<PAGE>
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Annual Report August 31, 1998
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OPPENHEIMER
Main Street California
Municipal Fund(R)
[GRAPHIC]
[LOGO]
OppenheimerFunds(R)
THE RIGHT WAY TO INVEST
<PAGE>
Report highlights
-----------------
Contents
3 President's Letter
4 An Interview with Your Fund's Manager
8 Fund Performance
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11 Financial Statements
29 Independent Auditors' Report
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30 Federal Income Tax Information
31 Officers and Directors
32 Information and Services
Report highlights
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o Four-star Morningstar: The Fund's Class A shares have maintained a 4-star
ranking (****) from Morningstar for the 3- and 5-year periods ended
September 30, 1998, among 1,581 (3-year) and 943 (5-year) municipal
funds./1/
o Oppenheimer Main Street California Municipal Fund's performance has been
reasonably good during the 1-year period ended August 31, 1998, providing
investors with a tax-free dividend yield of 4.77%.
o Despite California's close trading ties with Asia, the California economy
continued to perform well over the period, as employment in entertainment,
financial services and high technology increased.
=================================
Avg Annual Total Returns
=================================
For the 1-Year Period
Ended 8/31/98
Class A
Without With
Sales Chg./2/ Sales Chg./3/
=================================
9.33% 4.13%
=================================
Class B
Without With
Sales Chg./2/ Sales Chg./3/
==================================
8.24% 3.24%
==================================
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Because of ongoing
market volatility, the Fund's performance may be subject to substantial
short-term changes. For updates on the Fund's performance, please contact your
financial advisor, call us at 1-800-525-7048 or visit our website,
www.oppenheimerfunds.com.
1. Source: Morningstar, Inc., 9/30/98. Morningstar, Inc. ranks mutual
funds in broad investment classes, based on risk adjusted returns after
considering sales charges and expenses. Return and risk are measured as
performance above and below 90-day U.S. Treasury bill returns, respectively.
Current star rankings are based on the weighted average of 3-, 5- and 10-year
(if applicable) rankings for a fund or class and are subject to change monthly.
Top 10%: 5 stars. Next 22.5%: 4 stars. Middle 35%: 3 stars. Next 22.5%: 2 stars.
Bottom 10%: 1 star.
2. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
3. 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
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[PHOTO]
James C. Swain
Chairman
Oppenheimer Main Street
California Municipal Fund
[PHOTO]
Bridget A. Macaskill
President
Oppenheimer Main Street
California Municipal Fund
Dear shareholder,
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The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since that time, stocks have declined sharply
amid heightened volatility. Yet, the bond market remains poised to benefit from
the same positive economic conditions that existed earlier in the year.
Why have stocks faltered lately? The financial crises in Asia and Russia
have negatively affected the earnings of some large U.S. corporations and have
contributed to a slow-down in U.S. economic growth. Although slower economic
growth has been negative for stocks, it should not adversely impact bonds.
That's because slower economic growth generally means fewer inflationary
pressures and less likelihood that interest rates will rise.
What should you do during this period of relative uncertainty? If you have
well-defined long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged by
our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the perspective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ James C. Swain /s/ Bridget A. Macaskill
James C. Swain Bridget A. Macaskill
September 22, 1998
3 Oppenheimer Main Street California Municipal Fund
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"Low interest rates have encouraged municipalities to issue new bonds and
refinance old debt at lower rates."
An interview with your Fund's manager
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How did the Fund perform during the 12-month period that ended August 31, 1998?
Oppenheimer Main Street California Municipal Fund's performance has been
reasonably good during the period, providing investors with a tax-free dividend
yield of 4.77%. In addition, falling interest rates translated into higher bond
prices for the Fund's portfolio.
What factors affected the Fund's performance?
Since the middle of 1997, interest rates have fallen significantly, and bond
prices generally have risen. Municipal bonds, including those issued in
California, have also performed well. However, relative to the very strong
performance of U.S. Treasury securities, municipal bonds have lagged somewhat.
The Asian economic crisis, which surfaced last October, caused investors to
seek the safety and liquidity of U.S. Treasury bonds, boosting prices and
reducing yields. Negative economic news from Russia only reinforced this global
flight to quality. As of August 31 of this year, the yield of 30-year Treasury
bonds fell to 5.15%, its lowest level since 1977.
Despite California's close trading relationship with Asia, the state's
economy has been very resilient, which has kept municipal bond credit quality
strong. Indeed, companies such as computer manufacturers that import goods from
Asia have benefited from the devalued currencies. Meanwhile, exports to Mexico
and Europe, where the economies are improving, have remained strong. In
addition, California's economy has recovered from a deep recession in the early
1990s caused by job losses in the aerospace industry. Those jobs have largely
been replaced by employment gains in other industries, including entertainment,
financial services and high technology.
4 Oppenheimer Main Street California Municipal Fund
<PAGE>
[PHOTO]
Portfolio Management Team (l to r)
Jerry Webman (Portfolio
Manager)
Bob Patterson
However, low interest rates have encouraged municipalities to issue new bonds
and refinance old debt at lower rates. As a result, the supply of bonds was much
higher in 1998 compared to 1997. Excess supply has meant that issuers have had
to offer bonds at attractive prices and higher yields to attract buyers. Thus,
on a relative basis, California municipal bonds have done well, but not as well
as Treasury bonds.
What specific investment strategies have worked well for the Fund?
The Fund has benefited from some investments we made in the Southern California
real estate market a few years ago. Over the past decades, the region had
historically bounced back from economic adversity, and therefore, we believed
that real estate prices in the mid-1990s were significantly undervalued. As it
turned out, we were right, and the credit quality of bonds associated with that
real estate has been upgraded, which has boosted their value. We have found
attractive values in housing bonds, particularly those issued to finance
retirement care facilities. In healthcare, we have looked for niche hospitals
that, because of unique services that they offer, have little competition. An
example would be City of Hope National Medical Center, a severe cancer care
hospital with a large endowment and an important role in the community. In
contrast, we have been cautious with bonds issued by electric utilities, because
deregulation has created more competition, thus clouding the industry's profit
outlook.
5 Oppenheimer Main Street California Municipal Fund
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========================================
Avg Annual Total Returns
========================================
For the Period Ended 9/30/98/1/
Class A
Since
1 year 5 year Inception
========================================
4.29% 5.63% 7.82%
========================================
Class B
Since
1 year 5 year Inception
========================================
3.40% N/A 5.25%
========================================
An interview with your Fund's manager
- --------------------------------------------------------------------------------
Because interest rates have fluctuated very little during the period, we chose
to keep the Fund's duration (a measure of the Fund's sensitivity to interest
rates) close to that of our benchmark. Therefore, we have not tried to enhance
the Fund's performance by acting on interest rate forecasts. In addition, the
Fund consistently maintained a very high credit rating of AA-. In such a strong
economic environment, bonds of lower quality have not, in our opinion, offered
enough extra yield to offset credit risk.
What is your outlook?
We believe that municipal bonds are very attractive investments compared to U.S.
Treasury bonds. As of August 31, 1998, municipal bonds provided nearly 95% of
the yield of taxable government securities. In other words, Oppenheimer Main
Street California Municipal Fund Class A shares' current yield of 4.27% would be
equivalent to a taxable yield of 7.36% for an investor in a combined federal and
state income tax bracket of 42%. That's almost twice the yield offered by the
ten-year U.S. Treasury note. We think California investors will find these
yields attractive, particularly if the stock market continues to encounter
difficulty.
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
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% for the 1-year period 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.
6 Oppenheimer Main Street California Municipal Fund
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Credit Allocation/2/
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
AAA 51.9%
AA 15.0
A 12.3
BBB 20.8
Standardized Yields/3/
For the 30 Days Ended 8/31/98
- ------------------------------
Class A 4.27%
- ------------------------------
Class B 3.48%
- ------------------------------
Regardless of the market environment, we will continue to search for California
municipal bonds that offer high-quality tax-exempt income for our shareholders.
This search for quality and yield is what makes Oppenheimer Main Street
California Municipal Fund part of The Right Way to Invest.
Top Five Industries/4/
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Single Family Housing 19.1%
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Special Assessment 17.8
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General Obligation 12.9
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Highways 8.2
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Lease Rental 7.6
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2. Portfolio data is as of August 31, 1998 and is dollar-weighted based on
invested assets and subject to change. Securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category.
Average credit quality and allocation include rated securities and those not
rated by a national rating organization (currently 5.63% 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.
3. Standardized yield is based on net investment income for the 30-day period
ended 8/31/98. Falling share prices will tend to artificially raise yields.
4. Portfolio is subject to change. Percentages are as of August 31, 1998 and
are based on total market value of investments.
7 Oppenheimer Main Street California Municipal Fund
<PAGE>
Fund performance
- --------------------------------------------------------------------------------
How Has the Fund Performed? Below is a discussion by the Manager of the Fund of
its performance during its fiscal year ended August 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
[ ] Management's Discussion of Performance. During the fiscal year that
ended August 31, 1998, Oppenheimer Main Street California Municipal Fund's
investments generally appreciated as interest rates fell. However, the municipal
bond market as a whole did not perform as well as the U.S. Treasury bond market,
which global investors sought as a refuge from the Asian economic crisis. As a
result, municipal bond price increases have lagged those of taxable investments.
The Fund's policy of seeking to maintain a steady dividend for its Class A
shares did not materially affect portfolio management strategies during its last
fiscal year. The Fund's portfolio and its portfolio manager's strategies are
subject to change.
[ ] Comparing the Fund's Performance to the Market. The graphs that follow
show the performance of a hypothetical $10,000 investment in each class of
shares of the Fund from the inception of the class held through August 31, 1998,
with all dividends and capital gains distributions reinvested in additional
shares. The inception date of Class A is May 18, 1990, while the inception date
of Class B is October 29, 1993. The graphs reflect the deduction of 4.75%
maximum initial sales charge on Class A shares and the applicable contingent
deferred sales charge for Class B.
Because the Fund invests in a variety of Municipal Securities, the Fund's
performance is compared to that of the Lehman Brothers Municipal Bond Index, an
unmanaged index of a broad range of investment grade municipal bonds that is
widely regarded as a measure of the performance of the general municipal bond
market. Index performance reflects the reinvestment of dividends but does not
consider the effect of capital gains or transaction costs, and none of the data
below shows the effect of taxes. Also, the Fund's performance reflects the
effect of Fund business and operating expenses. While index comparisons may be
useful to provide a benchmark for the Fund's performance, it must be noted that
the Fund's investments are not limited to the securities in any one index.
8 Oppenheimer Main Street California Municipal Fund
<PAGE>
Fund performance
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Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Main Street California Municipal Fund (Class A) and Lehman Brothers
Municipal Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
California Municipal Fund Lehman Brothers
Date Class A Municipal Bond Index
---- ------------------------- --------------------
5/18/90 $ 9,525 $10,000
6/30/90 $ 9,711 $10,088
6/30/91 $10,482 $10,997
6/30/92 $11,657 $12,292
6/30/93 $13,098 $13,761
6/30/94 $13,020 $13,785
6/30/95 $14,182 $15,002
6/30/96 $15,135 $15,997
8/31/96/1/ $15,304 $16,139
8/31/97 $16,872 $17,633
8/31/98 $18,446 $19,155
Average Annual Total Return of Class A Shares of the Fund at 8/31/98/2/
1 Year 4.13% 5 Year 5.57% Life 7.67%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments In:
Oppenheimer Main Street California Municipal Fund (Class B) and Lehman Brothers
Municipal Bond Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Oppenheimer Main Street
California Municipal Fund Lehman Brothers
Date Class B Municipal Bond Index
---- ------------------------- --------------------
10/29/93 $10,000 $10,000
6/30/94 $ 9,458 $ 9,671
6/30/95 $10,205 $10,525
6/30/96 $10,782 $11,224
8/31/96/1/ $10,874 $11,323
8/31/97 $11,878 $12,371
8/31/98 $12,655 $13,439
Average Annual Total Return of Class B Shares of the Fund at 8/31/98(3)
1 Year 3.24% Life 4.99%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information in the graphs for Lehman Brothers Municipal Bond
Index for Class A begins on 5/31/90 and for Class B begins on 10/31/93.
1. The Fund changed its fiscal year end from 6/30 to 8/31.
2. The inception date of the Fund's Class A shares was 5/18/90. The average
annual total returns are shown net of the applicable 4.75% maximum initial sales
charge.
3. Class B shares of the Fund were first publicly offered on 10/29/93. The
average annual total returns are shown net of the applicable 5% and 2%
contingent deferred sales charge for the 1-year period and the life of the
class, respectively. The ending account value in the graph is net of the
applicable 2% contingent deferred sales charge.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
9 Oppenheimer Main Street California Municipal Fund
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Financials
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10 Oppenheimer Main Street California Municipal Fund
<PAGE>
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Statement of Investments August 31, 1998
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<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
Municipal Bonds and Notes--100.5%
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California--93.9%
Alameda, CA PFAU RRB, Marina Village
Assessment District Refinancing, 6.375%, 9/2/14 NR/NR $2,100,000 $2,162,811
- ------------------------------------------------------------------------------------------------------------------------------------
Anaheim, CA PFAU TXAL RB, MBIA Insured,
Inverse Floater, 8.97%, 12/28/18(1) Aaa/AAA 1,000,000 1,301,250
- ------------------------------------------------------------------------------------------------------------------------------------
Berkeley, CA HF RRB, Alta Bates Medical
Center, Series A, 6.50%, 12/1/11 A2/NR 1,500,000 1,659,045
- ------------------------------------------------------------------------------------------------------------------------------------
CA Assn. of Bay Area Governments FAU for
Non-profit Corps. Refunding COP, American
Baptist Homes, Series A, 6.20%, 10/1/27 NR/BBB 1,790,000 1,916,660
- ------------------------------------------------------------------------------------------------------------------------------------
CA Assn. of Bay Area Governments FAU for
Non-profit Corps. Refunding COP, Rhonda
Haas Goldman Plaza, 5.125%, 5/15/23 NR/A+ 700,000 693,168
- ------------------------------------------------------------------------------------------------------------------------------------
CA CDAU Lease RB, United Airlines, Series A,
5.70%, 10/1/33 Baa3/BB+ 3,200,000 3,304,736
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CA CDAU MH RB, Village Riviera Hills,
Series E, 5.45%, 2/1/25 NR/AAA 1,000,000 1,045,170
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CA Foothill/Eastern Transportation Corridor
Agency Toll Road RB, Sr. Lien, Series A, 6.50%,
1/1/32 Baa/BBB-/BBB 1,400,000 1,545,628
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CA GOB, 5%, 10/1/23 A1/A+/AA- 6,000,000 5,953,140
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CA HFA Home Mtg. RB, Series C, 6.75%, 2/1/25 Aa2/A+ 4,875,000 5,224,099
- ------------------------------------------------------------------------------------------------------------------------------------
CA HFA SFM Purchase RB, Series A-2,
6.45%, 8/1/25 Aaa/AAA 2,500,000 2,677,750
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CA HFA SFM RB, Series A, Cl. I, 5.40%, 8/1/26 Aaa/AAA 1,810,000 1,828,353
- ------------------------------------------------------------------------------------------------------------------------------------
CA PCFAU RB, Pacific Gas & Electric Co.
Project, Series B, 6.35%, 6/1/09 A1/AA- 2,000,000 2,169,340
- ------------------------------------------------------------------------------------------------------------------------------------
CA PWBL RB, State Prison Department of
Corrections, Series E, FSA Insured, 5.50%,
6/1/15 Aaa/AAA 2,000,000 2,186,600
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CA Rural Home Mtg. FAU SFM RB, Mtg.-Backed
Securities Program, Series B-3, 5.75%, 6/1/29 NR/AAA 1,500,000 1,666,995
- ------------------------------------------------------------------------------------------------------------------------------------
CA Rural Home Mtg. FAU SFM RB, Series A,
5.75%, 12/1/29 NR/AAA 2,000,000 2,205,600
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CA Rural Home Mtg. FAU SFM RB, Series D,
6.70%, 5/1/29 NR/AAA 1,930,000 2,211,027
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CA SCDAU Revenue Refunding COP, Inverse
Floater, 7.068%, 11/1/15(1) A1/NR 1,200,000 1,239,000
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Central CA Joint Powers Health FAU COP,
Community Hospitals of Central California
Project, 5%, 2/1/23 Baa1/NR 285,000 270,548
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Central Valley FAU, CA Cogeneration Project
RRB, Carson Ice, MBIA Insured, 5.25%, 7/1/14 NR/AAA/AAA 500,000 523,555
</TABLE>
11 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Statement of Investments (Continued)
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<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
California (continued)
Contra Costa Cnty., CA SPTX RRB, CFD 91-1,
5.58%, 8/1/16 NR/NR $3,075,000 $3,121,679
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Corona, CA SFM RB, Sub. Lien, Series B, 6.30%,
11/1/28 A2/NR 800,000 860,232
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Duarte, CA COP, City of Hope National
Medical Center, 6.25%, 4/1/23 Baa1/NR 2,460,000 2,611,708
- ------------------------------------------------------------------------------------------------------------------------------------
Escondido, CA Union High SDI CAP GOB,
MBIA Insured, Zero Coupon, 6.20%, 11/1/19(2) Aaa/AAA 2,000,000 698,100
- ------------------------------------------------------------------------------------------------------------------------------------
Fontana, CA RA TXAL GORB, Jurupa Hills
Redevelopment Project-A, 7.10%, 10/1/23 NR/BBB+ 1,960,000 2,236,928
- ------------------------------------------------------------------------------------------------------------------------------------
Fontana, CA RA TXAL Refunding Bonds,
Jurupa Hills Redevelopment Project,
Series A, 5.50%, 10/1/19 NR/BBB+ 1,185,000 1,216,118
- ------------------------------------------------------------------------------------------------------------------------------------
Fresno, CA HAU MH RB, Central Valley
Coalition Projects, Series A, 5.60%, 8/1/30 NR/AAA 3,075,000 3,199,722
- ------------------------------------------------------------------------------------------------------------------------------------
Fresno, CA USD GORB, Series A, MBIA
Insured, 6.55%, 8/1/20 Aaa/AAA/AAA 1,225,000 1,472,609
- ------------------------------------------------------------------------------------------------------------------------------------
Fresno, CA USD RB, Series A, MBIA Insured,
6.40%, 8/1/16 Aaa/AAA/AAA 1,000,000 1,191,280
- ------------------------------------------------------------------------------------------------------------------------------------
La Quinta, CA RA TXAL Refunding Bonds,
Redevelopment Project Area No. 1, MBIA
Insured, 7.30%, 9/1/09 Aaa/AAA 1,015,000 1,276,606
- ------------------------------------------------------------------------------------------------------------------------------------
Las Virgenes, CA USD CAP Bonds, Series A,
MBIA Insured, Zero Coupon, 4.95%, 11/1/12(2) Aaa/AAA/AAA 2,095,000 1,066,229
- ------------------------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RRB, Series A,
FGIC Insured, 6%, 5/15/09 Aaa/AAA 500,000 566,310
- ------------------------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RRB, Series A,
FGIC Insured, 6%, 5/15/10 Aaa/AAA 500,000 568,120
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA COP, CAP, Disney Parking
Project, Zero Coupon, 6.95%, 9/1/11(2) Baa1/BBB/A- 2,340,000 1,203,602
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA COP, CAP, Disney Parking
Project, Zero Coupon, 5.67%, 9/1/16(2) Baa1/BBB/A- 1,745,000 673,448
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA MTAU Sales Tax RRB,
Series A, FSA Insured, 5%, 7/1/12(3) Aaa/AAA/AAA 2,000,000 2,031,600
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA MTAU Sales Tax RRB,
Series A, FSA Insured, 5%, 7/1/19(3) Aaa/AAA/AAA 2,000,000 1,983,980
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA Public Works FAU RRB,
Regional Park & Open Space District,
Series A, 5%, 10/1/16 Aa3/AA 1,900,000 1,905,529
- ------------------------------------------------------------------------------------------------------------------------------------
Los Angeles, CA USD GOB, Series A,
FGIC Insured, 6%, 7/1/15 Aaa/AAA/AAA 1,000,000 1,151,250
- ------------------------------------------------------------------------------------------------------------------------------------
Oakland, CA State Building Authority Lease
RB, Elihu M. Harris, Series A, AMBAC Insured,
5%, 4/1/23 Aaa/AAA/AAA 1,100,000 1,093,785
</TABLE>
12 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
================================================================================
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
California (continued)
Palmdale, CA Civic Authority RRB, Merged
Redevelopment Project Areas, Series A,
6.60%, 9/1/34 NR/A- $1,000,000 $1,114,370
- ------------------------------------------------------------------------------------------------------------------------------------
Pittsburg, CA Improvement Bond Act of 1915
SPAST GOB, Assessment District 1990-01,
7.75%, 9/2/20 NR/NR 95,000 97,861
- ------------------------------------------------------------------------------------------------------------------------------------
Pittsburg, CA RA TXAL Refunding Bonds,
Los Medanos Community Development
Project, Sub. Lien, 6.20%, 8/1/19 NR/BBB 1,000,000 1,082,020
- ------------------------------------------------------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity,
Series A, 7.60%, 5/1/23 Aaa/AAA 2,500,000 3,330,750
- ------------------------------------------------------------------------------------------------------------------------------------
Pomona, CA USD GORB, Series A, MBIA
Insured, 6.15%, 8/1/15 Aaa/AAA 500,000 585,045
- ------------------------------------------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
FGIC Insured, Inverse Floater, 7.535%, 6/1/19(1) Aaa/AAA/AAA 1,150,000 1,263,563
- ------------------------------------------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP,
MBIA Insured, Inverse Floater, 8.781%, 7/8/22(1) Aaa/AAA 500,000 671,875
- ------------------------------------------------------------------------------------------------------------------------------------
Riverside CA PFAU Lease RB, AMBAC Insured,
5.25%, 10/1/17 Aaa/AAA/AAA 2,100,000 2,166,717
- ------------------------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA CFD SPTX Bonds,
No. 88-12, 7.55%, 9/1/17 NR/NR 1,500,000 1,639,605
- ------------------------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA PFAU TXAL RRB,
Redevelopment Projects, Series A,
5.625%, 10/1/33 Baa2/BBB- 1,650,000 1,708,988
- ------------------------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA SFM RB, Escrowed to
Maturity, Series A, 7.80%, 5/1/21 Aaa/AAA 1,000,000 1,372,160
- ------------------------------------------------------------------------------------------------------------------------------------
Sacramento Cnty., CA SFM RB, Escrowed to
Maturity, 8.125%, 7/1/16(4) Aaa/AAA 2,810,000 3,855,180
- ------------------------------------------------------------------------------------------------------------------------------------
Sacramento, CA MUD Electric RRB, FGIC
Insured, Inverse Floater, 9.071%, 8/15/18(1) Aaa/AAA/AAA 1,500,000 1,786,875
- ------------------------------------------------------------------------------------------------------------------------------------
Sacramento, CA Cogeneration Authority RRB,
MBIA Insured, 5.25%, 7/1/12 NR/AAA/AAA 250,000 264,625
- ------------------------------------------------------------------------------------------------------------------------------------
Salinas Valley, CA Solid Waste Authority RB,
5.80%, 8/1/27 Baa3/BBB 1,665,000 1,707,141
- ------------------------------------------------------------------------------------------------------------------------------------
San Diego Cnty., CA Water Authority Revenue
COP, Series 91-B, MBIA Insured, Inverse
Floater, 8.62%, 4/8/21(1) Aaa/AAA 1,000,000 1,321,250
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, CA Bay Area Rapid Transit
District Sales Tax RRB, AMBAC Insured,
6.75%, 7/1/11 Aaa/AAA/AAA 1,000,000 1,221,860
- ------------------------------------------------------------------------------------------------------------------------------------
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 1,420,702
</TABLE>
13 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Statement of Investments (Continued)
================================================================================
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
California (continued)
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 $ 1,607,637
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Airport
Commission International Airport RRB,
Second Series Issue 15-A, FSA Insured,
5%, 5/1/21 Aaa/AAA/AAA 1,000,000 987,250
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. RA Lease RB,
CAP, George R. Moscone Project,
Zero Coupon, 5.36%, 7/1/10(2) A1/A-/A+ 4,500,000 2,574,540
- ------------------------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty.
Redevelopment FAU TXAL CAP Refunding
Bonds, Redevelopment Projects, Series C,
Zero Coupon, 5.20%, 8/1/13(2) A2/A 2,350,000 1,117,613
- ------------------------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation Corridor
Agency Toll Road RB, Sr. Lien, 6.75%, 1/1/32 Aaa/AAA/AAA 3,500,000 3,974,950
- ------------------------------------------------------------------------------------------------------------------------------------
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 2,230,848
- ------------------------------------------------------------------------------------------------------------------------------------
San Ysidro, CA SDI GOB, AMBAC Insured,
6.125%, 8/1/21 Aaa/AAA 700,000 806,904
- ------------------------------------------------------------------------------------------------------------------------------------
South Orange Cnty., CA PFAU SPTX RB,
Foothill Area, Series C, FGIC Insured, 8%,
8/15/08 Aaa/AAA/AAA 1,500,000 1,950,570
- ------------------------------------------------------------------------------------------------------------------------------------
Southern CA Home FAU SFM RB, Series A,
7.35%, 9/1/24 NR/AAA 265,000 279,914
- ------------------------------------------------------------------------------------------------------------------------------------
Southern CA Home FAU SFM RB, Series A,
7.35%, 9/1/24 NR/AAA 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Southern CA Metropolitan Water District
Waterworks RB, 5.55%, 10/30/20 Aa2/AA 2,400,000 2,503,392
- ------------------------------------------------------------------------------------------------------------------------------------
Southern CA PPAU Transmission Project RB,
Inverse Floater, 7.893%, 7/1/12(1) Aa3/A+ 2,100,000 2,420,250
- ------------------------------------------------------------------------------------------------------------------------------------
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 1,536,580
- ------------------------------------------------------------------------------------------------------------------------------------
Suisun City, CA PFAU TXAL RB, Suisun City
Redevelopment Project, Series A, 5.20%,
10/1/28 NR/A- 2,500,000 2,514,375
- ------------------------------------------------------------------------------------------------------------------------------------
Temecula, CA SPTX Refunding Bonds, CFD
88-12-A, 5.625%, 9/1/17 NR/NR 535,000 539,649
- ------------------------------------------------------------------------------------------------------------------------------------
West Covina, CA COP, Queen of the Valley
Hospital, 6.50%, 8/15/19 A2/NR 1,120,000 1,289,579
------------
124,877,948
</TABLE>
14 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
================================================================================
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
===================================================================================================================================
<S> <C> <C> <C>
U.S. Possessions--6.6%
PR CMWLTH GOB, 5%, 7/1/27 Baa1/A $1,000,000 $ 987,140
- -----------------------------------------------------------------------------------------------------------------------------------
PR CMWLTH GOB, 5.375%, 7/1/25 Baa1/A 1,650,000 1,690,673
- -----------------------------------------------------------------------------------------------------------------------------------
PR CMWLTH GORB, MBIA Insured,
Inverse Floater, 7.934%, 7/1/08(1) Aaa/AAA 1,500,000 1,706,250
- -----------------------------------------------------------------------------------------------------------------------------------
PR CMWLTH Highway & Transportation
Authority RRB, Series A, AMBAC Insured,
5.50%, 7/1/13 Aaa/AAA/AAA 1,500,000 1,653,255
- -----------------------------------------------------------------------------------------------------------------------------------
PR CMWLTH Highway & Transportation
Authority RRB, Series A, AMBAC Insured,
5.50%, 7/1/14 Aaa/AAA/AAA 1,500,000 1,651,425
- -----------------------------------------------------------------------------------------------------------------------------------
PR Housing Finance Corp. SFM RB,
Portfolio 1, Series B, 7.65%, 10/15/22 Aaa/AAA 150,000 159,150
- -----------------------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental
PC Facilities Tourist RB, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 595,000 650,341
- -----------------------------------------------------------------------------------------------------------------------------------
PR Public Buildings Authority RB,
Government Facilities, Series B, AMBAC
Insured, 5%, 7/1/27 Aaa/AAA 300,000 299,298
------------
8,797,532
------------
Total Municipal Bonds and Notes (Cost $125,206,488) 133,675,480
===================================================================================================================================
Short-Term Tax-Exempt Obligations--0.5%
- -----------------------------------------------------------------------------------------------------------------------------------
Orange Cnty., CA Sanitation District COP,
FGIC Insured, 3.15%, 9/1/98 (6) (Cost $700,000) 700,000 700,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $125,906,488) 101.0% 134,375,480
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.0) (1,389,605)
----- ------------
Net Assets 100.0% $132,985,875
===== ============
</TABLE>
15 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Statement of Investments (Continued)
================================================================================
- --------------------------------------------------------------------------------
To simplify the listings of securities, abbreviations are used per the table
below:
CAP --Capital Appreciation
CDAU --Communities Development Authority
CFD --Community Facilities District
CMWLTH --Commonwealth
COP --Certificates of Participation
FAU --Finance Authority
GOB --General Obligation Bonds
GORB --General Obligation Refunding Bonds
HAU --Housing Authority
HF --Health Facilities
HFA --Housing Finance Agency
MH --Multifamily Housing
MTAU --Metropolitan Transportation Authority
MUD --Municipal Utility District
PC --Pollution Control
PCFAU --Pollution Control Finance Authority
PFAU --Public Finance Authority
PPAU --Public Power Authority
PWBL --Public Works Board Lease
RA --Redevelopment Agency
RB --Revenue Bonds
RRB --Revenue Refunding Bonds
SCDAU --Statewide Communities Development Authority
SDI --School District
SFM --Single Family Mtg.
SPAST --Special Assessment
SPTX --Special Tax
TXAL --Tax Allocation
USD --Unified School District
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 $11,710,313 or 8.81% of the
Fund's net assets as of August 31, 1998.
2. For zero coupon bonds, the interest rate shown is the effective yield on
the date of purchase.
3. When-issued security to be delivered and settled after August 31, 1998.
4. Securities with an aggregate market value of $466,463 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
5. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
6. Floating or variable rate obligation maturing in more than one year. The
interest rate, which is based on specific, or an index of, market interest
rates, is subject to change periodically and is the effective rate on August 31,
1998. This instrument may also have a demand feature which allows, on up to 30
days' notice, the recovery of principal at any time, or at specified intervals
not exceeding one year.
16 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
As of August 31, 1998, securities subject to the alternative minimum tax amount
to $37,917,206 or 28.51% 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>
Single Family Housing $ 25,691,210 19.1%
- --------------------------------------------------------------------------------
Special Assessment 23,871,602 17.8
- --------------------------------------------------------------------------------
General Obligation 17,308,620 12.9
- --------------------------------------------------------------------------------
Highways 11,056,106 8.2
- --------------------------------------------------------------------------------
Lease Rental 10,197,990 7.6
- --------------------------------------------------------------------------------
Hospital/Healthcare 7,720,221 5.8
- --------------------------------------------------------------------------------
Electric Utilities 6,930,743 5.2
- --------------------------------------------------------------------------------
Sales Tax 6,351,810 4.7
- --------------------------------------------------------------------------------
Marine/Aviation Facilities 5,150,019 3.8
- --------------------------------------------------------------------------------
Multi-Family Housing 4,244,892 3.2
- --------------------------------------------------------------------------------
Resource Recovery 3,943,721 2.9
- --------------------------------------------------------------------------------
Water Utilities 3,824,642 2.8
- --------------------------------------------------------------------------------
Corporate Backed 3,304,736 2.5
- --------------------------------------------------------------------------------
Adult Living Facilities 2,609,828 1.9
- --------------------------------------------------------------------------------
Pollution Control 2,169,340 1.6
------------ -----
Total $134,375,480 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Main Street California Municipal Fund
<PAGE>
<TABLE>
=====================================================================================
Statement of Assets and Liabilities August 31, 1998
=====================================================================================
=====================================================================================
<S> <C>
Assets
Investments, at value (cost $125,906,488)--see accompanying statement $ 134,375,480
- -------------------------------------------------------------------------------------
Cash 801,113
- -------------------------------------------------------------------------------------
Receivables:
Shares of capital stock sold 1,988,712
Interest 1,691,439
- -------------------------------------------------------------------------------------
Other 13,786
-------------
Total assets 138,870,530
=====================================================================================
Liabilities
Payables and other liabilities:
Investments purchased 5,439,669
Dividends 351,482
Transfer and shareholder servicing agent fees 12,108
Daily variation on future contracts--Note 5 9,540
Distribution and service plan fees 9,265
Shares of capital stock redeemed 5,378
Other 57,213
-------------
Total liabilities 5,884,655
=====================================================================================
Net Assets $ 132,985,875
=============
=====================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 102,131
- -------------------------------------------------------------------------------------
Additional paid-in capital 124,777,693
- -------------------------------------------------------------------------------------
Overdistributed net investment income (351,652)
- -------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (1,749)
- -------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 8,459,452
-------------
Net assets $ 132,985,875
=============
</TABLE>
18 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
================================================================================
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $109,810, 944 and 8,431, 451 shares of capital
stock outstanding) $13.02
Maximum offering price per share (net asset value plus sales
charge of 4.75% of offering price) $13.67
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $23,174,931 and 1,781,698
shares of capital stock outstanding) $13.01
See accompanying Notes to Financial Statements.
19 Oppenheimer Main Street California Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
===================================================================================
Statement of Operations For the Year Ended August 31, 1998
===================================================================================
===================================================================================
<S> <C>
Investment Income
Interest $ 6,586,112
===================================================================================
Expenses
Management fees--Note 4 646,955
- -----------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class B 180,565
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 64,929
- -----------------------------------------------------------------------------------
Shareholder reports 53,535
- -----------------------------------------------------------------------------------
Custodian fees and expenses 18,391
- -----------------------------------------------------------------------------------
Legal, auditing and other professional fees 11,917
- -----------------------------------------------------------------------------------
Registration and filing fees:
Class A 7,604
Class B 3,822
- -----------------------------------------------------------------------------------
Directors' fees and expenses 2,449
- -----------------------------------------------------------------------------------
Other 4,142
------------
Total expenses 994,309
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (176,110)
Less expenses paid indirectly--Note 4 (17,391)
------------
Net expenses 800,808
===================================================================================
Net Investment Income 5,785,304
===================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 439,154
Closing of futures contracts (586,335)
------------
Net realized loss (147,181)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 4,576,330
------------
Net realized and unrealized gain 4,429,149
===================================================================================
Net Increase in Net Assets Resulting from Operations $ 10,214,453
============
</TABLE>
See accompanying Notes to Financial Statements.
20 Oppenheimer Main Street California Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================
Statements of Changes in Net Assets
==========================================================================================================
Year Ended August 31,
1998 1997
==========================================================================================================
<S> <C> <C>
Operations
Net investment income $ 5,785,304 $ 5,140,982
- ----------------------------------------------------------------------------------------------------------
Net realized gain (loss) (147,181) 754,676
- ----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 4,576,330 2,696,390
------------- -------------
Net increase in net assets resulting from operations 10,214,453 8,592,048
==========================================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (5,113,266) (4,733,799)
Class B (736,400) (394,165)
- ----------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (802,490) (9,642)
Class B (131,382) (827)
==========================================================================================================
Capital Stock Transactions
Net increase in net assets resulting from
capital stock transactions--Note 2:
Class A 16,887,977 10,035,358
Class B 10,757,185 5,675,756
==========================================================================================================
Net Assets
Total increase 31,076,077 19,164,729
- ----------------------------------------------------------------------------------------------------------
Beginning of period 101,909,798 82,745,069
------------- -------------
End of period [including undistributed (overdistributed) net
investment income of $(351,652) and $437,009, respectively] $ 132,985,875 $ 101,909,798
============= =============
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer Main Street California Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Financial Highlights
===========================================================================================================
Class A
------------------------------------------------------------
Year Ended
Year Ended August 31, June 30,
1998 1997 1996/2/ 1996
===========================================================================================================
<S> <C> <C> <C> <C>
Per Share Operating Data
Net asset value, beginning of period $ 12.64 $ 12.16 $ 12.15 $ 12.09
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .65 .73 .12 .73
Net realized and unrealized gain (loss) .51 .49 .01 .07
----------- ----------- ----------- -----------
Total income (loss) from investment
operations 1.16 1.22 .13 .80
- -----------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.67) (.74) (.12) (.73)
Dividends in excess of net investment
income -- -- -- --
Distributions from net realized gain (.11) -- -- --
Distributions in excess of net realized gain -- -- -- (.01)
----------- ----------- ----------- -----------
Total dividends and distributions
to shareholders (.78) (.74) (.12) (.74)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.02 $ 12.64 $ 12.16 $ 12.15
=========== =========== =========== ===========
===========================================================================================================
Total Return, at Net Asset Value/3/ 9.33% 10.24% 1.12% 6.73%
===========================================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands) $ 109,811 $ 89,991 $ 76,817 $ 76,913
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 99,678 $ 80,311 $ 77,584 $ 78,676
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.04% 5.91% 6.00%(4) 5.99%
Expenses, before voluntary
assumption by the Manager/5/ 0.69% 0.59% 0.57%(4) 0.58%
Expenses, net of voluntary
assumption by the Manager 0.53% N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate/6/ 29.7% 46.4% 1.4% 33.1%
</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. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
(4.) Annualized.
22 Oppenheimer Main Street California Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
========================================================================================================================
Class B
- ----------------------------- ---------------------------------------------------------------------------------------
Year Ended June 30, Year Ended August 31, Year Ended June 30,
1995 1994 1998 1997 1996/2/ 1996 1995 1994/1/
========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11.82 $ 12.66 $ 12.63 $ 12.14 $ 12.14 $ 12.08 $ 11.80 $ 12.90
- ------------------------------------------------------------------------------------------------------------------------
.73 .75 .54 .60 .10 .61 .62 .38
.27 (.80) .49 .50 -- .07 .27 (1.07)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1.00 (.05) 1.03 1.10 .10 .68 .89 (.69)
- ------------------------------------------------------------------------------------------------------------------------
(.69) (.73) (.54) (.61) (.10) (.61) (.57) (.37)
(.04) (.03) -- -- -- -- (.04) (.01)
-- -- (.11) -- -- -- -- --
-- (.03) -- -- -- (.01) -- (.03)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(.73) (.79) (.65) (.61) (.10) (.62) (.61) (.41)
- ------------------------------------------------------------------------------------------------------------------------
$ 12.09 $ 11.82 $ 13.01 $ 12.63 $ 12.14 $ 12.14 $ 12.08 $ 11.80
=========== =========== =========== =========== =========== =========== =========== ===========
========================================================================================================================
8.93% (0.60)% 8.24% 9.24% 0.85% 5.66% 7.90% (5.42)%
========================================================================================================================
$ 78,134 $ 79,555 $ 23,175 $ 11,919 $ 5,928 $ 5,442 $ 2,648 $ 1,203
- ------------------------------------------------------------------------------------------------------------------------
$ 76,148 $ 81,741 $ 18,087 $ 8,129 $ 5,767 $ 3,848 $ 1,904 $ 649
- ------------------------------------------------------------------------------------------------------------------------
6.27% 6.09% 4.19% 4.85% 4.92%/4/ 4.94% 5.17% 4.91%(4)
0.57% 0.53% 1.70% 1.60% 1.62%/4/ 1.60% 1.55% 1.62%(4)
N/A N/A 1.53% N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------
14.2% 20.2% 29.7% 46.4% 1.4% 33.1% 14.2% 20.2%
</TABLE>
5. Beginning in fiscal 1995, the expense ratios reflect the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
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 period
ended August 31, 1998 were $65,210,846 and $34,982,825, respectively.
See accompanying Notes to Financial Statements.
23 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Notes to Financial Statements
================================================================================
================================================================================
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, Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At August 31, 1998, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $11,000, which expires in 2006.
24 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
================================================================================
================================================================================
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. The character of the distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.
The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 1998, amounts have been reclassified to reflect an
increase in overdistributed net investment income of $724,299, accumulated net
realized loss on investments was decreased by $158,956, and paid-in capital was
increased by $565,343.
- --------------------------------------------------------------------------------
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. Such cumulative change was limited to a reclassification
adjustment and had no impact on net assets or total increase (decrease) in net
assets. Accordingly, during the year ended August 31, 1998, amounts have been
reclassified to reflect an increase in unrealized appreciation of $1,179,386.
Paid-in capital was decreased by the same amount. 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. 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.
25 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Notes to Financial Statements (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>
Year Ended August 31, 1998 Year Ended August 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 2,165,645 $ 27,847,918 1,377,422 $ 17,228,574
Dividends and distributions
reinvested 290,138 3,721,102 233,721 2,900,249
Redeemed (1,141,736) (14,681,043) (811,980) (10,093,465)
------------ ------------ ------------ ------------
Net increase 1,314,047 $ 16,887,977 799,163 $ 10,035,358
============ ============ ============ ============
- ------------------------------------------------------------------------------------------
Class B:
Sold 931,591 $ 11,964,499 467,166 $ 5,821,078
Dividends and distributions
reinvested 44,882 575,114 20,557 255,214
Redeemed (138,617) (1,782,428) (32,007) (400,536)
------------ ------------ ------------ ------------
Net increase 837,856 $ 10,757,185 455,716 $ 5,675,756
============ ============ ============ ============
</TABLE>
================================================================================
3. Unrealized Gains and Losses on Investments
At August 31, 1998, net unrealized appreciation on investments of $8,468,992 was
composed of gross appreciation of $8,468,992.
================================================================================
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 continue to waive those
expenses over 0.40% when the net assets of the Fund exceed $100 million.
For the year ended August 31, 1998, commissions (sales charges paid by
investors) on sales of Class A shares totaled $406,963, of which $41,120 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 $465,076. During the year ended August 31, 1998, OFDI received
contingent deferred sales charges of $32,708 upon redemption of Class B shares.
26 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
================================================================================
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4. Management Fees and Other Transactions with Affiliates (continued)
OppenheimerFunds Services (OFS), a division of the Manager, is the transfer and
shareholder servicing agent for the Fund and other Oppenheimer funds. OFS's
total costs of providing such services are allocated ratably to these funds.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
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 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 year ended August 31, 1998, OFDI retained
$159,237 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 August 31, 1998, OFDI had incurred excess distribution and servicing costs of
$811,620 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.
27 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Notes to Financial Statements (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 August 31, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Unrealized
Expiration Number of Valuation as of Appreciation
Date Contracts August 31, 1998 (Depreciation)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Purchase
- ---------------------
Municipal Bond Future 12/98 26 $3,286,563 $ 2,178
--------
Contracts to Sell
- -----------------
U.S. Treasury Bonds, 20 yr. 12/98 20 2,540,000 (11,718)
--------
$ (9,540)
========
</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 year ended August 31,
1998.
28 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Independent Auditors' Report
================================================================================
================================================================================
The Board of Directors and Shareholders of
Oppenheimer Main Street California Municipal Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street California Municipal
Fund as of August 31, 1998, the related statement of operations for the year
then ended, the statements of changes in net assets for the years ended August
31, 1998 and 1997, and the financial highlights for the period July 1, 1993 to
August 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1998, by correspondence with the custodian and brokers; and where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Oppenheimer Main
Street California Municipal Fund at August 31, 1998, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Denver, Colorado
September 22, 1998
29 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Federal Income Tax Information (Unaudited)
================================================================================
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $0.1612 and $0.1504 per share were paid to Class A and
Class B shareholders, respectively, on December 10, 1997, of which, for each
class of shares, $0.0410 was designated as a capital gain distribution in the
"28% Rate Group" and $0.0318 was designated as a capital gains distribution in
the "20% Rate Group" for federal income tax purposes. Whether received in stock
or in cash, the capital gain distribution should be treated by shareholders as a
gain from the sale of capital assets.
None of the dividends paid by the Fund during the year ended August 31,
1998, 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.
30 Oppenheimer Main Street California Municipal Fund
<PAGE>
================================================================================
Oppenheimer Main Street California Municipal Fund
================================================================================
A Series of Oppenheimer Main Street Funds, Inc.
================================================================================
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 OppenheimerFunds Services
Shareholder
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer 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, and are not insured by the FDIC or any other
agency, and involve investment risks, including
possible loss of the principal amount invested.
31 Oppenheimer Main Street California Municipal Fund
<PAGE>
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or savings account, you can use the
Telephone Transactions number or website to make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
Internet
24-hr access to account
information. Online
transactions now available
www.oppenheimerfunds.com
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
1-800-525-7048
Account Transactions
Mon-Fri 8:30am-8pm ET
1-800-852-8457
PhoneLink
24-hr automated information
and automated transactions
1-800-533-3310
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
1-800-843-4461
OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
1-800-835-3104
[LOGO] OppenheimerFunds(R)
Distributor, Inc.
RA0725.001.0898 October 30, 1998
