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OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
ANNUAL REPORT JUNE 30, 1994
[Logo]
OPPENHEIMER FUNDS
"Our taxes were increasing while our deductions were decreasing. We
needed an investment that would help us keep more of what we earn.
"We invested in this Fund because it lets us take advantage of the tax-free
benefits of municipal bonds. We've earned a level of income that lets us enjoy
everything life has to offer."
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FUND FACTS
IN THIS REPORT:
ANSWERS TO THREE TIMELY QUESTIONS YOU SHOULD ASK YOUR FUND'S MANAGERS.
- - DID THE FEDERAL RESERVE'S MOVES TO RAISE INTEREST RATES OVER THE PAST SIX
MONTHS AFFECT THE FUND'S INVESTMENT STRATEGY OR RETURNS?
- - HOW ARE CALIFORNIA'S ECONOMY AND BUDGET SHAPING UP, AND WHAT'S THE CREDIT
OUTLOOK FOR THE STATE'S BONDS?
- - WHAT'S THE LONGER-TERM OUTLOOK FOR THE CALIFORNIA MUNICIPAL MARKET?
FACTS EVERY SHAREHOLDER SHOULD KNOW ABOUT
OPPENHEIMER MAIN STREET CALIFORNIA TAX-EXEMPT FUND
1 The Fund seeks high current income exempt from federal and California state
income taxes while attempting to preserve capital.
2 Standardized yields for Class A and B shares for the 30 days ended June 30,
1994 were 5.47% and 4.60%, respectively.(1)
3 Total return at net asset value for Class A shares for the 12-month period
ended June 30, 1994 was -0.60%. Total return at net asset value for Class B
shares since inception on October 29, 1993 was -5.42%.(2)
4 Average annual total returns for Class A shares for the 1-year period, and
since inception of the Fund on May 18, 1990 were -5.32% and 6.65%,
respectively.(3) Total return for Class B shares since inception on October
29, 1993 was -10.15%.
5 Under the new, higher federal tax rates, the value of tax-free income has
increased. The table below shows the taxable equivalent yield required to
match the Fund's current yield for the new tax brackets.
HERE IS THE TAXABLE EQUIVALENT OF THE FUND'S YIELD FOR A
CALIFORNIA RESIDENT, FILING A JOINT RETURN WITH TAXABLE
INCOME OF:
FUND YIELD
ON 6/30/94 $92,000 $225,000 $260,000
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Class A(1) 5.47% 8.74% 9.50% 10.06%
Class B(1) 4.60% 7.35% 7.99% 8.46%
This table assumes that an investor's highest effective tax bracket
(combined federal and state) applies to the change in taxable income
resulting from a switch between taxable and non-taxable investments. A
portion of the Fund's distributions may be subject to income taxes. For
investors subject to alternative minimum tax, a portion of the Fund's
distributions may increase that tax.
6 "California faces significant challenges--for example, how best to fund
education, allocate tax revenues, help the economy grow, and recover from
last year's earthquake. Fortunately, these efforts are supported by the
state's underlying economic strength."
PORTFOLIO MANAGER BOB PATTERSON, JUNE 30, 1994
(1) Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30 day period ended 6/30/94, divided by the
maximum offering price at the end of the period, compounded semi-annually and
then annualized. Falling net asset values will tend to artificially raise
yields.
(2) Based on the change in net asset value from 6/30/93 and 10/29/93,
respectively to 6/30/94, without deducting any sales charges.
(3) Average annual total returns are based on a hypothetical investment in Class
A shares, after deducting the maximum initial sales charge of 4.75% on 6/30/93
and 5/18/90, respectively, held until 6/30/94. The total return for Class B
shares was based on a hypothetical investment held for that period, after
deducting the 5% contingent deferred sales charge.
Past performance is not indicative of future results. The principal value and
return of an investment in the Fund will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
2 Oppenheimer Main Street California Tax-Exempt Fund
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REPORT TO SHAREHOLDERS
Oppenheimer Main Street California Tax-Exempt Fund met its objective of
providing income exempt from federal and state taxes for the year ended June 30,
1994. On that date, Morningstar awarded your Fund's Class A shares a STAR STAR
STAR STAR ranking, among 551 municipal bond funds.(4)
The Fund's total return over the last 12 months was, of course, affected by
the broad decline in bond prices that followed four increases in short-term
interest rates by the Federal Reserve Board from early February through mid-May.
Throughout the period, however, your management team held to a steady course.
Rather than trying to track temporary turns in the market, your managers
continued to focus on bond maturity, quality, call protection and
diversification--all factors that help moderate price fluctuations and have
contributed to the Fund's long-term performance.
As a result, the Fund is currently well-positioned to take advantage of
what your managers expect to be a strong California market in the months ahead,
a belief supported by several factors. First, inflation--the factor that has the
greatest effect on interest-rate levels and long-term bond values--remains well
under control. Barring a sudden shift in the economy or the currency markets,
interest rates are likely to hold in their current ranges, making tax-free bonds
more attractive to investors.
Second, the municipal market's supply and demand characteristics are
positive. The supply of municipal bonds is running well below last year's pace,
while demand for tax-free securities is rising. California remains the nation's
largest single municipal issuer, and the combination of shrinking supply and
mounting demand nationwide should provide significant support for California
bond prices.
To take advantage of these developments, your managers continue to focus on
essential-service issues which are bonds backed by stable, predictable revenue
streams. We continue to invest in transportation, housing, and education
bonds--the market sectors likely to turn in the best performance over time.
Looking ahead, your managers believe that at current price and yield levels
the California market offers real value to investors. While day-to-day market
fluctuations may be greater than has been the case in the past, the fundamentals
for long-term performance are in place, and your managers will look for
opportunities to buy value at attractive prices--the best way to produce
long-term investment gains.
We appreciate your trust in Oppenheimer Main Street California Tax-Exempt
Fund. We look forward to helping you meet your investment goals in the future.
James C. Swain, Chairman Jon S. Fossel, President
Oppenheimer Main Street Oppenheimer Main Street
California Tax-Exempt Fund California Tax-Exempt Fund
July 22, 1994
4. Source: MORNINGSTAR MUTUAL FUNDS, 6/30/94. Morningstar, Inc., an independent
mutual fund monitoring service, produces proprietary monthly rankings of mutual
funds in broad investment categories (equity, taxable bond, tax-exempt bond, or
"hybrid") that reflect historical risk-adjusted performance based on a fund's
3-, 5-, and 10-year average annual total returns in excess of 90-day U.S.
Treasury bill returns, after considering expenses and sales charges. Risk is
calculated by a factor that reflects fund performance below 3-month U.S.
Treasury bill returns. Risk and returns are combined to produce star rankings,
reflecting risk-adjusted performance relative to the average fund in a category.
The highest ranking is 5 stars, the lowest, 1 star. The Fund was ranked among
551 municipal bond funds of which 10% receive 5 stars and 22.5% receive 4 stars.
Rankings are subject to change. The Fund's Class A and Class B shares have the
same portfolio.
All figures assume reinvestment of dividends and capital gains distribution.
3 Oppenheimer Main Street California Tax-Exempt Fund
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Statement of Investments June 30, 1994
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
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Municipal Bonds and Notes--98.1%
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California--86.2% Alameda County, California Certificates of
Participation, Prerefunded, BIG Insured, 7.25%, 6/1/09 Aaa/AAA
$1,635,000 $1,839,542
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Anaheim, California Public Financing Authority
Tax Allocation Revenue Bonds, MBIA Insured,
9.72%, 12/28/18(1) Aaa/AAA 1,000,000 1,028,398
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California Educational Facilities Authority Revenue Bonds, Santa Clara
University Project,
6.25%, 2/1/16 A1/NR 1,000,000 979,076
California Health Facilities Financing Authority:
Revenue Bonds:
Episcopal Homes Project, Series A,
OSHPD Insured,
7.80%, 7/1/15 NR/A+ 1,000,000 1,080,854
Henry Mayo Newhall Project, Series A,
OSHPD Insured,
8%, 10/1/18 NR/A+ 280,000 305,834
Revenue Refunding Bonds, Catholic Health
Facilities, Series A, MBIA Insured,
5%, 7/1/11 Aaa/AAA 2,500,000 2,185,082
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California Housing Finance Agency Revenue Bonds, Home Mtg., Series C:
FHA Insured, 7.60%, 8/1/30 Aa/A+ 75,000 77,456
6.75%, 2/1/25 Aa/A+ 5,000,000 5,069,714
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California Pollution Control Financing Authority Revenue Bonds, Pacific Gas and
Electric Co., Series B,
6.35%, 6/1/09 A1/A 2,000,000 1,971,482
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California State Department of Water Resources Revenue Bonds, Central Valley
Water System Project, Series L,
5.50%, 12/1/23 Aa/AA 2,000,000 1,748,456
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California State General Obligation Bonds, FSA Insured,
5.50%, 4/1/19 Aaa/AAA/AAA 2,500,000 2,219,265
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California State Public Works Board Lease Revenue Bonds:
Department of Corrections California State Prison, Series B, MBIA Insured,
5.50%, 12/1/12 Aaa/AAA/A+ 3,000,000 2,764,941
Regents of the University of California, Prerefunded, Series A,
7%, 9/1/15 Aaa/AAA/AAA 150,000 166,281
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Capistrano, California University School District Community Facilities Special
Tax Bonds, No. 87-1,
7.60%, 9/1/14 NR/NR 1,000,000 1,017,478
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Contra Costa, California Water District Revenue Bonds, Prerefunded, Series A,
6.875%, 10/1/20 A/A+ 1,100,000 1,212,945
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Corona, California Certificates of Participation, Prerefunded, Series B,
10%, 11/1/20 Aaa/AAA 2,250,000 2,966,168
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East Bay, California Municipal Utility District Water System Revenue Bonds,
Prerefunded, AMBAC Insured,
6.375%, 6/1/21 Aaa/AAA/AAA 1,000,000 1,078,550
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Los Angeles, California Community Redevelopment Agency Finance Revenue Bonds,
Grand Central Qualified Redevelopment, Series A,
5.90%, 12/1/13 A2/A
1,000,000 884,096
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Los Angeles, California Department of Water and Power Electric Plant Revenue
Bonds: Second Issue 1991,
6%, 6/1/12 Aa/AA 500,000 483,473
7.375%, 2/1/29 Aa/AA 2,000,000 2,234,378
4 Oppenheimer Main Street California Tax-Exempt Fund
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Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
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California (continued) Los Angeles, California Wastewater System Revenue
Refunding Bonds, Series D, FGIC Insured,
8.70%, 11/1/03 Aaa/AAA/AAA $5,115,000 $6,267,650
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Los Angeles County, California Certificates of Participation, Correctional
Facilities Project, MBIA Insured,
6.50%, 9/1/13 Aaa/AAA 400,000 408,584
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Los Angeles County, California Transportation: Revenue Bonds, Commission Sales
Tax, Prerefunded, Series A, FGIC Insured,
6.75%, 7/1/18 Aaa/AAA/AAA 1,000,000 1,097,976
Revenue Refunding Bonds, Commission Sales Tax, Prerefunded, Series A,
8%, 7/1/16 Aaa/A+/A+ 1,000,000 1,110,403
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Metropolitan Water District Revenue Bonds, Southern California Waterworks
Project:
5%, 7/1/20 Aa/AA 2,500,000 2,016,460
8.005%, 10/30/20(1) Aa/AA 1,500,000 1,150,183
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Orange County, California Community Facilities District Special Tax Bonds:
No. 87-3 Mission Viejo, Series A,
8.05%, 8/15/08 A/NR 1,480,000 1,623,846
No. 88-1 Aliso Viejo, Prerefunded, Series A,
7.35%, 8/15/18 NR/NR 2,000,000 2,280,546
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Pittsburg, California Improvement Bond Act of 1915 Bonds, Assessment District
1990-01,
7.75%, 9/2/20 NR/NR 100,000 100,768
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Rancho, California Water District Financing Authority Revenue Refunding Bonds,
AMBAC Insured,
5%, 8/15/14 Aaa/AAA/AAA 1,500,000 1,262,617
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Redding, California Electric System Revenue Certificates of Participation:
FGIC Insured, 8.043%, 6/1/19(1) Aaa/AAA/AAA 1,150,000 926,680
MBIA Insured, 9.461%, 7/8/22(1) Aaa/AAA 500,000 493,109
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Riverside County, California Community Facilities District Bonds, Special Tax
No. 88-12,
7.55%, 9/1/17 NR/NR 1,500,000 1,515,208
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Sacramento, California Municipal Utility District Electric Revenue Refunding
Bonds:
Series B, FGIC Insured, 9.376%, 8/15/18(1) Aaa/AAA/AAA 1,500,000
1,487,415
Series D, MBIA Insured, 5.25%, 11/15/20 Aaa/AAA/A- 2,000,000
1,706,446
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San Bernardino County, California Certificates of Participation, Medical Center
Financing Project,
5.50%, 8/1/17 Baa1/A 2,500,000 2,108,652
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San Diego County, California Water Authority Revenue Certificates of
Participation, Series B, MBIA Insured,
9.28%, 4/8/21(1) Aaa/AAA 1,000,000 994,013
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San Francisco, California Bay Area Rapid Transit District Revenue Refunding
Bonds, AMBAC Insured,
6.75%, 7/1/11 Aaa/AAA/AAA 1,000,000 1,060,548
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San Francisco, California City and County Airport Commission International
Airport Revenue Refunding Bonds, Second Series, Issue I, AMBAC Insured,
6.30%, 5/1/11 Aaa/AAA/AAA 1,000,000 1,010,109
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San Joaquin Hills, California Transportation Corridor Agency Toll Road Revenue
Bonds, Sr. Lien,
6.75%, 1/1/32 NR/NR/BBB 3,500,000 3,348,859
5 Oppenheimer Main Street California Tax-Exempt Fund
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Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------
California (continued) South Orange County, California Public Financing
Authority Special Tax Revenue Bonds, Sr. Lien, Series A, MBIA Insured,
6.20%, 9/1/13 Aaa/AAA $1,000,000 $987,758
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Southern California Home Financing Authority Single Family Mtg. Revenue Bonds,
GNMA and FNMA Mtg.-Backed Securities, Series A,
7.35%, 9/1/24 NR/AAA 285,000 297,185
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Southern California Public Power Authority Revenue Refunding Bonds,
8.848%, 7/1/12(1) Aa/AA- 2,500,000 2,369,835
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University of California Revenue Refunding Bonds, Multiple Purpose Project,
Series A,
6.875%, 9/1/16 A/A- 1,000,000 1,109,214
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Victorville, California Special Tax Bonds, Community Facilities District No.
90-1 (Western Addition), Series A,
8.30%, 9/1/16 NR/NR 450,000 468,852
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West Basin, California Municipal Water District Certificates of Participation,
Prerefunded, AMBAC Insured,
6.85%, 8/1/16 Aaa/AAA/AAA 1,000,000 1,099,815
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69,616,200
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U.S. Possessions--11.9% Puerto Rico Commonwealth Highway Authority Revenue
Bonds,Prerefunded, Series P,
8.125%, 7/1/13 Aaa/AAA 2,000,000 2,268,576
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Puerto Rico Commonwealth Public Improvement General Obligation Bonds:
Prerefunded, Series A, 7.75%, 7/1/17 NR/AAA 1,000,000 1,132,213
Prerefunded, 7.25%, 7/1/12 NR/AAA 1,430,000 1,558,711
YCNS, MBIA Insured, 8.314%, 7/1/08(1) Aaa/AAA 1,500,000 1,517,763
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Puerto Rico Housing Finance Corp. Single Family Mtg. Revenue Bonds, Portfolio 1,
Series B,
7.65%, 10/15/22 Aaa/AAA 380,000 391,638
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Puerto Rico Public Buildings Authority Guaranteed Public Education and Health
Facilities Revenue Bonds, Prerefunded, Series H,
7.875%, 7/1/07 Aaa/AAA 2,500,000 2,766,995
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9,635,896
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Total Investments, at Value (Cost $81,294,291) 98.1% 79,252,096
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Other Assets Net of Liabilities 1.9 1,505,267
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Net Assets 100.0% $80,757,363
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(1) Represents the current interest rate for a variable rate bond. Variable rate
bonds known as "inverse floaters" pay interest at a rate that varies inversely
with short-term interest rates. As interest rates rise, inverse floaters produce
less current income. Their price may be more volatile than the price of a
comparable fixed-rate security.
See accompanying Notes to Financial Statements.
6 Oppenheimer Main Street California Tax-Exempt Fund
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Statement of Assets and Liabilities June 30, 1994
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Assets Investments, at value (cost $81,294,291)--see accompanying statement
$79,252,096
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Cash 181,329
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Receivables:
Interest 1,564,695
Shares of capital stock sold 145,006
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Deferred organization costs 1,391
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Other 8,736
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Total assets 81,153,253
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Liabilities Payables and other liabilities:
Dividends 265,443
Shares of capital stock redeemed 92,116
Distribution and service plan fees--Note 4 1,031
Other 37,300
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Total liabilities 395,890
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Net Assets $80,757,363
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- ------
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Composition of Net Assets
Par value of shares of capital stock 68,336
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Additional paid-in capital 82,845,340
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Overdistributed net investment income (95,768)
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Accumulated net realized loss from investment transactions (18,350)
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Net unrealized depreciation on investments--Note 3 (2,042,195)
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Net assets $80,757,363
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Net Asset Value
Per Share
Class A Shares:
Net asset value and redemption price per share (net assets of $79,554,826 and
6,731,736 shares of capital stock outstanding) $11.82
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $12.41
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Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,202,537 and 101,906 shares of capital stock outstanding) $11.80
See accompanying Notes to Financial Statements.
7 Oppenheimer Main Street California Tax-Exempt Fund
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Statement of Operations For the Year Ended June 30, 1994
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Investment Income Interest $5,432,409
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Expenses Management fees--Note 4 318,921
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Transfer and shareholder servicing agent fees--Note 4 51,532
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Shareholder reports 32,644
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Legal and auditing fees 16,104
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Registration and filing fees:
Class A 5,418
Class B 391
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Distribution and service plan fees--Class B--Note 4 4,375
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Custodian fees and expenses 2,333
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Directors' fees and expenses 1,397
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Other 3,982
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Total expenses 437,097
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Net Investment Income 4,995,312
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Realized and Unrealized
Loss on Investments
Net realized loss on investments (102,647)
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Net change in unrealized appreciation or depreciation on investments
(5,742,053)
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Net realized and unrealized loss on investments (5,844,700)
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Net Decrease in Net Assets Resulting From Operations $(849,388)
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See accompanying Notes to Financial Statements.
8 Oppenheimer Main Street California Tax-Exempt Fund
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Statements of Changes in Net Assets
Year Ended June 30,
1994 1993
- ------
Operations Net investment income $4,995,312 $3,542,119
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Net realized gain (loss) on investments (102,647) 175,417
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Net change in unrealized appreciation or depreciation on investments
(5,742,053) 2,790,047
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Net increase in net assets resulting from operations (849,388) 6,507,583
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Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A ($.729 and $.81 per share, respectively) (4,729,265) (3,585,299)
Class B ($.37 per share) (19,459) --
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Dividends in excess of net investment income:
Class A ($.028 per share) (179,070) --
Class B ($.014 per share) (737) --
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Distributions from net realized gain on investments:
Class A ($.02 per share) -- (78,238)
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Distributions in excess of gain on investments:
Class A ($.028 per share) (186,921) --
Class B ($.028 per share) (599) --
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Capital Stock
Transactions
Net increase in net assets resulting from Class A capital stock
transactions--Note 2 13,070,898 29,488,371
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Net increase in net assets resulting from Class B capital stock
transactions--Note 2 1,264,874 --
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Net Assets Total increase 8,370,333 32,332,417
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Beginning of year 72,387,030 40,054,613
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End of year (including overdistributed net investment income
of $95,768 and $43,180, respectively) $80,757,363 $72,387,030
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See accompanying Notes to Financial Statements.
9 Oppenheimer Main Street California Tax-Exempt Fund
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Financial Highlights
Class A Class B
- ------ ------
Year Ended Period Ended
June 30, June 30,
1994 1993 1992 1991 1990(2) 1994(1)
- ------
Per Share Operating Data:
Net asset value, beginning
of period $12.66 $12.05 $11.61 $11.56 $11.43 $12.90
Income (loss) from
investment operations:
Net investment income .75 .80 .82 .83(3) .06(3) .38
Net realized and unrealized
gain (loss) on investments (.80) .64 .45 .05 .13 (1.07)
- ------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (.05) 1.44 1.27 .88 .19 (.69)
- ------
Dividends and distributions to shareholders:
Dividends from net
investment income (.73) (.81) (.82) (.83) (.06) (.37)
Dividends in excess of net
investment income (.03) -- -- -- -- (.01)
Distributions from net realized
gain on investments -- (.02) (.01) -- -- --
Distributions in excess of net
realized gain on investments (.03) -- -- -- -- (.03)
- ------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (.79) (.83) (.83) (.83)
(.06) (.41)
- ------
Net asset value, end of period $11.82 $12.66 $12.05 $11.61
$11.56 $11.80
- ------ ------ ------ ------ ------ ------
- ------ ------ ------ ------ ------ ------
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Total Return, at Net Asset Value(4) (.60)% 12.53% 11.21%
7.94% 1.95% (5.42)%
- ------
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $79,555 $72,387 $40,055 $13,924 $2,027
$1,203
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Average net assets
(in thousands) $81,741 $54,840 $26,304 $6,661 $1,685
$649
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Number of shares outstanding
at end of period (in thousands) 6,732 5,719 3,324 1,199 175
102
- ------
Ratios to average net assets:
Net investment income 6.09% 6.46% 6.74% 6.94% 5.48%(5)
4.91%(5)
Expenses .53% .39% .32% .33%(3) .20%(3)(5) 1.62%(5)
- ------
Portfolio turnover rate(6) 20.2% 5.8% 25.7% 14.6% 0.0% 20.2%
1. For the period from October 29, 1993 (inception of offering) to June 30,
1994.
2. For the period from May 18, 1990 (commencement of operations) to June 30,
1990.
3. Net investment income would have been $.82 and $.04 per share in 1991 and
1990 absent the voluntary expense assumption, resulting in an expense ratio of
.42% and 1.93%, respectively.
4. Assumes a hypothetical initial 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.
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) for the year
ended June 30, 1994 were $29,672,105 and $15,979,622, respectively.
See accompanying Notes to Financial Statements.
10 Oppenheimer Main Street California Tax-Exempt Fund
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Notes to Financial Statements
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1. Significant Accounting Policies
Oppenheimer Main Street California Tax-Exempt Fund (the Fund), formerly named
Main Street Funds, Inc. -- California Tax-Exempt Fund, is a separate series of
Oppenheimer Main Street Funds, Inc., an open-end management investment company
registered under the Investment Company Act of 1940, as amended. The Fund's
investment advisor is Oppenheimer Management Corporation (the Manager). The Fund
offers both Class A and Class B shares. Class A shares are sold with a front-end
sales charge. Class B shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical rights to earnings, assets and
voting privileges, except that each class has its own expenses directly
attributable to a particular class and exclusive voting rights with
respect to matters affecting a single class. In addition, Class B shares have
their own distribution plan and 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.
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Investment Valuation. Portfolio securities are valued at 4:00 p.m. (New York
time) on each trading day. Long-term debt securities are valued by a portfolio
pricing service approved by the Board of Directors. Long-term debt securities
which cannot be valued by the approved portfolio pricing service are valued by
averaging the mean between the bid and asked prices obtained from two active
market makers in such securities. Short-term 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. Securities for
which market quotes are not readily available are valued under procedures
established by the Board of Directors to determine fair value in good faith.
- ------
Allocation of Income, Expenses and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- ------
Federal Income 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 tax provision is required.
- ------
Organization Costs. The Manager advanced $16,719 for organization and start-up
costs of the Fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Manager's initial investment in shares of the fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the
Fund for any unamortized expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares outstanding at the time of such
redemption.
- ------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A and Class B 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.
- ------
Change in Accounting for Distributions to Shareholders. Effective July 1, 1993,
the Fund adopted Statement of Position 93-2: Determination, Disclosure, and
Financial Statement Presentation of Income, Capital Gain, and Return of Capital
Distributions by Investment Companies. As a result, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, subsequent to June 30, 1993
amounts have been reclassified to reflect a decrease in undistributed net
investment income of $14,319, and a decrease in overdistributed capital loss on
investments of $14,319. During the year ended June 30, 1994, in accordance with
Statement of Position 93-2, undistributed net income was decreased by $105,050,
and overdistributed capital loss on investments was decreased by $105,050.
- ------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date).Original issue 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
unrealized appreciation and depreciation are determined on an identified cost
basis, which is the same basis used for federal income tax purposes. For bonds
acquired after April 30, 1993, accrued market discount is recognized at maturity
or disposition as taxable ordinary income. Taxable ordinary income is realized
to the extent of the lesser of gain or accrued market discount.
11 Oppenheimer Main Street California Tax-Exempt Fund
<PAGE>
- ------
Notes to Financial Statements (Continued)
- ------
2. Capital Stock The Fund has authorized 26,250,000 shares of $.01 par value
capital stock of each class. Transactions in shares
of capital stock were as follows:
Year Ended June 30, 1994(1) Year Ended June 30, 1993
- ------ ------
Shares Amount Shares Amount
- ------
Class A
Sold 1,640,622 $20,818,911 2,642,454 $32,529,648
Dividends and distributions reinvested 275,074 3,448,622 201,620
2,481,021
Redeemed (903,096) (11,196,635) (449,110) (5,522,298)
- ------ ------ ------ ------
Net increase 1,012,600 $13,070,898 2,394,964 $29,488,371
- ------ ------ ------ ------
- ------ ------ ------ ------
- ------
Class B
Sold 101,400 $1,258,622 -- $--
Dividends and distributions reinvested 1,061 12,907 -- --
Redeemed (555) (6,655) -- --
- ------ ------ ------ ------
Net increase 101,906 $1,264,874 -- $--
- ------ ------ ------ ------
- ------ ------ ------ ------
1. For the year ended June 30, 1994 for Class A shares and for the period from
October 29, 1993 (inception of offering) to June 30, 1994 for Class B shares.
- ------
3. Unrealized Gains and Losses on Investments
At June 30, 1994, net unrealized depreciation on investments of $2,042,195 was
composed of gross appreciation of $1,286,705, and gross depreciation of
$3,328,900.
- ------
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 an annual fee of .55% on net
assets, with a contractual waiver when net assets are less than $100 million.
Annual fees, reflecting this waiver, are .40% on net assets of $75 million or
more but less than $100 million, .25% of net assets of $50 million or more but
less than $75 million, .15% of net assets of $25 million or more but less than
$50 million, and 0% on net assets less than $25 million. The Manager has agreed
to assume Fund expenses (with specified exceptions) in excess of the regulatory
limitation of the State of California.
For the year ended June 30, 1994, commissions (sales charges paid by
investors) on sales of Class A shares totaled $663,089, of which $108,300 was
retained by Oppenheimer Funds Distributor, Inc. (OFDI), a subsidiary of the
Manager as general distributor.
Oppenheimer Shareholder Services (OSS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OSS's total costs of providing such services are allocated
ratably to these companies.
Under a separate approved plan, the Fund may expend up to .25% of its Class
B net assets annually to reimburse OFDI for costs incurred in connection with
the personal service and maintenance of accounts that hold Class B shares of the
Fund, including amounts paid to brokers, dealers, banks and other institutions.
In addition, Class B shares are subject to an asset-based sales charge of .75%
of net assets annually, to reimburse OFDI for sales commissions paid from its
own resources at the time of sale and associated financing costs. In the event
of termination or discontinuance of the Class B plan, the Board of Trustees may
allow the Fund to continue payment of the asset-based sales charge to OFDI for
distribution expenses incurred on Class B shares sold prior to termination or
discontinuance of the plan. During the year ended June 30, 1994, OFDI retained
$4,375 as reimbursement for Class B sales commissions and service fee advances,
as well as financing costs.
12 Oppenheimer Main Street California Tax-Exempt Fund
<PAGE>
- ------
Independent Auditors' Report
- ------
The Board of Trustees and Shareholders of Oppenheimer Main Street California
Tax-Exempt Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street California Tax-Exempt
Fund as of June 30, 1994, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended June 30, 1994
and 1993, and the financial highlights for the period May 18, 1990 to June 30,
1994. 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 also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confirmation of securities owned
at June 30, 1994 by correspondence with the custodian. 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 Main
Street California Tax-Exempt Fund at June 30, 1994, 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
Denver, Colorado
July 22, 1994
13 Oppenheimer Main Street California Tax-Exempt Fund
<PAGE>
- ------
Federal Income Tax Information (Unaudited)
- ------
In early 1995, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1994. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
A distribution of $.028 per share was paid on December 10, 1993, of which
$.022 was designated as a ``capital gain distribution'' for federal income tax
purposes. Whether received in stock or cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of capital assets held
for more than one year (long-term capital gains). Both short-term and long-term
capital gain distributions are subject to federal, state and local taxes.
None of the dividends paid by the Fund during the fiscal year ended June 30,
1994 are eligible for the corporate dividend-received deduction. The dividends
were derived from interest on municipal bonds and are not subject to federal
income tax. To the extent a shareholder is subject to any state or local tax
laws, some or all of the dividends received may be taxable.
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.
14 Oppenheimer Main Street California Tax-Exempt Fund
<PAGE>
- ------
Oppenheimer Main Street California Tax-Exempt Fund
A Series of Oppenheimer Main Street Funds, Inc.
- ------
Officers and Directors
James C. Swain, Chairman and Chief Executive Officer
Robert G. Avis, Director
William A. Baker, Director
Charles Conrad, Jr., Director
Jon S. Fossel, Director and President
Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
Andrew J. Donohue, Vice President
Robert E. Patterson, Vice President
George C. Bowen, Vice President, Secretary and Treasurer
Robert J. Bishop, Assistant Treasurer
Scott Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
- ------
Investment Advisor Oppenheimer Management Corporation
- ------
Distributor Oppenheimer Funds Distributor, Inc.
- ------
Transfer and Shareholder
Servicing Agent
Oppenheimer Shareholder Services
- ------
Custodian of
Portfolio Securities
The Bank of New York
- ------
Independent Auditors Deloitte & Touche
- ------
Legal Counsel Myer, Swanson & Adams, P.C.
This is a copy of a report to shareholders of Oppenheimer Main Street California
Tax-Exempt Fund. This report must be preceded or accompanied by a Prospectus of
Oppenheimer Main Street California Tax-Exempt Fund. For material information
concerning the Fund, see the Prospectus.
15 Oppenheimer Main Street California Tax-Exempt Fund
<PAGE>
"HOW MAY I HELP YOU?
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"Just as OppenheimerFunds offers over 30 different mutual funds designed to
help meet virtually every investment need, Oppenheimer Shareholder Services
offers a variety of services to satisfy your individual needs. Whenever you
require help, we're only a toll-free phone call away.
"For personalized assistance and account information, call our General
Information number to speak with our knowledgeable Customer Service
Representatives and get the help you need.
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shares, exchange shares, or conduct AccountLink transactions, simply by calling
our Telephone Transactions number.
"And for added convenience, OppenheimerFunds' PhoneLink, an automated voice
response system is available 24 hours a day, 7 days a week. PhoneLink gives you
access to a variety of fund, account, and market information. You can even make
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PhoneLink will always give you the option to speak with a Customer Service
Representative during the hours shown to the left.
"When you invest in OppenheimerFunds, you know you'll receive a high level
of customer service. The International Customer Service Association knows it,
too, as it awarded Oppenheimer Shareholder Services a 1993 Award of Excellence
for consistently demonstrating superior customer service.
"Whatever your needs, we're ready to assist you."
[Logo]
AWARD OF EXCELLENCE
ICSA
International Customer Service Association
[Photo]
BARBARA HENNIGAR
CHIEF EXECUTIVE OFFICER
OPPENHEIMER SHAREHOLDER SERVICES
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
[Logo] OPPENHEIMER FUNDS
Oppenheimer Funds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
