OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Supplement Dated August 4, 1994
to the Prospectus dated May 1, 1994, revised August 4, 1994
The Prospectus is amended by adding the following paragraph as a new
second paragraph to the section of the Prospectus captioned "How To Buy
Shares - Special Arrangements With Dealers":
Instead of paying dealers the regular commission for sales of
Class A shares stated in the table above in "Class A Shares",
the Distributor will pay dealers the entire commission shown in
that table to participating dealers on "qualifying transactions"
from May 1, 1994 through August 31, 1994. In addition to paying
dealers the regular commission for sales of Class B shares
described in the third paragraph of "Distribution and Service
Plan for Class B Shares" below, the Distributor will pay
participating dealers an amount equal to .50% of the offering
price of shares of the Fund sold in "qualifying transactions"
from May 1, 1994 through August 31, 1994. "Qualifying
transactions" are sales of Class A and/or Class B shares by a
registered representative of a participating dealer, but do not
include sales of Class A shares (i) at net asset value without
sales charge, (ii) subject to a contingent deferred sales
charge, or (iii) intended under a Letter of Intent.
August 4, 1994
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OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
Supplement Dated August 4, 1994
to the Statement of Additional Information
dated May 1, 1994
The Statement of Additional Information is revised as follows:
1. The fourth paragraph on page 2 is replaced with the following:
Under normal circumstances, the Fund anticipates that it will
maintain a dollar-weighted average portfolio effective duration
of not more than three years. Subject to that limitation, the
Fund may invest in individual debt obligations of any maturity
or duration. The Manager will in good faith determine the
effective duration of debt obligations purchased by the Fund and
will consider various factors applicable to each type of debt
obligation, including those set forth below. Duration
incorporates a bond's yield, coupon interest payments, final
maturity and call features into one measure. For generic fixed-
income securities, duration is calculated as the average time
of present-value-weighted cash flows divided by a small
adjustment factor, pursuant to a calculation known as modified
Macaulay duration. Thus, for any generic fixed-income security
with interest payments occurring prior to the payment of
principal, duration is also less than maturity. Also, all other
factors being equal, the lower the stated or coupon rate of
interest of a fixed-income security, the longer the duration of
the security; conversely, the higher the stated or coupon rate
of interest of a fixed-income security, the shorter the duration
of the security.
Futures, options and options on futures have durations which,
in general, are closely related to the duration of the
securities which underlie them. Holding long futures or call
option positions (backed by segregated liquid assets) will
lengthen the portfolio's duration. There are some situations,
however, where the standard modified Macaulay duration
calculation does not properly reflect the interest rate exposure
of a security. For example, the interest rate exposure is not
properly captured by modified Macaulay duration in the case of
mortgage pass-though securities. The stated final maturity of
such securities is generally 30 years, but changes in prepayment
rates are more critical in determining the securities' price
exposure to interest rates. Indeed, the modified Macaulay
calculation even falls short in calculating the price
sensitivity of callable bonds to interest rates. In these and
other similar situations, the Manager will use more
sophisticated analytical techniques that incorporate the
economic life of a security as well as relevant macroeconomic
factors (e.g., mortgage prepayment rates) into the determination
of the Fund's effective duration.
2. The final sentence beginning on page 35 is revised to read as
follows:
However, when Class A shares acquired by exchange of Class A
shares purchased subject to a Class A CDSC are redeemed within
18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A CDSC is
imposed on the redeemed shares (see "Class A Contingent Deferred
Sales Charge" in the Prospectus), and the Class B CDSC is
imposed on Class B shares redeemed within five years of the
initial purchase of the exchanged Class B shares.
August 4, 1994
