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 811-3430
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.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
(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: August 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP FIVE HOLDINGS BY ISSUER
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Federal National Mortgage Assn. 49.8%
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Federal Home Loan Mortgage Corp. 12.3
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U.S. Treasury 11.1
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Tennessee Valley Authority 6.5
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Federal Home Loan Bank 2.6
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2005, and are based on total investments.
For more current Fund holdings, please visit www.oppenheimerfunds.com.
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CREDIT ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Treasury 11.1%
Agency 46.7
AAA 38.0
AA 0.3
A 0.3
Not Rated 3.6
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2005, and are based on total investments. Securities rated by any
rating organization are included in the equivalent Standard & Poor's rating
category. Average credit quality and allocation include rated securities and
those not rated by a national rating organization (currently 0.00% of total
investments) but to which the Manager in its judgment has assigned ratings as
securities comparable to those rated by a rating agency in the same category.
The Fund may invest in securities of any maturity, including those issued by
private issuers and federally chartered mortgage companies whose interest and
principal repayments are not guaranteed by the U.S. government. U.S. Treasury
securities are not rated but are deemed to have the highest rating equivalency.
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8 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED AUGUST 31, 2005, 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, 2005, several factors contributed to Oppenheimer U.S. Government
Trust's competitive total return and yield, as well as its favorable ranking
among its peers, amidst somewhat challenging macro conditions. First, our active
management of the Fund's exposure (vis-a-vis the benchmark) to mortgage-related
securities benefited performance. In the first half of the Fund's fiscal year,
this segment of the U.S. government securities market enjoyed solid
outperformance over Treasuries while providing favorable relative yield. As
such, our decision to substantially overweight our exposure to mortgage-backed
securities over the first half of the reporting period definitively added to
performance.
With a landscape of stable mortgage rates and tame prepayments, mortgage
investors had little to complain about throughout the period. This stability
fostered consistent demand for mortgage securities from money managers, banks
and foreign investors throughout the period. This being said, midway through the
period we determined that certain sectors of the mortgage market had become less
attractive and we subsequently trimmed some of our overall mortgage exposure.
Some of our emphasis instead was shifted to commercial mortgage-backed
securities and agency debentures, segments of the market that continued to
outperform treasuries over the later half of the period, while residential
mortgages only kept pace with treasuries. As a result, this tactical shift
supported Fund returns.
Throughout the year, our emphasis on higher-coupon mortgages within our
residential-mortgage exposure proved to be another boon to returns. As
valuations became what we considered unattractive in the mortgage sector, we
trimmed our overall exposure to the sector by reducing the Fund's exposure to
lower-coupon issues while maintaining our emphasis on higher-coupon mortgages,
which have continued to outperform in an environment of low volatility.
The Fund's overall exposure to and emphasis on U.S. government
agency-related debt also added to returns. Agency debentures delivered
additional yield relative to Treasuries this period, and thanks in part to
limited overall supply, this segment of the government securities markets
enjoyed moderate spread tightening versus Treasuries, thereby outperforming from
a total return perspective.
Finally, the portfolio's interest-rate exposure, also known as "duration,"
provided a definitive impact to Fund performance. When we entered the period,
the Fund's portfolio held less interest-rate sensitivity than did the benchmark.
This decision was based on our belief that the markets were "off" in their
expectations for a slow rate of convergence between short and long rates at that
time. In short, we were of the opinion that
9 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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longer-term rates were artificially low. When rates spiked in March, our
duration positioning substantially added to returns, particularly versus many of
our peers. However, as the first half of 2005 came to a close longer-term
interest rates had returned to their lowest levels of the year. Therefore, we
further reduced our interest-rate sensitivity as we became even more convinced
that the markets were underestimating the extent of rate increases moving
forward. As the period ended, we maintained a moderate underweight duration
position versus the Fund's benchmark, having reduced our extreme underweight
position in July after interest rates increased moderately.
While it is difficult to identify a factor that detracted from the Fund's
performance, had we been more aggressive in adjusting our interest-rate
sensitivity, the additional returns we enjoyed from this factor might have been
more significant. However, our disciplined investment process does not include
reacting to short-term interest-rate volatility or other short-term, macro
conditions. Furthermore, we believe to do so would have introduced unnecessary
risk to the Fund's portfolio. We believe that the Fund's performance results as
well as its favorable peer ranking this period exhibit the tried-and-true
strength of our investment process and approach, which includes seeking to
minimize risk to principal whenever possible.
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, 2005. In the case of Class A, Class B and Class C
shares, performance is measured over a ten-fiscal-year period. 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 maximum initial sales charge on Class A shares, the applicable contingent
deferred sales charge on Class B, Class C, and Class N shares, and reinvestments
of all dividends and capital gains distributions. Past performance cannot
guarantee future results.
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 income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
10 | 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer U.S. Lehman Brothers
Government Trust U.S. Government
(Class A) Bond Index
---------------- ---------------
06/30/1995 9,525 10,000
09/30/1995 9,696 10,177
12/31/1995 10,022 10,642
03/31/1996 9,933 10,402
06/30/1996 9,992 10,451
08/31/1996 1 10,034 10,454
11/30/1996 10,537 11,050
02/28/1997 10,559 10,964
05/31/1997 10,766 11,100
08/31/1997 11,082 11,429
11/30/1997 11,454 11,862
02/28/1998 11,697 12,132
05/31/1998 11,845 12,347
08/31/1998 12,108 12,832
11/30/1998 12,221 13,137
02/28/1999 12,149 12,928
05/31/1999 12,136 12,894
08/31/1999 12,060 12,849
11/30/1999 12,223 12,956
02/29/2000 12,287 13,074
05/31/2000 12,472 13,275
08/31/2000 12,908 13,844
11/30/2000 13,270 14,292
02/28/2001 13,667 14,891
05/31/2001 13,660 14,840
08/31/2001 14,166 15,456
11/30/2001 14,513 15,769
02/28/2002 14,679 15,878
05/31/2002 14,807 15,998
08/31/2002 15,547 16,906
11/30/2002 15,625 17,016
02/28/2003 16,075 17,665
05/31/2003 16,290 18,156
08/31/2003 15,834 17,411
11/30/2003 16,062 17,682
02/29/2004 16,499 18,202
05/31/2004 16,148 17,744
08/31/2004 16,700 18,332
11/30/2004 16,769 18,295
02/28/2005 16,934 18,444
05/31/2005 17,270 18,894
08/31/2005 17,392 19,048
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
8/31/05
1-Year -0.80% 5-Year 5.12% 10-Year 5.60%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR
FURTHER INFORMATION.
1. The Fund changed its fiscal year end from June 30 to August 31.
11 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer U.S. Lehman Brothers
Government Trust U.S. Government
(Class B) Bond Index
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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
11/30/2003 16,222 17,747
02/29/2004 16,663 18,269
05/31/2004 16,309 17,809
08/31/2004 16,866 18,400
11/30/2004 16,937 18,363
02/28/2005 17,103 18,512
05/31/2005 17,442 18,963
08/31/2005 17,566 19,118
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
8/31/05
1-Year -1.55% 5-Year 5.02% 10-Year 5.63%
12 | OPPENHEIMER U.S. GOVERNMENT TRUST
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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer U.S. Lehman Brothers
Government Trust U.S. Government
(Class C) Bond Index
---------------- ---------------
06/30/1995 10,000 10,000
09/30/1995 10,149 10,177
12/31/1995 10,482 10,642
03/31/1996 10,358 10,402
06/30/1996 10,411 10,451
08/31/1996 1 10,441 10,454
11/30/1996 10,945 11,050
02/28/1997 10,948 10,964
05/31/1997 11,143 11,100
08/31/1997 11,448 11,429
11/30/1997 11,812 11,862
02/28/1998 12,040 12,132
05/31/1998 12,169 12,347
08/31/1998 12,403 12,832
11/30/1998 12,508 13,137
02/28/1999 12,397 12,928
05/31/1999 12,373 12,894
08/31/1999 12,272 12,849
11/30/1999 12,400 12,956
02/29/2000 12,454 13,074
05/31/2000 12,618 13,275
08/31/2000 13,035 13,844
11/30/2000 13,361 14,292
02/28/2001 13,735 14,891
05/31/2001 13,717 14,840
08/31/2001 14,183 15,456
11/30/2001 14,503 15,769
02/28/2002 14,643 15,878
05/31/2002 14,758 15,998
08/31/2002 15,467 16,906
11/30/2002 15,502 17,016
02/28/2003 15,923 17,665
05/31/2003 16,122 18,156
08/31/2003 15,640 17,411
11/30/2003 15,820 17,682
02/29/2004 16,221 18,202
05/31/2004 15,845 17,744
08/31/2004 16,373 18,332
11/30/2004 16,394 18,295
02/28/2005 16,525 18,444
05/31/2005 16,839 18,894
08/31/2005 16,909 19,048
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
8/31/05
1-Year 2.29% 5-Year 5.34% 10-Year 5.32%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR
FURTHER INFORMATION.
1. The Fund changed its fiscal year end from June 30 to August 31.
13 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer U.S. Lehman Brothers
Government Trust U.S. Government
(Class N) 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
11/30/2003 11,665 11,874
02/29/2004 11,959 12,223
05/31/2004 11,709 11,916
08/31/2004 12,101 12,310
11/30/2004 12,132 12,286
02/28/2005 12,256 12,386
05/31/2005 12,491 12,688
08/31/2005 12,572 12,791
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
8/31/05
1-Year 2.91% 5-Year N/A Since Inception (3/1/01) 5.22%
14 | 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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer U.S. Lehman Brothers
Government Trust U.S. Government
(Class Y) 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
11/30/2003 13,793 14,321
02/29/2004 14,172 14,742
05/31/2004 13,881 14,371
08/31/2004 14,381 14,848
11/30/2004 14,437 14,818
02/28/2005 14,590 14,938
05/31/2005 14,908 15,303
08/31/2005 15,026 15,427
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 8/31/05
1-Year 4.48% 5-Year 6.53% Since Inception (5/18/98) 5.75%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 4.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 16 FOR
FURTHER INFORMATION.
15 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES
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Total returns and the ending account values in the graphs include 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.
Investors should consider the Fund's investment objectives, risks, and other
charges and expenses carefully before investing. The Fund's prospectus contains
this and other information about the Fund, and may be obtained by asking your
financial advisor, calling us at 1.800.525.7048 or visiting our website at
www.oppenheimerfunds.com. Read the prospectus carefully before investing.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
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.
16 | OPPENHEIMER U.S. GOVERNMENT TRUST
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.
17 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended August 31, 2005.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
18 | OPPENHEIMER U.S. GOVERNMENT TRUST
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(3/1/05) (8/31/05) AUGUST 31, 2005
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,027.10 $4.61
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.67 4.59
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,024.30 8.45
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,023.20 8.45
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,025.80 5.89
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,019.41 5.87
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,029.90 2.92
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,022.33 2.91
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended August 31, 2005 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 0.90%
- ----------------------------
Class B 1.65
- ----------------------------
Class C 1.65
- ----------------------------
Class N 1.15
- ----------------------------
Class Y 0.57
The expense ratios reflect voluntary waivers or reimbursements of expenses by
the Fund's Manager and Transfer Agent that can be terminated at any time,
without advance notice. The "Financial Highlights" tables in the Fund's
financial statements, included in this report, also show the gross expense
ratios, without such waivers or reimbursements.
- --------------------------------------------------------------------------------
19 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS August 31, 2005
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--4.1%
- ------------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 3.669%, 4/20/08 1,2 $ 1,350,000 $ 1,348,973
- ------------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2004-2, Cl. A3, 3.58%, 1/15/09 4,780,000 4,725,400
- ------------------------------------------------------------------------------------------------------------------
Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed Certificates:
Series 2004-D, Cl. AF1, 2.98%, 4/25/20 1 1,254,701 1,247,733
Series 2005-B, Cl. AF1, 4.02%, 3/26/35 1 1,268,994 1,264,625
- -----------------------------------------------------------------------------------------------------------------
Chase Funding Mortgage Loan Asset-Backed Certificates, Home Equity Mtg.
Obligations, Series 2004-1, Cl. 1A2, 2.427%, 6/25/19 2,211,048 2,202,958
- ------------------------------------------------------------------------------------------------------------------
CIT Equipment Collateral, Equipment Receivable-Backed Nts.,
Series 2004-DFS, Cl. A2, 2.66%, 11/20/06 1 3,932,748 3,916,899
- ------------------------------------------------------------------------------------------------------------------
Conseco Finance Securitizations Corp., Home Equity Loan Pass-Through
Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32 1,3 5,000,000 407,009
- ------------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates,
Series 2004-B, Cl. A2, 2.48%, 2/8/07 1 1,979,627 1,976,253
- ------------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 1,3 4,550,157 34,126
- ------------------------------------------------------------------------------------------------------------------
Equity One ABS, Inc., Home Equity Mtg. Pass-Through Certificates,
Series 2004-3, Cl. AF2, 3.80%, 7/25/34 4,035,000 4,018,629
- ------------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates:
Series 2004-A, Cl. A2, 2.13%, 10/15/06 3,036,746 3,029,923
Series 2005-B, Cl. A2, 3.77%, 9/15/07 4,650,000 4,647,187
- ------------------------------------------------------------------------------------------------------------------
Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.,
Series 2003-3, Cl. A1, 1.50%, 1/15/08 1,626,361 1,623,068
- ------------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.,
Series 2004-A, Cl. A2, 1.40%, 7/17/06 9,957 9,952
- ------------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust, Home Equity Pass-Through
Certificates, Series 2005-1, Cl. AF2, 3.914%, 5/25/35 950,000 941,397
- ------------------------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.,
Series 2004-2, Cl. A2, 2.41%, 2/15/07 2,066,855 2,062,359
- ------------------------------------------------------------------------------------------------------------------
Volkswagen Auto Lease Trust, Automobile Lease Asset-Backed Securities,
Series 2004-A, Cl. A2, 2.47%, 1/22/07 3,297,848 3,287,858
- ------------------------------------------------------------------------------------------------------------------
Wachovia Auto Owner Trust, Automobile Receivable Nts.,
Series 2004-B, Cl. A2, 2.40%, 5/21/07 1,943,269 1,937,285
- ------------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust, Collateralized Mtg. Obligations,
Series 2004-2, Cl. AI1B, 2.94%, 9/25/18 4,130,900 4,098,222
----------------
Total Asset-Backed Securities (Cost $52,030,037) 42,779,856
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--76.5%
- ------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--63.4%
- ------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--62.8%
Fannie Mae Whole Loan, Collateralized Mtg. Obligations Pass-Through
Certificates, Trust 2004-W9, Cl. 2A2, 7%, 2/25/44 7,505,197 7,885,147
20 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.:
6%, 7/1/24-10/1/34 $ 36,142,047 $ 37,078,221
6.50%, 4/1/18-3/1/29 3,163,126 3,277,971
7%, 8/1/16-3/1/32 16,477,911 17,251,876
7.50%, 9/1/12-2/1/32 1,284,479 1,360,092
8%, 4/1/16 2,526,982 2,699,906
9%, 8/1/22-5/1/25 571,045 622,066
11.50%, 6/1/20 47,249 52,399
12.50%, 7/1/19 167,366 186,444
13%, 8/1/15 140,112 156,758
14%, 1/1/11 54,838 61,799
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Pass-Through Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 149,671 149,511
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg. Investment
Conduit Multiclass Pass-Through Certificates:
Series 1669, Cl. G, 6.50%, 2/15/23 434,859 435,135
Series 2055, Cl. ZM, 6.50%, 5/15/28 2,669,673 2,767,589
Series 2080, Cl. Z, 6.50%, 8/15/28 1,722,728 1,782,248
Series 2220, Cl. PD, 8%, 3/15/30 629,415 676,183
Series 2387, Cl. PD, 6%, 4/15/30 2,597,141 2,619,752
Series 2392, Cl. PV, 6%, 12/15/20 9,952,000 10,208,434
Series 2410, Cl. NE, 6.50%, 9/15/30 500,500 501,417
Series 2423, Cl. PD, 6.50%, 11/15/30 19,336 19,316
Series 2456, Cl. BD, 6%, 3/15/30 1,224,403 1,230,090
Series 2498, Cl. PC, 5.50%, 10/15/14 191,406 191,691
Series 2500, Cl. FD, 4.071%, 3/15/32 2 1,463,095 1,469,432
Series 2526, Cl. FE, 3.971%, 6/15/29 2 1,931,443 1,941,295
Series 2551, Cl. FD, 3.971%, 1/15/33 2 1,506,047 1,517,420
Series 2583, Cl. KA, 5.50%, 3/15/22 4,507,368 4,530,148
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 192, Cl. IO, 12.337%, 2/1/28 4 771,094 138,355
Series 195, Cl. IO, 1.40%, 4/1/28 4 11,013,494 2,119,969
Series 200, Cl. IO, 11.043%, 1/1/29 4 919,627 165,267
Series 205, Cl. IO, 7.858%, 9/1/29 4 4,974,677 927,469
Series 206, Cl. IO, (18.05)%, 12/1/29 4 1,468,813 295,435
Series 217, Cl. IO, 2.019%, 2/1/32 4 1,847,878 349,001
Series 2074, Cl. S, 6.2917%, 7/17/28 4 982,085 117,164
Series 2079, Cl. S, 8.0809%, 7/17/28 4 1,551,784 188,981
Series 2122, Cl. S, 20.338%, 2/15/29 4 7,142,068 712,901
Series 2304, Cl. SK, 21.534%, 6/15/29 4 6,576,992 582,906
Series 2493, Cl. S, 22.213%, 9/15/29 4 1,471,901 143,190
Series 2526, Cl. SE, 14.555%, 6/15/29 4 2,558,089 180,091
Series 2819, Cl. S, 12.384%, 6/15/34 4 22,488,565 2,213,977
Series 2920, Cl. S, 20.781%, 1/15/35 4 13,809,767 818,035
Series 3000, Cl. SE, 41.914%, 7/15/25 4 14,557,604 766,745
21 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.:
4.50%, 5/1/19-6/1/19 $ 5,349,590 $ 5,310,653
4.50%, 9/1/20 5 39,927,000 39,602,593
5%, 2/1/18-6/1/18 11,029,267 11,120,673
5%, 9/1/35 5 70,953,000 70,487,406
5.50%, 2/1/33-1/1/34 30,926,983 31,300,485
5.50%, 9/1/20-9/1/35 5 126,099,000 127,795,963
6%, 6/1/16-11/1/32 48,972,285 50,550,306
6%, 9/1/35 5 36,603,000 37,460,901
6.50%, 11/1/28-9/1/32 21,446,157 22,241,840
6.50%, 9/1/35 5 66,801,000 69,034,692
7%, 11/1/17 5,667,879 5,938,532
7.50%, 2/1/27 1,633,379 1,736,864
8%, 12/1/22 88,614 95,141
8.50%, 7/1/32 308,845 336,470
11%, 7/1/16 80,890 90,938
11.50%, 11/1/15-11/17/20 504,309 560,699
13%, 11/1/12 8,595 9,288
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust:
Commercial Mtg. Obligations, Interest-Only Stripped Mtg.-Backed Security,
Trust 2001-T4, Cl. IO, 5.152%, 7/25/41 1,4 10,873,067 345,412
Commercial Mtg. Obligations, Trust 2001-T6, Cl. B, 6.088%, 5/25/11 10,000,000 10,836,266
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations, Gtd.
Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22 199,697 204,536
Trust 1998-63, Cl. PG, 6%, 3/25/27 483,136 482,816
Trust 2001-42, Cl. QF, 4.621%, 9/25/31 2 8,000,000 8,173,942
Trust 2001-50, Cl. NE, 6%, 8/25/30 1,358,552 1,368,427
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 5,907,847 6,141,506
Trust 2001-70, Cl. LR, 6%, 9/25/30 1,488,003 1,507,444
Trust 2001-72, Cl. NH, 6%, 4/25/30 1,049,068 1,055,916
Trust 2001-74, Cl. PD, 6%, 5/25/30 422,831 425,404
Trust 2002-52, Cl. FD, 3.96%, 9/25/32 2 1,892,493 1,900,947
Trust 2002-77, Cl. WF, 3.988%, 12/18/32 2 2,355,659 2,370,583
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 753,958 752,675
Trust 2003-10, Cl. HP, 5%, 2/25/18 6,170,000 6,249,992
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 3,128,000 3,232,586
Trust 2004-101, Cl. BG, 5%, 1/25/20 4,060,000 4,127,272
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Interest-Only Stripped Mtg.-Backed Security:
Trust 2002-28, Cl. SA, 10.667%, 4/25/32 4 1,348,515 131,451
Trust 2002-38, Cl. SO, 8.38%, 4/25/32 4 1,999,175 158,607
Trust 2002-39, Cl. SD, 3.498%, 3/18/32 4 2,112,935 230,493
Trust 2002-48, Cl. S, 10.032%, 7/25/32 4 2,229,574 224,367
Trust 2002-52, Cl. SL, 10.083%, 9/25/32 4 1,380,236 141,287
Trust 2002-53, Cl. SK, 3.762%, 4/25/32 4 1,317,986 148,355
Trust 2002-56, Cl. SN, 11.862%, 7/25/32 4 3,046,547 308,628
Trust 2002-77, Cl. IS, 8.464%, 12/18/32 4 3,406,002 382,528
22 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed
Security:
Trust 221, Cl. 2, 2.71%, 5/1/23 4 $ 3,977,728 $ 747,227
Trust 240, Cl. 2, 14.818%, 9/1/23 4 2,495,861 452,826
Trust 252, Cl. 2, 1.905%, 11/1/23 4 1,822,959 351,796
Trust 254, Cl. 2, 2.581%, 1/1/24 4 2,643,447 505,182
Trust 303, Cl. IO, 4.707%, 11/1/29 4 1,450,007 278,006
Trust 321, Cl. 2, 5.86%, 3/1/32 4 6,455,280 1,246,053
Trust 322, Cl. 2, 11.633%, 4/1/32 4 1,949,193 346,455
Trust 324, Cl. 2, 1.00%, 6/1/32 4 4,996,201 950,518
Trust 327, Cl. 2, 11.716%, 8/1/32 4 5,969,798 1,043,227
Trust 329, Cl. 2, 8.059%, 1/1/33 4 3,183,474 599,469
Trust 333, Cl. 2, 8.61%, 3/1/33 4 4,121,375 785,050
Trust 338, Cl. 2, 6.756%, 6/1/33 4 2,799,561 535,663
Trust 350, Cl. 2, 9.68%, 2/1/34 4 13,320,130 2,510,292
Trust 2001-61, Cl. SH, 26.297%, 11/18/31 4 6,919,880 637,534
Trust 2001-63, Cl. SD, 13.263%, 12/18/31 4 2,204,699 217,958
Trust 2001-68, Cl. SC, 12.635%, 11/25/31 4 1,581,987 164,260
Trust 2001-81, Cl. S, 11.645%, 1/25/32 4 1,683,352 160,693
Trust 2002-9, Cl. MS, 9.893%, 3/25/32 4 2,519,833 266,981
Trust 2002-52, Cl. SD, 3.257%, 9/25/32 4 1,892,493 208,387
Trust 2002-77, Cl. SH, 16.018%, 12/18/32 4 2,017,699 208,582
Trust 2003-4, Cl. S, 24.661%, 2/25/33 4 3,789,574 381,528
Trust 2005-40, Cl. SB, 27.904%, 5/25/35 4 9,122,815 574,736
Trust 2005-71, Cl. SA, 31.268%, 8/25/25 4 9,292,465 526,845
----------------
648,665,978
- ------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.6%
Government National Mortgage Assn.:
4.375%, 4/20/17 2 59,020 59,715
6.50%, 11/15/23-12/15/23 156,082 163,496
7%, 1/15/28-1/20/30 1,270,506 1,336,274
7.50%, 10/15/06-11/15/26 1,082,315 1,155,847
8%, 6/15/06-8/15/28 291,677 312,887
8.25%, 4/15/08 7,502 7,811
8.50%, 1/15/06-12/15/17 919,887 1,000,050
9%, 9/15/08-5/15/09 17,265 18,130
9.50%, 7/15/18-12/15/19 57,614 64,017
10%, 8/15/17-8/15/19 131,812 149,234
10.50%, 8/15/13-5/15/21 487,042 552,782
11%, 10/20/19-7/20/20 424,795 471,173
11.50%, 2/15/13 13,830 15,326
12%, 12/15/12-3/15/14 6,780 7,868
12.50%, 1/15/14-11/15/14 107,666 121,436
13%, 4/15/11-12/15/14 16,426 18,188
13.50%, 5/15/11-1/15/13 16,649 18,999
14%, 6/15/11 4,380 5,013
23 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 1998-6, Cl. SA, 5.907%, 3/16/28 4 $ 1,899,655 $ 208,853
Series 1998-19, Cl. SB, 5.168%, 7/16/28 4 3,118,401 374,063
----------------
6,061,162
- ------------------------------------------------------------------------------------------------------------------
NON-AGENCY--13.1%
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL--11.5%
Asset Securitization Corp., Commercial Mtg. Pass-Through
Certificates:
Series 1996-MD6, Cl. A2, 7.641%, 11/13/29 2 3,000,000 3,158,320
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30 4,373,491 4,520,553
- ------------------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates:
Series 2005-2, Cl. A4, 4.783%, 7/10/43 5,570,000 5,640,467
Series 2005-3, Cl. A2, 4.501%, 7/10/43 4,590,000 4,584,755
- ------------------------------------------------------------------------------------------------------------------
Bank of America Mortgage Securities, Inc., Collateralized Mtg.
Obligations
Pass-Through Certificates:
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 5,490,390 5,573,124
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 4,104,409 4,200,608
Series 2004-E, Cl. 2A9, 3.712%, 6/25/34 1,556,847 1,556,191
Series 2005-E, Cl. 2A2, 4.995%, 6/25/35 2 1,316,144 1,314,930
- ------------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only
Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 6.66%, 6/22/24 4 43,041,296 1,714,494
- ------------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates, Series 2001-SPGA, Cl. B, 6.662%, 8/13/18 10,767,000 11,910,432
- ------------------------------------------------------------------------------------------------------------------
First Union National Bank/Lehman Brothers/Bank of America Commercial
Mtg. Trust, Pass-Through Certificates, Series 1998-C2, Cl. A2,
6.56%, 11/18/35 2,997,974 3,139,083
- ------------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 2,610,000 2,647,951
- ------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 2,037,353 2,115,763
- ------------------------------------------------------------------------------------------------------------------
Heller Financial Commercial Mortgage Asset Corp., Interest-Only
Commercial Mtg. Obligations, Series 2000-PH1, Cl. X, 6.9972%,
1/17/34 4 173,247,529 2,821,232
- ------------------------------------------------------------------------------------------------------------------
J.P. Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 10,000,000 11,143,264
- ------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates, Series 2005-LDP2, Cl. A2, 4.575%,
7/15/42 1,120,000 1,123,660
- ------------------------------------------------------------------------------------------------------------------
LB-UBS Securities Commercial Mortgage Trust, Commercial Mtg.
Pass-Through Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 3,140,000 3,186,119
- ------------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., Collateralized Mtg. Obligations,
Series 2002-GE1, Cl. A, 2.514%, 7/26/24 1 600,945 507,305
- ------------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, Pass-Through Collateralized Mtg.
Obligations, Series 2004-6, Cl. 10A1, 6%, 7/25/34 5,899,982 6,022,247
24 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
Nomura Asset Securities Corp., Commercial Mtg. Pass-Through Certificates,
Series 1998-D6, Cl. A1B, 6.59%, 3/15/30 $ 3,480,000 $ 3,671,741
- ------------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34 10,000,000 10,857,226
- ------------------------------------------------------------------------------------------------------------------
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 9,224,401
- ------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Collateralized Mtg. Obligations Interest-Only
Pass-Through Certificates, Series 2002-AL1, Cl. AIO, 18.39%, 2/25/32 4 21,559,935 3,078,267
- ------------------------------------------------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust, Commercial Mtg. Obligations,
Series 2005-C20, Cl. A5, 5.087%, 7/15/42 3,140,000 3,219,725
- ------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
Pass-Through Certificates, Series 2005-AR5, Cl. A1, 4.686%, 5/25/35 2 5,290,798 5,299,629
- ------------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities Trust, Collateralized Mtg.
Obligations:
Series 2004-DD, Cl. 2 A1, 4.533%, 1/25/35 2 4,590,674 4,582,781
Series 2004-W, Cl. A2, 4.60%, 11/25/34 2 1,107,067 1,104,238
----------------
117,918,506
- ------------------------------------------------------------------------------------------------------------------
RESIDENTIAL--1.6%
Countrywide Alternative Loan Trust, Collateralized Mtg. Obligations,
Series 2005-J1, Cl. 3A1, 6.50%, 8/25/32 8,438,039 8,606,799
- ------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18 2,500,000 2,526,490
- ------------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Collateralized Mtg. Obligations
Pass-Through Certificates, Series 2002-AL1, Cl. B2, 3.45%, 2/25/32 4,146,936 3,738,029
- ------------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
Series 1995-2B, Cl. 2IO, (2.812)%, 6/15/25 4 14,065,269 345,709
- ------------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Loan Trust, Collateralized Mtg. Obligations,
Series 2000-1, Cl. M3, 5.391%, 1/25/40 2
1,422,198 1,436,323
----------------
16,653,350
----------------
Total Mortgage-Backed Obligations (Cost $783,142,555) 789,298,996
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--50.0%
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds:
3.125%, 11/15/06 20,315,000 20,106,670
Series S906, 3.50%, 8/15/06 16,200,000 16,134,422
- ------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.75%, 8/15/06 12,660,000 12,524,095
4.125%, 7/12/10 31,597,000 31,574,566
5.25%, 1/15/06 5,430,000 5,459,300
6.625%, 9/15/09 18,340,000 20,042,466
25 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
- ------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
3.01%, 6/2/06 $ 11,400,000 $ 11,317,054
3.25%, 7/31/06 9,150,000 9,094,899
3.75%, 5/17/07 10,270,000 10,225,521
4.25%, 8/15/10 12,700,000 12,771,031
4.25%, 7/15/07 6 12,810,000 12,872,538
6%, 5/15/11 15,262,000 16,678,863
6.625%, 9/15/09 6,890,000 7,532,375
7.25%, 1/15/10 54,848,000 61,704,603
7.25%, 5/15/30 6 6,085,000 8,421,969
- ------------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. STRIPS, 5.92%, 1/15/21 7 25,656,000 12,886,573
- ------------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds:
4.65%, 6/15/35 3,605,000 3,619,838
5.375%, 11/13/08 16,600,000 17,250,753
Series A, 6.79%, 5/23/12 61,107,000 70,166,052
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
5.50%, 8/15/28 7,862,000 9,214,516
6.875%, 8/15/25 8 15,740,000 21,079,307
7.25%, 5/15/16 4,325,000 5,490,895
9.25%, 2/15/16 39,850,000 57,155,181
11.25%, 2/15/15 1,450,000 2,262,624
STRIPS, 4.90%, 2/15/16 7 24,460,000 15,838,657
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
2.50%, 9/30/06 7,825,000 7,720,771
2.75%, 8/15/07 8 37,309,000 36,564,312
----------------
Total U.S. Government Obligations (Cost $500,380,892) 515,709,851
- ------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--1.4%
- ------------------------------------------------------------------------------------------------------------------
Israel (State of) Aid Bonds, United States Gtd., 5.50%, 12/4/23
(Cost $13,000,582) 13,050,000 14,533,266
- ------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.4%
- ------------------------------------------------------------------------------------------------------------------
Undivided interest of 0.36% in joint repurchase agreement (Principal Amount/
Value $1,184,643,000, with a maturity value of $1,184,759,490) with UBS
Warburg LLC, 3.54%, dated 8/31/05, to be repurchased at $4,259,419 on 9/1/05,
collateralized by Federal National Mortgage Assn., 6%, 4/1/35, with
a value of $1,209,814,832 (Cost $4,259,000) 4,259,000 4,259,000
- ------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $1,352,813,066) 1,366,580,969
26 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--3.2%
- ------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.2%
Undivided interest of 3.33% in joint repurchase agreement (Principal Amount/
Value $1,000,000,000, with a maturity value of $1,000,098,958) with Cantor
Fitzgerald Securities, 3.56%, dated 8/31/05, to be repurchased at $33,297,757 on
9/1/05, collateralized by U.S. Agency Mortgages, 0.00%--9.572%, 3/8/06--11/1/44,
with a value of $1,019,815,443 9 (Cost $33,294,462) $ 33,294,462 $ 33,294,462
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,386,107,528) 135.6% 1,399,875,431
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (35.6) (367,627,768)
-------------------------------
NET ASSETS 100.0% $ 1,032,247,663
===============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Illiquid security. The aggregate value of illiquid securities as of August
31, 2005 was $11,048,335, which represents 1.07% of the Fund's net assets. See
Note 8 of Notes to Financial Statements.
2. Represents the current interest rate for a variable or increasing rate
security.
3. Issue is in default. Non-income producing. See Note 1 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 $34,032,500 or 3.30% of the Fund's net assets
as of August 31, 2005.
5. When-issued security or forward commitment to be delivered and settled after
August 31, 2005. See Note 1 of Notes to Financial Statements.
6. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $8,930,034. See Note 5 of Notes to Financial
Statements.
7. Zero coupon bond reflects effective yield on the date of purchase.
8. Partial or fully-loaned security. See Note 9 of Notes to Financial
Statements.
9. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 9 of Notes to Financial
Statements.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES August 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (including securities loaned of
$44,710,615) (cost $1,386,107,528)--
see accompanying statement of investments $ 1,399,875,431
- --------------------------------------------------------------------------------
Cash 575,002
- --------------------------------------------------------------------------------
Unrealized appreciation on swap contracts 64,871
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued basis or forward commitment 17,942,391
Interest and principal paydowns 7,665,366
Shares of beneficial interest sold 2,628,859
Other 42,303
----------------
Total assets 1,428,794,223
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Return of collateral for securities loaned 33,294,462
- --------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 10,135
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis or forward
commitment 359,631,403
Shares of beneficial interest redeemed 1,708,418
Futures margins 459,042
Dividends 438,297
Distribution and service plan fees 426,835
Trustees' compensation 215,766
Transfer and shareholder servicing agent fees 209,595
Shareholder communications 99,067
Other 53,540
----------------
Total liabilities 396,546,560
- --------------------------------------------------------------------------------
NET ASSETS $ 1,032,247,663
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 106,050
- --------------------------------------------------------------------------------
Additional paid-in capital 1,029,200,241
- --------------------------------------------------------------------------------
Accumulated net investment loss (699,671)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (9,589,855)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 13,230,898
----------------
NET ASSETS $ 1,032,247,663
================
28 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $661,162,858 and 67,895,228 shares of beneficial
interest outstanding) $ 9.74
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $ 10.23
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $209,493,716 and 21,540,782
shares of beneficial interest outstanding) $ 9.73
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $117,783,253 and 12,114,727
shares of beneficial interest outstanding) $ 9.72
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $41,126,524 and 4,223,809
shares of beneficial interest outstanding) $ 9.74
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $2,681,312 and 275,421 shares
of beneficial interest outstanding) $ 9.74
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF OPERATIONS For the Year Ended August 31, 2005
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 43,638,191
- --------------------------------------------------------------------------------
Fee income 9,195,136
- --------------------------------------------------------------------------------
Portfolio lending fees 158,527
----------------
Total investment income 52,991,854
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 5,975,866
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,622,014
Class B 2,314,622
Class C 1,218,411
Class N 190,425
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,516,978
Class B 556,960
Class C 281,931
Class N 169,953
Class Y 112
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 113,891
Class B 61,283
Class C 23,546
Class N 4,742
- --------------------------------------------------------------------------------
Trustees' compensation 35,631
- --------------------------------------------------------------------------------
Custodian fees and expenses 34,504
- --------------------------------------------------------------------------------
Other 69,029
----------------
Total expenses 14,189,898
Less reduction to custodian expenses (19,657)
Less waivers and reimbursements of expenses (1,843,387)
----------------
Net expenses 12,326,854
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 40,665,000
30 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ 150,145
Closing of futures contracts 6,812,839
Swap contracts (53,967)
----------------
Net realized gain 6,909,017
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments (7,726,939)
Futures contracts (44,549)
Swap contracts 59,972
----------------
Net change in unrealized appreciation (7,711,516)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,862,501
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2005 2004
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net investment income $ 40,665,000 $ 43,396,625
- --------------------------------------------------------------------------------
Net realized gain (loss) 6,909,017 (2,476,585)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (7,711,516) 21,840,854
--------------------------------
Net increase in net assets resulting from
operations 39,862,501 62,760,894
- --------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Dividends from net investment income:
Class A (28,761,551) (28,399,993)
Class B (8,224,269) (9,096,106)
Class C (4,322,159) (4,777,984)
Class N (1,537,304) (1,022,931)
Class Y (116,040) (99,858)
- --------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (7,292,104) (1,491,853)
Class B (2,596,070) (633,564)
Class C (1,300,111) (319,195)
Class N (384,795) (56,550)
Class Y (24,917) (4,531)
- --------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (1,560,900) --
Class B (539,636) --
Class C (284,161) --
Class N (88,929) --
Class Y (5,876) --
- --------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A (30,234,986) (138,310,756)
Class B (47,615,648) (114,089,516)
Class C (17,745,157) (57,216,063)
Class N 7,623,862 7,724,093
Class Y 365,439 (274,825)
- --------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Total decrease (104,782,811) (285,308,738)
- --------------------------------------------------------------------------------
Beginning of period 1,137,030,474 1,422,339,212
--------------------------------
End of period (including accumulated net
investment income (loss) of $(699,671) and
$4,609,263, respectively) $1,032,247,663 $1,137,030,474
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.89 $ 9.76 $ 9.88 $ 9.52 $ 9.19
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 1 .38 .28 .54 .51
Net realized and unrealized gain (loss) -- .14 (.10) .36 .36
----------------------------------------------------------------------------------
Total from investment operations .40 .52 .18 .90 .87
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.42) (.37) (.28) (.54) (.54)
Distributions from net realized gain (.11) (.02) (.02) -- --
Tax return of capital distribution (.02) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.55) (.39) (.30) (.54) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.15% 5.47% 1.85% 9.75% 9.75%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 661,163 $ 702,064 $ 830,310 $ 853,671 $ 599,659
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 670,487 $ 746,658 $ 906,353 $ 679,657 $ 580,177
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.07% 3.80% 2.85% 5.57% 5.46%
Total expenses 1.06% 1.06% 1.01% 1.06% 0.91%
Expenses after payments and waivers and
reduction to custodian expenses 0.90% 0.98% N/A 4 N/A 4 N/A 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 95% 5 84% 5 72% 121% 215%
1. Per share amounts calculated based on the average shares outstanding during
the period.
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. Reduction to custodian expenses less than 0.01%.
5. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ------------------------------------------------------------------------------
Year Ended August 31, 2005 $ 5,959,020,148 $ 6,246,681,163
Year Ended August 31, 2004 5,578,633,006 5,998,603,295
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED AUGUST 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.88 $ 9.75 $ 9.87 $ 9.51 $ 9.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 1 .31 .21 .46 .45
Net realized and unrealized gain (loss) .01 .14 (.10) .36 .35
----------------------------------------------------------------------------------
Total from investment operations .33 .45 .11 .82 .80
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.35) (.30) (.21) (.46) (.47)
Distributions from net realized gain (.11) (.02) (.02) -- --
Tax return of capital distribution (.02) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.48) (.32) (.23) (.46) (.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.73 $ 9.88 $ 9.75 $ 9.87 $ 9.51
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.37% 4.67% 1.07% 8.93% 8.92%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 209,494 $ 261,065 $ 370,984 $ 393,355 $ 204,576
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 231,801 $ 301,926 $ 431,102 $ 266,559 $ 169,440
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.33% 3.01% 2.08% 4.74% 4.67%
Total expenses 1.84% 1.86% 1.78% 1.82% 1.67%
Expenses after payments and waivers and
reduction to custodian expenses 1.65% 1.76% N/A 4 N/A 4 N/A 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 95% 5 84% 5 72% 121% 215%
1. Per share amounts calculated based on the average shares outstanding during
the period.
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. Reduction to custodian expenses less than 0.01%.
5. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ------------------------------------------------------------------------------
Year Ended August 31, 2005 $ 5,959,020,148 $ 6,246,681,163
Year Ended August 31, 2004 5,578,633,006 5,998,603,295
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER U.S. GOVERNMENT TRUST
CLASS C YEAR ENDED AUGUST 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.88 $ 9.75 $ 9.87 $ 9.50 $ 9.18
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .32 1 .31 .21 .46 .45
Net realized and unrealized gain (loss) -- .14 (.10) .37 .34
----------------------------------------------------------------------------------
Total from investment operations .32 .45 .11 .83 .79
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.35) (.30) (.21) (.46) (.47)
Distributions from net realized gain (.11) (.02) (.02) -- --
Tax return of capital distribution (.02) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.48) (.32) (.23) (.46) (.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.72 $ 9.88 $ 9.75 $ 9.87 $ 9.50
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 3.27% 4.69% 1.12% 9.05% 8.81%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 117,783 $ 137,480 $ 192,496 $ 205,349 $ 124,542
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 122,062 $ 156,925 $ 216,954 $ 144,852 $ 109,060
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.33% 3.04% 2.13% 4.76% 4.69%
Total expenses 1.82% 1.81% 1.74% 1.81% 1.67%
Expenses after payments and waivers and
reduction to custodian expenses 1.65% 1.74% N/A 4 N/A 4 N/A 4
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 95% 5 84% 5 72% 121% 215%
1. Per share amounts calculated based on the average shares outstanding during
the period.
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. Reduction to custodian expenses less than 0.01%.
5. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ------------------------------------------------------------------------------
Year Ended August 31, 2005 $ 5,959,020,148 $ 6,246,681,163
Year Ended August 31, 2004 5,578,633,006 5,998,603,295
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED AUGUST 31, 2005 2004 2003 2002 2001 1
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.89 $ 9.76 $ 9.88 $ 9.52 $ 9.45
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .37 2 .34 .24 .50 .25
Net realized and unrealized gain (loss) -- .15 (.10) .39 .07
----------------------------------------------------------------------------------
Total from investment operations .37 .49 .14 .89 .32
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.39) (.34) (.24) (.53) (.25)
Distributions from net realized gain (.11) (.02) (.02) -- --
Tax return of capital distribution (.02) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.52) (.36) (.26) (.53) (.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.89% 5.13% 1.45% 9.62% 3.50%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 41,127 $ 34,067 $ 25,947 $ 13,453 $ 513
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 38,200 $ 29,034 $ 22,027 $ 6,092 $ 90
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 3.82% 3.52% 2.41% 5.21% 5.54%
Total expenses 1.53% 1.59% 1.52% 1.31% 0.85%
Expenses after payments and waivers and
reduction to custodian expenses 1.15% 1.29% 1.42% N/A 5 N/A 5
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 95% 6 84% 6 72% 121% 215%
1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. 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.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- ---------------------------------------------------------------------------
Year Ended August 31, 2005 $5,959,020,148 $6,246,681,163
Year Ended August 31, 2004 5,578,633,006 5,998,603,295
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER U.S. GOVERNMENT TRUST
CLASS Y YEAR ENDED AUGUST 31, 2005 2004 2003 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.89 $ 9.76 $ 9.88 $ 9.52 $ 9.19
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 1 .42 .33 .56 .56
Net realized and unrealized gain (loss) -- .14 (.10) .36 .34
----------------------------------------------------------------------------------
Total from investment operations .43 .56 .23 .92 .90
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.45) (.41) (.33) (.56) (.57)
Distributions from net realized gain (.11) (.02) (.02) -- --
Tax return of capital distribution (.02) -- -- -- --
----------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.58) (.43) (.35) (.56) (.57)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
==================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 4.48% 5.88% 2.37% 10.05% 10.10%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 2,681 $ 2,354 $ 2,602 $ 2,861 $ 1,522
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 2,524 $ 2,377 $ 3,133 $ 1,933 $ 464
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.40% 4.20% 3.36% 5.80% 5.83%
Total expenses 0.58% 0.58% 0.59% 0.83% 1.06% 4
Expenses after payments and waivers and
reduction to custodian expenses N/A 5 N/A 5 N/A 5 0.81% 0.61%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 95% 6 84% 6 72% 121% 215%
1. Per share amounts calculated based on the average shares outstanding during
the period.
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%.
6. The portfolio turnover rate excludes purchase and sales of To Be Announced
(TBA) mortgage-related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
- -------------------------------------------------------------------------------
Year Ended August 31, 2005 $5,959,020,148 $6,246,681,163
Year Ended August 31, 2004 5,578,633,006 5,998,603,295
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | 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, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class 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. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic 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 traded on foreign exchanges are valued based on the last sale price
on the principal exchange on which the security is traded, in the country that
is identified by the portfolio pricing service, prior to the time when the
Fund's assets are valued. In the absence of a sale, the security is valued at
the official closing price on the principal exchange. Corporate, government and
municipal debt instruments having a remaining maturity in excess of sixty days
and all mortgage-backed securities will be valued at the mean between the "bid"
and "asked" prices. Futures contracts traded on a commodities or futures
exchange will be valued at the final settlement price or official closing price
on the principal exchange as reported by such principal exchange at its trading
session ending at, or most recently prior to, the time when the Fund's assets
are valued. Securities may be valued primarily
38 | OPPENHEIMER U.S. GOVERNMENT TRUST
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. 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 OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days 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
internally designated 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 or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of August 31, 2005, the Fund had purchased
$359,631,403 of securities issued on a when-issued basis or forward commitment
and sold $17,942,391 of securities issued on a when-issued basis or forward
commitment.
In connection with its ability to purchase or sell 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 Fund
records the incremental difference between the forward purchase and sale of each
forward roll as realized gain (loss) on investments or as fee income in the case
of such transactions that have an associated fee in lieu of a difference in the
forward purchase and sale price.
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 at redelivery as compared to the
securities sold to the counterparty; 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
39 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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, 2005, securities with an aggregate market value of $441,135,
representing 0.04% 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. 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.
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 securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
--------------------------------------------------------------------------
$-- $-- $10,250,533 $13,666,715
1. As of August 31, 2005, the Fund had $4,102,739 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2014.
2. The Fund had $6,147,794 of straddle losses which were deferred.
3. During the fiscal year ended August 31, 2005, the Fund did not utilize any
capital loss carryforward.
4. During the fiscal year ended August 31, 2004, the Fund utilized $1,135,763 of
capital loss carryforward to offset capital gains realized in that fiscal year.
40 | OPPENHEIMER U.S. GOVERNMENT TRUST
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, 2005. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
REDUCTION TO ACCUMULATED NET REALIZED LOSS
PAID-IN CAPITAL INVESTMENT INCOME ON INVESTMENTS
-------------------------------------------------------
$1,600,901 $3,012,611 $4,613,512
The tax character of distributions paid during the years ended August 31, 2005
and August 31, 2004 was as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2005 AUGUST 31, 2004
------------------------------------------------------------
Distributions paid from:
Ordinary income $ 53,442,425 $ 45,902,565
Long-term capital gain 1,116,895 --
Return of capital 2,479,502 --
------------------------------
Total $ 57,038,822 $ 45,902,565
==============================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2005 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 1,386,207,765
Federal tax cost of other investments (188,945,484)
---------------
Total federal tax cost $ 1,197,262,281
===============
Gross unrealized appreciation $ 29,503,881
Gross unrealized depreciation (15,837,166)
---------------
Net unrealized appreciation $ 13,666,715
===============
- --------------------------------------------------------------------------------
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, 2005, the Fund's projected benefit obligations were increased by $5,906 and
payments of $14,956 were made to retired trustees, resulting in an accumulated
liability of $171,421 as of August 31, 2005.
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
41 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
compensation they are entitled to receive from the Fund. For purposes of
determining the amount owed to the Trustee under the plan, deferred amounts are
treated as though equal dollar amounts had been invested in shares of the Fund
or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares
of the funds selected for deferral by the Trustee in amounts equal to his or her
deemed investment, resulting in a Fund asset equal to the deferred compensation
liability. Such assets are included as a component of "Other" within the asset
section of the Statement of Assets and Liabilities. 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.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.
- --------------------------------------------------------------------------------
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 U.S. generally
accepted accounting principles 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.
42 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
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, 2005 YEAR ENDED AUGUST 31, 2004
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------
CLASS A
Sold 18,201,396 $ 177,730,859 17,673,365 $ 173,717,812
Dividends and/or
distributions reinvested 3,316,201 32,315,297 2,588,082 25,461,721
Redeemed (24,577,442) (240,281,142) (34,338,514) (337,490,289)
------------------------------------------------------------------
Net decrease (3,059,845) $ (30,234,986) (14,077,067) $ (138,310,756)
==================================================================
- -----------------------------------------------------------------------------------------------
CLASS B
Sold 3,431,412 $ 33,508,152 4,316,726 $ 42,393,552
Dividends and/or
distributions reinvested 1,012,781 9,855,570 826,871 8,123,741
Redeemed (9,322,282) (90,979,370) (16,766,093) (164,606,809)
------------------------------------------------------------------
Net decrease (4,878,089) $ (47,615,648) (11,622,496) $ (114,089,516)
==================================================================
- -----------------------------------------------------------------------------------------------
CLASS C
Sold 2,869,464 $ 27,940,960 3,160,748 $ 30,972,554
Dividends and/or
distributions reinvested 522,828 5,085,042 448,493 4,405,051
Redeemed (5,194,614) (50,771,159) (9,437,217) (92,593,668)
------------------------------------------------------------------
Net decrease (1,802,322) $ (17,745,157) (5,827,976) $ (57,216,063)
==================================================================
- -----------------------------------------------------------------------------------------------
CLASS N
Sold 2,185,762 $ 21,313,658 1,789,792 $ 17,568,689
Dividends and/or
distributions reinvested 197,014 1,919,111 109,294 1,074,565
Redeemed (1,602,483) (15,608,907) (1,112,894) (10,919,161)
------------------------------------------------------------------
Net increase 780,293 $ 7,623,862 786,192 $ 7,724,093
==================================================================
- -----------------------------------------------------------------------------------------------
CLASS Y
Sold 264,048 $ 2,550,959 170,773 $ 1,681,776
Dividends and/or
distributions reinvested 14,987 145,986 10,535 103,635
Redeemed (241,605) (2,331,506) (209,782) (2,060,236)
------------------------------------------------------------------
Net increase (decrease) 37,430 $ 365,439 (28,474) $ (274,825)
==================================================================
43 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2005, were as
follows:
PURCHASES SALES
----------------------------------------------------------------
Investment securities $ 535,094,883 $ 427,056,137
U.S. government and
government agency obligations 422,995,406 557,085,764
To Be Announced (TBA)
mortgage-related securities 5,959,020,148 6,246,681,163
- --------------------------------------------------------------------------------
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 0.60% of the first $300 million of average annual net assets of
the Fund, 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. Prior to January 1, 2005 the Fund provided 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, 2005, the Fund paid
$2,510,126 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
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. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.
44 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
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 to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of 0.25% per year under each plan. If either the
Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must
determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at August 31, 2005
for Class B, Class C and Class N shares were $7,669,306, $2,525,582 and
$603,016, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ----------------------------------------------------------------------------------------------------
August 31, 2005 $311,568 $5,080 $675,226 $24,853 $33,239
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. Effective March 1, 2004, the Manager has
voluntarily undertaken to limit the "Total Annual Operating Expenses" for all
classes of shares so that "Total Annual Operating Expenses," as a percentage of
average daily net assets will not exceed the following annual rates: 0.90% for
the Class A shares; 1.65% for Class B and Class C shares, respectively; 1.15%
for the Class N shares and 0.65% for the Class Y shares. During the year ended
August 31, 2005, the Manager reimbursed the Fund $1,053,855, $435,482, $208,977
and $108,818 for Class A, Class B, Class C and Class N shares, respectively. The
Manager may modify or terminate that undertaking at any time without notice to
shareholders.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended August 31, 2005, OFS waived $36,255 for Class N shares.
This undertaking may be amended or withdrawn at any time.
45 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 stocks 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 securities.
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 in the Statement of Operations as the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in 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, 2005, the Fund had outstanding futures contracts as follows:
VALUATION UNREALIZED
EXPIRATION NUMBER OF AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS AUGUST 31, 2005 (DEPRECIATION)
- --------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 12/20/05 935 $ 110,359,219 $ 959,611
---------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 12/30/05 751 155,527,406 (531,314)
U.S. Treasury Nts., 5 yr. 12/20/05 323 35,005,125 (288,243)
U.S. Treasury Nts., 10 yr. 12/20/05 971 108,827,859 (731,795)
---------------
(1,551,352)
---------------
$ (591,741)
===============
46 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
6. INTEREST RATE SWAP CONTRACTS
The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is not
exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as notional. The Fund records an increase or
decrease to unrealized gain (loss), in the amount due to or owed by the Fund at
termination or settlement.
Interest rate swaps are subject to credit risk (if the counterparty fails
to meet its obligations) and interest rate risk. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a result of
interest rate changes.
As of August 31, 2005, the Fund had entered into the following interest rate
swap agreements:
RATE RATE
PAID BY RECEIVED BY
THE FUND AT THE FUND AT
SWAP NOTIONAL AUGUST 31, AUGUST 31, FLOATING TERMINATION UNREALIZED
COUNTERPARTY AMOUNT 2005 2005 RATE INDEX DATE DEPRECIATION
- ----------------------------------------------------------------------------------------------------------
Three-
Morgan Stanley Month
Capital Services, Inc. $1,000,000 3.529% 1.895% LIBOR 4/2/06 $ 10,135
Index abbreviations are as follows:
LIBOR London-Interbank Offered Rate
- --------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS
The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The Fund records an increase or decrease to unrealized
gain (loss), in the amount due to or owed by the Fund at termination or
settlement. Total return swaps are subject to risks (if the counterparty fails
to meet its obligations).
47 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. TOTAL RETURN SWAP CONTRACTS Continued
As of August 31, 2005, the Fund had entered into the following total return swap
agreements:
PAID BY RECEIVED BY
THE FUND AT THE FUND AT
SWAP NOTIONAL AUGUST 31, AUGUST 31, TERMINATION UNREALIZED
COUNTERPARTY AMOUNT 2005 2005 DATE APPRECIATION
- --------------------------------------------------------------------------------
One-Month
LIBOR
UBS AG $4,480,000 Minus 0.25% 1.51% 12/1/05 $64,871
Index abbreviations are as follows:
LIBOR London-Interbank Offered Rate
- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of August 31, 2005, 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 will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
9. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of August 31, 2005,
the Fund had on loan securities valued at $44,710,615. Collateral of $45,456,002
was received for the loans, of which $33,294,462 was received in cash and
subsequently invested in approved instruments.
48 | OPPENHEIMER U.S. GOVERNMENT TRUST
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10. LITIGATION
A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") including the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-filed
putative derivative and class action complaints. Like those prior complaints,
the complaint alleges that the Manager charged excessive fees for distribution
and other costs, improperly used assets of the funds in the form of directed
brokerage commissions and 12b-1 fees to pay brokers to promote sales of the
funds, and failed to properly disclose the use of assets of the funds to make
those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.
The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.
49 | OPPENHEIMER U.S. GOVERNMENT TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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- --------------------------------------------------------------------------------
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, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year 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 the standards of the Public
Company Accounting Oversight Board (United States). 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, 2005, 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, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.
KPMG LLP
Denver, Colorado
October 17, 2005
50 | OPPENHEIMER U.S. GOVERNMENT TRUST
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2006, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2005. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends and distributions of $0.1805, $0.1741, $0.1732, $0.1783 and
$0.1830 per share were paid to Class A, Class B, Class C, Class N and Class Y
shareholders, respectively, on December 30, 2004, of which $0.0539 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).
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.
51 | OPPENHEIMER U.S. GOVERNMENT TRUST
REPORT OF SHAREHOLDER MEETING Unaudited
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- --------------------------------------------------------------------------------
On August 17, 2005, a joint special meeting of shareholders was held at which
the eleven Trustees identified below were elected (Proposal No. 1) and changes
in, or the addition or elimination of, certain fundamental investment policies
were approved (Proposal No. 2) as described in the Fund's proxy statement for
that meeting. The following is a report of the votes cast:
- --------------------------------------------------------------------------------
PROPOSAL NO. 1
NOMINEE FOR WITHHELD TOTAL
- --------------------------------------------------------------------------------
TRUSTEES
Matthew P. Fink 60,724,194.278 1,121,293.027 61,845,487.305
Robert G. Galli 60,722,511.311 1,122,975.994 61,845,487.305
Phillip A. Griffiths 60,804,943.074 1,040,544.231 61,845,487.305
Mary F. Miller 60,741,884.791 1,103,602.514 61,845,487.305
Joel W. Motley 60,794,485.236 1,051,002.069 61,845,487.305
John V. Murphy 60,794,616.932 1,050,870.373 61,845,487.305
Kenneth A. Randall 60,741,201.567 1,104,285.738 61,845,487.305
Russell S. Reynolds, Jr. 60,737,167.293 1,108,320.012 61,845,487.305
Joseph M. Wikler 60,805,140.113 1,040,347.192 61,845,487.305
Peter I. Wold 60,802,496.488 1,042,990.817 61,845,487.305
Clayton K. Yeutter 60,704,331.070 1,141,156.235 61,845,487.305
- --------------------------------------------------------------------------------
PROPOSAL NO. 2:
FOR AGAINST ABSTAIN BROKER NON-VOTE TOTAL
- -------------------------------------------------------------------------------------
To Approve a Modification to the Fund's Fundamental Investment Objective
2b: Concentration of Investments
45,029,624.878 1,571,090.147 2,249,409.280 12,995,363.000 61,845,487.305
2c: Diversification of Investments
44,901,044.710 1,685,105.968 2,263,973.627 12,995,363.000 61,845,487.305
2g: Investing in Other Investment Companies
44,124,964.287 2,546,244.634 2,178,915.384 12,995,363.000 61,845,487.305
2i: Margin and Short Sales (purchases)
43,272,575.508 3,224,526.429 2,353,022.368 12,995,363.000 61,845,487.305
2k: Real Estate and Commodities
44,726,744.816 2,129,065.146 1,994,314.343 12,995,363.000 61,845,487.305
2l: Senior Securities
44,940,016.721 1,611,561.080 2,298,546.504 12,995,363.000 61,845,487.305
2m: Underwriting
44,454,220.468 2,041,896.653 2,354,007.184 12,995,363.000 61,845,487.305
52 | OPPENHEIMER U.S. GOVERNMENT TRUST
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS 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
1.800.525.7048, (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 is required to
file 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 Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
53 | OPPENHEIMER U.S. GOVERNMENT TRUST
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
advisory agreement. The Investment Company Act of 1940, as amended, requires
that the Board request and evaluate, and that the Manager provide, such
information as may be reasonably necessary to evaluate the terms of the advisory
agreement. The Board employs an independent consultant to prepare a report that
provides information, including comparative information, that the Board requests
for this purpose. In addition, the Board receives information throughout the
year regarding Fund services, fees, expenses and performance.
NATURE AND EXTENT OF SERVICES. In considering the renewal of the Fund's
advisory agreement for the current year, the Board evaluated the nature and
extent of the services provided by the Manager and its affiliates. The Manager
provides the Fund with office space, facilities and equipment; administrative,
accounting, clerical, legal and compliance personnel; securities trading
services; oversight of third party service providers and the services of the
portfolio manager and the Manager's investment team, who provide research,
analysis and other advisory services in regard to the Fund's investments.
QUALITY OF SERVICES. The Board also considered the quality of the services
provided and the quality of the Manager's resources that are available to the
Fund. The Board noted that the Manager has had over forty years of experience as
an investment adviser and that its assets under management rank it among the top
mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services and information the
Board received regarding the experience and professional qualifications of the
Manager's personnel and the size and functions of its staff. The Board members
also considered their experiences as directors or trustees of the Fund and other
funds advised by the Manager. The Board received and reviewed information
regarding the quality of services provided by affiliates of the Manager, which
it also reviews at other times during the year in connection with the renewal of
the Fund's service agreements. The Board was aware that there are alternatives
to retaining the Manager.
PORTFOLIO MANAGEMENT SERVICES AND PERFORMANCE. In its evaluation of the
quality of the portfolio management services to be provided, the Board
considered the experience of the Fund's lead portfolio manager and the Manager's
fixed-income investment team and analysts. The Fund is managed by a portfolio
management team comprised of Angelo Manioudakis and other investment
professionals selected from the Manager's High-Grade Bond Team in its Fixed
Income department. Mr. Manioudakis has been a portfolio manager of the Fund
since April 2002. He has been a Vice President of the Fund and a Senior Vice
President of the Manager since April 2002 and is an officer and
54 | OPPENHEIMER U.S. GOVERNMENT TRUST
portfolio manager of other Oppenheimer funds. Mr. Manioudakis has had over 12
years of experience managing fixed-income investments.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other U.S. government funds advised by
other investment advisers. The Board also receives and reviews comparative
performance information regarding the Fund and other funds at each Board
meeting. The Board considered that the Fund's one-year, three-year, five-year
and ten-year performance were better than its peer group average.
MANAGEMENT FEES AND EXPENSES. The Board also reviewed information,
including comparative information, regarding the fees paid to the Manager and
its affiliates and the other expenses borne by the Fund. The independent
consultant provided comparative data in regard to the fees and expenses of the
Fund, other U.S. government funds and other funds with comparable asset levels
and distribution features. The Board noted that the Fund's contractual
management fee and total expenses were higher than its peer group average.
However, the Fund's actual management fee was lower than its peer group average.
In addition, the Board evaluated the comparability of the fees charged and the
services provided to the Fund to the fees charged and services provided to other
types of entities advised by the Manager. The Manager has agreed to voluntarily
limit expenses for all classes so that total annual operating expenses as a
percentage of average daily net assets would not exceed the following annual
rates: 0.90% for Class A shares, 1.65% for Class B shares, 1.65% for Class C
shares, 1.15% for Class N shares and 0.65% for Class Y shares. The Manager may
modify or terminate this undertaking at any time without notice to shareholders.
Based on its evaluation of the Fund's fees and expenses, the Board requested,
and the Manager agreed to revise the Fund's management fee schedule to lower the
fees for the first $200 million of average net assets. Accordingly, the
management fee schedule was changed to: 0.60% of the first $300 million of
average annual net assets of the Fund, 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.
PROFITABILITY OF THE MANAGER AND AFFILIATES. The Board also reviewed
information regarding the cost of services provided by the Manager and its
affiliates and the Manager's profitability. The Board considered that the
Manager must be able to pay and retain experienced professional personnel at
competitive rates to provide services to the Fund and that maintaining the
financial viability of the Manager is important in order for the Manager to
continue to provide significant services to the Fund and its shareholders. In
addition the Board considered information that was provided regarding the direct
and
55 | OPPENHEIMER U.S. GOVERNMENT TRUST
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
indirect benefits the Manager receives as a result of its relationship with the
Fund, including compensation paid to the Manager's affiliates.
ECONOMIES OF SCALE. The Board reviewed the extent to which the Manager may
realize economies of scale in managing and supporting the Fund and the current
level of Fund assets in relation to the Fund's breakpoint schedule for its
management fees. The Board considered that the Fund has not experienced recent
asset growth and that, based on current asset levels, the Fund is not yet
approaching its last management fee breakpoint.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received (including information
about the voluntary expense limitation) and its evaluations described above, the
Board, including a majority of the independent Trustees, concluded that the
nature, extent and quality of the services provided to the Fund by the Manager
are a benefit to the Fund and in the best interest of the Fund's shareholders
and that the amount and structure of the compensation received by the Manager
and its affiliates and the revised fee structure adopted by the Board and the
Manager are reasonable in relation to the services provided. Accordingly, the
Board elected to continue the advisory agreement for another year. In arriving
at this decision, the Board did not single out any factor or factors as being
more important than others, but considered all of the factors together. The
Board judged the terms and conditions of the advisory agreement, including the
management fee, in light of all of the surrounding circumstances.
56 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/
WITH THE FUND, LENGTH OF DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX
SERVICE, AGE CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS TWO WORLD FINANCIAL CENTER,
TRUSTEES NEW YORK, NY 10281-1008. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL
HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL
CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January 2005);
Chairman of the Board Attorney at Hogan & Hartson (law firm) (since June 1993); Director of Danielson
of Trustees (since 2003); Holding Corp. (waste-to-energy company) (since 2002); Director of Weyer-
Trustee (since 1993) haeuser Corp. (1999-April 2004); Director of Caterpillar, Inc. (1993-December
Age: 74 2002); Director of ConAgra Foods (1993-2001); Director of Texas Instruments
(1993-2001); Director of FMC Corporation (1993-2001). Oversees 38 portfolios in
the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation)
Trustee (since 2005) (since 2005); Director of ICI Education Foundation (education foundation)
Age: 64 (since October 1991); President of the Investment Company Institute (trade
association) (1991-2004); Director of ICI Mutual Insurance Company (insurance
company) (1991-2004). Oversees 38 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A trustee or director of other Oppenheimer funds. Oversees 48 portfolios in the
Trustee (since 1993) OppenheimerFunds complex.
Age: 72
PHILLIP A. GRIFFITHS, Director of GSI Lumonics Inc. (precision medical equipment supplier) (since
Trustee (since 1999) 2001); Trustee of Woodward Academy (since 1983); Senior Advisor of The Andrew
Age: 66 W. Mellon Foundation (since 2001); Member of the National Academy of Sciences
(since 1979); Member of the American Philosophical Society (since 1996);
Council on Foreign Relations (since 2002); Director of the Institute for
Advanced Study (1991-2004); Director of Bankers Trust New York Corporation
(1994-1999). Oversees 38 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October
Trustee (since 2004) 1998); and Senior Vice President and General Auditor of American Express
Age: 62 Company (financial services company) (July 1998-February 2003). Oversees 38
portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser)
Trustee (since 2002) (since 2002); Managing Director of Carmona Motley, Inc. (privately-held
Age: 53 financial adviser) (since January 2002); Managing Director of Carmona Motley
Hoffman Inc. (privately-held financial adviser) (January 1998-December 2001).
Oversees 38 portfolios in the OppenheimerFunds complex.
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (since
Trustee (since 1987) February 1972); Former Director of Prime Retail, Inc. (real estate investment
Age: 78 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumber-
mens Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company; Former President and Chief Executive
Officer of The Conference Board, Inc. (international economic and business
research). Oversees 38 portfolios in the OppenheimerFunds complex.
57 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consult-
Trustee (since 1989) ing and executive recruiting) (since 1993); Life Trustee of International House
Age: 73 (non-profit educational organization); Former Trustee of The Historical Society
of the Town of Greenwich. Oversees 38 portfolios in the OppenheimerFunds
complex.
JOSEPH M. WIKLER Director of the following medical device companies: Medintec (since 1992)
Trustee (since 2005) and Cathco (since 1996); Director of Lakes Environmental Association (since
Age: 64 1996); Member of the Investment Committee of the Associated Jewish Charities of
Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994-December
2001). Oversees 39 portfolios in the OppenheimerFunds complex.
PETER I. WOLD President of Wold Oil Properties, Inc. (oil and gas exploration and production
Trustee (since 2005) company) (since 1994); Vice President, Secretary and Treasurer of Wold Trona
Age: 57 Company, Inc. (soda ash processing and production) (since 1996); Vice President
of Wold Talc Company, Inc. (talc mining) (since 1999); Managing Member of
Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Director and Chairman of
the Denver Branch of the Federal Reserve Bank of Kansas City (1993-1999); and
Director of PacifiCorp. (electric utility) (1995-1999). Oversees 39 portfolios
in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET,
AND OFFICER 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM AND AS AN OFFICER FOR AN ANNUAL TERM, OR UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
President and (since September 2000) of the Manager; President and Director or Trustee of
Principal Executive other Oppenheimer funds; President and Director of Oppenheimer Acquisition
Officer Corp. ("OAC") (the Manager's parent holding company) and of Oppenheimer
(since 2001) Partnership Holdings, Inc. (holding company subsidiary of the Manager) (since
and Trustee July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the
(since 2001) Manager) (since November 2001); Chairman and Director of Shareholder Services,
Age: 56 Inc. and of Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001); President and Director of
OppenheimerFunds Legacy Program (charitable trust program established by the
Manager) (since July 2001); Director of the following investment advisory
subsidiaries of the Manager: OFI Institutional Asset Management, Inc.,
Centennial Asset Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since November 2001),
HarbourView Asset Management Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November 1, 2001) and Director (since July
2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of
Massachusetts Mutual Life Insurance Company (OAC's parent company) (since
February 1997); Director of DLB Acquisition Corporation (holding company parent
of Babson Capital Management LLC) (since June 1995); Member of the Investment
Company Institute's Board of Governors (since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June 2001); President and Trustee of MML
Series Investment Fund and MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001); Director of C.M. Life Insurance
Company (September 1999-August 2000); President, Chief Executive Officer and
Director of MML Bay State Life Insurance Company (September 1999-August 2000);
Director of Emerald Isle Bancorp and Hibernia Savings Bank (wholly-owned
subsidiary of Emerald Isle Bancorp) (June 1989-June 1998). Oversees 87
58 | OPPENHEIMER U.S. GOVERNMENT TRUST
JOHN V. MURPHY, portfolios as a Director or Trustee and as an officer in the OppenheimerFunds
Continued complex.
- -----------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MR.
OF THE FUND MANIOUDAKIS AND MR. ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
FLOOR, NEW YORK, NY 10281-1008, AND FOR MR. WIXTED AND MR. VANDEHEY, 6803 S.
TUCSON WAY, CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM
OR UNTIL HIS OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President (since Management Corporation (since April 2002) and of OFI Institutional Asset
2002) Management, Inc. (since June 2002). Formerly Executive Director and portfolio
Age: 38 manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April 2002). An officer of 14 portfolios in
the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Chief Compliance Officer Management Corporation and Shareholder Services, Inc. (since June 1983). Former
(since 2004) Vice President and Director of Internal Audit of the Manager (1997-February
Age: 55 2004). An officer of 87 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999);
Treasurer and Treasurer of the following: HarbourView Asset Management Corporation,
Principal Financial Shareholder Financial Services, Inc., Shareholder Services, Inc., Oppenheimer
and Accounting Officer Real Asset Management Corporation, and Oppenheimer Partnership Holdings, Inc.
(since 1999) (since March 1999), OFI Private Investments, Inc. (since March 2000),
Age: 46 OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc
(since May 2000), OFI Institutional Asset Management, Inc. (since November
2000), and OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the Manager) (since
May 2000); Assistant Treasurer of the following: OAC (since March 1999),
Centennial Asset Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and Chief
Operating Officer of Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March
Secretary (since 2001) 2002) of the Manager; General Counsel and Director of the Distributor (since
Age: 57 December 2001); General Counsel of Centennial Asset Management Corporation
(since December 2001); Senior Vice President and General Counsel of HarbourView
Asset Management Corporation (since December 2001); Secretary and General
Counsel of OAC (since November 2001); Assistant Secretary (since September
1997) and Director (since November 2001) of OppenheimerFunds International Ltd.
and OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of Oppenheimer Real
Asset Management, Inc. (since November 2001); Senior Vice President, General
Counsel and Director of Shareholder Financial Services, Inc. and Shareholder
Services, Inc. (since December 2001); Senior Vice President, General Counsel
and Director of OFI Private Investments, Inc. and OFI Trust Company (since
November 2001); Vice President of OppenheimerFunds Legacy Program (since June
2003); Senior Vice President and General Counsel of OFI Institutional Asset
Management, Inc.
59 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. ZACK, (since November 2001); Director of OppenheimerFunds (Asia) Limited (since
Continued December 2003); Senior Vice President (May 1985-December 2003), Acting General
Counsel (November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of the following:
Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001), and OppenheimerFunds
International Ltd. (September 1997-November 2001). An officer of 87 portfolios
in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
60 | OPPENHEIMER U.S. GOVERNMENT TRUST
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that the registrant does
not have an audit committee financial expert serving on its Audit Committee. In
this regard, no member of the Audit Committee was identified as having all of
the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR
to qualify as an "audit committee financial expert," whether
through the type of specialized education or experience described in that
Instruction. The Board has concluded that while the members of the Audit
Committee collectively have the necessary attributes and experience required to
serve effectively as an Audit Committee, no single member possesses all of the
required technical attributes through the particular methods of education or
experience set forth in the Instructions to be designated as an audit committee
financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $33,000 in fiscal 2005 and $30,000 in fiscal 2004.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $132,059 in fiscal 2005 and $39,500 in fiscal 2004 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed $5,000 in fiscal 2005 and $6,000 in fiscal 2004 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services: Preparation of Form 5500 and tax consultations on pass through of
foreign withholding taxes and mortgage dollar roll transactions.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $137,059 in fiscal 2005 and $45,500 in fiscal
2004 to the registrant and the registrant's investment adviser or any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of August 31, 2005, the registrant's principal executive
officer and principal financial officer found the registrant's disclosure
controls and procedures to provide reasonable assurances that information
required to be disclosed by the 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.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer U.S. Government Trust
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: October 17, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
------------------
John V. Murphy
Principal Executive Officer
Date: October 17, 2005
By: /s/ Brian W. Wixted
-------------------
Brian W. Wixted
Principal Financial Officer
Date: October 17, 2005