Annual Report July 31, 1997
OPPENHEIMER
Pennsylvania
Municipal Fund
[CHECKBOOK AND PENCIL GRAPHIC]
[OPPENHEIMER GRAPHIC]
OppenheimerFunds(SM)
THE RIGHT WAY TO INVEST
<PAGE>
Report highlights
- --------------------------------------------------------------------------------
Contents
3 President's Letter
4 Fund Performance
6 An Interview
with the Fund's
Managers
11 Statement of
Investments
16 Statement of
Assets &
Liabilities
18 Statement of
Operations
19 Statements of
Changes in
Net Assets
20 Financial Highlights
22 Notes to Financial
Statements
28 Independent
Auditors' Report
29 Federal Income
Tax Information
30 Officers & Trustees
32 Information &
Services
[bullet] Pennsylvania's solid gains are largely due to the state's sound
economic move away from over-reliance on steel industries and into
broader-based companies, such as healthcare.
[bullet] We focused on higher-quality bonds, because investors weren't being
compensated for taking higher risks associated with lower-rated bonds
[bullet] We favor revenue bonds over general obligation bonds because they are
backed by the earnings of specific projects, such as bridge tolls and sewer
charges.
Total Returns
For the Year Ended 7/31/97(1)
Class A
1 year
9.68%
Class B
1 year
8.86%
Class C
1 year
8.84%
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken
into account.
2 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Dear shareholder,
- --------------------------------------------------------------------------------
[PHOTO OF BRIDGET A. MACASKILL]
Bridget A. Macaskill
President
Oppenheimer
Pennsylvania
Municipal Fund
I'd like to welcome you to the premier issue of our newly redesigned
shareholder reports. As you can see, we've changed the format to allow easier
access to the information you need to monitor your investments. Some notable
additions are "at-a-glance" report highlights and charts that let you quickly
assess how your Fund has performed.
On the following pages, your portfolio team discuss their current
investment thinking, your Fund's strategies, and performance. Before these
commentaries, I'd like to share a few global observations.
As we consider the world's financial markets over the past twelve months,
some global trends emerge. For example, inflation has hit its lowest level in
three decades worldwide, which has helped spur many bullish financial markets.
The United States has been a beneficiary of this low-inflation environment, as
well as of a strong dollar, robust corporate earnings and a healthy economy.
However, many financial analysts are now concerned that the United States has
reached a point in the business cycle where earnings could decline because
companies are unable to further reduce costs.
On the other hand, a wave of corporate restructuring throughout Europe
has resulted in some exciting changes and opportunities. Because a similar
restructuring took place in the United States ten years ago, European companies
have been able to enjoy the benefit of hindsight by following our footsteps.
Latin America, too, has begun to shift its economies more toward the U.S.
capitalist model and has reported positive earnings growth along the way.
With major changes occurring in today's economies around the globe, it's
more important than ever to maintain a diversified portfolio across different
countries and market sectors. Now is the time to speak to your financial
adviser to ensure that your assets are allocated properly, so you have the
opportunity to benefit from investments in both domestic and international
funds. It's important to remember that investing abroad can involve greater
risk and expenses--including political and economic uncertainties--and should
be undertaken with a long-term approach in mind.
To keep in touch with our views on the markets, visit our website,
www.oppenheimerfunds.com, where you can access your account information and
fund performance data, 24 hours a day. The site also features prospectuses,
timely market updates and insightful commentaries. Our new shareholder reports
and presence on the Internet are just two examples of our commitment to keeping
you well informed.
Thank you for your confidence in OppenheimerFunds, The Right Way to
Invest. We look forward to helping you reach your investment goals in the
future.
/s/ Bridget A. Macaskill
- ------------------------
Bridget A. Macaskill August 21, 1997
3 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Performance update
- --------------------------------------------------------------------------------
Avg Annual Total Returns
For the Period Ended 6/30/97(1)
Class A
Since
1 year 5 year Inception
2.89% 5.55% 6.64%
Class B
Since
1 year 5 year Inception
2.12% N/A 4.19%
Class C
Since
1 year 5 year Inception
6.09% N/A 6.39%
Oppenheimer Pennsylvania Municipal Fund has per formed very well over the past
twelve months, edging out many of its competitors. In this Fund, approximately
90% of the Fund's assets are invested in revenue bonds, while the other 10% are
invested in general obligation bonds. Because revenue bonds' earnings are backed
by specific projects, such as bridge tolls and sewer charges, our heavy
weighting to these bonds benefited the Fund's overall performance.
Growth of $10,000
Over five years
(without sales charges)(2)
[TABULAR REPRESENTATION OF MOUNTAIN CHART]
Oppenheimer Pennsylvania Lehman Brothers Municipal
Municipal Fund Class A shares Bond Index
6/30/92 10000 10000
10238 10266
10445 10452
10938 10840
11255 11195
11688 11573
11826 11735
11184 11091
11035 11214
11092 11291
10913 11129
11699 11915
11978 12230
12211 12554
12765 13072
12630 12914
12707 13013
13010 13313
13314 13652
13304 13620
6/30/97 13719 14090
1. These returns are provided as of the most recent quarter end to facilitate
comparisons. Total returns include changes in share price and reinvestment of
dividends and capital gains distributions in a hypothetical investment for the
periods shown. Class A returns include the current initial sales charge of
4.75%. Class A shares were first publicly offered on 9/18/89. Class B returns
include the applicable contingent deferred sales charge of 5% (1-year) and 2%
(since inception on 5/1/93). Class C returns include the contingent deferred
sales charge of 1% for the 1-year result. Class C shares were first offered on
8/29/95. 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. Results of a hypothetical $10,000 investment in Class A shares on
June 30, 1992. Lehman Brothers Municipal Bond Index includes a broad range of
municipal bonds. It is an unmanaged index, including reinvestment of income,
and cannot be purchased directly by investors. Past performance does not
guarantee future results.
4 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Portfolio review
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Oppenheimer Pennsylvania Municipal Fund is for investors looking for a source of
income that's exempt from federal and Pennsylvania taxes.
Credit Allocation(3)
[TABULAR REPRESENTATION OF PIE CHART]
AAA 43.5%
AA 12.5
A 18.6
BBB 21.1
BB 2.6
Not Rated 1.7
What We Look For
[bullet] Securities that provide high income.
[bullet] Sectors and regions that offer relative value.
[bullet] Municipal projects or regions with improving credit quality.
[bullet] Investment opportunities from a wide range of securities statewide.
Top Five Sectors(4)
- -------------------------------------------
Hospital/Healthcare 23.8%
- -------------------------------------------
Higher Education 13.0
- -------------------------------------------
Highways 9.6
- -------------------------------------------
Resource Recovery 8.7
- -------------------------------------------
Single Family Housing 8.5
- -------------------------------------------
3. Portfolio data are dollar-weighted based on total investments at value and
are subject to change. The Fund may invest up to 25% of its assets in below-
investment-grade securities which carry greater risk that an issuer may default
on repayment of principal or interest. Securities rated by any rating
organization are included in the equivalent Standard & Poor's rating category.
Average credit quality and allocation include rated securities and those not
rated by a national rating organization (currently 1.7% of total investments)
but to which the ratings given above have been assigned by the Manager for
internal purposes as being comparable, in the Manager's judgment, to securities
rated by a rating agency in the same category.
4. Sector weightings are as of 7/31/97, represent a percentage of total
investments at value, and are subject to change.
5 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How has the Fund performed during the fiscal year ended July 31, 1997?
Oppenheimer Pennsylvania Municipal Fund's Class A shares have provided a total
rate of return, before sales charges, of 9.68% for the one-year period ended
July 31, 1997.1 This competitive return helped the Fund outperform many of its
peers in the Pennsylvania municipal debt fund category ranked by Lipper
Analytical Services for the one-year period ended July 31, 1997.(2)
"We found many high-yielding bonds in the strengthening healthcare sector."
What influences and events had the greatest effect on the municipal market?
Yields on municipal bonds generally followed the trends established over the
past twelve months by taxable bonds, such as U.S. Treasury securities. However,
during the twelve-month period, taxable and tax-exempt bond markets experienced
a relatively high level of volatility. Bond yields rose and fell with
investors' changing outlooks for economic growth, inflation and federal
monetary policy. When the economy appeared to be growing quickly, investors
became concerned about a resurgence of inflation and a more restrictive
monetary policy. During April, long-term interest rates peaked, then declined
by the end of July to the lowest rates during the period. When the economy
appeared to be slowing, investors seemed confident that inflation would not be
a problem.
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. Source: Lipper Analytical Services, Inc., 7/31/97. Based on the comparisons
between changes in net asset value without considering sales charges, with
dividends and capital gains distributions of the Fund's Class A shares
reinvested. The Fund's Class A shares were ranked 24 of 62 (1-year), 18 of 49
(3-year) and 17 of 23 (5-year) among Pennsylvania municipal debt funds for the
period ended 7/31/97. Past performance does not guarantee future results.
6 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
[PHOTO OF PORTFOLIO MANAGEMENT TEAM]
Portfolio Management Team (l to r)
Jerry Webman
Bob Patterson
(Fund Manager)
What developments in Pennsylvania contributed to the Fund's performance?
While Pennsylvania is participating in the generally positive economic
environment that pervades most of the United States, it is not growing as
robustly as some states outside the Northeast.
The state is making progress in its transition from a primarily
industrial economy to a broader-based mix of manufacturing and service
companies. For example, Pittsburgh has transformed its economy from over-
reliance on the steel industry to a more diversified base of service industries,
especially healthcare. We attribute this successful shift to the state's
conservative leadership, which has made sound decisions and encouraged economic
growth.
How did you manage the Fund in this environment?
We continued to follow the time-tested investment strategies we have used for
years. Regardless of market conditions, we prefer to keep our shareholders'
assets fully invested in a diversified portfolio of good-quality securities
that provide competitive levels of income and attractive relative values.
Within that fully invested position, we attempt to boost returns and reduce
risks.
One of the ways we do this is by actively managing the portfolio's
effective average duration--a measure of the portfolio's sensitivity to changes
in interest rates. By changing the portfolio's average duration relative to the
Fund's investment benchmark, we have been able to benefit when interest rates
are falling and protect ourselves when rates rise.
7 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
An interview with your Fund's managers
- --------------------------------------------------------------------------------
For example, we've had a very positive view on inflation recently, and that's
caused us to keep the portfolio's average duration relatively long in order to
be exposed to declining interest rates. When interest rates are rising, we try
to keep our average duration relatively short.
"By changing the Fund's duration, we benefited when interest rates were
falling..."
What market sectors did you find attractive and which did you avoid?
While we were able to find creditworthy investments in virtually every area of
the Pennsylvania bond market, we focused on those municipalities, authorities
and agencies whose bonds offered the most competitive income and best values.
We were very selective in our purchases of new bonds. For example, the
strengthening healthcare sector enabled us to invest in relatively
high-yielding bonds issued to finance the construction and renovation of
hospitals. We believe these hospitals are taking steps to ensure their
viability in a more competitive environment. On the other hand, we have
generally avoided bonds issued by smaller cities and municipalities. That's
because we believe these localities may have difficulty shouldering the
increased burden of mandated programs that have been shifted to them by state
and federal governments.
In addition, we continue to favor revenue bonds that are backed by the
earnings of specific projects, such as bridge tolls and sewer charges, over
general obligation bonds that are backed by general tax revenues. The portfolio
now consists of approximately 90% revenue bonds and 10% general obligation
bonds, diversified throughout the state and comprising both insured and
noninsured securities.
8 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
How did the Fund's credit quality change during the period?
The Fund consistently maintained an average credit rating within the A to AA
(or Aa) range. Strong economic conditions helped produce adequate tax revenues
for many Pennsylvania municipal borrowers, reducing their need to finance
deficits in the public markets. In addition, the difference in yields between
investment-grade and below-investment-grade bonds narrowed considerably as more
investors reached for higher yields in a low-supply environment. When "spreads"
narrow, we tend to focus on higher-quality bonds because our shareholders are
not adequately compensated for assuming the higher risks associated with
lower-rated bonds.
"...and protected ourselves when rates were rising."
What is your outlook for the Pennsylvania municipal bond market?
We are cautiously optimistic. Our optimism is rooted in the nation's economy,
which is in its seventh year of expansion. This economy is unusual because it
has been characterized by moderate growth without an acceleration of inflation.
As long as inflationary pressures remain benign, our outlook for interest rates
and the bond market should be positive. We are also optimistic regarding
further strengthening of Pennsylvania's economy on both the state and local
levels. On the other hand, we are tempering our optimism with caution because
no market or economy moves in a straight line. In our view, the risk for the
foreseeable future is that the economy will grow faster than is currently
expected, causing inflation fears to surface among bond investors. While we do
not expect these fears to persist, they may cause volatility over the short
term. Therefore, we intend to remain vigilant when it comes to protecting our
shareholders from the brunt of market declines, while enabling them to
participate in the bulk of the market's gains.
9 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Financials
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10 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statement of Investments July 31, 1997
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Bonds and Notes -- 98.2%
- --------------------------------------------------------------------------------------------
Pennsylvania -- 88.8%
Beaver Cnty., PA IDAU PC Collateral RRB,
Toledo Edison Project, Series A, 7.75%,
5/1/20 Ba2/BB $2,000,000 $2,268,360
- --------------------------------------------------------------------------------------------
Beaver Cnty., PA IDAU PC RRB, Ohio
Edison Project, Series A, FGIC Insured,
7.75%, 9/1/24 Aaa/AAA/AAA 1,000,000 1,092,400
- --------------------------------------------------------------------------------------------
Berks Cnty., PA GOB, Prerefunded, FGIC
Insured, Inverse Floater, 8.33%, 11/10/20(1) Aaa/AAA/AAA 1,000,000 1,221,250
- --------------------------------------------------------------------------------------------
Blair Cnty., PA HA RB, Altoona Hospital
Project, AMBAC Insured, Inverse Floater,
7.49%, 7/1/14(1) Aaa/AAA/AAA 700,000 806,141
- --------------------------------------------------------------------------------------------
Delaware River Port Authority RRB,
Delaware River Bridges, AMBAC Insured,
7.375%, 1/1/07 Aaa/AAA/AAA 770,000 820,412
- --------------------------------------------------------------------------------------------
Delaware Cnty., PA Authority Health Care
RB, Mercy Health Corp. Southeastern,
Series B, 6%, 11/15/07 NR/BBB+/BBB+ 2,830,000 2,988,423
- --------------------------------------------------------------------------------------------
Delaware Cnty., PA Authority University RB,
Villanova University, MBIA Insured, 6.90%,
8/1/16 Aaa/AAA 1,000,000 1,091,550
- --------------------------------------------------------------------------------------------
Erie, PA Higher Education Building
Authority College RB, Mercyhurst College
Project, Prerefunded, 7.85%, 9/15/19 NR/AAA 1,000,000 1,078,520
- --------------------------------------------------------------------------------------------
Langhorne Manor Boro, PA Health &
HEAU RB, Woods Schools Project,
Prerefunded, 8.75%, 11/15/14 NR/AAA 1,000,000 1,121,470
- --------------------------------------------------------------------------------------------
Lehigh Cnty., PA General Purpose
Authority RB, Lehigh Valley Hospital, Inc.,
Series A, MBIA Insured, 7%, 7/1/16 Aaa/AAA 1,250,000 1,534,250
- --------------------------------------------------------------------------------------------
Monroeville, PA HA RRB, Forbes Health
System, 6.25%, 10/1/15 A3/BBB+ 2,000,000 2,097,180
- --------------------------------------------------------------------------------------------
Northampton Cnty., PA HEAU RB,
Moravian College, Prerefunded, 8.20%,
6/1/11 NR/AAA 2,095,000 2,430,326
- --------------------------------------------------------------------------------------------
Northampton Cnty., PA HEAU RRB, Lehigh
University, 7.10%, 9/1/05(2) A1/A+ 2,140,000 2,188,492
- --------------------------------------------------------------------------------------------
PA Convention Center Authority RB,
Escrowed to Maturity, Series A, FGIC
Insured, 6.70%, 9/1/16 Aaa/AAA/AAA 1,850,000 2,177,709
- --------------------------------------------------------------------------------------------
PA EDFAU RR RB, Colver Project, Series D,
7.15%, 12/1/18 NR/BBB-/BBB- 2,000,000 2,201,660
- --------------------------------------------------------------------------------------------
</TABLE>
11 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statement of Investments (Continued)
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania (continued)
PA EDFAU RR RB, Northampton
Generating, Series A, 6.50%, 1/1/13 NR/NR $1,450,000 $1,487,163
- -----------------------------------------------------------------------------------------
PA EDFAU Wastewater Treatment RB, Sun
Co., Inc.-R & M Project, Series A, 7.60%
12/1/24 Baa1/BBB 2,000,000 2,316,560
- -----------------------------------------------------------------------------------------
PA GORB, First Series, 10%, 4/15/98 A1/AA-/AA- 1,880,000 1,960,201
- -----------------------------------------------------------------------------------------
PA HEAA Student Loan RB, Series B,
AMBAC Insured, Inverse Floater, 8.158%,
3/1/22(1) Aaa/AAA/AAA 1,250,000 1,381,250
- -----------------------------------------------------------------------------------------
PA HEFAU College & University RB,
Thomas Jefferson University, Series A,
6.625%, 8/15/09 Aa/A+ 1,000,000 1,104,610
- -----------------------------------------------------------------------------------------
PA HFA RB, SFM, Inverse Floater, 9.712%,
10/3/23(1) Aa2/AA+ 1,000,000 1,167,500
- -----------------------------------------------------------------------------------------
PA HFA RB, SFM, Series 40, 6.80%, 10/1/15 Aa2/AA+ 2,000,000 2,168,800
- -----------------------------------------------------------------------------------------
PA HFA RB, SFM, Series 44C, 6.65%, 10/1/21 Aa2/AA+ 1,000,000 1,079,670
- -----------------------------------------------------------------------------------------
PA HFA RB, SFM, Series 54A, 6.15%, 10/1/22 Aa2/AA+ 1,000,000 1,037,540
- -----------------------------------------------------------------------------------------
PA IDAU ED RB, Prerefunded, Series A, 7%,
1/1/11 NR/A-/AAA 1,000,000 1,116,910
- -----------------------------------------------------------------------------------------
PA State University RRB, Series B,
5.50%, 8/15/16 A1/AA- 2,500,000 2,529,000
- -----------------------------------------------------------------------------------------
PA Turnpike Commission RB, Prerefunded,
Series E, MBIA Insured, 7.50%, 12/1/09 Aaa/AAA 1,000,000 1,096,450
- -----------------------------------------------------------------------------------------
PA Turnpike Commission RB, Prerefunded,
Series K, 7.50%, 12/1/19 Aaa/AAA 2,500,000 2,741,125
- -----------------------------------------------------------------------------------------
Philadelphia, PA Gas Works RB, 15th
Series, MBIA Insured, 5.25%, 8/1/15 Aaa/AAA/A- 1,000,000 1,007,130
- -----------------------------------------------------------------------------------------
Philadelphia, PA Hospitals & HEFAU RB,
Albert Einstein Medical Center, 7.625%
4/1/11 A3/BBB+ 3,500,000 3,725,575
- -----------------------------------------------------------------------------------------
Philadelphia, PA Hospitals & HEFAU RB,
Temple University Hospital, Series A,
6.625%, 11/15/23 Baa1/A- 3,800,000 4,120,834
- -----------------------------------------------------------------------------------------
Philadelphia, PA Hospitals & HEFAU RRB,
Jeanes Health System Project, 6.60%,
7/1/10 Baa3/BBB 3,560,000 3,823,903
- -----------------------------------------------------------------------------------------
Philadelphia, PA Hospitals & HEFAU RRB,
Jeanes Hospital Project, 5.875%, 7/1/17 Baa3/BBB 1,500,000 1,518,900
- -----------------------------------------------------------------------------------------
Philadelphia, PA Regional Port Authority
Lease RB, MBIA Insured, Inverse Floater
8.50%, 9/1/20(1) Aaa/AAA 2,100,000 2,420,250
- -----------------------------------------------------------------------------------------
Philadelphia, PA Water & Wastewater RB,
FGIC Insured, 10%, 6/15/05 Aaa/AAA/AAA 4,400,000 5,957,424
- -----------------------------------------------------------------------------------------
</TABLE>
12 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
Ratings:
Moody's/
S&P/Fitch Face Market Value
(Unaudited) Amount See Note 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pennsylvania (continued)
Pittsburgh, PA Urban Redevelopment
Authority Mtg. RRB, Series A, 6.20%, 10/1/21 Aa2/AAA $ 565,000 $ 588,289
- -----------------------------------------------------------------------------------------------
Pittsburgh, PA Urban Redevelopment
Authority Mtg. RRB, Series A, 6.25%, 10/1/28 Aa2/AAA 1,400,000 1,463,616
- -----------------------------------------------------------------------------------------------
Pittsburgh, PA Water & Sewer Authority
RRB, Escrowed to Maturity, FGIC Insured,
7.25%, 9/1/14 Aaa/AAA/AAA 1,200,000 1,465,992
- -----------------------------------------------------------------------------------------------
Reading, PA Parking Authority CAP RB, MBIA
Insured, Zero Coupon, 5.70%, 11/15/15(3) Aaa/AAA 2,345,000 908,922
- -----------------------------------------------------------------------------------------------
Schuylkill Cnty., PA IDAU RR RRB,
Schuylkill Energy Resources, Inc., 6.50%,
1/1/10 NR/NR/BBB- 3,995,000 4,064,034
- -----------------------------------------------------------------------------------------------
St. Mary HA Langhorne, PA Hospital RRB,
Franciscan Health Project, Series B, BIG
Insured, 7%, 7/1/14 Aaa/AAA 500,000 534,735
- -----------------------------------------------------------------------------------------------
Washington Cnty., PA Municipal Facility
Lease Authority RB, Prerefunded, AMBAC
Insured, 7.45%, 12/15/12 Aaa/AAA/AAA 2,000,000 2,235,100
-----------
80,139,626
- -----------------------------------------------------------------------------------------------
U.S. Possessions--9.4%
PR Commonwealth GOB, 6.50%, 7/1/15 Baa1/A 1,200,000 1,397,268
- -----------------------------------------------------------------------------------------------
PR Commonwealth GOB, MBIA Insured,
Inverse Floater, 8%, 7/1/08(1) Aaa/AAA 1,000,000 1,123,750
- -----------------------------------------------------------------------------------------------
PR Commonwealth HTAU RB, Series Y, 5%,
7/1/36 Baa1/A 3,100,000 2,966,948
- -----------------------------------------------------------------------------------------------
PR EPAU CAP RRB, Series N, MBIA
Insured, Zero Coupon, 5.69%, 7/1/17(3) Aaa /AAA 3,300,000 1,200,969
- -----------------------------------------------------------------------------------------------
PR Industrial Tourist Educational Medical
& Environmental Control Facilities RB,
Polytechnic University Project, Series A,
6.50%, 8/1/24 NR/BBB- 1,000,000 1,087,580
- -----------------------------------------------------------------------------------------------
PR Port Authority RB, American Airlines
Special Facilities Project, Series A, 6.25%,
6/1/26 Baa3/BBB+ 675,000 724,113
-----------
8,500,628
- -----------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $84,374,226) 98.2% 88,640,254
- -----------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 1.8 1,589,552
----------- -----------
Net Assets 100.0% $90,229,806
=========== ===========
</TABLE>
13 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
To simplify the listings of securities abbreviations are used per the table
below:
<TABLE>
<S> <C>
CAP --Capital Appreciation HEFAU--Higher Educational Facilities Authority
ED --Economic Development HFA --Housing Finance Agency
EDFAU--Economic Development HTAU --Highway & Transportation Authority
Finance Authority IDAU --Industrial Development Authority
EPAU --Electric Power Authority PC --Pollution Control
GOB --General Obligation Bonds RB --Revenue Bonds
GORB --General Obligation Refunding Bonds RR --Resource Recovery
HA --Hospital Authority RRB --Revenue Refunding Bonds
HEAA --Higher Education Assistance Agency SFM --Single Family Mortgage
HEAU --Higher Education 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 $8,120,141 or 9% of
the Fund's net assets at July 31, 1997.
2. Securities with an aggregate market value of $1,022,660 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 5 of Notes to Financial Statements.
3. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
14 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
As of July 31, 1997, securities subject to the alternative minimum tax amount
to $17,628,290 or 19.54% of the Fund's net assets.
Distribution of investments by industry, as a percentage of total investments
at value, is as follows:
Industry Market Value Percent
- -----------------------------------------------------------
Hospital/Healthcare $21,149,941 23.8%
- -----------------------------------------------------------
Higher Education 11,510,078 13.0
- -----------------------------------------------------------
Highways 8,533,857 9.6
- -----------------------------------------------------------
Resource Recovery 7,752,857 8.7
- -----------------------------------------------------------
Single Family Housing 7,505,415 8.5
- -----------------------------------------------------------
Water Utilities 7,423,416 8.4
- -----------------------------------------------------------
General Obligation 5,702,469 6.4
- -----------------------------------------------------------
Lease Rental 4,412,809 5.0
- -----------------------------------------------------------
Corporate Backed 4,157,583 4.7
- -----------------------------------------------------------
Pollution Control 3,360,760 3.8
- -----------------------------------------------------------
Marine/Aviation Facilities 2,420,250 2.7
- -----------------------------------------------------------
Student Loans 1,381,250 1.6
- -----------------------------------------------------------
Electric Utilities 1,200,969 1.4
- -----------------------------------------------------------
Education 1,121,470 1.3
- -----------------------------------------------------------
Gas Utilities 1,007,130 1.1
----------- ------
$88,640,254 100.0%
============ ======
See accompanying Notes to Financial Statements.
15 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statement of Assets and Liabilities July 31, 1997
<TABLE>
<S> <C>
Assets
Investments, at value (cost $84,374,226)--see accompanying statement $ 88,640,254
- --------------------------------------------------------------------------------------
Cash 523,779
- --------------------------------------------------------------------------------------
Receivables:
Interest 1,293,825
Shares of beneficial interest sold 193,622
- --------------------------------------------------------------------------------------
Other 5,002
------------
Total assets 90,656,482
- --------------------------------------------------------------------------------------
Liabilities
Payables and other liabilities:
Dividends 269,127
Shareholder reports 49,551
Shares of beneficial interest redeemed 37,612
Trustees' fees --Note 1 29,649
Distribution and service plan fees 11,087
Daily variation on futures contracts --Note 5 9,375
Transfer and shareholder servicing agent fees 4,363
Other 15,912
------------
Total liabilities 426,676
- --------------------------------------------------------------------------------------
Net Assets $ 90,229,806
============
- --------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $ 87,707,489
- --------------------------------------------------------------------------------------
Overdistributed net investment income (167,336)
- --------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (1,427,781)
- --------------------------------------------------------------------------------------
Net unrealized appreciation on investments --Notes 3 and 5 4,117,434
------------
Net assets $ 90,229,806
============
</TABLE>
16 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$68,279,964 and 5,485,676 shares of beneficial interest outstanding) $12.45
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $13.07
- -----------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $19,338,904
and 1,553,925 shares of beneficial interest outstanding) $12.45
- -----------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $2,610,938
and 209,882 shares of beneficial interest outstanding) $12.44
</TABLE>
See accompanying Notes to Financial Statements.
17 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statement of Operations For the Year Ended July 31, 1997
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------
Investment Income
Interest $5,636,842
- -----------------------------------------------------------------------------------
Expenses
Management fees -- Note 4 505,333
- -----------------------------------------------------------------------------------
Distribution and service plan fees -- Note 4:
Class A 95,484
Class B 172,166
Class C 13,881
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees -- Note 4 73,337
- -----------------------------------------------------------------------------------
Shareholder reports 59,161
- -----------------------------------------------------------------------------------
Legal and auditing fees 10,324
- -----------------------------------------------------------------------------------
Custodian fees and expenses 9,874
- -----------------------------------------------------------------------------------
Registration and filing fees:
Class A 28
Class B 749
Class C 345
- -----------------------------------------------------------------------------------
Other 622
----------
Total expenses 941,304
----------
Less assumption of expenses by OppenheimerFunds, Inc.--Note 4 (33,555)
Less expenses paid indirectly--Note 4 (9,560)
----------
Net expenses 898,189
- -----------------------------------------------------------------------------------
Net Investment Income 4,738,653
- -----------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments (178,404)
Closing of futures contracts (204,083)
----------
Net realized loss (382,487)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments 3,353,916
----------
Net realized and unrealized gain 2,971,429
- -----------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $7,710,082
==========
</TABLE>
See accompanying Notes to Financial Statements.
18 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended
Year Ended July 31, December 31,
1997 1996(1) 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income $ 4,738,653 $ 2,600,096 $ 4,284,425
- -----------------------------------------------------------------------------------------------
Net realized loss (382,487) (39,279) (149,202)
- -----------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation 3,353,916 (2,305,381) 7,766,744
------------ ------------ -----------
Net increase in net assets resulting from
operations 7,710,082 255,436 11,901,967
- -----------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (3,716,343) (2,144,352) (3,637,885)
Class B (844,253) (430,663) (583,457)
Class C (67,628) (8,248) (803)
- -----------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- -- (92,297)
Class B -- -- (20,449)
- -----------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets
resulting from beneficial interest
transactions -- Note 2:
Class A 1,518,657 (191,910) (796,475)
Class B 2,681,795 1,960,511 3,839,201
Class C 2,069,618 224,120 262,069
- -----------------------------------------------------------------------------------------------
Net Assets
Total increase (decrease) 9,351,928 (335,106) 10,871,871
- -----------------------------------------------------------------------------------------------
Beginning of period 80,877,878 81,212,984 70,341,113
------------ ------------ -----------
End of period (including overdistributed net
investment income of $167,336, $161,975
and $147,080, respectively) $ 90,229,806 $ 80,877,878 $81,212,984
============ ============ ===========
</TABLE>
1. For the seven months ended July 31, 1996. The Fund changed its fiscal year
end from December 31 to July 31.
See accompanying Notes to Financial Statements.
19 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------
Year Ended July 3 Year Ended December 31,
1997 1996(2) 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $ 12.01 $ 12.36 $ 11.19 $ 12.85 $ 12.05 $ 11.93
- ------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .70 .40 .68 .67 .69 .76
Net realized and unrealized gain (loss) .43 (.35) 1.18 (1.64) .85 .17
-------- ----------- -------- --------- -------- --------
Total income (loss) from investment
operations 1.13 .05 1.86 (.97) 1.54 .93
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to
shareholders:
Dividends from net investment income (.69) (.40) (.67) (.69) (.70) (.73)
Dividends in excess of net investment
income -- -- (.02) -- -- --
Distributions from net realized gain -- -- -- -- (.04) (.08)
-------- ----------- -------- ----------- -------- --------
Total dividends and distributions to
shareholders (.69) (.40) (.69) (.69) (.74) (.81)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.45 $ 12.01 $ 12.36 $ 11.19 $ 12.85 $ 12.05
======== =========== ======== ========= ======== ========
- ------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(4) 9.68% 0.44% 16.94% (7.68)% 13.12% 8.04%
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $ 68,280 $ 64,391 $66,483 $ 60,857 $64,640 $ 33,290
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 65,710 $ 64,997 $64,901 $ 62,786 $ 50,974 $ 21,936
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 5.79% 5.71%(5) 5.68% 5.65% 5.52% 6.36%
Expenses, before voluntary assumption by
the Manager or Distributor(6) 0.93% 1.03%(5) 1.02% 0.98% 1.06% 1.39%
Expenses, net of voluntary assumption by
the Manager or Distributor 0.90% N/ N/A N/A 0.99% 1.06%
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 22.3% 5.8% 31.1% 37.0% 14.6% 29.9%
</TABLE>
1. For the period from August 29, 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 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.
20 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- --------------------------------------------------------------------- ------------------------------------------
Period
Ended
Year Ended July 31, Year Ended December 31, Year Ended July 31, Dec. 31,
1997 1996(2) 1995 1994 1993(3) 1997 1996(2) 1995(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 12.01 $ 12.36 $ 11.19 $ 12.84 $ 12.44 $ 12.00 $ 12.36 $ 11.91
- ----------------------------------------------------------------------------------------------------------------
.61 .35 .59 .59 .36 .60 .34 .21
.42 (.35) 1.17 (1.65) .45 .43 (.36) .45
- --------- ----------- -------- ----------- ----------- -------- ----------- -----------
1.03 -- 1.76 (1.06) .81 1.03 (.02) .66
- ----------------------------------------------------------------------------------------------------------------
(.59) (.35) (.57) (.59) (.37) (.59) (.34) (.21)
-- -- (.02) -- -- -- -- --
-- -- -- -- (.04) -- -- --
- --------- ----------- -------- ----------- ----------- -------- ----------- -----------
(.59) (.35) (.59) (.59) (.41) (.59) (.34) (.21)
- ----------------------------------------------------------------------------------------------------------------
$ 12.45 $ 12.01 $ 12.36 $ 11.19 $ 12.84 $ 12.44 $ 12.00 $ 12.36
========= =========== ======== =========== =========== ======== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
8.86% (0.01)% 16.06% (8.32)% 6.67% 8.84% (0.15)% 5.55%
- ----------------------------------------------------------------------------------------------------------------
$ 19,339 $ 16,005 $ 14,466 $ 9,484 $ 5,576 $ 2,611 $ 482 $ 264
- ----------------------------------------------------------------------------------------------------------------
$ 17,243 $ 15,085 $ 12,183 $ 7,329 $ 2,770 $ 1,390 $ 296 $ 51
- ----------------------------------------------------------------------------------------------------------------
5.02% 4.94%(5) 4.89% 4.88% 4.26(5) 4.99% 4.83%(5) 4.40%(5)
1.78% 1.89%(5) 1.89% 1.85% 1.88(5) 1.79% 1.97%(5) 2.07%(5)
1.65% 1.79%(5) 1.78% 1.75% 1.78%(5) 1.66% 1.87%(5) 1.96%(5)
- ----------------------------------------------------------------------------------------------------------------
22.3 % 5.8 % 31.1 % 37.0 % 14.6 % 22.3 % 5.8 % 31.1 %
</TABLE>
6. Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at the
time of acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended July 31, 1997 were $24,156,172 and $18,551,508,
respectively.
See accompanying Notes to Financial Statements.
21 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Significant Accounting Policies
Oppenheimer Pennsylvania Municipal Fund (the Fund) is a separate series of
Oppenheimer Multi-State Municipal Trust, a non-diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. The Fund's investment objective is to seek the maximum current income
exempt from federal and Pennsylvania personal income taxes for individual
investors as is available from municipal securities that is consistent with
preservation of capital. The Fund's investment adviser 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.
- --------------------------------------------------------------------------------
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, 1997, the Fund
had available for federal income purposes an unused capital loss carryover of
$1,153,000, which expires between 2002 and 2004.
22 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, a credit of $14,246 was made for the Fund's projected benefit
obligations, and payments of $1,509 were made to retired trustees, resulting in
an accumulated liability of $29,649 at July 31, 1997.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of premium amortization on long-term bonds for tax
purposes. The character of the distributions made during the year from net
investment income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed may
differ from the fiscal year in which the income or realized gain was recorded
by the Fund.
During the year ended July 31, 1997, the Fund adjusted 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, 1997,
amounts have been reclassified to reflect an increase in overdistributed net
investment income of $115,790. 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 using the
effective yield method, 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.
23 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
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>
Year Ended July 31, 1997 Period Ended July 31, 1996(1) Year Ended Dec. 31, 1995(2)
---------------------------- ----------------------------- -----------------------------
Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 903,722 $ 10,967,827 444,071 $ 5,368,304 825,097 $ 9,802,254
Dividends
reinvested 191,572 2,323,665 113,937 1,371,426 199,971 2,384,211
Redeemed (971,739) (11,772,835) (572,992) (6,931,640) (1,088,358) (12,982,940)
--------- ------------- --------- ------------ ----------- -------------
Net increase
(decrease) 123,555 $ 1,518,657 (14,984) $ (191,910) (63,290) $ (796,475)
========= ============= ========= ============ =========== =============
- -----------------------------------------------------------------------------------------------------------------
Class B:
Sold 347,074 $ 4,208,953 224,245 $ 2,699,403 359,124 $ 4,282,282
Dividends
reinvested 39,450 478,556 21,125 254,088 30,661 366,174
Redeemed (165,514) (2,005,714) (82,510) (992,980) (67,574) (809,255)
--------- ------------- --------- ------------ ----------- -------------
Net increase 221,010 $ 2,681,795 162,860 $ 1,960,511 322,211 $ 3,839,201
========= ============= ========= ============ =========== =============
- -----------------------------------------------------------------------------------------------------------------
Class C:
Sold 184,614 $ 2,249,660 29,594 $ 355,700 21,431 $ 263,229
Dividends
reinvested 3,565 43,275 608 7,281 31 377
Redeemed (18,433) (223,317) (11,403) (138,861) (125) (1,537)
--------- ------------- --------- ------------ ----------- -------------
Net increase 169,746 $ 2,069,618 18,799 $ 224,120 21,337 $ 262,069
========= ============= ========= ============ =========== =============
</TABLE>
1. The Fund changed its fiscal year end from December 31 to July 31.
2. 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.
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At July 31, 1997, net unrealized appreciation on investments of $4,266,028 was
composed of gross appreciation of $4,905,015, and gross depreciation of
$638,987.
24 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
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. Effective
January 1, 1997, the Manager has voluntarily undertaken to waive a portion of
its management fee, whereby the Fund pays a fee not to exceed 0.57% of average
annual net assets.
For the year ended July 31, 1997, commissions (sales charges paid
by investors) on sales of Class A shares totaled $229,396, of which $44,608 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 $162,068 and $20,610, respectively, of which $7,054 was
paid to an affiliated broker/dealer for Class B. During the year ended July 31,
1997, OFDI received contingent deferred sales charges of $45,781 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 at the custodian bank 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 shareholder 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 maintaining accounts
of their customers that hold Class A shares. During the year ended July 31,
1997, OFDI paid $6,747 to an affiliated broker/
dealer as reimbursement for Class A personal service and maintenance expenses.
25 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
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 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 and Class C
shares, as compensation for sales commissions paid from its own resources at
the time of sale and associated financing costs. 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 for Class B and Class C shares on the average annual net assets of
each class, respectively, determined as of the close of each regular business
day. During the year ended July 31, 1997, OFDI paid $1,928 to an affiliated
broker/dealer as compensation for Class B personal service and maintenance
expenses and retained $134,557 and $11,004, respectively, as compensation for
Class B and Class C sales commissions and service fee advances, as well as
financing costs. If either Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to OFDI for distributing shares before the Plan was terminated. At July
31, 1997, OFDI had incurred unreimbursed expenses of $535,790 for Class B and
$28,807 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 or
cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are recorded
as unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
26 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
- --------------------------------------------------------------------------------
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, 1997, the Fund had outstanding futures contracts to
sell debt securities as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Expiration Date Futures Contracts July 31, 1997 Depreciation
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds 9/97 25 $2,918,750 $148,594
</TABLE>
27 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders of
Oppenheimer Pennsylvania Municipal Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer Pennsylvania Municipal Fund (formerly Oppenheimer
Pennsylvania Tax-Exempt Fund) (a series of Oppenheimer Multi-State Municipal
Trust) as of July 31, 1997, the related statement of operations for the year
then ended, the statements of changes in net assets for the year then ended,
the seven-month period ended July 31, 1996 and the year ended December 31,
1995, and the financial highlights for the year ended July 31, 1997, the
seven-month period ended July 31, 1996 and for each of the years in the
four-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, 1997, 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 Municipal Fund as of July 31, 1997, the
results of its operations for the year then ended, the changes in its net
assets for the year then ended, the seven-month period ended July 31, 1996 and
the year ended December 31, 1995, and the financial highlights for the year
ended July 31, 1997, the seven-month period ended July 31, 1996 and for each of
the years in the four-year period ended December 31, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 21, 1997
28 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Federal Income Tax Information (Unaudited)
- --------------------------------------------------------------------------------
In early 1998, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1997.
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, 1997 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 adviser for specific
guidance.
29 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Oppenheimer Pennsylvania Municipal Fund
A series of Oppenheimer Multi-State Municipal 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
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 Adviser OppenheimerFunds, Inc.
- --------------------------------------------------------------------------------
Distributor OppenheimerFunds Distributor, Inc.
- --------------------------------------------------------------------------------
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
- --------------------------------------------------------------------------------
Custodian of Portfolio Citibank, N.A.
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 Municipal Fund. This report
must be preceded or accompanied by a Prospectus of
Oppenheimer Pennsylvania 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.
30 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
OppenheimerFunds Family
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Real Asset Funds
- -----------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
- -----------------------------------------------------------------------------------------
Stock Funds
- -----------------------------------------------------------------------------------------
Developing Markets Fund Quest Small Cap Value Fund Global Fund
Enterprise Fund Capital Appreciation Fund1 Quest Global Value Fund
International Growth Fund Quest Capital Value Fund Disciplined Value Fund
Discovery Fund Growth Fund Quest Value Fund
- -----------------------------------------------------------------------------------------
Stock & Bond Funds
- -----------------------------------------------------------------------------------------
Main Street Income & Quest Growth & Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund(2)
Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
- -----------------------------------------------------------------------------------------
Bond Funds
- -----------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
- -----------------------------------------------------------------------------------------
Municipal 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
- -----------------------------------------------------------------------------------------
LifeSpan
- -----------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund."
2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1997 OppenheimerFunds, Inc. All rights reserved.
31 Oppenheimer Pennsylvania Municipal Fund
<PAGE>
Information and services
- --------------------------------------------------------------------------------
Internet
24-hr access to account information
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-9pm ET
Sat 10am-4pm 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
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
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OppenheimerFunds(SM)
Distributor, Inc.
RA0740.001.0797 September 30, 1997
