[FRONT COVER]
Oppenheimer California Tax-Exempt Fund
Annual Report July 31, 1996
[Picture of Couple at coffee table]
"We want
investment
income
that won't add
to our taxes."
[Oppenheimer Logo]
<PAGE>
This Fund is for California residents who need a source of income that's exempt
from current taxes.
Yield
Standardized Yields
For the 30 Days Ended 7/31/96:(3)
Class A
4.65%
Class B
4.12%
Class C
4.05%
The Fund's Class A shares
were ranked (4 stars)
among 875 tax-exempt
bond funds as of 7/31/96 by
Morningstar Mutual Funds.(4)
How Your Fund Is Managed
Oppenheimer California Tax-Exempt Fund invests in a diversified portfolio of
California municipal bonds. As a Fund shareholder, you receive income that is
free from federal and California income taxes.(1) Your dividends don't increase
your taxable income the way taxable investments do, so you can keep more of what
you earn.
Performance
Your Fund's average annual total returns at maximum offering price for Class A
shares for the 1- and 5-year periods ended 7/31/96 and since inception of the
class on 11/3/88 were 2.05%, 6.28% and 7.22%, respectively. For Class B shares,
average annual total returns for the 1-year period ended 7/31/96 and since
inception of the class on 5/1/93 were 1.31% and 3.81%, respectively. For Class C
shares, cumulative total return since inception on 11/1/95 was 1.71%.(2)
Outlook
"We think the outlook is positive. From our perspective, the economic
growth rate that set off increases in interest rates will not be enough to make
inflation a serious concern. Thus, we expect any further increase in interest
rates in the near future will be moderate and that the general bond market could
strengthen later in the year."
Jerry Webman, Portfolio Manager
July 31, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. 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. For more complete information, please review the
prospectus carefully before you invest.
1. A portion of the distributions paid by the Fund may be subject to federal and
state income taxes. For investors subject to federal and/or state alternative
minimum tax (AMT), the Fund's distributions may increase this tax. Capital gains
distributions, if any, are taxed as capital gains.
2. Class A returns show results of hypothetical investments on 7/31/95, 7/31/91
and 11/3/88 (inception of class), after deducting the current maximum initial
sales charge of 4.75%. The Fund's maximum sales charge for Class A shares was
higher during a portion of some of the periods shown, and actual investment
results will be different as a result of the change. Class B returns show
results of hypothetical investments on 7/31/95 and 5/1/93 (inception of class),
after the deduction of the applicable contingent deferred sales charge of 5%
(1-year) and 3% (since inception). Class C return shows results of a
hypothetical investment on 11/1/95 after the deduction of the 1% contingent
deferred sales charge. When such returns are calculated in the same manner for
the period ended 6/30/96, they are as follows: for Class A shares, 1.35%, 6.29%
and 7.12% for the 1- and 5-year period and since inception of the class; for
Class B shares, 0.70% and 3.53% for the 1-year period and since inception of the
class; and for Class C shares, cumulative total return since inception of the
class was 0.44%. An explanation of the different performance calculations is in
the Fund's prospectus.
3. Standardized yield is net investment income calculated on a yield-to-maturity
basis for the 30-day period ended 7/31/96, divided by the maximum offering price
at the end of the period, compounded semiannually and then annualized. Falling
net asset values will tend to artificially raise yields.
4. Source: Morningstar Mutual Funds, 7/31/96. Morningstar, Inc., an independent
mutual fund monitoring service, produces proprietary monthly rankings of funds
in broad investment categories (equity, taxable bond, tax-exempt bond, or
"hybrid") based on risk-adjusted investment returns, after considering sales
charges and expenses. Investment return measures a fund's (or class's) 3-, 5-,
and 10-year (depending on the inception of the class or fund) average annual
total returns in excess of 90-day U.S. Treasury bill returns. Risk and returns
are combined to produce star rankings, reflecting performance relative to the
average fund in a fund's category. Five stars is the "highest" ranking (top
10%), 4 stars is "above average," and 1 star the "lowest" (bottom 10%). The
4-star current ranking is a weighted average of the 3- and 5-year rankings for
the class, which were 3 and 4 stars, weighted 40% and 60%, respectively. There
were 875 and 492 funds ranked in these respective periods. Rankings are subject
to change. The Fund's Class A, B and C shares have the same portfolio.
2 Oppenheimer California Tax-Exempt Fund
<PAGE>
(Picture of Bridget A. Macaskill)
[Caption]Bridget A. Macaskill
President
Oppenheimer
California Tax-Exempt
Fund
Dear Shareholder,
While municipal bonds have been affected by the concern over inflation in recent
months, we believe that the outlook remains favorable--especially if you're in a
high tax bracket.
Let's review the first half of the year. The most widely quoted interest
rate on long-term bonds, the benchmark 30-year U.S. Treasury bond, rose from 6%
in January to 7% by mid-year. Municipal bond yields tend to track Treasuries
pretty closely, yielding slightly less--about 80-85% of Treasuries--because
their interest is free from federal income tax. But during those six months,
yields on muni bonds rose proportionately, increasing their after-tax advantage.
So, while the current rise in interest rates over the past six months
pushed bond prices lower, our outlook for the rest of the year is much more
positive. Although the prices of food and gas, the most common gauges of
inflation, have increased recently, we believe that inflation is likely to
remain under control. We feel that food production will be able to meet demand
and, unlike previous energy disruptions, there doesn't appear to be a shortage
of crude oil in the world today. Thus, we are confident that the general
long-term trend is for moderate growth and low inflation. And while we
anticipate that interest rates will fluctuate over the near term, we feel bond
market conditions should improve in the coming months.
A number of other developments bode well for the municipal bond market.
The first is the muni bond's continuing status as one of the few true remaining
tax shelters, as earlier proposals for flat tax legislation seem to have quieted
down considerably. Another factor favorably impacting the municipal bond market
is the strengthening financial condition of many municipalities throughout the
United States. This is particularly true of California, which is one of the
nation's largest issuers of municipal bonds.
Finally, the tax-free market is also benefiting from a shrinking supply
of securities. About ten years ago, a surge of municipal bond issuance occurred
just prior to the Tax Reform Act of 1986. By today's standards, these bonds paid
very high interest. This year, billions of dollars worth of these bonds are
being redeemed by issuers who were contractually obligated to wait at least ten
years to "call" them. As a result, the supply of securities is falling, and the
former bondholders are receiving cash which they will either reinvest in the
municipal bond market or place elsewhere.
All things considered--the prospect of lower interest rates, the
diminishing likelihood of major tax legislation, the strengthening economies of
states and localities, as well as the shrinking supply of securities--the
outlook is very positive for municipal bond investors.
Your portfolio managers discuss the outlook for your Fund in light of
these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
August 21, 1996
3 Oppenheimer California Tax-Exempt Fund
<PAGE>
(Photo of Robert Patterson,
Portfolio Manager, with Len Darling,
Executive VP, Director of Fixed
Income Investments)
(Photo of Michael Maciolek,
Securities Analyst)
Q+A
An interview with your Fund's managers.
Q What
investments
helped the
Fund's
performance?
How has the Fund performed over the past year?
The bond market, during much of the period, weakened due in large part to
investors' concerns that the economy was strengthening and interest rates would
rise over the near term. Our performance year-to-date, in contrast to the
prevailing environment, has been strong, especially in comparison with our
peers. Because of strategic positioning decisions we made going into this
period, we ranked 36th against a peer group of 95 other ranked California
tax-free bond funds.(1)
What investment strategies made positive contributions to performance?
A major factor in the Fund's performance was our emphasis on pre-refunded bonds,
with shorter maturities, which performed well versus other municipal bonds.
Because these issuers have escrowed money to repay bond holders, pre-refunded
bonds have low credit risk and are less sensitive to changes in interest rates.
With interest rates rising over much of the period, these bonds performed
extremely well compared to longer maturity municipal bonds.
Another factor in our strong relative performance was the small
percentage we owned of municipal bonds trading at a discount. Discount bonds
tend to be more volatile than bonds trading at par or a premium, and they tend
to suffer significant price declines when interest rates are rising.
Our shorter-than-average duration, a measure of the portfolio's price
sensitivity, was particularly helpful in a rising rate environment. While a long
duration strategy can benefit bond investors when rates decline, the opposite is
(Photo of Caryn Halbrecht, Vice President, Tax-Exempt Portfolio Manager)
1. Source: Lipper Analytical Services 7/31/96. This comparison does not take
sales charges into consideration.
4 Oppenheimer California Tax-Exempt Fund
<PAGE>
[Caption]
Facing page
Top left: Robert Patterson,
Portfolio Manager, with Len Darling,
Executive VP, Director of Fixed
Income Investments
Top right: Michael Maciolek,
Securities Analyst
Bottom: Caryn Halbrecht, Vice President, Tax-Exempt Portfolio Manager
This page
Top right: Robert Patterson
Bottom: Caryn Halbrecht with Donna Compert, Municipal Securities Trader
A A major
factor was our
emphasis on
pre-refunded
bonds.
(Photo of Robert Patterson)
typically true when rates rise.(2)
Did any investments perform poorly?
As always, our philosophy is to spread the Fund's assets across a range of
fixed-income securities. Unfortunately, our holdings in long-term municipal
bonds underperformed other municipal bond sectors. But, we lowered our weighting
in this sector over the past six months, which has helped the Fund's
performance. Should rates turn around and begin to head lower again, these bonds
would typically have the potential to appreciate significantly.
What areas of the market are you currently targeting?
Because we believe the market and interest rate environment will be slightly
better later in the year, we're buying securities with a higher degree of
exposure to the market. That means we're buying some longer-term bonds that tend
to be more volatile, but have the potential to outperform shorter-term bonds. At
the same time, we're taking appropriate measures to offset the possibility that
rates may continue to rise.
We've also been buying bonds issued by projects and localities that are
well-positioned to benefit from ongoing regional economic recovery. In
particular, we purchased Los Angeles County bonds recently where we found
attractive yields. We also purchased Puerto Rico hospital bonds for portfolio
diversification. We think that a more aggressive posture is appropriate as
California credits improve. Finally, we continue to look for high income
opportunities across the board, conducting careful research and trying to lock
in our income by purchasing bonds with call-protection whenever possible.
What is your outlook for the Fund?
We think the outlook is positive. From our perspective, the economic growth rate
that set off increases in interest rates will not be enough to make inflation a
serious concern. Thus, we expect any further increase in interest rates in the
near future will be moderate and that the general bond market could strengthen
later in the year.[solid box]
(Photo of Caryn Halbrecht with Donna Compert, Municipal Securities Trader)
2. The Fund's portfolio is subject to change.
5 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Investments July 31, 1996
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
<S> <C> <C> <C>
===================================================================================================================================
Municipal Bonds and Notes--97.3%
- -----------------------------------------------------------------------------------------------------------------------------------
California--85.7% Anaheim, California Public Financing Authority Tax
Allocation Revenue Bonds, MBIA Insured, 6.45%, 12/28/1 Aaa/AAA $6,000,000 $ 6,382,830
------------------------------------------------------------------------------------------------------------
Avalon, California Community Improvement Agency
Tax Allocation Bonds, Series A, 7.25%, 8/1/21 NR/A- 200,000 217,346
------------------------------------------------------------------------------------------------------------
Berkeley, California Health Facility Revenue Refunding
Bonds, Alta Bates Medical Center, Series A, 6.50%, 12/1/11 Baa/BBB+ 4,500,000 4,560,066
------------------------------------------------------------------------------------------------------------
Big Bear Lake, California Water Revenue Refunding
Bonds, FGIC Insured, 6.25%, 4/1/12 Aaa/AAA/AAA 400,000 416,242
------------------------------------------------------------------------------------------------------------
California Educational Facilities Authority
Revenue Refunding Bonds:
Pooled Educational Facilities Program,
MBIA Insured, 7%, 3/1/16 Aaa/AAA 100,000 108,191
Stanford University, Series J, 6%, 11/1/16 Aaa/AAA 750,000 762,007
------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority Revenue:
Bonds:
Children's Hospital of Los Angeles,
Prerefunded, Series A, 7.125%, 6/1/21 Aaa/NR 1,000,000 1,126,856
Henry Mayo Newhall Project, Series A, 8%, 10/1/18 NR/A 3,000,000 3,230,445
La Palma Hospital Medical Center, 7.10%, 2/1/13 NR/A 1,875,000 1,959,467
Refunding Bonds:
Adventist Health System-West, Series B,
MBIA Insured, 6.50%, 3/1/07 Aaa/AAA 315,000 338,477
Catholic Health Care West, Series A,
MBIA Insured, 5%, 7/1/11(1) Aaa/AAA 7,500,000 7,019,812
Hospital of the Good Samaritan, 7%, 9/1/21 Baa/A- 1,000,000 1,052,830
------------------------------------------------------------------------------------------------------------
California Housing Finance Agency Home Mtg.
Revenue Bonds:
Series A, 7.35%, 8/1/11 Aa/AA- 80,000 85,594
Series C, 6.75%, 2/1/25 Aa/AA- 9,980,000 10,445,117
Series C, 7.60%, 8/1/30 Aa/AA- 1,580,000 1,676,871
Series E-1, 6.45%, 2/1/12 Aa/AA- 750,000 782,544
------------------------------------------------------------------------------------------------------------
California Housing Finance Agency Single Family
Mtg. Purchase Revenue Bonds, Series A-2, 6.45%, 8/1/25 Aaa/AAA 8,000,000 8,217,447
------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority:
Revenue Bonds, Pacific Gas & Electric Co. Project,
Series B, 8.875%, 1/1/10 A2/A 2,275,000 2,442,128
Revenue Refunding Bonds, San Diego Gas & Electric Co.
Project, Series A, 5.90%, 6/1/14 NR/NR 1,500,000 1,519,729
Solid Waste Disposal Revenue Refunding Bonds,
Escrowed to Maturity, North County Recycling
Center, Series A, 6.75%, 7/1/11 Aaa/AAA 500,000 564,137
------------------------------------------------------------------------------------------------------------
California State Department of Water Resources
Revenue Bonds, Central Valley Project,
Prerefunded, Series H, 6.90%, 12/1/25 Aaa/AA 3,595,000 3,950,200
------------------------------------------------------------------------------------------------------------
California State Franchise Tax Board Refunding
Certificates of Participation, 6.90%, 10/1/06 A/A- 1,000,000 1,073,853
------------------------------------------------------------------------------------------------------------
California State General Obligation Refunding Bonds,
AMBAC Insured, 5.15%, 10/1/19 Aaa/AAA/AAA 1,000,000 907,020
6 Oppenheimer California Tax-Exempt Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) California State Public Works Board Lease
Revenue Bonds:
Department of Corrections, Series A,
AMBAC Insured, 5.25%, 1/1/21 Aaa/AAA/AAA $10,000,000 $ 9,176,219
Department of Corrections-Madera State Prison,
Series E, 5.50%, 6/1/15 A1/A-/A- 3,000,000 2,854,566
Regents of the University of California, Prerefunded,
Series A, 7%, 9/1/15 Aaa/AAA/AAA 9,650,000 10,724,179
------------------------------------------------------------------------------------------------------------
Calleguas-Las Virgines, California Public Financing
Authority Installment Purchase Revenue Refunding Bonds,
Calleguas Municipal Water District, FGIC Insured,
5.125%, 7/1/14 Aaa/AAA/AAA 750,000 701,527
------------------------------------------------------------------------------------------------------------
Campbell, California Certificates of Participation,
Civic Center Project:
Prerefunded, 6.75%, 10/1/17 Aaa/NR 1,870,000 2,087,937
Unrefunded Balance, 6.75%, 10/1/17 A/A- 1,130,000 1,190,073
------------------------------------------------------------------------------------------------------------
Capistrano, California Unified School District
Community Facilities District Special Tax Bonds,
No. 87-1, 7.60%, 9/1/14 NR/NR 4,000,000 4,343,055
------------------------------------------------------------------------------------------------------------
Central California Joint Powers Health Financing
Authority Certificates of Participation, Community
Hospitals of Central California Project, 5%, 2/1/23 A/NR/A- 4,000,000 3,361,128
------------------------------------------------------------------------------------------------------------
Contra Costa, California Transportation
Authority Sales Tax Revenue Bonds,
Series A, FGIC Insured, 6.50%, 3/1/09 Aaa/AAA/AAA 750,000 826,037
------------------------------------------------------------------------------------------------------------
Corona, California Certificates of Participation,
Prerefunded, Series B, 10%, 11/1/20 Aaa/AAA 13,175,000 17,164,416
------------------------------------------------------------------------------------------------------------
East Bay, California Regional Park District General
Obligation Bonds, Series B, 6.375%, 9/1/10 Aa/AA- 500,000 524,825
------------------------------------------------------------------------------------------------------------
Fairfield, California Public Finance Authority Revenue
Refunding Bonds, Municipal Park Improvement
District No. 1, FGIC Insured, 6.25%, 7/1/14 Aaa/AAA/AAA 1,000,000 1,035,236
------------------------------------------------------------------------------------------------------------
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Bonds, Sr. Lien,
Series A, 6.50%, 1/1/32 Baa/BBB-/BBB 4,600,000 4,641,216
------------------------------------------------------------------------------------------------------------
Fresno, California Unified School District
Certificates of Participation, 7%, 5/1/12 A/BBB+ 250,000 265,111
------------------------------------------------------------------------------------------------------------
Fresno, California Water System Revenue Bonds,
Prerefunded, Series A, 7.30%, 6/1/20 NR/NR 1,500,000 1,614,726
------------------------------------------------------------------------------------------------------------
Industry, California Improvement Bond Act of 1915 Bonds,
Assessment District No. 91-1, 7.65%, 9/2/21 NR/NR 1,750,000 1,753,801
------------------------------------------------------------------------------------------------------------
Industry, California Urban Development Agency Tax
Allocation Bonds:
Transportation Distribution Industrial Redevelopment
Project No. 2, MBIA Insured, 6.50%, 11/1/07 Aaa/AAA 260,000 281,289
Transportation Distribution Project No. 3, 6.90%, 11/1/07 NR/A- 500,000 534,682
------------------------------------------------------------------------------------------------------------
Intermodal Container Transfer Facility Joint Power
Authority California Revenue Refunding Bonds, Southern
Pacific Transportation Co., Series A, 7.70%, 11/1/14 Aa3/A 1,000,000 1,064,668
7 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) La Quinta, California Redevelopment Agency Refunding
Tax Allocation Bonds, La Quinta Project, 8.40%, 9/1/12 Aaa/AAA $1,000,000 $1,163,065
------------------------------------------------------------------------------------------------------------
Long Beach, California Harbor Revenue Bonds,
5.125%, 5/15/18 Aa/AA- 5,000,000 4,502,100
------------------------------------------------------------------------------------------------------------
Los Angeles County, California Certificates of Participation:
6.50%, 3/1/10 Baa1/BBB 1,500,000 1,569,721
Correctional Facilities Project, MBIA Insured, 6.50%, 9/1/13 Aaa/AAA 3,600,000 3,757,348
Disney Parking Project, Zero Coupon:
6.924%, 9/1/10(2) Baa1/BBB/A- 5,960,000 2,362,388
6.95%, 9/1/11(2) Baa1/BBB/A- 2,900,000 1,068,557
7.03%, 9/1/13(2) Baa1/BBB/A- 4,500,000 1,426,342
------------------------------------------------------------------------------------------------------------
Los Angeles County, California Transportation
Commission Sales Tax Revenue Bonds,
Prerefunded, Series A, 6.75%, 7/1/11 Aaa/AA-/A+ 4,260,000 4,736,822
------------------------------------------------------------------------------------------------------------
Los Angeles, California Community Redevelopment Agency:
Financing Authority Revenue Bonds, Grand Central
Square Multifamily Housing, Series A, 5.90%, 12/1/13 Baa1/BBB+ 500,000 472,994
Financing Authority Revenue Bonds, Grand Central
Square Multifamily Housing, Series A, 5.90%, 12/1/26 Baa1/BBB+ 2,600,000 2,325,183
Tax Allocation Refunding Bonds, North Hollywood,
Series C, MBIA Insured, 7%, 7/1/15 Aaa/AAA 2,000,000 2,185,246
------------------------------------------------------------------------------------------------------------
Los Angeles, California Convention & Exhibition
Center Authority Refunding Certificates of
Participation, Prerefunded, Series A, 7.375%, 8/15/18 Aaa/AAA 7,400,000 8,149,213
------------------------------------------------------------------------------------------------------------
Los Angeles, California Unified School District
Certificates of Participation, Dr. Francisco
Bravo Medical Project, 6.60%, 6/1/06 A/A-/A 250,000 268,612
------------------------------------------------------------------------------------------------------------
M-S-R Public Power Agency of California Revenue:
Bonds, San Juan Project, Series C,
AMBAC Insured, 6.875%, 7/1/19 Aaa/AAA/AAA 2,000,000 2,059,202
Refunding Bonds, San Juan Project,
Series C, 6.875%, 7/1/19 A/A 760,000 781,050
------------------------------------------------------------------------------------------------------------
Merced, California Public Financing Authority Tax
Allocation Bonds, Series A-1, 5.50%, 12/1/10 NR/A-- 500,000 481,724
------------------------------------------------------------------------------------------------------------
Metropolitan Water District of Southern California
Waterworks Revenue Refunding Bonds, 5.55%, 10/30/20 Aa/AA 9,400,000 8,919,603
------------------------------------------------------------------------------------------------------------
Northern California Transmission Agency Revenue Bonds,
California-Oregon Transmission Project, Prerefunded,
Series A, MBIA Insured, 7%, 5/1/24 Aaa/AAA 7,300,000 8,033,905
------------------------------------------------------------------------------------------------------------
Oakland, California Redevelopment Agency Bonds,
MBIA Insured, Inverse Floater, 8.169%, 9/1/19(3) Aaa/AAA 4,300,000 4,206,152
------------------------------------------------------------------------------------------------------------
Oakland, California Revenue Refunding Bonds,
Series A, FGIC Insured, 7.60%, 8/1/21 Aaa/AAA/AAA 2,000,000 2,152,322
------------------------------------------------------------------------------------------------------------
Orange County, California Community Facilities
District Special Tax Bonds:
No. 87-3, Prerefunded, Series A, 8.05%, 8/15/08 NR/NR 3,000,000 3,292,143
No. 88-1, Aliso Viejo, Prerefunded, Series A, 7.10%, 8/15/05 NR/AAA 1,440,000 1,649,791
No. 88-1, Aliso Viejo, Prerefunded, Series A, 7.35%, 8/15/18 NR/AAA 8,000,000 9,256,119
8 Oppenheimer California Tax-Exempt Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) Pittsburg, California Improvement Bond Act of 1915 Bonds,
Assessment District 1990-01, 7.75%, 9/2/20 NR/NR $ 1,235,000 $ 1,256,579
------------------------------------------------------------------------------------------------------------
Pomona, California Single Family Mtg.
Revenue Refunding Bonds:
Escrowed to Maturity, Series A, 7.60%, 5/1/23 NR/AAA 4,500,000 5,445,643
Series B, 7.50%, 8/1/23 Aaa/AAA 500,000 605,052
------------------------------------------------------------------------------------------------------------
Rancho California Water District Financing Authority
Revenue Refunding Bonds, AMBAC Insured, 5%, 8/15/14 Aaa/AAA/AAA 4,500,000 4,152,532
------------------------------------------------------------------------------------------------------------
Redding, California Electric System Revenue
Certificates of Participation:
FGIC Insured, Inverse Floater, 7.484%, 6/1/19(3) Aaa/AAA/AAA 4,000,000 3,680,304
MBIA Insured, Inverse Floater, 8.802%, 7/8/22(3) Aaa/AAA 2,500,000 2,776,412
------------------------------------------------------------------------------------------------------------
Regents of the University of California Revenue
Bonds, Multiple Purpose Projects, Prerefunded,
Series A, 6.875%, 9/1/16 NR/A- 1,700,000 1,923,599
------------------------------------------------------------------------------------------------------------
Riverside County, California Community Facilities
District Special Tax Bonds, No. 88-12, 7.55%, 9/1/17 NR/NR 3,000,000 3,185,085
------------------------------------------------------------------------------------------------------------
Riverside County, California Single Family Mtg.
Revenue Bonds, Series A, 7.80%, 5/1/21 Aaa/AAA 300,000 369,121
------------------------------------------------------------------------------------------------------------
Sacramento County, California Single Family Mtg.
Revenue Bonds, Escrowed to Maturity, 8.125%, 7/1/16 Aaa/AAA 10,000,000 12,511,769
------------------------------------------------------------------------------------------------------------
Sacramento, California Cogeneration Authority Revenue
Bonds, Procter & Gamble Project, 6.50%, 7/1/14 NR/BBB- 5,000,000 5,061,995
------------------------------------------------------------------------------------------------------------
Sacramento, California Municipal Utility
District Electric Revenue:
Bonds, Prerefunded, Series W, 7.50%, 8/15/18 Aaa/AAA/A- 5,000,000 5,344,324
Refunding Bonds, FGIC Insured, Inverse Floater,
9.021%, 8/15/18(3) Aaa/AAA/AAA 5,500,000 5,689,931
------------------------------------------------------------------------------------------------------------
Sacramento, California Power Authority Revenue
Bonds, Cogeneration Project, 6%, 7/1/22 NR/BBB- 5,000,000 4,796,985
------------------------------------------------------------------------------------------------------------
Saddleback Community College District, California
Refunding Certificates of Participation,
BIG Insured, 7%, 8/1/19 Aaa/AAA 1,000,000 1,060,817
------------------------------------------------------------------------------------------------------------
San Bernardino County, California Certificates of
Participation, Medical Center Financing Project,
5.50%, 8/1/17 Baa1/A- 5,250,000 4,770,223
------------------------------------------------------------------------------------------------------------
San Diego County, California Certificates of Participation,
MBIA Insured, Inverse Floater, 8.996%, 11/18/19(3) A1/A 2,000,000 2,131,618
------------------------------------------------------------------------------------------------------------
San Diego County, California Water Authority Revenue
Certificates of Participation, Series 91-B,
MBIA Insured, Inverse Floater, 9.04%, 4/8/21(3) Aaa/AAA 3,000,000 3,229,680
------------------------------------------------------------------------------------------------------------
San Joaquin Hills, California Transportation Corridor
Agency Toll Road Revenue Bonds, Sr. Lien:
5%, 1/1/33 NR/NR/BBB 8,000,000 6,589,255
6.75%, 1/1/32 NR/NR/BBB 7,000,000 7,170,730
9 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------------------------------------------
California (continued) Santa Margarita/Dana Point, California Authority
Revenue Bonds, Improvement Districts 3-3A-4 & 4A,
Series B, MBIA Insured, 7.25%, 8/1/14 Aaa/AAA $ 680,000 $ 798,523
------------------------------------------------------------------------------------------------------------
Sonoma County, California Certificates of
Participation, 6.75%, 10/1/07 A1/A+ 150,000 161,369
------------------------------------------------------------------------------------------------------------
Southern California Home Financing Authority Single
Family Mtg. Revenue Bonds, Series A, 7.35%, 9/1/24 NR/AAA 1,670,000 1,749,462
------------------------------------------------------------------------------------------------------------
Southern California Public Power Authority Transmission
Project Revenue Bonds, Inverse Floater, 7.569%, 7/1/12(3) Aa/A+ 5,500,000 5,580,784
------------------------------------------------------------------------------------------------------------
Victorville, California Special Tax Bonds, Community
Facilities District No. 90-1, Series A, 8.30%, 9/1/16 NR/NR 1,265,000 1,064,879
------------------------------------------------------------------------------------------------------------
West & Central Basin Financing Authority California
Revenue Refunding Bonds, West Basin Refunding Project,
Series A, AMBAC Insured, 5%, 8/1/16 Aaa/AAA/AAA 3,000,000 2,704,950
-----------
291,615,123
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--11.6%
- -----------------------------------------------------------------------------------------------------------------------------------
Guam Power Authority Revenue Bonds,
Series A, 6.625%, 10/1/14 NR/BBB 2,000,000 2,057,874
------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth General Obligation Bonds:
6.50%, 7/1/15 Baa1/A 3,000,000 3,271,791
MBIA Insured, Inverse Floater, 6.62%, 7/1/08(3) Aaa/AAA 3,500,000 3,628,040
------------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue:
Bonds:
Prerefunded, Series T, 6.625%, 7/1/18 NR/AAA 1,995,000 2,217,861
Series Y, 5.50%, 7/1/36 Baa1/A 9,025,000 8,446,587
Unrefunded Balance, Series T, 6.625%, 7/1/18 NR/AAA 4,005,000 4,461,201
Refunding Bonds, Series X, 5.25%, 7/1/21 Baa1/A 500,000 453,595
------------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority Revenue Bonds,
Series P, 7%, 7/1/21 Aaa/A- 4,000,000 4,489,440
------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Bank & Finance Agency
Single Family Mtg. Revenue Bonds,
Affordable Housing Mtg.--Portfolio I, 6.25%, 4/1/29 Aaa/AAA 6,600,000 6,619,667
------------------------------------------------------------------------------------------------------------
Puerto Rico Housing Finance Corp. Single Family Mtg.
Revenue Bonds, Portfolio 1, Series B, 7.65%, 10/15/22 Aaa/AAA 910,000 946,011
------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial, Medical &
Environmental Pollution Control:
Facilities Tourist Revenue Bonds, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 2,400,000 2,413,666
Revenue Bonds, American Home Products, 5.10%, 12/1/18 Aaa/NR 500,000 462,329
-----------
39,468,062
-----------
Total Municipal Bonds and Notes (Cost $324,159,878) 331,083,185
</TABLE>
10 Oppenheimer California Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
Face Market Value
Amount See Note 1
<S> <C> <C> <C>
===================================================================================================================================
Short-Term Tax-Exempt Obligations--1.3%
- -----------------------------------------------------------------------------------------------------------------------------------
San Bernardino County, California Housing Authority Multifamily
Housing Revenue Refunding Bonds:
Arrowview Park Apts. Project, Series A, 3.35%, 9/1/96(4) $2,380,000 $ 2,380,000
Monterey Villas Apts. Project, Series A, 3.35%, 10/1/96(4) 2,125,000 2,125,000
------------
Total Short-Term Tax-Exempt Obligations (Cost $4,505,000) 4,505,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $328,664,878) 98.6% 335,588,185
- -----------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.4 4,653,491
---------- ------------
Net Assets 100.0% $340,241,676
========== ============
1. Securities with an aggregate market value of $935,975 are held in collateralized accounts to cover initial
margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements.
2. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase.
3. Represents the current interest rate for a variable rate bond. These bonds known as "inverse floaters"
pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise, inverse
floaters produce less current income. Their price may be more volatile than the price of a comparable fixed-rate
security. Inverse floaters amount to $30,922,921 or 9.09% of the Fund's net assets at July 31, 1996.
4. 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
July 31, 1996. This instrument may also have a demand feature which allows the recovery of principal at any
time, or at specified intervals not exceeding one year, on up to 30 days' notice. Maturity date shown represents
effective maturity based on variable rate and, if applicable, demand feature.
As of July 31, 1996, securities subject to the alternative minimum tax amounted to $49,672,276 or 14.60%
of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
</TABLE>
<TABLE>
<CAPTION>
Industry Market Value Percent
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Utilities $76,605,802 22.8%
---------------------------------------------------------------------------------------------------------------
Lease/Rental 72,354,069 21.6
---------------------------------------------------------------------------------------------------------------
Housing 49,927,293 14.9
---------------------------------------------------------------------------------------------------------------
Special Tax Bonds 49,921,355 14.9
---------------------------------------------------------------------------------------------------------------
Transportation 39,828,502 11.9
---------------------------------------------------------------------------------------------------------------
Hospitals 25,062,745 7.5
---------------------------------------------------------------------------------------------------------------
General Obligation Bonds 9,366,912 2.8
---------------------------------------------------------------------------------------------------------------
Pollution Control 3,961,858 1.2
---------------------------------------------------------------------------------------------------------------
Education 2,793,797 0.8
---------------------------------------------------------------------------------------------------------------
Letters of Credit 2,380,000 0.7
---------------------------------------------------------------------------------------------------------------
Government Agencies 2,125,000 0.6
---------------------------------------------------------------------------------------------------------------
Revenue Bonds 798,523 0.2
---------------------------------------------------------------------------------------------------------------
Corporate-Backed Municipals 462,329 0.1
------------ -----
$335,588,185 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
11 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1996
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C>
Assets Investments, at value (cost $328,664,878)--see accompanying statement $335,588,185
---------------------------------------------------------------------------------------------------------------
Cash 347,617
---------------------------------------------------------------------------------------------------------------
Receivables:
Interest 5,253,188
Shares of beneficial interest sold 765,814
---------------------------------------------------------------------------------------------------------------
Other 15,899
------------
Total assets 341,970,703
====================================================================================================================================
Liabilities Payables and other liabilities:
Dividends 1,040,221
Shares of beneficial interest redeemed 370,515
Trustees' fees 109,273
Distribution and service plan fees 70,347
Daily variation on futures contracts--Note 5 51,500
Transfer and shareholder servicing agent fees 6,250
Other 80,921
------------
Total liabilities 1,729,027
====================================================================================================================================
Net Assets $340,241,676
============
====================================================================================================================================
Composition of Paid-in capital $333,255,015
Net Assets ---------------------------------------------------------------------------------------------------------------
Undistributed net investment income 868,145
---------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (776,510)
---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 6,895,026
---------------------------------------------------------------------------------------------------------------
Net assets $340,241,676
============
====================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets
of $286,032,922 and 27,539,996 shares of beneficial interest outstanding) $10.39
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $10.91
---------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $52,038,162 and 5,008,911 shares of beneficial interest outstanding) $10.39
---------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $2,170,592 and 209,190 shares of beneficial interest outstanding) $10.38
See accompanying Notes to Financial Statements.
12 Oppenheimer California Tax-Exempt Fund
</TABLE>
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended July 31, December 31,
1996(1) 1995
====================================================================================================================================
<S> <C> <C> <C>
Investment Income Interest $12,390,825 $ 18,437,507
====================================================================================================================================
Expenses Management fees--Note 4 1,097,974 1,638,210
---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 399,061 614,629
Class B 269,950 298,592
Class C 6,697 149
---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 95,613 142,732
---------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 74,630 22,260
---------------------------------------------------------------------------------------------------------------
Shareholder reports 53,338 83,457
---------------------------------------------------------------------------------------------------------------
Legal and auditing fees 33,476 35,209
---------------------------------------------------------------------------------------------------------------
Insurance expenses 10,891 16,860
---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 6,450 12,060
---------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A -- 12,414
Class B 4,351 6,003
Class C 669 4
---------------------------------------------------------------------------------------------------------------
Other 5,655 5,783
----------- ------------
Total expenses 2,058,755 2,888,362
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 -- (9,646)
----------- ------------
Net expenses 2,058,755 2,878,716
====================================================================================================================================
Net Investment Income 10,332,070 15,558,791
====================================================================================================================================
Realized and Net realized gain (loss) on:
Unrealized Investments 183,414 (187,865)
Gain (Loss) Closing of futures contracts 166,933 --
----------- ------------
Net realized gain (loss) 350,347 (187,865)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (9,638,403) 33,596,236
----------- ------------
Net realized and unrealized gain (loss) (9,288,056) 33,408,371
====================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 1,044,014 $ 48,967,162
=========== ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to
July 31. See accompanying Notes to Financial Statements.
13 Oppenheimer California Tax-Exempt Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended July 31, Year Ended December 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C> <C>
Operations Net investment income $ 10,332,070 $ 15,558,791 $ 15,748,324
---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 350,347 (187,865) (999,410)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (9,638,403) 33,596,236 (39,209,125)
------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations 1,044,014 48,967,162 (24,460,211)
------------
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A (8,865,165) (13,975,299) (14,920,148)
Shareholders Class B (1,260,228) (1,412,825) (857,567)
Class C (30,161) (556) --
---------------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (350,447) --
Class B -- (50,636) --
Class C -- (153) --
====================================================================================================================================
Beneficial Net increase (decrease) in net assets resulting from
Interest beneficial interest transactions--Note 2:
Transactions Class A 8,617,533 35,765,117 (8,912,194)
Class B 12,021,290 17,684,830 12,644,856
Class C 2,058,790 122,526 --
====================================================================================================================================
Net Assets Total increase (decrease) 13,586,073 86,749,719 (36,505,264)
---------------------------------------------------------------------------------------------------------------
Beginning of period 326,655,603 239,905,884 276,411,148
------------ ------------ ------------
End of period [including undistributed (overdistributed)
net investment income of $868,145, $756,370 and
$(170,011), respectively] $340,241,676 $326,655,603 $239,905,884
============ ============ ============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to
July 31.
See accompanying Notes to Financial Statements.
14 Oppenheimer California Tax-Exempt Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------
Seven
Months
Ended
July 31, Year Ended December 31,
1996(2) 1995 1994 1993 1992 1991
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.45 $10.97 $10.35 $10.22 $ 9.86
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .33 .58 .60 .62 .61 .66
Net realized and unrealized
gain (loss) (.30) 1.25 (1.51) .72 .20 .38
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations .03 1.83 (.91) 1.34 .81 1.04
- ----------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment
income (.33) (.58) (.61) (.65) (.60) (.62)
Dividends in excess of net
investment income -- (.01) -- -- -- --
Distributions from net realized gain -- -- -- (.07) (.08) (.06)
------ ------ ------ ------ ------ ------
Total dividends and distributions
to shareholders (.33) (.59) (.61) (.72) (.68) (.68)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.45 $10.97 $10.35 $10.22
====== ====== ====== ====== ====== ======
======================================================================================================================
Total Return, at Net Asset
Value(4) 0.34% 19.76% (8.49)% 13.26% 8.28% 10.93%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $286,033 $285,307 $219,682 $266,490 $204,349 $145,163
- ----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $279,796 $250,188 $248,850 $245,193 $174,055 $115,661
- ----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.53%(5) 5.64% 5.99% 5.74% 6.07% 6.52%
Expenses, before voluntary
assumption by the Manager 0.97%(5) 0.95% 0.96% 0.97% 1.07% 1.05%
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A 0.73%
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 26.8% 26.6%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Class B Class C
--------------------------------------- ----------------
Seven Seven
Months Months Period
Ended Ended Ended
July 31, Year Ended December 31, July 31, Dec. 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $10.69 $ 9.44 $10.98 $10.72 $10.68 $10.46
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .28 .51 .54 .35 .27 .08
Net realized and unrealized
gain (loss) (.30) 1.25 (1.55) .34 (.30) .22
------ ------- ------- ------ ------ ------
Total income (loss) from
investment operations (.02) 1.76 (1.01) .69 (.03) .30
- -----------------------------------------------------------------------------------------------------------
Dividends and distributionsto shareholders:
Dividends from net investment
income (.28) (.50) (.53) (.36) (.27) (.07)
Dividends in excess of net
investment income -- (.01) -- -- -- (.01)
Distributions from net realized gain -- -- -- (.07) -- --
------ ------- ------- ------ ------ ------
Total dividends and distributions
to shareholders (.28) (.51) (.53) (.43) (.27) (.08)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.39 $10.69 $ 9.44 $10.98 $10.38 $10.68
====== ======= ======= ====== ====== ======
===========================================================================================================
Total Return, at Net Asset
Value(4) (0.12)% 18.97% (9.39)% 6.66% (0.19)% 2.90%
===========================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $52,038 $41,224 $20,224 $9,921 $2,171 $125
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $46,422 $29,918 $16,552 $5,218 $1,156 $ 91
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.74%(5) 4.82% 5.17% 4.57%(5) 4.54%(5) 4.56%(5)
Expenses, before voluntary
assumption by the Manager 1.74%(5) 1.72% 1.73% 1.79%(5) 1.80%(5) 1.68%(5)
Expenses, net of voluntary
assumption by the Manager N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 14.0% 23.0% 21.9% 13.7% 14.0% 23.0%
</TABLE>
(END RESTUBBED TABLE)
1. For the period from November 1, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $63,536,324 and $45,046,400, respectively.
See accompanying Notes to Financial Statements.
15 Oppenheimer California Tax-Exempt Fund
<PAGE>
Notes to Financial Statements
================================================================================
1. Significant
Accounting Policies
Oppenheimer California Tax-Exempt Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. On June 6, 1996, the Board of Trustees elected to
change the fiscal year end of the Fund from December 31 to July 31. Accordingly,
these financial statements include information for the seven month period from
January 1, 1996 to July 31, 1996. The Fund's investment objective is to seek as
high a level of current interest income exempt from federal and California
income taxes for individual investors as is consistent with preservation of
capital. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B and Class C shares. Class A shares are sold
with a front-end sales charge. Class B and Class C shares may be subject to a
contingent deferred sales charge. All classes of shares have identical rights to
earnings, assets and voting privileges, except that each class has its own
distribution and/or service plan, expenses directly attributable to a particular
class and exclusive voting rights with respect to matters affecting a single
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
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
- --------------------------------------------------------------------------------
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. At July 31, 1996, the Fund
had available for federal income tax purposes an unused capital loss carryover
of $874,000, which expires in 2002 and 2003.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the seven months
ended July 31, 1996, a provision of $45,122 was made for the Fund's projected
benefit obligations, and payments of $2,831 were made to retired trustees,
resulting in an accumulated liability of $106,276 at July 31, 1996.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C 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 their 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 year that the income or
realized gain (loss) was recorded by the Fund.
16 Oppenheimer California Tax-Exempt Fund
<PAGE>
================================================================================
1. Significant
Accounting Policies
(continued)
During the seven months ended July 31, 1996, the Fund changed the classification
of distributions to shareholders to better disclose the differences between
financial statement amounts and distributions determined in accordance with
income tax regulations. Accordingly, during the seven months ended July 31,
1996, amounts have been reclassified to reflect an increase in paid-in capital
of $41,183, a decrease in undistributed net investment income of $64,741, and a
decrease in accumulated net realized loss on investments of $23,558.
- --------------------------------------------------------------------------------
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. 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.
================================================================================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Seven Months Ended Year Ended Year Ended
July 31, 1996(2) December 31, 1995(1) December 31, 1994
------------------------- -------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount
- ------ ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 3,209,059 $ 33,325,829 5,047,063 $ 51,814,441 4,682,338 $ 47,539,656
Issued in connection with the
acquisition of Quest California
Tax-Exempt Fund--Note 6 -- -- 1,757,696 18,455,811 -- --
Dividends and distributions reinvested 487,581 5,059,245 805,760 8,234,996 895,069 9,014,619
Redeemed (2,856,210) (29,767,541) (4,166,682) (42,740,131) (6,611,428) (65,466,469)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) 840,430 $ 8,617,533 3,443,837 $ 35,765,117 (1,034,021) $ (8,912,194)
========== ============ ========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 1,589,523 $ 16,574,775 1,996,884 $ 20,575,685 1,595,370 $ 16,152,328
Dividends and distributions
reinvested 69,259 717,798 80,329 824,085 52,979 528,961
Redeemed (506,438) (5,271,283) (362,263) (3,714,940) (410,584) (4,036,433)
---------- ------------ ---------- ------------ ---------- ------------
Net increase 1,152,344 $ 12,021,290 1,714,950 $ 17,684,830 1,237,765 $ 12,644,856
========== ============ ========== ============ ========== ============
- ------------------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 213,392 $ 2,220,863 11,729 $ 123,162 -- $ --
Dividends and distributions
reinvested 1,712 17,557 36 383 -- --
Redeemed (17,583) (179,630) (96) (1,019) -- --
---------- ------------ ---------- ------------ ---------- ------------
Net increase 197,521 $ 2,058,790 11,669 $ 122,526 -- $ --
========== ============ ========== ============ ========== ============
</TABLE>
1. For the year ended December 31, 1995 for both Class A and Class B shares and
for the period from November 1, 1995 (inception of offering) to December 31,
1995 for Class C shares.
2. The Fund changed its fiscal year end from December 31 to July 31.
17 Oppenheimer California Tax-Exempt Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
3. Unrealized Gains and
Losses on Investments
At July 31, 1996, net unrealized appreciation on investments of $6,923,307 was
composed of gross appreciation of $10,915,501, and gross depreciation of
$3,992,194.
- --------------------------------------------------------------------------------
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 0.60% on the first
$200 million of average annual net assets, 0.55% on the next $100 million, 0.50%
on the next $200 million, 0.45% on the next $250 million, 0.40% on the next $250
million and 0.35% on net assets in excess of $1 billion. The Manager has agreed
to assume Fund expenses (with specified exceptions) in excess of the regulatory
limitation of the State of California.
In 1995, the Manager reimbursed the Fund for SEC fees incurred in
connection with the acquisition of Quest California Tax-Exempt Fund.
For the seven months ended July 31, 1996, commissions (sales charges
paid by investors) on sales of Class A shares totaled $611,757, of which
$110,874 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a subsidiary
of the Manager, as general distributor, and by an affiliated broker/dealer.
Sales charges advanced to broker/dealers by OFDI on sales of the Fund's Class B
and Class C shares totaled $594,090 and $21,117, of which $1,664 was paid to an
affiliated broker/dealer for Class B shares. During the seven months ended July
31, 1996, OFDI received contingent deferred sales charges of $102,835 upon
redemption of Class B shares as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.25% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the seven months ended July 31, 1996, OFDI paid $10,465 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans
for Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class
B shares that are outstanding for 6 years or less and on Class C shares, as
compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. If the Plans are terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of 0.25% per year as compensation
for costs incurred in connection with the personal service and maintenance of
accounts that hold shares of the Fund, including amounts paid to brokers,
dealers, banks and other financial institutions. Both fees are computed on the
average annual net assets of Class B and Class C shares, determined as of the
close of each regular business day. During the seven months ended July 31, 1996,
OFDI retained $234,947 and $6,697, respectively, as compensation for Class B and
Class C sales commissions and service fee advances, as well as financing costs.
At July 31, 1996, OFDI had incurred unreimbursed expenses of $2,170,622 for
Class B and $32,971 for Class C.
18 Oppenheimer California Tax-Exempt Fund
<PAGE>
================================================================================
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 in an amount (initial margin) 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.
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 July 31, 1996, the Fund had outstanding futures contracts to sell debt
securities as follows:
Number of Valuation
Expiration Futures as of Unrealized
Date Contracts July 31, 1996 Depreciation
- --------------------------------------------------------------------------------
U.S. Treasury Bonds 9/96 54 $5,892,750 $23,281
Municipal Bonds 9/96 20 2,258,125 5,000
---------- -------
$8,150,875 $28,281
========== =======
================================================================================
6. Acquisition of
Quest California
Tax-Exempt Fund
On November 24, 1995, Oppenheimer California Tax-Exempt Fund acquired all of the
net assets of Quest California Tax-Exempt Fund, pursuant to an Agreement and
Plan of Reorganization approved by the Quest California Tax-Exempt Fund
shareholders on November 16, 1995. The Fund issued 1,757,696 shares of
beneficial interest, valued at $18,455,811, in exchange for the net assets,
resulting in combined net assets of $319,511,243 on November 24, 1995. The net
assets acquired included net unrealized appreciation of $602,361. The exchange
was tax-free.
19 Oppenheimer California Tax-Exempt Fund
<PAGE>
Independent Auditors' Report
================================================================================
The Board of Trustees and Shareholders of Oppenheimer California
Tax-Exempt Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer California Tax-Exempt Fund as of July 31, 1996, and
the statements of operations for the seven month period then ended and the year
ended December 31, 1995, the statements of changes in net assets for the seven
month period ended July 31, 1996 and the years ended December 31, 1995 and 1994,
and the financial highlights for the seven month period ended July 31, 1996 and
each of the years in the five year period ended December 31, 1995. 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 as of July
31, 1996, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer California Tax-Exempt Fund as of July 31, 1996, the
results of its operations for the seven month period then ended and the year
ended December 31, 1995, the changes in its net assets for the seven month
period ended July 31, 1996 and the years ended December 31, 1995 and 1994, and
the financial highlights for the seven month period ended July 31, 1996 and each
of the years in the five year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1996
20 Oppenheimer California Tax-Exempt Fund
<PAGE>
Federal Income Tax Information (Unaudited)
================================================================================
In early 1997, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1996. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended July
31, 1996 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.
21 Oppenheimer California Tax-Exempt Fund
<PAGE>
Oppenheimer California Tax-Exempt Fund
================================================================================
Officers and Trustees Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Jerry A. Webman, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder
Servicing Agent OppenheimerFunds Services
================================================================================
Custodian of
Portfolio Securities Citibank, N.A.
================================================================================
Independent Auditors KPMG Peat Marwick LLP
================================================================================
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of Oppenheimer California Tax-Exempt
Fund. This report must be preceded or accompanied by a Prospectus of Oppenheimer
California Tax-Exempt Fund. For material information concerning the Fund, see
the Prospectus. Shares of Oppenheimer funds are not deposits or obligations of
any bank, are not guaranteed by any bank, and are not insured by the FDIC or any
other agency, and involve investment risks, including possible loss of the
principal amount invested.
22 Oppenheimer California Tax-Exempt Fund
<PAGE>
OppenheimerFunds Family
================================================================================
OppenheimerFunds offers over 50 funds designed to fit virtually every investment
goal. Whether you're investing for retirement, your children's education or
tax-free income, we have the funds to help you seek your objective.
When you invest with OppenheimerFunds, you can feel comfortable knowing
that you are investing with a respected financial institution with over 35 years
of experience in helping people just like you reach their financial goals. And
you're investing with a leader in global, growth stock and flexible fixed-income
investments--with over 3 million shareholder accounts and more than $50 billion
under OppenheimerFunds' management and that of our affiliates.
At OppenheimerFunds we don't charge a fee to exchange shares. And you
can exchange shares easily by mail or by telephone.1 For more information on
Oppenheimer funds, please contact your financial advisor or call us at
1-800-525-7048 for a prospectus. You may also write us at the address shown on
the back cover. As always, please read the prospectus carefully before you
invest.
================================================================================
Stock Funds Global Emerging Growth Fund Growth Fund
Enterprise Fund(2) Global Fund
International Growth Fund Quest Global Value Fund
Discovery Fund Disciplined Value Fund
Quest Small Cap Value Fund Oppenheimer Fund
Gold & Special Minerals Fund Value Stock Fund
Target Fund Quest Value Fund
================================================================================
Stock & Main Street Income & Growth Fund Equity Income Fund
Bond Funds Quest Opportunity Value Fund Disciplined Allocation Fund
Total Return Fund Asset Allocation Fund
Quest Growth & Income Value Fund Strategic Income & Growth Fund
Global Growth & Income Fund Bond Fund for Growth
================================================================================
Bond Funds International Bond Fund Bond Fund
High Yield Fund U.S. Government Trust
Champion Income Fund Limite-Term Government Fund
Strategic Income Fund
================================================================================
Tax-Exempt California Tax-Exempt Fund(3) Insured Tax-Exempt Fund
Funds Florida Tax-Exempt Fund(3) Intermediate Tax-Exempt Fund
New Jersey Tax-Exempt Fund(3)
New York Tax-Exempt Fund(3) Rochester Division
Pennsylvania Tax-Exempt Fund(3) Rochester Fund Municipals
Tax-Free Bond Fund Limited Term New York
Municipal Fund
================================================================================
Money Market Money Market Fund Cash Reserves
Funds(4)
================================================================================
LifeSpan Growth Fund Income Fund
Balanced Fund
1. Exchange privileges are subject to change or termination. Shares may be
exchanged only for shares of the same class of eligible funds.
2. Effective 4/1/96, the Fund is closed to new investors.
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1996 OppenheimerFunds, Inc. All rights reserved.
23 Oppenheimer California Tax-Exempt Fund
<PAGE>
[BACK COVER]
Information
General Information
Monday-Friday 8:30 a.m.-9 p.m. ET
Saturday 10 a.m.-2 p.m. ET
1-800-525-7048
Telephone Transactions
Monday-Friday 8:30 a.m.-8 p.m. ET
1-800-852-8457
PhoneLink
24 hours a day, automated
information and transactions
1-800-533-3310
Telecommunications Device
for the Deaf (TDD)
Monday-Friday 8:30 a.m.-8 p.m. 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
RA0790.001.0796 September 30, 1996
[Picture of Jennifer Leonard]
[Caption] Jennifer Leonard, Customer Service Representative
OppenheimerFunds Services
"How may I help you?"
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. 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 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--we're here to help.
- --------------------------------------------------------------------------------
[Oppenheimer Logo]
OppenheimerFunds Distributor, Inc.
P.O. Box 5270
Denver, CO 80217-5270
- ---------------------------------------------
Bulk Rate
U.S. Postage
PAID
Permit No. 469
Denver, CO
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