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
(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 - August 31, 2004
-----------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND(R) PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Equity 68.6%
Fixed-Income 30.7
Cash Equivalents 0.7
Portfolio's holdings and allocations are subject to change. Percentages are as
of August 31, 2004, and are based on total investments.
- --------------------------------------------------------------------------------
OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND) SECTOR ALLOCATION
- -----------------------------------------------------------------------------
Financials 24.5%
- -----------------------------------------------------------------------------
Information Technology 16.2
- -----------------------------------------------------------------------------
Health Care 13.9
- -----------------------------------------------------------------------------
Consumer Staples 10.4
- -----------------------------------------------------------------------------
Consumer Discretionary 9.7
- -----------------------------------------------------------------------------
Energy 9.3
- -----------------------------------------------------------------------------
Industrials 9.2
- -----------------------------------------------------------------------------
Telecommunication Services 4.7
- -----------------------------------------------------------------------------
Materials 1.7
- -----------------------------------------------------------------------------
Utilities 0.4
Portfolio's holdings and allocations are subject to change. Percentages are as
of August 31, 2004, and are based on common stocks.
8 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND)
TOP TEN COMMON STOCK INDUSTRIES
- ------------------------------------------------------------------------------
Oil & Gas 9.0%
- ------------------------------------------------------------------------------
Pharmaceuticals 9.0
- ------------------------------------------------------------------------------
Commercial Banks 8.7
- ------------------------------------------------------------------------------
Diversified Financial Services 8.6
- ------------------------------------------------------------------------------
Industrial Conglomerates 5.4
- ------------------------------------------------------------------------------
Software 4.6
- ------------------------------------------------------------------------------
Insurance 4.6
- ------------------------------------------------------------------------------
Computers & Peripherals 4.4
- ------------------------------------------------------------------------------
Diversified Telecommunication Services 3.7
- ------------------------------------------------------------------------------
Communications Equipment 3.4
Portfolio's holdings and allocations are subject to change. Percentages are as
of August 31, 2004, and are based on net assets.
OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND)
TOP TEN COMMON STOCK HOLDINGS
- ------------------------------------------------------------------------------
General Electric Co. 4.2%
- ------------------------------------------------------------------------------
Exxon Mobil Corp. 4.1
- ------------------------------------------------------------------------------
Citigroup, Inc. 3.4
- ------------------------------------------------------------------------------
Pfizer, Inc. 3.3
- ------------------------------------------------------------------------------
Microsoft Corp. 3.2
- ------------------------------------------------------------------------------
Bank of America Corp. 2.7
- ------------------------------------------------------------------------------
American International Group, Inc. 2.3
- ------------------------------------------------------------------------------
Johnson & Johnson 2.3
- ------------------------------------------------------------------------------
JPMorgan Chase & Co. 2.1
- ------------------------------------------------------------------------------
Intel Corp. 2.0
Portfolio's holdings and allocations are subject to change. Percentages are as
of August 31, 2004, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
9 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED AUGUST 31, 2004, FOLLOWED BY
A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED
MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. The equity component of the Fund's
portfolio is invested in shares of Oppenheimer Main Street Fund (the "Underlying
Fund"). The fixed income component, managed by OppenheimerFunds' High Grade
Investment team, is invested primarily in Treasury STRIPS that mature on or
around the end of the seven-year warranty period (8/5/03-8/5/10) with the post
warranty period beginning 8/6/10-on. As of 8/31/04 the Fund, had a 68.6% equity
exposure (Oppenheimer Main Street Fund Class Y shares).
During its fiscal year ended August 31, 2004, Oppenheimer Main Street Fund
(the "Underlying Fund") provided higher total returns than its benchmark, the
Standard & Poor's 500 Index, and its Lipper peer group average, the large-cap
core funds category.
The Underlying Fund benefited during the first half of the reporting
period from its focus on stocks with market capitalizations toward the lower end
of the large-cap range. As had been the case for some time, smaller-cap stocks
consistently outperformed their larger-cap counterparts over the reporting
period's first half. During the reporting period's second half, however, a
number of factors considered by the Underlying Fund's models--including the
five-year reversal factor, interest rate spread indicators and relative
valuation components--began to favor larger stocks over smaller ones.
As a result, during the second half of the reporting period the Underlying
Fund substantially increased its investments in higher-quality companies with
larger market capitalizations. As of August 31, 2004, the Underlying Fund's
weighted average market capitalization was 1.25 times that of the S&P 500 Index
up from .83 times at the end of December 2003. Similarly, at the end of August
2004 the Underlying Fund had a greater percentage of higher-quality companies
(by S&P quality rating 4) relative to the S&P 500 Index than when compared to
its composition at the end of December 2003.
Because the Underlying Fund was in a period of transition, it
underperformed its benchmark during the second calendar quarter of 2004, which
detracted from its relative performance for the overall reporting period. It
typically has taken some time for the models used by the Underlying Fund to
adjust to fundamental changes in market conditions, and in order to manage
transaction costs effectively, the Underlying Fund tended to make substantial
changes to its portfolio slowly.
Nonetheless, the Underlying Fund's stock selection strategy contributed
positively to its overall performance for the reporting period. Because its
stock scoring system assigned higher rankings to a number of companies in the
better-performing energy,
4. Standard & Poor's quality ratings seek to measure the creditworthiness of an
issuer.
10 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
financials and telecommunications services sectors, the Underlying Fund had
greater exposure to these groups than the S&P 500 Index, benefiting its
performance. On the other hand, the Underlying Fund's models found fewer
opportunities in the utilities sector, which hurt its relative performance when
utilities stocks fared relatively well. Although its weightings in the
technology, consumer discretionary and health care sectors were roughly
equivalent to their representation in the S&P 500 Index, the Underlying Fund's
stocks in each of these sectors produced lower returns than their corresponding
holdings in the S&P 500 Index.
The Underlying Fund ended the reporting period with a larger percentage of
its assets invested in financial and energy stocks than the S&P 500 Index, and a
smaller percentage allocated to utilities and industrial stocks. The Underlying
Fund expects to remain fully invested in large-cap stocks and to maintain a
well-diversified portfolio. The Underlying Fund expects to adjust the portfolio
as needed and indicated by its quantitative models.
As of 8/31/04 Oppenheimer Principal Protected Main Street Fund(R) had a
30.7% exposure to U.S. Treasury STRIPS. During the reporting period, treasuries
bore the brunt of the rising interest rate environment, given that they are
virtually devoid of credit risk and hold primarily interest-rate risk. However,
our active management of the portfolio's interest-rate sensitivity aided in the
Fund's performance.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until August 31, 2004. In the case of Class A, Class B, Class C and
Class N shares, performance is measured from inception of the classes on June 2,
2003. The Fund's performance reflects the deduction of the maximum initial sales
charge on Class A shares, the applicable contingent deferred sales charge on
Class B, Class C and Class N shares, and reinvestments of all dividends and
capital gains distributions. Past performance cannot guarantee future results.
The Fund's performance is compared to the performance of the S&P 500
Index. The S&P 500 Index is an unmanaged index of equity securities. Index
performance reflects the reinvestment of income but does not consider the effect
of transaction costs, and none of the data in the graphs shows the effect of
taxes. The Fund's performance reflects the effects of the Fund's business and
operating expenses. While index comparisons may be useful to provide a benchmark
for the Fund's performance, it must be noted that the Fund's investments are not
limited to the investments in the index.
11 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (R) (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal Protected
Main Street Fund (R)
(Class A) S&P 500 Index
06/02/2003 9,425 10,000
08/31/2003 9,689 10,507
11/30/2003 10,141 11,080
02/29/2004 10,773 12,040
05/31/2004 10,440 11,832
08/31/2004 10,354 11,710
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
08/31/04
1 YEAR SINCE INCEPTION
- ------ ---------------
0.72% 2.83%
12 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (R) (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal Protected
Main Street Fund (R)
(Class B) S&P 500 Index
06/02/2003 10,000 10,000
08/31/2003 10,280 10,507
11/30/2003 10,730 11,080
02/29/2004 11,374 12,040
05/31/2004 11,012 11,832
08/31/2004 10,491 11,710
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
08/31/04
1 YEAR SINCE INCEPTION
- ------ ---------------
0.94% 3.92%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND CLASS N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. SEE PAGE 16 FOR FURTHER INFORMATION.
13 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (R) (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal Protected
Main Street Fund (R)
(Class C) S&P 500 Index
06/02/2003 10,000 10,000
08/31/2003 10,280 10,507
11/30/2003 10,730 11,080
02/29/2004 11,375 12,040
05/31/2004 11,012 11,832
08/31/2004 10,892 11,710
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
08/31/04
1 YEAR SINCE INCEPTION
- ------ ---------------
4.95% 7.09%
14 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (R) (Class N)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal Protected
Main Street Fund (R)
(Class N) S&P 500 Index
06/02/2003 10,000 10,000
08/31/2003 10,280 10,507
11/30/2003 10,750 11,080
02/29/2004 11,417 12,040
05/31/2004 11,064 11,832
08/31/2004 10,853 11,710
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
08/31/04
1 YEAR SINCE INCEPTION
- ------ ---------------
5.55% 6.78%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE 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 THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND CLASS N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. SEE PAGE 16 FOR FURTHER INFORMATION.
15 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES
- --------------------------------------------------------------------------------
Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
Investors should consider the Fund's investment objectives, risks, and other
charges and expenses carefully before investing. The Fund's prospectus contains
this and other information about the Fund, and may be obtained by asking your
financial advisor, calling us at 1.800.525.7048 or visiting our website at
www.oppenheimerfunds.com. Read the prospectus carefully before investing.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
The Fund has entered into a warranty agreement with Merrill Lynch Bank USA "the
warranty provider" in order to make sure that the value of each shareholder's
account on the maturity date (March 3, 2011) will be at least equal to a
shareholder's original investment (reduced by any adjustments to the warranty
amount permitted by the Warranty Agreement, and less any redemptions of Fund
shares or distributions taken in cash, sales charges and extraordinary fund
expenses). The warranty is solely the obligation of the warranty provider to the
Fund, not to shareholders. The warranty does not guarantee performance of the
Fund. The ability of the Fund to maintain the value of your original investment
is dependent on the ability of the warranty provider to make a payment to the
Fund on the maturity date.
The principal risks of an investment in the Fund during the Warranty Period and
the Post-Warranty Period are those generally attributable to investing in stocks
and debt securities. Because the Fund invests in both stocks and debt securities
during the Warranty Period, the Fund may underperform stock funds when stocks
are in favor and underperform bond funds when debt securities are in favor.
Shareholders could lose money by investing in this Fund. A shareholder's
warranted amount will be reduced, as more fully described in the prospectus, if
the shareholder takes any dividends or distributions in cash instead of
reinvesting them in additional shares of the Fund, redeems any shares before the
Maturity Date, if there are extraordinary expenses incurred by the Fund (as such
expenses are not covered by the Warranty Agreement), if the Fund or the Manager
fails to perform certain obligations under the Warranty Agreement, or if the
warranty provider fails to or is unable to meet its obligations under the
Warranty Agreement.
16 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
The warranty is solely the obligation of the warranty provider. It is possible
that the financial position of the warranty provider may deteriorate.
Shareholders could lose money if the warranty provider fails to or is unable to
perform its obligations under the warranty. The Fund's assets and the
obligations of the warranty provider under the warranty 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 lack of a
guarantee of the warranty provider's obligations under the warranty presents
some risk to shareholders if the warranty provider fails to or is unable to
honor its obligations to the Fund on the Maturity Date under the warranty.
Distributions from the Fund are taxable whether or not you reinvest them in
additional shares of the Fund. The warranty provider's obligation to make
payment to the Fund is not guaranteed by any entity and the Fund is not
obligated to replace the warranty provider should it be unable to make the
payments necessary to support the warranted amount. The warranty agreement fees
increase the Fund's expenses that you pay and therefore the expenses of this
Fund will be higher than the expenses of a Fund that does not offer principal
protection.
The Fund offered its shares to the public from May 30, 2003 through July 31,
2003. From August 5, 2003, and until August 5, 2010, shares of the Fund will
only be issued upon reinvestment of dividends and distributions.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
17 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments;
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; the warranty fee; distribution
and service fees; and other Fund expenses. These examples are intended to help
you understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended August 31, 2004.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
18 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
- ----------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(3/1/04) (8/31/04) AUGUST 31, 2004
- ----------------------------------------------------------------------------
Class A Actual $1,000.00 $ 961.10 $5.09
- ----------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.96 5.24
- ----------------------------------------------------------------------------
Class B Actual 1,000.00 957.50 8.85
- ----------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,016.14 9.11
- ----------------------------------------------------------------------------
Class C Actual 1,000.00 957.50 8.75
- ----------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,016.24 9.01
- ----------------------------------------------------------------------------
Class N Actual 1,000.00 959.40 5.98
- ----------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,019.05 6.16
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period). Those expense ratios for the 6-month
period ended August 31, 2004 are as follows:
CLASS EXPENSE RATIOS
- -------------------------
Class A 1.03%
- -------------------------
Class B 1.79
- -------------------------
Class C 1.77
- -------------------------
Class N 1.21
The expense ratios reflect voluntary reimbursements of expenses by the Fund's
Manager that can be terminated at any time, without advance notice. The
"Financial Highlights" tables in the Fund's financial statements, included in
this report, also show the gross expense ratios, without such reimbursements.
- --------------------------------------------------------------------------------
19 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF INVESTMENTS August 31, 2004
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES EQUITY FUNDS--68.9%
- -----------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y (Cost $150,746,534) 5,250,414 $ 172,896,134
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--30.8%
- -----------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 3.98%, 5/15/10 1 (Cost $75,889,451) $95,006,000 77,290,041
- -----------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.7%
- -----------------------------------------------------------------------------------------------------------
Undivided interest of 0.22% in joint repurchase agreement (Principal
Amount/Value $806,836,000, with a maturity value of $806,870,963) with
UBS Warburg LLC, 1.56%, dated 8/31/04, to be repurchased at $1,774,077
on 9/1/04, collateralized by Federal National Mortgage Assn., 5%, 3/1/34,
with a value of $824,829,716 (Cost $1,774,000) 1,774,000 1,774,000
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $228,409,985) 100.4% 251,960,175
- -----------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (1,033,055)
-----------------------------
NET ASSETS 100.0% $ 250,927,120
=============================
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Zero coupon bond reflects effective yield on the date of purchase.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF ASSETS AND LIABILITIES August 31, 2004
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------------------------------------------------
Investments, at value (cost $228,409,985)--see accompanying statement of investments $251,960,175
- ----------------------------------------------------------------------------------------------------
Cash 95,975
- ----------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest 77
Other 2,604
-------------
Total assets 252,058,831
- ----------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 675,039
Warranty agreement fees 255,283
Distribution and service plan fees 107,098
Shareholder communications 20,645
Transfer and shareholder
servicing agent fees 17,239
Trustees' compensation 3,051
Other 53,356
-------------
Total liabilities 1,131,711
- ----------------------------------------------------------------------------------------------------
NET ASSETS $250,927,120
=============
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ----------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 23,151
- ----------------------------------------------------------------------------------------------------
Additional paid-in capital 228,087,413
- ----------------------------------------------------------------------------------------------------
Accumulated net investment loss (128,418)
- ----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (605,216)
- ----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 23,550,190
-------------
NET ASSETS $250,927,120
=============
21 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $71,666,212 and
6,588,498 shares of beneficial interest outstanding) $10.88
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $11.54
- --------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $122,411,020 and 11,311,623 shares
of beneficial interest outstanding) $10.82
- --------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $51,740,581 and 4,780,860 shares of
beneficial interest outstanding) $10.82
- --------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $5,109,307 and 470,272 shares of
beneficial interest outstanding) $10.86
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF OPERATIONS For the Year Ended August 31, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 2,546,751
- --------------------------------------------------------------------------------
Dividends 1,919,549
-------------
Total investment income 4,466,300
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 426,546
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 196,857
Class B 1,272,440
Class C 595,085
Class N 27,065
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 54,306
Class B 104,306
Class C 39,532
Class N 1,019
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 18,029
Class B 27,058
Class C 11,050
Class N 582
- --------------------------------------------------------------------------------
Warranty agreement fees 1,625,565
- --------------------------------------------------------------------------------
Trustees' compensation 9,273
- --------------------------------------------------------------------------------
Custodian fees and expenses 7,918
- --------------------------------------------------------------------------------
Other 79,888
-------------
Total expenses 4,496,519
Less reduction to custodian expenses (448)
Less payments and waivers of expenses (328,320)
-------------
Net expenses 4,167,751
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 298,549
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on investments 733,006
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 16,062,701
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,094,256
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2004 2003 1
- ---------------------------------------------------------------------------------------------
OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income (loss) $ 298,549 $ (13,537)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) 733,006 (32,352)
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation 16,062,701 7,487,489
-------------------------------
Net increase in net assets resulting from operations 17,094,256 7,441,600
- ---------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (483,371) --
Class B (459,193) --
Class C (225,058) --
Class N (28,161) --
- ---------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (132,440) --
Class B (206,129) --
Class C (99,883) --
Class N (9,001) --
- ---------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A (138,125) --
Class B (223,202) --
Class C (104,341) --
Class N (9,493) --
- ---------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A (11,842,886) 76,527,144
Class B (7,092,628) 119,572,316
Class C (11,893,836) 58,607,625
Class N (647,857) 5,279,783
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Total increase (decrease) (16,501,348) 267,428,468
- ---------------------------------------------------------------------------------------------
Beginning of period 267,428,468 --
-------------------------------
End of period (including accumulated net investment loss of
$128,418 and $82,173, respectively) $ 250,927,120 $ 267,428,468
===============================
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A CLASS B
YEAR ENDED AUGUST 31, 2004 2003 1 2004 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) .07 -- 2 (.02) -- 2
Net realized and unrealized gain .64 .28 .63 .28
-----------------------------------------------------
Total from investment operations .71 .28 .61 .28
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.07) -- (.03) --
Dividends from net realized gain (.02) -- (.02) --
Tax return of capital distribution (.02) -- (.02) --
-----------------------------------------------------
Total dividends and/or distributions to shareholders (.11) -- (.07) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.88 $ 10.28 $ 10.82 $ 10.28
=====================================================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.87% 2.80% 5.94% 2.80%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 71,666 $ 78,758 $122,411 $122,968
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 78,668 $ 39,416 $127,128 $ 64,461
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) 0.65% 0.35% (0.14)% (0.20)%
Total expenses 1.14% 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)%
Payments and waivers and reduction
to custodian expenses (0.12)% -- (0.12)% --
-----------------------------------------------------
Net expenses 1.02% 0.81% 7 1.77% 1.25% 7
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 179% 12% 179% 12%
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 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. 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 were 1.60% and 1.38% for
August 31, 2004 and 2003, respectively.
6. Expenses paid including all underlying fund expenses were 2.35% and 2.13% for
August 31, 2004 and 2003, respectively.
7. For this period reduction to custodian expenses was zero.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C CLASS N
YEAR ENDED AUGUST 31, 2004 2003 1 2004 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) (.02) -- 2 .05 -- 2
Net realized and unrealized gain .64 .28 .63 .28
-----------------------------------------------------
Total from investment operations .62 .28 .68 .28
- -------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.04) -- (.06) --
Dividends from net realized gain (.02) -- (.02) --
Tax return of capital distribution (.02) -- (.02) --
-----------------------------------------------------
Total dividends and/or distributions to shareholders (.08) -- (.10) --
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.82 $ 10.28 $ 10.86 $ 10.28
=====================================================
- -------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.95% 2.80% 6.55% 2.80%
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 51,741 $ 60,271 $ 5,109 $ 5,432
- -------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 59,429 $ 31,946 $ 5,408 $ 3,713
- -------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income (loss) (0.10)% (0.20)% 0.46% 0.06%
Total expenses 1.88% 5 1.88% 5 1.34% 6 1.38% 6
Less reimbursement of management fees during
offering period -- (0.32)% -- (0.32)%
Less reimbursement to maintain yield -- (0.32)% -- --
Payments and waivers and reduction
to custodian expenses (0.12)% -- (0.12)% --
-----------------------------------------------------
Net expenses 1.76% 1.24% 7 1.22% 1.06% 7
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 179% 12% 179% 12%
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 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. 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 were 2.34% and 2.13% for
August 31, 2004 and 2003, respectively.
6. Expenses paid including all underlying fund expenses were 1.80% and 1.63% for
August 31, 2004 and 2003, respectively.
7. For this period reduction to custodian expenses was zero.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 due
to each class having its own expenses, such as transfer and shareholder
servicing agent fees and shareholder communications, directly attributable to
that class. Class 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.
- --------------------------------------------------------------------------------
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
27 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
the shareholder's Warranty Amount, the Warranty Provider will pay the Fund an
amount equal to the excess of his or her warranty amount over his or her account
value.
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 year ended August 31, 2004, the amount paid for Warranty Agreement
fees was $1,487,749.
- --------------------------------------------------------------------------------
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 maturities approximately equal to the period
remaining in the Warranty Period. Long-term debt securities having a remaining
maturity in excess of 60 days will be valued at the mean between the "bid" and
"asked" prices. 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 Stock Exchange (the
Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for
business. 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
28 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
Manager, may transfer uninvested cash balances into joint trading accounts on a
daily basis. 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
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.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD TAX PURPOSES
----------------------------------------------------------------------
$-- $-- $-- $22,944,974
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for August 31, 2004. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO
REDUCTION TO ACCUMULATED NET
REDUCTION TO ACCUMULATED NET REALIZED GAIN
PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS
-------------------------------------------------------------
$474,607 $1,326,150 $851,543
29 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax character of distributions paid during the years ended August 31, 2004
and August 31, 2003 was as follows:
YEAR ENDED PERIOD ENDED
AUGUST 31, 2004 AUGUST 31, 2003 1
--------------------------------------------------------------
Distributions paid from:
Ordinary income $ 601,524 $--
Return of capital 475,161 --
Net realized gain 1,041,712 --
------------------------------
Total $2,118,397 $--
==============================
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Total federal tax cost $ 229,015,201
=============
Gross unrealized appreciation $ 23,209,265
Gross unrealized depreciation (264,291)
-------------
Net unrealized appreciation $ 22,944,974
=============
- --------------------------------------------------------------------------------
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. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of other Oppenheimer funds selected by the
Trustee. The Fund purchases shares of the funds selected for deferral by the
Trustee in amounts equal to his or her deemed investment, resulting in a Fund
asset equal to the deferred compensation liability. Such assets are included as
a component of "Other" within the asset section of the Statement of Assets and
Liabilities. 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.
30 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date. 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 U.S. 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 $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
YEAR ENDED AUGUST 31, 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 66,031 746,580 -- --
Redeemed (1,135,729) (12,589,466) (75,844) (762,910)
---------------------------------------------------------------
Net increase (decrease) (1,069,698) $(11,842,886) 7,658,196 $ 76,527,144
===============================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold -- $ -- 12,010,627 $120,027,161 2
Dividends and/or
distributions reinvested 65,445 719,894 -- --
Redeemed (719,209) (7,812,522) (45,240) (454,845)
---------------------------------------------------------------
Net increase (decrease) (653,764) $ (7,092,628) 11,965,387 $119,572,316
===============================================================
- ---------------------------------------------------------------------------------------------
CLASS C
Sold -- $ -- 5,882,060 $ 58,782,614 2
Dividends and/or
distributions reinvested 25,625 451,966 -- --
Redeemed (1,109,424) (12,345,802) (17,401) (174,989)
---------------------------------------------------------------
Net increase (decrease) (1,083,799) $(11,893,836) 5,864,659 $ 58,607,625
===============================================================
31 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED AUGUST 31, 2004 PERIOD ENDED AUGUST 31, 2003 1
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
CLASS N
Sold -- $ -- 528,325 $ 5,279,783 2
Dividends and/or
distributions reinvested 4,395 48,349 -- --
Redeemed (62,448) (696,206) -- --
--------------------------------------------------------------
Net increase (decrease) (58,053) $ (647,857) 528,325 $ 5,279,783
==============================================================
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.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
August 31, 2004, were $238,471,811 and $259,556,220, respectively. There were
purchases of $243,729,006 and sales of $258,721,586 of U.S. government and
government agency obligations for the year ended August 31, 2004.
- --------------------------------------------------------------------------------
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 Oppenheimer Main Street Fund
relating to the Fund's assets invested in Oppenheimer Main Street 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.
32 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for
preparing and filing the Fund's tax returns.
- --------------------------------------------------------------------------------
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 year ended August 31, 2004, the Fund paid
$191,651 to OFS for services to 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.
- --------------------------------------------------------------------------------
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 all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
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.
- --------------------------------------------------------------------------------
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 those 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 and 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 August 31, 2004
for Class B, Class C and Class N shares were $4,792,314, $519,335 and $94,403,
respectively. Fees incurred by the Fund under the plans are detailed in the
Statement of Operations.
- --------------------------------------------------------------------------------
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.
33 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------------------
August 31, 2004 $3,071 $337 $275,030 $22,133 $6,056
- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. 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. During
the year ended August 31, 2004, the Manager reimbursed the Fund $328,320. This
voluntary undertaking may be amended or eliminated at any time.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average daily net assets per fiscal year
for all classes. This undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. LITIGATION
Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine directors/ trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law.
OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.
34 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Principal Protected Main Street Fund, a series of Oppenheimer
Principal Protected Trust, including the statement of investments, as of August
31, 2004, and the related statement of operations for the year then ended, the
statements of changes in net assets for the year then ended and the period from
June 2, 2003 (commencement of operations) to August 31, 2003, and the financial
highlights for the periods indicated. 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 the standards of the Public
Company Accounting Oversight Board (United States). 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 August 31, 2004, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Principal Protected Main Street Fund as of August 31, 2004, the
results of its operations for the year then ended, the changes in its net assets
for the year then ended and the period from June 2, 2003 (commencement of
operations) to August 31, 2003, and the financial highlights for the periods
presented, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 14, 2004
35 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends and distributions of $0.1071, $0.0722, $0.0729 and $0.0943 per
share were paid to Class A, Class B, Class C and Class N shareholders,
respectively, on December 31, 2003, all of which was designated as ordinary
income for federal income tax purposes.
Dividends, if any, paid by the Fund during the fiscal year ended August
31, 2004 which are not designated as capital gain distributions should be
multiplied by 100% to arrive at the amount eligible for the corporate
dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended August 31, 2004 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $1,728,870 of the Fund's fiscal year taxable income may be eligible
for the lower individual income tax rates. In early 2005, shareholders of record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
36 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
1.800.525.7048, (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 is 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 Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
37 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD
FUND, LENGTH OF SERVICE, AGE BY TRUSTEE; NUMBER OF PORTFOLIOS IN FUND COMPLEX CURRENTLY OVERSEEN BY TRUSTEE
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES CO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, Chairman of the following private mortgage banking companies: Cherry Creek
Chairman of the Board of Mortgage Company (since 1991), Centennial State Mortgage Company (since
Trustees (since 2003) and 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services,
Trustee (since 2003) Inc. (since 1997); Chairman of the following private companies: Great Frontier
Age: 67 Insurance (insurance agency) (since 1995), Ambassador Media Corporation and
Broadway Ventures (since 1984); a director of the following public companies:
Helmerich & Payne, Inc. (oil and gas drilling/production company) (since 1992)
and UNUMProvident (insurance company) (since 1991). Mr. Armstrong is also
a Director/Trustee of Campus Crusade for Christ and the Bradley Foundation.
Formerly a director of the following: Storage Technology Corporation (a publicly-
held computer equipment company) (1991-February 2003), and International
Family Entertainment (television channel) (1992-1997), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-1999), and Frontier Title (title insurance
agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees
38 portfolios in the OppenheimerFunds complex.
ROBERT G. AVIS, Formerly, Director and President of A.G. Edwards Capital, Inc. (General Partner
Trustee (since 2003) of private equity funds) (until February 2001); Chairman, President and Chief
Age: 73 Executive Officer of A.G. Edwards Capital, Inc. (until March 2000); Vice Chairman
and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons,
Inc. (its brokerage company subsidiary) (until March 1999); Chairman of A.G.
Edwards Trust Company and A.G.E. Asset Management (investment advisor)
(until March 1999); and a Director (until March 2000) of A.G. Edwards & Sons
and A.G. Edwards Trust Company. Oversees 38 portfolios in the
OppenheimerFunds complex.
GEORGE C. BOWEN, Formerly Assistant Secretary and a director (December 1991-April 1999) of
Trustee (since 2003) Centennial Asset Management Corporation; President, Treasurer and a director
Age: 67 (June 1989-April 1999) of Centennial Capital Corporation; Chief Executive
Officer and a director of MultiSource Services, Inc. (March 1996-April 1999).
Until April 1999 Mr. Bowen held several positions in subsidiary or affiliated
companies of the Manager. Oversees 38 portfolios in the OppenheimerFunds
complex.
EDWARD L. CAMERON, A member of The Life Guard of Mount Vernon, George Washington's home
Trustee (since 2003) (since June 2000). Formerly Director (March 2001-May 2002) of Genetic ID, Inc.
Age: 66 and its subsidiaries (a privately held biotech company); a partner (July 1974-June
1999) with PricewaterhouseCoopers LLP (an accounting firm); and Chairman
(July 1994-June 1998) of Price Waterhouse LLP Global Investment Management
Industry Services Group. Oversees 38 portfolios in the OppenheimerFunds
complex.
JON S. FOSSEL, Director (since February 1998) of Rocky Mountain Elk Foundation (a not-for-
Trustee (since 2003) profit foundation); a director (since 1997) of Putnam Lovell Finance (finance
Age: 62 company); a director (since June 2002) of UNUMProvident (an insurance company).
Formerly a director (October 1999-October 2003) of P.R. Pharmaceuticals
(a privately held company); Chairman and a director (until October 1996) and
President and Chief Executive Officer (until October 1995) of the Manager;
President, Chief Executive Officer and a director (until October 1995) of
38 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
JON S. FOSSEL, Oppenheimer Acquisition Corp., Shareholders Services Inc. and Shareholder
Continued Financial Services, Inc. Oversees 38 portfolios in the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado Uplift (a non-profit charity) (since September 1984).
Trustee (since 2003) Formerly (until October 1994) Mr. Freedman held several positions in subsidiary
Age: 63 or affiliated companies of the Manager. Oversees 38 portfolios in the
OppenheimerFunds complex.
BEVERLY L. HAMILTON, Trustee of Monterey International Studies (an educational organization) (since
Trustee (since 2003) February 2000); a director of The California Endowment (a philanthropic
Age: 57 organization) (since April 2002) and of Community Hospital of Monterey Peninsula
(educational organization) (since February 2002); a director of America Funds
Emerging Markets Growth Fund (since October 1991) (an investment company);
an advisor to Credit Suisse First Boston's Sprout venture capital unit. Mrs.
Hamilton also is a member of the investment committees of the Rockefeller
Foundation and of the University of Michigan. Formerly, Trustee of MassMutual
Institutional Funds (open-end investment company) (1996-May 2004); a director
of MML Series Investment Fund (April 1989-May 2004) and MML Services
(April 1987-May 2004) (investment companies); member of the investment
committee (2000-2003) of Hartford Hospital; an advisor (2000-2003) to
Unilever (Holland)'s pension fund; and President (February 1991-April 2000)
of ARCO Investment Management Company. Oversees 37 portfolios in the
OppenheimerFunds complex.
ROBERT J. MALONE, Chairman, Chief Executive Officer and Director of Steele Street State Bank
Trustee (since 2003) (a commercial banking entity) (since August 2003); director of Colorado UpLIFT
Age: 59 (a non-profit organization) (since 1986); trustee (since 2000) of the Gallagher
Family Foundation (non-profit organization). Formerly, Chairman of U.S. Bank-
Colorado (a subsidiary of U.S. Bancorp and formerly Colorado National Bank,)
(July 1996-April 1, 1999), a director of: Commercial Assets, Inc. (a REIT) (1993-
2000), Jones Knowledge, Inc. (a privately held company) (2001-July 2004) and
U.S. Exploration, Inc. (oil and gas exploration) (1997-February 2004). Oversees
37 portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Institutional Funds (since 1996) and MML Series
Trustee (since 2003) Investment Fund (since 1987) (both open-end investment companies) and the
Age: 62 Springfield Library and Museum Association (since 1995) (museums) and the
Community Music School of Springfield (music school) (since 1996); Trustee
(since 1987), Chairman of the Board (since 2003) and Chairman of the
investment committee (since 1994) for the Worcester Polytech Institute (private
university); and President and Treasurer (since January 1999) of the SIS Fund
(a private not for profit charitable fund). Formerly, member of the investment
committee of the Community Foundation of Western Massachusetts (1998 -
2003); Chairman (January 1999-July 1999) of SIS & Family Bank, F.S.B. (formerly
SIS Bank) (commercial bank); and Executive Vice President (January 1999-July
1999) of Peoples Heritage Financial Group, Inc. (commercial bank). Oversees
38 portfolios in the OppenheimerFunds complex.
39 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IN THE CHART BELOW IS TWO WORLD FINANCIAL CENTER,
AND OFFICER 225 LIBERTY STREET, 11TH FLOOR, NEW YORK, NY 10281-1008. MR. MURPHY SERVES FOR
AN INDEFINITE TERM, UNTIL HIS RESIGNATION, DEATH OR REMOVAL.
JOHN V. MURPHY, Chairman, Chief Executive Officer and director (since June 2001) and President
President and Trustee (since September 2000) of the Manager; President and a director or trustee
(since 2003) of other Oppenheimer funds; President and a director (since July 2001) of
Age: 55 Oppenheimer Acquisition Corp. (the Manager's parent holding company) and
of Oppenheimer Partnership Holdings, Inc. (a holding company subsidiary of the
Manager); a director (since November 2001) of OppenheimerFunds Distributor,
Inc. (a subsidiary of the Manager); Chairman and a director (since July 2001)
of Shareholder Services, Inc. and of Shareholder Financial Services, Inc. (transfer
agent subsidiaries of the Manager); President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust program established by the
Manager); a director of the following investment advisory subsidiaries of the
Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation and
OFI Private Investments, Inc. (since July 2001); President (since November 1, 2001)
and a director (since July 2001) of Oppenheimer Real Asset Management, Inc.;
Executive Vice President (since February 1997) of Massachusetts Mutual Life
Insurance Company (the Manager's parent company); a director (since June 1995) of
DLB Acquisition Corporation (a holding company that owns the shares of Babson
Capital Management LLC); a member of the Investment Company Institute's Board of
Governors (elected to serve from October 3, 2003 through September 30, 2006).
Formerly, Chief Operating Officer (September 2000-June 2001) of the Manager;
President and trustee (November 1999-November 2001) of MML Series Investment Fund
and MassMutual Institutional Funds (open-end investment companies); a director
(September 1999-August 2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000) of MML Bay State Life
Insurance Company; a director (June 1989-June 1998) of Emerald Isle Bancorp and
Hibernia Savings Bank (a wholly-owned subsidiary of Emerald Isle Bancorp). Oversees
73 portfolios as Trustee/Director and 10 portfolios as Officer in the
OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------------------
OFFICERS THE ADDRESS OF THE OFFICERS IN THE CHART BELOW IS AS FOLLOWS: FOR MESSRS. MANIOUDAKIS,
SCHADT, AND ZACK, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR,
NEW YORK, NY 10281-1008, FOR MESSRS. VANDEHEY AND WIXTED 6803 S. TUCSON WAY,
CENTENNIAL, CO 80112-3924. EACH OFFICER SERVES FOR AN ANNUAL TERM OR UNTIL HIS OR
HER EARLIER RESIGNATION, DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since April 2002), of HarbourView Asset
Vice President and Management Corporation (since April, 2002 and of OFI Institutional Asset
Portfolio Manager Management, Inc. (since June 2002); an officer of 14 portfolios in the
(since 2003) OppenheimerFunds complex. Formerly Executive Director and portfolio
Age: 37 manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (August 1993-April 2002).
RUDI SCHADT, Vice President, Director of Research, Product Design and Risk Management of
Vice President and the Manager; an officer of 2 portfolios in the OppenheimerFunds complex. Prior
Portfolio Manager to joining the Manager in February 2002 he was a Director and Senior Quantitative
(since 2004) Analyst (September 2000-April 2001) at UBS Asset Management prior to
Age: 46 which he was an Associate Director and Senior Researcher (June 1997-August
2000) at State Street Global Investors.
40 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
BRIAN W. WIXTED, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer (since 2003) Treasurer of HarbourView Asset Management Corporation, Shareholder Financial
Age: 44 Services, Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management
Corporation, and Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI
Private Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd.
and OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management,
Inc. (since November 2000), and of OppenheimerFunds Legacy Program (a Colorado
non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer
(since May 2000) of OFI Trust Company (a trust company subsidiary of the Manager);
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. Formerly
Assistant Treasurer of Centennial Asset Management Corporation (March 1999-October
2003) and OppenheimerFunds Legacy Program (April 2000-June 2003); Principal and
Chief Operating Officer (March 1995-March 1999) at Bankers Trust Company-Mutual Fund
Services Division. An officer of 83 portfolios in the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since
Vice President and Secretary February 2002) of the Manager; General Counsel and a director (since November
(since 2003) 2001) of the Distributor; General Counsel (since November 2001) of Centennial
Age: 56 Asset Management Corporation; Senior Vice President and General Counsel
(since November 2001) of HarbourView Asset Management Corporation;
Secretary and General Counsel (since November 2001) of Oppenheimer
Acquisition Corp.; Assistant Secretary and a director (since October 1997) of
OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President
and a director (since November 2001) of Oppenheimer Partnership Holdings,
Inc.; a director (since November 2001) of Oppenheimer Real Asset Management,
Inc.; Senior Vice President, General Counsel and a director (since November 2001)
of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and OFI Trust Company; Vice President (since November 2001)
of OppenheimerFunds Legacy Program; Senior Vice President and General
Counsel (since November 2001) of OFI Institutional Asset Management, Inc.; a
director (since June 2003) of OppenheimerFunds (Asia) Limited. Formerly Senior
Vice President (May 1985-December 2003), Acting General Counsel (November
2001-February 2002) and Associate General Counsel (May 1981-October 2001)
of the Manager; Assistant Secretary of Shareholder Services, Inc. (May 1985-
November 2001), Shareholder Financial Services, Inc. (November 1989-November
2001); and OppenheimerFunds International Ltd. (October 1997-November
2001). An officer of 83 portfolios in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Manager; Vice President (since June 1983) of OppenheimerFunds Distributor,
Chief Compliance Officer Inc., Centennial Asset Management Corporation and Shareholder Services, Inc.
(since 2004) Formerly (until February 2004) Vice President and Director of Internal Audit of
Age: 53 OppenheimerFunds, Inc. An officer of 83 portfolios in the Oppenheimer funds
complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY
CALLING 1-800.525.7048.
41 | 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
(a) Audit Fees
The principal accountant for the audit of the registrant's annual
financial statements billed $12,000 in fiscal 2004 and $23,600 in
fiscal 2003.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and
$40,259 in fiscal 2003 to the registrant's investment adviser or
any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant.
Such fees would include, among others: due diligence related to
mergers and acquisitions, accounting consultations and audits in
connection with acquisitions, internal control reviews and
consultation concerning financial accounting and reporting
standards.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and
$10,448 in fiscal 2003 to the registrant's investment adviser or
any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant.
Such fees would include, among others: tax compliance, tax
planning and tax advice. Tax compliance generally involves
preparation of original and amended tax returns, claims for a
refund and tax payment-planning services. Tax planning and tax
advice
includes assistance with tax audits and appeals, tax advice
related to mergers and acquisitions and requests for rulings or
technical advice from taxing authorities.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees to the registrant during
the last two fiscal years.
The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and $3,500
in fiscal 2003 to the registrant's investment adviser or any
entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant.
Such fees would include services provided to the registrant's
Board of Trustees with respect to the annual renewal of the
registrant's investment advisory agreement.
(e) (1) During its regularly scheduled periodic meetings, the
registrant's audit committee will pre-approve all audit,
audit-related, tax and other services to be provided by the
principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its
Chairman for any subsequent new engagements that arise between
regularly scheduled meeting dates provided that any fees such
pre-approved are presented to the audit committee at its next
regularly scheduled meeting.
Pre-approval of non-audit services is waived provided that: 1) the
aggregate amount of all such services provided constitutes no more
than five percent of the total amount of fees paid by the
registrant to it principal accountant during the fiscal year in
which services are provided 2) such services were not recognized
by the registrant at the time of engagement as non-audit services
and 3) such services are promptly brought to the attention of the
audit committee of the registrant and approved prior to the
completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed no such fees in fiscal 2004 and
$54,207 in fiscal 2003 to the registrant and the registrant's
investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing
services to the registrant related to non-audit fees. Those
billings did not include any prohibited non-audit services as
defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser, and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is
compatible with maintaining the principal account's independence.
No such services were rendered.
ITEM 5. NOT APPLICABLE
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable
ITEM 7. NOT APPLICABLE
ITEM 8. NOT APPLICABLE
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The members of the Governance Committee are Robert Malone (Chairman),
William Armstrong, Beverly Hamilton and F. William Marshall, Jr. Each member of
the Committee is independent, meaning each person is not "interested person" as
defined in the Act. The Governance Committee was established in August 2004. The
Governance Committee is expected to consider general governance matters,
including a formal process for shareholders to send communications to the Board
and the qualifications of candidates for board positions including consideration
of any candidate recommended by shareholders.
The Governance Committee has not yet adopted a charter, but anticipates that it
will do so by the end of this calendar year. The Committee has temporarily
adopted the process previously adopted by the Audit Committee regarding
shareholder submission of nominees for board positions. That policy is as
follows. To date, the Committee has been able to identify from its own resources
an ample number of qualified candidates. Nonetheless, shareholders may submit
names of individuals, accompanied by complete and properly supported resumes,
for the Governance Committee's consideration by mailing such information to the
Committee in care of the Fund. The Committee may consider such persons at such
time as it meets to consider possible nominees. The Committee, however, reserves
sole discretion to determine the candidates to present to the Board and/or
shareholders when it meets for the purpose of considering potential nominees.
This Committee also will select and nominate, to the full Board, nominees for
election as Trustees, and select and nominate Independent Trustees for election.
The Committee may, but need not, consider the advice and recommendation of the
Manager and its affiliates in selecting nominees. The full Board elects new
trustees except for those instances when a shareholder vote is required.
Shareholders who desire to communicate with the Board should address
correspondence to the Board or an individual Board member and may submit their
correspondence electronically at www.oppenheimerfunds.com
http://www.oppenheimerfunds.com/ under the caption "contact us" or by mail to
the Fund at the address above. The Governance Committee will consider if a
different process should be recommended to the Board.
ITEM 10. CONTROLS AND PROCEDURES
(a) Based on their evaluation of registrant's disclosure controls and
procedures (as defined in rule 30a-3(c) under the Investment
Company Act of 1940 (17 CFR 270.30a-3(c)) as of August 31, 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)(NOT
APPLICABLE TO SEMIANNUAL REPORTS)
(B) EXHIBITS ATTACHED HERETO. (ATTACH CERTIFICATIONS AS EXHIBITS)