145 $ 177,038,753
=====================================================================
- ------------------------------------------------------------------------------------------------------------
Class C
Sold 10,172,062 $ 101,135,131 13,565,886 $ 130,250,103
Dividends and/or
distributions reinvested 433,362 4,305,775 613,993 5,880,095
Redeemed (11,673,080) (115,833,713) (6,470,186) (61,928,048)
---------------------------------------------------------------------
Net increase (decrease) (1,067,656) $ (10,392,807) 7,709,693 $ 74,202,150
=====================================================================
- ------------------------------------------------------------------------------------------------------------
Class N
Sold 2,734,977 $ 27,196,182 1,861,890 $ 17,830,379
Dividends and/or
distributions reinvested 56,283 559,905 32,852 314,778
Redeemed (1,495,408) (14,859,265) (587,177) (5,591,433)
---------------------------------------------------------------------
Net increase 1,295,852 $ 12,896,822 1,307,565 $ 12,553,724
=====================================================================
- ------------------------------------------------------------------------------------------------------------
Class Y
Sold 194,270 $ 1,933,455 198,277 $ 1,903,907
Dividends and/or
distributions reinvested 11,213 111,561 11,662 111,903
Redeemed (228,630) (2,270,015) (80,212) (766,762)
---------------------------------------------------------------------
Net increase (decrease) (23,147) $ (224,999) 129,727 $ 1,249,048
=====================================================================
- --------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended August 31, 2003, were
$1,392,021,467 and $1,408,427,356, respectively.
30 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates
Management Fees. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.65% of the first $200 million of average annual net assets of
the Fund, 0.60% of the next $100 million, 0.57% of the next $100 million, 0.55%
of the next $400 million, 0.50% of the next $1.2 billion, and 0.475% of average
annual net assets over $2.0 billion.
- --------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the year ended August 31, 2003, the Fund
paid $2,920,206 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $5,000 for
assets of less than $10 million and $10,000 for assets of $10 million or more.
The Class Y shares are subject to the minimum fees in the event that the per
account fee does not equal or exceed the applicable minimum fees. OFS may
voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average annual net assets for all
classes. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
Distribution and Service Plan (12b-1) Fees. Under its General Distributor's
Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Fund's principal underwriter in the continuous public
offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the
period indicated.
Aggregate Class A Concessions Concessions Concessions Concessions
Front-End Front-End on Class A on Class B on Class C on Class N
Sales Charges Sales Charges Shares Shares Shares Shares
on Class A Retained by Advanced by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor 1 Distributor 1 Distributor 1 Distributor 1
- -------------------------------------------------------------------------------------------------------------------------
August 31, 2003 $3,750,127 $791,915 $1,317,951 $3,956,516 $542,151 $212,758
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its
own resources at the time of sale.
Class A Class B Class C Class N
Contingent Contingent Contingent Contingent
Deferred Deferred Deferred Deferred
Sales Charges Sales Charges Sales Charges Sales Charges
Retained by Retained by Retained by Retained by
Year Ended Distributor Distributor Distributor Distributor
- -------------------------------------------------------------------------------------------------------
August 31, 2003 $40,961 $1,852,281 $112,066 $110,391
31 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
4. Fees and Other Transactions with Affiliates Continued
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class
A Shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. For the year ended August 31, 2003, expense under
the Class A Plan totaled $2,198,600, all of which were paid by the Distributor
to recipients, which included $24,802 retained by the Distributor and $142,068
which was paid to an affiliate of the Manager. Any unreimbursed expenses the
Distributor incurs with respect to Class A shares in any fiscal year cannot be
recovered in subsequent years.
- --------------------------------------------------------------------------------
Distribution and Service Plans for Class B, Class C and Class N Shares. The
Fund has adopted Distribution and Service Plans for Class B, Class C and Class
N shares. Under the plans, the Fund pays the Distributor an annual asset-based
sales charge of 0.75% per year on Class B shares and on Class C shares and the
Fund pays the Distributor an annual asset-based sales charge of 0.25% per year
on Class N shares. The Distributor also receives a service fee of 0.25% per
year under each plan.
Distribution fees paid to the Distributor for the year ended August 31, 2003,
were as follows:
Distributor's
Distributor's Aggregate
Aggregate Unreimbursed
Unreimbursed Expenses as %
Total Payments Amount Retained Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
- ----------------------------------------------------------------------------------------------------------------
Class B Plan $4,311,570 $3,503,724 $11,051,062 2.98%
Class C Plan 2,169,872 666,737 2,188,523 1.14
Class N Plan 109,966 94,911 444,148 1.71
- --------------------------------------------------------------------------------
5. Futures Contracts
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy
and sell futures contracts that relate to broadly based securities indices
"financial futures" or debt securities "interest rate futures" in order to gain
exposure to or protection from changes in market value of stock and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it
may be more efficient or cost effective than actually buying fixed income
securities.
32 | OPPENHEIMER U.S. GOVERNMENT TRUST
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open futures
contracts is noted in the Statement of Assets and Liabilities. Securities held
in collateralized accounts to cover initial margin requirements on open futures
contracts are noted in the Statement of Investments. The Statement of Assets
and Liabilities reflects a receivable and/or payable for the daily mark to
market for variation margin. Realized gains and losses are reported on the
Statement of Operations as closing and expiration of futures contracts. The net
change in unrealized appreciation and depreciation is reported on the Statement
of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of August 31, 2003, the Fund had outstanding futures contracts as follows:
Unrealized
Expiration Number of Valuation as of Appreciation
Contract Description Dates Contracts August 31, 2003 (Depreciation)
- ----------------------------------------------------------------------------------------------------------
Contracts to Purchase
U.S. Treasury Nts., 5 yr. 12/19/03 85 $ 9,338,047 $ 30,228
-------------
Contracts to Sell
U.S. Long Bonds 12/19/03 1,134 120,204,000 (1,489,284)
U.S. Treasury Nts., 2 yr. 12/29/03 439 93,527,578 (129,475)
U.S. Treasury Nts., 2 yr. 9/29/03 696 149,357,250 438,947
U.S. Treasury Nts., 10 yr. 12/19/03 1,079 118,386,531 (599,992)
-------------
(1,779,804)
-------------
$(1,749,576)
=============
- --------------------------------------------------------------------------------
6. Illiquid Securities
As of August 31, 2003, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of August
31, 2003 was $54,818,778, which represents 3.85% of the Fund's net assets.
33 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
7. Borrowing and Lending Arrangements
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission to allow these affiliated
funds to lend money to, and borrow money from, each other, in an attempt to
reduce borrowing costs below those of bank loan facilities. Under the
arrangement the Fund may lend money to other Oppenheimer funds and may borrow
from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
based upon a recommendation by the Manager. The Fund's borrowings, if any, are
subject to asset coverage requirements under the Investment Company Act and the
provisions of the SEC order and other applicable regulations. If the Fund
borrows money, there is a risk that the loan could be called on one day's
notice, in which case the Fund might have to borrow from a bank at higher rates
if a loan were not available from another Oppenheimer fund. If the Fund lends
money to another fund, it will be subject to the risk that the other fund might
not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the year
ended or at August 31, 2003.
34 | OPPENHEIMER U.S. GOVERNMENT TRUST
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of Oppenheimer U.S. Government Trust:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer U.S. Government Trust, including the statement of investments, as
of August 31, 2003, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of August 31, 2003, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer U.S. Government Trust as of August 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
Denver, Colorado
September 22, 2003
35 | OPPENHEIMER U.S. GOVERNMENT TRUST
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
In early 2004, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2003. Regulations of the U.S. Treasury Department require the
Fund to report this information to the Internal Revenue Service.
Dividends and distributions of $0.0459, $0.0395, $0.0401, $0.0439 and
$0.0495 per share were paid to Class A, Class B, Class C, Class N and Class Y
shareholders, respectively, on December 30, 2002, of which $0.0213 was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of the capital assets held for
more than one year (long-term capital gains).
Dividends paid by the Fund during the fiscal year ended August 31, 2003
which are not designated as capital gain distribution, may be eligible for
lower individual income tax rates to the extent that the Fund has received
qualified dividend income as stipulated by recent tax legislation. In early
2004, shareholders of record will receive information regarding the percentage
of distributions that are eligible for lower individual income tax rates. The
amount will be the maximum amount allowed.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because
of the complexity of the federal regulations which may affect your individual
tax return and the many variations in state and local tax regulations, we
recommend that you consult your tax advisor for specific guidance.
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES Unaudited
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and
Procedures is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, (ii) on the Fund's website at
www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In
addition, the Fund will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31, 2004,
for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX
filing will be available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov.
36 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited
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Name, Position(s) Held with Principal Occupation(s) During Past 5 Years; Other Trusteeships/Directorships Held by Trustee;
Fund, Length of Service, Age Number of Portfolios in Fund Complex Currently Overseen by Trustee
INDEPENDENT TRUSTEES The address of each Trustee in the chart below is 6803 S. Tucson Way, Centennial, CO 80112-3924.
Each Trustee serves for an indefinite term, until his or her resignation, retirement, death or
removal.
Clayton K. Yeutter, Of Counsel (since 1993), Hogan & Hartson (a law firm). Other directorships: Weyerhaeuser Corp.
Chairman of the Board (since 1999) and Danielson Holding Corp. (since 2002); formerly a director of Caterpillar, Inc.
of Trustees since 2003, (1993-December 2002). Oversees 29 portfolios in the OppenheimerFunds complex.
Trustee (since 1991)
Age: 72
Robert G. Galli, A trustee or director of other Oppenheimer funds. Formerly Trustee (May 2000-2002) of Research
Trustee (since 1996) Foundation of AIMR (investment research, non-profit) and Vice Chairman (October 1995-December
Age: 70 1997) of OppenheimerFunds, Inc. (the Manager). Oversees 39 portfolios in the OppenheimerFunds
complex.
Phillip A. Griffiths, A director (since 1991) of the Institute for Advanced Study, Princeton, N.J., a director (since
Trustee (since 1999) 2001) of GSI Lumonics, a trustee (since 1983) of Woodward Academy, a Senior Advisor (since 2001)
Age: 64 of The Andrew W. Mellon Foundation. A member of: the National Academy of Sciences (since 1979),
American Academy of Arts and Sciences (since 1995), American Philosophical Society (since 1996)
and Council on Foreign Relations (since 2002). Formerly a director of Bankers Trust New York
Corporation (1994-1999). Oversees 29 portfolios in the OppenheimerFunds complex.
Joel W. Motley, Director (since 2002) Columbia Equity Financial Corp. (privately-held financial adviser); Managing
Trustee (since 2002) Director (since 2002) Carmona Motley, Inc. (privately-held financial adviser); Formerly he held
Age: 51 the following positions: Managing Director (January 1998-December 2001), Carmona Motley Hoffman
Inc. (privately-held financial adviser); Managing Director (January 1992-December 1997), Carmona
Motley & Co. (privately-held financial adviser). Oversees 29 portfolios in the OppenheimerFunds
complex.
Kenneth A. Randall, A director of Dominion Resources, Inc. (electric utility holding company) and Prime Retail, Inc.
Trustee (since 1985) (real estate investment trust); formerly a director of Dominion Energy, Inc. (electric power and
Age: 76 oil & gas producer), President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research) and a director of Lumbermens Mutual Casualty
Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance Company.
Oversees 29 portfolios in the OppenheimerFunds complex.
Edward V. Regan, President, Baruch College, CUNY; a director of RBAsset (real estate manager); a director of
Trustee (since 1993) OffitBank; formerly Trustee, Financial Accounting Foundation (FASB and GASB), Senior Fellow of
Age: 73 Jerome Levy Economics Institute, Bard College, Chairman of Municipal Assistance Corporation for
the City of New York, New York State Comptroller and Trustee of New York State and Local
Retirement Fund. Oversees 29 investment companies in the OppenheimerFunds complex.
Russell S. Reynolds, Jr., Chairman (since 1993) of The Directorship Search Group, Inc. (corporate governance consulting and
Trustee (since 1989) executive recruiting); a life trustee of International House (non-profit educational
Age: 71 organization), and a trustee (since 1996) of the Greenwich Historical Society. Oversees 29
portfolios in the OppenheimerFunds complex.
37 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited / Continued
Donald W. Spiro, Chairman Emeritus (since January 1991) of the Manager. Formerly a director (January 1969-August
Vice Chairman of the 1999) of the Manager. Oversees 29 portfolios in the OppenheimerFunds complex.
Board of Trustees,
Trustee (since 1985)
Age: 77
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INTERESTED TRUSTEE AND OFFICER The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New York, NY 10018. Mr. Murphy
serves for an indefinite term, until his resignation, death or removal.
John V. Murphy, Chairman, Chief Executive Officer and director (since June 2001) and President (since September
President and Trustee, 2000) of the Manager; President and a director or trustee of other Oppenheimer funds; President
Trustee (since 2001) and a director (since July 2001) of Oppenheimer Acquisition Corp. (the Manager's parent holding
Age: 54 company) and of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the
Manager); a director (since November 2001) of OppenheimerFunds Distributor, Inc. (a subsidiary of
the Manager); Chairman and a director (since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager); President and a
director (since July 2001) of OppenheimerFunds Legacy Program (a charitable trust program
established by the Manager); a director of the investment advisory subsidiaries of the Manager:
OFI Institutional Asset Management, Inc. and Centennial Asset Management Corporation (since
November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 1, 2001) and a director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management
Corp. and Tremont Advisers, Inc. (investment advisory affiliates of the Manager); Executive Vice
President (since February 1997) of Massachusetts Mutual Life Insurance Company (the Manager's
parent company); a director (since June 1995) of DLB Acquisition Corporation (a holding company
that owns the shares of David L. Babson & Company, Inc.); formerly, Chief Operating Officer
(September 2000-June 2001) of the Manager; President and trustee (November 1999-November 2001) of
MML Series Investment Fund and MassMutual Institutional Funds (open-end investment companies); a
director (September 1999-August 2000) of C.M. Life Insurance Company; President, Chief Executive
Officer and director (September 1999-August 2000) of MML Bay State Life Insurance Company; a
director (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank (a wholly-owned
subsidiary of Emerald Isle Bancorp). Oversees 75 portfolios in the OppenheimerFunds complex.
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OFFICERS The address of the Officers in the chart below is as follows: for Messrs. Manioudakis and Zack,
498 Seventh Avenue, New York, NY 10018, for Mr. Wixted, 6803 S. Tucson Way, Centennial, CO
80112-3924. Each Officer serves for an annual term or until his or her earlier resignation, death
or removal.
Angelo Manioudakis, Senior Vice President of the Manager (since April 2002); an officer of 12 portfolios in the
Vice President and OppenheimerFunds complex; formerly Executive Director and portfolio manager for Miller, Anderson &
Portfolio Manager (since 2002) Sherrerd, a division of Morgan Stanley Investment Management (August 1993-April 2002).
Age: 36
38 | OPPENHEIMER U.S. GOVERNMENT TRUST
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer (since March
Treasurer (since 1999) 1999) of HarbourView Asset Management Corporation, Shareholder Services, Inc., Oppenheimer Real
Age: 43 Asset Management Corporation, Shareholder Financial Services, Inc., Oppenheimer Partnership
Holdings, Inc., OFI Private Investments, Inc. (since March 2000), OppenheimerFunds International
Ltd. and OppenheimerFunds plc (since May 2000) and OFI Institutional Asset Management, Inc. (since
November 2000) (offshore fund management subsidiaries of the Manager); Treasurer and Chief
Financial Officer (since May 2000) of Oppenheimer Trust Company (a trust company subsidiary of the
Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and
OppenheimerFunds Legacy Program (since April 2000); formerly Principal and Chief Operating Officer
(March 1995-March 1999), Bankers Trust Company-Mutual Fund Services Division. An officer of 91
portfolios in the OppenheimerFunds complex.
Robert G. Zack, Senior Vice President (since May 1985) and General Counsel (since February 2002) of the Manager;
Secretary (since 2001) General Counsel and a director (since November 2001) of OppenheimerFunds Distributor, Inc.; Senior
Age: 55 Vice President and General Counsel (since November 2001) of HarbourView Asset Management
Corporation; Vice President and a director (since November 2000) of Oppenheimer Partnership
Holdings, Inc.; Senior Vice President, General Counsel and a director (since November 2001) of
Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc.,
Oppenheimer Trust Company and OFI Institutional Asset Management, Inc.; General Counsel (since
November 2001) of Centennial Asset Management Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a director (since November 2001)
of OppenheimerFunds International Ltd.; Vice President (since November 2001) of OppenheimerFunds
Legacy Program; Secretary (since November 2001) of Oppenheimer Acquisition Corp.; formerly Acting
General Counsel (November 2001-February 2002) and Associate General Counsel (May 1981-October
2001) of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November 2001); OppenheimerFunds International
Ltd. and OppenheimerFunds plc (October 1997-November 2001). An officer of 91 portfolios in the
OppenheimerFunds complex.
The Fund's Statement of Additional Information contains additional information
about the Fund's Trustees and is available without charge upon request.
39 | OPPENHEIMER U.S. GOVERNMENT TRUST
ITEM 2. CODE OF ETHICS
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the Fund has determined that Edward
V. Regan, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Regan as the Audit
Committee's financial expert. Mr. Regan is an "independent" Trustee pursuant to
paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES - NOT REQUIRED
ITEM 5. NOT APPLICABLE
ITEM 6. RESERVED
ITEM 7. NOT APPLICABLE
ITEM 8. RESERVED
ITEM 9. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(c)) as of August 31, 2003, registrant's
principal executive officer and principal financial officer found
registrant's disclosure controls and procedures to be appropriately
designed to ensure that information required to be disclosed by
registrant in the reports that it files under the Securities Exchange
Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal
financial officer, to allow timely decisions regarding required
disclosure, and (b) is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms adopted by the
U.S. Securities and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls or in other factors that could significantly affect
registrant's internal controls subsequent to the date of the most
recent evaluation as indicated, including no significant deficiencies
or material weaknesses that required corrective action.
ITEM 10. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)