Annual Report September 30, 1997
O P P E N H E I M E R
Limited-Term
Government
Fund
[photo of capitol building]
[Oppenheimerfunds logo]
<PAGE>
Report highlights
- --------------------------------------------------------------------------------
Contents
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
11 Statement of
Investments
14 Statement of
Assets &
Liabilities
16 Statement of
Operations
17 Statements of
Changes in
Net Assets
18 Financial Highlights
20 Notes to Financial
Statements
29 Independent
Auditors' Report
30 Federal Income
Tax Information
31 Officers &
Trustees
32 Information &
Services
[bullet] Our strong returns helped the Fund outperform the general U.S.
government securities market during the past twelve months.
[bullet] Long-term interest rates remained within a fairly narrow trading
range, creating a favorable environment for the Fund.
[bullet] Mortgage-backed securities comprised about 45% to 65% of the Fund's
assets during the period. U.S. Treasury bonds balanced out the rest of the
portfolio.
- --------------------------------
Avg Annual Total Returns
- --------------------------------
For the 1-year period ended
9/30/97 without sales charges(1)
Class A
- --------------------------------
7.62%
- --------------------------------
Class B
- --------------------------------
6.82%
- --------------------------------
Class C
- --------------------------------
6.83%
- --------------------------------
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember 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. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
2 Oppenheimer Limited-Term Government Fund
<PAGE>
Dear shareholder,
- --------------------------------------------------------------------------------
[photo of James C. Swain]
James C. Swain
Chairman
Oppenheimer
Limited-Term
Government Fund
[photo of Bridget A. Macaskill]
Bridget A. Macaskill
President
Oppenheimer
Limited-Term
Government Fund
As you are no doubt aware, during the end of October and early November many
stock markets around the world recorded their all-time largest point declines,
followed by subsequent gains and continued volatility, leaving investors
uncertain about what would occur next.
To put those events in focus, let's look at a "snapshot" of the two-week
time period. Sharp declines in the overseas stock markets, particularly in Asia,
triggered a series of sell-offs throughout Europe, Latin America and the United
States. In response, the U.S. stock market, as measured by the Dow Jones
Industrial Average, dropped 554 points on October 27, its largest point decline
in history. However, almost as quickly, the U.S. stock market bounced back over
the succeeding few days, regaining nearly all of its losses.
While no one could have predicted the timing or extent of these
fluctuations, many analysts, including our fund managers here at
OppenheimerFunds, had warned of a correction for several months. We believed
that U.S. valuations were too high, stocks were expensive relative to bonds,
recent corporate earnings were somewhat disappointing and that Federal Reserve
Chairman Alan Greenspan could possibly seek a short-term interest rate hike.
As a result, when October 27 arrived, our equity funds held above-average
cash positions relative to many of our competitors. Not only did our higher cash
levels serve as a protection, they also enabled us to buy the stocks of numerous
excellent companies that were selling at more reasonable prices. In addition,
our international and global funds were not as impacted because they weren't
heavily invested in Southeast Asia and Japan. Finally, on the fixed-income side,
our bond funds were generally characterized by longer-than-normal durations,
which allowed us to lock in higher yields.
In conclusion, many of our funds experienced relatively strong performance
during the October-November market shake-ups. We'd like to take this opportunity
to remind shareholders that stock market volatility is a normal and expected
part of the business cycle. As Alan Greenspan suggested, in years to come this
period will likely be remembered as a positive change for a market that was
growing too quickly.
For frequent market updates, please visit our website at www.oppenheimer
funds.com or call 1-800-835-3104 to listen to our recorded messages. In the
meantime, thank you for your confidence in OppenheimerFunds, The Right Way to
Invest. 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
November 7, 1997
3 Oppenheimer Limited-Term Government Fund
<PAGE>
Performance update
- --------------------------------------------------------------------------------
- -------------------------------
Avg Annual Total Returns
- -------------------------------
For the Period Ended 9/30/97(1)
Class A
1 year 5 year 10 year
- -------------------------------
3.85% 5.12% 8.22%
- -------------------------------
Class B
Since
1 year 5 year Inception
- -------------------------------
2.82% N/A 4.64%
- -------------------------------
Class C
Since
1 year 5 year Inception
- -------------------------------
5.83% N/A 6.40%
- -------------------------------
- -------------------------------
Cumulative Total Return
- -------------------------------
For the Period Ended 9/30/97(1)
Class A
5 year
- -------------------------------
28.36% $12,836(4)
- -------------------------------
Oppenheimer Limited-Term Government Fund performed very well over the past
twelve months, largely because of its heavy weighting to mortgage-backed
securities. In fact, the Fund's Class A shares provided an average annual total
return of 7.62%, without sales charges, for the one-year period ended September
30, 1997.(2) These returns helped the Fund outperform the general U.S.
government securities market. During the same period, Lipper Analytical Services
ranked the Fund's Class A shares in its top quartile of all U.S. government
funds in its category.(3)
[typeset representation of mountain chart]
Growth of $10,000
Over five years
(without sales charges)(4)
Lehman Oppenheimer
Brothers Limited-Term
Government Government
Bond Fund
Index Class A shares
9/30/92 10000 10000
10004 10034
10456 10317
10759 10585
11108 10761
11071 10818
10737 10853
10614 10765
10659 10841
10697 10869
11201 11276
11896 11511
12105 11712
12658 12003
12372 12040
12430 12137
12640 12360
13009 12588
12904 12710
13350 13036
9/30/97 13797 13290
[end mountain chart]
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
3.50%. Class A shares were first publicly offered on 3/10/86. The Fund's
maximum sales charge for Class A shares was higher prior to 2/23/94, so actual
performance may have been lower. Class B returns include the applicable
contingent deferred sales charge of 4% (1-year) and 1% (since inception on
5/3/93). Class Class C returns for the one-year result include the contingent
deferred sales charge of 1%. Class C shares have an inception date of 2/1/95.
An explanation of the different performance calculations is in the Fund's
prospectus. Class B and C shares are subject to an annual 0.75% asset-based
sales charge. 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.
4 Oppenheimer Limited-Term Government Fund
<PAGE>
Portfolio review
- --------------------------------------------------------------------------------
- -----------------------------
Standard Yields(5)
- -----------------------------
For the 30 Days Ended 9/30/97
Class A
- -----------------------------
5.53%
- -----------------------------
Class B
- -----------------------------
4.97%
- -----------------------------
Class C
- -----------------------------
4.96%
- -----------------------------
Sector Allocation(6)
[pie chart]
U.S. Notes & Bonds 46.8%
Federal National Mortgage Assoc. 28.6
Federal Home Loan Mortgage 13.4
Government National Mortgage Assoc. 10.3
Repurchase Agreements 0.9
Oppenheimer Limited-Term Government Fund is for investors looking for income and
safety of principal from a short-duration bond portfolio.7
What We Look For
[bullet] Sectors of the government debt market that offer relative value.
[bullet] High income potential to help cushion against volatility.
[bullet] Diversification among different types of government securities, such
as Fannie Maes, Ginnie Maes, and U.S. Treasuries.
[bullet] Securities that are less sensitive to changes in interest rates.
2. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
3. Source: Lipper Analytical Services, 9/30/97. Oppenheimer Limited-Term
Government Fund's Class A shares were ranked 22 out of 96 (1-year), 6 out of 41
(5-year), and 1 out of 12 (10-year) for the periods ended 9/30/97. Oppenheimer
Limited-Term Government Fund is characterized by Lipper as a short-intermediate
U.S. government fund. Lipper rankings are based on total return and do not take
sales charges into consideration.
4. Results of a hypothetical $10,000 investment in Class A shares on September
30, 1992. The Lehman Brothers Government Bond Index is an unmanaged broad-based
index of U.S. Treasury issues and corporate debt guaranteed by the U.S.
government, and cannot be purchased directly by investors.
5. Standardized yield is based on net investment income for the 30-day period
ended 9/30/97. Falling net asset values will tend to artificially raise yields.
6. Portfolio data is as of 9/30/97, and is subject to change. Portfolio data
are dollar-weighted based on total market value of investments.
7. The Fund may be more volatile than certain short-term investments and may
not have the return potential of longer-term investments.
5 Oppenheimer Limited-Term Government Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How has the Fund performed during the 12-month period ended September 30, 1997?
Oppenheimer Limited-Term Government Fund's Class A shares provided an average
annual total return of 7.62%, without sales charges, for the one-year period
ended September 30, 1997.(1) These returns helped the Fund outperform the
general U.S. government securities market. Accordingly, the Fund was ranked
in the top quartile in its category for the one-year period ended September 30,
1997, as determined by Lipper Analytical Services.(2)
What influences and events had the greatest effect on the market for U.S.
government securities?
During the early part of the year, the U.S. government securities market was
volatile as investors became concerned about the high rate of economic growth
and its potentially adverse effects on inflation. Yields on 30-year U.S.
Treasury bonds rose and, in March, the Federal Reserve raised short-term
interest rates in an effort to prevent a resurgence of inflation.
By April, however, it became clear to most investors that their
inflation fears were unjustified. Even though the economy was growing and
unemployment was low, no economic data indicated that inflation would become a
problem. More recently, interest rates have drifted lower. Difficulties in the
Pacific Rim economies caused many foreign investors to buy
- ----------------
"We don't
believe that
higher inflation
is imminent."
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
2. Source: Lipper Analytical Services, 9/30/97. Oppenheimer Limited-Term
Government Fund's Class A shares were ranked 22 out of 96 (1-year), 6 out of 41
(5-year), and 1 out of 12 (10-year) for the periods ended 9/30/97. Oppenheimer
Limited-Term Government Fund is characterized by Lipper as a short-intermediate
U.S. government fund. Lipper rankings are based on total return and do not take
sales charges into consideration.
6 Oppenheimer Limited-Term Government Fund
<PAGE>
[photo of Webman, Palmieri and Falconio]
Portfolio Management
Team (l to r)
Jerry Webman
(Fund Manager)
Gina Palmieri
Leslie Falconio
U.S. Treasury securities for their high credit quality, increasing demand for a
limited supply of investments. Overall, however, long-term interest rates have
remained within a relatively narrow range over the last six months. This has
continued to create a favorable environment for the Fund.
Why are stable long-term interest rates positive for a limited-term bond fund?
The Fund primarily holds two types of securities--U.S. Treasury bonds and
mortgage-backed securities. Treasury bonds are issued and guaranteed directly
by the federal government. Mortgage-backed securities are pools of home
mortgages that are securitized and backed by government agencies, such as the
Government National Mortgage Association (GNMA) and Federal National Mortgage
Association (FNMA). Mortgage-backed securities usually offer higher yields than
comparable Treasury securities, and they tend to perform best in a stable
market environment. That's because stable interest rates reduce the risk that
homeowners in the pool will refinance their mortgages and return principal
early to bondholders. This phenomenon, known as prepayment risk, can adversely
affect mortgage-backed securities when interest rates decline substantially.
7 Oppenheimer Limited-Term Government Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How much did you allocate to mortgage-backed securities over the period?
We've maintained a fairly large percentage--between 45% and 60% of the
portfolio--in mortgage-backed securities, and that's helped our performance.
The bulk of these investments are in securities backed by U.S. government
agencies, so their credit quality is very high.
Where did you find the best values in U.S. Treasury securities?
It was an interesting period for U.S. Treasury securities. Strong economic
conditions helped produce higher- than-expected federal tax revenues, easing
pressure on the federal budget. In turn, a declining federal budget deficit
required the federal government to issue fewer bonds. Yet, demand for these
investments remained high from both domestic and overseas investors who sought
the safety of a U.S. government guarantee. As a result, yields on most U.S.
Treasury securities remained low relative to their historical relationship with
other fixed-income securities. Consistent with our diversified investment
approach, we invested between 40% and 55% of the portfolio in Treasuries. In
this Fund, we've had good success using a "barbell" strategy in which we take
advantage of the higher yields provided by longer-dated Treasuries and balance
their risks with very short-term U.S. Treasury bills. This approach enabled us
to produce an average duration of between 2.25 years and 2.75 years.
- ------------------
"We've maintained
a fairly large
percentage
of the Fund's
assets..."
8 Oppenheimer Limited-Term Government Fund
<PAGE>
What is your outlook for the future?
We expect the current economic environment to persist over the next few months,
although hints of stronger economic growth may cause some temporary concerns
among investors. Nevertheless, we do not believe that higher inflation is
imminent.
Longer term, we are optimistic about the direction of interest rates,
which should continue to decline slowly albeit not in a straight line. If this
gradual decline in interest rates occurs, it should produce positive results
for investments in mortgage-backed securities. Investors should continue to
seek higher yields wherever they can find them, and mortgage-backed securities
are a relatively low-risk way to earn additional yield.
- -------------------
"...in mortgage-
backed securities,
which helped our
performance."
9 Oppenheimer Limited-Term Government Fund
<PAGE>
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Financials
10 Oppenheimer Limited-Term Government Fund
<PAGE>
- ---------------------------------------------------------------------
Statement of Investments September 30, 1997
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Obligations--62.9%
- ----------------------------------------------------------------------------------------------------
Government Agency--62.9%
- ----------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--50.5%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg.
Participation Certificates:
Series 1060, Cl. D, 8.20%, 7/15/19(1) $ 37,223 $ 37,154
Series 1065, Cl. H, 8.50%, 10/15/19 3,419,877 3,446,587
Series 1092, Cl. K, 8.50%, 6/15/21 16,000,000 17,310,538
Series 1097, Cl. L, 8.60%, 2/15/06 1,720,315 1,746,121
Series 1252, Cl. J, 8%, 5/15/22 7,000,000 7,541,608
Series 1343, Cl. LA, 8%, 8/15/22 9,100,000 9,788,499
Series 1455, Cl. J, 7.50%, 12/15/22 6,375,000 6,694,822
Series 151, Cl. F, 9%, 5/15/21 2,500,000 2,717,207
Series 1914, Cl. H, 6.50%, 8/15/24 2,500,000 2,384,375
Series 1920, Cl. M, 6.50%, 6/15/23 5,000,000 4,889,093
10%, 8/1/21 3,262,038 3,612,137
11.50%, 6/1/20 1,754,182 2,056,779
11.75%, 1/1/16 2,546,494 2,957,914
13%, 8/1/15 3,347,827 4,062,380
9.25%, 11/1/08 400,607 426,355
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 1610, Cl. PM, 6.25%, 4/15/22 7,500,000 7,387,500
Interest-Only Stripped Mtg.-Backed Security, Series 177, Cl. B,
10.424%-12.786%, 7/1/26(2) 111,052,167 36,230,771
Principal-Only Stripped Mtg.-Backed Security, Series 179, 4.959%,
9/1/26(3) 16,569,538 12,693,820
- ----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
7%, 8/1/25-2/1/27 7,855,896 7,827,256
7%, 11/1/12-10/25/27(4) 20,710,000 20,765,828
7.50%, 6/1/25-8/1/25 10,811,032 11,014,498
7.50%, 11/25/12-10/1/27(4) 114,275,000 116,295,509
9%, 8/1/19 653,278 703,333
9.50%, 11/1/21 400,278 433,697
11%, 11/1/15-5/15/19 14,696,231 16,846,755
11.25%, 6/1/14 1,348,572 1,530,208
11.50%, 8/15/13 1,402,715 1,637,232
11.75%, 9/1/03-11/1/15 494,119 565,620
12%, 1/1/16-4/15/19 6,693,286 7,900,497
13%, 8/1/10-12/1/15 4,937,561 5,989,045
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 1992-34,
Cl. G, 8%, 3/25/22 2,940,000 3,150,386
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
12.50%, 12/1/15 2,966,676 3,588,752
8%, 1/1/23 241,271 250,259
Trust 1990-18, Cl. K, 9.60%, 3/25/20 5,000,000 5,706,007
11 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Face Market Value
Amount See Note 1
- ----------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored (continued)
Federal National Mortgage Assn.:
Trust 1991-169, Cl. PK, 8%, 10/25/21 $ 595,000 $ 630,510
Trust 1991-170, Cl. E, 8%, 12/25/06 2,500,000 2,626,335
Trust 1992-169, Cl. L, 7%, 9/25/22 5,500,000 5,427,903
Trust 1994-51, Cl. PH, 6.50%, 1/25/23 5,000,000 4,976,550
Trust 1995-4, Cl. PC, 8%, 5/25/25 4,806,220 5,201,341
Trust 1996-64, Cl. PB, 6.50%, 1/18/19 1,500,000 1,509,236
Trust 1997-25, Cl. B, 7%, 12/18/22 3,420,000 3,434,426
Trust 1997-27, Cl. J, 7.50%, 4/18/27 7,095,360 7,400,184
Trust 1997-5, Cl. B, 7%, 9/18/17 9,191,000 9,239,354
Trust G93-31, Cl. PN, 7%, 9/25/23 5,000,000 5,008,721
Principal-Only Stripped Mtg.-Backed Security:
Trust 148, Cl. G, 0.443%, 8/25/23(3) 8,891,258 5,351,426
Trust 1997-7, Cl. GA, 6.889%, 7/25/23(3) 2,980,588 1,628,146
Trust 277-C1, 5.346%, 4/1/27(3) 13,423,756 9,723,834
STRIPS, Pass-Through Certificates, Trust 6, Cl. IP, 11.50%, 3/1/09 2,014,854 2,281,178
-------------
394,627,686
- ----------------------------------------------------------------------------------------------------
GNMA/Guaranteed--12.4%
Government National Mortgage Assn.:
6%, 11/1/27(4) 19,500,000 19,621,875
6%, 8/20/27 5,000,000 5,043,750
7.50%, 10/1/27(4) 15,000,000 15,257,850
7.50%, 10/15/25-9/15/27 37,665,229 38,345,519
8%, 9/15/07 125,427 130,946
8.50%, 9/15/21 59,224 62,739
9.50%, 9/15/17 125,276 136,634
10.50%, 1/15/16-7/15/21 2,629,618 2,951,065
11%, 2/15/98-10/20/19 6,399,215 7,263,869
11.50%, 1/15/13-5/15/13 619,704 689,454
13%, 2/15/11-9/15/14 54,289 64,692
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-5, Cl. PQ, 7.493%,
7/16/24 6,900,000 7,231,491
-------------
96,799,884
-------------
Total Mortgage-Backed Obligations (Cost $489,117,019) 491,427,570
- ----------------------------------------------------------------------------------------------------
U.S. Government Obligations--56.2%
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
8.125%, 8/15/19 218,000 259,488
STRIPS, Zero Coupon, 7.14%, 8/15/22(5) 19,400,000 3,876,913
12 Oppenheimer Limited-Term Government Fund
<PAGE>
Face Market Value
Amount See Note 1
- --------------------------------------------------------------------------------
U.S. Government Obligations (continued)
U.S. Treasury Nts.:
6%, 8/15/00 $91,000,000 $ 91,341,333
6.875%, 3/31/00 50,140,000 51,315,179
7.25%, 2/15/98 83,100,000 83,645,382
7.50%, 10/31/99 6,100,000 6,296,347
7.75%, 12/31/99 74,280,000 77,228,022
8.25%, 7/15/98 62,500,000 63,769,560
8.875%, 11/15/97(6) 57,000,000 57,249,427
9.125%, 5/15/99 2,765,000 2,905,843
9.25%, 8/15/98 1,500,000 1,545,469
-------------
Total U.S. Government Obligations (Cost $441,125,185) 439,432,963
</TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Call Options Purchased--0.0%
- -------------------------------------------------------------------------------
U.S. Treasury Nts. 6.625%
5/15/07 Call Opt. (Cost $175,359) 10/97 105.188% 25,800 24,187
</TABLE>
<TABLE>
<CAPTION>
Face
Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements--1.1%
- ----------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 6.125%, dated
9/30/97, to be repurchased at $8,401,429 on 10/1/97, collateralized
by U.S. Treasury Nts., 5.75%, 8/15/03, with a value of $8,571,047
(Cost $8,400,000) $ 8,400,000 8,400,000
- ----------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $938,817,563) 120.2% 939,284,720
- ----------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (20.2) (157,741,776)
------------ --------------
Net Assets 100.0% $ 781,542,944
============ ==============
</TABLE>
1. Identifies issues considered to be illiquid--See Note 7 of Notes to
Financial Statements.
2. 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.
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. When-issued security to be delivered and settled after September 30, 1997.
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
6. Securities with an aggregate market value of $2,008,752 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.
13 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Assets
Investments, at value (cost $938,817,563)--see accompanying statement $ 939,284,720
- ----------------------------------------------------------------------------------------
Cash 235,449
- ----------------------------------------------------------------------------------------
Receivables:
Investments sold 97,080,335
Interest and principal paydowns 9,171,488
Shares of beneficial interest sold 6,092,989
Daily variation on futures contracts--Note 5 50,641
- ----------------------------------------------------------------------------------------
Other 13,829
--------------
Total assets 1,051,929,451
- ----------------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Investments purchased on a when-issued basis--Note 1 266,798,217
Shares of beneficial interest redeemed 1,713,177
Dividends 1,138,246
Distribution and service plan fees 455,235
Transfer and shareholder servicing agent fees 71,678
Daily variation on futures contracts--Note 5 3,644
Other 206,310
--------------
Total liabilities 270,386,507
- ----------------------------------------------------------------------------------------
Net Assets $ 781,542,944
==============
- ----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $ 792,268,602
- ----------------------------------------------------------------------------------------
Overdistributed net investment income (189)
- ----------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (10,729,954)
- ----------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 4,485
--------------
Net assets $ 781,542,944
==============
</TABLE>
14 Oppenheimer Limited-Term Government Fund
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$524,507,808 and 50,926,979 shares of beneficial interest outstanding) $10.30
Maximum offering price per share (net asset value plus sales charge of
3.50% of offering price) $10.67
- --------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $183,475,666 and 17,816,755 shares of beneficial interest outstanding) $10.30
- --------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $73,559,470 and 7,151,819 shares of beneficial interest outstanding) $10.29
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------
Investment Income
Interest $53,794,323
- --------------------------------------------------------------------------------------
Expenses
Distribution and service plan fees--Note 4:
Class A 1,078,579
Class B 1,713,202
Class C 573,966
- --------------------------------------------------------------------------------------
Management fees--Note 4 2,924,120
- --------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 716,765
- --------------------------------------------------------------------------------------
Shareholder reports 238,319
- --------------------------------------------------------------------------------------
Registration and filing fees 140,036
- --------------------------------------------------------------------------------------
Custodian fees and expenses 118,902
- --------------------------------------------------------------------------------------
Legal and auditing fees 39,642
- --------------------------------------------------------------------------------------
Trustees' fees and expenses 2,215
- --------------------------------------------------------------------------------------
Other 23,506
------------
Total expenses 7,569,252
- --------------------------------------------------------------------------------------
Net Investment Income 46,225,071
- --------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments (81,142)
Closing of futures contracts (3,902,026)
Closing of options written (166,766)
------------
Net realized loss (4,149,934)
- --------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 5,545,271
------------
Net realized and unrealized gain 1,395,337
- --------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $47,620,408
============
</TABLE>
See accompanying Notes to Financial Statements.
16 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 46,225,071 $ 39,979,280
- --------------------------------------------------------------------------------------------------
Net realized loss (4,149,934) (8,479,349)
- --------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 5,545,271 (2,255,816)
------------- -------------
Net increase in net assets resulting from operations 47,620,408 29,244,115
- --------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (30,141,730) (26,704,976)
Class B (10,420,608) (8,852,431)
Class C (3,475,469) (1,884,621)
- --------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (700,992) (1,369,245)
Class B (245,211) (503,246)
Class C (98,310) (142,148)
- --------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 85,939,817 97,751,994
Class B 22,254,728 42,090,398
Class C 27,993,027 31,425,681
- --------------------------------------------------------------------------------------------------
Net Assets
Total increase 138,725,660 161,055,521
- --------------------------------------------------------------------------------------------------
Beginning of period 642,817,284 481,761,763
------------- -------------
End of period (including overdistributed net investment income
of $189 and $186, respectively) $ 781,542,944 $642,817,284
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Limited-Term Government Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Year Ended September 30,
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.26 $10.44 $10.40 $11.04 $10.97
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .73 .75 .79 .72 .73
Net realized and unrealized gain (loss) .03 (.19) .01 (.64) .07
------ ------ ------ ------ ------
Total income (loss) from investment
operations .76 .56 .80 .08 .80
- ------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.71) (.71) (.76) (.71) (.73)
Tax return of capital distribution (.01) (.03) -- (.01) --
------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.72) (.74) (.76) (.72) (.73)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.30 $10.26 $10.44 $10.40 $11.04
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(3) 7.62% 5.54% 8.03% 0.74% 7.61%
- ------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $524,508 $436,889 $346,015 $227,858 $178,944
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $443,514 $393,727 $274,313 $190,829 $161,318
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.13% 7.22% 7.64% 6.74% 6.70%
Expenses 0.87% 0.87% 0.91% 0.99% 1.02%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 68% 71% 261% 226% 74%
</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.
18 Oppenheimer Limited-Term Government Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- ----------------------------------------------------------------------- ---------------------------------------------
Year Ended September 30, Year Ended September 30,
1997 1996 1995 1994 1993(2) 1997 1996 1995(1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.26 $10.44 $10.41 $11.06 $10.96 $10.25 $10.43 $10.32
- ----------------------------------------------------------------------------------------------------------------
.66 .67 .71 .62 .23 .66 .66 .45
.02 (.19) .01 (.64) .10 .02 (.18) .10
------ ------ ------ ------ ------ ------ ------ ------
.68 .48 .72 (.02) .33 .68 .48 .55
- ----------------------------------------------------------------------------------------------------------------
(.63) (.63) (.69) (.62) (.23) (.63) (.63) (.44)
(.01) (.03) -- (.01) -- (.01) (.03) --
------ ------ ------ ------ ------ ------ ------ ------
(.64) (.66) (.69) (.63) (.23) (.64) (.66) (.44)
- ----------------------------------------------------------------------------------------------------------------
$10.30 $10.26 $10.44 $10.41 $11.06 $10.29 $10.25 $10.43
====== ====== ====== ====== ====== ====== ====== ======
- ----------------------------------------------------------------------------------------------------------------
6.82% 4.74% 7.18% ( 0.17)% 3.02% 6.83% 4.71% 5.47%
- ----------------------------------------------------------------------------------------------------------------
$183,476 $160,572 $121,178 $38,877 $5,077 $73,559 $45,356 $14,569
- ----------------------------------------------------------------------------------------------------------------
$171,496 $147,017 $ 72,131 $15,801 $2,561 $57,506 $32,349 $ 6,112
- ----------------------------------------------------------------------------------------------------------------
6.39% 6.46% 6.80% 5.91% 4.81%(4) 6.35% 6.34% 6.51%(4)
1.62% 1.62% 1.71% 1.79% 1.87%(4) 1.62% 1.64% 1.80%(4)
- ----------------------------------------------------------------------------------------------------------------
68% 71% 261% 226% 74% 68% 71% 261%
</TABLE>
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
and mortgage "dollar-rolls") for the period ended September 30, 1997 were
$763,306,417 and $485,457,078, 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.
19 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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 primarily through investments in U.S.
Government and agency securities. The Fund's investment advisor 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
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 that class and exclusive voting rights
with respect to matters affecting that 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 an
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.
20 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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,
1997, the Fund had entered into outstanding when-issued or forward commitments
of $266,798,217.
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, 1997, the
Fund had available for federal tax purposes an unused capital loss carryover of
approximately $9,648,000, expiring between 2001 and 2005.
21 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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 its 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 fiscal year in which the
income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1997, amounts have been
reclassified to reflect a decrease in undistributed net investment income of
$1,142,754, a decrease in accumulated net realized loss on investments of
$5,226,655, and a decrease in paid-in capital of $4,083,901, of which
$1,044,513 is considered a tax return of capital.
- --------------------------------------------------------------------------------
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.
22 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997 Year Ended September 30, 1996
---------------------------------- --------------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 33,021,129 $ 339,328,054 21,513,142 $ 222,573,075
Dividends reinvested 2,266,710 23,303,389 2,005,298 20,746,018
Redeemed (26,940,608) (276,691,626) (14,074,194) (145,567,099)
------------ -------------- ------------ --------------
Net increase 8,347,231 $ 85,939,817 9,444,246 $ 97,751,994
============ ============== ============ ==============
- ------------------------------------------------------------------------------------------
Class B:
Sold 6,061,213 $ 62,284,400 7,184,124 $ 74,533,887
Dividends reinvested 722,567 7,426,989 612,492 6,335,732
Redeemed (4,618,172) (47,456,661) (3,752,397) (38,779,221)
------------ -------------- ------------ --------------
Net increase 2,165,608 $ 22,254,728 4,044,219 $ 42,090,398
============ ============== ============ ==============
- ------------------------------------------------------------------------------------------
Class C:
Sold 4,851,238 $ 49,789,058 3,837,630 $ 39,749,107
Dividends reinvested 274,536 2,818,476 153,531 1,583,682
Redeemed (2,399,494) (24,614,507) (962,267) (9,907,108)
------------ -------------- ------------ --------------
Net increase 2,726,280 $ 27,993,027 3,028,894 $ 31,425,681
============ ============== ============ ==============
- -----------------------------------------------------------------------------------------
</TABLE>
3. Unrealized Gains and Losses on Investments
At September 30, 1997, net unrealized appreciation on investments of $467,157
was composed of gross appreciation of $10,657,312, and gross depreciation of
$10,190,155.
23 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $2,369,751, of which
$649,017 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 $1,610,869 and $462,593, respectively,
of which $113,899 and $19,576, respectively, were paid to an affiliated
broker/dealer. During the year ended September 30, 1997, OFDI received
contingent deferred sales charges of $450,299 and $47,488, 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 shareholder 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 maintaining accounts
of their customers that hold Class A shares. During the year ended September
30, 1997, OFDI paid $81,789 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
24 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
The Fund has adopted 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
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. 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, 1997, OFDI paid $12,731 and
$10,271, respectively, to an affiliated broker/dealer as compensation for Class
B and Class C personal service and maintenance expenses and retained $1,409,224
and $351,116, respectively, as compensation for Class B and Class C sales
commissions and service fee advances, as well as financing costs. If either
Plan is terminated by the Fund, the Board of Trustees may allow the Fund to
continue payments of the asset-based sales charge to OFDI for distributing
shares before the Plan was terminated. At September 30, 1997, OFDI had incurred
unreimbursed expenses of $4,697,177 for Class B and $1,134,939 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 (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 expires.
25 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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 and/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, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Valuation as of
Expiration Number of September 30, Unrealized
Date Contracts 1997 Depreciation
- ----------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 30 yr. 12/97 12 $ 1,383,375 $ 3,750
---------
Contracts to Sell
- ---------------------
U.S. Treasury Nts., 5 yr. 12/97 179 19,225,719 95,172
U.S. Treasury Nts., 10 yr. 12/97 355 39,094,375 363,750
---------
458,922
---------
$462,672
=========
- --------------------------------------------------------------------------------------
</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.
26 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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.
Written option activity for the year ended September 30, 1997 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, 1996 -- $ -- -- $ --
Options written 31,000 217,969 56 16,289
Options closed or expired (31,000) (217,969) (56) (16,289)
-------- ---------- ---- ---------
Options outstanding at
September 30, 1997 -- $ -- -- $ --
======== ========== ==== =========
- ----------------------------------------------------------------------------------
</TABLE>
7. Illiquid Securities
At September 30, 1997, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 5% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation at September
30, 1997 was $37,154, which represents 0.01% of the Fund's net assets.
27 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
September 30, 1997.
- --------------------------------------------------------------------------------
9. Other Matters
At a meeting held on July 25, 1997, the Board of Trustees approved the addition
of Class Y shares for Oppenheimer Limited-Term Government Fund, to be offered
at a future date.
28 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended September
30, 1997 and 1996, and the financial highlights for the period October 1, 1992
to September 30, 1997. 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, 1997 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, 1997, 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, 1997
29 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 1998, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1997.
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, 1997 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 advisor for specific
guidance.
30 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
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
Jerry A. Webman, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
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Investment Advisor OppenheimerFunds, Inc.
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Distributor OppenheimerFunds Distributor, Inc.
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Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
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Custodian of Citibank, N.A.
Portfolio Securities
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Independent Auditors Deloitte & Touche LLP
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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.
31 Oppenheimer Limited-Term Government Fund
<PAGE>
Internet
24-hr access to account information
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www.oppenheimerfunds.com
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General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
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1-800-525-7048
- ------------------------
Account Transactions
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ------------------------
1-800-852-8457
- ------------------------
PhoneLink
24-hr automated information and automated transactions
- ------------------------
1-800-533-3310
- ------------------------
Telecommunication Device for the Deaf (TDD)
Mon-Fri 8:30am-2pm 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
- ------------------------
RA0855.001.0997 November 28, 1997
Information and services
- --------------------------------------------------------------------------------
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
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
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 OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
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, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[Oppenheimerfunds logo]
