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
Date of reporting period: 08/31/2006
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. 51.5%
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Federal Home Loan Mortgage Corp. 18.2
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Tennessee Valley Authority 1.9
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Government National Mortgage Assn. 1.2
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Resolution Funding Corp. 1.2
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of investments.
For more current Fund holdings, please visit www.oppenheimerfunds.com
CREDIT ALLOCATION
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Treasury 1.0%
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Agency 56.8
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AAA 31.8
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AA 0.4
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A 0.3
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Not Rated 9.7
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of investments. As of
that date, no securities held by the Fund were rated lower than A. 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 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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10 | 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, 2006, 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 ended August
31, 2006, several factors contributed to Oppenheimer U.S. Government Trust's
favorable ranking among its peer group of similarly managed funds, as well as to
the competitive yield and consistent total return it generated over the period.
To begin, the most significant factor supporting the Fund's performance for the
12-month review period was our active management of the portfolio's exposure to
interest-rate risk. Over the period, we successfully adjusted our duration, or
interest-rate sensitivity, such that we were able to not only profit from shifts
in rates, but also avoided unnecessary interest-rate risk, thereby helping to
buffer the Fund from potential losses. For example, we began the fiscal year
with a shorter duration than that of our benchmark, based on our evaluation of
market conditions in light of overall economic fundamentals.
Yields dropped markedly after Hurricane Katrina, in what we considered to
be an overreaction by the markets, and as such, we further reduced the
portfolio's interest-rate sensitivity relative to that of the benchmark. This
decision benefited us considerably when yields increased once the initial shock
associated with that hurricane subsided. As the period progressed, we maintained
a somewhat shorter-than-benchmark duration, which continued to benefit the
Fund's returns, given the fact that rates in general increased throughout late
2005 and the first half of 2006. As we began to perceive that rates were rising
to a level that we deemed more in line with economic fundamentals, we decreased
the degree to which we were underweight duration relative to the benchmark. By
June 2006, we had moved to a more neutral posture in terms of interest-rate
sensitivity, as at that time, we were convinced the risk of rising rates was
roughly equal to the risk of decreasing rates. As the review period came to a
close, rates began to drift lower, and we again moved to a very small
underweight in duration relative to the benchmark. Overall, these minor
adjustments in our overall level interest-rate risk enabled us to successfully
benefit from the movement in rates over the Fund's fiscal year.
Another factor that added to returns over the 12-month period was our
active management of the portfolio's mortgage holdings. First, our decision to
generally emphasize higher-coupon mortgages in the first half of the review
period supported performance, given the attractive risk/reward profile these
securities offered early in the period. For the first six months of the Fund's
fiscal year, these mortgages performed well for us, and added to our overall
returns. Second, we derived positive performance from opportunistically
adjusting our risk exposure to the overall mortgage sector. Specifically, we
began the
11 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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fiscal year with less mortgage risk than our benchmark, particularly in
lower-coupon mortgages, as we considered the sector overvalued at that point in
time. This underweight positioning substantially benefited the Fund's returns
when, in late 2005, the mortgage sector suffered relative to the overall
government securities market. Soon after, we perceived valuations in this sector
as attractive, and proceeded to overweight our exposure to mortgages relative to
the benchmark. This adjustment to our mortgage holdings proved very beneficial
to the Fund's relative performance when the mortgage sector performed quite
strongly in the first two months of 2006. Finally, after this strong performance
we perceived that mortgages had become richly valued, we began to trim back our
overweighted exposure to a more neutral posture, which is where we have been for
the latter half of the period.
While our overall emphasis on agency debentures during the period was not
the largest contributor to the Fund's strong relative performance, its
contribution was very consistent. However, by the end of the period we perceived
that valuations in the agency sector had peaked relative to Treasury securities.
Therefore, much as we did with our mortgage holdings earlier in the period, we
reduced our overall agency exposure to a neutral position versus the benchmark,
reaping gains for the portfolio in the process.
Finally, our decision to consistently overweight our exposure to
commercial mortgage-backed securities (CMBS) and select asset-backed securities
(ABS) has added to performance over the course of the fiscal year. These
securities are for the most part AAA-rated and in our opinion offer very
favorable return relative to risk characteristics. Since these holdings have
performed consistently well over the period, our decision to make best use of
our allowable exposure to these sectors as dictated by our prospectus has aided
overall Fund returns.
While we still believe good value lies in the high-coupon segment of the
mortgage sector, we were slightly disappointed by the performance of our
higher-coupon mortgage holdings over the second half of the fiscal year. While
this emphasis didn't necessarily detract from performance, it didn't serve the
portfolio as well as we had hoped given recent trends in both the housing market
and in interest rates. As such, we might have given up marginal performance on a
relative basis due to our emphasis on higher-coupon mortgage securities during
the second half of the period. However, we are convinced that the performance of
these securities, after adjusted for their lower risk, was more than adequate.
Fixed-income investing entails credit risks and interest rate risks. When
interest rates rise, bond prices generally fall and the Fund's share price can
fall.
12 | OPPENHEIMER U.S. GOVERNMENT TRUST
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, 2006. 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.
13 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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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 U.S.
Government Trust (Class A) Government Bond Index
08/31/1996 $ 9,525 $ 10,000
11/30/1996 $ 10,002 $ 10,570
02/28/1997 $ 10,023 $ 10,488
05/31/1997 $ 10,220 $ 10,618
08/31/1997 $ 10,520 $ 10,933
11/30/1997 $ 10,873 $ 11,347
02/28/1998 $ 11,104 $ 11,606
05/31/1998 $ 11,244 $ 11,811
08/31/1998 $ 11,494 $ 12,275
11/30/1998 $ 11,601 $ 12,567
02/28/1999 $ 11,533 $ 12,367
05/31/1999 $ 11,520 $ 12,335
08/31/1999 $ 11,449 $ 12,291
11/30/1999 $ 11,603 $ 12,394
02/29/2000 $ 11,664 $ 12,507
05/31/2000 $ 11,839 $ 12,699
08/31/2000 $ 12,253 $ 13,244
11/30/2000 $ 12,597 $ 13,672
02/28/2001 $ 12,974 $ 14,245
05/31/2001 $ 12,967 $ 14,196
08/31/2001 $ 13,448 $ 14,785
11/30/2001 $ 13,777 $ 15,084
02/28/2002 $ 13,935 $ 15,189
05/31/2002 $ 14,056 $ 15,304
08/31/2002 $ 14,758 $ 16,173
11/30/2002 $ 14,833 $ 16,277
02/28/2003 $ 15,260 $ 16,898
05/31/2003 $ 15,464 $ 17,368
08/31/2003 $ 15,031 $ 16,655
11/30/2003 $ 15,247 $ 16,915
02/29/2004 $ 15,662 $ 17,412
05/31/2004 $ 15,329 $ 16,974
08/31/2004 $ 15,853 $ 17,536
11/30/2004 $ 15,919 $ 17,501
02/28/2005 $ 16,075 $ 17,643
05/31/2005 $ 16,394 $ 18,074
08/31/2005 $ 16,510 $ 18,221
11/30/2005 $ 16,261 $ 17,960
02/28/2006 $ 16,474 $ 18,124
05/31/2006 $ 16,217 $ 17,914
08/31/2006 $ 16,702 $ 18,436
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year -3.65% 5-Year 3.42% 10-Year 5.26%
14 | OPPENHEIMER U.S. GOVERNMENT TRUST
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 U.S.
Government Trust (Class B) Government Bond Index
08/31/1996 $ 10,000 $ 10,000
11/30/1996 $ 10,482 $ 10,570
02/28/1997 $ 10,484 $ 10,488
05/31/1997 $ 10,670 $ 10,618
08/31/1997 $ 10,963 $ 10,933
11/30/1997 $ 11,310 $ 11,347
02/28/1998 $ 11,529 $ 11,606
05/31/1998 $ 11,653 $ 11,811
08/31/1998 $ 11,889 $ 12,275
11/30/1998 $ 11,977 $ 12,567
02/28/1999 $ 11,884 $ 12,367
05/31/1999 $ 11,848 $ 12,335
08/31/1999 $ 11,752 $ 12,291
11/30/1999 $ 11,888 $ 12,394
02/29/2000 $ 11,928 $ 12,507
05/31/2000 $ 12,084 $ 12,699
08/31/2000 $ 12,483 $ 13,244
11/30/2000 $ 12,796 $ 13,672
02/28/2001 $ 13,168 $ 14,245
05/31/2001 $ 13,136 $ 14,196
08/31/2001 $ 13,597 $ 14,785
11/30/2001 $ 13,903 $ 15,084
02/28/2002 $ 14,023 $ 15,189
05/31/2002 $ 14,132 $ 15,304
08/31/2002 $ 14,820 $ 16,173
11/30/2002 $ 14,895 $ 16,277
02/28/2003 $ 15,324 $ 16,898
05/31/2003 $ 15,528 $ 17,368
08/31/2003 $ 15,094 $ 16,655
11/30/2003 $ 15,311 $ 16,915
02/29/2004 $ 15,728 $ 17,412
05/31/2004 $ 15,393 $ 16,974
08/31/2004 $ 15,919 $ 17,536
11/30/2004 $ 15,985 $ 17,501
02/28/2005 $ 16,142 $ 17,643
05/31/2005 $ 16,463 $ 18,074
08/31/2005 $ 16,579 $ 18,221
11/30/2005 $ 16,329 $ 17,960
02/28/2006 $ 16,543 $ 18,124
05/31/2006 $ 16,285 $ 17,914
08/31/2006 $ 16,772 $ 18,436
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year -4.43% 5-Year 3.30% 10-Year 5.31%
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, 10-YEAR RETURNS FOR CLASS B SHARES USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER
INFORMATION.
15 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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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 U.S.
Government Trust (Class C) Government Bond Index
08/31/1996 $ 10,000 $ 10,000
11/30/1996 $ 10,483 $ 10,570
02/28/1997 $ 10,486 $ 10,488
05/31/1997 $ 10,673 $ 10,618
08/31/1997 $ 10,965 $ 10,933
11/30/1997 $ 11,313 $ 11,347
02/28/1998 $ 11,532 $ 11,606
05/31/1998 $ 11,655 $ 11,811
08/31/1998 $ 11,879 $ 12,275
11/30/1998 $ 11,980 $ 12,567
02/28/1999 $ 11,873 $ 12,367
05/31/1999 $ 11,851 $ 12,335
08/31/1999 $ 11,754 $ 12,291
11/30/1999 $ 11,876 $ 12,394
02/29/2000 $ 11,928 $ 12,507
05/31/2000 $ 12,086 $ 12,699
08/31/2000 $ 12,484 $ 13,244
11/30/2000 $ 12,797 $ 13,672
02/28/2001 $ 13,156 $ 14,245
05/31/2001 $ 13,138 $ 14,196
08/31/2001 $ 13,584 $ 14,785
11/30/2001 $ 13,891 $ 15,084
02/28/2002 $ 14,025 $ 15,189
05/31/2002 $ 14,135 $ 15,304
08/31/2002 $ 14,814 $ 16,173
11/30/2002 $ 14,848 $ 16,277
02/28/2003 $ 15,250 $ 16,898
05/31/2003 $ 15,441 $ 17,368
08/31/2003 $ 14,980 $ 16,655
11/30/2003 $ 15,152 $ 16,915
02/29/2004 $ 15,536 $ 17,412
05/31/2004 $ 15,176 $ 16,974
08/31/2004 $ 15,682 $ 17,536
11/30/2004 $ 15,702 $ 17,501
02/28/2005 $ 15,827 $ 17,643
05/31/2005 $ 16,128 $ 18,074
08/31/2005 $ 16,195 $ 18,221
11/30/2005 $ 15,920 $ 17,960
02/28/2006 $ 16,099 $ 18,124
05/31/2006 $ 15,834 $ 17,914
08/31/2006 $ 16,277 $ 18,436
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year -0.46% 5-Year 3.68% 10-Year 4.99%
16 | OPPENHEIMER U.S. GOVERNMENT TRUST
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 U.S.
Government Trust (Class N) Government Bond Index
03/01/2001 $ 10,000 $ 10,000
05/31/2001 $ 9,980 $ 9,965
08/31/2001 $ 10,350 $ 10,379
11/30/2001 $ 10,590 $ 10,589
02/28/2002 $ 10,726 $ 10,662
05/31/2002 $ 10,812 $ 10,743
08/31/2002 $ 11,346 $ 11,353
11/30/2002 $ 11,391 $ 11,427
02/28/2003 $ 11,713 $ 11,863
05/31/2003 $ 11,854 $ 12,192
08/31/2003 $ 11,511 $ 11,692
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
11/30/2005 $ 12,374 $ 12,608
02/28/2006 $ 12,516 $ 12,723
05/31/2006 $ 12,325 $ 12,576
08/31/2006 $ 12,686 $ 12,942
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year -0.06% 5-Year 4.15% Since Inception (3/1/01) 4.42%
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, 10-YEAR RETURNS FOR CLASS B SHARES USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER
INFORMATION.
17 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND PERFORMANCE DISCUSSION
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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 U.S.
Government Trust (Class Y) Government Bond Index
05/18/1998 $ 10,000 $ 10,000
05/31/1998 $ 10,041 $ 10,000
08/31/1998 $ 10,282 $ 10,393
11/30/1998 $ 10,316 $ 10,640
02/28/1999 $ 10,238 $ 10,471
05/31/1999 $ 10,235 $ 10,443
08/31/1999 $ 10,198 $ 10,407
11/30/1999 $ 10,342 $ 10,494
02/29/2000 $ 10,400 $ 10,589
05/31/2000 $ 10,570 $ 10,752
08/31/2000 $ 10,951 $ 11,213
11/30/2000 $ 11,255 $ 11,576
02/28/2001 $ 11,612 $ 12,061
05/31/2001 $ 11,613 $ 12,019
08/31/2001 $ 12,056 $ 12,518
11/30/2001 $ 12,356 $ 12,772
02/28/2002 $ 12,490 $ 12,860
05/31/2002 $ 12,623 $ 12,957
08/31/2002 $ 13,268 $ 13,693
11/30/2002 $ 13,363 $ 13,782
02/28/2003 $ 13,746 $ 14,307
05/31/2003 $ 13,958 $ 14,705
08/31/2003 $ 13,582 $ 14,102
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
11/30/2005 $ 14,795 $ 15,206
02/28/2006 $ 15,004 $ 15,345
05/31/2006 $ 14,835 $ 15,168
08/31/2006 $ 15,289 $ 15,609
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 8/31/06
1-Year 1.75% 5-Year 4.87% Since Inception (5/18/98) 5.26%
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, 10-YEAR RETURNS FOR CLASS B SHARES USES
CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 19 FOR FURTHER
INFORMATION.
18 | 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, the 10-year return for Class B uses Class A performance for the period
after conversion.
CLASS C shares of the Fund were first publicly offered on 12/1/93. Class C
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class C shares are subject to an annual 0.75% asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
CLASS Y shares of the Fund were first publicly offered on 5/18/98. Class Y
shares are offered only to certain institutional investors under special
agreements with the Distributor
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
19 | OPPENHEIMER U.S. GOVERNMENT TRUST
FUND EXPENSES
- --------------------------------------------------------------------------------
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, 2006.
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
20 | 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
(3/1/06) (8/31/06) AUGUST 31, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $ 1,013.90 $ 4.58
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,020.67 4.59
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,011.10 8.40
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,011.10 8.40
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.89 8.42
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,013.60 5.90
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,019.36 5.92
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,019.00 3.11
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,022.13 3.11
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, 2006 are as follows:
CLASS EXPENSE RATIOS
- ----------------------------
Class A 0.90%
- ----------------------------
Class B 1.65
- ----------------------------
Class C 1.65
- ----------------------------
Class N 1.16
- ----------------------------
Class Y 0.61
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.
- --------------------------------------------------------------------------------
21 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS August 31, 2006
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--6.1%
- ---------------------------------------------------------------------------------------------------------------
Aesop Funding II LLC, Automobile Asset-Backed Certificates,
Series 2005-1A, Cl. A2, 5.385%, 4/20/08 1 $ 1,350,000 $ 1,351,025
- ---------------------------------------------------------------------------------------------------------------
Argent Securities Trust 2004-W8, Asset-Backed Pass-Through Certificates,
Series 2004-W8, Cl. A2, 5.804%, 5/25/34 1 6,800,000 6,833,790
- ---------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Asset-Backed Securities,
Series 2004-2, Cl. A3, 3.58%, 1/15/09 4,780,000 4,704,715
- ---------------------------------------------------------------------------------------------------------------
Conseco Finance Securitizations Corp., Manufactured Housing Contract Sr.
Sub. Pass-Through Certificates, Series 2000-4, Cl. M1, 8.73%, 5/1/32 2 1,000,917 27,809
- ---------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-16, Asset-Backed Certificates,
Series 2005-16, Cl. 2AF2, 5.382%, 5/25/36 1 1,480,000 1,476,626
- ---------------------------------------------------------------------------------------------------------------
CWABS Asset-Backed Certificates Trust 2005-17, Asset-Backed Certificates:
Series 2005-17, Cl. 1AF1, 5.524%, 5/25/36 1 2,347,662 2,350,543
Series 2005-17, Cl. 1AF2, 5.363%, 5/25/36 1 980,000 977,390
- ---------------------------------------------------------------------------------------------------------------
Embarcadero Aircraft Securitization Trust, Airplane Receivable Nts.,
Series 2000-A, Cl. B, 8/15/25 2,3 4,550,157 45,502
- ---------------------------------------------------------------------------------------------------------------
First Franklin Mortgage Loan Trust, Mtg. Pass-Through Certificates:
Series 2005-FF10, Cl. A3, 5.534%, 11/25/35 1 6,310,000 6,316,839
Series 2006-FF5, Cl.2A1, 5.374%, 5/15/36 1 1,858,723 1,860,006
Series 2006-FF10, Cl. A3, 5.414%, 7/25/36 1 2,730,000 2,731,680
- ---------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Pass-Through Certificates,
Series 2005-B, Cl. A2, 3.78%, 9/15/07 38,827 38,820
- ---------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-4, Cl. 2A1B,
5.17%, 10/25/35 2,390,440 2,378,706
- ---------------------------------------------------------------------------------------------------------------
Morgan Stanley ABS Capital I, Mtg. Pass-Through Certificates,
Series 2005-WMC6, Cl. A2B, 5.584%, 7/25/35 1 1,670,000 1,674,017
- ---------------------------------------------------------------------------------------------------------------
Option One Mortgage Loan Trust, Asset-Backed Certificates, Series 2006-2,
Cl. 2A2, 5.424%, 7/1/36 1 4,570,000 4,572,814
- ---------------------------------------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust, Mtg. Pass-Through Certificates:
Series 2005-1, Cl. AF2, 3.914%, 5/25/35 1 950,000 941,978
Series 2005-6, Cl. A3, 5.68%, 1/25/36 1 1,550,000 1,547,870
- ---------------------------------------------------------------------------------------------------------------
RAMP Series 2006-RS4 Trust, Mtg. Asset-Backed Pass-Through Certificates,
Series 2006-RS4, Cl. A1, 5.404%, 7/25/36 1 1,769,881 1,770,974
- ---------------------------------------------------------------------------------------------------------------
Residential Asset Securities Corp., Home Equity Asset-Backed Pass-Through
Certificates, Series 2006-KS7, Cl. A2, 5.43%, 9/25/36 1 3,420,000 3,419,350
- ---------------------------------------------------------------------------------------------------------------
Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-2, Cl. A1, 5.384%, 4/25/36 1 2,045,555 2,046,951
- ---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Interest-Only Stripped Pass-Through
Certificates, Series 2002-AL1, Cl. AIO, 15.967%, 2/25/32 4 18,371,819 2,388,171
- ---------------------------------------------------------------------------------------------------------------
Structured Asset Securities Corp., Pass-Through Certificates, Series 2002-AL1,
Cl. B2, 3.45%, 2/25/32 3,907,676 3,432,070
- ---------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Asset-Backed Securities 2006-2 Trust,
Home Equity Asset-Backed Certificates, Series 2006-2,
Cl. A2, 5.485%, 7/25/36 1 2,710,000 2,711,668
---------------
Total Asset-Backed Securities (Cost $60,509,873) 55,599,314
22 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--79.1%
- ---------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--65.9%
- ---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--64.5%
Fannie Mae Whole Loan, CMO Pass-Through Certificates, Trust 2004-W9,
Cl. 2A2, 7%, 2/25/44 $ 5,416,522 $ 5,579,117
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.50%, 7/1/19 2,919,330 2,806,441
5%, 7/1/33-6/1/34 16,961,648 16,327,028
6%, 7/1/24-9/1/24 9,073,682 9,163,569
6%, 7/1/20 5 7,212,656 7,294,724
6.50%, 4/1/18-3/1/29 8,345,776 8,494,813
7%, 8/1/16-3/1/32 11,975,874 12,336,184
7.50%, 9/1/12-4/1/36 8,185,343 8,508,921
8%, 4/1/16 1,798,046 1,904,205
9%, 8/1/22-5/1/25 431,387 462,843
11.50%, 6/1/20-11/17/20 332,455 366,159
12.50%, 7/1/19 123,411 135,282
13%, 8/1/15 98,247 108,154
14%, 1/1/11 35,476 39,842
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Multiclass Mtg.
Participation Certificates:
Series 3057, Cl. LG, 5%, 10/15/35 5,000,000 4,618,411
Series 3138, Cl. PA, 5.50%, 2/15/27 14,408,391 14,449,302
Series 3153, Cl. FJ, 5.71%, 5/15/36 1 1,780,973 1,780,464
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 1644, Cl. S, 5.54%, 12/15/23 1 4,842,285 4,859,312
Series 2055, Cl. ZM, 6.50%, 5/15/28 2,040,097 2,083,699
Series 2080, Cl. Z, 6.50%, 8/15/28 1,326,848 1,354,327
Series 2220, Cl. PD, 8%, 3/15/30 480,950 510,268
Series 2326, Cl. ZP, 6.50%, 6/15/31 1,284,632 1,319,482
Series 2368, Cl. PR, 6.50%, 10/15/31 5,037,796 5,177,711
Series 2387, Cl. PD, 6%, 4/15/30 975,548 977,156
Series 2392, Cl. PV, 6%, 12/15/20 9,952,000 10,029,006
Series 2500, Cl. FD, 5.83%, 3/15/32 1 1,005,452 1,015,634
Series 2526, Cl. FE, 5.73%, 6/15/29 1 1,440,520 1,441,222
Series 2530, Cl. FD, 5.83%, 2/15/32 1 2,004,108 2,010,261
Series 2551, Cl. EA, 4%, 12/15/12 58,865 58,768
Series 2551, Cl. FD, 5.73%, 1/15/33 1 1,131,160 1,143,945
Series 2583, Cl. KA, 5.50%, 3/15/22 1,514,043 1,511,574
Series 2939, Cl. PE, 5%, 2/15/35 8,458,000 7,842,928
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Interest-Only Stripped
Mtg.-Backed Security:
Series 2005-87, Cl. SG, 12.157%, 10/25/35 4 13,814,460 743,152
Series 3004, Cl. SB, 9.414%, 7/15/35 4 15,199,379 412,356
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., CMO Pass-Through Participation
Certificates, Series 151, Cl. F, 9%, 5/15/21 108,102 107,786
23 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 192, Cl. IO, 15.207%, 2/1/28 4 $ 583,538 $ 127,145
Series 195, Cl. IO, 7.848%, 4/1/28 4 8,190,635 1,961,327
Series 200, Cl. IO, 14.051%, 1/1/29 4 697,317 157,876
Series 205, Cl. IO, 10.721%, 9/1/29 4 3,661,602 851,138
Series 206, Cl. IO, (12.913)%, 12/1/29 4 1,025,646 246,684
Series 217, Cl. IO, 6.828%, 1/1/32 4 1,353,562 313,500
Series 2003-118, Cl. S, 10.072%, 12/25/33 4 8,809,615 997,970
Series 2074, Cl. S, 1.598%, 7/17/28 4 765,614 71,800
Series 2079, Cl. S, 0.699%, 7/17/28 4 1,193,555 116,054
Series 2122, Cl. S, 6.197%, 2/15/29 4 5,465,738 501,438
Series 2304, Cl. SK, 5.01%, 6/15/29 4 4,905,288 390,130
Series 2493, Cl. S, 5.93%, 9/15/29 4 1,083,390 81,932
Series 2526, Cl. SE, 2.543%, 6/15/29 4 1,907,888 101,727
Series 2819, Cl. S, (1.761)%, 6/15/34 4 16,153,973 1,152,583
Series 2920, Cl. S, (2.806)%, 1/15/35 4 10,053,317 457,990
Series 3000, Cl. SE, (3.951)%, 7/15/25 4 11,569,120 382,473
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
4.50%, 5/1/19 2,754,100 2,650,198
5%, 2/1/18-11/1/33 31,300,799 30,297,262
5%, 5/1/18-9/1/36 5 55,392,966 53,717,805
5.50%, 1/1/33-1/1/34 62,796,774 61,856,932
5.50%, 9/1/21-9/1/36 5 40,012,000 39,440,384
6%, 6/1/30-5/1/33 26,125,515 26,249,232
6%, 9/1/21 5 22,328,000 22,579,190
6.50%, 6/1/17-9/1/32 39,405,995 40,180,338
6.50%, 9/1/36 5 17,380,000 17,646,123
7%, 11/1/17-3/1/36 19,865,160 20,480,748
7.50%, 2/1/27-8/1/33 20,879,532 21,678,811
8%, 12/1/22 65,524 69,306
8.50%, 7/1/32 184,541 198,883
11%, 7/1/16 60,370 66,443
11.50%, 11/1/15 52,018 57,115
13%, 11/1/12 5,794 5,989
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust, CMO Interest-Only
Stripped Mtg.-Backed Security, Trust 2001-T4, Cl. IO, 3.78%, 7/25/41 4 7,928,050 148,233
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Grantor Trust CMO, Trust 2001-T6,
Cl. B, 6.088%, 5/25/11 10,000,000 10,383,333
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22 148,076 149,960
Trust 1992-161, Cl. H, 7.50%, 9/25/22 9,043,976 9,509,276
Trust 2001-42, Cl. QF, 6.304%, 9/25/31 1 6,289,625 6,459,163
Trust 2001-50, Cl. NE, 6%, 8/25/30 536,080 537,088
Trust 2001-51, Cl. OD, 6.50%, 10/25/31 4,727,410 4,824,728
Trust 2001-70, Cl. LR, 6%, 9/25/30 2,666,838 2,673,804
Trust 2001-72, Cl. NH, 6%, 4/25/30 346,927 346,617
24 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates: Continued
Trust 2001-74, Cl. PD, 6%, 5/25/30 $ 142,157 $ 141,846
Trust 2002-9, Cl. PC, 6%, 3/25/17 3,939,708 3,991,402
Trust 2002-52, Cl. FD, 5.824%, 9/25/32 1 1,363,257 1,369,048
Trust 2002-59, Cl. F, 5.724%, 9/25/32 1 3,622,382 3,655,745
Trust 2002-77, Cl. WF, 5.73%, 12/18/32 1 1,696,900 1,711,873
Trust 2003-17, Cl. EQ, 5.50%, 3/25/23 3,128,000 3,057,709
Trust 2003-84, Cl. PW, 3%, 6/25/22 3,500,000 3,418,500
Trust 2003-89, Cl. XF, 5.724%, 11/25/32 1 2,084,601 2,101,589
Trust 2003-116, Cl. FA, 5.724%, 11/25/33 1 944,786 949,067
Trust 2004-101, Cl. BG, 5%, 1/25/20 4,060,000 3,950,672
Trust 2005-31, Cl. PB, 5.50%, 4/25/35 2,280,000 2,217,252
Trust 2005-100, Cl. BQ, 5.50%, 11/25/25 2,490,000 2,391,333
Trust 2006-44, Cl. OA, 5.50%, 12/25/26 6,910,000 6,926,870
Trust 2006-50, Cl. KS, 4.677%, 6/25/36 1 3,815,935 3,516,886
Trust 2006-50, Cl. SA, 4.677%, 6/25/36 1 2,619,039 2,519,177
Trust 2006-50, Cl. SK, 4.677%, 6/25/36 1 173,028 167,632
Trust 2006-57, Cl. PA, 5.50%, 8/25/27 9,565,675 9,577,071
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Interest-Only Stripped
Mtg.-Backed Security:
Trust 2002-28, Cl. SA, 0.239%, 4/25/32 4 1,002,128 73,408
Trust 2002-38, Cl. SO, (4.226)%, 4/25/32 4 1,440,106 81,332
Trust 2002-39, Cl. SD, (2.28)%, 3/18/32 4 1,522,053 110,072
Trust 2002-48, Cl. S, 0.616%, 7/25/32 4 1,659,731 130,025
Trust 2002-52, Cl. SL, 0.60%, 9/25/32 4 1,025,702 81,418
Trust 2002-53, Cl. SK, (1.861)%, 4/25/32 4 949,411 78,863
Trust 2002-56, Cl. SN, 1.627%, 7/25/32 4 2,267,899 178,573
Trust 2002-77, Cl. IS, 0.953%, 12/18/32 4 2,453,514 196,413
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., CMO Interest-Only Stripped
Mtg.-Backed Security, Trust 340, Cl. 2, 8.345%, 9/1/33 4 1,941,869 481,005
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 221, Cl. 2, 11.899%, 5/1/23 4 2,979,204 690,630
Trust 240, Cl. 2, 22.31%, 9/1/23 4 1,964,084 446,976
Trust 252, Cl. 2, 11.813%, 11/1/23 4 1,390,098 348,087
Trust 303, Cl. IO, 12.091%, 11/1/29 4 1,052,696 257,254
Trust 321, Cl. 2, 11.308%, 4/1/32 4 4,797,143 1,133,399
Trust 322, Cl. 2, 16.609%, 4/1/32 4 1,547,714 361,901
Trust 324, Cl. 2, 6.764%, 7/1/32 4 3,719,253 879,781
Trust 329, Cl. 2, 10.456%, 1/1/33 4 2,654,971 650,500
Trust 334, Cl. 12, 5.78%, 2/1/33 4 7,410,975 1,679,226
Trust 344, Cl. 2, 9.289%, 12/1/33 4 9,595,821 2,286,381
Trust 362, Cl. 12, 4.55%, 8/1/35 4 3,484,975 769,239
Trust 362, Cl. 13, 4.571%, 8/1/35 4 1,935,016 438,540
Trust 2001-61, Cl. SH, 10.297%, 11/18/31 4 5,417,631 516,722
Trust 2001-63, Cl. SD, 3.209%, 12/18/31 4 1,765,934 172,623
Trust 2001-68, Cl. SC, 3.072%, 11/25/31 4 1,252,221 112,495
25 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security: Continued
Trust 2001-81, Cl. S, 3.411%, 1/25/32 4 $ 1,246,516 $ 91,531
Trust 2002-9, Cl. MS, 0.057%, 3/25/32 4 1,855,473 148,830
Trust 2002-41, Cl. S, 14.052%, 7/25/32 4 4,826,548 426,784
Trust 2002-52, Cl. SD, (2.472)%, 9/25/32 4 1,363,257 105,494
Trust 2002-77, Cl. SH, 3.647%, 12/18/32 4 1,488,723 146,440
Trust 2003-4, Cl. S, 10.798%, 2/25/33 4 2,960,965 319,520
Trust 2003-33, Cl. SP, 13.214%, 5/25/33 4 4,507,262 516,659
Trust 2005-40, Cl. SB, 0.988%, 5/25/35 4 6,763,685 274,564
Trust 2005-71, Cl. SA, 3.446%, 8/25/25 4 7,351,742 385,450
Trust 2006-33, Cl. SP, 13.778%, 5/25/36 4 7,096,185 537,730
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only Stripped
Mtg.-Backed Security:
Trust 327, Cl. 1, 5.033%, 9/1/32 6 1,033,256 806,620
Trust 340, Cl. 1, 5.056%, 9/1/33 6 1,941,869 1,393,681
Trust 344, Cl. 1, 12/1/33 5,6 1,535,809 1,178,019
---------------
587,242,631
- ---------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--1.4%
Government National Mortgage Assn.:
5.375%, 4/20/17 1 39,742 39,788
6.50%, 11/15/23-12/15/23 142,318 145,641
7%, 1/15/28-1/20/30 938,133 967,352
7.50%, 2/15/22-11/15/26 733,686 765,445
8%, 9/15/07-8/15/28 183,128 193,649
8.25%, 4/15/08 2,941 2,998
8.50%, 8/15/17-12/15/17 707,101 754,877
9%, 9/15/08-5/15/09 4,406 4,543
9.50%, 7/15/18-12/15/19 42,673 46,685
10%, 8/15/17-8/15/19 84,433 93,796
10.50%, 8/15/13-5/15/21 406,704 452,933
11%, 10/20/19-7/20/20 340,778 376,737
11.50%, 2/15/13 11,941 13,073
12%, 12/15/12-3/15/14 6,251 7,085
12.50%, 1/15/14-11/15/14 88,607 98,658
13%, 4/15/11-12/15/14 11,299 12,380
13.50%, 5/15/11-1/15/13 9,353 10,545
14%, 6/15/11 3,854 4,352
- ---------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn., CMO Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 1999-32,
Cl. ZB, 8%, 9/16/29 7,550,946 8,132,111
26 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED Continued
Government National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Series 1998-6, Cl. SA, (1.35)%, 3/16/28 4 $ 1,486,180 $ 129,103
Series 1998-19, Cl. SB, 0.409%, 7/16/28 4 2,405,459 233,140
Series 2006-47, Cl. SA, 17.104%, 8/16/36 4 8,710,000 482,504
---------------
12,967,395
- ---------------------------------------------------------------------------------------------------------------
NON-AGENCY--13.2%
- ---------------------------------------------------------------------------------------------------------------
COMMERCIAL--11.2%
Asset Securitization Corp., Commercial Mtg. Pass-Through Certificates:
Series 1996-MD6, Cl. A2, 7.644%, 11/13/29 1 3,000,000 3,064,391
Series 1997-MD7, Cl. A1B, 7.41%, 1/13/30 4,115,765 4,141,054
- ---------------------------------------------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 4,590,000 4,477,195
- ---------------------------------------------------------------------------------------------------------------
Banc of America Funding Corp., CMO Pass-Through Certificates,
Series 2004-2, Cl. 2A1, 6.50%, 7/20/32 3,976,002 4,021,079
- ---------------------------------------------------------------------------------------------------------------
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2004-8, Cl. 5A1, 6.50%, 5/25/32 2,982,234 2,999,009
Series 2005-E, Cl. 2A2, 4.976%, 6/25/35 1 461,415 460,265
- ---------------------------------------------------------------------------------------------------------------
Capital Lease Funding Securitization LP, Interest-Only Corporate-Backed
Pass-Through Certificates, Series 1997-CTL1, 6.633%, 6/22/24 4 40,634,444 1,546,949
- ---------------------------------------------------------------------------------------------------------------
ChaseFlex Trust, CMO Pass-Through Certificates, Series 2006-2,
Cl. A1B, 5.43%, 8/25/08 1 2,910,000 2,910,000
- ---------------------------------------------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp., Commercial Mtg.
Pass-Through Certificates, Series 2001-SP GA, Cl. B, 6.662%, 8/13/18 10,767,000 11,426,325
- ---------------------------------------------------------------------------------------------------------------
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB2, Cl. A7, 5.961%, 6/25/36 4,065,112 4,058,191
- ---------------------------------------------------------------------------------------------------------------
Deutsche Alt-B Securities, Inc. Mortgage Loan Trust, CMO,
Series 2006-AB3, Cl. A7, 6.36%, 4/25/08 1,886,483 1,889,238
- ---------------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations,
Series 2005-C3, Cl. A2, 4.853%, 7/10/45 2,610,000 2,576,289
- ---------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc., Commercial Mtg.
Pass-Through Certificates, Series 1997-C1, Cl. A3, 6.869%, 7/15/29 1,148,937 1,158,427
- ---------------------------------------------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp., Commercial Mtg.
Pass-Through Certificates, Series 2005-G G5, Cl. A2, 5.117%, 4/10/37 2,960,000 2,945,276
- ---------------------------------------------------------------------------------------------------------------
Heller Financial Commercial Mortgage Asset Corp., Interest-Only
Commercial Mtg. Obligations, Series2000-PH1, Cl. X, 7.88%, 1/17/34 4 164,264,888 2,245,008
- ---------------------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., Commercial Mtg.
Obligations, Series 2000-C9, Cl. A2, 7.77%, 10/15/32 9,963,254 10,551,587
- ---------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates:
Series 2005-LDP2, Cl. A2, 4.575%, 7/15/42 1,120,000 1,094,324
Series 2005-LDP4, Cl. A2, 4.79%, 10/15/42 3,790,000 3,723,532
27 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
COMMERCIAL Continued
LB-UBS Commercial Mortgage Trust, Commercial Mtg. Pass-Through
Certificates, Series 2005-C5, Cl. A2, 4.885%, 9/15/30 $ 3,140,000 $ 3,106,880
- ---------------------------------------------------------------------------------------------------------------
Lehman Structured Securities Corp., CMO, Series 2002-GE1,
Cl. A, 2.514%, 7/26/24 3 523,730 382,323
- ---------------------------------------------------------------------------------------------------------------
Mastr Alternative Loan Trust, CMO Pass-Through Certificates:
Series 2004-6, Cl. 10A1, 6%, 7/25/34 4,496,574 4,463,475
Series 2004-9, Cl. A3, 4.70%, 8/25/34 1 2,659,362 2,639,295
- ---------------------------------------------------------------------------------------------------------------
PNC Mortgage Acceptance Corp., Commercial Mtg. Obligations,
Series 2001-C1, Cl. A2, 6.36%, 3/12/34 10,000,000 10,423,529
- ---------------------------------------------------------------------------------------------------------------
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 8,769,072
- ---------------------------------------------------------------------------------------------------------------
Residential Asset Securitization Trust, CMO, Series 2006-A9CB,
Cl. A5, 6%, 7/20/36 4,268,785 4,255,979
- ---------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR5 Trust,
CMO Mtg. Pass-Through Certificates, Series 2005-AR5, Cl. A1,
4.673%, 5/25/35 1 2,170,152 2,163,713
- ---------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2004-DD Trust, CMO Mtg.
Pass-Through Certificates, Series 2004-DD, Cl. 2A1, 4.511%, 1/25/35 1 542,979 540,890
---------------
102,033,295
- ---------------------------------------------------------------------------------------------------------------
OTHER--0.5%
JP Morgan Mortgage Trust, CMO Pass-Through Certificates,
Series 2005-S2, Cl. 3A1, 6.746%, 2/25/32 1 3,494,571 3,522,837
- ---------------------------------------------------------------------------------------------------------------
WAMU Mortgage Pass-Through Certificates Series 2005-AR8 Trust,
CMO Mtg. Pass-Through Certificates, Series 2005-AR8, Cl. 2AB1,
5.574%, 7/25/45 1 1,468,498 1,472,120
---------------
4,994,957
- ---------------------------------------------------------------------------------------------------------------
RESIDENTIAL--1.5%
Countrywide Alternative Loan Trust, CMO, Series 2005-J1, Cl. 3A1,
6.50%, 8/25/32 7,093,124 7,148,542
- ---------------------------------------------------------------------------------------------------------------
Lehman XS Trust, Mtg. Pass-Through Certificates, Series 2005-10,
Cl. 2A3B, 5.55%, 1/25/36 2,397,481 2,377,764
- ---------------------------------------------------------------------------------------------------------------
Salomon Smith Barney RV Trust, Recreational Vehicles Mtg. Obligations,
Series 2001-1, Cl. B, 6.64%, 4/15/18 2,500,000 2,506,901
- ---------------------------------------------------------------------------------------------------------------
Vendee Mortgage Trust, Interest-Only Stripped Mtg.-Backed Security,
Series 1995-2B, Cl. 2IO, 7.527%, 6/15/25 4 10,917,847 258,990
- ---------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Loan Trust, CMO Mtg. Pass-Through
Certificates, Series 2000-1, Cl. M3, 7.074%, 1/25/40 1 973,838 979,674
---------------
13,271,871
---------------
Total Mortgage-Backed Obligations (Cost $722,763,147) 720,510,149
28 | OPPENHEIMER U.S. GOVERNMENT TRUST
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--20.5%
- ---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
4.125%, 7/12/10 $ 15,772,000 $ 15,287,563
5.125%, 4/18/11 16,995,000 17,072,939
6%, 6/15/11 1,580,000 1,645,532
6.625%, 9/15/09 18,340,000 19,162,219
- ---------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Unsec. Nts.:
4.75%, 12/15/10 7 3,270,000 3,237,578
6%, 5/15/11 20,772,000 21,620,972
6.625%, 9/15/09 7 6,890,000 7,204,653
7.25%, 1/15/10 54,848,000 58,642,878
- ---------------------------------------------------------------------------------------------------------------
Resolution Funding Corp. Bonds, Residual Funding STRIPS, 5.921%, 1/15/21 8 25,656,000 12,356,879
- ---------------------------------------------------------------------------------------------------------------
Tennessee Valley Authority Bonds, Series A, 6.79%, 5/23/12 18,578,000 20,184,421
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 4.50%, 2/15/36 455,000 428,376
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 5.125%, 6/30/11 9,805,000 9,981,938
---------------
Total U.S. Government Obligations (Cost $188,025,812) 186,825,948
- ---------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--9.2%
- ---------------------------------------------------------------------------------------------------------------
Undivided interest of 6.78% in joint repurchase agreement (Principal Amount/
Value $1,235,729,000, with a maturity value of $1,235,908,181) with UBS
Warburg LLC, 5.22%, dated 8/31/06, to be repurchased at $83,806,150
on 9/1/06, collateralized by Federal National Mortgage Assn., 6%-7%,
3/1/36-8/1/36, with a value of $1,262,388,232 (Cost $83,794,000) 83,794,000 83,794,000
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,055,092,832) 114.9% 1,046,729,411
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (14.9) (135,912,891)
---------------------------------
NET ASSETS 100.0% $ 910,816,520
=================================
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Issue is in default. Non-income producing. See Note 1 of accompanying Notes.
3. Illiquid security. The aggregate value of illiquid securities as of August
31, 2006 was $427,825, which represents 0.05% of the Fund's net assets. See Note
8 of accompanying Notes.
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 $31,607,238 or 3.47% of the Fund's net assets
as of August 31, 2006.
5. When-issued security or forward commitment to be delivered and settled after
August 31, 2006. See Note 1 of accompanying Notes.
29 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
6. Principal-Only Strips represent the right to receive the monthly principal
payments on an underlying pool of mortgage loans. The value of these securities
generally increases as interest rates decline and prepayment rates rise. The
price of these securities is typically more volatile than that of coupon-bearing
bonds of the same maturity. Interest rates disclosed represent current yields
based upon the current cost basis and estimated timing of future cash flows.
These securities amount to $3,378,320 or 0.37% of the Fund's net assets as of
August 31, 2006.
7. 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 $7,208,510. See Note 5 of accompanying Notes.
8. Zero coupon bond reflects effective yield on the date of purchase.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (cost $1,055,092,832)--see
accompanying statement of investments $ 1,046,729,411
- --------------------------------------------------------------------------------
Cash 487,004
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold on a when-issued basis or forward
commitment 32,988,613
Interest and principal paydowns 5,973,102
Shares of beneficial interest sold 1,181,720
Futures margins 256,769
Other 53,921
----------------
Total assets 1,087,670,540
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Unrealized depreciation on swap contracts 19,744
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued basis or
forward commitment 174,023,086
Shares of beneficial interest redeemed 1,480,742
Dividends 452,389
Distribution and service plan fees 366,909
Trustees' compensation 189,950
Transfer and shareholder servicing agent fees 183,222
Shareholder communications 84,263
Other 53,715
----------------
Total liabilities 176,854,020
- --------------------------------------------------------------------------------
NET ASSETS $ 910,816,520
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 96,796
- --------------------------------------------------------------------------------
Additional paid-in capital 942,317,623
- --------------------------------------------------------------------------------
Accumulated net investment loss (596,718)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (23,225,766)
- --------------------------------------------------------------------------------
Net unrealized depreciation on investments (7,775,415)
----------------
NET ASSETS $ 910,816,520
================
31 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $596,293,502 and 63,350,569 shares of
beneficial interest outstanding) $ 9.41
Maximum offering price per share (net asset value plus
sales charge of 4.75% of offering price) $ 9.88
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $153,680,714 and 16,347,962
shares of beneficial interest outstanding) $ 9.40
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $100,629,986 and 10,708,305
shares of beneficial interest outstanding) $ 9.40
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $38,997,109 and 4,143,648
shares of beneficial interest outstanding) $ 9.41
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $21,215,209 and 2,245,596
shares of beneficial interest outstanding) $ 9.45
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF OPERATIONS For the Year Ended August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 46,723,039
- --------------------------------------------------------------------------------
Fee income 2,278,885
- --------------------------------------------------------------------------------
Other income 30,214
- --------------------------------------------------------------------------------
Portfolio lending fees 17,399
----------------
Total investment income 49,049,537
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 5,327,523
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,496,748
Class B 1,756,659
Class C 1,055,178
Class N 195,059
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,351,546
Class B 443,003
Class C 249,981
Class N 167,372
Class Y 5,342
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 133,981
Class B 60,486
Class C 26,407
Class N 4,938
- --------------------------------------------------------------------------------
Custodian fees and expenses 6,933
- --------------------------------------------------------------------------------
Trustees' compensation 4,717
- --------------------------------------------------------------------------------
Other 99,177
----------------
Total expenses 12,385,050
Less reduction to custodian expenses (621)
Less waivers and reimbursements of expenses (1,653,014)
----------------
Net expenses 10,731,415
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 38,318,122
33 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $ (9,813,710)
Closing and expiration of futures contracts (475,093)
Swap contracts 41,709
----------------
Net realized loss (10,247,094)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (22,131,324)
Futures contracts 1,199,491
Swap contracts (74,480)
----------------
Net change in unrealized depreciation (21,006,313)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 7,064,715
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER U.S. GOVERNMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2006 2005
- --------------------------------------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 38,318,122 $ 40,665,000
- --------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (10,247,094) 6,909,017
- --------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (21,006,313) (7,711,516)
-----------------------------------
Net increase in net assets resulting from operations 7,064,715 39,862,501
- --------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (28,474,486) (28,761,551)
Class B (6,781,036) (8,224,269)
Class C (4,072,710) (4,322,159)
Class N (1,700,449) (1,537,304)
Class Y (589,439) (116,040)
- --------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (7,292,104)
Class B -- (2,596,070)
Class C -- (1,300,111)
Class N -- (384,795)
Class Y -- (24,917)
- --------------------------------------------------------------------------------------------------------------
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 (42,850,282) (30,234,986)
Class B (48,959,213) (47,615,648)
Class C (13,297,248) (17,745,157)
Class N (763,357) 7,623,862
Class Y 18,992,362 365,439
- --------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Total decrease (121,431,143) (104,782,811)
- --------------------------------------------------------------------------------------------------------------
Beginning of period 1,032,247,663 1,137,030,474
-----------------------------------
End of period (including accumulated net investment loss
of $596,718 and $699,671, respectively) $ 910,816,520 $ 1,032,247,663
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 1 .40 1 .38 .28 .54
Net realized and unrealized gain (loss) (.30) -- .14 (.10) .36
--------------------------------------------------------------------------------
Total from investment operations .10 .40 .52 .18 .90
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.43) (.42) (.37) (.28) (.54)
Distributions from net realized gain -- (.11) (.02) (.02) --
Tax return of capital distribution -- (.02) -- -- --
--------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.43) (.55) (.39) (.30) (.54)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.41 $ 9.74 $ 9.89 $ 9.76 $ 9.88
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.16% 4.15% 5.47% 1.85% 9.75%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 596,294 $ 661,163 $ 702,064 $ 830,310 $ 853,671
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 618,102 $ 670,487 $ 746,658 $ 906,353 $ 679,657
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.26% 4.07% 3.80% 2.85% 5.57%
Total expenses 1.05% 1.06% 1.06% 1.01% 1.06%
Expenses after payments and waivers
and reduction to custodian expenses 0.90% 0.90% 0.98% 1.01% 1.06%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 4 95% 4 84% 4 72% 121%
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. 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, 2006 $3,476,956,717 $3,692,200,123
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 B YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.73 $ 9.88 $ 9.75 $ 9.87 $ 9.51
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .32 1 .31 .21 .46
Net realized and unrealized gain (loss) (.30) .01 .14 (.10) .36
--------------------------------------------------------------------------------
Total from investment operations .03 .33 .45 .11 .82
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.35) (.30) (.21) (.46)
Distributions from net realized gain -- (.11) (.02) (.02) --
Tax return of capital distribution -- (.02) -- -- --
--------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.36) (.48) (.32) (.23) (.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.40 $ 9.73 $ 9.88 $ 9.75 $ 9.87
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.41% 3.37% 4.67% 1.07% 8.93%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 153,681 $ 209,494 $ 261,065 $ 370,984 $ 393,355
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 175,707 $ 231,801 $ 301,926 $ 431,102 $ 266,559
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.50% 3.33% 3.01% 2.08% 4.74%
Total expenses 1.86% 1.84% 1.86% 1.78% 1.82%
Expenses after payments and waivers
and reduction to custodian expenses 1.65% 1.65% 1.76% 1.78% 1.82%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 4 95% 4 84% 4 72% 121%
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. 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, 2006 $3,476,956,717 $3,692,200,123
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
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.72 $ 9.88 $ 9.75 $ 9.87 $ 9.50
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 1 .32 1 .31 .21 .46
Net realized and unrealized gain (loss) (.29) -- .14 (.10) .37
--------------------------------------------------------------------------------
Total from investment operations .04 .32 .45 .11 .83
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.36) (.35) (.30) (.21) (.46)
Distributions from net realized gain -- (.11) (.02) (.02) --
Tax return of capital distribution -- (.02) -- -- --
--------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.36) (.48) (.32) (.23) (.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.40 $ 9.72 $ 9.88 $ 9.75 $ 9.87
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.51% 3.27% 4.69% 1.12% 9.05%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 100,630 $ 117,783 $ 137,480 $ 192,496 $ 205,349
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 105,608 $ 122,062 $ 156,925 $ 216,954 $ 144,852
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 3.51% 3.33% 3.04% 2.13% 4.76%
Total expenses 1.83% 1.82% 1.81% 1.74% 1.81%
Expenses after payments and waivers
and reduction to custodian expenses 1.65% 1.65% 1.74% 1.74% 1.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 4 95% 4 84% 4 72% 121%
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. 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, 2006 $3,476,956,717 $3,692,200,123
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.
38 | OPPENHEIMER U.S. GOVERNMENT TRUST
CLASS N YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
- ----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .38 1 .37 1 .34 .24 .50
Net realized and unrealized gain (loss) (.30) -- .15 (.10) .39
--------------------------------------------------------------------------------
Total from investment operations .08 .37 .49 .14 .89
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.41) (.39) (.34) (.24) (.53)
Distributions from net realized gain -- (.11) (.02) (.02) --
Tax return of capital distribution -- (.02) -- -- --
--------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.41) (.52) (.36) (.26) (.53)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.41 $ 9.74 $ 9.89 $ 9.76 $ 9.88
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.91% 3.89% 5.13% 1.45% 9.62%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 38,997 $ 41,127 $ 34,067 $ 25,947 $ 13,453
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 39,069 $ 38,200 $ 29,034 $ 22,027 $ 6,092
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets 3
Net investment income 4.01% 3.82% 3.52% 2.41% 5.21%
Total expenses 1.51% 1.53% 1.59% 1.52% 1.31%
Expenses after payments and waivers
and reduction to custodian expenses 1.15% 1.15% 1.29% 1.42% 1.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 4 95% 4 84% 4 72% 121%
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. 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, 2006 $3,476,956,717 $3,692,200,123
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.
39 | OPPENHEIMER U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS Y YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 9.74 $ 9.89 $ 9.76 $ 9.88 $ 9.52
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .43 1 .43 1 .42 .33 .56
Net realized and unrealized gain (loss) (.27) -- .14 (.10) .36
--------------------------------------------------------------------------------
Total from investment operations .16 .43 .56 .23 .92
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.45) (.45) (.41) (.33) (.56)
Distributions from net realized gain -- (.11) (.02) (.02) --
Tax return of capital distribution -- (.02) -- -- --
--------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.45) (.58) (.43) (.35) (.56)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.45 $ 9.74 $ 9.89 $ 9.76 $ 9.88
================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 1.75% 4.48% 5.88% 2.37% 10.05%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 21,215 $ 2,681 $ 2,354 $ 2,602 $ 2,861
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 12,688 $ 2,524 $ 2,377 $ 3,133 $ 1,933
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 4.58% 4.40% 4.20% 3.36% 5.80%
Total expenses 0.61% 0.58% 0.58% 0.59% 0.83%
Expenses after payments and waivers
and reduction to custodian expenses 0.61% 0.58% 0.58% 0.59% 0.81%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 74% 4 95% 4 84% 4 72% 121%
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. 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, 2006 $3,476,956,717 $3,692,200,123
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.
40 | 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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. 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(R) 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, as 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
41 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. 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, 2006, the Fund had purchased
$174,023,086 of securities issued on a when-issued basis or forward commitment
and sold $32,988,613 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.
42 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and may be more sensitive to economic conditions than
lower-yielding, higher-rated fixed-income securities. The Fund may acquire
securities in default, and is not obligated to dispose of securities whose
issuers subsequently default. As of August 31, 2006, securities with an
aggregate market value of $73,311, representing 0.01% of the Fund's net assets,
were in default.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. 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 provisions are
required, however, during the year ended August 31, 2006, the Fund paid federal
excise tax of $14,134.
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.
43 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
NET UNREALIZED
DEPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4,5 TAX PURPOSES
--------------------------------------------------------------------------
$435,867 $-- $18,924,285 $8,669,555
1. As of August 31, 2006, the Fund had $12,404,454 of net capital loss
carryforward available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of August 31, 2006, details
of the capital loss carryforward were as follows:
EXPIRING
----------------------------
2014 $12,404,454
2. As of August 31, 2006, the Fund had $6,382,650 of post-October losses
available to offset future realized capital gains, if any. Such losses, if
unutilized, will expire in 2015.
3. The Fund had $137,181 of straddle losses which were deferred.
4. During the fiscal year ended August 31, 2006, the Fund did not utilize any
capital loss carryforward.
5. During the fiscal year ended August 31, 2005, the Fund did not utilize any
capital loss carryforward.
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, 2006.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO INCREASE TO
PAID-IN ACCUMULATED NET ACCUMULATED NET
CAPITAL INVESTMENT LOSS LOSS ON INVESTMENTS
-------------------------------------------------------------
$14,134 $ 3,402,951 $ 3,388,817
The tax character of distributions paid during the years ended August 31, 2006
and August 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
-------------------------------------------------------------
Distributions paid from:
Ordinary income $ 41,618,120 $ 53,442,425
Long-term capital gain -- 1,116,895
Return of capital -- 2,479,502
-------------------------------
Total $ 41,618,120 $ 57,038,822
===============================
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, 2006 are noted below. The primary
difference between
44 | OPPENHEIMER U.S. GOVERNMENT TRUST
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 $ 1,055,364,672
Federal tax cost of other investments (26,166,356)
-----------------
Total federal tax cost $ 1,029,198,316
=================
Gross unrealized appreciation $ 8,577,345
Gross unrealized depreciation (17,246,900)
-----------------
Net unrealized depreciation $ (8,669,555)
=================
- --------------------------------------------------------------------------------
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, 2006, the Fund's projected benefit obligations were decreased by $21,403 and
payments of $14,347 were made to retired trustees, resulting in an accumulated
liability of $135,671 as of August 31, 2006.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
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
45 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
activity. The Fund pays interest to its custodian on such cash overdrafts, to
the extent they are not offset by positive cash balances maintained by the Fund,
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
CLASS A
Sold 14,257,373 $ 134,270,797 18,201,396 $ 177,730,859
Dividends and/or
distributions reinvested 2,563,009 24,143,007 3,316,201 32,315,297
Redeemed (21,365,041) (201,264,086) (24,577,442) (240,281,142)
-----------------------------------------------------------------
Net decrease (4,544,659) $ (42,850,282) (3,059,845) $ (30,234,986)
=================================================================
- ---------------------------------------------------------------------------------------------------
CLASS B
Sold 2,176,199 $ 20,461,713 3,431,412 $ 33,508,152
Dividends and/or
distributions reinvested 630,332 5,934,004 1,012,781 9,855,570
Redeemed (7,999,351) (75,354,930) (9,322,282) (90,979,370)
-----------------------------------------------------------------
Net decrease (5,192,820) $ (48,959,213) (4,878,089) $ (47,615,648)
=================================================================
46 | OPPENHEIMER U.S. GOVERNMENT TRUST
YEAR ENDED AUGUST 31, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
CLASS C
Sold 2,272,098 $ 21,351,324 2,869,464 $ 27,940,960
Dividends and/or
distributions reinvested 371,557 3,495,322 522,828 5,085,042
Redeemed (4,050,077) (38,143,894) (5,194,614) (50,771,159)
-----------------------------------------------------------------
Net decrease (1,406,422) $ (13,297,248) (1,802,322) $ (17,745,157)
=================================================================
- ---------------------------------------------------------------------------------------------------
CLASS N
Sold 1,467,459 $ 13,821,685 2,185,762 $ 21,313,658
Dividends and/or
distributions reinvested 166,474 1,567,918 197,014 1,919,111
Redeemed (1,714,094) (16,152,960) (1,602,483) (15,608,907)
-----------------------------------------------------------------
Net increase (decrease) (80,161) $ (763,357) 780,293 $ 7,623,862
=================================================================
- ---------------------------------------------------------------------------------------------------
CLASS Y
Sold 10,762,543 $ 101,810,143 264,048 $ 2,550,959
Dividends and/or
distributions reinvested 59,746 564,609 14,987 145,986
Redeemed (8,852,114) (83,382,390) (241,605) (2,331,506)
-----------------------------------------------------------------
Net increase 1,970,175 $ 18,992,362 37,430 $ 365,439
=================================================================
- --------------------------------------------------------------------------------
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, 2006, were as
follows:
PURCHASES SALES
--------------------------------------------------------------------
Investment securities $ 513,775,265 $ 360,802,001
U.S. government and
government agency obligations 98,223,758 402,067,458
To Be Announced (TBA)
mortgage-related securities 3,476,956,717 3,692,200,123
- --------------------------------------------------------------------------------
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
average annual rate as shown in the following table:
FEE SCHEDULE
------------------------------------------------
Up to $300 million of net assets 0.600%
Next $100 million of net assets 0.570
Next $400 million of net assets 0.550
Next $1.2 billion of net assets 0.500
Over $2 billion of net assets 0.475
47 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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, 2006, the Fund paid
$2,212,981 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
periodically 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 periodically 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
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
- --------------------------------------------------------------------------------
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% on Class B and
Class C shares and 0.25% 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, 2006 for Class B, Class C
and Class N shares were $6,894,329, $2,836,161 and $679,264, 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
48 | OPPENHEIMER U.S. GOVERNMENT TRUST
CDSC retained by the Distributor on the redemption of shares is shown in the
following table 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, 2006 $248,354 $14,627 $558,256 $25,154 $22,860
- --------------------------------------------------------------------------------------------------
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, 2006, the Manager reimbursed the Fund $953,104, $365,445, $193,081
and $110,748 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, 2006, OFS waived $30,636 for Class N shares.
This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
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
49 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued
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 at
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, 2006, the Fund had outstanding futures contracts as follows:
VALUATION UNREALIZED
EXPIRATION NUMBER OF AS OF APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS AUGUST 31, 2006 (DEPRECIATION)
- ---------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 12/19/06 1,472 $ 163,484,000 $ 1,026,255
U.S. Treasury Nts., 5 yr. 12/29/06 182 19,129,906 39,312
------------
1,065,567
------------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 12/29/06 758 154,892,563 (220,491)
U.S. Treasury Nts., 10 yr. 12/19/06 502 53,902,250 (237,326)
------------
(457,817)
------------
$ 607,750
============
- --------------------------------------------------------------------------------
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) on the notional amount of the swap in an
amount equal to the daily change in such valuation. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss).
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, 2006, the Fund had no outstanding interest rate swap
agreements.
50 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
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 unrealized gain (loss) related to the daily change
in the valuation of the notional amount of the swap, as well as the amount due
to (owed by) the Fund at termination or settlement, is combined and separately
disclosed as an asset (liability). The Fund also records any periodic payments
received from (paid to) the counterparty, including at termination, under such
contracts as realized gain (loss). Total return swaps are subject to risks (if
the counterparty fails to meet its obligations).
As of August 31, 2006, the Fund had entered into the following total return swap
agreements:
SWAP NOTIONAL TERMINATION UNREALIZED
COUNTERPARTY SWAP DESCRIPTION AMOUNT DATES DEPRECIATION
- -----------------------------------------------------------------------------------------------------------------
Received or paid monthly. The Counterparty
pays the Fund a Floating Payment which is
the sum of the Notional Amount, the
Lehman Brothers CMBS Index Spread and the
Financial Spread on the initial Notional
Amount for the Swap Interest Accrual Period.
In addition, the Counterparty, pays the Fund
the Total Return Amount if it is a positive
value for a given Index Period. If it is a
negative, the Fund pays the Counterparty
the absolute value of the Total Return
Amount for a given Index Period,
Deutsche Bank AG on each Payment Date. $10,000,000 12/1/06 $ 10,151
- -----------------------------------------------------------------------------------------------------------------
Received or paid monthly. If the Carry
Amount, plus the Spread Return Amount
(Spread Change times Duration times
Notional Amount), is positive, the
Counterparty pays the Fund. The payment is
based on the Carry Amount which is the
Spread on the Lehman Brothers CMBS AAA
8.5+ Index as of the close of one Business
Day prior to the Period End Day plus 15 basis
points times the Notional Amount times the
Day Count Basis. If it is negative, the Fund
Lehman Brothers pays the Counterparty the absolute value of
Special Financing, Inc. the Spread Return Amount. 9,450,000 12/1/06 9,593
--------
$ 19,744
========
Abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
51 | OPPENHEIMER U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. ILLIQUID SECURITIES
As of August 31, 2006, 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
securities, letters of credit 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 each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. 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. 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, 2006, the Fund had no securities on loan.
- --------------------------------------------------------------------------------
10. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
August 31, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.
52 | OPPENHEIMER U.S. GOVERNMENT TRUST
- --------------------------------------------------------------------------------
11. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
53 | OPPENHEIMER U.S. GOVERNMENT TRUST
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2006, 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, 2006, 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, 2006, 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 16, 2006
54 | OPPENHEIMER U.S. GOVERNMENT TRUST
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended August
31, 2006 are eligible for the corporate dividend-received deduction.
Dividends, if any, paid by the Fund during the fiscal year ended August
31, 2006 which are not designated as capital gain distributions, may be eligible
for lower individual income tax rates to the extent that the Fund has received
qualified dividend income as stipulated by recent tax legislation. In early
2007, shareholders of record will receive information regarding the percentage
of distributions that are eligible for lower individual income tax rates. The
amount will be the maximum amount allowed.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended August 31, 2006, $42,055,715 or 100% of the ordinary distributions
paid by the Fund qualifies as an interest related dividend.
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.
55 | 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 30, no later than August 31 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.
56 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS
FUND, LENGTH OF SERVICE, AGE HELD; NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. 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 Covanta
of Trustees (since 2003), Holding Corp. (waste-to-energy company) (since 2002); Director of Weyerhaeuser
Trustee (since 1993) Corp. (1999-April 2004); Director of Caterpillar, Inc. (1993-December 2002);
Age: 75 Director of ConAgra Foods (1993-2001); Director of Texas Instruments (1993-2001);
Director of FMC Corporation (1993-2001). Oversees 43 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: 65 (October 1991-August 2006); President of the Investment Company Institute (trade
association) (October 1991-June 2004); Director of ICI Mutual Insurance Company
(insurance company) (October 1991-June 2004). Oversees 43 portfolios in the
OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 53 portfolios in the
Trustee (since 1993) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and
Trustee (since 1999) Member (since 1979) of the National Academy of Sciences; Council on Foreign
Age: 68 Relations (since 2002); Director of GSI Lumonics Inc. (precision medical
equipment supplier) (since 2001); Senior Advisor of The Andrew W. Mellon
Foundation (since 2001); Chair of Science Initiative Group (since 1999); Member
of the American Philosophical Society (since 1996); Trustee of Woodward Academy
(since 1983); Foreign Associate of Third World Academy of Sciences; Director of
the Institute for Advanced Study (1991-2004); Director of Bankers Trust New York
Corporation (1994-1999); Provost at Duke University (1983-1991). Oversees 43
portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998);
Trustee (since 2004) and Senior Vice President and General Auditor of American Express Company
Age: 63 (financial services company) (July 1998-February 2003). Oversees 43 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 financial
Age: 54 adviser) (since January 2002); Managing Director of Carmona Motley Hoffman Inc.
(privately-held financial adviser) (January 1998-December 2001); Member of the
Finance and Budget Committee of the Council on Foreign Relations, the Investment
Committee of the Episcopal Church of America, the Investment Committee and Board
of Human Rights Watch and the Investment Committee of Historic Hudson Valley.
Oversees 43 portfolios in the OppenheimerFunds complex.
57 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 1982) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment
Age: 79 trust), Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's
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 43 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting
Trustee (since 1989) and executive recruiting) (since 1993); Life Trustee of International House
Age: 74 (non-profit educational organization); Founder, Chairman and Chief Executive
Officer of Russell Reynolds Associates, Inc. (1969-1993); Banker at J.P. Morgan &
Co. (1958-1966); 1st Lt. Strategic Air Command, U.S. Air Force (1954-1958).
Oversees 43 portfolios in the OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and
Trustee (since 2005) Cathco (since 1996); Director of Lakes Environmental Association (since 1996);
Age: 65 Member of the Investment Committee of the Associated Jewish Charities of
Baltimore (since 1994); Director of Fortis/Hartford mutual funds (1994-December
2001). Oversees 43 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: 58 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 43 portfolios in
the OppenheimerFunds complex.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995);
Trustee (since 2005) Director of Special Value Opportunities Fund, LLC (registered investment company)
Age: 63 (since September 2004); Member of Zurich Financial Investment Advisory Board
(insurance) (since October 2004); Board of Governing Trustees of The Jackson
Laboratory (non-profit) (since August 1990); Trustee of the Institute for
Advanced Study (non-profit educational institute) (since May 1992); Special
Limited Partner of Odyssey Investment Partners, LLC (private equity investment)
(January 1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002)
(investment research, non-profit); Governor, Jerome Levy Economics Institute of
Bard College (August 1990-September 2001) (economics research); Director of Ray &
Berendtson, Inc. (May 2000-April 2002) (executive search firm). Oversees 53
portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
AND OFFICER FLOOR, NEW YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN
OFFICER FOR AN INDEFINITE 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.
58 | OPPENHEIMER U.S. GOVERNMENT TRUST
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President
Trustee, President and (since September 2000) of the Manager; President and a director or trustee of
Principal Executive Officer other Oppenheimer funds; President and Director of Oppenheimer Acquisition Corp.
(since 2001) ("OAC") (the Manager's parent holding company) and of Oppenheimer Partnership
Age: 57 Holdings, Inc. (holding company subsidiary of the Manager) (since July 2001);
Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager) (since
November 2001); Chairman and Director of Shareholder Services, 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
91 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS.
OF THE FUND ZACK, GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY
STREET, NEW YORK, NEW YORK 10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN,
SZILAGYI AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO 80112-3924; FOR
MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD AND SWANEY, 470 ATLANTIC AVENUE, 11TH
FLOOR, BOSTON, MA 02210. EACH OFFICER SERVES FOR AN INDEFINITE 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 and Portfolio Management Corporation (since April, 2002 and of OFI Institutional Asset
Manager (since 2002) Management, Inc. (since June 2002); Executive Director and portfolio manager for
Age: 39 Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment Management
(August 1993-April 2002). An officer of 15 portfolios in the OppenheimerFunds
complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior Economist at the Board
Vice President and Portfolio of Governors of the Federal Reserve System from June 1992 to October 2003. A
Manager (since 2006) portfolio manager of 12 portfolios in the OppenheimerFunds complex.
Age: 39
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager since August 2003; Vice
Vice President and Portfolio President of ABN AMRO NA, Inc. (June 2002-August 2003); Vice President of Zurich
Manager (since 2006) Scudder Investments (January 1999-June 2002). A portfolio manager of 12
Age: 37 portfolios in the OppenheimerFunds complex.
59 | OPPENHEIMER U.S. GOVERNMENT TRUST
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BENJAMIN J. GORD, Vice President of the Manager (since April 2002), of HarbourView Asset Management
Vice President and Portfolio Corporation (since April 2002) and of OFI Institutional Asset Management, Inc.
Manager (since 2006) (as of June 2002); Executive Director and senior fixed income analyst at Miller
Age: 44 Anderson & Sherrerd, a division of Morgan Stanley Investment Management (April
1992-March 2002). A portfolio manager of 12 portfolios in the OppenheimerFunds
complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior analyst, high grade
Vice President and Portfolio investment team (June 2002-March 2006); senior fixed income analyst at Miller
Manager (since 2006) Anderson & Sherrerd, a division of Morgan Stanley Investment Management (May
Age: 33 1998-May 2002). A portfolio manager of 12 portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March
Vice President and Chief 2004); Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
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: 56 2004). An officer of 91 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer
Treasurer and Principal of the following: HarbourView Asset Management Corporation, Shareholder Financial
Financial and Accounting Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Officer (since 1999) Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Age: 47 Private Investments, Inc. (since March 2000), 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 91 portfolios in the
OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial
Assistant Treasurer Product Accounting of the Manager (November 1998-July 2002). An officer of 91
(since 2004) portfolios in the OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial
Assistant Treasurer Reporting and Compliance of First Data Corporation (April 2003-July 2004);
(since 2005) Manager of Compliance of Berger Financial Group LLC (May 2001-March 2003);
Age: 36 Director of Mutual Fund Operations at American Data Services, Inc. (September
2000-May 2001). An officer of 91 portfolios in the OppenheimerFunds complex.
60 | OPPENHEIMER U.S. GOVERNMENT TRUST
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: 58 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. (since
November 2001); Director of OppenheimerFunds (Asia) Limited (since 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 91 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary President (April 2001-April 2004), Associate General Counsel (December 2000-April
(since 2004) 2004), Corporate Vice President (May 1999-April 2001) and Assistant General
Age: 38 Counsel (May 1999-December 2000) of UBS Financial Services Inc. (formerly,
PaineWebber Incorporated). An officer of 91 portfolios in the OppenheimerFunds
complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary
Assistant Secretary (since October 2003) of the Manager; Vice President (since 1999) and Assistant
(since 2001) Secretary (since October 2003) of the Distributor; Assistant Secretary of
Age: 40 Centennial Asset Management Corporation (since October 2003); Vice President and
Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services,
Inc. (since December 2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 91 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September
Assistant Secretary 2004); First Vice President (2000-September 2004), Director (2000-September 2004)
(since 2004) and Vice President (1998-2000) of Merrill Lynch Investment Management. An officer
Age: 42 of 91 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.
61 | 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 $35,000 in fiscal 2006 and $33,000 in fiscal 2005
(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 $75,000 in fiscal 2006 and $132,059 in fiscal 2005 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 include: 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 no such fees in fiscal 2006 and $5,000 in fiscal 2005 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 include: filing form 5500.
(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 $8,000 in fiscal 2006 and no such fees in 2005 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 fees would include the cost to the principal accountant of attending audit
committee meetings and consultations regarding the registrant's retirement plan
with respect to its trustees.
(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 $83,000 in fiscal 2006 and $137,059 in fiscal
2005 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 08/31/2006, 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: 10/16/2006
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: 10/16/2006
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 10/16/2006