--------------------------------
Annual Report September 30, 1998
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OPPENHEIMER
Limited-Term
Government
Fund
[GRAPHIC OMITTED]
[LOGO]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
Contents
3 President's Letter
4 An Interview
with Your Fund's Manager
8 Fund Performance
13 Financial
Statements
33 Independent
Auditors' Report
34 Federal
Income Tax
Information
35 Officers and
Trustees
36 Information and Services
Report highlights
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o Four-star Morningstar: The Fund's Class A shares have maintained a 4-star
ranking (oooo) from Morningstar for the 3-, 5- and 10-year periods ended
September 30, 1998, among 1,491 (3-year), 940 (5-year), and 346 (10-year) fixed
income funds.(1)
o In a period of falling interest rates, mortgage-backed securities, which
comprise about 40% of the Fund's assets, do not perform as well as Treasury
bonds on a total return basis.
Avg Annual Total Returns
For the 1-Year Period
Ended 9/30/98
Class A
Without With
Sales Chg.(2) Sales Chg.(3)
- ---------------------------
7.70% 3.93%
- ---------------------------
Class B
Without With
Sales Chg.(2) Sales Chg.(3)
- ---------------------------
6.90% 2.90%
- ---------------------------
Class C
Without With
Sales Chg.(2) Sales Chg.(3)
- ---------------------------
6.81% 5.81%
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Class Y
Without With
Sales Chg.(2) Sales Chg.(3)
- ---------------------------
N/A N/A
- ---------------------------
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. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
short-term changes. For updates on the Fund's performance, please contact your
financial advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Source: Morningstar, Inc., 9/30/98. Morningstar ranks mutual funds in broad
investment classes, based on risk adjusted returns after considering sales
charges and expenses. Return and risk are measured as performance above and
below 90-day U.S. Treasury bill returns, respectively. Current star rankings are
based on the weighted average of 3-, 5- and 10-year (if applicable) rankings for
a fund or class and are subject to change monthly. Top 10%: 5 stars. Next 22.5%:
4 stars. Middle 35%: 3 stars. Next 22.5%: 2 stars. Bottom 10%: 1 star.
2. Includes changes in net asset value per share without deducting any sales
charges.
3. Class A return includes the current maximum initial sales charge of 3.50%.
Class B return includes the applicable contingent deferred sales charge of 4%.
Class C return includes the contingent deferred sales charge of 1%. Class Y
shares have an inception date of 1/26/98 and are not available for sale to
individual investors. Class B and C shares are subject to a 0.75% asset-based
sales charge. An explanation of the different performance calculations is in the
Fund's prospectus.
2 Oppenheimer Limited-Term Government Fund
<PAGE>
Dear shareholder,
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[PHOTO]
James C. Swain
Chairman
Oppenheimer
Limited-Term Government Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer
Limited-Term Government Fund
The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since late summer, amid heightened global
concern, stocks declined sharply. Yet, despite continued economic concerns
worldwide, the bond market appeared ready to benefit.
Why have the stock and bond markets responded differently? The financial
crises in Asia and Russia have weakened the earnings of some large U.S.
corporations and have contributed to a slowdown in U.S. economic growth.
Although this slowing economic growth has negatively impacted stocks, it created
a positive environment for bonds. That's because slowing economic growth
generally means fewer inflationary pressures and, as we've recently seen,
interest rates also tend to decline.
What should you do during this period of relative uncertainty? If you have
well-defined, long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged by
our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the perspective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ James C. Swain /s/ Bridget A. Macaskill
James C. Swain Bridget A. Macaskill
October 21, 1998
3 Oppenheimer Limited-Term Government Fund
<PAGE>
An interview with your Fund's manager
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"...there are no credit concerns normally associated with a slowing economy that
would tend to depress the value of the portfolio."
How did the Fund perform?
For the fiscal year that ended September 30, 1998, Oppenheimer Limited-Term
Government Fund performed well on a total return basis, reflecting a buoyant
bond market. However, the rapid decline in interest rates did affect the amount
of income paid out to shareholders. The monthly dividend payment on the Fund's
Class A shares fell from $0.05975 per share on September 30, 1997, to $0.05350
per share on September 30, 1998.
Could you explain the movement of interest rates during the period?
Interest rates on longer term securities, which are determined by supply and
demand, have actually fallen below short-term rates, which are set by the
Federal Reserve Board. That's very unusual, and suggests that investors expect
interest rates to fall even further in the months ahead.
In contrast, the federal funds rate, the interest rate banks charge each
other on very short-term loans, had remained at 5.50% since March 1997, until it
was lowered to 5.25% on September 29, 1998, in response to global financial
pressures. The Federal Reserve had been reluctant to lower this key rate because
of the strength of the U.S. economy, which remained strong through the summer.
Why are interest rates falling?
A slowdown in U.S. economic growth, plus the fiscal troubles of Japan, Russia
and other emerging markets, has exerted downward pressure on inflation. Lower
inflation generally means lower interest rates because bond issuers don't need
to compensate borrowers for the lost purchasing power that arises from
inflation. Moreover, the Asian economic crisis, which surfaced last October,
caused investors to seek the safety and liquidity of U.S. Treasury
4 Oppenheimer Limited-Term Government Fund
<PAGE>
[PHOTO]
Portfolio Management
Team (l to r)(1)
Jerry Webman
Gina Palmieri
Leslie Falconio
securities, further boosting prices and reducing yields. Negative economic and
market news from Russia, and, to some extent, Latin America only reinforced this
global "flight to quality."
Finally, the weakening U.S. stock market is beginning to have a negative
impact on the U.S. economy and consumer spending. As the demand to borrow
declines, so do interest rates. Up until recently, American consumers were
spending most of their earnings and rationalizing their lack of savings by
watching their portfolios rise. However, since mid-July, the stock market has
been extremely volatile, which may cause consumers to pull back on spending.
What other factors have affected the Fund's performance?
Because we invest in U.S. government bonds and not corporate bonds, there are no
credit concerns normally associated with a slowing economy that would tend to
depress the value of the portfolio. Another positive for the Fund is that
Treasury bonds are not "callable" by the U.S. government if interest rates fall,
forcing the investor to reinvest at lower rates.
Oppenheimer Limited-Term Government Fund also holds a large proportion of
mortgage-backed securities, which appreciate, although not as much as Treasury
bonds, during a bond market rally. That's because homeowners have the right to
prepay their mortgages and will tend to do so when interest rates fall. Over
time, mortgage-
1. John Kowalik (not shown) joined the Fund as Lead Portfolio Manager on October
27, 1998.
5 Oppenheimer Limited-Term Government Fund
<PAGE>
An interview with your Fund's manager
- --------------------------------------------------------------------------------
Avg Annual Total Returns
For the Periods Ended 9/30/98(2)
Class A
1 year 5 year 10 year
- -------------------------
3.93% 5.14% 7.62%
- -------------------------
Class B
Since
1 year 5 year Inception
- -------------------------
2.90% 4.90% 5.21%
- -------------------------
Class C
Since
1 year 5 year Inception
- -------------------------
5.81% N/A 6.51%
- -------------------------
Class Y
Since
1 year 5 year Inception
- -------------------------
N/A N/A 5.30%
- -------------------------
backed securities can be a very good investment. They pay significantly higher
yields to compensate investors for prepayment risk. Prepayments surged in March
and June of this year, which caused the Fund's mortgage portfolio to decline.
However, prepayments were not as strong as expected late in the summer when
interest rates fell sharply, because mortgage interest rates did not fall as
much as Treasury interest rates.
What changes have you made to the Fund's investments?
This is an income-oriented portfolio that continues to invest heavily in
mortgage-backed securities, a sector of the market that we expect to perform
well over the long term. Although we're currently at the lower end of the range,
we expect that mortgages will remain anywhere from 35% to 65% of the total
assets of the Fund. In the U.S. Treasury portion of the portfolio, we are
emphasizing intermediate maturity bonds. Currently, global demand seems to be
focused in the shorter end of the maturity spectrum, reflecting expectations of
the Federal Reserve Bank's lowering of short-term interest rates and the lower
interest rate risk of short maturity Treasuries.
2. 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 for the one-year result include
the contingent deferred sales charge of 4%. Class B shares held more than 5
years automatically convert to Class A shares. Class C returns for the one-year
result include the contingent deferred sales charge of 1%. Class C shares have
been available since 2/1/95. Class Y shares have an inception date of 1/26/98
and are not available for sale to individual investors. Total returns shown for
Class Y shares are not annualized. Class B and C shares are subject to an annual
0.75% asset-based sales charge. An explanation of the different performance
calculations is in the Fund's prospectus. 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.
6 Oppenheimer Limited-Term Government Fund
<PAGE>
What is your outlook?
Our current view of the world hasn't changed in the past six months. We still
see a fragile global economy and a slowing economy here in the United States.
The financial crises in Japan and throughout Asia should continue to exert
downward pressure on the worldwide demand for goods and services, thus dampening
inflation. As a result, interest rates could continue to decline further.
If bond prices begin to move within a narrow price range as we expect,
then mortgage-backed securities would have an advantage. Like Treasury bonds,
their price would likely remain stable, but their real advantage is higher
yields. We will continue to monitor the situation and adjust the portfolio's
percentage of mortgage-backed securities as market conditions warrant. This
active management style is what makes Oppenheimer Limited-Term Government Fund
part of The Right Way To Invest.
Credit Allocation(3)
[PIE CHART]
o Treasury 61.5%
o Government
Agency 36.1
o AAA 2.4
Standardized Yields(4)
For the 30 Days Ended 9/30/98
- -----------------------------
Class A 4.61%
- -----------------------------
Class B 4.02
- -----------------------------
Class C 4.02
- -----------------------------
Class Y 5.13
- -----------------------------
Top 5 Holdings by Issuer(5)
- --------------------------------------------------------------------------------
U.S. Notes and Bonds 61.5%
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Federal National Mortgage Association 19.4
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Federal Home Loan Mortgage Corporation 9.2
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Government National Mortgage Association 7.5
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Repurchase Agreements 2.4
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3. Portfolio data is as of September 30, 1998, is subject to change, and is
dollar-weighted based on invested assets. The Fund may invest in securities of
any maturity, including those issued by federally chartered mortgage companies
whose interest and principal repayments are not guaranteed by the U.S.
government. U.S. Treasury securities are not rated but are deemed to have the
highest rating equivalency.
4. Standardized yield is based on net investment income for the 30-day period
ended September 30, 1998. Falling share prices will tend to artificially raise
yields.
5. Portfolio is subject to change. Percentages are as of September 30, 1998, and
are based on invested assets.
7 Oppenheimer Limited-Term Government Fund
<PAGE>
Fund performance
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How Has the Fund Performed?
Below is a discussion by the Manager of the Fund's performance during its fiscal
year ended September 30, 1998, followed by a graphical comparison of the Fund's
performance to an appropriate broad-based market index and a sector index.
o Management's Discussion of Performance. During the past fiscal year,
which ended September 30, 1998, investments in the Oppenheimer Limited-Term
Government Fund generally appreciated in value due to falling interest rates.
The economic crisis in the emerging markets of Asia and Russia created a global
demand for the safety and liquidity of U.S. Treasury bonds, the best performing
fixed income sector over the period. Although mortgage-backed securities don't
perform well in a falling interest rate environment, they provide important
diversification as they tend to perform better when interest rates are stable or
rising. The Fund's portfolio and its portfolio manager's strategies are subject
to change.
o Comparing the Fund's Performance to the Market. The graphs that follow
show the performance of a hypothetical $10,000 investment in each Class of
shares of the Fund held until September 30, 1998. In the case of Class A shares,
performance is measured over a 10-year period. In the case of Class B shares,
performance is measured from inception of the Class on May 3, 1993. In the case
of Class C shares, performance is measured from inception of the Class on
February 1, 1995. In the case of Class Y shares, performance is measured from
the inception of the Class on January 26, 1998. The Fund's performance reflects
the deduction of the 3.50% maximum initial sales charge on Class A shares, the
4% (1-year) applicable contingent deferred sales charge for Class B, and the 1%
(1-year) contingent deferred sales charge for Class C shares. Class B
8 Oppenheimer Limited-Term Government Fund
<PAGE>
shares held more than 5 years automatically convert to Class A shares. The
graphs assume that all dividends and capital gains distributions were reinvested
in additional shares. The Fund had a different investment advisor prior to April
7, 1990.
The Fund's performance is compared to the performance of the Lehman
Brothers U.S. Government Bond Index and the Lehman Brothers 1-3 Year Government
Bond Index. The Lehman Brothers U.S. Government Bond Index is a broad-based
unmanaged index of U.S. Treasury issues, publicly-issued debt of U.S. government
agencies and quasi-public corporations and corporate debt guaranteed by the U.S.
government. This index is widely used to measure the performance of the U.S.
government securities market. The Lehman Brothers 1-3 Year Government Bond Index
is an unmanaged sector index of U.S. Treasury issues, publicly-issued debt of
U.S. government agencies and quasi-public corporations and corporate debt
guaranteed by the U.S. government with maturities of one to three years. This
secondary index comparison is included to reflect the adoption by the Fund,
effective May 1, 1994, of the investment policy that the Fund will, under normal
circumstances, seek to maintain a dollar-weighted average portfolio effective
duration of not more than three years.
Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
in the graphs that follow shows the effect of taxes. The Fund's performance
reflects the effects of Fund business and operating expenses. While index
comparisons may be useful to provide a benchmark for the Fund's performance, it
must be noted that the Fund's investments are not limited to the securities in
the indices.
9 Oppenheimer Limited-Term Government Fund
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Limited-Term Government Fund (Class A), Lehman Brothers U.S.
Government Bond Index and Lehman Brothers 1-3 Year Government Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer Lehman Brothers Lehman Brothers
Limited-Term U.S. Government 1-3 Year Government
Government Fund Class A Bond Index Bond Index
----------------------- ---------- ----------
9.30.88 9650 10000 10000
9.30.89 10582 11113 10889
9.30.90 11549 11883 11904
9.30.91 13246 13720 13244
9.30.92 14554 15493 14557
9.30.93 15662 17210 15276
9.30.94 15777 16515 15451
9.30.95 17045 18756 16717
9.30.96 17988 19585 17663
9.30.97 19359 21379 18879
9.30.98 20850 24285 20375
Average Annual Total Return of Class A Shares of the Fund at 9/30/98(1)
1 Year 3.93% 5 Year 5.14% 10 Year 7.62%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Limited-Term Government Fund (Class B), Lehman Brothers U.S.
Government Bond Index and Lehman Brothers 1-3 Year Government Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer Lehman Brothers Lehman Brothers
Limited-Term Government U.S. Government 1-3 Year Government
Fund Class B Bond Index Bond Index
------------ ---------- ----------
5.3.93 10000 10000 10000
9.30.93 10283 10542 10188
9.30.94 10265 10117 10305
9.30.95 11001 11489 11149
9.30.96 11523 11997 11780
9.30.97 12310 13096 12591
9.30.98 13159 14876 13589
Average Annual Total Return of Class B Shares of the Fund at 9/30/98(2)
1 Year 2.90% 5 Year 4.90% Life 5.21%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information for both indices in the graphs begins on 9/30/88 for
Class A, 4/30/93 for Class B, 1/31/95 for Class C and 1/30/98 for Class Y.
1. The average annual total returns are shown net of the applicable 3.50%
maximum initial sales charge.
2. Class B shares of the Fund were first publicly offered on 5/3/93. The average
annual total returns are shown net of the applicable 4% contingent deferred
sales charges for the one-year period. Class B shares held more than 5 years
automatically convert to Class A shares.
10 Oppenheimer Limited-Term Government Fund
<PAGE>
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Limited-Term Government Fund (Class C), Lehman Brothers U.S.
Government Bond Index and Lehman Brothers 1-3 Year Government Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer Lehman Brothers Lehman Brothers
Limited-Term Government U.S. Government 1-3 Year Government
Fund Class C Bond Index Bond Index
------------ ---------- ----------
2.1.95 10000 10000 10000
9.30.95 10547 11110 10673
9.30.96 11044 11601 11277
9.30.97 11798 12664 12053
9.30.98 12601 14386 13009
Average Annual Total Return of Class C Shares of the Fund at 9/30/98(3)
1 Year 5.81% Life 6.51%
Class Y Shares
Comparison of Change in Value of $10,000 Hypothetical Investments in:
Oppenheimer Limited-Term Government Fund (Class Y), Lehman Brothers U.S.
Government Bond Index and Lehman Brothers 1-3 Year Government Bond Index
[The following table was originally a line graph in the printed materials.]
Oppenheimer Lehman Brothers Lehman Brothers
Ltd-Term Govt U.S. Government 1-3 Year Government
Fund Cls Y Bond Index Bond Index
---------- ---------- ----------
1.26.98 10000 10000 10000
9.30.98 10530 10832 10515
Cumulative Total Return of Class Y Shares of the Fund at 9/30/98(4)
Life 5.30%
3. Class C shares of the Fund were first publicly offered on 2/1/95. The average
annual total returns are shown net of the applicable 1% contingent deferred
sales charge for the one-year period.
4. Class Y shares have an inception date of 1/26/98 and are not available for
sale to individual investors. Past performance is not predictive of future
performance. Graphs are not drawn to the same scale.
11 Oppenheimer Limited-Term Government Fund
<PAGE>
Financials
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12 Oppenheimer Limited-Term Government Fund
<PAGE>
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Statement of Investments September 30, 1998
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<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
===================================================================================================
<S> <C> <C>
Mortgage-Backed Obligations--37.0%
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Government Agency--37.0%
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FHLMC/FNMA/Sponsored--29.4%
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates:
Series 151, Cl. F, 9%, 5/15/21 $2,422,990 $2,616,830
Series 1092, Cl. K, 8.50%, 6/15/21 5,000,000 5,460,727
Series 1451, Cl. G, 7%, 9/15/06 2,442,000 2,513,722
Series 1541, Cl. H, 7%, 10/15/22 6,500,000 7,048,405
Series 1546, Cl. H, 7%, 12/15/22 3,000,000 3,218,430
Series 1914, Cl. H, 6.50%, 8/15/24 2,500,000 2,605,450
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg
Participation Certificates:
9.25%, 11/1/08 347,325 366,804
10%, 8/1/21 2,420,609 2,708,814
11.50%, 6/1/20 1,182,336 1,371,510
11.75%, 1/1/16-4/1/19 1,792,623 2,080,564
13%, 8/1/15 2,513,770 3,047,161
Series 1797, Cl. D, 6.166%, 7/15/08 5,000,000 5,150,000
Series 2021, Cl. PR, 6%, 7/15/26 3,381,000 3,440,168
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates:
Series 1603, Cl. J, 6.50%, 7/15/23 5,000,000 5,290,625
Series 1702-A, Cl. PD, 6.50%, 4/15/22 6,250,000 6,613,250
Series 1836, Cl. H, 6.50%, 9/15/24 5,000,000 5,278,100
Series 1914, Cl. G, 6.50%, 2/15/24 3,000,000 3,118,110
</TABLE>
13 Oppenheimer Limited-Term Government Fund
<PAGE>
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Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC/FNMA/Sponsored (continued)
Federal Home Loan Mortgage Corp., Interest-Only
Stripped Mtg.-Backed Security:
Series 164, Cl. A, 6.309%, 3/1/24(1) $ 11,205,814 $ 2,612,356
Series 176, Cl. IO, 0.058%-5.886%, 6/1/26(1) 24,113,771 3,157,397
Series 183, Cl. IO, 3.637%-4.035%, 4/1/27(1) 12,147,124 1,541,167
Series 197, Cl. IO, 13.844%-15.649%, 4/1/28-5/15/28(1) 19,763,617 4,026,837
Series 199, Cl. IO, 14.104%, 4/1/28(1) 9,900,918 2,017,312
Series 199, Cl. IO, 10.662%-11.183%, 8/1/28(1) 53,876,289 9,133,715
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Principal-Only
Stripped Mtg.-Backed Security:
Series 192, Cl. PO, 3.924%, 2/1/28(2) 7,287,199 6,303,428
Series 199, Cl. PO, 5.152%, 8/1/28(2) 7,981,672 6,778,186
- ---------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.-Government National
Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates,
Series 32, Cl. TG, 6.054%, 1/25/21 2,000,000 2,108,120
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6.50%, 6/1/28-8/1/28 19,999,998 20,341,200
6.50%, 10/25/13-10/25/28(3) 46,000,000 46,858,490
7%, 8/1/25-2/1/27 7,120,393 7,320,484
7.50%, 6/1/25-8/1/25 6,576,624 6,786,815
9%, 8/1/19 420,917 447,915
9.50%, 11/1/21 290,717 313,923
10.50%, 12/1/14 1,160,355 1,307,576
11%, 11/1/15-5/15/19 10,549,247 12,083,192
11.25%, 6/1/14 1,003,939 1,145,746
11.50%, 8/15/13 948,540 1,100,900
11.75%, 7/1/11-11/1/15 407,945 462,380
12%, 1/1/16-4/15/19 9,326,226 10,827,352
13%, 8/1/10-12/1/15 3,623,860 4,366,910
</TABLE>
14 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC/FNMA/Sponsored (continued)
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-188, Cl. PG, 6.65%, 1/25/17 $ 4,000,000 $ 4,035,000
Trust 1992-34, Cl. G, 8%, 3/25/22 2,940,000 3,201,836
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg
Investment Conduit Pass-Through Certificates:
8%, 1/1/23 161,003 167,458
12.50%, 12/1/15 2,152,379 2,564,022
Trust 1990-18, Cl. K, 9.60%, 3/25/20 5,000,000 5,582,860
Trust 1991-169, Cl. PK, 8%, 10/25/21 595,000 636,275
Trust 1991-170, Cl. E, 8%, 12/25/06 2,442,963 2,582,652
Trust 1993-183, Cl. G, 6%, 1/25/19 3,500,000 3,580,920
Trust 1994-27, Cl. PH, 6.50%, 9/25/22 4,000,000 4,221,240
Trust 1994-51, Cl. PH, 6.50%, 1/25/23 5,000,000 5,273,400
Trust 1996-64, Cl. PB, 6.50%, 1/18/19 1,500,000 1,526,250
Trust 1997-25, Cl. B, 7%, 12/18/22 3,420,000 3,554,645
Trust 1997-54, Cl. C, 6.50%, 9/18/24 5,000,000 5,165,625
Trust 1997-63, Cl. PC, 6.50%, 3/18/26 7,500,000 7,851,525
Trust G93-31, Cl. PN, 7%, 9/25/23 5,000,000 5,523,181
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Trust 294, Cl. 2, 7.476%-11.499%, 2/1/28(1) 12,845,976 1,702,093
Trust 1997-9, Cl. H, 7.522%, 3/25/27(1) 10,000,000 3,325,000
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Principal-Only
Stripped Mtg.-Backed Security:
Trust 277, Cl. 1, 18.575%, 4/1/27(2) 2,446,570 2,269,194
Trust 291, Cl. 1, 7.087%, 11/1/27(2) 10,728,363 9,913,678
Trust 294, Cl. 1, 4.583%-6.054%, 2/1/28(2) 25,367,779 22,672,454
- ---------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Stripped Mtg.-Backed Security,
Trust G, Cl. 2, 11.50%, 3/1/09 1,578,178 1,740,432
------------
310,059,811
</TABLE>
15 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
GNMA/Guaranteed--7.6%
Government National Mortgage Assn.:
7%, 1/15/28-8/15/28 $ 9,617,859 $ 9,932,177
7.50%, 10/15/25-3/15/28 60,896,859 63,153,701
8%, 9/15/07 106,177 110,811
8.50%, 9/15/21 38,587 40,909
9.50%, 9/15/17 89,525 96,722
10.50%, 1/15/16-7/15/21 2,062,688 2,263,510
11%, 12/15/98-2/15/01 4,099,030 4,632,864
11.50%, 1/15/13-5/15/13 370,812 414,294
13%, 2/15/11-9/15/14 42,852 49,741
------------
80,694,729
------------
Total Mortgage-Backed Obligations (Cost $392,139,701) 390,754,540
===================================================================================================
U.S. Government Obligations--63.2%
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.125%, 11/15/27 11,500,000 13,257,349
STRIPS, 5.125%, 5/15/10(4) 74,500,000 42,299,163
- ---------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.50%, 1/31/03 11,000,000 11,495,011
5.625%, 5/15/01-5/15/08 68,700,000 73,473,392
6.125%, 8/15/07 3,100,000 3,472,003
6.25%, 8/31/02 56,500,000 60,260,809
6.375%, 9/30/01 4,750,000 5,011,255
7.50%, 2/15/05 55,500,000 65,073,806
7.75%, 1/31/00 40,000,000 41,650,040
7.875%, 11/15/04 87,550,000 103,828,872
8.50%, 11/15/20 95,000,000 102,896,970
8.75%, 8/15/00(5) 133,850,000 144,265,270
------------
Total U.S. Government Obligations (Cost $652,097,294) 666,983,940
</TABLE>
16 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
=====================================================================================================
<S> <C> <C>
Repurchase Agreements--2.4%
- -----------------------------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan Securities, Inc., 5.40%,
dated 9/30/98, to be repurchased at $25,703,855 on 10/1/98,
collateralized by U.S. Treasury Nts., 5.625%, 5/15/08,
with a value of $26,399,929 (Cost $25,700,000) $ 25,700,000 $ 25,700,000
- -----------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,069,936,995) 102.6% 1,083,438,480
- -----------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (2.6) (27,816,443)
------------ --------------
Net Assets 100.0% $1,055,622,037
============ ==============
</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. 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.
3. When-issued security to be delivered and settled after September 30, 1998.
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 $1,185,594 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.
17 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
==============================================================================================
Assets
Investments, at value (cost $1,069,936,995)--see accompanying statement $ 1,083,438,480
- ----------------------------------------------------------------------------------------------
Cash 44,754
- ----------------------------------------------------------------------------------------------
Receivables:
Investments sold on a when-issued basis--Note 1 61,009,103
Interest and principal paydowns 13,001,335
Shares of beneficial interest sold 8,725,730
Daily variation on futures contracts--Note 5 442,140
- ----------------------------------------------------------------------------------------------
Other 83,511
----------------
Total assets 1,166,745,053
==============================================================================================
Liabilities
Payables and other liabilities:
Investments purchased on a when-issued basis--Note 1 107,294,894
Shares of beneficial interest redeemed 1,649,626
Dividends 1,133,742
Distribution and service plan fees 604,965
Transfer and shareholder servicing agent fees 91,103
Daily variation on futures contracts--Note 5 34,027
Other 314,659
----------------
Total liabilities 111,123,016
==============================================================================================
Net Assets $ 1,055,622,037
================
==============================================================================================
Composition of Net Assets
Paid-in capital $ 1,056,867,778
- ----------------------------------------------------------------------------------------------
Overdistributed net investment income (189)
- ----------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (15,312,880)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 14,067,328
----------------
Net assets $ 1,055,622,037
================
</TABLE>
18 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
$634,676,819 and 61,222,403 shares of beneficial interest outstanding) $10.37
Maximum offering price per share (net asset value plus sales charge of
3.50% of offering price) $10.75
- ----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $277,381,058 and
26,760,031 shares of beneficial interest outstanding) $10.37
- ----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $143,563,154 and
13,868,911 shares of beneficial interest outstanding) $10.35
- ----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,006 and 97 shares of beneficial interest outstanding) $10.37
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
=========================================================================================
Investment Income
Interest $65,695,043
=========================================================================================
Expenses
Management fees--Note 4 3,815,048
- -----------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 1,430,203
Class B 2,101,064
Class C 1,004,126
- -----------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 833,212
- -----------------------------------------------------------------------------------------
Registration and filing fees 220,337
- -----------------------------------------------------------------------------------------
Shareholder reports 157,318
- -----------------------------------------------------------------------------------------
Custodian fees and expenses 87,053
- -----------------------------------------------------------------------------------------
Legal, auditing and other professional fees 28,380
- -----------------------------------------------------------------------------------------
Accounting service fees--Note 4 12,000
- -----------------------------------------------------------------------------------------
Trustees' fees and expenses 7,014
- -----------------------------------------------------------------------------------------
Other 23,732
-----------
Total expenses 9,719,487
=========================================================================================
Net Investment Income 55,975,556
=========================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (4,970,145)
Closing of futures contracts 30,688
Closing and expiration of option contracts written--Note 6 (227,037)
-----------
Net realized loss (5,166,494)
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 14,062,843
-----------
Net realized and unrealized gain 8,896,349
=========================================================================================
Net Increase in Net Assets Resulting from Operations $64,871,905
===========
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
1998 1997
==========================================================================================
<S> <C> <C>
Operations
Net investment income $ 55,975,556 $ 46,225,071
- ------------------------------------------------------------------------------------------
Net realized loss (5,166,494) (4,149,934)
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 14,062,843 5,545,271
--------------- -------------
Net increase in net assets resulting from operations 64,871,905 47,620,408
==========================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment
income:
Class A (38,031,985) (30,141,730)
Class B (12,153,183) (10,420,608)
Class C (5,790,342) (3,475,469)
Class Y (46) --
- ------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A (1,307,734) --
Class B (417,888) --
Class C (199,101) --
Class Y (2) --
- ------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A -- (700,992)
Class B -- (245,211)
Class C -- (98,310)
==========================================================================================
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 106,066,201 85,939,817
Class B 91,996,096 22,254,728
Class C 69,044,172 27,993,027
Class Y 1,000 --
==========================================================================================
Net Assets
Total increase 274,079,093 138,725,660
- ------------------------------------------------------------------------------------------
Beginning of period 781,542,944 642,817,284
--------------- -------------
End of period (including overdistributed net investment
income of $189 and $189, respectively) $ 1,055,622,037 $ 781,542,944
=============== =============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
------------------------------
Year Ended September 30,
1998 1997 1996
==================================================================================
<S> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.30 $10.26 $10.44
- ----------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .67 .73 .75
Net realized and unrealized gain (loss) .10 .03 (.19)
-------- -------- --------
Total income (loss) from investment operations .77 .76 .56
- ----------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.68) (.71) (.71)
Dividends in excess of net investment income (.02) -- --
Tax return of capital distribution -- (.01) (.03)
-------- -------- --------
Total dividends and distributions to shareholders (.70) (.72) (.74)
- ----------------------------------------------------------------------------------
Net asset value, end of period $10.37 $10.30 $10.26
======== ======== ========
==================================================================================
Total Return, at Net Asset Value(4) 7.70% 7.62% 5.54%
==================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $634,677 $524,508 $436,889
- ----------------------------------------------------------------------------------
Average net assets (in thousands) $584,171 $443,514 $393,727
- ----------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.52% 7.13% 7.22%
Expenses 0.82% 0.87% 0.87%
- ----------------------------------------------------------------------------------
Portfolio turnover rate(6) 161% 68% 71%
</TABLE>
1. For the period from January 26, 1998 (inception of offering) to September 30,
1998.
2. For the period from February 1, 1995 (inception of offering) to September 30,
1995.
3. Per share amounts calculated based on the average shares outstanding during
the period.
4. 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.
22 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class B
-------------------- ----------------------------------------------------
Year Ended September 30,
1995 1994 1998 1997 1996 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.40 $11.04 $10.30 $10.26 $10.44 $10.41 $11.06
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .79 .72 .60 .66 .67 .71 .62
Net realized and unrealized gain (loss) .01 (.64) .09 .02 (.19) .01 (.64)
-------- -------- -------- -------- -------- -------- -------
Total income (loss) from investment operations .80 .08 .69 .68 .48 .72 (.02)
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.76) (.71) (.60) (.63) (.63) (.69) (.62)
Dividends in excess of net investment income -- -- (.02) -- -- -- --
Tax return of capital distribution -- (.01) -- (.01) (.03) -- (.01)
-------- -------- -------- -------- -------- -------- -------
Total dividends and distributions to shareholders (.76) (.72) (.62) (.64) (.66) (.69) (.63)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.44 $10.40 $10.37 $10.30 $10.26 $10.44 $10.41
======== ======== ======== ======== ======== ======== =======
==============================================================================================================================
Total Return, at Net Asset Value(4) 8.03% 0.74% 6.90% 6.82% 4.74% 7.18% (0.17)%
==============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $346,015 $227,858 $277,381 $183,476 $160,572 $121,178 $38,877
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $274,313 $190,829 $210,362 $171,496 $147,017 $72,131 $15,801
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 7.64% 6.74% 5.76% 6.39% 6.46% 6.80% 5.91%
Expenses 0.91% 0.99% 1.58% 1.62% 1.62% 1.71% 1.79%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 261% 226% 161% 68% 71% 261% 226%
</TABLE>
5. Annualized.
6. 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, 1998, were $1,985,225,950 and
$1,631,088,746, respectively. Prior to the year ended September 30, 1995,
purchases and sales of investment securities included mortgage dollar-rolls.
23 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C Class Y
---------------------------------------- -------
Period
Ended
Year Ended September 30, Sept. 30,
1998 1997 1996 1995(2) 1998(1)
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $10.29 $10.25 $10.43 $10.32 $10.33
- -------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .59(3) .66 .66 .45 .47
Net realized and unrealized gain (loss) .09(3) .02 (.18) .10 .06
-------- ------- ------- ------- ---------
Total income (loss) from investment
operations .68 .68 .48 .55 .53
- -------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.61) (.63) (.63) (.44) (.47)
Dividends in excess of net investment
income (.01) -- -- -- (.02)
Tax return of capital distribution -- (.01) (.03) -- --
-------- ------- ------- ------- ---------
Total dividends and distributions to
shareholders (.62) (.64) (.66) (.44) (.49)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.35 $10.29 $10.25 $10.43 $10.37
======== ======= ======= ======= =========
=======================================================================================================
Total Return, at Net Asset Value(4) 6.81% 6.83% 4.71% 5.47% 5.30%
=======================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands) $143,563 $73,559 $45,356 $14,569 $1
- -------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $100,604 $57,506 $32,349 $6,112 $1
- -------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.73% 6.35% 6.34% 6.51%(5) 6.82%(5)
Expenses 1.57% 1.62% 1.64% 1.80%(5) 0.43%(5)
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 161% 68% 71% 261% 161%
</TABLE>
1. For the period from January 26, 1998 (inception of offering) to September 30,
1998.
2. For the period from February 1, 1995 (inception of offering) to September 30,
1995.
3. Per share amounts calculated based on the average shares outstanding during
the period.
4. 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.
5. Annualized.
6. 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, 1998, were $1,985,225,950 and
$1,631,088,746, respectively. Prior to the year ended September 30, 1995,
purchases and sales of investment securities included mortgage dollar-rolls.
See accompanying Notes to Financial Statements.
24 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, Class C
and Class Y 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 expenses directly attributable to
that class and exclusive voting rights with respect to matters affecting that
class. Classes A, B and C have separate distribution and/or service plans. No
such plan has been adopted for Class Y shares. Class B shares will automatically
convert to Class A shares six years after the date of purchase. The following is
a summary of significant accounting policies consistently followed by the Fund.
- --------------------------------------------------------------------------------
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.
25 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
1. Significant Accounting Policies (continued)
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,
1998, the Fund had entered into outstanding when-issued or forward commitments
of $46,285,791.
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, Gains and Losses. Income, expenses (other than
those attributable to a specific class), 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.
26 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B, Class C and Class Y 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, 1998, amounts have been reclassified to reflect a
decrease in paid-in capital of $2,508,293, a decrease in overdistributed net
investment income of $1,924,725, and a decrease in accumulated net realized loss
on investments of $583,568.
- --------------------------------------------------------------------------------
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.
27 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
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, 1998 Year Ended September 30, 1997
------------------------------- --------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 46,472,235 $ 478,261,632 33,021,129 $ 339,328,054
Dividends reinvested 2,895,623 29,794,401 2,266,710 23,303,389
Redeemed (39,072,434) (401,989,832) (26,940,608) (276,691,626)
------------- ------------- ------------- -------------
Net increase 10,295,424 $ 106,066,201 8,347,231 $ 85,939,817
============= ============= ============= =============
- ----------------------------------------------------------------------------------------------
Class B:
Sold 14,069,222 $ 144,687,126 6,061,213 $ 62,284,400
Dividends reinvested 871,211 8,965,350 722,567 7,426,989
Redeemed (5,997,157) (61,656,380) (4,618,172) (47,456,661)
------------- ------------- ------------- -------------
Net increase 8,943,276 $ 91,996,096 2,165,608 $ 22,254,728
============= ============= ============= =============
- ----------------------------------------------------------------------------------------------
Class C:
Sold 11,346,525 $ 116,547,257 4,851,238 $ 49,789,058
Dividends reinvested 448,545 4,607,623 274,536 2,818,476
Redeemed (5,077,978) (52,110,708) (2,399,494) (24,614,507)
------------- ------------- ------------- -------------
Net increase 6,717,092 $ 69,044,172 2,726,280 $ 27,993,027
============= ============= ============= =============
- ----------------------------------------------------------------------------------------------
Class Y:
Sold 97 $ 1,000 -- $ --
------------- ------------- ------------- -------------
Net increase 97 $ 1,000 -- $ --
============= ============= ============= =============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Investments
As of September 30, 1998, net unrealized appreciation on investments of
$13,501,485 was composed of gross appreciation of $30,572,304, and gross
depreciation of $17,070,819.
28 Oppenheimer Limited-Term Government Fund
<PAGE>
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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% of the first
$100 million of average annual net assets, 0.45% of the next $150 million,
0.425% of the next $250 million and 0.40% of average annual net assets in excess
of $500 million. The Fund's management fee for the year ended September 30,
1998, was 0.43% of average annual net assets for Class A, Class B, Class C and
Class Y shares.
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, 1998, commissions (sales charges
paid by investors) on sales of Class A shares totaled $3,307,408, of which
$713,814 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 $2,706,222 and $870,358, respectively, of which
$123,807 and $20,699, respectively, was paid to an affiliated broker/dealer.
During the year ended September 30, 1998, OFDI received contingent deferred
sales charges of $537,788 and $91,616, 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 Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
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 maintenance of accounts of their customers that
hold Class A shares. During the year ended September 30, 1998, OFDI paid
$101,978 to an affiliated broker/dealer as reimbursement for Class A personal
service and maintenance expenses.
29 Oppenheimer Limited-Term Government Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
4. Management Fees and Other Transactions with Affiliates (continued)
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to compensate OFDI for its 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 and Class C shares for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to compensate dealers for providing personal
services for accounts that hold Class B and C shares. Each fee is computed on
the average annual net assets of Class B or Class C shares, determined as of the
close of each regular business day. During the year ended September 30, 1998,
OFDI paid $14,364 and $15,438, respectively, to an affiliated broker/dealer as
compensation for Class B and Class C personal service and maintenance expenses
and retained $1,731,768 and $679,162, 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. As of September 30, 1998,
OFDI had incurred excess distribution and servicing costs of $5,942,929 for
Class B and $2,179,294 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.
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.
30 Oppenheimer Limited-Term Government Fund
<PAGE>
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================================================================================
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of September 30, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Expiration Number of Valuation as of Unrealized
Date Contracts Sept. 30,1998 Appreciation
- --------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds, 5 yr. 12/98 393 $45,176,578 $182,812
U.S. Treasury Bonds, 10 yr. 12/98 327 39,710,063 208,406
U.S. Treasury Bonds, 20 yr. 12/98 164 21,560,875 174,625
--------
$565,843
========
</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. 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.
31 Oppenheimer Limited-Term Government Fund
<PAGE>
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Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
================================================================================
6. Option Activity (continued)
Written option activity for the year ended September 30, 1998 was as follows:
Call Options
-------------------------
Number of Amount of
Options Premiums
- ---------------------------------------------------------------------------
Options outstanding as of September 30, 1997 -- $ --
Options written 90,600 252,469
Options closed or expired (90,600) (252,469)
------- ---------
Options outstanding as of September 30, 1998 -- $ --
======= =========
================================================================================
7. 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 Oppenheimer funds 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, 1998.
32 Oppenheimer Limited-Term Government Fund
<PAGE>
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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, 1998, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended September 30, 1998,
and 1997, and the financial highlights for the period October 1, 1993, to
September 30, 1998. 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, 1998, by correspondence with the custodian and brokers;
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, 1998, 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, 1998
33 Oppenheimer Limited-Term Government Fund
<PAGE>
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Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. 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, 1998, 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.
34 Oppenheimer Limited-Term Government Fund
<PAGE>
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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, Trustee, 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
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and OppenheimerFunds Services
Shareholder
Servicing Agent
================================================================================
Custodian of Citibank, N.A.
Portfolio Securities
================================================================================
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.
35 Oppenheimer Limited-Term Government Fund
<PAGE>
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 or by visiting our website. 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 or website 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.
Internet
24-hr access to account
information. Online
transactions now available
- -------------------------
www.oppenheimerfunds.com
- -------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- -------------------------
1-800-525-7048
- -------------------------
Account Transactions
Mon-Fri 8:30am-8pm 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
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[LOGO] OppenheimerFunds(R)
Distributor, Inc.
RA0855.001.0998 November 27, 1998
