<PAGE> 1
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
ANNUAL REPORT SEPTEMBER 30, 1996
[PHOTO]
"We need our
money to work
hard and we
need to feel
comfortable
about how
it's invested."
[OPPENHEIMER LOGO]
<PAGE> 2
NEWS
STANDARDIZED YIELDS
For the 30 Days Ended 9/30/96:(5)
Class A
6.42%
Class B
5.89%
Class C
5.88%
THE FUND'S CLASS A SHARES ARE RANKED **** AMONG 956 (3-YEAR) AND 508 (5-YEAR)
TAXABLE BOND FUNDS FOR THE COMBINED 3- AND 5-YEAR PERIODS ENDED 9/30/96 BY
MORNINGSTAR MUTUAL FUNDS.(6)
THIS FUND IS FOR PEOPLE WHO WANT HIGH RETURN POTENTIAL WITHOUT GIVING UP THE
COMFORT OF A SHORT-TERM INVESTMENT.(1)
HOW YOUR FUND IS MANAGED
Oppenheimer Limited-Term Government Fund seeks high current return by investing
in a portfolio of fixed-income securities, with an emphasis on securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
and mortgage-backed securities. The Fund also invests in collateralized
mortgage obligations and mortgage-backed stripped securities.(2) The Fund is
designed to offer a greater degree of stability than longer-term fixed-income
investments because it intends to maintain an average effective portfolio
duration of not more than three years.
PERFORMANCE
Total returns at net asset value for the 12 months ended 9/30/96 for Class A, B
and C shares were 5.54%, 4.74% and 4.71%, respectively.(3)
Your Fund's average annual total returns at maximum offering price for
Class A shares for the 1-, 5- and 10-year periods ended 9/30/96 were 1.85%,
5.56% and 7.53%, respectively. For Class B shares, average annual total returns
for the 1-year period ended 9/30/96 and since inception on 5/3/93 were 0.81%
and 4.00%, respectively. For Class C shares, average annual total returns for
the 1-year period ended 9/30/96 and since inception on 2/1/95 were 3.73% and
6.15%, respectively.(4)
OUTLOOK
"We're inclined to take a cautious approach in the short term while watching
for any changes that could produce positive results for the bond market over
the long term."
David Rosenberg, Portfolio Manager
September 30, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. In reviewing the notes that follow on performance
and rankings, please be aware that past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost.
1. The Fund may be more volatile than certain short-term investments and may
not have the return potential of longer-term investments.
2. These securities involve risks from early prepayment of underlying mortgages
that can affect the Fund's income and principal value.
3. Based on the change in net asset value per share for the period shown,
without deducting any sales charges. Such performance would have been lower if
sales charges were taken into account.
4. Class A returns show hypothetical investments on 9/30/95, 9/30/91 and
9/30/86, after deducting the current maximum initial sales charge of 3.50%.
Prior to 2/1/94, the maximum Class A sales charge was higher, and actual
account performance would have been less. Class B returns show hypothetical
investments on 9/30/95 and 5/3/93 (inception of class), after the deduction of
the applicable contingent deferred sales charge of 4% (1-year) and 2% (since
inception). Class C returns show hypothetical investments on 9/30/95 and
2/1/95 (inception of class), after the deduction of the 1% contingent deferred
sales charge for the 1-year result. The Fund's investment policy of limiting
average portfolio duration was adopted on 5/1/94, and the Fund had a different
advisor prior to 4/7/90. An explanation of the different total returns is in
the Fund's prospectus.
5. Standardized yield is net investment income calculated on a yield-to-
maturity basis for the 30-day period ended 9/30/96, divided by the maximum
offering price at the end of the period, compounded semiannually and then
annualized. Falling net asset values will tend to artificially raise yields.
6. Source: Morningstar Mutual Funds, 9/30/96. Morningstar rankings are based on
risk-adjusted investment return, after considering sales charges and expenses.
Investment return measures a fund's (or class's) 1-, 3-, 5- and 10-year
(depending on the inception of the class or fund) average annual total returns
in excess of 90-day U.S. Treasury bill returns. Risk measures a fund's (or
class's) performance below 90-day U.S. Treasury bill returns. Risk and returns
are combined to produce star rankings, reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top
10%), 4 stars is "above average" (next 22.5%), and 1 star is the lowest
(bottom 10%). The 4-star current ranking is a weighted average of the 3-and
5-year rankings for the class, which were 4 stars and 4 stars, weighted 40%
and 60%, respectively. The 1-year ranking is 3 stars, but is not included in
the overall ranking calculations. There were 956 funds ranked for the 1-year
period. Rankings are subject to change. The Fund's Class A, B and C shares have
the same portfolio but different expenses.
2 Oppenheimer Limited-Term Government Fund
<PAGE> 3
[PHOTO]
James C. Swain
Chairman
Oppenheimer
Limited-Term
Government Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Limited-Term
Government Fund
DEAR SHAREHOLDER,
While it's true that earlier this year was difficult for most bond investors,
mainly due to rising interest rates and concerns about inflation, we remain
confident that the general long-term trend is for moderate economic growth and
low inflation, which should help to stabilize and even lower interest rates
over time. Though we still anticipate that interest rates will fluctuate over
the near term, our outlook for the rest of the year remains positive.
During the first six months of this year, investors were concerned that
economic growth appeared to be accelerating. Unemployment was at a six-year
low, industrial production was up, and even retail sales showed unexpected
strength. In addition, because the stock market was performing so well, many
investors felt more prosperous, and sales of big-ticket items such as homes and
cars increased. While much of this data seems to indicate that economic growth
is picking up, we believe that in today's world, faster economic growth may not
necessarily mean higher inflation. In fact, we believe that inflation is
likely to remain under control for the following three reasons: the Federal
Reserve's conservative monetary policy over the last few years; the declining
federal government deficit; and higher corporate productivity that has caused
unit labor costs to grow more slowly than they have in the past.
With the yield on today's 30-year Treasuries hovering just below 7%,
bonds clearly offer a significant value. Typically, the yield on a bond is
compared to the current inflation rate, which is now about 3%. This "spread" of
approximately four percentage points between bond yields and inflation is
considered very generous by historical standards. So, even if interest rates
stay where they are, bonds still would offer significant value for today's
investors. If, on the other hand, interest rates were to fall, as we expect
they will, bond values would appreciate.
Finally, the recent swings in the stock market have captured the
attention of many investors who had their assets invested primarily in stocks
and have given new life to the fixed-income market. The more volatile the stock
market is, the more attractive bonds appear in the portfolios of many
investors, particularly those who are nearing retirement. In addition, because
the prices of bonds are lower, we feel they are a good buy. Given the current
market circumstances, diversifying into other asset classes, rather than
relying solely on equities, may make more sense now than ever before.
Your portfolio managers discuss the outlook for your Fund in the light of
these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
- --------------------------------- ------------------------------
James C. Swain Bridget A. Macaskill
October 21, 1996
3 Oppenheimer Limited-Term Government Fund
<PAGE> 4
Q HOW DID THE FUND PERFORM?
Q + A
[PHOTO]
AN INTERVIEW WITH YOUR FUND'S MANAGERS.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
The Fund performed exceptionally well. We finished 7th out of 86 funds in our
category ranked by Lipper Analytical Services for the 1-year period ended
9/30/96.(1) Once again, over the last six months the Fund showed that in a
declining market it can outperform many other government funds, reinforcing
that this Fund is not only well-suited for a declining market, but it is also
well-suited for any long-term portfolio.
[PHOTO]
WHAT INVESTMENTS OR MARKET FACTORS MADE POSITIVE CONTRIBUTIONS TO PERFORMANCE?
The Fund's strong performance can be attributed primarily to two important
factors: our focus on achieving yield and our ability to limit the portfolio's
average maturity. First, because a large percentage of the portfolio--about
70%--was invested in higher-yielding mortgage-backed securities, the Fund
benefited from a reduction in prepayment risk. That's because when interest
rates rise, homeowners are less likely to refinance their homes, producing a
more stable income stream. This high concentration of mortgage-backed
securities played a significant role in protecting the Fund's principal and
enhancing yield. Second, the portfolio's overall average duration is usually
limited to three years, but over the last six months we have taken an even more
conservative approach, maintaining an average duration of two and a half years.
This portfolio is well-suited for the long-term investor.(2)
[PHOTO]
WERE THERE ANY FACTORS THAT LIMITED PERFORMANCE OVER THE PERIOD?
Actually, we didn't have any disappointments, and in spite of the volatility
during the
1. Source: Lipper Analytical Services, 9/30/96. Oppenheimer Limited-Term
Government Fund is characterized as a short-intermediate U.S. government fund.
Lipper does not take sales charges into consideration.
2. The Fund's portfolio is subject to change.
4 Oppenheimer Limited-Term Government Fund
<PAGE> 5
FACING PAGE
Top left: David Rosenberg,
Portfolio Manager
Top right: Donna Compert, Member
of Fixed Income Investments Team
Bottom: Len Darling, Executive VP,
Director of Fixed Income
Investments
THIS PAGE
Top: Michael Maciolek, Member
of Fixed Income Investments Team
Bottom: David Rosenberg with
Leslie Falconio and Gina Palmieri,
Members of Fixed Income
Investments Team
A THE FUND FINISHED IN THE TOP QUARTILE OF ITS PEERS.
summer months, we still managed to produce strong results. In fact,
we actually increased the dividend during this last quarter.
Looking back over the past year, the only changes we could have made to
improve performance would have been to be a little more cautious and further
shorten the Fund's overall average maturity. Specifically, because
mortgage-backed securities performed so well, had we increased our holdings in
this sector, we could have seen even higher gains. But overall, we're very
pleased with the Fund's performance.
WHAT AREAS ARE YOU CURRENTLY TARGETING?
We are continuing a defensive stance toward the fixed-income markets and are
remaining cautious about the future direction of interest rates. We believe it
is time to shift the Fund's overall allocation between mortgage-backed
securities and Treasury holdings. Therefore, over the next several months, we
plan to decrease our exposure to mortgage-backed securities by approximately
10-15%, because they have done so well, and begin to increase our investments
in the Treasury market.
[PHOTO]
Furthermore, we've begun to position our investments in the intermediate
range of the yield curve. This is a change from our previous approach of
"barbelling" the maturities, in which we combined very short-term with
longer-term maturities to achieve our targeted intermediate maturity.
[PHOTO]
DO YOU SEE ANY CHANGES IN LIGHT OF THE UPCOMING PRESIDENTIAL ELECTION?
We believe the agenda for Congress in 1997 will focus on pro-growth rather than
anti-deficit policies, which could put extra pressure on the bond market over
the next several months. While pro-growth policies are not generally positive
for the bond market in the near term, historically, investors have been
rewarded for the risks they have taken with strong inflation-adjusted returns
over the long term. With that thought in mind, we're inclined to take a
cautious approach in the short term while watching for any changes that could
produce positive results for the bond market over the long term.
5 Oppenheimer Limited-Term Government Fund
<PAGE> 6
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
======================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--70.0%
- ----------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--70.0%
- ----------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--58.3%
Federal Home Loan Mortgage Corp.:
Interest-Only Stripped Mtg.-Backed Security, Trust 177,
Cl. B, 15.389--15.793%, 7/15/26(1) $111,555,114 $41,292,822
Collateralized Mtg. Obligations, Gtd.
Multiclass Mtg. Participation Certificates:
Series 1360, Cl. PK, 10%, 12/15/20 15,030,000 16,993,219
7.50%, 10/15/26(2) 15,000,000 14,840,700
Series 1060, Cl. D, 8.20%, 7/15/19 400,997 404,005
Series 1065, Cl. H, 8.50%, 10/15/19 7,645,370 7,781,534
Series 1092, Cl. K, 8.50%, 6/15/21 15,000,000 15,773,400
Series 1097, Cl. L, 8.60%, 2/15/06 3,000,000 3,067,500
Series 1252, Cl. J, 8%, 5/15/22 7,000,000 7,039,340
Series 1455, Cl. J, 7.50%, 12/15/22 15,000,000 14,807,700
Series 25, Cl. F, 9.50%, 12/15/18 348,697 348,914
Series 45, Cl. D, 10%, 11/15/19 5,230,034 5,223,497
Series 5, Cl. Z, 9%, 5/15/19 3,191,469 3,348,176
Gtd. Multiclass Mtg. Participation Certificates:
10%, 8/1/21 3,744,375 4,070,613
11.50%, 6/1/20 2,200,876 2,522,754
11.75%, 1/1/16--4/1/19 3,224,597 3,688,932
13%, 8/1/15 4,220,974 5,033,512
7.50%, 5/1/26 10,031,643 9,929,722
9.25%, 11/1/08 427,157 448,835
--------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
11%, 11/1/15-- 5/15/19 17,650,278 19,840,727
11.50%, 8/15/13 2,152,600 2,470,782
11.75%, 9/1/03--11/1/15 751,412 842,276
12%, 8/1/16--4/15/19 6,559,550 7,616,440
13%, 8/1/10--12/1/15 6,168,795 7,351,740
7%, 10/15/26(2) 30,000,000 28,940,700
7%, 8/1/25--5/1/26 48,182,736 46,500,920
7.50%, 10/15/26(2) 5,000,000 4,940,650
7.50%, 6/1/25--8/1/25 11,969,861 11,857,705
8%, 10/15/26(2) 7,200,000 7,263,000
8.50%, 10/15/26(2) 5,000,000 5,128,150
9%, 8/1/19 789,369 829,532
STRIPS, Pass-Through Certificates, Trust 6, Cl. IP, 11.50%, 3/1/09 2,420,258 2,702,364
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-103, Cl. JB, 10.50%, 11/25/20 10,000,000 11,153,100
12.50%, 12/1/15 3,644,832 4,304,889
8%, 1/1/23 263,864 267,854
Trust 1989-4, Cl. D, 10%, 2/25/19 6,000,000 6,706,860
Trust 1990-143, Cl. J, 8.75%, 12/25/20 7,500,000 7,837,500
Trust 1990-18, Cl. K, 9.60%, 3/25/20 5,000,000 5,587,500
Trust 1991-169, Cl. PK, 8%, 10/25/21 595,000 607,644
Trust 1991-170, Cl. E, 8%, 12/25/06 2,500,000 2,603,900
Trust 1992-169, Cl. L, 7%, 9/25/22 5,500,000 5,065,115
</TABLE>
6 Oppenheimer Limited-Term Government Fund
<PAGE> 7
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC/FNMA/SPONSORED
(CONTINUED)
Interest-Only Stripped Mtg.-Backed Security:
Trust 218, Cl. 2, 11.836%, 4/1/23(1) $ 6,796,442 $ 2,264,065
Trust 240, Cl. 2, 9.686%--9.749%, 9/1/23(1) 18,603,630 6,426,973
Trust 252, Cl. 2, 11.047%, 11/1/23(1) 4,890,972 1,662,931
Trust 254, Cl. 2, 10.799%, 1/1/24(1) 19,549,084 6,671,125
Trust 257, Cl. 2, 10.982%, 2/1/24(1) 11,987,717 4,156,366
Principal-Only Stripped Mtg.-Backed Security:
Trust 148, Cl. G, 0.538%, 8/25/23(3) 8,891,258 4,729,038
Trust 4, Cl. J, 2.673%, 9/25/22(3) 3,400,000 1,742,500
------------
374,687,521
- ----------------------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--11.7%
Government National Mortgage Assn.:
10.50%, 1/15/16--7/15/21 3,369,102 3,726,273
11%, 2/15/98--2/15/01 1,109,936 1,176,255
11.50%, 1/15/13--5/15/13 752,799 864,478
13%, 2/15/11--9/15/14 72,342 85,899
7.50%, 10/15/26(2) 34,750,000 34,315,625
7.50%, 10/15/25--6/15/26 25,297,120 25,005,227
8%, 10/15/26(2) 10,000,000 10,093,800
8%, 9/15/07 158,198 162,957
8.50%, 9/15/21 66,250 68,701
9.50%, 9/15/17 159,459 172,221
------------
75,671,436
------------
Total Mortgage-Backed Obligations (Cost $453,576,570) 450,358,957
======================================================================================================================
U.S. GOVERNMENT OBLIGATIONS--44.9%
- ----------------------------------------------------------------------------------------------------------------------
TREASURY--44.9%
U.S. Treasury Bonds:
8.125%, 8/15/19 5,000,000 5,589,065
STRIPS, Zero Coupon, 7.342%, 11/15/21(4) 10,000,000 1,675,099
STRIPS, Zero Coupon, 7.19%, 8/15/22(4) 12,000,000 1,920,082
--------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
6%, 8/31/97(5) 128,995,000 129,236,866
6.375%, 8/15/02 12,012,000 11,929,418
6.50%, 5/15/05 2,853,000 2,816,444
6.875%, 3/31/00 7,840,000 7,964,945
7.25%, 11/15/96--2/15/98 78,416,000 78,663,997
7.75%, 1/31/00 2,500,000 2,603,125
8%, 1/15/97 45,700,000 46,071,313
------------
Total U.S. Government Obligations (Cost $290,182,746) 288,470,354
</TABLE>
7 Oppenheimer Limited-Term Government Fund
<PAGE> 8
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
======================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT--0.3%
- ----------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 5.62%, dated 9/30/96,
to be repurchased at $2,000,312 on 10/1/96, collateralized by U.S. Treasury
Bonds, 7.625%, 11/15/22, with a value of $2,043,143 (Cost $2,000,000) $2,000,000 $2,000,000
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $745,759,316) 115.2% 740,829,311
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER Assets (15.2) (98,012,027)
---------- -------------
NET ASSETS 100.0% $642,817,284
========== =============
</TABLE>
1. 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.
2. When-issued security to be delivered and settled after September 30,
1996.
3. 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.
4. For zero coupon bonds, the interest rate shown is the effective
yield on the date of purchase.
5. Securities with an aggregate market value of $6,011,250 are held in
collateralized accounts to cover initial margin requirements on open
futures sales contracts. See Note 5 of Notes to Financial Statements.
See accompanying Notes to Financial Statements.
8 Oppenheimer Limited-Term Government Fund
<PAGE> 9
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
<S> <C>
======================================================================================================================
ASSETS Investments, at value (cost $745,759,316)--see accompanying statement $740,829,311
--------------------------------------------------------------------------------------------------------------
Cash 375,421
--------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 23,010,497
Interest and principal paydowns 7,070,560
Shares of beneficial interest sold 2,408,013
Daily variation on futures contracts--Note 5 101,812
--------------------------------------------------------------------------------------------------------------
Other 3,928
------------
Total assets 773,799,542
======================================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased (including $104,687,336 purchased on a when-issued basis)--Note 1 127,628,898
Shares of beneficial interest redeemed 1,885,402
Dividends 956,712
Distribution and service plan fees 388,462
Transfer and shareholder servicing agent fees 21,854
Trustees' fees 6,066
Other 94,864
------------
Total liabilities 130,982,258
======================================================================================================================
NET ASSETS $642,817,284
============
======================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $660,164,931
--------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (186)
--------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (11,806,675)
--------------------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments--Notes 3 and 5 (5,540,786)
------------
Net assets $642,817,284
============
======================================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $436,889,403 and 42,579,748 shares of beneficial interest outstanding) $10.26
Maximum offering price per share (net asset value plus sales charge
of 3.50% of offering price) $10.63
--------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $160,572,232 and 15,651,147 shares of beneficial interest outstanding) $10.26
--------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $45,355,649 and 4,425,539 shares of beneficial interest outstanding) $10.25
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Limited-Term Government Fund
<PAGE> 10
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
<S> <C>
======================================================================================================================
INVESTMENT INCOME
Interest $46,303,392
======================================================================================================================
EXPENSES
Distribution and service plan fees--Note 4:
Class A 959,130
Class B 1,467,201
Class C 322,622
--------------------------------------------------------------------------------------------------------------
Management fees--Note 4 2,529,645
--------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 595,567
--------------------------------------------------------------------------------------------------------------
Shareholder reports 230,964
--------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 42,723
Class B 18,944
Class C 11,297
--------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 41,713
--------------------------------------------------------------------------------------------------------------
Legal and auditing fees 24,007
--------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 16,158
--------------------------------------------------------------------------------------------------------------
Other 64,141
-----------
Total expenses 6,324,112
======================================================================================================================
NET INVESTMENT INCOME 39,979,280
======================================================================================================================
REALIZED AND
UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised) (8,315,542)
Closing of futures contracts 724,899
Closing of options written (888,706)
-----------
Net realized loss (8,479,349)
--------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (2,255,816)
-----------
Net realized and unrealized loss (10,735,165)
======================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $29,244,115
===========
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Limited-Term Government Fund
<PAGE> 11
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1996 1995
======================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 39,979,280 $ 26,134,113
--------------------------------------------------------------------------------------------------------------
Net realized loss (8,479,349) (1,750,174)
--------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (2,255,816) 2,574,769
----------- ------------
Net increase in net assets resulting from operations 29,244,115 26,958,708
======================================================================================================================
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from net investment income:
Class A (26,704,976) (20,166,681)
Class B (8,852,431) (4,762,585)
Class C (1,884,621) (253,856)
--------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (1,369,245) --
Class B (503,246) --
Class C (142,148) --
======================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 97,751,994 116,780,567
Class B 42,090,398 81,900,018
Class C 31,425,681 14,569,935
======================================================================================================================
NET ASSETS
Total increase 161,055,521 215,026,106
--------------------------------------------------------------------------------------------------------------
Beginning of period 481,761,763 266,735,657
------------ ------------
End of period [including undistributed (overdistributed) net
investment income of $(186) and $1,076,858, respectively] $642,817,284 $481,761,763
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer Limited-Term Government Fund
<PAGE> 12
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1996 1995 1994 1993 1992
==================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.44 $10.40 $11.04 $10.97 $10.75
- --------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .75 .79 .72 .73 .81
Net realized and unrealized
gain (loss) (.19) .01 (.64) .07 .22
------- ------- ------- -------- -------
Total income (loss) from
investment operations .56 .80 .08 .80 1.03
- --------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.71) (.76) (.71) (.73) (.81)
Tax return of capital distribution (.03) -- (.01) -- --
------- ------- ------- -------- -------
Total dividends and distributions
to shareholders (.74) (.76) (.72) (.73) (.81)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period $10.26 $10.44 $10.40 $11.04 $10.97
======= ======= ======= ======== =======
==================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 5.54% 8.03% 0.74% 7.61% 9.88%
==================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $436,889 $346,015 $227,858 $178,944 $158,068
- --------------------------------------------------------------------------------------------------
Average net assets (in thousands) $393,727 $274,313 $190,829 $161,318 $160,830
- --------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.22% 7.64% 6.74% 6.70% 7.44%
Expenses 0.87% 0.91% 0.99% 1.02% 0.97%
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 71% 261% 226% 74% 154%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------- ------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPT. 30,
1996 1995 1994 1993(2) 1996 1995(1)
===================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $10.44 $10.41 $11.06 $10.96 $10.43 $10.32
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .67 .71 .62 .23 .66 .45
Net realized and unrealized
gain (loss) (.19) .01 (.64) .10 (.18) .10
------- ------- ------- -------- ------- -------
Total income (loss) from
investment operations .48 .72 (.02) .33 .48 .55
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.63) (.69) (.62) (.23) (.63) (.44)
Tax return of capital distribution (.03) -- (.01) -- (.03) --
------- ------- ------- -------- ------- -------
Total dividends and distributions
to shareholders (.66) (.69) (.63) (.23) (.66) (.44)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.26 $10.44 $10.41 $11.06 $10.25 $10.43
======= ======= ======= ======== ======= =======
==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3) 4.74% 7.18% (0.17)% 3.02% 4.71% 5.47%
==================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $160,572 $121,178 $38,877 $5,077 $45,356 $14,569
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $147,017 $72,131 $15,801 $2,561 $32,349 $6,112
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.46% 6.80% 5.91% 4.81%(4) 6.34% 6.51%(4)
Expenses 1.62% 1.71% 1.79% 1.87%(4) 1.64% 1.80%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 71% 261% 226% 74% 71% 261%
</TABLE>
1. For the period from February 1, 1995 (inception of offering) to September
30, 1995.
2. For the period from May 3, 1993 (inception of offering) to September 30,
1993.
3. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
4. Annualized.
5. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended September 30, 1996 were $603,877,225 and $415,889,318,
respectively. For the years ended September 30, 1995 and 1994, purchases and
sales of investment securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
12 Oppenheimer Limited-Term Government Fund
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer Limited-Term Government Fund (the Fund) is registered under
the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The Fund's investment objective
is to seek high current return and safety of principal. The Fund's
investment adviser is OppenheimerFunds, Inc. (the Manager). The Fund
offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All three classes of
shares have identical rights to earnings, assets and voting privileges,
except that each class has its own distribution and/or service plan,
expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. 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.
------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of
the New York Stock Exchange on each trading day. Listed and unlisted
securities for which such information is regularly reported are valued
at the last sale price of the day or, in the absence of sales, at
values based on the closing bid or the last sale price on the prior
trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the
Board of Trustees. Such securities which cannot be valued by the
approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering
the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established
by the Board of Trustees to determine fair value in good faith.
Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined
market value) adjusted for amortization to maturity of any premium or
discount. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of
any transactions that day, the value is based upon the last sale price
on the prior trading date if it is within the spread between the
closing bid and asked prices. If the last sale price is outside the
spread, the closing bid is used.
------------------------------------------------------------------------
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
securities that have been purchased by the Fund on a forward commitment
or when-issued basis can take place a month or more after the
transaction date. During the 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, in a
segregated account with its custodian, assets with a market value equal
to the amount of its purchase commitments. The purchase of securities
on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes
such purchases while remaining substantially fully invested. As of
September 30, 1996, the Fund had entered into outstanding when-issued
or forward commitments of $104,687,336.
In connection with its ability to purchase
securities on a when-issued or forward commitment basis, the Fund may
enter into mortgage "dollar-rolls" in which the Fund sells securities
for delivery in the current month and simultaneously contracts with the
same counterparty to repurchase similar (same type, coupon and
maturity) but not identical securities on a specified future date. The
Fund records each dollar-roll as a sale and a new purchase transaction.
------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book
Entry System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the
agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains
and losses are allocated daily 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 continue to comply with
provisions of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income,
including any net realized gain on investments not offset by loss
carryovers, to shareholders. Therefore, no federal income or excise tax
provision is required. At September 30, 1996, the Fund had available for
federal tax purposes an unused capital loss carryover of approximately
$6,058,000, expiring between 1997 and 2004.
13 Oppenheimer Limited-Term Government Fund
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to declare dividends
separately for Class A, Class B and Class C shares from net investment
income each day the New York Stock Exchange is open for business and
pay such dividends monthly. Distributions from net realized gains on
investments, if any, will be declared at least once each year.
------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income
(loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of paydown gains and losses. The
character of the distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing
of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gain
(loss) was recorded by the Fund.
During the year ended September 30, 1996, the
Fund adjusted the classification of distributions to reflect the
differences between the financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly,
during the year ended September 30, 1996, amounts have been
reclassified to reflect a decrease in paid-in capital of $3,594,221, of
which $2,014,639 is considered a tax return of capital, a decrease in
undistributed net investment income of $1,599,657, and a decrease in
accumulated net realized loss on investments of $5,193,878.
------------------------------------------------------------------------
OTHER. Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Discount on securities
purchased is amortized over the life of the respective securities, in
accordance with federal income tax requirements. Realized gains and
losses on investments and options written and unrealized appreciation
and depreciation are determined on an identified cost basis, which is
the same basis used for federal income tax purposes.
The preparation of financial statements in
conformity with 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 no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996 YEAR ENDED SEPTEMBER 30, 1995(1)
------------------------------ --------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 21,513,142 $222,573,075 18,462,358 $ 191,899,002
Dividends reinvested 2,005,298 20,746,018 1,399,150 14,547,766
Issued in connection with the
acquisition of Oppenheimer Strategic
Short-Term Income Fund--Note 7 -- -- 1,615,189 16,862,577
Redeemed (14,074,194) (145,567,099) (10,247,223) (106,528,778)
----------- ------------ ----------- -------------
Net increase 9,444,246 $ 97,751,994 11,229,474 $ 116,780,567
=========== ============ =========== =============
-----------------------------------------------------------------------------------------------------------------------
Class B:
Sold 7,184,124 $ 74,533,887 8,638,202 $ 89,826,104
Dividends reinvested 612,492 6,335,732 310,362 3,231,003
Issued in connection with the
acquisition of Oppenheimer Strategic
Short-Term Income Fund--Note 7 -- -- 810,988 8,466,715
Redeemed (3,752,397) (38,779,221) (1,886,739) (19,623,804)
----------- ------------ ----------- -------------
Net increase 4,044,219 $ 42,090,398 7,872,813 $ 81,900,018
=========== ============ =========== =============
-----------------------------------------------------------------------------------------------------------------------
Class C:
Sold 3,837,630 $ 39,749,107 1,483,730 $ 15,478,180
Dividends reinvested 153,531 1,583,682 20,278 211,531
Redeemed (962,267) (9,907,108) (107,363) (1,119,776)
----------- ------------ ----------- -------------
Net increase 3,028,894 $ 31,425,681 1,396,645 $ 14,569,935
=========== ============ =========== =============
</TABLE>
1. For the year ended September 30, 1995 for Class A and Class B shares
and for the period from February 1, 1995 (inception of offering) to
September 30, 1995 for Class C shares.
14 Oppenheimer Limited-Term Government Fund
<PAGE> 15
================================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized depreciation on investments of
$4,930,005 was composed of gross appreciation of $4,276,107, and gross
depreciation of $9,206,112.
================================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of
0.50% on the first $100 million of average annual net assets, 0.45% on
the next $150 million, 0.425% on the next $250 million and 0.40% on net
assets in excess of $500 million. The Manager has agreed to reimburse
the Fund if aggregate expenses (with specified exceptions) exceed the
most stringent applicable regulatory limit on Fund expenses.
The Manager acts as the accounting agent for
the Fund at an annual fee of $12,000, plus out-of-pocket costs and
expenses reasonably incurred.
For the year ended September 30, 1996,
commissions (sales charges paid by investors) on sales of Class A
shares totaled $2,342,696, of which $631,567 was retained by
OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary of the Manager,
as general distributor, and by an affiliated broker/dealer. Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class
B and Class C shares totaled $1,966,794 and $390,698 of which $113,402
and $14,752, respectively, was paid to an affiliated broker/dealer.
During the year ended September 30, 1996, OFDI received contingent
deferred sales charges of $395,003 and $49,546, respectively, upon
redemption of Class B and Class C shares as compensation for sales
commissions advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of
the Manager, is the transfer and shareholder servicing agent for the
Fund, and for other registered investment companies. OFS's total costs
of providing such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class
A shares to reimburse OFDI for a portion of its costs incurred in
connection with the personal service and maintenance of accounts that
hold Class A shares. Reimbursement is made quarterly at an annual rate
that may not exceed 0.25% of the average annual net assets of Class A
shares of the Fund. OFDI uses the service fee to reimburse brokers,
dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that
hold Class A shares. During the year ended September 30, 1996, OFDI
paid $49,926 to an affiliated broker/dealer as reimbursement for Class
A personal service and maintenance expenses.
The Fund has adopted compensation type
Distribution and Service Plans for Class B and Class C shares to
compensate OFDI for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays
OFDI an annual asset-based sales charge of 0.75% per year on Class B
shares and on Class C shares, as compensation for sales commissions
paid from its own resources at the time of sale and associated
financing costs. If the Plans are terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plans
were terminated. OFDI also receives a service fee of 0.25% per year as
compensation for costs incurred in connection with the personal service
and maintenance of accounts that hold shares of the Fund, including
amounts paid to brokers, dealers, banks and other financial
institutions. Both fees are computed on the average annual net assets
of Class B and Class C shares, determined as of the close of each
regular business day. During the year ended September 30, 1996, OFDI
paid $12,012 and $1,687, respectively, to an affiliated broker/dealer
as compensation for Class B and Class C personal service and
maintenance expenses and retained $1,292,678 and $290,375,
respectively, as compensation for Class B and Class C sales commissions
and service fee advances, as well as financing costs. At September 30,
1996, OFDI had incurred unreimbursed expenses of $4,393,354 for Class B
and $612,203 for Class C.
================================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to
gain exposure to or protect against changes in interest rates. The Fund
may also buy or write put or call options on these futures contracts.
The Fund generally sells futures contracts to
hedge against increases in interest rates and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund may
also purchase futures contracts to gain exposure to changes in interest
rates as it may be more efficient or cost effective than actually
buying fixed income securities.
Upon entering into a futures contract, the
Fund is required to deposit either cash or securities in an amount
(initial margin) 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 expires.
15 Oppenheimer Limited-Term Government Fund
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
5. FUTURES CONTRACTS
(CONTINUED)
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a
receivable or payable for the daily mark to market for variation
margin.
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.
At September 30, 1996, the Fund had outstanding futures contracts to
sell debt securities as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
DATE FUTURES CONTRACTS SEPTEMBER 30, 1996 DEPRECIATION
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Nts. 12/96 372 $39,908,625 $589,250
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts. 12/96 20 2,183,750 8,750
---------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts. 12/96 213 22,491,469 12,781
----------- --------
$64,583,844 $610,781
=========== ========
</TABLE>
================================================================================
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and
covered call options on portfolio securities in order to produce
incremental earnings or protect against changes in the value of
portfolio securities.
The Fund generally purchases put options or
writes covered call options to hedge against adverse movements in the
value of portfolio holdings. When an option is written, the Fund
receives a premium and becomes obligated to sell or purchase the
underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last
sale price on the principal exchange on which the option is traded and
unrealized appreciation or depreciation is recorded. The Fund will
realize a gain or loss upon the expiration or closing of the option
transaction. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the
cost of the security for a purchased put or call option is adjusted by
the amount of premium received or paid.
Securities designated to cover outstanding
call options are noted in the Statement of Investments where
applicable. Shares subject to call, expiration date, exercise price,
premium received and market value are detailed in a footnote to the
Statement of Investments. Options written are reported as a liability
in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the
Fund gives up the opportunity for profit if the market price of the
security increases and the option is exercised. The risk in writing a
put option is that the Fund may incur a loss if the market price of the
security decreases and the option is exercised. The risk in buying an
option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market does not
exist.
Option activity for the year ended September 30, 1996 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
--------------------------- --------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS PREMIUMS
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at September 30, 1995 -- $ -- -- $ --
-------------------------------------------------------------------------------------------------------------
Options written 37,500 294,922 33,874 1,307,684
-------------------------------------------------------------------------------------------------------------
Options exercised (37,500) (294,922) -- --
-------------------------------------------------------------------------------------------------------------
Options closed -- -- (33,874) (1,307,684)
------- --------- ------- -----------
Options outstanding at September 30, 1996 -- $ -- -- $ --
======= ========= ======= ===========
</TABLE>
================================================================================
7. ACQUISITION OF OPPENHEIMER
STRATEGIC SHORT-TERM
INCOME FUND
On September 22, 1995, the Fund acquired all of the net assets of
Oppenheimer Strategic Short-Term Income Fund, pursuant to an Agreement
and Plan of Reorganization approved by the Oppenheimer Strategic Short-
Term Income Fund shareholders on February 28, 1995. The Fund issued
1,615,189 and $810,988 shares of beneficial interest for Class A and
Class B, respectively, valued at $16,862,577 and $8,466,715 in exchange
for the net assets, resulting in combined Class A net assets of
$342,039,434 and Class B net assets of $118,635,825 on September 22,
1995. The net assets acquired included net unrealized depreciation of
$114,214. The exchange qualifies as a tax free reorganization for
federal income tax purposes.
16 Oppenheimer Limited-Term Government Fund
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of Oppenheimer Limited-Term
Government Fund:
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Oppenheimer Limited-Term
Government Fund as of September 30, 1996, the related statement of
operations for the year then ended, the statements of changes in net
assets for the years ended September 30, 1996 and 1995, and the
financial highlights for the period October 1, 1991 to September 30,
1996. 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
generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at September 30,
1996 by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material respects, the
financial position of Oppenheimer Limited-Term Government Fund at
September 30, 1996, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
17 Oppenheimer Limited-Term Government Fund
<PAGE> 18
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1997, shareholders will receive information regarding all
dividends and distributions paid to them by the Fund during calendar
year 1996. 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 September 30, 1996 are eligible for the corporate
dividend-received deduction.
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 adviser for specific guidance.
18 Oppenheimer Limited-Term Government Fund
<PAGE> 19
OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
================================================================================
OFFICERS AND TRUSTEES
James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Trustee and President
Robert G. Avis, Trustee
William A. Baker, Trustee
Charles Conrad, Jr., Trustee
Jon S. Fossel, Trustee
Sam Freedman, Trustee
Raymond J. Kalinowski, Trustee
C. Howard Kast, Trustee
Robert M. Kirchner, Trustee
Ned M. Steel, Trustee
George C. Bowen, Vice President, Treasurer and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
David A. Rosenberg, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
================================================================================
INVESTMENT ADVISER
OppenheimerFunds, Inc.
================================================================================
DISTRIBUTOR
OppenheimerFunds Distributor, Inc.
================================================================================
TRANSFER AND SHAREHOLDER
SERVICING AGENT
OppenheimerFunds Services
================================================================================
CUSTODIAN OF
PORTFOLIO SECURITIES
Citibank, N.A.
================================================================================
INDEPENDENT AUDITORS
Deloitte & Touche LLP
================================================================================
LEGAL COUNSEL
Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of Oppenheimer Limited-Term
Government Fund. This report must be preceded or accompanied by a
Prospectus of Oppenheimer Limited-Term Government Fund. For material
information concerning the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any
bank, are not guaranteed by any bank, and are not insured by the FDIC
or any other agency, and involve investment risks, including possible
loss of the principal amount invested.
19 Oppenheimer Limited-Term Government Fund
<PAGE> 20
INFORMATION
GENERAL INFORMATION
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
TELEPHONE TRANSACTIONS
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PHONELINK
24 hours a day, automated
information and transactions
1-800-533-3310
TELECOMMUNICATIONS DEVICE
FOR THE DEAF (TDD)
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-843-4461
OPPENHEIMERFUNDS
INFORMATION HOTLINE
24 hours a day, timely and insightful
messages on the economy and
issues that affect your investments
1-800-835-3104
RA0855.001.0996 November 30, 1996
[PHOTO]
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OppenheimerFunds Services
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As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
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And when you need help, our Customer Service Representatives are only a
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handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling
our toll-free Telephone Transactions number. And, by enrolling in AccountLink,
a convenient service that "links" your Oppenheimer funds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
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For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today--we're here to help.
[OPPENHEIMERFUNDS LOGO]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
Bulk Rate
U.S. Postage
PAID
Permit No. 130
Torrington, CT
