<PAGE> 1
SEMIANNUAL REPORT FEBRUARY 28, 1998
OPPENHEIMER
Main Street California
Municipal Fund(R)
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's Manager
10 Statement of Investments
16 Statement of
Assets and
Liabilities
18 Statement of Operations
19 Statements of
Changes in
Net Assets
20 Financial Highlights
22 Notes to Financial Statements
27 Officers and Directors
28 Information and Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - THE ASIAN FINANCIAL AND ECONOMIC CRISIS is of particular significance to
California, because the state's location, on the Pacific coast, makes it an
important point of contact for U.S. trade with Asia. While U.S. exports to the
region may suffer, exporters represent a much smaller portion of California's
trade sector than do importers.
- - THE SUPPLY OF MUNICIPAL BONDS INCREASED during the last 12 months, as many
municipalities took advantage of lower interest rates to finance new projects
and refinance existing debt.
- - TWO FACTORS SUPPORT A FURTHER RALLY IN MUNICIPAL BONDS: First, municipal
bonds are inexpensive relative to taxable bonds. And second, inflation remains
fairly benign, and the economy looks like it may slow down from year-end 1997
levels.
CUMULATIVE TOTAL RETURNS
For the 6-Month Period Ended 2/28/98
<TABLE>
<CAPTION>
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
<S> <C>
5.81% 0.78%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
<S> <C>
5.28% 0.28%
</TABLE>
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
IN REVIEWING PERFORMANCE AND RANKINGS, PLEASE REMEMBER THAT PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance is not annualized and would have been lower if sales
charges were taken into account.
2. Class A returns include the current maximum initial sales charge of 4.75%.
Class B returns include the applicable contingent deferred sales charge of 5%.
An explanation of the different performance calculations is in the Fund's
prospectus. Class B shares are subject to an annual 0.75% asset-based sales
charge.
2 Oppenheimer Main Street California Municipal Fund
<PAGE> 3
[PHOTO]
JAMES C. SWAIN
Chairman
Oppenheimer Main Street
California Municipal Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer Main Street
California Municipal Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
These have been very positive times for many American investors. The U.S.
economy has continued to grow at a moderate pace, unemployment has fallen to
its lowest level in 30 years and inflation has also fallen to a record low. In
fact, long-term interest rates have fallen to their lowest level since the
government began issuing 30-year Treasury bonds in 1977.
What benefits does this provide to the average American? First, when
unemployment levels are low, many individuals tend to feel a greater sense of
job security and can command higher wages because there are fewer unemployed
workers vying for their jobs. Second, many homeowners are opting to refinance
their existing home mortgage loans and take advantage of lower financing rates.
And third, because wages are increasing faster than the rate of inflation, a
paycheck may stretch farther and investors, as consumers, are able to enjoy a
higher level of disposable income. This extra income can be put to use in many
ways, including allocating more money to investment opportunities.
Some industry analysts have tempered such positive news by suggesting that
if the rate of inflation falls any lower, it might actually trigger a period of
deflation, where we see the prices of American goods and services decline.
While lower prices may sound like positive news, in reality it isn't: When
prices fall too low, it erodes the value of those goods to the producer. That
is, when economic conditions force a decrease in the price of goods, companies
have to sell more of those items in order to make the same amount of profit,
which translates into greater difficulties for corporations seeking to improve
their bottom lines.
At OppenheimerFunds, we do not believe we will see a period of deflation in
the United States. The fundamental factors that have driven the U.S. market
still appear to be in place: an economy that's in its eighth year of expansion
with moderate growth, low unemployment, virtually no inflation and low interest
rates. However, because of economic uncertainties in other parts of the world,
particularly Asia, we expect to see slower growth for stocks in 1998 and a year
in which double-digit returns from the equity markets are unlikely. It's also
possible that we may see investors favor the fixed, more secure interest
payments offered from the bond markets.
In closing, we'd like to reassure you that as professional money managers,
we continue to keep a watchful eye on these situations and are closely
monitoring your fund's investments. In times like these, your financial advisor
can be of invaluable assistance to you in helping review your financial plan
and guide your investments accordingly.
Thank you for your confidence in OppenheimerFunds, The Right Way to Invest.
We look forward to helping you reach your investment goals in the future.
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
March 20, 1998
3 Oppenheimer Main Street California Municipal Fund
<PAGE> 4
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 3/31/98(1)
<TABLE>
<CAPTION>
CLASS A
Since
1 year 5 year Inception
<S> <C> <C>
6.50% 6.06% 7.64%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Since
1 year 5 year Inception
<S> <C> <C>
5.78% N/A 4.79%
</TABLE>
CUMULATIVE TOTAL RETURN
For the Period Ended 3/31/98(1)
<TABLE>
<CAPTION>
CLASS A
5 year
<S> <C>
34.20% $13,420(4)
</TABLE>
PERFORMANCE UPDATE
- ------------------------------------------------------------------------------
Oppenheimer Main Street California Municipal Fund has continued to perform
well, particularly during what has turned out to be a difficult period for
municipal bonds. During the last six months, long-term interest rates have
fallen, which has caused a decline in municipal bond yields. However,
Oppenheimer Main Street California Municipal Fund's Class A shares provided a
cumulative total return, without sales charges, of 5.81% for the six-month
period ended February 28, 1998.(2) In addition, the Fund's Class A shares were
ranked in the top quartile of California municipal funds by Lipper, for the
one-year period which ended March 31, 1998.(3)
<TABLE>
<CAPTION>
GROWTH OF $10,000
Over five years(4)
(without sales charges)
Oppenheimer Main Street California Lehman Brothers Municipal
Municipal Fund Class A Bond Index
<S> <C>
10000 10000
10327.2 10317.5
10676 10708.8
10825.9 10832.7
10231.6 10222.1
10344.9 10250
10415.7 10286.3
10266.1 9999.39
10992 10876.5
11257.4 11161.3
11581.2 11433.3
12058.8 11974.9
11913.4 11842.5
12004.7 11915.5
12281.1 12204.8
12594 12610
12563.9 12571.6
12996.8 13019.3
13388.5 13504.4
13751.8 13925
13910.2 14066.2
</TABLE>
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current initial sales charge of 4.75%. Class
A shares were first publicly offered on 5/18/90. The Fund's maximum sales
charge for Class A shares was lower prior to 11/2/91, so actual performance may
have been higher. Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (since inception on 10/29/93). An
explanation of the different performance calculations is in the Fund's
prospectus. Class B shares are subject to an annual 0.75% asset-based sales
charge.
2. Includes changes in net asset value per share without deducting any sales
charges. Such performance is not annualized and would have been lower if sales
charges were taken into account.
4 Oppenheimer Main Street California Municipal Fund
<PAGE> 5
<TABLE>
<CAPTION>
CREDIT ALLOCATION(6)
<S> <C>
- -AAA 53.1%
- -AA 12.3
- -A 15.6
- -BBB 19.0
</TABLE>
PORTFOLIO REVIEW
Oppenheimer Main Street California Municipal Fund is for investors looking for
a source of income that's exempt from federal and California taxes.
WHAT WE LOOK FOR
- - DIVERSIFICATION among a wide range of securities.
- - Projects and regions demonstrating IMPROVING CREDIT QUALITY.
- - Securities that provide HIGH INCOME.
<TABLE>
<CAPTION>
TOP 10 INDUSTRIES
(Percentage of total market value of investments)(5)
.......................................................................................
<S> <C> <C> <C>
Special Assessment 17.8% General Obligation 6.7%
.......................................................................................
Single Family Housing 16.2 Sewer Utilities 5.1
.......................................................................................
Hospital/Healthcare 11.2 Electric Utilities 4.9
.......................................................................................
Highways 8.8 Marine/Aviation Facilities 4.2
.......................................................................................
Lease Rental 7.0 Multi-Family Housing 3.4
.......................................................................................
</TABLE>
3. Source: Lipper Analytical Services, Inc., 3/31/98. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 25 of 104 (1-year) and 7 of
54 (5-year) among California municipal bond funds for the periods ended
3/31/98. Past performance does not guarantee future results.
4. Results of a hypothetical $10,000 investment in Class A shares on March 31,
1993. Lehman Brothers Municipal Bond Index includes a broad range of municipal
bonds. It is an unmanaged index, including reinvestment of income, and cannot
be purchased directly by investors. Past performance does not guarantee future
results.
5. Industry weightings are as of 2/28/98, and are subject to change.
6. Portfolio data is as of February 28, 1998, dollar-weighted based on total
market value of investments and subject to change. Securities rated by any
rating organization are included in the equivalent Standard & Poors rating
category. Average credit quality and allocation include rated securities and
those not rated by a national rating organization (currently 4.8% of total
investments) but to which the Manager in its judgment has assigned ratings as
securities comparable to those rated by a rating agency in the same category.
5 Oppenheimer Main Street California Municipal Fund
<PAGE> 6
"THE CATALYST FOR INCREASED BOND SALES WAS ASIA'S FINANCIAL AND ECONOMIC
CRISIS."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- ------------------------------------------------------------------------------
HOW DID THE FUND PERFORM DURING THE PERIOD?
For the six months ended February 28, 1998, Oppenheimer Main Street California
Municipal Fund's Class A shares provided a cumulative total return, without
sales charges, of 5.81%.(1) The Fund's gains can be attributed to California's
dramatic economic improvements in recent years, in concert with the U.S. economy
as a whole.
WHAT WERE THE MAIN INFLUENCES ON THE BOND MARKETS?
A couple of events and trends were critical to overall bond markets, municipal
markets and, specifically, California municipal securities. First, in the U.S.
bond markets, corporate and Treasury bonds benefited from low inflation and
increased investor participation--particularly in September through early
January of 1998. The catalyst for increased bond sales was Asia's financial and
economic crisis, which sparked turmoil in world stock markets. Simply put, it
appears that investors feared that the bottom would fall out of the U.S. stock
market, so they fled to U.S. bonds as a safe haven.
Second, because many investors switched out of stocks and into bonds, bond
prices rose. And, the increased bond purchases caused interest rates, which
move in the opposite direction from bond prices, to fall. On January 12, 1998,
the interest rate on 30-year Treasury bonds, the benchmark rate for long-term
bonds as a whole, dipped to 5.69%, its lowest level since 30-year Treasuries
began to be sold regularly in 1977. Although interest rates on municipal
securities also fell during the period, they did not decline to the same extent
as rates on taxable fixed-income securities. This was to be expected, as
municipal bond prices typically do not rise
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance is not annualized and would have been lower if sales
charges were taken into account.
6 Oppenheimer Main Street California Municipal Fund
<PAGE> 7
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Jerry Webman
(Portfolio Manager)
Bob Patterson
as much as taxable bond prices when interest rates fall. Furthermore, there was
a significant rise in the supply of municipal securities on the market, as many
municipalities took advantage of lower interest rates to finance new projects
and refinance existing debt. This increase offered municipal investors many new
opportunities.
HOW DID YOUR STRATEGY AFFECT THE FUND'S PERFORMANCE?
Our strategy had two main components. First, due to our outlook for falling
interest rates, we purchased zero coupon, lower coupon, and discount municipal
bonds, all of which tend to increase in value when interest rates decline.
Because interest rates fell as we anticipated, these investments posted gains.
Second, we added higher-yielding California municipal securities, which
performed very well. We also purchased California Tax Allocation Development
Bonds, including the BBB-rated Fontana Redevelopment issue, which added yield
to the Fund. Overall, our two-pronged strategy helped the Fund achieve a very
competitive total return.
The Fund's performance was also given a boost by improved credit ratings
on several securities, such as the bonds of a Berkeley hospital that was
recently acquired by a major hospital chain with A-rated debt. The hospital
security was prerefunded--that is, the hospital issued a longer-maturity bond
to pay off its earlier bond--and its rating was raised to AAA from BBB. In
general, the Fund's credit quality has improved, mostly because of better
economic conditions in California.
7 Oppenheimer Main Street California Municipal Fund
<PAGE> 8
"WITH INTEREST RATES LIKELY TO STAY LOW..."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- ------------------------------------------------------------------------------
WHAT IMPACT DO YOU THINK THE U.S. ECONOMY WILL HAVE ON THE BOND MARKETS IN
1998?
Most important, we don't anticipate any increase in interest rates by the
Federal Reserve Board in the near future. In the current economic environment,
we do not believe the Federal Reserve will see a need to put the brakes on U.S.
economic growth through more restrictive monetary policy. Over the past several
years, whenever the U.S. economy has begun to expand too rapidly, something has
happened to slow it down. For example, when the U.S. economy started to
overheat in 1994, the Mexican peso crisis cooled it off by reducing our exports
to Mexico and lowering the prices of imported goods. Now, Asia's financial and
economic problems are starting to have the same effect on the U.S., making a
rate hike highly unlikely. In fact, if inflation remains very low or prices
begin to decline, it's possible we may even see the Fed implement a rate cut.
With interest rates likely to stay low, the economic backdrop for bond markets
in 1998 appears quite favorable. This is particularly true for municipal bonds,
which are now producing slightly higher yields than usual, and offer very good
value.
WHAT IS YOUR OUTLOOK FOR THE CALIFORNIA MUNICIPAL BOND MARKET?
We are optimistic about California. One reason is that the state's economy is
recovering. Another reason is that California's location, on the Pacific coast,
makes it an important point of contact for U.S. trade with Asia. We have been
monitoring the Asian financial and economic crisis very closely and analyzing
its implications for California's economy. First, we believe if Southeast Asian
currencies continue to weaken, imports from Asia to the U.S. are likely to
increase. And second, while U.S. exports to the region may suffer, exporters
represent a much
8 Oppenheimer Main Street California Municipal Fund
<PAGE> 9
"...THE ECONOMIC BACKDROP FOR BOND MARKETS IN 1998 APPEARS QUITE FAVORABLE."
smaller portion of California's trade sector than do importers. As a result,
the net effect of the Asian crisis could be a significant increase in the
state's trade activity. With that thought in mind, we have made several
trade-related municipal investments in the state. These investments include the
ports of Long Beach, Los Angeles and San Diego, as well as the airports of San
Francisco and San Diego.
Looking ahead, we plan to maintain the Fund's long average maturity and
thus take advantage of generally declining interest rates. To maximize the
Fund's total return, we will continue to research California municipal markets
for promising new issues and add them to our holdings. In addition to
discovering undervalued securities, we will explore other sectors of the
California municipal market--such as tax increment bonds, land development
bonds, and industrial bonds--that appear to have particularly good potential as
California's economy continues to improve. Finally, to cushion the Fund against
interest rate fluctuations, we plan to add different types of fixed-income
instruments to diversify the Fund's investment mix. In our view, this balanced
approach is The Right Way to Invest in today's California municipal market.
9 Oppenheimer Main Street California Municipal Fund
<PAGE> 10
STATEMENT OF INVESTMENTS February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ FACE MARKET VALUE
S&P/FITCH AMOUNT SEE NOTE 1
==================================================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--103.2%
- ------------------------------------------------------------------------------------------------------------------
CALIFORNIA--96.2%
Alameda, CA PFAU RRB, Marina Village
Assessment District Refinancing, 6.375%, 9/2/14 NR/NR $2,100,000 $2,161,362
- ------------------------------------------------------------------------------------------------------------------
Anaheim, CA PFAU TXAL RB, MBIA Insured,
Inverse Floater, 8.99%, 12/28/18(1) Aaa/AAA 1,000,000 1,263,750
- ------------------------------------------------------------------------------------------------------------------
Berkeley, CA HF RRB, Alta Bates Medical Center,
Series A, 6.50%, 12/1/11 A2/A+ 1,500,000 1,656,345
- ------------------------------------------------------------------------------------------------------------------
CA CDAU Lease RB, United Airlines, Series A,
5.70%, 10/1/33 Baa3/BB+ 3,200,000 3,261,024
- ------------------------------------------------------------------------------------------------------------------
CA CDAU MH RB, Village Riviera Hills,
Series E, 5.45%, 2/1/25 NR/AAA 1,000,000 1,028,240
- ------------------------------------------------------------------------------------------------------------------
CA Foothill/Eastern Transportation Corridor
Agency Toll Road RB, Sr. Lien, Series A,
6.50%, 1/1/32 Baa/BBB-/BBB 1,400,000 1,530,914
- ------------------------------------------------------------------------------------------------------------------
CA HFA Home Mtg. RB, Series C, 6.75%, 2/1/25 Aa2/AA- 4,890,000 5,212,740
- ------------------------------------------------------------------------------------------------------------------
CA HFA SFM Purchase RB, Series A-2, 6.45%,
8/1/25 Aaa/AAA 2,500,000 2,659,850
- ------------------------------------------------------------------------------------------------------------------
CA HFFAU RB, Episcopal Homes Project,
Series A, 7.80%, 7/1/15 NR/A+ 1,000,000 1,032,010
- ------------------------------------------------------------------------------------------------------------------
CA PCFAU RB, Pacific Gas & Electric Co. Project,
Series B, 6.35%, 6/1/09 A1/AA- 2,000,000 2,166,300
- ------------------------------------------------------------------------------------------------------------------
CA PWBL RB, State Prison Department of
Corrections, Series E, FSA Insured, 5.50%, 6/1/15 Aaa/AAA 2,000,000 2,153,100
- ------------------------------------------------------------------------------------------------------------------
CA Rural Home Mtg. FAU SFM RB, Series D,
5.50%, 5/1/29 NR/AAA 2,200,000 2,419,934
- ------------------------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP,
Cedars-Sinai Medical Center, 5.40%, 11/1/15(2) A1/NR 1,000,000 1,001,790
- ------------------------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP, Inverse
Floater, 7.068%, 11/1/15(1) A1/NR 700,000 701,750
- ------------------------------------------------------------------------------------------------------------------
Central CA Joint Powers Health FAU COP,
Community Hospitals of Central California
Project, 5%, 2/1/23 Baa1/NR/A- 2,050,000 1,932,945
- ------------------------------------------------------------------------------------------------------------------
Corona, CA COP, Vista Hospital Project,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 2,400,000 3,041,928
- ------------------------------------------------------------------------------------------------------------------
Corona, CA SFM RB, Sub. Lien, Series B,
6.30%, 11/1/28 A/NR 800,000 853,088
- ------------------------------------------------------------------------------------------------------------------
Duarte, CA COP, City of Hope National
Medical Center, 6.25%, 4/1/23 Baa1/NR 2,460,000 2,617,169
- ------------------------------------------------------------------------------------------------------------------
Escondido, CA Union High SDI CAP GOB,
MBIA Insured, Zero Coupon, 6.20%, 11/1/19(3) Aaa/AAA 2,000,000 651,720
- ------------------------------------------------------------------------------------------------------------------
Fontana, CA RA TXAL GORB, Jurupa Hills
Redevelopment Project-A, 7.10%, 10/1/23 NR/BBB+ 1,960,000 2,238,614
</TABLE>
10 Oppenheimer Main Street California Municipal Fund
<PAGE> 11
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ FACE MARKET VALUE
S&P/FITCH AMOUNT SEE NOTE 1
==================================================================================================================
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Fontana, CA RA TXAL Refunding Bonds,
Jurupa Hills Redevelopment Project, Series A,
5.50%, 10/1/19 NR/BBB+ $1,185,000 $1,198,106
- ------------------------------------------------------------------------------------------------------------------
Fresno, CA HAU MH RB, Central Valley
Coalition Projects, Series A, 5.60%, 8/1/30 NR/AAA 3,075,000 3,161,161
- ------------------------------------------------------------------------------------------------------------------
Fresno, CA USD GORB, Series A, MBIA Insured,
6.55%, 8/1/20 Aaa/AAA 1,225,000 1,442,021
- ------------------------------------------------------------------------------------------------------------------
Fresno, CA USD RB, Series A, MBIA Insured,
6.40%, 8/1/16 Aaa/AAA 1,000,000 1,169,680
- ------------------------------------------------------------------------------------------------------------------
La Quinta, CA RA TXAL Refunding Bonds,
Redevelopment Project Area No. 1, MBIA
Insured, 7.30%, 9/1/09 Aaa/AAA 1,015,000 1,268,679
- ------------------------------------------------------------------------------------------------------------------
Las Virgenes, CA USD CAP Bonds, Series A,
MBIA Insured, Zero Coupon, 4.95%, 11/1/12(3) Aaa/AAA 2,095,000 1,022,088
- ------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RB, 5.125%, 5/15/18 Aa3/AA- 1,000,000 984,460
- ------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RRB, Series A, FGIC
Insured, 6%, 5/15/09 Aaa/AAA 500,000 561,930
- ------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RRB, Series A, FGIC
Insured, 6%, 5/15/10 Aaa/AAA 500,000 563,080
- ------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA COP, Disney Parking
Project, Zero Coupon, 6.95%, 9/1/11(3) Baa1/BBB/A- 2,340,000 1,145,102
- ------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA MTAU Sales Tax RRB,
Series A, FSA Insured, 5%, 7/1/19(4) Aaa/AAA/AAA 2,000,000 1,935,180
- ------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA Public Works FAU RRB,
Regional Park & Open Space District, Series A,
5%, 10/1/16 Aa3/AA 1,900,000 1,879,499
- ------------------------------------------------------------------------------------------------------------------
Los Angeles, CA USD GOB, Series A, FGIC
Insured, 6%, 7/1/15 Aaa/AAA/AAA 1,000,000 1,135,030
- ------------------------------------------------------------------------------------------------------------------
Los Angeles, CA Wastewater System RRB,
Series D, FGIC Insured, 8.70%, 11/1/03 Aaa/AAA/AAA 5,115,000 6,320,708
- ------------------------------------------------------------------------------------------------------------------
Newport Mesa, CA USD SPTX Bonds,
CFD No. 90-1, 6.625%, 9/1/14 NR/NR 2,000,000 2,061,480
- ------------------------------------------------------------------------------------------------------------------
Pittsburg, CA Improvement Bond Act of 1915
SPAST GOB, Assessment District 1990-01,
7.75%, 9/2/20 NR/NR 95,000 99,076
- ------------------------------------------------------------------------------------------------------------------
Pittsburg, CA RA TXAL Refunding Bonds,
Los Medanos Community Development
Project, Sub. Lien, 6.20%, 8/1/19 NR/BBB 1,000,000 1,073,700
- ------------------------------------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 Aaa/AAA 2,500,000 3,222,500
- ------------------------------------------------------------------------------------------------------------------
Pomona, CA USD GORB, Series A, MBIA
Insured, 6.15%, 8/1/15 Aaa/AAA 500,000 580,155
- ------------------------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
FGIC Insured, Inverse Floater, 7.484%, 6/1/19(1) Aaa/AAA/AAA 1,150,000 1,243,438
</TABLE>
11 Oppenheimer Main Street California Municipal Fund
<PAGE> 12
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ FACE MARKET VALUE
S&P/FITCH AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Redding, CA Electric System Revenue COP,
MBIA Insured, Inverse Floater, 8.705%, 7/8/22(1) Aaa/AAA $ 500,000 $ 650,000
- ------------------------------------------------------------------------------------------------------------------
Riverside CA PFAU Lease RB, AMBAC Insured,
5.25%, 10/1/17 Aaa/AAA 2,100,000 2,136,414
- ------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA CFD SPTX Bonds,
No. 88-12, 7.55%, 9/1/17 NR/NR 1,500,000 1,593,015
- ------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA PFAU TXAL RRB,
Redevelopment Projects, Series A,
5.625%, 10/1/33 Baa2/BBB- 1,650,000 1,684,898
- ------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA SFM RB, Escrowed to
Maturity, Series A, 7.80%, 5/1/21 Aaa/AAA 1,000,000 1,356,110
- ------------------------------------------------------------------------------------------------------------------
Sacramento Cnty., CA SFM RB, Escrowed to
Maturity, 8.125%, 7/1/16(6) Aaa/AAA 2,810,000 3,815,980
- ------------------------------------------------------------------------------------------------------------------
Sacramento, CA MUD Electric RRB, FGIC
Insured, Inverse Floater, 9.02%, 8/15/18(1) Aaa/AAA/AAA 1,500,000 1,768,125
- ------------------------------------------------------------------------------------------------------------------
Salinas Valley, CA Solid Waste Authority
RB, 5.80%, 8/1/27 Baa3/BBB 1,665,000 1,686,262
- ------------------------------------------------------------------------------------------------------------------
San Diego Cnty., CA Water Authority
Revenue COP, Series 91-B, MBIA Insured,
Inverse Floater, 8.63%, 4/8/21(1) Aaa/AAA 1,000,000 1,311,250
- ------------------------------------------------------------------------------------------------------------------
San Francisco, CA Bay Area Rapid Transit
District Sales Tax RRB, AMBAC Insured,
6.75%, 7/1/11 Aaa/AAA/AAA 1,000,000 1,215,360
- ------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Airport
Commission International Airport RB,
Second Series Issue 13-B, MBIA Insured,
8%, 5/1/07 Aaa/AAA 1,140,000 1,419,619
- ------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Airport
Commission International Airport RB,
Second Series Issue 14-A, MBIA Insured,
8%, 5/1/07 Aaa/AAA 1,290,000 1,606,411
- ------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. RA Lease RB,
CAP, George R. Moscone Project, Zero Coupon,
5.36%, 7/1/10(3) A1/A-/A+ 4,500,000 2,475,630
- ------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Redevelopment
FAU TXAL CAP Refunding Bonds,
Redevelopment Projects, Series C, Zero
Coupon, 5.20%, 8/1/13(3)(4) A2/A 2,350,000 1,072,446
- ------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation Corridor
Agency Toll Road RB, Sr. Lien, 6.75%, 1/1/32 Aaa/NR/BBB 3,500,000 3,968,475
- ------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation Corridor
Agency Toll Road RRB, CAP, Series A,
0%/5.75%, 1/15/21(5) Baa3/BBB-/BBB 3,200,000 2,157,664
- ------------------------------------------------------------------------------------------------------------------
San Ysidro, CA SDI GOB, AMBAC Insured,
6.125%, 8/1/21 Aaa/AAA 700,000 790,482
</TABLE>
12 Oppenheimer Main Street California Municipal Fund
<PAGE> 13
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/ FACE MARKET VALUE
S&P/FITCH AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
South Orange Cnty., CA PFAU SPTX Tax RB,
Foothill Area, Series C, FGIC Insured, 8%, 8/15/08 Aaa/AAA/AAA $1,500,000 $ 1,948,275
- ------------------------------------------------------------------------------------------------------------------
Southern CA Home FAU SFM RB, Series A,
7.35%, 9/1/24 NR/AAA 285,000 301,678
- ------------------------------------------------------------------------------------------------------------------
Southern CA Metropolitan Water District
Waterworks RB, 5.55%, 10/30/20 Aa2/AA 2,400,000 2,472,192
- ------------------------------------------------------------------------------------------------------------------
Southern CA PPAU Transmission Project RB,
Inverse Floater, 7.508%, 7/1/12(1) Aa3/A+ 2,100,000 2,417,625
- ------------------------------------------------------------------------------------------------------------------
Stanislaus, CA Waste-To-Energy Financing
Agency Solid Waste Facilities RRB, Ogden
Martin System, Inc. Project, 7.50%, 1/1/05 NR/BBB+ 1,450,000 1,551,428
- ------------------------------------------------------------------------------------------------------------------
Suisun City, CA PFAU TXAL RB, Suisun City
Redevelopment Project, Series A, 5.20%, 10/1/28 NR/A- 2,500,000 2,458,500
- ------------------------------------------------------------------------------------------------------------------
West Covina, CA COP, Queen of the Valley
Hospital, 6.50%, 8/15/19 A2/A 1,120,000 1,237,275
--------------
114,746,760
- ------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--7.0%
PR CMWLTH GOB, 5.375%, 7/1/25 Baa1/A 1,650,000 1,672,259
- ------------------------------------------------------------------------------------------------------------------
PR CMWLTH GORB, MBIA Insured, Inverse
Floater, 7.784%, 7/1/08(1) Aaa/AAA 1,500,000 1,708,125
- ------------------------------------------------------------------------------------------------------------------
PR CMWLTH Highway & Transportation
Authority RRB, Series A, AMBAC Insured,
5.50%, 7/1/13 Aaa/AAA 1,500,000 1,626,630
- ------------------------------------------------------------------------------------------------------------------
PR CMWLTH Highway & Transportation
Authority RRB, Series A, AMBAC Insured,
5.50%, 7/1/14 Aaa/AAA 1,500,000 1,623,225
- ------------------------------------------------------------------------------------------------------------------
PR Housing Finance Corp. SFM RB, Portfolio 1,
Series B, 7.65%, 10/15/22 Aaa/AAA 210,000 223,952
- ------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental PC
Facilities Tourist RB, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 600,000 654,690
- ------------------------------------------------------------------------------------------------------------------
PR Public Buildings Authority RB, Government
Facilities, Series B, AMBAC Insured, 5%, 7/1/27 Aaa/AAA 800,000 784,256
--------------
8,293,137
--------------
Total Municipal Bonds and Notes (Cost $115,655,471) 123,039,897
</TABLE>
<TABLE>
<CAPTION>
DATE STRIKE CONTRACTS
==================================================================================================================
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASED--0.0%
- ------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 30 yr. Futures, 3/98 Call
Opt. (Cost $22,125) 3/98 123.00% 50 8,594
</TABLE>
13 Oppenheimer Main Street California Municipal Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Unaudited)(Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM TAX-EXEMPT OBLIGATIONS--0.5%
Orange Cnty., CA Sanitation District COP,
FGIC Insured, 3.60%, 3/2/98(2) (Cost $600,000) $600,000 $ 600,000
- ------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $116,277,596) 103.7% 123,648,491
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (3.7) (4,358,728)
------------- --------------
NET ASSETS 100.0% $119,289,763
============= ==============
</TABLE>
To simplify the listings of securities, abbreviations are used per the table
below:
<TABLE>
<S> <C> <C> <C>
CAP --Capital Appreciation PC --Pollution Control
CDAU --Communities Development Authority PCFAU --Pollution Control Finance Authority
CFD --Community Facilities District PFAU --Public Finance Authority
CMWLTH --Commonwealth PPAU --Public Power Authority
COP --Certificates of Participation PWBL --Public Works Board Lease
FAU --Finance Authority RA --Redevelopment Agency
GOB --General Obligation Bonds RB --Revenue Bonds
GORB --General Obligation Refunding Bonds RRB --Revenue Refunding Bonds
HAU --Housing Authority SCDAU --Statewide Communities Development Authority
HF --Health Facilities SDI --School District
HFA --Housing Finance Agency SFM --Single Family Mtg.
HFFAU --Health Facilities Finance Authority SPAST --Special Assessment
MH --Multifamily Housing SPTX --Special Tax
MTAU --Metropolitan Transportation Authority TXAL --Tax Allocation
MUD --Municipal Utility District USD --Unified School District
</TABLE>
1. Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays 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. Inverse floaters amount to $11,064,063 or 9.27%
of the Fund's net assets at February 28, 1998.
2. Represents the current interest rate for a variable rate security.
3. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
4. When-issued security to be delivered and settled after February 28, 1998.
5. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
6. Securities with an aggregate market value of $434,560 are held in
collateralized accounts to cover initial margin requirements on futures sales
contracts. See Note 5 of Notes to Financial Statements.
14 Oppenheimer Main Street California Municipal Fund
<PAGE> 15
- ------------------------------------------------------------------------------
As of February 28, 1998, securities subject to the alternative minimum tax
amount to $32,204,750 or 27.00% of the Fund's net assets.
Distribution of investments by industry of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
- -----------------------------------------------------------------------------------
<S> <C> <C>
Special Assessment $ 22,001,399 17.8%
Single Family Housing 20,065,832 16.2
Hospital/Healthcare 13,875,903 11.2
Highways 10,906,908 8.8
Lease Rental 8,694,502 7.0
General Obligation 8,246,047 6.7
Sewer Utilities 6,320,708 5.1
Electric Utilities 6,079,188 4.9
Marine/Aviation Facilities 5,135,500 4.2
Multi-Family Housing 4,189,402 3.4
Resource Recovery 3,837,690 3.1
Water Utilities 3,783,442 3.1
Corporate Backed 3,261,024 2.6
Sales Tax 3,150,540 2.5
Pollution Control 2,166,300 1.8
Education 1,925,512 1.6
Options - Treasury 8,594 0.0
-------------- --------
Total $123,648,491 100.0%
============== ========
</TABLE>
See accompanying Notes to Financial Statements.
15 Oppenheimer Main Street California Municipal Fund
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998 (UNAUDITED)
<TABLE>
<S> <C>
================================================================================================================
ASSETS
Investments, at value (cost $116,277,596)--see accompanying statement $123,648,491
- ----------------------------------------------------------------------------------------------------------------
Cash 491,072
- ----------------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,496,038
Shares of capital stock sold 355,791
- ----------------------------------------------------------------------------------------------------------------
Other 36,463
--------------
Total assets 126,027,855
================================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 6,267,508
Dividends 307,040
Shares of capital stock redeemed 45,861
Daily variation on futures contracts--Note 5 13,556
Transfer and shareholder servicing agent fees 10,988
Distribution and service plan fees 7,185
Other 85,954
--------------
Total liabilities 6,738,092
================================================================================================================
NET ASSETS $119,289,763
==============
================================================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of capital stock $ 92,329
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 111,626,237
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 293,989
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (68,609)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 7,345,817
--------------
Net assets $119,289,763
==============
</TABLE>
16 Oppenheimer Main Street California Municipal Fund
<PAGE> 17
<TABLE>
<S> <C>
================================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$100,375,559 and 7,767,436 shares of capital stock outstanding) $12.92
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $13.56
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $18,914,204
and 1,465,504 shares of capital stock outstanding) $12.91
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Main Street California Municipal Fund
<PAGE> 18
STATEMENT OF OPERATIONS For the Six Months Ended February 28, 1998 (Unaudited)
<TABLE>
<S> <C>
================================================================================================================
NVESTMENT INCOME
Interest $3,181,466
================================================================================================================
EXPENSES
Management fees--Note 4 303,769
- ----------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class B 75,500
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 34,716
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 22,251
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 5,567
Class B 2,410
- ----------------------------------------------------------------------------------------------------------------
Legal and auditing fees 5,914
- ----------------------------------------------------------------------------------------------------------------
Insurance expenses 1,581
- ----------------------------------------------------------------------------------------------------------------
Directors' fees and expenses 1,182
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 694
- ----------------------------------------------------------------------------------------------------------------
Other 610
------------
Total expenses 454,194
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (82,513)
------------
Net expenses 371,681
================================================================================================================
NET INVESTMENT INCOME 2,809,785
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (184,465)
Closing of futures contracts--Note 5 129,566
------------
Net realized loss (54,899)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 3,364,713
------------
Net realized and unrealized gain 3,309,814
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,119,599
============
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Main Street California Municipal Fund
<PAGE> 19
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28, 1998 YEAR ENDED
(UNAUDITED) AUGUST 31, 1997
================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 2,809,785 $ 5,140,982
- ----------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (54,899) 754,676
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,364,713 2,696,390
-------------- --------------
Net increase in net assets resulting from operations 6,119,599 8,592,048
================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (2,522,473) (4,733,799)
Class B (318,133) (394,165)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (802,676) (9,642)
Class B (131,382) (827)
================================================================================================================
CAPITAL STOCK TRANSACTIONS
Net increase in net assets resulting from
capital stock transactions--Note 2:
Class A 8,337,168 10,035,358
Class B 6,697,862 5,675,756
================================================================================================================
NET ASSETS
Total increase 17,379,965 19,164,729
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 101,909,798 82,745,069
-------------- --------------
End of period (including undistributed net investment
income of $293,989 and $437,009, respectively) $119,289,763 $101,909,798
============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
19 Oppenheimer Main Street California Municipal Fund
<PAGE> 20
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
1998 YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
(UNAUDITED) 1997 1996(2) 1996 1995
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $12.64 $12.16 $12.15 $12.09 $11.82
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .31 .73 .12 .73 .73
Net realized and unrealized gain (loss) .42 .49 .01 .07 .27
------- ------- ------- ------- -------
Total income (loss) from investment
operations .73 1.22 .13 .80 1.00
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.34) (.74) (.12) (.73) (.69)
Dividends in excess of net investment
income -- -- -- -- (.04)
Distributions from net realized gain (.11) -- -- --(3) --
Distributions in excess of net
realized gain -- -- -- (.01) --
------- ------- ------- ------- -------
Total dividends and distributions
to shareholders (.45) (.74) (.12) (.74) (.73)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.92 $12.64 $12.16 $12.15 $12.09
======= ======= ======= ======= =======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 5.81% 10.24% 1.12% 6.73% 8.93%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $100,376 $89,991 $76,817 $76,913 $78,134
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 96,325 $80,311 $77,584 $78,676 $76,148
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.06%(5) 5.91% 6.00%(5) 5.99% 6.27%
Expenses, before voluntary assumption
by the Manager or Distributor(6) 0.68%(5) 0.59% 0.57%(5) 0.58% 0.57%
Expenses, net of voluntary assumption
by the Manager or Distributor 0.53%(5) N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 15.9% 46.4% 1.4% 33.1% 14.2%
</TABLE>
1. For the period from October 29, 1993 (inception of offering) to June 30,
1994.
2. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
3. Less than $0.005 per share.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
20 Oppenheimer Main Street California Municipal Fund
<PAGE> 21
<TABLE>
<CAPTION>
CLASS B
------------------ --------------------------------------------------------------------
SIX MONTHS
ENDED
FEBRUARY 28,
1998 YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1994 1993 (UNAUDITED) 1997 1996(2) 1996 1995 1994(1)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $12.66 $12.05 $12.63 $12.14 $12.14 $12.08 $11.80 $12.90
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .75 .80 .28 .60 .10 .61 .62 .38
Net realized and unrealized gain (loss) (.80) .64 .38 .50 -- .07 .27 (1.07)
--------- -------- -------- --------- -------- -------- ------- -------
Total income (loss) from investment
operations (.05) 1.44 .66 1.10 .10 .68 .89 (.69)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.73) (.81) (.27) (.61) (.10) (.61) (.57) (.37)
Dividends in excess of net investment
income (.03) -- -- -- -- -- (.04) (.01)
Distributions from net realized gain -- (.02) (.11) -- -- --(3) -- --
Distributions in excess of net
realized gain (.03) -- -- -- -- (.01) -- (.03)
--------- -------- -------- --------- -------- -------- ------- -------
Total dividends and distributions
to shareholders (.79) (.83) (.38) (.61) (.10) (.62) (.61) (.41)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.82 $12.66 $12.91 $12.63 $12.14 $12.14 $12.08 $11.80
========= ======== ======== ========= ======== ======== ======= =======
==================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) (0.60)% 12.53% 5.28% 9.24% 0.85% 5.66% 7.90% (5.42)%
==================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $79,555 $72,387 $18,914 $11,919 $5,928 $5,442 $2,648 $1,203
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $81,741 $54,840 $15,263 $ 8,129 $5,767 $3,848 $1,904 $ 649
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 6.09% 6.46% 4.12%(5) 4.85% 4.92%(5) 4.94% 5.17% 4.91%(5)
Expenses, before voluntary assumption
by the Manager or Distributor(6) 0.53% 0.39% 1.70%(5) 1.60% 1.62%(5) 1.60% 1.55% 1.62%(5)
Expenses, net of voluntary assumption
by the Manager or Distributor N/A N/A 1.55%(5) N/A N/A N/A N/A N/A
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 20.2% 5.8% 15.9% 46.4% 1.4% 33.1% 14.2% 20.2%
</TABLE>
6. Beginning in fiscal 1995, the expense ratios reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended February 28, 1998 were $39,122,439 and $17,704,860,
respectively.
See accompanying Notes to Financial Statements.
21 Oppenheimer Main Street California Municipal Fund
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (Unaudited)
==============================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Main Street California Municipal Fund (the 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 objective is to seek as high a level of current
income which is exempt from Federal and California personal income taxes as is
available from investing in municipal securities while attempting to preserve
capital. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers 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 distribution and/or
service plan, expenses directly attributable to that class and exclusive voting
rights with respect to matters affecting that class. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- ------------------------------------------------------------------------------
INVESTMENT VALUATION. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by
an approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount.
- ------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- ------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
22 Oppenheimer Main Street California Municipal Fund
<PAGE> 23
==============================================================================
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.
- ------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of premium amortization for tax purposes. The
character of the distributions made during the year from net investment income
or net realized gains may differ from its ultimate characterization for federal
income tax purposes. Also, due to timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.
- ------------------------------------------------------------------------------
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. As of November 4, 1997, in
order to conform book and tax bases, the Fund began amortization of premiums on
securities for book purposes. Accordingly, during the six months ended February
28, 1998, amounts have been reclassified to reflect a decrease in undistributed
net investment income of $112,199, an increase in unrealized appreciation on
investments of $1,277,368 and a decrease in paid-in capital of $1,165,169. For
bonds acquired after April 30, 1993, on disposition or maturity, taxable
ordinary income is recognized to the extent of the lesser of gain or market
discount that would have accrued over the holding period. 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. The Fund concentrates its investments in
California and, therefore, may have more credit risks related to the economic
conditions of California than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
23 Oppenheimer Main Street California Municipal Fund
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
==============================================================================
2. CAPITAL STOCK
The Fund has authorized 16,250,000 shares of $.01 par value capital stock of
each class. Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28, 1998 YEAR ENDED AUGUST 31, 1997
----------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 1,032,334 $13,268,334 1,377,422 $ 17,228,574
Dividends and
distributions reinvested 165,041 2,113,339 233,721 2,900,249
Redeemed (547,343) (7,044,505) (811,980) (10,093,465)
----------- ------------- ----------- --------------
Net increase 650,032 $ 8,337,168 799,163 $ 10,035,358
=========== ============= =========== ==============
- ---------------------------------------------------------------------------------------------------------
Class B:
Sold 527,809 $ 6,779,866 467,166 $ 5,821,078
Dividends and
distributions reinvested 23,896 305,746 20,557 255,214
Redeemed (30,043) (387,750) (32,007) (400,536)
----------- ------------- ----------- --------------
Net increase 521,662 $ 6,697,862 455,716 $ 5,675,756
=========== ============= =========== ==============
</TABLE>
==============================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At February 28, 1998, net unrealized appreciation on investments of $7,370,895
was composed of gross appreciation of $7,461,334, and gross depreciation of
$90,439.
==============================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.55% of average
annual net assets, with a contractual waiver when net assets are less than $100
million. Annual fees, reflecting this waiver, are 0.40% of net assets of $75
million or more but less than $100 million, 0.25% of net assets of $50 million
or more but less than $75 million, 0.15% of net assets of $25 million or more
but less than $50 million, and 0% of net assets less than $25 million. In
addition, the Manager has voluntarily undertaken to waive a portion of its
management fee, whereby the Fund shall pay an annual management fee of 0.40% of
its average annual net assets in excess of $100 million.
For the six months ended February 28, 1998, commissions (sales charges
paid by investors) on sales of Class A shares totaled $227,558, of which
$30,142 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
shares totaled $270,258. During the six months ended February 28, 1998, OFDI
received contingent deferred sales charges of $11,459 upon redemption of Class
B shares.
24 Oppenheimer Main Street California Municipal Fund
<PAGE> 25
==============================================================================
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and for other registered investment
companies. OFS's total costs of providing such services are allocated ratably
to these companies.
The Fund has adopted a Distribution and Service Plan for Class B shares
to reimburse OFDI for its costs in distributing Class B shares and servicing
accounts. Under the Plan, the Fund pays OFDI an annual asset-based sales charge
of 0.75% per year on Class B shares for its services rendered in distributing
Class B shares. OFDI also receives a service fee of 0.25% per year to reimburse
dealers for providing personal services for accounts that hold Class B shares.
Each fee is computed on the average annual net assets of Class B shares,
determined as of the close of each regular business day. During the six months
ended February 28, 1998, OFDI retained $65,677 as reimbursement for Class B
sales commissions and service fee advances, as well as financing costs. If the
Plan is terminated by the Fund, the Board of Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for distributing
shares before the Plan was terminated. As of February 28, 1998, OFDI had
incurred excess distribution and servicing costs of $690,671 for Class B.
==============================================================================
5. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases
in interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable or
payable for the daily mark to market for variation margin.
25 Oppenheimer Main Street California Municipal Fund
<PAGE> 26
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
==============================================================================
5. FUTURES CONTRACTS (CONTINUED)
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At February 28, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
DATE CONTRACTS FEBRUARY 28, 1998 DEPRECIATION
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO SELL
U.S. Treasury Bonds, 30 yr. 6/98 30 $3,614,063 $25,078
</TABLE>
==============================================================================
6. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the six months ended
February 28, 1998.
26 Oppenheimer Main Street California Municipal Fund
<PAGE> 27
OPPENHEIMER MAIN STREET CALIFORNIA MUNICIPAL FUND
A series of Oppenheimer Main Street Funds, Inc.
<TABLE>
===========================================================================================================
<S> <C>
OFFICERS AND DIRECTORS James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Director and President
Robert G. Avis, Director
William A. Baker, Director
Charles Conrad, Jr., Director
Jon S. Fossel, Director
Sam Freedman, Director
Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
George C. Bowen, Director, Vice President, Treasurer and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Jerry A. Webman, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
===========================================================================================================
INVESTMENT ADVISOR OppenheimerFunds, Inc.
===========================================================================================================
DISTRIBUTOR OppenheimerFunds Distributor, Inc.
===========================================================================================================
TRANSFER AND SHAREHOLDER OppenheimerFunds Services
SERVICING AGENT
===========================================================================================================
CUSTODIAN OF The Bank of New York
PORTFOLIO SECURITIES
===========================================================================================================
INDEPENDENT AUDITORS Deloitte & Touche LLP
===========================================================================================================
LEGAL COUNSEL Myer, Swanson, Adams & Wolf, P.C.
The financial statements included herein have been taken from the records of
the Fund without examination of the independent auditors. This is a copy of a
report to shareholders of Oppenheimer Main Street California Municipal Fund.
This report must be preceded or accompanied by a Prospectus of Oppenheimer
Main Street California Municipal Fund. For material information concerning
the Funds, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are
not guaranteed by any bank, are not insured by the FDIC or any other agency,
and involve investment risks, including possible loss of the principal amount
invested.
</TABLE>
27 Oppenheimer Main Street California Municipal Fund
<PAGE> 28
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You can count on us whenever you need assistance. That's why the
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[OPPENHEIMERFUNDS LOGO]
RS0725.001.0298 April 29, 1998
