UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21281
Oppenheimer Principal Protected Main Street Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
(Address of principal executive offices)
(Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
--------------
Date of fiscal year end: August 31
Date of reporting period: September 1, 2003 - February 29, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
STATEMENT OF INVESTMENTS FEBRUARY 29, 2004 / UNAUDITED
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MARKET VALUE
SHARES SEE NOTE 1
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INVESTMENTS IN AFFILIATED COMPANIES EQUITY FUNDS--80.7%
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Oppenheimer Main Street Fund, Cl. Y (Cost $192,960,048) 6,644,467 $225,845,432
PRINCIPAL
AMOUNT
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U.S. GOVERNMENT OBLIGATIONS--18.6%
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U.S. Treasury Bonds, STRIPS, 4.07%, 5/15/10 1 (Cost $50,144,565) $64,400,000 52,019,936
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TOTAL INVESTMENTS, AT VALUE (COST $243,104,613) 99.3% 277,865,368
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OTHER ASSETS NET OF LIABILITIES 0.7 1,993,632
----------------------------
NET ASSETS 100.0% $279,859,000
============================
<FN>
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Zero coupon bond reflects effective yield on the date of purchase.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8 | Oppenheimer Principal Protected Main Street Fund
STATEMENT OF ASSETS AND LIABILITIES UNAUDITED
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FEBRUARY 29, 2004
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ASSETS
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Investments, at value (cost $243,104,613)--see accompanying statement $277,865,368
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Receivables and other assets:
Investments sold 4,361,202
Due from Manager 11,708
Other 26,868
--------------
Total assets 282,265,146
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LIABILITIES
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BANK OVERDRAFT 1,449,573
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Payables and other liabilities:
Shares of beneficial interest redeemed 511,538
Warranty agreement fees 279,996
Distribution and service plan fees 116,370
Transfer and shareholder servicing agent fees 16,491
Shareholder communications 2,410
Trustees' compensation 1,733
Other 28,035
--------------
Total liabilities 2,406,146
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NET ASSETS $279,859,000
==============
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COMPOSITION OF NET ASSETS
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Par value of shares of beneficial interest $ 24,747
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Additional paid-in capital 246,023,706
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Accumulated net investment loss (466,114)
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Accumulated net realized loss on investments (484,094)
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Net unrealized appreciation on investments 34,760,755
--------------
NET ASSETS $279,859,000
==============
9 | Oppenheimer Principal Protected Main Street Fund
STATEMENT OF ASSETS AND LIABILITIES UNAUDITED / CONTINUED
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NET ASSET VALUE PER SHARE
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Class A Shares:
Net asset value and redemption price per share (based on net assets of $80,858,699 and
7,143,567 shares of beneficial interest outstanding) $11.32
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $12.01
------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $132,660,213 and 11,735,180 shares
of beneficial interest outstanding) $11.30
------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $61,003,833 and 5,396,512 shares of
beneficial interest outstanding) $11.30
------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $5,336,255 and 471,557 shares of
beneficial interest outstanding) $11.32
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10 | Oppenheimer Principal Protected Main Street Fund
STATEMENT OF OPERATIONS UNAUDITED
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FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
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INVESTMENT INCOME
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Dividends $ 1,919,549
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Interest, including accretion of discounts 1,466,061
------------
Total investment income 3,385,610
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EXPENSES
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Management fees 235,231
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Distribution and service plan fees:
Class A 102,574
Class B 637,551
Class C 309,527
Class N 14,090
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Transfer and shareholder servicing agent fees:
Class A 28,625
Class B 54,606
Class C 20,779
Class N 535
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Shareholder communications:
Class A 8,463
Class B 9,463
Class C 4,300
Class N 362
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Warranty agreement fees 830,003
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Custodian fees and expenses 7,069
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Trustees' compensation 4,483
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Other 20,881
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Total expenses 2,288,542
Less reduction to custodian expenses (167)
Less voluntary reimbursement of duplicate expenses from underlying fund (189,768)
-------------
Net expenses 2,098,607
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NET INVESTMENT INCOME 1,287,003
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REALIZED AND UNREALIZED GAIN
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Net realized gain on investments 2,585
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Net change in unrealized appreciation on investments 27,273,266
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,562,854
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11 | Oppenheimer Principal Protected Main Street Fund
STATEMENTS OF CHANGES IN NET ASSETS
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SIX MONTHS PERIOD
ENDED ENDED
FEBRUARY 29, 2004 AUGUST 31,
(UNAUDITED) 2003 1
-----------------------------------------------------------------------------------------
OPERATIONS
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Net investment income (loss) $ 1,287,003 $ (13,537)
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Net realized gain (loss) 2,585 (32,352)
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Net change in unrealized appreciation 27,273,266 7,487,489
----------------------------
Net increase in net assets resulting from operations 28,562,854 7,441,600
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DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
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Dividends from net investment income:
Class A (675,441) --
Class B (641,651) --
Class C (314,495) --
Class N (39,357) --
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Distributions from net realized gain:
Class A (132,440) --
Class B (206,129) --
Class C (99,883) --
Class N (9,001) --
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BENEFICIAL INTEREST TRANSACTIONS
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Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (5,745,567) 76,527,144
Class B (2,464,249) 119,572,316
Class C (5,170,529) 58,607,625
Class N (633,580) 5,279,783
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NET ASSETS
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Total increase 12,430,532 267,428,468
-----------------------------------------------------------------------------------------
Beginning of period 267,428,468 --
----------------------------
End of period (including accumulated net investment loss
of $466,114 and $82,173, respectively) $279,859,000 $267,428,468
============================
<FN>
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12 | Oppenheimer Principal Protected Main Street Fund
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
SIX MONTHS CLASS A SIX MONTHS CLASS B
ENDED PERIOD ENDED PERIOD
FEBRUARY 29, ENDED FEBRUARY 29, ENDED
2004 AUGUST 31, 2004 AUGUST 31,
(UNAUDITED) 2003 1 (UNAUDITED) 2003 1
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PER SHARE OPERATING DATA
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Net asset value, beginning of period $10.28 $10.00 $10.28 $10.00
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Income (loss) from investment operations:
Net investment gain (loss) .08 -- 2 .04 -- 2
Net realized and unrealized gain 1.07 .28 1.05 .28
---------------------------------------------------
Total from investment operations 1.15 .28 1.09 .28
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Dividends and/or distributions to shareholders:
Dividends from net investment income (.09) -- (.05) --
Distributions from net realized gain (.02) -- (.02) --
---------------------------------------------------
Total dividends and/or distributions to shareholders (.11) -- (.07) --
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Net asset value, end of period $11.32 $10.28 $11.30 $10.28
===================================================
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TOTAL RETURN, AT NET ASSET VALUE 3 11.19% 2.80% 10.64% 2.80%
----------------------------------------------------------------------------------------------------------
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RATIOS/SUPPLEMENTAL DATA
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Net assets, end of period (in thousands) $80,859 $78,758 $132,660 $122,968
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Average net assets (in thousands) $81,928 $39,416 $128,033 $ 64,461
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Ratios to average net assets: 4
Net investment income (loss) 1.45% 0.35% 0.69% (0.20)%
Total expenses 1.13% 5 1.13% 5 1.89% 6 1.88% 6
Less reimbursement of management fees
during offering period -- (0.32)% -- (0.32)%
Less reimbursement to maintain yield -- -- -- (0.31)%
Less voluntary reimbursement of duplicate expense
from underlying fund (0.14)% -- (0.14)% --
---------------------------------------------------
Net expenses 0.99% 0.81% 7 1.75% 1.25% 7
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Portfolio turnover rate 131% 12% 131% 12%
<FN>
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distribu- tions 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. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses was 1.38% and 1.60% for
August 31, 2003 and February 29, 2004, respectively.
6. Expenses paid including all underlying fund expenses was 2.13% and 2.36% for
August 31, 2003 and February 29, 2004, respectively.
7. For this period reduction to custodian expenses was zero.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13 | Oppenheimer Principal Protected Main Street Fund
FINANCIAL HIGHLIGHTS CONTINUED
- -------------------------------------------------------------------------------
SIX MONTHS CLASS C SIX MONTHS CLASS N
ENDED PERIOD ENDED PERIOD
FEBRUARY 29, ENDED FEBRUARY 29, ENDED
2004 AUGUST 31, 2004 AUGUST 31,
(UNAUDITED) 2003 1 (UNAUDITED) 2003 1
----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.28 $10.00 $10.28 $10.00
----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment gain (loss) .04 -- 2 .07 -- 2
Net realized and unrealized gain 1.06 .28 1.07 .28
---------------------------------------------------
Total from investment operations 1.10 .28 1.14 .28
----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.06) -- (.08) --
Distributions from net realized gain (.02) -- (.02) --
---------------------------------------------------
Total dividends and/or distributions to shareholders (.08) -- (.10) --
----------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.30 $10.28 $11.32 $10.28
===================================================
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TOTAL RETURN, AT NET ASSET VALUE 3 10.65% 2.80% 11.06% 2.80%
----------------------------------------------------------------------------------------------------------
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RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $61,004 $60,271 $5,336 $5,432
----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $62,138 $31,946 $5,656 $3,713
----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.70% (0.20)% 1.24% 0.06%
Total expenses 1.87% 5 1.88% 5 1.32% 6 1.38% 6
Less reimbursement of management fees
during offering period -- (0.32)% -- (0.32)%
Less reimbursement to maintain yield -- (0.32)% -- --
Less voluntary reimbursement of duplicate expense
from underlying fund (0.14)% -- (0.14)% --
------------------------------------------------------
Net expenses 1.73% 1.24% 7 1.18% 1.06% 7
----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 131% 12% 131% 12%
<FN>
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Less than $0.005 per share.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distribu- tions 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. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses was 2.13% and 2.34% for
August 31, 2003 and February 29, 2004, respectively.
6. Expenses paid including all underlying fund expenses was 1.63% and 1.79% for
August 31, 2003 and February 29, 2004, respectively.
7. For this period reduction to custodian expenses was zero.
</FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14 | Oppenheimer Principal Protected Main Street Fund
NOTES TO FINANCIAL STATEMENTS UNAUDITED
- --------------------------------------------------------------------------------
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1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Principal Protected Main Street Fund (the Fund), a series of
Oppenheimer Principal Protected Trust, is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund seeks capital preservation in order to have a net asset value on the
Maturity Date at least equal to your original investment (the Warranty Amount)
(net of any sales charges and less your share of extraordinary expenses and the
proportional reduction of dividends paid in cash and redemption of the Fund
shares). The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
Shares of the Fund were offered during the Offering Period (May 30, 2003 to
July 31, 2003). Shares are not offered during the Warranty Period (August 5,
2003 to August 5, 2010) to the Maturity Date (August 5, 2010) except in
connection with reinvestment of dividends and distributions. During the
Warranty Period, the Fund will seek capital preservation, and secondarily high
total return by allocating its assets between Oppenheimer Main Street Fund and
certain U.S. government securities.
The Fund offered Class A, Class B, Class C and Class N shares. Class A
shares were sold at their offering price, which is normally net asset value
plus a front-end sales charge. Class B, Class C and Class N shares were sold
without a front-end sales charge but may be subject to a contingent deferred
sales charge (CDSC). Class N shares were sold only through retirement plans.
Retirement plans that offer Class N shares may impose charges on those
accounts. All classes of shares have identical rights and voting privileges
with respect to the Fund in general and exclusive voting rights on matters that
affect that class alone. Earnings, net assets and net asset value per share may
differ by minor amounts due to each class having its own expenses directly
attributable to that class. Classes A, B, C and N have separate distribution
and/or service plans. Class B shares will automatically convert to Class A
shares 88 months after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
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WARRANTY AGREEMENT. The Fund has entered into a Financial Warranty Agreement
with Merrill Lynch Bank USA (the Warranty Provider) to ensure that on the
Maturity Date each shareholder's account will be no less than the value of that
shareholder's account on the second business day after the end of the Offering
Period. This value will include net income, if any, earned by the Fund during
the offering period and reduced by adjustments permitted under the Warranty
Agreement, sales charges, applicable share of extraordinary expenses and
proportionately reduced for dividends and distributions paid in cash and
redemptions of Fund shares. To avoid a reduced warranty amount, shareholders
must reinvest all dividends and distributions received from the Fund to
purchase additional shares of the Fund and must not redeem any shares of the
Fund during the Warranty Period. If the value of the Fund's assets on the
Maturity Date is insufficient to result in the value of each shareholder's
account being at least equal to the shareholder's Warranty Amount, the Warranty
Provider will pay the Fund an amount equal to his or her Warranty Amount.
15 | Oppenheimer Principal Protected Main Street Fund
NOTES TO FINANCIAL STATEMENTS UNAUDITED / CONTINUED
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The Financial Warranty is solely the obligation of the Warranty Provider. It
is possible that the financial position of the Warranty Provider may
deteriorate and it would be unable to satisfy its obligations under the
Financial Warranty. The Fund's assets and the obligations of the Warranty
Provider under the Warranty Agreement are not guaranteed by Merrill Lynch &
Co., Inc. (the Warranty Provider's parent company), the United States
Government, the Manager, or any other entity or person. The Warranty Agreement
requires the Manager, on behalf of the Fund, to comply with certain agreed upon
investment parameters in an attempt to limit the Fund's risk. If the Manager
fails to comply with the agreed-upon investment parameters or otherwise fails
to comply with certain requirements set forth in the Warranty Agreement, the
Warranty Provider may terminate its Financial Warranty in certain limited
circumstances. The Warranty Provider may monitor the Fund's compliance with the
Warranty Agreement solely to protect the interests of the Warranty Provider and
not the Fund's shareholders.
The fee paid to the Warranty Provider is an annual fee of 0.60% of the
average daily net assets of the Fund. If the Fund is required to make a
complete and irreversible allocation of its assets to the debt portfolio, the
Warranty Fee will thereafter be reduced to 0.35% of the average daily net
assets of the Fund. For the six months ended February 29, 2004, the amount paid
for Warranty Agreement fees was $667,475.
-------------------------------------------------------------------------------
SECURITIES VALUATION. The allocation of the Fund's assets between the debt
portfolio and the equity portfolio will vary over time based upon the Warranty
Formula. The formula is intended to allow the Fund to have a net asset value on
the Maturity Date at least equal to the Warranty Amount.
During the Warranty Period, the Fund will invest a portion of its assets,
and in certain circumstances, the Fund may invest all of its assets, in U.S.
government securities having maturity approximately equal to the period
remaining in the Warranty Period. Long-term and short-term "non-money market"
debt securities are valued by a portfolio pricing service approved by the Board
of Trustees. Short-term "money market type" debt securities with remaining
maturities of sixty days or less are valued at amortized cost (which
approximates market value).
The Fund invests the equity portfolio in Class Y shares of Oppenheimer Main
Street Fund (the Underlying Fund). The net asset value of the Underlying Fund
is determined as of the close of The New York Exchange, on each day the
Exchange is open for trading. The net asset value per share is determined by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding.
-------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint
trading accounts on a daily basis. Secured by U.S. government securities, these
balances are invested in one or more repurchase agreements. Securities pledged
as collateral for repurchase agreements are held by a custodian bank until the
agreements mature. Each agreement requires that the
16 | Oppenheimer Principal Protected Main Street Fund
market value of the collateral be sufficient to cover payments of interest and
principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
-------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis 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 comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
As of February 29, 2004, the Fund had no estimated unused capital loss
carryforward available for federal income tax purposes.
-------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. Under the plan, deferred amounts are treated as
though equal dollar amounts had been invested in shares of the Fund or are
invested in other Oppenheimer funds selected by the Trustee. Deferral of
trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net investment
income per share. Amounts will be deferred until distributed in accordance to
the Plan.
-------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
-------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date.
Non-cash dividends included in dividend income, if any, are recorded at the
fair market value of the securities received. Interest income, which includes
accretion of discount and amortization of premium, is accrued as earned.
-------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.
-------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
-------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and
17 | Oppenheimer Principal Protected Main Street Fund
NOTES TO FINANCIAL STATEMENTS UNAUDITED / CONTINUED
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
SIX MONTHS ENDED FEBRUARY 29, 2004 PERIOD ENDED AUGUST 31, 2003 1
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
CLASS A
Sold -- $ -- 7,734,040 $ 77,290,054 2
Dividends and/or
distributions reinvested 66,031 726,342 -- --
Redeemed (580,660) (6,471,909) (75,844) (762,910)
------------------------------------------------------------------
Net increase (decrease) (514,629) $(5,745,567) 7,658,196 $ 76,527,144
==================================================================
- -----------------------------------------------------------------------------------------------------
CLASS B
Sold -- $ -- 12,010,627 $120,027,161 2
Dividends and/or
distributions reinvested 65,444 719,894 -- --
Redeemed (295,651) (3,184,143) (45,240) (454,845)
------------------------------------------------------------------
Net increase (decrease) (230,207) $(2,464,249) 11,965,387 $119,572,316
==================================================================
- -----------------------------------------------------------------------------------------------------
CLASS C
Sold -- $ -- 5,882,060 $ 58,782,614 2
Dividends and/or
distributions reinvested 25,625 281,883 -- --
Redeemed (493,772) (5,452,412) (17,401) (174,989)
------------------------------------------------------------------
Net increase (decrease) (468,147) $(5,170,529) 5,864,659 $ 58,607,625
==================================================================
- -----------------------------------------------------------------------------------------------------
CLASS N
Sold -- $ -- 528,325$ $ 5,279,783 2
Dividends and/or
distributions reinvested 4,395 48,349 -- --
Redeemed (61,163) (681,929) -- --
------------------------------------------------------------------
Net increase (decrease) (56,768) $ (633,580) 528,325 $ 5,279,783
==================================================================
<FN>
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Costs incurred by the Fund for obtaining the Warranty Agreement for the
benefit of share purchases during the Offering Period were $171,068, and are
included in Paid-in-Capital.
</FN>
-------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the six months ended February 29, 2004, were
$557,304,599 and $315,902,593, respectively.
18 | Oppenheimer Principal Protected Main Street Fund
-------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
the investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.50% of the average annual net assets of the Fund, reduced by
the amount of advisory fees paid to the Manager by the Underlying Fund relating
to the Fund's assets invested in the Underlying Fund, but not below zero. That
fee will apply during the Warranty Period and the Post-Warranty Period. If
during the Warranty Period 100% of the Fund's assets are completely and
irreversibly invested in the debt portfolio, the management fee will be at an
annual rate of 0.25% of the average annual net assets of the Fund, and if that
occurs the Manager will further reduce its management fee to the extent
necessary so that total annual operating expenses of the Fund (other than
Extraordinary Expenses such as litigation costs) do not exceed 1.30% for Class
A shares, 2.05% for Class B shares, 2.05% for Class C shares and 1.55% for
Class N shares. However, if this reduction in the management fee is not
sufficient to reduce total annual operating expenses to these limits, the
Manager is not required to subsidize Fund expenses to assure that expenses do
not exceed those limits. Furthermore, if expenses exceed these expense limits,
the Warranty Amount will be reduced by any expenses that exceed those limits.
In addition, during the Warranty Period the Manager has voluntarily agreed to
reduce the management fee payable by the Fund by 0.00833% per month in any
month following a month where the Fund's average daily equity allocation was
less than 10%. Those voluntary undertakings may be amended or eliminated at any
time.
The Manager has voluntarily undertaken to reimburse the Fund for expenses
equal to the Underlying Fund expenses, other than Underlying Fund management
fees, paid by the Fund as a shareholder of the Underlying Fund. That expense
reimbursement will fluctuate as the Fund's allocation between the Underlying
Fund and the debt portfolio changes. This voluntary undertaking may be amended
or eliminated at any time.
-------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the six months ended February 29, 2004,
the Fund paid $97,782 to OFS for services to the Fund.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent
fees for all classes, up to an annual rate of 0.35% of average net assets per
class. This undertaking may be amended or withdrawn at any time.
-------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
organizational costs associated with the registration and seeding of the Fund.
-------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
19 | Oppenheimer Principal Protected Main Street Fund
NOTES TO FINANCIAL STATEMENTS UNAUDITED / CONTINUED
- --------------------------------------------------------------------------------
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4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
A shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses the fees it receives
from the Fund to pay brokers, dealers and other financial institutions for
personal services and account maintenance services they provide for their
customers who hold Class A shares. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. Fees incurred by the Fund under the plan are detailed in the
Statement of Operations.
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DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Fund has adopted Distribution and Service Plans for Class B, Class C and Class
N shares to compensate the Distributor for its services in connection with the
distribution of these shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B shares and on Class C shares and 0.25% per year on Class N shares. The
Distributor also receives a service fee of up to 0.25% per year under each
plan. If either the Class B, Class C or Class N plan is terminated by the Fund
or by the shareholders of a class, the Board of Trustees and its independent
trustees must determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the service fee and/or asset-based sales
charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at February 29, 2004 for Class B, Class C and Class N shares was $5,444,628,
$770,842 and $110,791, respectively. Fees incurred by the Fund under the plans
are detailed in the Statement of Operations.
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SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption
proceeds prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
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February 29, 2004 $190 $-- $111,600 $13,435 $6,056
20 | Oppenheimer Principal Protected Main Street Fund
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5. BORROWING AND LENDING ARRANGEMENTS
The Fund entered into an "interfund borrowing and lending arrangement" with
other funds in the Oppenheimer funds complex, to allow funds to borrow for
liquidity purposes. The arrangement was initiated pursuant to exemptive relief
granted by the Securities and Exchange Commission (the SEC) to allow these
affiliated funds to lend money to, and borrow money from, each other, in an
attempt to reduce borrowing costs below those of bank loan facilities. The
SEC's order requires the Fund's Board of Trustees to adopt operating policies
and procedures to administer interfund borrowing and lending. Under the
arrangement the Fund may lend money to other Oppenheimer funds and may borrow
from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
based upon a recommendation by the Manager. The Fund's borrowings, if any, are
subject to asset coverage requirements under the Investment Company Act and the
provisions of the SEC order and other applicable regulations. If the Fund
borrows money, there is a risk that the loan could be called on one day's
notice, in which case the Fund might have to borrow from a bank at higher rates
if a loan were not available from another Oppenheimer fund. If the Fund lends
money to another fund, it will be subject to the risk that the other fund might
not repay the loan in a timely manner, or at all.
The Fund had no interfund borrowings or loans outstanding during the six
months ended or at February 29, 2004.
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PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES UNAUDITED
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The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and
Procedures is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, (ii) on the Fund's website at
www.oppenheimerfunds.com, and (iii) on the SEC's website at www.sec.gov. In
addition, the Fund will be required to file new Form N-PX, with its complete
proxy voting record for the 12 months ended June 30th, no later than August
31st of each year. The first such filing is due no later than August 31, 2004,
for the twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX
filing will be available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.225.5677, and (ii) on the SEC's website at www.sec.gov.
21 | Oppenheimer Principal Protected Main Street Fund
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Trustees of the registrant has determined that
Edward L. Cameron, the Chairman of the Board's Audit Committee, and George C.
Bowen, a member of the Board's Audit Committee, possess the technical attributes
identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as "audit
committee financial experts," and has designated Messrs. Cameron and Bowen as
the Audit Committee's financial experts. Messrs. Cameron and Bowen are
"independent" Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable to semiannual reports.
ITEM 5. NOT APPLICABLE
ITEM 6. RESERVED
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board is responsible for approving nominees for election as trustees. To
assist in this task, the Board has designated the Audit Committee as the
nominating committee for the Board. It reviews and recommends nominees to the
Board. The Committee is comprised entirely of disinterested trustees as defined
in Section 2(a)(19) of the Investment Company Act of 1940.
The Audit Committee charter describes the responsibilities of the Committee in
nominating candidates for election as independent Trustees of the Registrant.
The Registrant's Board has adopted a written charter for the Committee. A
current copy of the Audit Committee charter is available to shareholders on the
OppenheimerFunds website at www.oppenheimerfunds.com.
Under the current policy, if the Board determines that a vacancy exists or is
likely to exist on the Board, the Audit Committee of the Board will consider
candidates for Board membership including recommended by Registrant
shareholders. The Audit Committee will consider nominees recommended by
independent Board members or recommended by any other Board members including
Board members affiliated with the Registrant's investment advisors. The
Committee may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Audit Committee may
also use the services of legal, financial, or other external counsel that it
deems necessary or desirable in the screening process. Shareholders wishing to
submit a nominee for election to the Board may do so by mailing their submission
to the offices of OppenheimerFunds, Inc., 6803 South Tucson Way,
Centennial, CO 80112, to the attention of the Board of Trustees of the named
Registrant, c/o the Secretary of the Registrant.
The Committee's process for identifying and evaluating nominees for trustee
includes a number of factors. In screening candidates for board membership,
whether the candidate is suggested by Board members, shareholders or others, the
Committee considers the candidate's professional experience, soundness of
judgment, integrity, ability to make independent, analytical inquiries,
collegiality, willingness and ability to devote the time required to perform
Board activities adequately, ability to represent the interests of all
shareholders of the Registrant, and diversity relative to the board's
composition. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-2(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(c)) as of February 29, 2004,
registrant's principal executive officer and principal financial
officer found registrant's disclosure controls and procedures to
provide reasonable assurances that information required to be
disclosed by registrant in the reports that it files under the
Securities Exchange Act of 1934 (a) is accumulated and
communicated to registrant's management, including its principal
executive officer and principal financial officer, to allow timely
decisions regarding required disclosure, and (b) is recorded,
processed, summarized and reported, within the time periods
specified in the rules and forms adopted by the U.S. Securities
and Exchange Commission.
(b) There have been no significant changes in registrant's internal
controls over financial reporting that occurred during the
registrant's last fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(A) EXHIBIT ATTACHED HERETO. (ATTACH CODE OF ETHICS AS EXHIBIT)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)