<PAGE> 1
ANNUAL REPORT JULY 31, 1998
OPPENHEIMER
CALIFORNIA
MUNICIPAL FUND
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Manager
8 Fund Performance
13 Financial
Statements
36 Independent
Auditors' Report
37 Federal
Income Tax
Information
38 Officers and
Trustees
40 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - A RESILIENT DOMESTIC ECONOMY AND LOW INFLATION have been good for U.S. bonds
of all kinds.
- - LOWER BORROWING COSTS have caused states and municipalities to rush to finance
new projects and refinance existing debt at lower rates. As a result, the supply
of municipal bonds for the first half of 1998 was relatively high.
- - THE GROWING NEED FOR HOUSING IN CALIFORNIA has spurred development in many
parts of the state, including subsidized housing and retirement care facilities.
Consequently, we have found particularly attractive values in these industries.
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period Ended 7/31/98
CLASS A
Without With
Sales Chg.(1) Sales Chg.(2)
5.66% 0.64%
CLASS B
Without With
Sales Chg.(1) Sales Chg.(2)
4.86% (0.13)%
CLASS C
Without With
Sales Chg.(1) Sales Chg.(2)
4.87% 3.87%
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. TOTAL RETURNS AS OF
7/31/98 DO NOT REFLECT SUBSTANTIAL CHANGES THAT OCCURRED AS A RESULT OF MARKET
VOLATILITY IN AUGUST AND SEPTEMBER 1998.
1. 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.
2. Class A return includes the current maximum initial sales charge of 4.75%.
Class B return includes the applicable contingent deferred sales charge of 5%
(1-year) and 1% (since inception on 5/3/93). Class C return includes the
contingent deferred sales charge of 1%. An explanation of the different
performance calculations is in the Fund's prospectus. Class B and C shares are
subject to an annual 0.75% asset-based sales charge.
2 Oppenheimer California Municipal Fund
<PAGE> 3
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer California
Municipal Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
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/ BRIDGET A. MACASKILL
Bridget A. Macaskill
August 21, 1998
3 Oppenheimer California Municipal Fund
<PAGE> 4
"WE BELIEVE CALIFORNIA'S ECONOMY IS LIKELY TO REMAIN STRONG BECAUSE..."
AN INTERVIEW WITH YOUR FUND'S MANAGER
- --------------------------------------------------------------------------------
HOW HAS OPPENHEIMER CALIFORNIA MUNICIPAL FUND PERFORMED OVER THE PAST 12 MONTHS?
The Fund's Class A shares provided an average annual total return, without
deducting sales charges, of 5.66% for the one-year period that ended July 31,
1998.(1) These results reflect both income payments and capital appreciation of
the tax-exempt fixed-income securities in which the Fund invests.
HOW HAVE POSITIVE U.S. ECONOMIC CONDITIONS OVER THE PAST YEAR AFFECTED
CALIFORNIA'S MUNICIPAL BONDS?
A resilient U.S. economy and low inflation have been good for domestic bonds of
all kinds, including those from California issuers. The state and national
economies have continued to expand, despite concerns that the Asian financial
crisis might cause growth to slow. So far, consumers appear to have picked up
any slack created by weak demand from Asia, spending freely for major purchases
such as cars, boats and second homes. Yet, inflation has remained at
historically low levels. Even record-high employment has failed to rekindle
inflationary pressures.
These economic influences, which have prevailed in California as well as
the rest of the country, have allowed longer-term interest rates to move lower
relative to short-term interest rates. Because bond prices generally rise when
interest rates decline, most sectors of the U.S. bond market provided above
average total returns over the past year. Taxable bonds, such as U.S. Treasury
securities, generally provided higher returns than tax-exempt bonds.
WHY DID TAXABLE BONDS OUTPERFORM MUNICIPAL BONDS?
It's a matter of supply and demand. When the supply of municipal bonds issued is
high relative to demand from
1. 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.
4 Oppenheimer California Municipal Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Bob Patterson
Caryn Halbrecht
Jerry Webman
(Portfolio Manager)
investors, higher yields may be required to attract a limited number of
investors. Conversely, when supply is low, issuers can offer bonds with lower
yields because there are more than enough buyers.
Particularly over the past six months, states and municipalities have
rushed to take advantage of lower borrowing costs by financing new projects and
refinancing existing debt at lower rates. As a result, the supply of municipal
bonds nationally during the first half of 1998 was about 60% higher than it was
in the first half of 1997.
In contrast, the supply of U.S. Treasury securities fell because of the
federal government's progress toward achieving a balanced budget. The strong
economy has bolstered tax revenues, requiring the government to borrow less.
Yet, demand for U.S. Treasury securities has remained high, especially from
overseas investors seeking a safe haven from volatile foreign markets.
WHERE DID YOU FIND ATTRACTIVE INVESTMENT OPPORTUNITIES UNDER THESE MARKET
CONDITIONS?
We've invested in bonds that support a wide variety of purposes, ranging from
airports to school districts. Over the past year, however, we have found
particularly attractive values in certain industries. For example, the growing
need for housing in California has spurred development in many parts of the
state, including subsidized housing and retirement care facilities. California's
population continues to grow, and the aging of America indicates that demand for
senior housing should remain high, enhancing these projects' ability to meet
their debt obligations.
5 Oppenheimer California Municipal Fund
<PAGE> 6
STANDARDIZED YIELDS(2)
For the 30 Days Ended 7/31/98
CLASS A
4.23%
CLASS B
3.68%
CLASS C
3.68%
AN INTERVIEW WITH YOUR FUND'S MANAGER
- --------------------------------------------------------------------------------
We also have found attractive opportunities for income and diversification from
bonds issued by U.S. territories such as Puerto Rico and Guam. Under federal
law, income from these bonds is exempt from personal income taxes for residents
of all states.
HAVE YOU AVOIDED ANY AREAS OF THE MUNICIPAL BOND MARKET?
We have been careful with regard to electric utilities because deregulation is
changing the entire power-generation industry. We are waiting for the
competitive picture to become clearer before we invest more substantially in
this area. We have also proceeded cautiously with regard to some of
California's lower-rated development districts because of concerns that they
may not meet their financial projections if an economic downturn constrains
demand for new housing.
WHAT IS YOUR OUTLOOK FOR CALIFORNIA'S MUNICIPAL BOND MARKET?
We are optimistic. First, on a national level, tax-exempt bonds are inexpensive
relative to comparable taxable securities because of high supply. On average,
municipal bonds have historically provided about 85% of the pre-tax yield of
U.S. Treasury securities. As of July 31, municipal bonds provided almost 92% of
taxable bonds' yield. We expect municipal bond prices to rise as yields fall
when the relationship between taxable and tax-exempt bonds returns to more
normal levels. Second, we expect demand for municipal bonds to increase when
common stocks lose their luster. Many individuals, including California
residents, have happily remained invested in equities because stocks have
generated stellar returns over the past three years. If the stock market
corrects, we think many of these investors may turn to bonds, which are
generally less risky than stocks.
6 Oppenheimer California Municipal Fund
<PAGE> 7
CREDIT ALLOCATION(3)
[PIE CHART]
<TABLE>
<S> <C>
- - AAA 45.5%
- - AA 7.7
- - A 10.9
- - BBB 25.5
- - BB 9.5
- - B 0.9
</TABLE>
In addition, we are optimistic about the future of the U.S. economy. We expect
the slowdown in Asia to constrain U.S. economic growth, preventing the Federal
Reserve from raising short-term interest rates in an effort to forestall an
acceleration of inflation. However, even in a slowdown, we believe California's
economy is likely to remain strong because of its diversified mix of industries,
such as aerospace, high technology and entertainment.
No matter what the future brings, however, we intend to continue to
search for California municipal bonds that provide high levels of income exempt
from federal and California state personal income taxes, while attempting to
preserve capital.
<TABLE>
<CAPTION>
TOP 5 INDUSTRIES
<S> <C>
Percentage of invested assets(4)
- ------------------------------------------------------------------
Special Assessment 23.6%
- ------------------------------------------------------------------
Single Family Housing 13.9
- ------------------------------------------------------------------
Lease Rental 11.8
- ------------------------------------------------------------------
Electric Utilities 11.1
- ------------------------------------------------------------------
Highways 8.3
- ------------------------------------------------------------------
</TABLE>
2. Standardized yield is based on net investment income for the 30-day period
ended July 31, 1998. Falling share prices will tend to artificially raise
yields.
3. Portfolio data are as of July 31, 1998, are dollar-weighted based on
invested assets and are subject to change. The Fund may invest up to 25% of its
assets in below-investment-grade securities which carry greater risk of default.
Average credit quality and ratings allocations include securities rated by
national ratings organizations as well as unrated securities (currently 15.8% of
total investments) which have ratings assigned by the Manager in categories
equivalent to those of ratings organizations.
4. Industry weightings are as of July 31, 1998, and are subject to change.
7 Oppenheimer California Municipal Fund
<PAGE> 8
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended July 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 Fund's fiscal year
that ended July 31, 1998, Oppenheimer California Municipal Fund performed
relatively well. The primary drivers of the Fund's performance were the effects
of positive domestic economic conditions and low inflation in a declining
interest-rate environment.
These economic influences have allowed longer-term interest rates to move
lower relative to short-term interest rates. Because bond prices generally rise
when interest rates decline, most sectors of the U.S. bond market provided
above-average total returns over the past year. However, this has also caused
yields on most fixed-income securities, including many of the Fund's
investments, to decline during the period. As a result, the Fund's Class A
shares reduced its dividend in December of 1997. The Fund's portfolio holdings,
allocations and strategies are subject to change.
During the Fund's fiscal year ended July 31, 1998, the Fund
maintained the practice, to the extent consistent with the amount of the Fund's
net ivestment income and other distributable income, of attempting to pay
dividends on Class A shares at a constant level. This practice required the
Manager, consistent with the Fund's investment objectives and investment
restrictions, to monitor the Fund's portfolio and select higher yielding
securities when deemed appropriate to maintain necessary net investment income
levels.
8 Oppenheimer California Municipal Fund
<PAGE> 9
- 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 held from the inception of the
class until July 31, 1998. In each case, all dividends and capital gains
distributions were reinvested in additional shares. The graphs reflect the
deduction of the 4.75% maximum initial sales charge on Class A shares, the
applicable 5% and 1% contingent deferred sales charge for Class B shares,
respectively for the 1-year period and the life of the class, and the 1%
contingent deferred sales charge on Class C. The ending account value for Class
B shares is net applicable 1% contingent deferred sales charge. The inception
date for Class A shares is 11/3/88; for Class B shares is 5/3/93; for Class C
shares is 11/1/95.
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 income but does not
consider the effect of capital gains or transaction costs, and none of the
following data 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.
Moreover, the index performance data does not reflect an assessment of the risk
of the investments included in the index.
9 Oppenheimer California Municipal Fund
<PAGE> 10
FUND PERFORMANCE
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer California Municipal Fund (Class A) and Lehman Brothers Municipal
Bond Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Lehmann
California Brothers
Muncipal Fund Municipal
Class A Bond Index
<S> <C> <C>
11.3.88 9,525 10,000
9,661 10,010
12.31.89 10,783 10,090
11,470 11,898
12.31.91 12,724 13,343
13,777 14,519
12.31.93 15,604 16,302
14,279 15,458
7.31.95 17,100 18,160
7.31.96 17,158 18,241
19,063 20,114
7.31.98 20,143 21,316
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 7/31/98(1)
<TABLE>
<S> <C> <C>
1 YEAR 0.64% 5 YEAR 5.26% LIFE 7.45%
</TABLE>
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer California Municipal Fund (Class B) and Lehman Brothers Municipal
Bond Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Lehmann
California Brothers
Muncipal Fund Municipal
Class B Bond Index
<S> <C> <C>
5.3.93 10,000 10,000
12.31.93 10,656 10,718
12.31.94 9,655 10,163
12.31.95 11,487 11,939
7.31.96 11,474 11,993
7.31.97 12,651 13,225
7.31.98 13,166 14,015
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 7/31/98(2)
<TABLE>
<S> <C> <C>
1 YEAR -0.13% 5 YEAR 5.12% LIFE 5.39%
</TABLE>
10 Oppenheimer California Municipal Fund
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer California Municipal Fund (Class C) and Lehman Brothers Municipal
Bond Index
[The following table was originally a line graph in the printed materials.]
<TABLE>
<CAPTION>
Oppenheimer Lehmann
California Brothers
Muncipal Fund Municipal
Class C Bond Index
<S> <C> <C>
11.1.95 10,000 10,000
10,290 10,264
7.31.96 10,271 10,310
7.31.97 11,324 11,369
7.31.98 11,876 12,048
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 7/31/98(3)
<TABLE>
<S> <C>
1 YEAR 3.87% LIFE 6.45%
</TABLE>
Total returns and the ending account value in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
1. Class A returns are shown net of the applicable 4.75% maximum initial sales
charge. The inception date of the Fund (Class A shares) was 11/3/88.
2. Class B shares of the Fund were first publicly offered on 5/3/93. The average
annual total returns reflect reinvestment of all dividends and capital gains
distributions and are shown net of the applicable 5% and 1% contingent deferred
sales charges, respectively, for the 1-year period and life-of-class. The ending
account value in the graph is net of the applicable 1% sales charge.
3. Class C shares of the Fund were first publicly offered on 11/1/95. The 1-year
period is shown net of the applicable 1% contingent deferred sales charge.
Past performance is not predictive of future performance.
Graphs are not drawn to same scale.
11 Oppenheimer California Municipal Fund
<PAGE> 12
FINANCIALS
- --------------------------------------------------------------------------------
12 Oppenheimer California Municipal Fund
<PAGE> 13
STATEMENT OF INVESTMENTS July 31, 1998
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
=====================================================================================================================
<S> <C> <C> <C>
MUNICIPAL BONDS AND NOTES--101.1%
- ---------------------------------------------------------------------------------------------------------------------
CALIFORNIA--92.7%
Anaheim, CA PFAU TXAL RB, MBIA Insured,
Inverse Floater, 8.93%, 12/28/18(1) Aaa/AAA $3,000,000 $ 3,825,000
- ---------------------------------------------------------------------------------------------------------------------
Avalon, CA CIA TXAL RB, Series A, 7.25%,
8/1/21 NR/A- 200,000 220,618
- ---------------------------------------------------------------------------------------------------------------------
Berkeley, CA HF RRB, Alta Bates Medical
Center, Series A, 6.50%, 12/1/11 A2/NR 4,500,000 4,944,915
- ---------------------------------------------------------------------------------------------------------------------
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 6,000,000 6,361,860
Episcopal Homes Foundation, 5.125%, 7/1/18 NR/A- 2,400,000 2,347,152
Rhonda Haas Goldman Plaza, 5.125%, 5/15/23 NR/A+ 2,300,000 2,243,075
- ---------------------------------------------------------------------------------------------------------------------
CA CDAU Lease RB, United Airlines, Series A,
5.70%, 10/1/33 Baa3/BB+ 9,185,000 9,385,968
- ---------------------------------------------------------------------------------------------------------------------
CA Community College FAU Lease RB,
West Valley Mission Community College,
MBIA Insured, 5.625%, 5/1/22 Aaa/AAA 3,585,000 3,761,669
- ---------------------------------------------------------------------------------------------------------------------
CA Educational FA RRB:
L.A. College Chiropractic, 5.60%, 11/1/17 Baa2/NR 1,000,000 1,028,930
Pooled Educational Facilities Program,
MBIA Insured, 7%, 3/1/16 Aaa/AAA 100,000 106,884
- ---------------------------------------------------------------------------------------------------------------------
CA Foothill/Eastern Transportation Corridor
Agency Toll Road RB, Sr. Lien, Series A,
6.50%, 1/1/32 Baa/BBB-/BBB 4,600,000 5,042,888
- ---------------------------------------------------------------------------------------------------------------------
CA Franchise Tax Board Refunding COP,
Prerefunded, 6.90%, 10/1/06 A2/A- 1,000,000 1,056,020
- ---------------------------------------------------------------------------------------------------------------------
CA HFA Home Mtg. RB:
Series A, 7.35%, 8/1/11 Aa2/AA- 75,000 79,672
Series C, 6.75%, 2/1/25 Aa2/AA- 9,775,000 10,433,542
Series C, 7.60%, 8/1/30 Aa2/AA- 1,285,000 1,350,021
Series E-1, 6.45%, 2/1/12 Aa2/AA- 750,000 802,590
Series M, MBIA Insured, 5.60%, 8/1/29 Aaa/AAA 2,500,000 2,563,975
- ---------------------------------------------------------------------------------------------------------------------
CA HFA SFM Purchase RB, Series A-2,
6.45%, 8/1/25 Aaa/AAA 8,000,000 8,521,360
- ---------------------------------------------------------------------------------------------------------------------
CA HFFAU RB:
La Palma Hospital Medical Center, 7.10%,
2/1/13 NR/A+ 1,875,000 1,938,787
Los Angeles Children's Hospital,
Prerefunded, Series A, 7.125%, 6/1/21 Aaa/NR 1,000,000 1,103,000
- ---------------------------------------------------------------------------------------------------------------------
CA Intermodal Container Transfer Facility
Joint PAU RRB, Southern Pacific
Transportation Co., Series A, 7.70%, 11/1/14 NR/A- 1,000,000 1,055,690
</TABLE>
13 Oppenheimer California Municipal Fund
<PAGE> 14
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)
CA PCFAU SWD RRB, North Cnty. Recycling
Center, Escrowed to Maturity, Series A,
6.75%, 7/1/11 Aaa/NR $ 500,000 $ 573,890
- ----------------------------------------------------------------------------------------------------------------------
CA PWBL RB, State Prison Department of
Corrections, Series E, FSA Insured,
5.50%, 6/1/15 Aaa/AAA 3,000,000 3,211,650
- ----------------------------------------------------------------------------------------------------------------------
CA Saddleback Community College District
Refunding COP, BIG Insured, 7%, 8/1/19 Aaa/AAA 1,000,000 1,047,870
- ----------------------------------------------------------------------------------------------------------------------
CA SCDAU Revenue Refunding COP:
Cedars-Sinai Medical Center, 5.40%, 11/1/15 A1/NR 2,000,000 2,011,720
Inverse Floater, 6.866%, 11/1/15(1) A1/NR 5,600,000 5,663,000
- ----------------------------------------------------------------------------------------------------------------------
Campbell, CA Refunding COP, Civic Center
Project, Prerefunded, 6.75%, 10/1/17 A2/A 1,130,000 1,244,446
- ----------------------------------------------------------------------------------------------------------------------
Capistrano, CA USD CFD SPTX Bonds:
No. 87-1, Prerefunded, 7.60%, 9/1/14 Aaa/NR 4,000,000 4,245,200
No. 92-1, 7.10%, 9/1/21 NR/NR 3,250,000 3,927,072
- ----------------------------------------------------------------------------------------------------------------------
Central CA Joint Powers Health FAU COP,
Community Hospitals of Central California
Project, 5%, 2/1/23 Baa1/NR/BBB+ 5,090,000 4,749,733
- ----------------------------------------------------------------------------------------------------------------------
Clovis, CA USD CAP GOB, Series D, FGIC
Insured, Zero Coupon, 5.60%, 8/1/10(2) Aaa/AAA 2,000,000 1,133,960
- ----------------------------------------------------------------------------------------------------------------------
Colton, CA PFAU TXAL RRB, Redevelopment
Projects, Series B, 5.875%, 8/1/27 NR/NR 3,700,000 3,729,489
- ----------------------------------------------------------------------------------------------------------------------
Commerce, CA Community Development
Commission TXAL Refunding Bonds,
Redevelopment Project No. 1, Sub. Lien,
Series B:
5.75%, 8/1/10 NR/NR 815,000 845,620
6%, 8/1/21 NR/NR 2,800,000 2,846,200
- ----------------------------------------------------------------------------------------------------------------------
Commerce, CA Joint Powers FAU Lease RB,
Community Center, Series A, 6.25%, 10/1/22 Baa2/NR 1,410,000 1,501,114
- ----------------------------------------------------------------------------------------------------------------------
Compton, CA Refunding COP, Civic Center
& Capital Improvements, Series A,
5.50%, 9/1/15 NR/BBB 3,000,000 3,040,860
- ----------------------------------------------------------------------------------------------------------------------
Contra Costa, CA Transportation Authority
Sales Tax RB, Escrowed to Maturity, Series A,
FGIC Insured, 6.50%, 3/1/09 Aaa/AAA/AAA 750,000 810,780
- ----------------------------------------------------------------------------------------------------------------------
Davis, CA Public Facilities FAU Local Agency
RRB, Mace Ranch Area, Series A,
6.60%, 9/1/25 NR/NR 5,000,000 5,289,000
</TABLE>
14 Oppenheimer California Municipal Fund
<PAGE> 15
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Delta Cnty., CA Home Mortgage FAU SFM RB,
Series A, 5.35%, 6/1/24 Aaa/AAA/AAA $ 4,605,000 $4,630,374
- ---------------------------------------------------------------------------------------------------------------------
Duarte, CA COP, City of Hope National
Medical Center, 6.25%, 4/1/23 Baa1/NR 4,500,000 4,752,585
- ---------------------------------------------------------------------------------------------------------------------
East Bay, CA Regional Park District GOB,
Series B, Prerefunded, 6.375%, 9/1/10 Aa2/AA 500,000 534,895
- ---------------------------------------------------------------------------------------------------------------------
Escondido, CA Union High SDI CAP GOB,
MBIA Insured, Zero Coupon:
6.20%, 11/1/18(2) Aaa/AAA 6,000,000 2,127,960
6.20%, 11/1/19(2) Aaa/AAA 2,000,000 666,980
- ---------------------------------------------------------------------------------------------------------------------
Fontana, CA RA TXAL Refunding Bonds,
Jurupa Hills Redevelopment Project, Series A:
5.50%, 10/1/19 NR/BBB+ 1,345,000 1,363,386
5.50%, 10/1/27 NR/BBB+ 5,395,000 5,468,750
- ---------------------------------------------------------------------------------------------------------------------
Fresno, CA USD COP, Prerefunded, 7%, 5/1/12 A2/BBB+ 250,000 261,080
- ---------------------------------------------------------------------------------------------------------------------
Huntington Park, CA PFAU Lease RRB,
Wastewater System Project, Series A,
6.20%, 10/1/25 NR/NR 3,000,000 3,088,620
- ---------------------------------------------------------------------------------------------------------------------
Industry, CA Improvement Bond Act of 1915
SPAST GOB, District No. 91-1, 7.65%, 9/2/21 NR/NR 1,750,000 1,804,652
- ---------------------------------------------------------------------------------------------------------------------
Industry, CA UDA TXAL Bonds, Transportation
Distribution Project No. 3, 6.90%, 11/1/07 NR/A- 500,000 552,060
- ---------------------------------------------------------------------------------------------------------------------
Irvine, CA Improvement Bond Act of 1915
SPAST GOB:
District 94-13-Group One, 5.50%, 9/2/22 NR/NR 10,000,000 9,874,600
District 95-12-Group Three, 5.50%, 9/2/21 NR/NR 3,000,000 2,970,810
District 97-16-Group Two, 5.50%, 9/2/22 NR/NR 2,000,000 1,974,920
- ---------------------------------------------------------------------------------------------------------------------
La Quinta, CA RA TXAL Refunding Bonds,
La Quinta Project, Prerefunded, 8.40%, 9/1/12 Aaa/AAA 1,000,000 1,110,190
- ---------------------------------------------------------------------------------------------------------------------
Laguna Salada, CA USD GOB, CAP, Series B,
FGIC Insured, Zero Coupon, 5.30%, 8/1/22(2) Aaa/AAA/AAA 3,035,000 871,925
- ---------------------------------------------------------------------------------------------------------------------
Lake Elsinore, CA Recreation Authority RB,
Public Facilities Project, Series A,
7.10%, 2/1/17 NR/NR 2,960,000 3,043,502
- ---------------------------------------------------------------------------------------------------------------------
Long Beach, CA Harbor RRB, Series A,
FGIC Insured, 6%, 5/15/10 Aaa/AAA 3,000,000 3,354,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA COP, CAP, Disney
Parking Project, Zero Coupon:
5.58%, 3/1/12(2) Baa1/BBB/A- 1,700,000 821,100
6.924%, 9/1/10(2) Baa1/BBB/A- 5,960,000 3,156,476
6.95 %, 9/1/11(2) Baa1/BBB/A- 2,900,000 1,447,912
7.03%, 9/1/13(2) Baa1/BBB/A- 4,500,000 1,990,980
</TABLE>
15 Oppenheimer California Municipal Fund
<PAGE> 16
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)
Los Angeles Cnty., CA COP, Prerefunded,
6.50%, 3/1/10 Baa1/BBB $ 1,500,000 $ 1,589,670
- ----------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA MTAU Sales Tax RRB,
First Tier-Property A, Series A, FSA Insured,
5%, 7/1/15(3) Aaa/AAA/AAA 10,000,000 9,820,100
- ----------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA Public Works FAU Lease
RB, Multiple Capital Facilities Project V,
Series A, AMBAC Insured, 5.125%, 6/1/17 Aaa/AAA 1,965,000 1,964,862
- ----------------------------------------------------------------------------------------------------------------------
Los Angeles Cnty., CA Public Works FAU
RRB, Regional Park & Open Space District,
Series A, 5%, 10/1/16 Aa3/AA 7,600,000 7,496,868
- ----------------------------------------------------------------------------------------------------------------------
Los Angeles, CA Harbor Department RB,
Series B, 5.375%, 11/1/23 Aa3/AA/AA 5,000,000 5,066,450
- ----------------------------------------------------------------------------------------------------------------------
Los Angeles, CA USD Refunding COP,
Dr. Francisco Bravo Medical Project,
6.60%, 6/1/06 A2/A/A 250,000 272,910
- ----------------------------------------------------------------------------------------------------------------------
Oakland, CA RA Refunding Bonds, MBIA
Insured, Inverse Floater, 8.168%, 9/1/19(1) Aaa/AAA 4,300,000 4,875,125
- ----------------------------------------------------------------------------------------------------------------------
Oakland, CA RRB, Municipal Retirement
System Pension Fund, Series A, FGIC
Insured, 7.60%, 8/1/21 Aaa/AAA/AAA 2,000,000 2,040,000
- ----------------------------------------------------------------------------------------------------------------------
Oakland, CA State Building Authority Lease
RB, Elihu M. Harris, Series A, AMBAC
Insured, 5%, 4/1/23 Aaa/AAA/AAA 2,900,000 2,825,586
- ----------------------------------------------------------------------------------------------------------------------
Orange Cnty., CA CFD Refunding SPTX
Bonds, No. 86-2, Rancho Santa Margarita,
Series A, 5.55%, 8/15/17 NR/NR 1,000,000 1,002,430
- ----------------------------------------------------------------------------------------------------------------------
Orange Cnty., CA CFD SPTX Bonds, No. 88-1,
Aliso Viejo, Prerefunded, Series A:
7.10%, 8/15/05 NR/AAA 1,440,000 1,630,685
7.35%, 8/15/18 NR/AAA 7,000,000 7,988,820
- ----------------------------------------------------------------------------------------------------------------------
Orange Cnty., CA Improvement Bond Act of
1915 SPAST GOB, Assessment No. 88-1,
6.25%, 9/2/18 NR/NR 2,300,000 2,359,248
- ----------------------------------------------------------------------------------------------------------------------
Palm Springs, CA COP, Escrowed to Maturity,
Sub. Lien, Series B, Zero Coupon,
5.608%, 4/15/21(2) Aaa/AAA 15,000,000 4,542,450
- ----------------------------------------------------------------------------------------------------------------------
Pittsburg, CA Improvement Bond Act of 1915
SPAST GOB, Assessment District 1990-01,
7.75%, 9/2/20 NR/NR 1,235,000 1,274,656
</TABLE>
16 Oppenheimer California Municipal Fund
<PAGE> 17
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Pittsburg, CA RA TXAL Refunding Bonds,
Los Medanos Community Development
Project, Sub. Lien, 6.20%, 8/1/19 NR/BBB $ 2,500,000 $ 2,673,900
- ----------------------------------------------------------------------------------------------------------------------
Placentia, CA PFAU SPTX RB, Jr. Lien,
Series B, 6.60%, 9/1/15 NR/NR 1,600,000 1,667,248
- ----------------------------------------------------------------------------------------------------------------------
Pomona, CA SFM RRB, Escrowed to Maturity:
Series A, 7.60%, 5/1/23 Aaa/AAA 4,500,000 5,911,740
Series B, 7.50%, 8/1/23 Aaa/AAA 500,000 650,585
- ----------------------------------------------------------------------------------------------------------------------
Pomona, CA USD GORB, Series A, MBIA
Insured, 6.15%, 8/1/15 Aaa/AAA 2,000,000 2,290,220
- ----------------------------------------------------------------------------------------------------------------------
Port Oakland, CA Port RB, Series G, MBIA
Insured, 5.375%, 11/1/25 Aaa/AAA/AAA 10,650,000 10,774,605
- ----------------------------------------------------------------------------------------------------------------------
Redding, CA Electric System Revenue COP:
FGIC Insured, Inverse Floater, 7.403%, 6/1/19(1) Aaa/AAA/AAA 4,000,000 4,330,000
MBIA Insured, Inverse Floater, 8.781%, 7/8/22(1) Aaa/AAA 2,500,000 3,262,500
- ----------------------------------------------------------------------------------------------------------------------
Richmond, CA Improvement Bond Act 1915
GORB, Reassessment District No. 855,
6.60%, 9/2/19 NR/NR 1,500,000 1,545,870
- ----------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA CFD SPTX Bonds,
No. 88-12, 7.55%, 9/1/17 NR/NR 3,000,000 3,271,710
- ----------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA PFAU TXAL RRB,
Redevelopment Projects, Series A,
5.625%, 10/1/33 Baa2/BBB- 6,600,000 6,758,598
- ----------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA Refunding COP, Air Force
Village West, Inc., Series A:
8.125%, 6/15/12 NR/NR 3,000,000 3,262,710
8.125%, 6/15/20 NR/NR 3,000,000 3,277,290
- ----------------------------------------------------------------------------------------------------------------------
Riverside Cnty., CA SFM RB, Escrowed to
Maturity, Series A, 7.80%, 5/1/21 Aaa/AAA 4,285,000 5,767,653
- ----------------------------------------------------------------------------------------------------------------------
Sacramento Cnty., CA SFM RB, Escrowed to
Maturity, 8.125%, 7/1/16(4) Aaa/AAA 10,000,000 13,457,400
- ----------------------------------------------------------------------------------------------------------------------
Sacramento Cnty., CA SPTX Refunding Bonds,
CFD No. 1, 5.70%, 12/1/20 NR/NR 2,000,000 2,007,280
- ----------------------------------------------------------------------------------------------------------------------
Sacramento, CA Cogeneration Authority RB,
Procter & Gamble Project, 6.50%, 7/1/14 NR/BBB-/BBB- 5,000,000 5,490,950
- ----------------------------------------------------------------------------------------------------------------------
Sacramento, CA MUD Electric RRB, FGIC
Insured, Inverse Floater, 9.071%, 8/15/18(1) Aaa/AAA/AAA 5,500,000 6,455,625
- ----------------------------------------------------------------------------------------------------------------------
Sacramento, CA MWFAU Electric RRB,
Series L, AMBAC Insured, 5.10%, 7/1/14 Aaa/AAA/AAA 11,795,000 11,937,366
</TABLE>
17 Oppenheimer California Municipal Fund
<PAGE> 18
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)
Sacramento, CA PAU RB, Cogeneration
Project, 6%, 7/1/22 NR/BBB-/BBB- $ 7,300,000 $ 7,692,667
- ---------------------------------------------------------------------------------------------------------------------
San Bernardino Cnty., CA COP, Medical
Center Financing Project, MBIA Insured,
5.50%, 8/1/17 Aaa/AAA 5,250,000 5,576,235
- ---------------------------------------------------------------------------------------------------------------------
San Diego Cnty., CA COP, MBIA Insured,
Inverse Floater, 8.796%, 11/18/19(1) A1/A 2,000,000 2,282,500
- ---------------------------------------------------------------------------------------------------------------------
San Diego Cnty., CA Water Authority Revenue
COP, Prerefunded Series 91-B, MBIA Insured,
Inverse Floater, 8.62%, 4/8/21(1) Aaa/AAA 3,000,000 3,855,000
- ---------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty. Community
International Airport RRB, Second Series-
Issue 15A, FSA Insured, 5%, 5/1/21 Aaa/AAA/AAA 1,500,000 1,447,530
- ---------------------------------------------------------------------------------------------------------------------
San Francisco, CA City & Cnty.
Redevelopment FAU Refunding TXAL Bonds:
CAP Redevelopment Projects, Series C,
Zero Coupon, 5.25%, 8/1/14(2) A2/A 2,350,000 1,026,362
CAP Redevelopment Projects, Series C,
Zero Coupon, 5.10%, 8/1/11(2) A2/A 2,350,000 1,214,903
CAP Redevelopment Projects, Series C,
Zero Coupon, 5.15%, 8/1/12(2) A2/A 2,350,000 1,146,918
Series C, Zero Coupon, 5%, 8/1/10(2) A2/A 2,350,000 1,293,182
- ---------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation
Corridor Agency Toll Road RB, Sr. Lien:
5%, 1/1/33 Baa3/NR/BBB 8,000,000 7,543,360
Prerefunded, 6.75%, 1/1/32 Aaa/AAA/AAA 7,000,000 7,881,930
- ---------------------------------------------------------------------------------------------------------------------
San Joaquin Hills, CA Transportation
Corridor Agency Toll Road RRB, CAP,
Series A, 0%/5.75%, 1/15/21(5) Baa3/BBB-/BBB 11,800,000 7,983,880
- ---------------------------------------------------------------------------------------------------------------------
Santa Ana, CA FAU RRB, Inner-City
Commuter, Series C, 5.60%, 9/1/19 NR/BBB 3,060,000 3,071,842
- ---------------------------------------------------------------------------------------------------------------------
Santa Margarita/Dana Point, CA Authority RB,
Improvement Districts 3-3A-4-4A, Series B,
MBIA Insured, 7.25%, 8/1/14 Aaa/AAA 680,000 860,186
- ---------------------------------------------------------------------------------------------------------------------
Southern CA Home FAU SFM RB, Series A,
7.35%, 9/1/24 NR/AAA 1,670,000 1,761,616
- ---------------------------------------------------------------------------------------------------------------------
Southern CA Metropolitan Water District
Waterworks RB:
5.55%, 10/30/20 Aa2/AA 3,600,000 3,718,764
Inverse Floater, 6.811%, 10/30/20(1) Aa2/AA 1,500,000 1,582,500
</TABLE>
18 Oppenheimer California Municipal Fund
<PAGE> 19
<TABLE>
<CAPTION>
RATINGS:
MOODY'S/
S&P/FITCH FACE MARKET VALUE
(UNAUDITED) AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA (CONTINUED)
Southern CA PPAU Transmission Project RB,
Inverse Floater, 7.893%, 7/1/12(1) Aa3/A+ $ 1,900,000 $ 2,163,625
- --------------------------------------------------------------------------------------------------------------------
Stockton, CA CFD SPTX RRB, Brookside
Estates, No. 90-2, 6.20%, 8/1/15 NR/NR 1,750,000 1,821,558
- --------------------------------------------------------------------------------------------------------------------
Temecula, CA SPTX Refunding Bonds,
CFD 88-12-A, 5.625%, 9/1/17 NR/NR 1,800,000 1,797,822
- --------------------------------------------------------------------------------------------------------------------
Tustin, CA USD SPTX RB, CFD No. 88-1,
Series B, 6.375%, 9/1/21 NR/NR 3,500,000 3,766,700
- --------------------------------------------------------------------------------------------------------------------
University of CA Regents RB, Multiple
Purpose Projects, Prerefunded, Series A,
6.875%, 9/1/16 NR/AA- 1,950,000 2,191,976
- --------------------------------------------------------------------------------------------------------------------
West Sacramento, CA Improvement Bond
Act 1915 SPAST Refunding Bonds,
5.60%, 9/2/17 NR/NR 2,000,000 1,980,240
- --------------------------------------------------------------------------------------------------------------------
Yuba City, CA USD Refunding COP, Series A,
5%, 2/1/17 Aaa/AAA 3,010,000 2,979,569
------------
396,096,952
- --------------------------------------------------------------------------------------------------------------------
U.S. POSSESSIONS--8.4%
Guam PAU RB, Series A, 6.625%, 10/1/14 NR/BBB 2,000,000 2,214,040
- --------------------------------------------------------------------------------------------------------------------
PR CMWLTH GOB, 5.375%, 7/1/25 Baa1/A 6,600,000 6,692,994
- --------------------------------------------------------------------------------------------------------------------
PR CMWLTH GORB, MBIA Insured, Inverse
Floater, 7.934%, 7/1/08(1) Aaa/AAA 3,500,000 3,928,750
- --------------------------------------------------------------------------------------------------------------------
PR CMWLTH Highway & Transportation
Authority RRB, Series A, AMBAC Insured:
5.50%, 7/1/13 Aaa/AAA/AAA 3,500,000 3,770,340
5.50%, 7/1/14 Aaa/AAA/AAA 3,500,000 3,766,315
- --------------------------------------------------------------------------------------------------------------------
PR EPAU RB, Prerefunded, Series P,
7%, 7/1/21 Aaa/BBB+ 4,000,000 4,407,120
- --------------------------------------------------------------------------------------------------------------------
PR HFA & Bank SFM RB, Affordable Housing
Mtg.-Portfolio I, 6.25%, 4/1/29 Aaa/AAA 3,565,000 3,769,702
- --------------------------------------------------------------------------------------------------------------------
PR Housing Finance Corp. SFM RB,
Portfolio 1, Series B, 7.65%, 10/15/22 Aaa/AAA 515,000 546,111
- --------------------------------------------------------------------------------------------------------------------
PR Industrial, Medical & Environmental
PC Facilities Tourist RB, Mennonite General
Hospital Project, Series A, 6.50%, 7/1/12 NR/BBB-/BBB 2,375,000 2,577,326
- --------------------------------------------------------------------------------------------------------------------
PR Public Buildings Authority RB,
Government Facilities, Series B, AMBAC
Insured, 5%, 7/1/27 Aaa/AAA 4,400,000 4,310,812
------------
35,983,510
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $403,735,430) 101.1% 432,080,462
- --------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (1.1) (4,578,667)
----------- ------------
NET ASSETS 100.0% $427,501,795
=========== ============
</TABLE>
19 Oppenheimer California Municipal Fund
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
- -------------------------------------------------------------------------------
To simplify the listings of securities, abbreviations are used per the table
below:
<TABLE>
<S> <C> <C> <C>
CAP --Capital Appreciation PC --Pollution Control
CDAU --Communities Development Authority PCFAU --Pollution Control Finance Authority
CFD --Community Facilities District PFAU --Public Finance Authority
CIA --Community Improvement Agency PPAU --Public Power Authority
CMWLTH --Commonwealth PWBL --Public Works Board Lease
COP --Certificates of Participation RA --Redevelopment Agency
EPAU --Electric Power Authority RB --Revenue Bonds
FA --Facilities Authority RRB --Revenue Refunding Bonds
FAU --Finance Authority SCDAU --Statewide Communities Development Authority
GOB --General Obligation Bonds SDI --School District
GORB --General Obligation Refunding Bonds SFM --Single Family Mortgage
HF --Health Facilities SPAST --Special Assessment
HFA --Housing Finance Agency SPTX --Special Tax
HFFAU --Health Facilities Finance Authority SWD --Solid Waste Disposal
MTAU --Metropolitan Transportation Authority TXAL --Tax Allocation
MUD --Municipal Utility District UDA --Urban Development Agency
MWFAU --Municipal Water Finance Authority USD --Unified School District
PAU --Power Authority
</TABLE>
1. Represents the current interest rate for a variable rate bond known as an
"inverse floater" which pays interest at a rate that varies inversely with
short-term interest rates. As interest rates rise, inverse floaters produce
less current income. Their price may be more volatile than the price of a
comparable fixed-rate security. Inverse floaters amount to $42,223,625 or 9.88%
of the Fund's net assets at July 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 July 31, 1998.
4. Securities with an aggregate market value of $1,751,451 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.
20 Oppenheimer California Municipal Fund
<PAGE> 21
- -------------------------------------------------------------------------------
As of July 31, 1998, securities subject to the alternative minimum tax amount
to $83,086,785 or 19.44% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments
at value, is as follows:
<TABLE>
<CAPTION>
INDUSTRY MARKET VALUE PERCENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Special Assessment $102,011,008 23.6%
- -----------------------------------------------------------------------------------------------------------
Single Family Housing 60,246,341 13.9
- -----------------------------------------------------------------------------------------------------------
Lease Rental 50,777,746 11.8
- -----------------------------------------------------------------------------------------------------------
Electric Utilities 47,953,893 11.1
- -----------------------------------------------------------------------------------------------------------
Highways 35,988,713 8.3
- -----------------------------------------------------------------------------------------------------------
Hospital/Healthcare 32,283,517 7.5
- -----------------------------------------------------------------------------------------------------------
Marine/Aviation Facilities 21,698,275 5.0
- -----------------------------------------------------------------------------------------------------------
Adult Living Facilities 17,492,087 4.0
- -----------------------------------------------------------------------------------------------------------
General Obligation 17,375,759 4.0
- -----------------------------------------------------------------------------------------------------------
Water Utilities 16,653,132 3.9
- -----------------------------------------------------------------------------------------------------------
Sales Tax 10,630,880 2.5
- -----------------------------------------------------------------------------------------------------------
Corporate Backed 9,385,968 2.2
- -----------------------------------------------------------------------------------------------------------
Higher Education 8,137,328 1.9
- -----------------------------------------------------------------------------------------------------------
Education 871,925 0.2
- -----------------------------------------------------------------------------------------------------------
Resource Recovery 573,890 0.1
------------ -----
$432,080,462 100.0%
============ =====
</TABLE>
See accompanying Notes to Financial Statements.
21 Oppenheimer California Municipal Fund
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES July 31, 1998
<TABLE>
<S> <C>
============================================================================================================
ASSETS
Investments, at value (cost $403,735,430)--see accompanying statement $432,080,462
- ------------------------------------------------------------------------------------------------------------
Cash 868,959
- ------------------------------------------------------------------------------------------------------------
Receivables:
Interest 5,893,118
Shares of beneficial interest sold 556,489
Investments sold 463,688
- ------------------------------------------------------------------------------------------------------------
Other 9,532
------------
Total assets 439,872,248
============================================================================================================
LIABILITIES
Payables and other liabilities:
Investments purchased 10,790,303
Dividends 1,078,436
Trustees' fees--Note 1 167,674
Shares of beneficial interest redeemed 110,483
Distribution and service plan fees 90,421
Transfer and shareholder servicing agent fees 28,124
Daily variation on futures contracts--Note 5 20,375
Other 84,637
------------
Total liabilities 12,370,453
============================================================================================================
NET ASSETS $427,501,795
============
============================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital $400,975,901
- ------------------------------------------------------------------------------------------------------------
Overdistributed net investment income (859,305)
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (1,015,114)
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Notes 3 and 5 28,400,313
------------
Net assets $427,501,795
============
</TABLE>
22 Oppenheimer California Municipal Fund
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
============================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$300,717,304 and 27,537,971 shares of beneficial interest outstanding) $10.92
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price) $11.46
- ------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $115,444,395
and 10,567,970 shares of beneficial interest outstanding) $10.92
- ------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $11,340,096
and 1,039,758 shares of beneficial interest outstanding) $10.91
</TABLE>
See accompanying Notes to Financial Statements.
23 Oppenheimer California Municipal Fund
<PAGE> 24
STATEMENT OF OPERATIONS For the Year Ended July 31, 1998
<TABLE>
<S> <C>
============================================================================================================
INVESTMENT INCOME
Interest $23,657,945
============================================================================================================
EXPENSES
Management fees--Note 4 2,275,703
- ------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 728,542
Class B 991,756
Class C 85,990
- ------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 207,241
- ------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 89,837
- ------------------------------------------------------------------------------------------------------------
Shareholder reports 65,860
- ------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 31,685
- ------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 18,847
- ------------------------------------------------------------------------------------------------------------
Registration and filing fees 12,386
- ------------------------------------------------------------------------------------------------------------
Other 13,639
-----------
Total expenses 4,521,486
============================================================================================================
NET INVESTMENT INCOME 19,136,459
============================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 1,807,712
Closing of futures contracts (2,928,076)
-----------
Net realized loss (1,120,364)
- ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 3,444,127
-----------
Net realized and unrealized gain 2,323,763
============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,460,222
===========
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer California Municipal Fund
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
1998 1997
====================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 19,136,459 $ 19,125,130
- --------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (1,120,364) 3,408,420
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 3,444,127 15,361,034
------------ ------------
Net increase in net assets resulting from operations 21,460,222 37,894,584
====================================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (14,732,831) (15,608,071)
Class B (4,147,106) (3,005,232)
Class C (359,910) (177,543)
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (2,092,323) --
Class B (677,374) --
Class C (51,258) --
====================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase (decrease) in net assets resulting from
beneficial interest transactions--Note 2:
Class A 3,072,554 (2,968,658)
Class B 33,042,362 26,671,234
Class C 5,382,827 3,556,642
====================================================================================================================
NET ASSETS
Total increase 40,897,163 46,362,956
- --------------------------------------------------------------------------------------------------------------------
Beginning of period 386,604,632 340,241,676
------------ ------------
End of period [including undistributed (overdistributed) net
investment income of $(859,305) and $966,465, respectively] $427,501,795 $386,604,632
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer California Municipal Fund
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1998 1997 1996(2) 1995 1994
================================================================================================================================
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $ 10.94 $ 10.39 $ 10.69 $ 9.45 $ 10.97
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .54 .58 .33 .58 .60
Net realized and unrealized gain (loss) .06 .54 (.30) 1.25 (1.51)
-------- -------- -------- -------- --------
Total income (loss) from investment
operations .60 1.12 .03 1.83 (.91)
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.54) (.57) (.33) (.58) (.61)
Dividends in excess of net
investment income -- -- -- (.01) --
Distributions from net realized gain (.08) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions
to shareholders (.62) (.57) (.33) (.59) (.61)
================================================================================================================================
Net asset value, end of period $ 10.92 $ 10.94 $ 10.39 $ 10.69 $ 9.45
======== ======== ======== ======== ========
================================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 5.66% 11.11% 0.34% 19.76% (8.49)%
================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $300,717 $298,162 $286,033 $285,307 $219,682
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $297,372 $289,439 $279,796 $250,188 $248,850
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.91% 5.49% 5.53% (5) 5.64% 5.99%
Expenses 0.92% 0.94% 0.97% (5) 0.95% 0.96%
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 30.8% 31.1% 14.0% 23.0% 21.9%
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to December 31,
1995.
2. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
3. For the period from May 3, 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.
26 Oppenheimer California Municipal Fund
<PAGE> 27
<TABLE>
<CAPTION>
CLASS B
- ------------ -----------------------------------------------------------------------------------------
YEAR ENDED JULY 31, YEAR ENDED DECEMBER 31,
1993 1998 1997 1996(2) 1995 1994 1993(3)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$10.35 $10.94 $10.39 $10.69 $ 9.44 $10.98 $10.72
- ------------------------------------------------------------------------------------------------------------
.62 .46 .49 .28 .51 .54 .35
.72 .06 .55 (.30) 1.25 (1.55) .34
------- ------- ------- ------- ------- -------- -------
1.34 .52 1.04 (.02) 1.76 (1.01) .69
- ------------------------------------------------------------------------------------------------------------
(.65) (.46) (.49) (.28) (.50) (.53) (.36)
-- -- -- -- (.01) -- --
(.07) (.08) -- -- -- -- (.07)
------- ------- ------- ------- ------- -------- -------
(.72) (.54) (.49) (.28) (.51) (.53) (.43)
- ------------------------------------------------------------------------------------------------------------
$10.97 $10.92 $10.94 $10.39 $10.69 $ 9.44 $10.98
======= ======= ======= ======= ======= ======== =======
============================================================================================================
13.26% 4.86% 10.27% (0.12)% 18.97% (9.39)% 6.66%
============================================================================================================
$266,490 $115,444 $82,474 $52,038 $41,224 $20,224 $9,921
- ------------------------------------------------------------------------------------------------------------
$245,193 $ 99,266 $65,192 $46,422 $29,918 $16,552 $5,218
- ------------------------------------------------------------------------------------------------------------
5.74% 4.21% 4.70% 4.74% (5) 4.82% 5.17% 4.57% (5)
0.97% 1.67% 1.70% 1.74% (5) 1.72% 1.73% 1.79% (5)
- ------------------------------------------------------------------------------------------------------------
13.7% 30.8% 31.1% 14.0% 23.0% 21.9% 13.7%
</TABLE>
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, 1998 were $171,617,027 and $125,867,402 respectively.
27 Oppenheimer California Municipal Fund
<PAGE> 28
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CLASS C
-----------------------------------------------------------
PERIOD
ENDED
YEAR ENDED JULY 31, DEC. 31,
1998 1997 1996(2) 1995(1)
================================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $10.93 $10.38 $10.68 $10.46
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .46 .49 .27 .08
Net realized and unrealized gain (loss) .06 .55 (.30) .22
---- ---- ---- ----
Total income (loss) from investment
operations .52 1.04 (.03) .30
- ----------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.46) (.49) (.27) (.07)
Dividends in excess of net
investment income -- -- -- (.01)
Distributions from net realized gain (.08) -- -- --
---- ---- ---- ----
Total dividends and distributions
to shareholders (.54) (.49) (.27) (.08)
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.91 $10.93 $10.38 $10.68
======== ======== ======== ========
================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(4) 4.87% 10.26% (0.19)% 2.90%
================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) $11,340 $5,969 $2,171 $125
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 8,614 $3,869 $1,156 $ 91
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.24% 4.66% 4.54% (5) 4.56% (5)
Expenses 1.66% 1.70% 1.80% (5) 1.68% (5)
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(6) 30.8% 31.1% 14.0% 23.0%
</TABLE>
1. For the period from November 1, 1995 (inception of offering) to December 31,
1995.
2. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
3. For the period from May 3, 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, 1998 were $171,617,027 and $125,867,402 respectively.
See accompanying Notes to Financial Statements.
28 Oppenheimer California Municipal Fund
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer California Municipal Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. 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 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 Trustees. 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 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. Options are valued based upon the last sale price on the
principal exchange on which the option is traded or, in the absence of any
transactions that day, the value is based upon the last sale price on the prior
trading date if it is within the spread between the closing bid and asked
prices. If the last sale price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
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.
29 Oppenheimer California Municipal Fund
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
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, 1998, the Fund
had available for federal income tax purposes an unused capital loss carryover
of approximately $960,000 which expires in 2006.
- --------------------------------------------------------------------------------
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 year ended
July 31, 1998, a provision of $31,827 was made for the Fund's projected benefit
obligations, and payments of $7,543 were made to retired trustees, resulting in
an accumulated liability of $163,318 at July 31, 1998.
The Board of Trustees had adopted a deferred compensation plan for
independent Trustees that enables Trustees to elect to defer receipt of all or a
portion of annual fees they are entitled to receive from the Fund. Under the
plan, the compensation deferred is periodically adjusted as though an equivalent
amount had been invested for the Trustee in shares of one or more Oppenheimer
funds selected by the Trustee. The amount paid to the Trustee under the plan
will be determined based upon the performance of the selected funds. Deferral of
Trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net income per
share.
- --------------------------------------------------------------------------------
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. 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.
30 Oppenheimer California Municipal Fund
<PAGE> 31
================================================================================
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
July 31, 1998, amounts have been reclassified to reflect a decrease in
undistributed net investment income of $1,722,382, a decrease in accumulated net
realized loss on investments of $124,880, and an increase in paid-in capital of
$1,597,502.
- --------------------------------------------------------------------------------
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 July 31, 1998, amounts have been
reclassified to reflect an increase in net unrealized appreciation on
investments of $2,700,126. Paid-in capital was decreased by the same amount. 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.
31 Oppenheimer California Municipal Fund
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
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>
YEAR ENDED JULY 31, 1998 YEAR ENDED JULY 31, 1997
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 4,625,371 $ 50,462,764 3,743,446 $ 39,457,645
Dividends and
distributions reinvested 921,790 10,031,986 847,947 8,930,517
Redeemed (5,266,312) (57,422,196) (4,874,267) (51,356,820)
------------ ------------ ------------ --------------
Net increase (decrease) 280,849 $ 3,072,554 (282,874) $ (2,968,658)
============ ============ ============ ==============
- ------------------------------------------------------------------------------------------------
Class B:
Sold 3,871,772 $ 42,232,554 3,027,347 $ 31,931,406
Dividends and
distributions reinvested 279,759 3,046,210 167,555 1,766,598
Redeemed (1,120,147) (12,236,402) (667,227) (7,026,770)
------------ ------------ ------------ --------------
Net increase 3,031,384 $ 33,042,362 2,527,675 $ 26,671,234
============ ============ ============ ==============
- ------------------------------------------------------------------------------------------------
Class C:
Sold 697,841 $$ 7,611,935 477,845 $ 5,040,612
Dividends and
distributions reinvested 29,500 320,853 11,183 117,848
Redeemed (233,849) (2,549,961) (151,952) (1,601,818)
------------ ------------ ------------ --------------
Net increase 493,492 $ 5,382,827 337,076 $ 3,556,642
============ ============ ============ ==============
</TABLE>
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At July 31, 1998, net unrealized appreciation on investments of $28,400,313 was
composed of gross appreciation of $28,602,209, and gross depreciation of
$201,896.
32 Oppenheimer California Municipal Fund
<PAGE> 33
================================================================================
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% of the first
$200 million of average annual net assets, 0.55% of the next $100 million, 0.50%
of the next $200 million, 0.45% of the next $250 million, 0.40% of the next $250
million and 0.35% of average annual net assets in excess of $1 billion.
For the year ended July 31, 1998, commissions (sales charges
paid by investors) on sales of Class A shares totaled $922,528, of which
$141,083 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 $1,607,116 and $66,159, respectively, of which
$24,983 and $1,207, respectively, was paid to an affiliated broker/dealer.
During the year ended July 31, 1998, OFDI received contingent deferred sales
charges of $264,900 and $5,565, respectively, upon redemption of Class B and
Class C 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 shareholder 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 year ended July
31, 1998, OFDI paid $21,461 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
33 Oppenheimer California Municipal Fund
<PAGE> 34
================================================================================
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
The Fund has adopted Distribution and Service Plans for Class
B and Class C shares to compensate OFDI for its 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 and Class C
shares, for its services rendered in distributing Class B and Class C shares.
OFDI also receives a service fee of 0.25% per year to compensate dealers for
providing personal services for accounts that hold Class B and Class C shares.
Each fee is computed on the average annual net assets of Class B or Class C
shares, determined as of the close of each regular business day. During the year
ended July 31, 1998, OFDI paid $2,065 and $2,722, respectively, to an affiliated
broker/dealer as compensation for Class B and Class C personal service and
maintenance expenses and retained $832,617 and $59,727, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as 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. At July 31, 1998, OFDI had incurred excess distribution and
servicing costs of $3,588,025 for Class B and $138,504 for Class C.
================================================================================
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 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.
34 Oppenheimer California Municipal Fund
<PAGE> 35
================================================================================
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, 1998, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION NUMBER OF VALUATION AS OF APPRECIATION
DATE CONTRACTS JULY 31, 1998 (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
Municipal Bond Future 9/98 135 $16,740,000 $(37,969)
-----
CONTRACTS TO SELL
- -----------------
U.S. Treasury Bonds, 20 yr. 9/98 374 45,850,063 93,250
---------
$ 55,281
=========
</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
July 31, 1998.
35 Oppenheimer California Municipal Fund
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
================================================================================
The Board of Trustees and Shareholders of
Oppenheimer California Municipal Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer California Municipal Fund as of July 31, 1998, the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the two-year period then
ended, the seven-month period ended July 31, 1996, and for each of the years in
the three-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, 1998, 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 Municipal Fund as of July 31, 1998,
the results of its operations for the year then ended, the changes in its net
assets for each of the years in the two-year period then ended and the financial
highlights for each of the years in the two-year period then ended, the
seven-month period ended July 31, 1996, and for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
August 21, 1998
36 Oppenheimer California Municipal Fund
<PAGE> 37
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 $0.0443, $0.0375 and $0.0375 per share were
paid to Class A, Class B and Class C shareholders, respectively, on December 10,
1997, of which, for each class of shares, $0.0332 was designated as a capital
gain distribution in the "28% Rate Group" and $0.0345 was designated as a
capital gain distribution in the "20% Rate Group" for federal income tax
purposes. Whether received in stock or cash, the capital gain distribution
should be treated by shareholders as a gain from the sale of capital assets.
None of the dividends paid by the Fund during the fiscal year
ended July 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.
37 Oppenheimer California Municipal Fund
<PAGE> 38
OPPENHEIMER CALIFORNIA MUNICIPAL 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
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 OppenheimerFunds Services
SERVICING AGENT
================================================================================
CUSTODIAN OF Citibank, N.A.
PORTFOLIO SECURITIES
================================================================================
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
================================================================================
LEGAL COUNSEL Gordon Altman Butowsky Weltzen Shalov & Wein
This is a copy of a report to shareholders of
Oppenheimer California Municipal Fund. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer California Municipal 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.
38 Oppenheimer California Municipal Fund
<PAGE> 39
OPPENHEIMERFUNDS FAMILY
<TABLE>
<S> <C> <C>
============================================================================================
REAL ASSET FUNDS
- --------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
============================================================================================
GLOBAL STOCK FUNDS
- --------------------------------------------------------------------------------------------
Developing Markets Fund International Growth Fund Quest Global Value Fund
International Small Global Fund Global Growth &Income Fund
Company Fund
============================================================================================
STOCK FUNDS
- --------------------------------------------------------------------------------------------
Enterprise Fund MidCap Fund Growth Fund
Discovery Fund Capital Appreciation Fund Disciplined Value Fund
Quest Small Cap Value Fund Quest Capital Value Fund Quest Value Fund
============================================================================================
STOCK & BOND FUNDS
- --------------------------------------------------------------------------------------------
Main Street Income & Total Return Fund Disciplined Allocation Fund
Growth Fund Quest Balanced Multiple Strategies Fund
Quest Opportunity Value Fund(1) Convertible Securities Fund(2)
Value Fund Equity Income Fund
============================================================================================
TAXABLE BOND FUNDS
- --------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
World Bond Fund Strategic Income Fund Limited-Term Government Fund
High Yield Fund Bond Fund
============================================================================================
MUNICIPAL BOND FUNDS
- --------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
============================================================================================
MONEY MARKET FUNDS(4)
- --------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
</TABLE>
1. On 5/18/98, the Fund's name was changed from "Quest Growth & Income Value
Fund."
2. On 4/28/98, the Fund's name was changed from "Bond Fund for Growth."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
these funds may seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in these funds.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1998 OppenheimerFunds, Inc. All rights reserved.
39 Oppenheimer California Municipal Fund
<PAGE> 40
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
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.
[OPPENHEIMERFUNDS LOGO]
RA0790.001.0798 September 29, 1998
