UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4563
Oppenheimer Limited-Term Government Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: September 30
Date of reporting period: October 1, 2003 - March 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
STATEMENT OF INVESTMENTS March 31, 2004 / Unaudited
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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ASSET-BACKED SECURITIES--14.1%
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Centex Home Equity Co. LLC, Home Equity Loan Asset-Backed
Certificates, Series 2004-A, Cl. AF1, 2.03%, 6/25/19 $ 9,196,631 $ 9,217,333
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Chase Manhattan Auto Owner Trust, Automobile Loan
Pass-Through Certificates:
Series 2002-A, Cl. A3, 3.49%, 3/15/06 15,489,174 15,592,430
Series 2004-A, Cl. A2, 1.45%, 10/15/06 15,000,000 15,009,300
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Citibank Credit Card Issuance Trust, Credit Card Receivable Nts.,
Series 2002-A3, Cl. A3, 4.40%, 5/15/07 11,030,000 11,403,284
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DaimlerChrysler Auto Trust, Automobile Loan Pass-Through
Certificates:
Series 2003-A, Cl. A2, 1.52%, 12/8/05 30,000,000 30,058,779
Series 2003-B, Cl. A2, 1.61%, 7/8/06 29,200,000 29,289,866
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Honda Auto Receivables Owner Trust, Automobile Receivable
Obligations, Series 2003-4, Cl. A2, 1.58%, 7/17/06 39,000,000 39,106,872
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Household Automotive Trust, Automobile Loan Certificates,
Series 2003-2, Cl. A2, 1.56%, 12/18/06 14,980,000 15,020,304
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M&I Auto Loan Trust, Automobile Loan Certificates:
Series 2002-1, Cl. A3, 2.49%, 10/22/07 16,447,028 16,578,229
Series 2003-1, Cl. A2, 1.60%, 7/20/06 34,000,000 34,092,596
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National City Auto Receivables Trust, Automobile Receivable
Obligations, Series 2004-A, Cl. A2, 1.50%, 2/15/07 10,800,000 10,793,250
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Nissan Auto Lease Trust, Automobile Lease Obligations, Series 2003-A,
Cl. A2, 1.69%, 12/15/05 25,000,000 25,055,025
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Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.:
Series 2002-C, Cl. A3, 2.60%, 8/15/06 4,293,716 4,328,764
Series 2003-C, Cl. A2, 1.62%, 4/17/06 1 33,000,000 33,097,739
Series 2004-A, Cl. A2, 1.40%, 7/17/06 12,090,000 12,104,497
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USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.:
Series 2002-1, Cl. A3, 2.41%, 10/16/06 12,981,114 13,064,737
Series 2004-1, Cl. A2, 1.43%, 9/15/06 29,480,000 29,489,913
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Volkswagen Auto Loan Enhanced Trust, Automobile Loan Receivable
Certificates, Series 2003-2, Cl. A2, 1.55%, 6/20/06 22,000,000 22,054,633
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Whole Auto Loan Trust, Automobile Loan Receivable Certificates,
Series 2002-1, Cl. A3, 2.60%, 8/15/06 13,740,000 13,887,221
---------------
Total Asset-Backed Securities (Cost $378,512,633) 379,244,772
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MORTGAGE-BACKED OBLIGATIONS--59.5%
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GOVERNMENT AGENCY--59.3%
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FHLMC/FNMA/SPONSORED--57.8%
Federal Home Loan Mortgage Corp.:
5.50%, 1/1/34 7,934,484 8,140,045
5.50%, 4/15/34 2 12,273,000 12,579,825
7%, 9/1/33-8/1/34 78,898,199 83,773,517
7.50%, 2/1/32 1,301,360 1,400,598
8%, 4/1/16 8,831,157 9,500,706
10 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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FHLMC/FNMA/SPONSORED Continued
Federal Home Loan Mortgage Corp.: Continued
8.50%, 3/1/31 $ 2,288,560 $ 2,476,044
9%, 8/1/22-5/1/25 2,230,119 2,491,022
9.25%, 11/1/08 52,672 55,794
10%, 12/25/10-8/1/21 825,357 918,258
11%, 11/1/20 409,539 467,018
11.50%, 2/1/16-6/1/20 165,062 188,432
11.75%, 1/1/16-4/1/19 221,037 250,869
12%, 6/1/15 204,913 234,007
12.50%, 7/1/19 383,634 440,812
13%, 8/1/15 451,769 522,300
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Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates,
Series 1669, Cl. G, 6.50%, 2/15/23 7,280,557 7,417,607
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Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through
Participation Certificates, Series 151, Cl. F, 9%, 5/15/21 259,220 259,689
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Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 2055, Cl. ZM, 6.50%, 5/15/28 10,901,546 11,431,736
Series 2080, Cl. Z, 6.50%, 8/15/28 7,325,936 7,609,834
Series 2410, Cl. NE, 6.50%, 9/15/30 5,950,390 6,075,573
Series 2491, Cl. PE, 6%, 12/15/27 10,000,000 10,134,374
Series 2498, Cl. PC, 5.50%, 10/15/14 3,050,000 3,121,753
Series 2500, Cl. FD, 1.59%, 3/15/32 3 6,932,904 6,990,334
Series 2526, Cl. FE, 1.49%, 6/15/29 3 8,109,235 8,143,853
Series 2551, Cl. FD, 1.49%, 1/15/33 3 6,926,978 6,954,050
Series 2551, Cl. TA, 4.50%, 2/15/18 19,501,142 19,664,894
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Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 177, Cl. B, (8.448)%, 7/1/26 4 19,021,244 2,834,717
Series 205, Cl. IO, (9.90)%, 9/15/29 4 23,409,989 3,374,094
Series 206, Cl. IO, (30.725)%, 12/15/29 4 870,162 138,561
Series 2526, Cl. SE, 20.414%, 6/15/29 4 11,203,897 1,093,447
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Federal Home Loan Mortgage Corp., Structured Pass-Through
Securities, Collateralized Mtg. Obligations:
Series H006, Cl. A1, 1.724%, 4/15/08 2,765,666 2,761,590
Series T-42, Cl. A2, 5.50%, 2/25/42 1,812,400 1,827,690
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Federal Home Loan Mortgage Corp./Government National Mortgage
Assn., Gtd. Multiclass Mtg. Participation Certificates, Series
28, Cl. PG, 6.875%, 2/25/23 5,500,000 5,697,358
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Federal National Mortgage Assn.:
4.68%, 11/1/12 4,913,709 5,131,293
4.73%, 12/1/12 4,199,337 4,399,656
4.80%, 3/1/13 2,948,309 3,101,597
5%, 4/15/34 2 45,223,000 45,435,005
5.50%, 4/1/19-12/1/34 96,809,658 99,849,301
5.50%, 2/1/34-3/1/34 2 12,933,593 13,262,745
5.863%, 1/1/12 16,609,396 18,615,845
11 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.: Continued
6.50%, 1/1/29-5/1/31 $ 17,764,002 $ 18,675,812
6.50%, 10/1/30-4/1/34 2 206,479,411 216,940,640
6.95%, 10/1/06 2,401,699 2,608,856
7%, 7/1/13-11/1/33 62,414,484 66,446,439
7%, 4/25/34 2 668,049,000 709,175,433
7.50%, 10/1/29-1/1/30 1,675,554 1,797,155
8%, 4/1/17-1/1/23 30,793 33,749
8.50%, 7/1/32 2,366,986 2,559,355
9%, 8/1/19 45,342 50,691
9.50%, 11/1/21 41,578 46,558
10.50%, 12/1/14 300,845 335,126
11%, 11/1/15-7/20/19 2,693,600 3,068,150
11.25%, 6/1/14-2/15/16 513,869 588,068
11.50%, 7/15/19-11/17/20 1,247,523 1,432,544
11.75%, 7/1/11-8/1/13 49,376 56,388
12%, 1/1/16-8/1/16 1,101,870 1,265,152
12.50%, 8/1/15-12/1/15 389,601 450,589
13%, 8/15/15-8/1/26 803,989 933,643
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Federal National Mortgage Assn. Grantor Trust, Commercial Mtg.
Obligations, Trust 2001-T6, Cl. B, 6.088%, 5/25/11 10,125,000 11,386,569
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Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22 466,446 491,224
Trust 1994-27, Cl. PH, 6.50%, 9/25/22 716,320 720,681
Trust 2001-50, Cl. LD, 6.50%, 5/25/30 5,639,696 5,716,496
Trust 2001-70, Cl. LR, 6%, 9/25/30 8,930,217 9,146,623
Trust 2001-70, Cl. PD, 6%, 3/25/29 9,460,000 9,631,687
Trust 2001-72, Cl. NH, 6%, 4/25/30 7,890,000 8,117,219
Trust 2001-74, Cl. PD, 6%, 5/25/30 3,180,000 3,254,557
Trust 2002-50, Cl. PD, 6%, 9/25/27 6,930,000 7,077,516
Trust 2002-52, Cl. FD, 1.59%, 9/25/32 3 9,103,862 9,139,789
Trust 2002-73, Cl. PA, 5%, 1/25/17 7,467,943 7,512,312
Trust 2002-77, Cl. WF, 1.49%, 12/18/32 3 11,602,170 11,640,540
Trust 2002-94, Cl. MA, 4.50%, 8/25/09 13,407,987 13,580,832
Trust 2003-21, Cl. FK, 1.49%, 3/25/33 3 970,800 974,035
Trust 2003-81, Cl. PA, 5%, 2/25/12 5,393,539 5,506,751
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Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
Trust 1988-7, Cl. Z, 9.25%, 4/25/18 210,138 235,171
Trust 1991-109, Cl. Z, 8.50%, 9/25/21 262,036 288,287
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Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates Interest-Only Stripped
Mtg.-Backed Security:
Trust 2001-T4, Cl. IO, (5.043)%, 7/25/28 1,4 18,119,462 441,662
Trust 2002-28, Cl. SA, 14.612%, 4/25/32 4 6,285,983 533,061
Trust 2002-39, Cl. SD, 14.473%, 3/18/32 4 10,598,474 917,944
Trust 2002-48, Cl. S, 11.867%, 7/25/32 4 10,239,974 994,381
12 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates Interest-Only Stripped
Mtg.-Backed Security: Continued
Trust 2002-52, Cl. SL, 12.502%, 9/25/32 4 $ 6,563,988 $ 658,163
Trust 2002-53, Cl. SK, 14.057%, 4/25/32 4 6,183,996 557,298
Trust 2002-56, Cl. SN, 15.731%, 7/25/32 4 13,907,619 1,353,534
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Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 2001-63, Cl. SD, 22.589%, 12/18/31 4 8,330,859 814,584
Trust 2001-68, Cl. SC, 24.161%, 11/25/31 4 8,617,203 835,256
Trust 2002-52, Cl. SD, 13.61%, 9/25/32 4 9,103,862 802,198
Trust 2002-9, Cl. MS, 9.507%, 3/25/32 4 11,440,669 1,056,241
Trust 221, Cl. 2, (7.575)%, 5/1/23 4 6,778,533 1,157,566
Trust 240, Cl. 2, (5.058)%, 9/1/23 4 9,515,933 1,560,910
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Federal National Mortgage Assn., Stripped Mtg.-Backed Security,
Trust G, Cl. 2, 11.50%, 3/1/09 301,682 333,797
---------------
1,561,667,075
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GNMA/GUARANTEED--1.5%
Government National Mortgage Assn.:
6.50%, 1/15/24 800,578 849,271
7%, 1/15/09-1/20/30 8,716,956 9,295,593
7.50%, 1/15/28-9/15/28 3,398,981 3,659,965
8%, 9/15/07-10/15/28 1,199,032 1,310,960
8.50%, 8/15/17-9/15/21 3,040,448 3,371,211
9.50%, 9/15/17 12,790 14,365
10.50%, 2/15/16-7/15/21 321,164 366,227
11%, 10/20/19 529,780 602,834
11.50%, 1/15/13-7/15/19 120,537 138,281
13%, 2/15/11-9/15/14 16,007 18,682
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Government National Mortgage Assn., Commercial Mtg. Obligations,
Trust 2002-9, Cl. A, 4.691%, 6/16/16 20,888,680 21,817,110
---------------
41,444,499
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PRIVATE--0.2%
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RESIDENTIAL--0.2%
Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
Obligations Pass-Through Certificates, Series 2003-AR7, Cl. A1,
1.507%, 8/25/33 3 5,239,861 5,244,626
---------------
Total Mortgage-Backed Obligations (Cost $1,600,784,011) 1,608,356,200
13 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
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PRINCIPAL MARKET VALUE
AMOUNT SEE NOTE 1
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U.S. GOVERNMENT OBLIGATIONS--63.3%
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Federal Home Loan Bank Unsec. Bonds:
2.75%, 11/15/06 $ 52,400,000 $ 53,283,464
Series 1Y06, 2.375%, 2/15/06 75,000,000 75,915,525
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Federal Home Loan Mortgage Corp. Unsec. Nts.:
2.375%, 4/15/06 62,000,000 62,780,022
4.50%, 1/15/13 6,195,000 6,376,947
4.875%, 3/15/07 5 199,500,000 214,605,542
5.50%, 7/15/06 32,700,000 35,320,709
5.75%, 4/29/09-1/15/12 42,000,000 44,157,700
6.625%, 9/15/09 51,770,000 60,410,465
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Federal National Mortgage Assn. Nts., 1.51%, 2/7/05 28,400,000 28,402,584
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Federal National Mortgage Assn. Unsec. Nts.:
4.25%, 7/15/07 53,630,000 56,752,285
5.25%, 6/15/06-4/15/07 115,700,000 124,452,566
5.50%, 2/15/06 216,030,000 231,342,638
7.25%, 1/15/10 25,050,000 30,152,084
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Tennessee Valley Authority Bonds:
4.75%, 7/15/04 3,320,000 3,353,602
5.375%, 11/13/08 19,700,000 21,706,012
Series C, 4.75%, 8/1/13 1,935,000 2,017,959
Series C, 6%, 3/15/13 1,860,000 2,116,518
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U.S. Treasury Nts.:
1.75%, 12/31/05 149,130,000 150,219,395
2.625%, 5/15/08 39,180,000 39,431,026
3%, 2/15/08 30,350,000 31,072,027
3.25%, 8/15/07 22,330,000 23,128,141
3.50%, 11/15/06 5 53,850,000 56,144,979
6.875%, 5/15/06 121,650,000 134,969,823
7%, 7/15/06 198,600,000 222,214,930
---------------
Total U.S. Government Obligations (Cost $1,683,501,041) 1,710,326,943
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JOINT REPURCHASE AGREEMENTS--0.9%
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Undivided interest of 17.45% in joint repurchase agreement
(Principal Amount/Market Value $136,202,000, with a
maturity value of $136,205,708) with Banc One Capital
Markets, Inc., 0.98%, dated 3/31/04, to be repurchased at
$23,764,647 on 4/1/04, collateralized by U.S. Treasury
Bills, 6/10/04, with a value of $138,929,082 (Cost
$23,764,000) 23,764,000 23,764,000
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TOTAL INVESTMENTS, AT VALUE (COST $3,686,561,685) 137.8% 3,721,691,915
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LIABILITIES IN EXCESS OF OTHER ASSETS (37.8) (1,020,207,778)
-----------------------------------
NET ASSETS 100.0% $2,701,484,137
===================================
14 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Identifies issues considered to be illiquid. See Note 7 of Notes to Financial
Statements.
2. When-issued security to be delivered and settled after March 31, 2004. See
Note 1 of Notes to Financial Statements.
3. Represents the current interest rate for a variable or increasing rate
security.
4. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $19,123,617 or 0.71% of the Fund's net assets
as of March 31, 2004.
5. Securities with an aggregate market value of $17,534,187 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.
15 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES Unaudited
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March 31, 2004
- -----------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------
Investments, at value (including securities loaned of approximately
$792,341,000) (cost $3,686,561,685)--see accompanying statement of
investments $3,721,691,915
- -------------------------------------------------------------------------------------
Cash 1,747,765
- -------------------------------------------------------------------------------------
Collateral for securities loaned 805,630,141
- -------------------------------------------------------------------------------------
Receivables and other assets:
Interest and principal paydowns 23,347,033
Shares of beneficial interest sold 8,832,460
Investments sold on a when-issued basis 3,001,983
Other 160,104
---------------
Total assets 4,564,411,401
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LIABILITIES
- -------------------------------------------------------------------------------------
Return of collateral for securities loaned 805,630,141
- -------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $1,039,988,484 purchased on a
when-issued basis) 1,040,021,698
Shares of beneficial interest redeemed 11,258,065
Futures margins 1,984,797
Distribution and service plan fees 1,543,388
Dividends 1,432,567
Transfer and shareholder servicing agent fees 437,104
Shareholder communications 318,979
Trustees' compensation 37,226
Other 263,299
---------------
Total liabilities 1,862,927,264
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NET ASSETS $2,701,484,137
===============
- -------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 262,493
- -------------------------------------------------------------------------------------
Additional paid-in capital 2,704,977,907
- -------------------------------------------------------------------------------------
Accumulated net investment income 6,124,044
- -------------------------------------------------------------------------------------
Accumulated net realized loss on investments (37,435,232)
- -------------------------------------------------------------------------------------
Net unrealized appreciation on investments 27,554,925
---------------
NET ASSETS $2,701,484,137
===============
16 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
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NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,262,343,567 and 122,585,911 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
$581,619,992 and 56,500,878 shares of beneficial interest outstanding) $10.29
- ---------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$562,363,161 and 54,721,738 shares of beneficial interest outstanding) $10.28
- ---------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$45,375,385 and 4,410,648 shares of beneficial interest outstanding) $10.29
- ---------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $249,782,032 and 24,274,037 shares of beneficial interest
outstanding) $10.29
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004
- -----------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------
Interest $37,767,091
- -----------------------------------------------------------------------------------
Fee income 10,581,146
- -----------------------------------------------------------------------------------
Portfolio lending fees 463,135
------------
Total investment income 48,811,372
- -----------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------
Management fees 5,808,311
- -----------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,582,581
Class B 3,218,516
Class C 3,091,340
Class N 107,746
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,352,529
Class B 701,309
Class C 454,752
Class N 72,283
Class Y 6,520
- -----------------------------------------------------------------------------------
Shareholder communications:
Class A 202,431
Class B 119,639
Class C 95,314
Class N 6,464
Class Y 8,824
- -----------------------------------------------------------------------------------
Custodian fees and expenses 37,390
- -----------------------------------------------------------------------------------
Trustees' compensation 28,034
- -----------------------------------------------------------------------------------
Accounting service fees 6,000
- -----------------------------------------------------------------------------------
Other 123,873
------------
Total expenses 17,023,856
Less reduction to custodian expenses (1,910)
Less voluntary reimbursement of expenses:
Class A (226,030)
Class B (121,722)
Class C (72,430)
Class N (12,709)
Less voluntary waiver of transfer and shareholder servicing agent fees:
Class A (12,088)
Class B (8,359)
Class C (2,974)
Class N (339)
------------
Net expenses 16,565,295
- -----------------------------------------------------------------------------------
NET INVESTMENT INCOME 32,246,077
18 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- -----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- -----------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments $28,432,760
Closing of futures contracts (49,829,690)
------------
Net realized loss (21,396,930)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (20,434,776)
Futures contracts 32,994,245
------------
Net change in unrealized appreciation 12,559,469
- -----------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,408,616
- -----------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPTEMBER 30,
(UNAUDITED) 2003
- ---------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income $ 32,246,077 $ 59,152,461
- ----------------------------------------------------------------------------------------
Net realized gain (loss) (21,396,930) 34,991,801
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation 12,559,469 (44,026,316)
--------------------------------
Net increase in net assets resulting from operationss 23,408,616 50,117,946
- ----------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (16,570,839) (32,102,684)
Class B (5,769,764) (11,401,375)
Class C (5,746,901) (10,869,253)
Class N (475,179) (643,343)
Class Y (3,683,392) (5,110,246)
- ----------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest
transactions:
Class A (103,140,794) 18,458,944
Class B (139,776,356) (33,109,343)
Class C (121,345,012) 31,132,187
Class N 1,852,294 19,655,069
Class Y 8,567,691 100,941,875
- ----------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------
Total increase (decrease) (362,679,636) 127,069,777
- ----------------------------------------------------------------------------------------
Beginning of period 3,064,163,773 2,937,093,996
--------------------------------
End of period (including accumulated net investment
income of $6,124,044 and $6,124,042, respectively) $2,701,484,137 $3,064,163,773
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.33 $10.35 $10.22 $ 9.93 $10.03 $10.37
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .13 .22 .44 .50 .64 .63
Net realized and unrealized gain (loss) (.03) (.01) .13 .37 (.13) (.35)
--------------------------------------------------------------------------------
Total from investment operations .10 .21 .57 .87 .51 .28
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.13) (.23) (.44) (.58) (.61) (.62)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.30 $10.33 $10.35 $10.22 $ 9.93 $10.03
================================================================================
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 1.00% 2.01% 5.72% 8.98% 5.33% 2.78%
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,262,344 $1,369,364 $1,355,382 $786,012 $627,495 $734,407
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,291,321 $1,476,397 $ 968,852 $681,977 $673,323 $696,607
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.56% 2.14% 4.27% 4.96% 6.46% 6.23%
Total expenses 0.91% 0.88% 0.88% 0.85% 0.83% 0.84%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 0.87% N/A 3 N/A 3 N/A 3 N/A 3 N/A 3
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 82% 161% 97% 121% 141%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.32 $10.35 $10.22 $ 9.93 $10.02 $10.37
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .09 .14 .37 .43 .57 .56
Net realized and unrealized gain (loss) (.03) (.02) .12 .36 (.12) (.37)
---------------------------------------------------------------
Total from investment operations .06 .12 .49 .79 .45 .19
- --------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.09) (.15) (.36) (.50) (.54) (.54)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.29 $10.32 $10.35 $10.22 $9.93 $10.02
===============================================================
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 0.61% 1.14% 4.93% 8.17% 4.64% 1.91%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $581,620 $723,564 $759,144 $425,088 $329,877 $399,692
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $642,084 $800,685 $523,711 $353,905 $360,003 $351,099
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 1.79% 1.39% 3.50% 4.20% 5.70% 5.48%
Total expenses 1.68% 1.62% 1.63% 1.60% 1.59% 1.59%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 1.64% N/A 3 N/A 3 N/A 3 N/A 3 N/A 3
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 82% 161% 97% 121% 141%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.30 $10.33 $10.20 $ 9.92 $10.01 $10.35
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .10 .15 .36 .44 .57 .56
Net realized and unrealized gain (loss) (.02) (.03) .13 .34 (.12) (.36)
---------------------------------------------------------------
Total from investment operations .08 .12 .49 .78 .45 .20
- --------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.10) (.15) (.36) (.50) (.54) (.54)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.28 $10.30 $10.33 $10.20 $9.92 $10.01
===============================================================
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 0.74% 1.21% 4.95% 8.08% 4.65% 2.01%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $562,363 $685,735 $656,959 $248,537 $168,665 $210,616
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $616,838 $733,037 $407,864 $190,885 $184,442 $187,226
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 1.86% 1.45% 3.43% 4.21% 5.70% 5.47%
Total expenses 1.60% 1.56% 1.62% 1.60% 1.59% 1.59%
Expenses after expense reimbursement
or fee waiver and reduction to
custodian expenses 1.58% N/A 3 N/A 3 N/A 3 N/A 3 N/A 3
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 82% 161% 97% 121% 141%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS N (UNAUDITED) 2003 2002 2001 1
- -----------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $10.32 $10.35 $10.21 $10.06
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .11 .19 .37 .32
Net realized and unrealized gain (loss) (.03) (.03) .19 .15
---------------------------------------
Total from investment operations .08 .16 .56 .47
- -----------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.11) (.19) (.42) (.32)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $10.29 $10.32 $10.35 $10.21
=======================================
- -----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 0.82% 1.58% 5.60% 4.74%
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $45,375 $43,645 $24,101 $1,922
- -----------------------------------------------------------------------------------------
Average net assets (in thousands) $43,059 $35,965 $ 8,750 $ 597
- -----------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 2.20% 1.75% 3.62% 5.29%
Total expenses 1.29% 1.20% 1.11% 0.87%
Expenses after expense reimbursement or
fee waiver and reduction to custodian expenses 1.23% N/A 4 N/A 4 N/A 4
- -----------------------------------------------------------------------------------------
Portfolio turnover rate 43% 82% 161% 97%
<FN>
1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
SIX MONTHS YEAR
ENDED ENDED
MARCH 31, 2004 SEPT. 30,
CLASS Y (UNAUDITED) 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.32 $10.34 $10.21 $ 9.93 $10.03 $10.37
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .15 .26 .47 .56 .68 .66
Net realized and unrealized gain (loss) (.03) (.01) .14 .33 (.13) (.34)
----------------------------------------------------------------
Total from investment operations .12 (.25) .61 .89 .55 .32
- ---------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.15) (.27) (.48) (.61) (.65) (.66)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.29 $10.32 $10.34 $10.21 $9.93 $10.03
================================================================
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1 1.22% 2.41% 6.13% 9.19% 5.71% 3.15%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $249,782 $241,856 $141,508 $42,527 $6,400 $69
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $245,374 $201,564 $ 86,883 $22,239 $4,178 $ 2
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income 2.99% 2.53% 4.54% 5.14% 6.78% 6.75%
Total expenses 0.44% 3 0.44% 3 0.49% 3 0.71% 3 0.51% 3 0.60% 3
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 43% 82% 161% 97% 121% 141%
<FN>
1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year.
3. Reduction to custodian expenses less than 0.01%.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Limited-Term Government Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek high current
return and safety of principal. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class
A shares are sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares are sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares are sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ by minor amounts due to each class having
its own expenses directly attributable to that class. Classes A, B, C and N
have separate distribution and/or service plans. No such plan has been adopted
for Class Y shares. Class B shares will automatically convert to Class A shares
six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. Securities listed or traded on National Stock Exchanges
or other domestic or foreign exchanges are valued based on the last sale price
of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ are valued based on the closing
price provided by NASDAQ prior to the time when the Fund's assets are valued.
In the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing bid and asked
prices, and if not, at the closing bid price. Securities may be valued
primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities (including restricted
securities) for which market quotations are not readily available are valued at
their fair value. Foreign securities whose values have been materially affected
by what the Manager identifies as a significant event occurring before the
Fund's assets are valued but after the close of their respective foreign
exchanges will be fair valued. Fair value is determined in good faith using
consistently applied procedures under the supervision of the Board of Trustees.
Short-term "money market type" debt securities with remaining maturities of
sixty days or less are valued at amortized cost (which approximates market
value).
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN ISSUED BASIS. Delivery and payment for securities that
have been purchased by the Fund on a when issued basis can take place a month
or more after the trade date. Normally the settlement date occurs within six
months after the trade date; however, the Fund may, from time to time, purchase
securities whose settlement date extends six months or more beyond trade date.
During this period, such securities do
26 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
not earn interest, are subject to market fluctuation and may increase or
decrease in value prior to their delivery. The Fund maintains segregated assets
with a market value equal to or greater than the amount of its purchase
commitments. The purchase of securities on a when issued basis may increase the
volatility of the Fund's net asset value to the extent the Fund executes such
purchases while remaining substantially fully invested. As of March 31, 2004,
the Fund had entered into net when issued commitments of $1,036,986,501.
In connection with its ability to purchase securities on a when issued
basis, the Fund may enter into forward roll transactions with respect to
mortgage-related securities. Forward roll transactions require the sale of
securities for delivery in the current month, and a simultaneous agreement with
the same counterparty to repurchase similar (same type, coupon and maturity)
but not identical securities on a specified future date. The Fund records the
incremental difference between the forward purchase and sale of each forward
roll as fee income or realized gain (loss) on investments.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities to what was sold to the counterparty
at redelivery; counterparty credit risk; and the potential pay down speed
variance between the mortgage-related pools.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral, for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the market value of the
collateral be sufficient to cover payments of interest and principal. In the
event of default by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes primarily due to the recognition of
paydown gains and losses as capital gain or loss for tax purposes. The
character of dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from
27 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
their ultimate characterization for federal income tax purposes. Also, due to
timing of dividends and distributions, the fiscal year in which amounts are
distributed may differ from the fiscal year in which the income or net realized
gain was recorded by the Fund.
As of March 31, 2004, the Fund had available for federal income tax purposes
an estimated unused capital loss carryforward of $76,107,412 expiring by 2011.
This estimated capital loss carryforward represents carryforward as of the end
of the last fiscal year, increased for losses deferred under tax accounting
rules to the current fiscal year and is increased or decreased by capital
losses or gains realized in the first six months of the current fiscal year.
During the six months ended March 31, 2004 and the year ended September 30,
2003, the Fund did not utilize any capital loss carryforwards.
As of September 30, 2003, the Fund had available for federal income tax
purposes unused capital loss carryforwards as follows:
EXPIRING
----------------------
2008 $ 1,794,205
2009 18,671,218
2011 34,245,059
-----------
Total $54,710,482
===========
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though equal dollar amounts had been invested in shares of the Fund or are
invested in other Oppenheimer funds selected by the Trustee. Deferral of
trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net investment
income per share. Amounts will be deferred until distributed in accordance to
the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are
declared daily and paid monthly. Capital gain distributions, if any, are
declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and
amortization of premium, is accrued as earned.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
28 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------
CLASS A
Sold 22,684,755 $ 233,275,057 100,461,351 $1,039,189,571
Dividends and/or
distributions reinvested 1,332,979 13,703,523 2,504,365 25,899,896
Redeemed (34,050,750) (350,119,374) (101,241,200) (1,046,630,523)
------------------------------------------------------------
Net increase (decrease) (10,033,016) $(103,140,794) 1,724,516 $ 18,458,944
============================================================
- ---------------------------------------------------------------------------------------
CLASS B
Sold 3,843,496 $ 39,508,478 29,213,322 $ 302,173,190
Dividends and/or
distributions reinvested 457,506 4,700,874 892,086 9,226,246
Redeemed (17,900,502) (183,985,708) (33,341,136) (344,508,779)
------------------------------------------------------------
Net decrease (13,599,500) $(139,776,356) (3,235,728) $ (33,109,343)
============================================================
- ---------------------------------------------------------------------------------------
CLASS C
Sold 6,134,030 $ 62,964,646 33,644,164 $ 347,374,197
Dividends and/or
distributions reinvested 428,636 4,397,795 805,763 8,316,702
Redeemed (18,386,818) (188,707,453) (31,472,492) (324,558,712)
------------------------------------------------------------
Net increase (decrease) (11,824,152) $(121,345,012) 2,977,435 $ 31,132,187
============================================================
- ---------------------------------------------------------------------------------------
CLASS N
Sold 1,428,068 $ 14,677,366 3,877,790 $ 40,070,323
Dividends and/or
distributions reinvested 40,940 420,493 56,238 580,959
Redeemed (1,289,396) (13,245,565) (2,032,606) (20,996,213)
------------------------------------------------------------
Net increase 179,612 $ 1,852,294 1,901,422 $ 19,655,069
===========================================================
29 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
SIX MONTHS ENDED MARCH 31, 2004 YEAR ENDED SEPTEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------
CLASS Y
Sold 3,701,342 $ 38,038,871 13,011,063 $ 134,494,322
Dividends and/or
distributions reinvested 2,156 22,148 4,686 48,440
Redeemed (2,870,033) (29,493,328) (3,256,157) (33,600,887)
----------------------------------------------------------
Net increase 833,465 $ 8,567,691 9,759,592 $ 100,941,875
==========================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended March 31, 2004, were
$1,179,710,129 and $1,281,138,612, respectively.
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee at
annual rate of 0.50% of the first $100 million of average annual net assets of
the Fund, 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. Effective March
1, 2004, the Manager has voluntarily undertaken to limit the "Total Annual
Operating Expenses" for all classes of shares so that "Total Annual Operating
Expenses," as percentages of average daily net assets, will not exceed the
following annual rates: 0.70% for the Class A shares; 1.45% for the Class B and
Class C shares, respectively; 0.95% for the Class N shares and 0.45% for the
Class Y shares. The Manager may terminate this voluntary expense limitation
arrangement at any time without notice to shareholders.
- --------------------------------------------------------------------------------
ACCOUNTING FEES. 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.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the six months ended March 31, 2004, the
Fund paid $2,623,024 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $5,000 for
assets of less than $10 million and $10,000 for assets of $10 million or more.
The Class Y shares are subject to the minimum fees in the event that the per
account fee does not equal or exceed the applicable minimum fees. OFS may
voluntarily waive the minimum fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees up to an annual rate of 0.35% of average annual net assets for all
classes. This undertaking may be amended or withdrawn at any time.
30 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
A shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial institutions for
personal services and account maintenance services they provide for their
customers who hold Class A shares. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Fund has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services in connection with the
distribution of these shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per year under each
plan. If either the Class B, Class C or Class N plan is terminated by the Fund
or by the shareholders of a class, the Board of Trustees and its independent
trustees must determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the service fee and/or asset-based sales
charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at March 31, 2004 for Class B, Class C and Class N shares were $3,931,138,
$12,726,470 and $897,709, respectively. Fees incurred by the Fund under the
plans are detailed in the Statement of Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -------------------------------------------------------------------------------------------
March 31, 2004 $424,242 $23,075 $851,108 $106,912 $38,302
31 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy
and sell futures contracts that relate to broadly based securities indices
"financial futures" or debt securities "interest rate futures" in order to gain
exposure to or protection from changes in market value of stock and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it
may be more efficient or cost effective than actually buying 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 has expired.
Cash held by the broker to cover initial margin requirements on open futures
contracts is noted in the Statement of Assets and Liabilities. Securities held
in collateralized accounts to cover initial margin requirements on open futures
contracts are noted in the Statement of Investments. The Statement of Assets
and Liabilities reflects a receivable and/or payable for the daily mark to
market for variation margin. Realized gains and losses are reported on the
Statement of Operations as closing and expiration of futures contracts. The net
change in unrealized appreciation and depreciation is reported on the Statement
of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of March 31, 2004, the Fund had outstanding futures contracts as follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATES CONTRACTS MARCH 31, 2004 DEPRECIATION
- ------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
U.S. Long Bonds 6/21/04 283 $ 32,279,688 $ 296,655
-----------
CONTRACTS TO SELL
U.S. Treasury Nts., 2 yr. 6/30/04 2,076 446,696,813 1,423,988
U.S. Treasury Nts., 10 yr. 6/21/04 3,114 359,375,063 5,854,662
-----------
7,278,650
-----------
$7,575,305
===========
32 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
- --------------------------------------------------------------------------------
6. INTEREST RATE SWAP CONTRACTS
The Fund may enter into an interest rate swap transaction to maintain a total
return or yield spread on a particular investment, or portion of its portfolio,
or for other non-speculative purposes. Interest rate swaps involve the exchange
of commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The coupon payments are based on an agreed
upon principal amount and a specified index. Because the principal amount is
not exchanged, it represents neither an asset nor a liability to either
counterparty, and is referred to as notional. The Fund records an increase or
decrease to interest income, in the amount due to or owed by the Fund at
termination or settlement.
Interest rate swaps are subject to credit risk (if the counterparty fails to
meet its obligations) and interest rate risk. The Fund could be obligated to
pay more under its swap agreements than it receives under them, as a result of
interest rate changes.
As of March 31, 2004, the Fund had entered into the following interest rate
swap agreements:
FLOATING RATE
RATE PAID BY RECEIVED BY
THE FUND AT THE FUND AT UNREALIZED
SWAP NOTIONAL MARCH 31, MARCH 31, FLOATING TERMINATION APPRECIATION
COUNTERPARTY PRINCIPAL 2004 2004 RATE INDEX DATE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------
JPMorgan Three-Month
Chase Bank $1,000,000 1.110% 1.895% LIBOR 4/2/06 $--
- --------------------------------------------------------------------------------
7. ILLIQUID SECURITIES
As of March 31, 2004, 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 10% 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 as of March
31, 2004 was $33,539,401, which represents 1.24% of the Fund's net assets.
- --------------------------------------------------------------------------------
8. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral. Cash collateral is invested in cash equivalents. As of March 31,
2004, the Fund had on loan securities valued at approximately
33 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. SECURITIES LENDING Continued
$792,341,000. Cash of $805,630,141 was received as collateral for the loans,
and has been invested in approved instruments.
- --------------------------------------------------------------------------------
9. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's order requires the Fund's Board of Trustees to adopt operating policies
and procedures to administer interfund borrowing and lending. Under the
arrangement the Fund may lend money to other Oppenheimer funds and may borrow
from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
based upon a recommendation by the Manager. The Fund's borrowings, if any, are
subject to asset coverage requirements under the Investment Company Act and the
provisions of the SEC order and other applicable regulations. If the Fund
borrows money, there is a risk that the loan could be called on one day's
notice, in which case the Fund might have to borrow from a bank at higher rates
if a loan were not available from another Oppenheimer fund. If the Fund lends
money to another fund, it will be subject to the risk that the other fund might
not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six
months ended or at March 31, 2004.
- --------------------------------------------------------------------------------
PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and
Procedures is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, (ii) on the Fund's website at
www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In
addition, the Fund will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31, 2004,
for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX
filing will be available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov.
34 | OPPENHEIMER LIMITED-TERM GOVERNMENT FUND
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that Edward L.
Cameron, the Chairman of the Board's Audit Committee, and George C. Bowen, a
member of the Board's Audit Committee, possess the technical attributes
identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit
committee financial experts," and has designated Messrs. Cameron and Bowen as
the Audit Committee's financial experts. Messrs. Cameron and Bowen are
"independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board is responsible for approving nominees for election as trustees. To
assist in this task, the Board has designated the Audit Committee as the
nominating committee for the Board. It reviews and recommends nominees to the
Board. The Committee is comprised entirely of disinterested trustees as defined
in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the Committee in
nominating candidates for election as independent Trustees of the Registrant.
The Registrant's Board has adopted a written charter for the Committee. A
current copy of the Audit Committee charter is available to shareholders on the
OppenheimerFunds website at www.oppenheimerfunds.com.
Under the current policy, if the Board determines that a vacancy exists or is
likely to exist on the Board, the Audit Committee of the Board will consider
candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by
mailing their submission to the offices of OppenheimerFunds, Inc., 6803 South
Tucson Way, Centennial, CO 80112, to the attention of the Board of Trustees of
the named Registrant, c/o the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for trustees
includes a number of factors. In screening candidates for board membership,
whether the candidate is suggested by Board members, shareholders or others, the
Committee considers the candidate's professional experience, soundness of
judgment, integrity, ability to make independent, analytical inquiries,
collegiality, willingness and ability to devote the time required to perform
Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of March 31, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)