[FRONT COVER]
Oppenheimer Pennsylvania Tax-Exempt Fund
Annual Report July 31, 1996
[Picture of Couple at Coffee Table]
"We want
investment
income
that won't add
to our taxes."
[Oppenheimer Logo]
<PAGE>
This Fund is for Pennsylvania residents who need a source of
income that's exempt from current taxes.
Yield
Standardized Yields
For the 30 Days Ended 7/31/96:(3)
Class A
4.87%
Class B
4.34%
Class C
4.24%
How Your Fund Is Managed
Oppenheimer Pennsylvania Tax-Exempt Fund invests in a diversified portfolio of
Pennsylvania municipal bonds. As a Fund shareholder, you receive income that is
free from federal, and Pennsylvania income taxes, and in some cases, local
school district taxes.(1) Your dividends don't increase your taxable income the
way taxable investments do, so you can keep more of what you earn.
Pennsylvania Tax-Exempt Fund is managed by an experienced team of
municipal bond specialists who research investments thoroughly before they are
included in the Fund's portfolio.
Performance
Your Fund's average annual total returns at maximum offering price for Class A
shares for the 1- and 5-year periods ended 7/31/96 and since inception of the
Class on 9/18/89 were 1.30%, 5.91% and 6.49%, respectively. For Class B shares,
average annual total returns for the 1-year period and since inception of the
Class on 5/1/93 were 0.55% and 3.43%, respectively. For Class C shares,
cumulative total return since inception on 8/29/95 was 4.40%.(2)
Outlook
"We think the outlook is positive. From our perspective, the economic growth
rate that set off increases in interest rates will not be enough to make
inflation a serious concern. Thus, we expect any increase in interest rates in
the near future will be moderate and that the general bond market could
strengthen later in the year."
Robert Patterson, Portfolio Manager
July 31, 1996
Total returns include change in share price and reinvestment of dividends and
capital gains distributions. Past performance does not guarantee future
results. Investment return and principal value of an investment in the Fund
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. For more complete information, please review
the prospectus carefully before you invest.
1. A portion of the distributions paid by the Fund may be subject to federal
and state income taxes. For investors subject to federal and/or state
alternative minimum tax (AMT), the Fund's distributions may increase this tax.
Capital gains distributions, if any, are taxed as capital gains.
2. Class A returns show results of hypothetical investments on 7/31/95, 7/31/91
and 9/18/89 (inception of class), after deducting the current maximum initial
sales charge of 4.75%. Class B returns show results of hypothetical investments
on 7/31/95 and 5/1/93 (inception of class), after the deduction of the
applicable contingent deferred sales charge of 5% (1-year) and 3% (since
inception). Class C shares show results of a hypothetical investment on 8/29/95
after the deduction of the 1% contingent deferred sales charge. When such
returns are calculated in the same manner for the period ended 6/30/96, they
are as follows: for Class A shares, 1.03%, 5.99% and 6.43% for the 1- and
5-year period and since inception of the class; for Class B shares, 0.27% and
3.25% for the 1-year period and since inception of the class; and for Class C
shares, cumulative total return since inception of the class was 3.62%. An
explanation of the different performance calculations is in the Fund's
prospectus.
3. Standardized yield is net investment income calculated on a
yield-to-maturity basis for the 30-day period ended 7/31/96, divided by the
maximum offering price at the end of the period, compounded semiannually and
then annualized. Falling net asset values will tend to artificially raise
yields.
2 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
(Photo of Bridget A. Macaskill)
[Caption]
Bridget A. Macaskill
President
Oppenheimer
Pennsylvania
Tax-Exempt Fund
Dear Shareholder,
While municipal bonds have been affected by the concern over inflation in
recent months, we believe that the outlook remains favorable--especially if
you're in a high tax bracket.
Let's review the first half of the year. The most widely quoted interest
rate on long-term bonds, the benchmark 30-year U.S. Treasury bond, rose from 6%
in January to 7% by mid-year. Municipal bond yields tend to track Treasuries
pretty closely, yielding slightly less--about 80-85% of Treasuries--because
their interest is free from federal income tax. But during those six months,
yields on muni bonds rose proportionately, increasing their after-tax advantage.
So, while the current rise in interest rates over the past six months
pushed bond prices lower, our outlook for the rest of the year is much more
positive. Although the prices of food and gas, the most common gauges of
inflation, have increased recently, we believe that inflation is likely to
remain under control. We feel that food production will be able to meet demand
and, unlike previous energy disruptions, there doesn't appear to be a shortage
of crude oil in the world today. Thus, we are confident that the general
long-term trend is for moderate growth and low inflation. And while we
anticipate that interest rates will fluctuate over the near term, we feel bond
market conditions should improve in the coming months.
A number of other developments bode well for the municipal bond market.
The first is the muni bond's continuing status as one of the few true remaining
tax shelters, as earlier proposals for flat tax legislation seem to have quieted
down considerably. Another factor favorably impacting the municipal bond market
is the strengthening financial condition of many municipalities throughout the
United States. This is particularly true of California, which is one of the
nation's largest issuers of municipal bonds.
Finally, the tax-free market is also benefiting from a shrinking supply
of securities. About ten years ago, a surge of municipal bond issuance occurred
just prior to the Tax Reform Act of 1986. By today's standards, these bonds paid
very high interest. This year, billions of dollars worth of these bonds are
being redeemed by issuers who were contractually obligated to wait at least ten
years to "call" them. As a result, the supply of securities is falling, and the
former bondholders are receiving cash which they will either reinvest in the
municipal bond market or place elsewhere.
All things considered--the prospect of lower interest rates, the
diminishing likelihood of major tax legislation, the strengthening economies of
states and localities, as well as the shrinking supply of securities--the
outlook is very positive for municipal bond investors.
Your portfolio managers discuss the outlook for your Fund in light of
these broad issues on the following pages. Thank you for your confidence in
OppenheimerFunds. We look forward to helping you reach your investment goals in
the future.
/s/ Bridget A. Macaskill
Bridget A. Macaskill
August 21, 1996
3 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
(Photo of Robert Patterson,
Portfolio Manager, with Len Darling,
Executive VP, Director of Fixed
Income Investments)
(Photo of Michael Maciolek,
Securities Analyst)
(Photo of Caryn Halbrecht, Vice
President, Tax-Exempt Portfolio
Manager)
Q+A
Q How has
the Fund
performed?
An interview with your Fund's managers.
How has the Fund performed over the past year?
The bond market, during much of the period, weakened due in large part to
investors' concerns that the economy was strengthening and interest rates would
rise over the near term. Our performance year-to-date, in contrast to the
prevailing environment, has been stronger than that of some of our peers.
Because of strategic positioning decisions we made going into this period, we
ranked 25th against a peer group of 63 other ranked Pennsylvania tax-free bond
funds.(1)
What investment strategies made positive contributions to performance?
A major factor in the Fund's performance was our emphasis on pre-refunded bonds,
with shorter maturities, which performed extremely well versus other municipal
bonds. Because these issuers have escrowed money to repay bondholders,
pre-refunded bonds have low credit risk and are less sensitive to changes in
interest rates. With interest rates rising over much of the period these bonds
performed extremely well compared to longer maturity municipal bonds.
Another factor in our strong relative performance was the small
percentage we owned of municipal bonds trading at a discount. Discount bonds
tend to be more volatile than bonds trading at par or a premium and they tend
to suffer significant price declines when interest rates are rising.
Our shorter-than-average duration, which is a measure of the portfolio's
price sensitivity, was particularly helpful in a rising rate environment. While
a long duration strategy can benefit bond investors when rates
1. Source: Lipper Analytical Services 7/31/96. This comparison does not take
sales charges into consideration.
4 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
[Captions]
Facing page
Top left: Robert Patterson,
Portfolio Manager, with Len Darling,
Executive VP, Director of Fixed
Income Investments
Top right: Michael Maciolek,
Securities Analyst
Bottom: Caryn Halbrecht, Vice
President, Tax-Exempt Portfolio
Manager
This page
Top right: Robert Patterson
Bottom: Caryn Halbrecht with Donna
Compert, Municipal Securities Trader
A Our
year-to-date
performance
has been
stronger
than many of
our peers.
(Photo of Robert Patterson)
decline, the opposite is typically true when rates rise. Finally, a relatively
limited supply of new municipal bonds coupled with steady demand further
enhanced our performance.(2)
Did any investments perform poorly?
As always, our philosophy is to spread the Fund's assets across a range of
fixed-income securities. Unfortunately, our holdings in long-term municipal
bonds underperformed other municipal bond sectors. But, we lowered our weighting
in this sector over the past six months which helped the Fund's performance.
Should rates turn around and begin to head lower again, these bonds have the
potential to appreciate significantly.
What areas are you currently targeting?
Because we believe the market and interest rate environment will be slightly
better later in the year, we're buying securities with a higher degree of
exposure to the market. We're buying some longer-term bonds that tend to be more
volatile, but have the potential to outperform shorter-term bonds. At the
same time, by maintaining a fully diversified portfolio, we're taking
appropriate measures to offset the possibility that rates may continue to rise.
We've also been buying bonds issued by projects and localities that are
well-positioned to benefit from ongoing regional economic recovery. In
particular, we purchased Pennsylvania education, housing, transportation and
utility bonds, and added Puerto Rico University bonds for portfolio diversity.
Finally, we continue to look for high-income opportunities across the board,
conducting careful research and trying to lock in our income using bonds with
call-protection whenever possible.
What is your outlook for the Fund?
We think the outlook is positive. From our perspective, the economic growth rate
that set off increases in interest rates will not be enough to make inflation a
serious concern. Thus, we expect any increase in interest rates in the near
future will be moderate and that the general bond market could strengthen later
in the year.
(Photo of Caryn Halbrecht with Donna
Compert, Municipal Securities Trader)
2. The Fund's portfolio is subject to change.
5 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statement of Investments July 31, 1996
<TABLE>
<CAPTION>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
====================================================================================================================================
<S> <C> <C> <C>
Municipal Bonds and Notes--98.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania--90.7% Allegheny County, Pennsylvania Hospital Development
Authority Revenue Bonds:
Magee Women's Hospital, FGIC Insured, 5.375%, 10/1/13 Aaa/AAA/AAA $2,000,000 $1,909,210
Presbyterian University Hospital, Prerefunded,
Series A, MBIA Insured, 7.60%, 3/1/08 Aaa/AAA 600,000 642,715
-----------------------------------------------------------------------------------------------------------
Beaver County, Pennsylvania Industrial Development
Authority Pollution Control Revenue Refunding Collateral
Bonds, Toledo Edison Project, Series A, 7.75%, 5/1/20 Ba2/BB 2,000,000 2,086,632
-----------------------------------------------------------------------------------------------------------
Berks County, Pennsylvania General Obligation Bonds,
FGIC Insured, Inverse Floater, 8.79%, 11/10/20(1) Aaa/AAA/AAA 1,000,000 1,176,792
-----------------------------------------------------------------------------------------------------------
Blair County, Pennsylvania Hospital Authority
Revenue Bonds, Altoona Hospital Project,
AMBAC Insured, Inverse Floater, 7.594%, 7/1/14(1) Aaa/AAA/AAA 700,000 730,508
-----------------------------------------------------------------------------------------------------------
Bucks County, Pennsylvania Water & Sewer Authority
Revenue Bonds, Neshaminy Interceptor System,
Prerefunded, FGIC Insured, 7.50%, 12/1/13 Aaa/AAA/AAA 1,500,000 1,610,880
-----------------------------------------------------------------------------------------------------------
Dauphin County, Pennsylvania Hospital Authority
Revenue Refunding Bonds:
Harrisburg Hospital Project, MBIA Insured, 8.25%, 7/1/14 Aaa/AAA 1,450,000 1,522,682
Polyclinic Medical Center Project,
MBIA Insured, 5.40%, 8/15/13 Aaa/AAA/NR 1,800,000 1,724,551
-----------------------------------------------------------------------------------------------------------
Delaware County, Pennsylvania Authority University
Revenue Bonds, Villanova University,
MBIA Insured, 6.90%, 8/1/16 Aaa/AAA 1,000,000 1,060,928
-----------------------------------------------------------------------------------------------------------
Delaware County, Pennsylvania Industrial Development
Authority Revenue Refunding Bonds,
Resource Recovery Project, Series A, 8.10%, 12/1/13 Aa3/AA- 3,200,000 3,348,207
-----------------------------------------------------------------------------------------------------------
Delaware River Joint Toll Bridge Commission
Revenue Bonds, Interstate 78, Prerefunded,
FGIC Insured, 7.80%, 7/1/18 Aaa/AAA/AAA 1,275,000 1,383,644
-----------------------------------------------------------------------------------------------------------
Delaware River Port Authority, Delaware River Bridges
Revenue Refunding Bonds, AMBAC Insured, 7.375%, 1/1/07 Aaa/AAA/AAA 770,000 830,724
-----------------------------------------------------------------------------------------------------------
Erie, Pennsylvania Higher Education Building Authority
College Revenue Bonds, Mercyhurst College Project,
Prerefunded, 7.85%, 9/15/19 NR/AAA 1,000,000 1,099,854
-----------------------------------------------------------------------------------------------------------
Langhorne Manor Boro, Pennsylvania Higher
Education & Health Authority Revenue Bonds,
Woods Schools Project, Prerefunded, 8.75%, 11/15/14 NR/AAA 1,000,000 1,149,403
-----------------------------------------------------------------------------------------------------------
Lehigh County, Pennsylvania General Purpose Authority
Revenue Bonds, Lehigh Valley Hospital, Inc.,
Series A, MBIA Insured, 7%, 7/1/16 Aaa/AAA 1,250,000 1,420,905
-----------------------------------------------------------------------------------------------------------
Monroeville, Pennsylvania Hospital Authority Revenue
Refunding Bonds, Forbes Health System, 6.25%, 10/1/15 Baa1/BBB+ 1,000,000 987,805
-----------------------------------------------------------------------------------------------------------
Northampton County, Pennsylvania Higher Education
Authority Revenue Refunding Bonds, Lehigh University,
7.10%, 9/1/05 NR/A 2,140,000 2,238,630
-----------------------------------------------------------------------------------------------------------
Northumberland County, Pennsylvania Authority
Commonwealth Lease Revenue Bonds, MBIA Insured,
6.25%, 10/15/09 Aaa/AAA 2,000,000 2,142,460
6 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Pennsylvania Convention Center Authority Revenue Bonds,
(continued) Escrowed to Maturity, Series A, FGIC Insured, 6.70%, 9/1/16 Aaa/AAA/AAA $1,850,000 $2,067,090
-----------------------------------------------------------------------------------------------------------
Pennsylvania Economic Development Financing Authority:
Resource Recovery Revenue Bonds, Colver Project,
Series D, 7.15%, 12/1/18 NR/BBB- 2,000,000 2,118,094
Wastewater Treatment Revenue Bonds, Sun Co.,
Inc.-R & M Project, Series A, 7.60%, 12/1/24 Baa1/BBB+ 2,000,000 2,164,996
-----------------------------------------------------------------------------------------------------------
Pennsylvania Housing Finance Agency
Revenue Bonds, Single Family Mtg.:
Series 31C, Inverse Floater, 10.074%, 10/1/23(1) Aa/AA+ 1,000,000 1,052,081
Series 40, 6.80%, 10/1/15 Aa/AA+ 2,000,000 2,075,746
Series 44C, 6.65%, 10/1/21 Aa/AA+ 1,000,000 1,040,168
-----------------------------------------------------------------------------------------------------------
Pennsylvania State General Obligation
Refunding Bonds, First Series, 10%, 4/15/98 A1/AA-/AA- 1,880,000 2,059,070
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Education Assistance
Agency Student Loan Revenue Bonds,
AMBAC Insured, Inverse Floater, 8.397%, 3/1/22(1) Aaa/AAA/AAA 1,250,000 1,205,526
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Higher Educational Facilities
Authority College & University Revenue Bonds:
Hahnemann University Project, MBIA Insured, 7.20%, 7/1/19 Aaa/AAA 1,500,000 1,640,571
Thomas Jefferson University, Series A, 6.625%, 8/15/09 Aa/A+ 750,000 806,665
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Industrial Development Authority
Economic Development Revenue Bonds, Prerefunded,
Series A, 7%, 1/1/11 NR/A-/AAA 1,300,000 1,453,569
-----------------------------------------------------------------------------------------------------------
Pennsylvania State Turnpike Commission Turnpike
Revenue Bonds, Prerefunded:
Series E, MBIA Insured, 7.50%, 12/1/09 Aaa/AAA 1,000,000 1,112,684
Series K, 7.50%, 12/1/19 Aaa/AAA 2,500,000 2,781,710
-----------------------------------------------------------------------------------------------------------
Pennsylvania State University Revenue
Refunding Bonds, Series B, 5.50%, 8/15/16 A1/AA- 2,500,000 2,420,362
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Gas Works Revenue Bonds,
15th Series, MBIA Insured, 5.25%, 8/1/15 Aaa/AAA/A- 1,000,000 939,362
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Hospitals & Higher
Educational Facilities Authority Revenue Bonds:
Albert Einstein Medical Center, 7.625%, 4/1/11 A/BBB+ 3,500,000 3,708,740
Temple University Hospital, Series A,
6.625%, 11/15/23 Baa1/A- 3,800,000 3,889,417
Refunding, Jeanes Health System Project,
6.60%, 7/1/10 NR/BBB 1,000,000 989,185
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Regional Port Authority
Lease Revenue Bonds, MBIA Insured, Inverse Floater,
8.481%, 9/1/20(1) Aaa/AAA 2,100,000 2,134,486
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Sewer
Revenue Refunding Bonds, Escrowed to Maturity,
Tenth Series, 7.35%, 9/1/04 Aaa/AAA 245,000 274,412
-----------------------------------------------------------------------------------------------------------
Philadelphia, Pennsylvania Water & Wastewater
Revenue Bonds, FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 1,900,000 2,526,971
-----------------------------------------------------------------------------------------------------------
Pittsburgh, Pennsylvania Water & Sewer Authority
Revenue Refunding Bonds, Escrowed to Maturity,
FGIC Insured, 7.25%, 9/1/14 Aaa/AAA/AAA 1,200,000 1,344,230
7 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statement of Investments (Continued)
Ratings: Moody's/
S&P's/Fitch's Face Market Value
(Unaudited) Amount See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Schuylkill County, Pennsylvania Industrial Development
(continued) Authority Resource Recovery Revenue Refunding Bonds,
Schuylkill Energy Resources, Inc., 6.50%, 1/1/10 NR/NR $3,670,000 $ 3,663,236
-----------------------------------------------------------------------------------------------------------
St. Mary Hospital Authority Langhorne, Pennsylvania
Hospital Revenue Refunding Bonds, Franciscan Health
Project, Series B, BIG Insured, 7%, 7/1/14 Aaa/AAA 500,000 534,049
-----------------------------------------------------------------------------------------------------------
Washington County, Pennsylvania Municipal Facility
Lease Authority Revenue Bonds, Prerefunded,
AMBAC Insured, 7.45%, 12/15/12 Aaa/AAA/AAA 2,000,000 2,250,996
-----------------------------------------------------------------------------------------------------------
73,319,946
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Possessions--7.8% Puerto Rico Commonwealth General Obligation Bonds:
6.50%, 7/1/15 Baa1/A 1,200,000 1,308,716
MBIA Insured, Inverse Floater, 7.835%, 7/1/08(1) Aaa/AAA 1,000,000 1,036,583
-----------------------------------------------------------------------------------------------------------
Puerto Rico Commonwealth Highway & Transportation
Authority Revenue Bonds, Series Y, 5%, 7/1/36 Baa1/A 1,600,000 1,369,054
-----------------------------------------------------------------------------------------------------------
Puerto Rico Electric Power Authority
Revenue Refunding Bonds, Series N, 5%, 7/1/12 Baa1/A- 1,000,000 910,753
-----------------------------------------------------------------------------------------------------------
Puerto Rico Industrial Tourist Educational Medical &
Environmental Control Facilities Revenue Bonds,
Polytechnic University Project, Series A, 6.50%, 8/1/24 NR/BBB- 1,000,000 1,008,772
-----------------------------------------------------------------------------------------------------------
Puerto Rico Port Authority Revenue Bonds, American
Airlines Special Facilities Project, Series A, 6.25%, 6/1/26 Baa3/BBB+ 675,000 675,000
----------
6,308,878
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $78,865,306) 98.5% 79,628,824
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.5 1,249,054
--------- ----------
Net Assets 100.0% $80,877,878
========= ===========
1. Represents the current interest rate for a variable rate bond. These bonds known as "inverse floaters"
pay interest at a rate that varies inversely with short-term interest rates. As interest rates rise,
inverse floaters produce less current income. Their price may be more volatile than the price of a
comparable fixed-rate security. Inverse floaters amount to $7,335,976 or 9.07% of the Fund's net assets at
July 31, 1996.
As of July 31, 1996, securities subject to the alternative minimum tax amounted to $13,994,847 or 17.30% of
the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments at value, is as follows:
</TABLE>
<TABLE>
<CAPTION>
Industry Market Value Percent
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Hospitals $18,059,768 22.7%
-----------------------------------------------------------------------------------------------------------
Utilities 16,736,145 21.0
-----------------------------------------------------------------------------------------------------------
Education 11,425,185 14.3
-----------------------------------------------------------------------------------------------------------
Transportation 9,612,301 12.1
-----------------------------------------------------------------------------------------------------------
General Obligation Bonds 7,648,251 9.7
-----------------------------------------------------------------------------------------------------------
Lease/Rental 4,393,456 5.5
-----------------------------------------------------------------------------------------------------------
Housing 4,167,995 5.2
-----------------------------------------------------------------------------------------------------------
Corporate-Backed Municipals 2,839,996 3.6
-----------------------------------------------------------------------------------------------------------
Pollution Control 2,086,632 2.6
-----------------------------------------------------------------------------------------------------------
Revenue Bonds 1,453,569 1.8
-----------------------------------------------------------------------------------------------------------
Student Loans 1,205,526 1.5
----------- -----
$79,628,824 100.0%
=========== =====
</TABLE>
See accompanying Notes to Financial Statements.
8 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1996
<TABLE>
====================================================================================================================================
<S> <C>
Assets Investments, at value (cost $78,865,306)--see accompanying statement $79,628,824
-----------------------------------------------------------------------------------------------------------
Cash 450,724
-----------------------------------------------------------------------------------------------------------
Receivables:
Interest 1,251,650
Shares of beneficial interest sold 119,197
-----------------------------------------------------------------------------------------------------------
Other 5,337
-----------
Total assets 81,455,732
====================================================================================================================================
Liabilities Payables and other liabilities:
Dividends 265,923
Shares of beneficial interest redeemed 180,171
Trustees' fees 48,271
Shareholder reports 45,703
Distribution and service plan fees 10,207
Transfer and shareholder servicing agent fees 4,893
Other 22,686
-----------
Total liabilities 577,854
====================================================================================================================================
Net Assets $80,877,878
============
====================================================================================================================================
Composition of Paid-in capital $81,437,419
Net Assets -----------------------------------------------------------------------------------------------------------
Overdistributed net investment income (161,975)
-----------------------------------------------------------------------------------------------------------
Accumulated net realized loss from investment transactions (1,161,084)
-----------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3 763,518
-----------
Net Assets $80,877,878
===========
====================================================================================================================================
Net Asset Value Class A Shares:
Per Share Net asset value and redemption price per share (based on net assets of $64,391,239
and 5,362,121 shares of beneficial interest outstanding) $12.01
Maximum offering price per share (net asset value plus sales charge of 4.75% of
offering price) $12.61
-----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $16,004,847 and 1,332,915 shares of beneficial interest outstanding) $12.01
-----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $481,792 and 40,136 shares of beneficial interest outstanding) $12.00
</TABLE>
See accompanying Notes to Financial Statements.
9 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Seven Months Year Ended
Ended July 31, December 31,
1996(1) 1995
====================================================================================================================================
<S> <C> <C>
Investment Income Interest $3,144,822 $ 5,156,837
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses Management fees--Note 4 280,681 462,471
-----------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 54,372 95,622
Class B 87,790 121,620
Class C 1,720 165
-----------------------------------------------------------------------------------------------------------
Shareholder reports 47,778 84,149
-----------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 39,191 62,693
-----------------------------------------------------------------------------------------------------------
Trustees' fees and expenses--Note 1 20,184 22,843
-----------------------------------------------------------------------------------------------------------
Legal and auditing fees 14,069 24,550
-----------------------------------------------------------------------------------------------------------
Custodian fees and expenses 5,928 8,545
-----------------------------------------------------------------------------------------------------------
Insurance expenses 4,092 6,512
-----------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 12 --
Class B 627 1,203
Class C 165 24
-----------------------------------------------------------------------------------------------------------
Other 2,850 2,628
---------- ----------
Total expenses 559,459 893,025
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (8,996) (12,068)
Less expenses paid indirectly--Note 4 (5,737) (8,545)
---------- ----------
Net expenses 544,726 872,412
====================================================================================================================================
Net Investment Income 2,600,096 4,284,425
====================================================================================================================================
Realized and Unrealized Net realized loss on investments (39,279) (149,202)
Gain (Loss) -----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments (2,305,381) 7,766,744
---------- ----------
Net realized and unrealized gain (loss) (2,344,660) 7,617,542
====================================================================================================================================
Net Increase in Net Assets Resulting From Operations $ 255,436 $11,901,967
========== ============
====================================================================================================================================
1. The Fund changed its fiscal year end from December 31 to July 31.
</TABLE>
See accompanying Notes to Financial Statements.
10 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Seven Months
Ended July 31, Year Ended December 31,
1996(1) 1995 1994
====================================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $ 2,600,096 $ 4,284,425 $ 3,907,127
-----------------------------------------------------------------------------------------------------------
Net realized loss (39,279) (149,202) (1,065,903)
-----------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (2,305,381) 7,766,744 (8,445,048)
----------- ---------- ----------
Net increase (decrease) in net assets resulting
from operations 255,436 11,901,967 (5,603,824)
====================================================================================================================================
Dividends and Dividends from net investment income:
Distributions to Class A (2,144,352) (3,637,885) (3,639,305)
Shareholders Class B (430,663) (583,457) (367,811)
Class C (8,248) (803) --
-----------------------------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A -- (92,297) --
Class B -- (20,449) --
====================================================================================================================================
Beneficial Interest Net increase (decrease) in net assets resulting from
Transactions beneficial interest transactions--Note 2:
Class A (191,910) (796,475) 4,897,535
Class B 1,960,511 3,839,201 4,838,266
Class C 224,120 262,069 --
====================================================================================================================================
Net Assets Total increase (decrease) (335,106) 10,871,871 124,861
-----------------------------------------------------------------------------------------------------------
Beginning of period 81,212,984 70,341,113 70,216,252
----------- ----------- ----------
End of period (including overdistributed net investment
income of $161,975, $147,080 and $62,280, respectively) $80,877,878 $81,212,984 $70,341,113
=========== ============ ============
</TABLE>
1. The Fund changed its fiscal year end from December
31 to July 31.
See accompanying Notes to Financial Statements.
11 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Seven Months
Ended July 31, Year Ended December 31,
1996(2) 1995 1994 1993 1992 1991
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93 $ 11.43
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .40 .68 .67 .69 .76 .74
Net realized and unrealized gain (loss) (.35) 1.18 (1.64) .85 .17 .53
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations .05 1.86 (.97) 1.54 .93 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.40) (.67) (.69) (.70) (.73) (.73)
Dividends in excess of net investment income -- (.02) -- -- -- --
Distributions from net realized gain -- -- -- (.04) (.08) (.04)
------- ------- ------- ------- ------- -------
Total dividends and distributions to shareholders (.40) (.69) (.69) (.74) (.81) (.77)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.01 $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93
======= ======= ======= ======= ======= =======
===================================================================================================================================
Total Return, at Net Asset Value(4) 0.44% 16.94% (7.68)% 13.12% 8.04% 11.49%
===================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $64,391 $66,483 $60,857 $64,640 $33,290 $13,791
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $64,997 $64,901 $62,786 $50,974 $21,936 $10,717
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.71%(5) 5.68% 5.65% 5.52% 6.36% 6.30%
Expenses, before voluntary assumption by
the Manager or Distributor(6) 1.03%(5) 1.02% 0.98% 1.06% 1.39% 1.29%
Expenses, net of voluntary assumption by
the Manager or Distributor N/A N/A N/A 0.99% 1.06% N/A
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 5.8% 31.1% 37.0% 14.6% 29.9% 15.5%
</TABLE>
12 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
---------------------------------------------------- ----------------------------
Seven Months Seven Months Period Ended
Ended July 31, Year Ended December 31, Ended July 31, December 31,
1996(2) 1995 1994 1993(3) 1996(2) 1995(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.36 $ 11.19 $12.84 $12.44 $12.36 $11.91
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 .59 .59 .36 .34 .21
Net realized and unrealized gain (loss) (.35) 1.17 (1.65) .45 (.36) .45
------- ------- ------ ------ ------- --------
Total income (loss) from investment operations -- 1.76 (1.06) .81 (.02) .66
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.35) (.57) (.59) (.37) (.34) (.21)
Dividends in excess of net investment income -- (.02) -- -- -- --
Distributions from net realized gain -- -- -- (.04) -- --
------- ------- ------ ------ ------- --------
Total dividends and distributions to shareholders (.35) (.59) (.59) (.41) (.34) (.21)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.01 $ 12.36 $11.19 $12.84 $12.00 $12.36
======= ======= ====== ====== ======= ========
===============================================================================================================================
Total Return, at Net Asset Value(4) (0.01)% 16.06% (8.32)% 6.67% (0.15)% 5.55%
===============================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $16,005 $14,466 $9,484 $5,576 $482 $264
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $15,085 $12,183 $7,329 $2,770 $296 $ 51
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 4.94%(5) 4.89% 4.88% 4.26%(5) 4.83%(5) 4.40%(5)
Expenses, before voluntary assumption by
the Manager or Distributor(6) 1.89%(5) 1.89% 1.85% 1.90%(5) 1.97%(5) 2.07%(5)
Expenses, net of voluntary assumption by
the Manager or Distributor 1.79%(5) 1.78% 1.75% 1.78%(5) 1.87%(5) 1.96%(5)
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 5.8% 31.1% 37.0% 14.6% 5.8% 31.1%
</TABLE>
1. For the period from August 29, 1995 (inception of offering) to December 31,
1995.
2. The Fund changed its fiscal year end from December 31 to July 31.
3. For the period from May 1, 1993 (inception of offering) to December 31, 1993.
4. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), with all dividends
and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the
fiscal period. Sales charges are not reflected in the total returns. Total
returns are not annualized for periods of less than one full year.
5. Annualized.
6. Beginning in fiscal 1995, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term securities) for the period
ended July 31, 1996 were $6,434,765 and $4,628,630, respectively.
See accompanying Notes to Financial Statements.
13 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Notes to Financial Statements
================================================================================
1. Significant
Accounting Policies
Oppenheimer Pennsylvania Tax-Exempt Fund (the Fund) is a separate series of
Oppenheimer Multi-State Tax-Exempt Trust, a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. On June 6, 1996, the Board of Trustees elected to change the fiscal
year end of the Fund from December 31 to July 31. Accordingly, these financial
statements include information for the seven month period from January 1, 1996
to July 31, 1996. The Fund's investment objective is to seek the maximum current
income exempt from Federal and Pennsylvania personal income taxes for individual
investors that is consistent with the preservation of capital. The Fund's
investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers
Class A, Class B and Class C shares. Class A shares are sold with a front-end
sales charge. Class B and Class C shares may be subject to a contingent deferred
sales charge. All classes of shares have identical rights to earnings, assets
and voting privileges, except that each class has its own distribution and/or
service plan, expenses directly attributable to a particular class and exclusive
voting rights with respect to matters affecting a single class. Class B shares
will automatically convert to Class A shares six years after the date of
purchase. The following is a summary of significant accounting policies
consistently followed by the Fund.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
asked price or the last sale price on the prior trading day. Long-term and
short-term "non-money market" debt securities are valued by a portfolio pricing
service approved by the Board of Trustees. Such securities which cannot be
valued by the approved portfolio pricing service are valued using
dealer-supplied valuations provided the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect current market
value, or are valued under consistently applied procedures established by the
Board of Trustees to determine fair value in good faith. Short-term "money
market type" debt securities having a remaining maturity of 60 days or less are
valued at cost (or last determined market value) adjusted for amortization to
maturity of any premium or discount.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily to each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At July 31, 1996, the Fund
had available for federal income tax purposes an unused capital loss carryover
of $1,161,000, which expires between 2002 and 2004.
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses. The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the seven months
ended July 31, 1996, a provision of $15,481 was made for the Fund's projected
benefit obligations, and payments of $1,214 were made to retired trustees,
resulting in an accumulated liability of $45,404 at July 31, 1996.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
14 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
================================================================================
1. Significant
Accounting Policies
(continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of premium amortization for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the income or
realized gain (loss) was recorded by the Fund.
During the seven months ended July 31, 1996, the Fund changed the
classification of distributions to shareholders to better disclose the
differences between financial statement amounts and distributions determined in
accordance with income tax regulations. Accordingly, during the seven months
ended July 31, 1996, amounts have been reclassified to reflect an increase in
overdistributed net investment income of $31,728. Accumulated net realized loss
on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Original issue discount on securities purchased
is amortized over the life of the respective securities, in accordance with
federal income tax requirements. For bonds acquired after April 30, 1993, on
disposition or maturity, taxable ordinary income is recognized to the extent of
the lesser of gain or market discount that would have accrued over the holding
period. Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. The Fund concentrates its investments in
Pennsylvania and, therefore, may have more credit risks related to the economic
conditions of Pennsylvania than a portfolio with a broader geographical
diversification.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
================================================================================
2. Shares of
Beneficial Interest
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
<TABLE>
<CAPTION>
Seven Months Ended July 31, 1996(2) Year Ended December 31, 1995(1) Year Ended December 31, 1994
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 444,071 $ 5,368,304 825,097 $ 9,802,254 1,479,731 $ 17,605,222
Dividends reinvested 113,937 1,371,426 199,971 2,384,211 200,372 2,359,317
Redeemed (572,992) (6,931,640) (1,088,358) (12,982,940) (1,270,347) (15,067,004)
-------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (14,984) $ (191,910) (63,290) $ (796,475) 409,756 $ 4,897,535
======== =========== ========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 224,245 $ 2,699,403 359,124 $ 4,282,282 442,928 $ 5,204,609
Dividends reinvested 21,125 254,088 30,661 366,174 19,685 230,132
Redeemed (82,510) (992,980) (67,574) (809,255) (48,897) (596,475)
-------- ----------- ---------- ------------ ---------- ------------
Net increase 162,860 $ 1,960,511 322,211 $ 3,839,201 413,716 $ 4,838,266
======== =========== ========== ============ ========== ============
- -----------------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 29,594 $ 355,700 21,431 $ 263,229 -- $ --
Dividends reinvested 608 7,281 31 377 -- --
Redeemed (11,403) (138,861) (125) (1,537) -- --
-------- ----------- ---------- ------------ ---------- ------------
Net increase 18,799 $ 224,120 21,337 $ 262,069 -- $ --
======== =========== ========== ============ ========== ============
</TABLE>
1. For the year ended December 31, 1995 for Class A and Class B shares and for
the period from August 29, 1995 (inception of offering) to December 31, 1995 for
Class C shares.
2. The Fund changed its fiscal year end from December 31 to July 31.
15 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
3. Unrealized Gains and
Losses on Investments
At July 31, 1996, net unrealized appreciation on investments of $763,518 was
composed of gross appreciation of $1,613,230, and gross depreciation of
$849,712.
================================================================================
4. Management Fees
And Other Transactions
With Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.60% on the first
$200 million of average annual net assets, 0.55% on the next $100 million, 0.50%
on the next $200 million, 0.45% on the next $250 million, 0.40% on the next $250
million and 0.35% on net assets in excess of $1 billion. The Manager has agreed
to assume Fund expenses (with specified exceptions) in excess of the most
stringent applicable regulatory limit on Fund expenses.
For the seven months ended July 31, 1996, commissions (sales charges
paid by investors) on sales of Class A shares totaled $132,759, of which $42,197
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 $90,813 and $2,794, of which $7,675 was paid to an
affiliated broker/dealer for Class B. During the seven months ended July 31,
1996, OFDI received contingent deferred sales charges of $13,599 upon redemption
of Class B shares as reimbursement for sales commissions advanced by OFDI at the
time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund, and for other registered
investment companies. OFS's total costs of providing such services are allocated
ratably to these companies.
Expenses paid indirectly represent a reduction of custodian fees for
earnings on cash balances maintained by the Fund.
The Fund has adopted a Service Plan for Class A shares to reimburse OFDI
for a portion of its costs incurred in connection with the personal service and
maintenance of accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate that may not exceed 0.15% of the average annual net
assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal service and maintenance of accounts of their customers that hold Class
A shares. During the seven months ended July 31, 1996, OFDI paid $3,663 to an
affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted compensation type Distribution and Service Plans
for Class B and Class C shares to compensate OFDI for its services and costs in
distributing Class B and Class C shares and servicing accounts. Under the Plans,
the Fund pays OFDI an annual asset-based sales charge of 0.75% per year on Class
B shares that are outstanding for 6 years or less and on Class C shares, as
compensation for sales commissions paid from its own resources at the time of
sale and associated financing costs. If the Plans are terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the asset-based
sales charge to OFDI for certain expenses it incurred before the Plans were
terminated. OFDI also receives a service fee of 0.25% (voluntarily reduced to
0.15% by the Fund's Board) per year as compensation for costs incurred in
connection with the personal service and maintenance of accounts that hold
shares of the Fund, including amounts paid to brokers, dealers, banks and other
financial institutions. Both fees are computed on the average annual net assets
of Class B and Class C shares, determined as of the close of each regular
business day. During the seven months ended July 31, 1996, OFDI paid $1,063 to
an affiliated broker/dealer as compensation for Class B personal service and
maintenance expenses and retained $69,264 and $1,546, respectively, as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing costs. At July 31, 1996, OFDI had incurred unreimbursed
expenses of $547,290 for Class B and $3,768 for Class C.
16 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Independent Auditors' Report
================================================================================
The Board of Trustees and Shareholders of Oppenheimer Pennsylvania Tax-Exempt
Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Pennsylvania Tax-Exempt Fund as of July 31, 1996, and
the statements of operations for the seven month period then ended and the year
ended December 31, 1995, the statements of changes in net assets for the seven
month period ended July 31, 1996 and the years ended December 31, 1995 and 1994,
and the financial highlights for the seven month period ended July 31, 1996 and
each of the years in the five year period ended December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian. 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 Pennsylvania Tax-Exempt Fund as of July 31, 1996, the
results of its operations for the seven month period then ended and the year
ended December 31, 1995, the changes in its net assets for the seven month
period ended July 31, 1996 and the years ended December 31, 1995 and 1994, and
the financial highlights for the seven month period ended July 31, 1996 and each
of the years in the five year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1996
17 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Federal Income Tax Information (Unaudited)
================================================================================
In early 1997, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1996. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
None of the dividends paid by the Fund during the fiscal year ended July
31, 1996 are eligible for the corporate dividend-received deduction. The
dividends were derived from interest on municipal bonds and are not subject to
federal income tax. To the extent a shareholder is subject to any state or local
tax laws, some or all of the dividends received may be taxable.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax advisor for specific
guidance.
18 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
Oppenheimer Pennsylvania Tax-Exempt Fund
A Series of Oppenheimer Multi-State Tax-Exempt Trust
================================================================================
Officers and Trustees Leon Levy, Chairman of the Board of Trustees
Donald W. Spiro, Vice Chairman of the Board of Trustees
Bridget A. Macaskill, Trustee and President
Robert G. Galli, Trustee
Benjamin Lipstein, Trustee
Elizabeth B. Moynihan, Trustee
Kenneth A. Randall, Trustee
Edward V. Regan, Trustee
Russell S. Reynolds, Jr., Trustee
Sidney M. Robbins, Trustee
Pauline Trigere, Trustee
Clayton K. Yeutter, Trustee
Robert E. Patterson, Vice President
George C. Bowen, Treasurer
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Andrew J. Donohue, Secretary
Robert G. Zack, Assistant Secretary
================================================================================
Investment Advisor OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder
Servicing Agent OppenheimerFunds Services
================================================================================
Custodian of Citibank, N.A.
Portfolio Securities
================================================================================
Independent Auditors KPMG Peat Marwick LLP
================================================================================
Legal Counsel Gordon Altman Butowsky Weitzen Shalov & Wein
This is a copy of a report to shareholders of Oppenheimer Pennsylvania
Tax-Exempt Fund. This report must be preceded or accompanied by a Prospectus of
Oppenheimer Pennsylvania Tax-Exempt Fund. For material information concerning
the Fund, see the Prospectus.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not
guaranteed by any bank, and are not insured by the FDIC or any other agency, and
involve investment risks, including possible loss of the principal amount
invested.
19 Oppenheimer Pennsylvania Tax-Exempt Fund
<PAGE>
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- -------------------------------------------------------------------------------
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- ----------------------- -----------------------
