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 TRUST
(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
Date of reporting period: 08/31/2006
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Equity 99.1%
Cash Equivalents 0.9
The Fund seeks exposure to the equity markets by investing in the Oppenheimer
Main Street Fund. Information relating to the Oppenheimer Main Street Fund's
portfolio holdings appears below.
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of investments.
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OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) SECTOR ALLOCATION
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Financials 23.2%
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Information Technology 15.9
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Industrials 13.3
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Energy 12.7
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Health Care 12.2
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Consumer Staples 8.2
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Consumer Discretionary 7.8
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Materials 2.7
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Telecommunication Services 2.6
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Utilities 1.4
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of common stocks.
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10 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
TOP TEN COMMON STOCK INDUSTRIES
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Oil & Gas 12.0%
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Diversified Financial Services 6.5
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Pharmaceuticals 5.7
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Insurance 5.4
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Commercial Banks 4.9
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Capital Markets 4.8
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Health Care Providers & Services 4.7
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Computers & Peripherals 4.0
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Industrial Conglomerates 3.9
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Aerospace & Defense 3.9
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on net assets.
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
TOP TEN COMMON STOCK HOLDINGS
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Exxon Mobil Corp. 3.8%
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General Electric Co. 2.7
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Bank of America Corp. 2.4
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Citigroup, Inc. 2.3
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Microsoft Corp. 2.0
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Chevron Corp. 1.6
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Johnson & Johnson 1.6
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JPMorgan Chase & Co. 1.6
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Altria Group, Inc. 1.5
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Pfizer, Inc. 1.4
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on net assets. For more current Fund holdings,
please visit www.oppenheimerfunds.com.
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11 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED AUGUST 31, 2006, FOLLOWED BY
A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO THE S&P 500 INDEX.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE. For the 12-month period ended August
31, 2006, Oppenheimer Principal Protected Main Street Fund's Class A shares
(without sales charge) produced a total return of 7.67%, which was below the S&P
500 Index's total return of 8.87%. During periods of rising stock markets,
principal protected funds tend to lag behind pure stock market indices, because
they typically have less than 100% of their net assets invested in the equity
markets. The Fund's main goal is not to chase absolute returns, but to preserve
investor's capital, while staying competitive with its peers.
The equity component of the Fund's portfolio is invested in Class Y shares
of Oppenheimer Main Street Fund. The fixed income component is normally invested
primarily in Treasury STRIPS that mature on or around the end of the seven-year
Warranty Period.5 The asset allocation of the Oppenheimer Principal Protected
Main Street Fund will shift over time based on market factors such as interest
rates, stock market performance and certain volatility measures. Additionally,
there is a pre-defined algorithm that dictates the maximum percentage the Fund
can invest in equity securities. This algorithm is based in part on current
stock weightings and changes in the market environment (including interest
rates, stock market performance and volatility).
OppenheimerFunds' risk management team monitors the Fund's asset allocation
and keeps the Fund's equity percentage dynamically set, depending on market
conditions. In an up stock market, the Fund will normally buy shares of
Oppenheimer Main Street Fund to take advantage of stock market growth potential.
While in a down market, the Fund will normally sell shares of Oppenheimer Main
Street Fund and buy Treasury STRIPS to attempt to cushion the Fund's share price
from potential declines in stock prices. In the sideways market, the algorithm
allows the Fund "to stay still" in order to avoid unnecessary trading costs.
OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND MAY NOT BE SUITABLE FOR
INVESTORS WHO NEED TO REDEEM SHARES PRIOR TO MATURITY, OR WHO NEED TO RECEIVE
DIVIDENDS IN CASH.
5. The Fund may invest a significant portion of assets in Treasury STRIPS, which
are sold at a discount and accrue to par value at maturity. For taxable income
purposes the discount on these treasury strips is amortized into income daily
using a level yield method over the holding period of the security, thus
investors will have taxable income.
12 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
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As of August 31, 2006, 99.6% of the Fund's net assets were invested in the
equity component (through Oppenheimer Main Street Fund's Class Y shares). For
the 12-month period ended August 31, 2006, the Fund's equity component, the
Class Y shares of Oppenheimer Main Street Fund, produced total returns that were
higher than that of its benchmark, the S&P 500 Index, and higher than the
average return of the funds reported in its peer group, the Lipper Large-Cap
Core category. 6 We attribute Oppenheimer Main Street Fund's strong relative
performance mainly to the success of its management team's security selection
strategy. The management team's sector allocation strategy made more modest
contributions to relative performance, while its market capitalization
allocations neither significantly helped nor hurt its performance for the
reporting period overall.
However, on closer examination, it appears that different factors drove
Oppenheimer Main Street Fund's performance at different times during the period.
For example, the management team's security selection strategy provided stronger
contributions during the reporting period's first nine months, but its emphasis
on the larger market capitalization ranges boosted returns over the final three
months of the reporting period, offsetting earlier weakness. This pattern is
consistent with the management team's observation that the long cycle of
small-cap outperformance appears to have given way to a new cycle of better
returns from large- and mega-cap stocks.
During the reporting period overall, Oppenheimer Main Street Fund received
positive contributions to its relative performance from eight of the ten
economic sectors represented in the S&P 500 Index. The energy area produced
particularly strong results, primarily as a result of the management team's
decision to allocate a relatively heavy exposure to the sector. In addition, the
management team's security selection strategy helped boost returns in the
consumer staples sector, more than balancing the adverse effects of an
underweighted position. Stock selections were also good in the health care,
industrials and financials sectors.
On the other hand, Oppenheimer Main Street Fund's telecommunications
services and information technology holdings detracted slightly from its
relative performance. Lagging performance in the telecommunications services
sector was primarily due to an underweighted position, preventing Oppenheimer
Main Street Fund from participating fully in the sector's rebound from
pronounced weakness in earlier reporting periods. Although stock selection was
good in information technology, the Fund's overweighted position in this weak
sector had a small negative impact on relative performance.
OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND MAY NOT BE SUITABLE FOR
INVESTORS WHO NEED TO REDEEM SHARES PRIOR TO MATURITY, OR WHO NEED TO RECEIVE
DIVIDENDS IN CASH.
6. The Lipper Large-Cap Category Average produced total returns of 7.12% for the
12 months ending August 31, 2006.
13 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
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Finally, Oppenheimer Main Street Fund's risk management disciplines
continued to work well. For example, as of the end of the reporting period,
Oppenheimer Main Street Fund was diversified across approximately 426 individual
stocks representing all of the economic sectors in the S&P 500 Index. No stock
held by Oppenheimer Main Street Fund is overweighted by more than 0.52% or
underweighted by more than 0.78% relative to the S&P 500 Index benchmark. As a
result, the performance of Oppenheimer Main Street Fund is not dependent on
making large, risky bets on individual stocks but on the effectiveness of its
disciplined quantitative models and its active market cap allocation strategies.
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, 2006. 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.
14 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (Class A)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal
Protected Main Street S&P 500
Fund (Class A) 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
11/30/2004 10,706 12,503
02/28/2005 10,951 12,879
05/31/2005 10,864 12,806
08/31/2005 11,077 13,180
11/30/2005 11,377 13,558
02/28/2006 11,752 13,960
05/31/2006 11,654 13,912
08/31/2006 11,927 14,349
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 08/31/06
1 Year 1.48% Since Inception (6/2/03) 5.58%
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, IF REDEEMED PRIOR TO THE END OF THE WARRANTY
PERIOD (AUGUST 5, 2010), 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 3% (SINCE INCEPTION); AND FOR CLASS C
AND CLASS N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. SEE PAGE 19 FOR FURTHER INFORMATION.
15 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (Class B)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal
Protected Main Street S&P 500
Fund (Class B) 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 10,891 11,710
11/30/2004 11,243 12,503
02/28/2005 11,486 12,879
05/31/2005 11,364 12,806
08/31/2005 11,567 13,180
11/30/2005 11,851 13,558
02/28/2006 12,222 13,960
05/31/2006 12,100 13,912
08/31/2006 12,065 14,349
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 08/31/06
1 Year 1.89% Since Inception (6/2/03) 5.95%
16 | 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 (Class C)
S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer
Principal
Protected Main Street S&P 500
Fund (Class C) 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
11/30/2004 11,244 12,503
02/28/2005 11,480 12,879
05/31/2005 11,369 12,806
08/31/2005 11,572 13,180
11/30/2005 11,855 13,558
02/28/2006 12,231 13,960
05/31/2006 12,110 13,912
08/31/2006 12,373 14,349
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 08/31/06
1 Year 5.93% Since Inception (6/2/03) 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, IF REDEEMED PRIOR TO THE END OF THE WARRANTY
PERIOD (AUGUST 5, 2010), 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 3% (SINCE INCEPTION); AND FOR CLASS C
AND CLASS N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. SEE PAGE 19 FOR FURTHER INFORMATION.
17 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Principal Protected Main Street Fund (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 (Class N) S&P 500 Index
03/01/2001 10,000 10,000
05/31/2001 10,259 10,162
08/31/2001 9,339 9,203
11/30/2001 9,307 9,283
02/28/2002 9,229 9,049
05/31/2002 9,235 8,756
08/31/2002 8,111 7,548
11/30/2002 8,024 7,750
02/28/2003 7,312 6,998
05/31/2003 8,313 8,050
08/31/2003 8,661 8,458
11/30/2003 9,243 8,919
02/29/2004 9,951 9,692
05/31/2004 9,717 9,524
08/31/2004 9,607 9,426
11/30/2004 10,138 10,065
02/28/2005 10,465 10,367
05/31/2005 10,384 10,308
08/31/2005 10,693 10,609
11/30/2005 11,061 10,914
02/28/2006 11,433 11,237
05/31/2006 11,349 11,198
08/31/2006 11,642 11,550
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year 6.50% Since Inception (6/2/03) 7.33%
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, IF REDEEMED PRIOR TO THE END OF THE WARRANTY
PERIOD (AUGUST 5, 2010), 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 3% (SINCE INCEPTION); AND FOR CLASS C
AND CLASS N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR
PERIOD. SEE PAGE 19 FOR FURTHER INFORMATION.
18 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES
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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" to make sure that the value of each shareholder's account on
the maturity date (August 5, 2010) 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 the shareholders. The Warranty is dependent on the financial ability of the
Warranty provider to pay. The Warranty Amount will be reduced by any redemptions
of Fund shares or distributions taken in cash, sales charges and extraordinary
fund expenses. Distributions from the Fund are taxable whether or not
shareholders reinvest them in additional shares of the Fund. The Warranty does
not apply to shares redeemed during the Warranty Period, and you can lose money
on shares you redeem early. Neither the Fund nor OppenheimerFunds, Inc. is
obligated to replace the Warranty provider should it be unable to make payments
necessary to support the Warranty Amount. The Financial Warranty increases the
Fund's expenses that shareholders pay and could lower Fund performance.
Shareholders
19 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES
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must redeem their shares in the Fund on, and only on, the Maturity Date
(expected to be August 5, 2010) to receive the greater of the then-current net
asset value of the Fund or their Warranty Amount. Prior to the Maturity Date the
Fund will provide each shareholder a notice to remind them that shares must be
redeemed on the Maturity Date to receive the full benefit of the Financial
Warranty. After the Maturity Date, shares of the Fund will not be covered under
the terms of the Financial Warranty and will be subject to market fluctuations
and the shares will then be redeemable at the Fund's then-current net asset
value, which may be lower than the Warranty Amount.
Shares may be exchanged or redeemed at any time. However, if you redeem shares
prior to the end of the seven-year Warranty Period you will receive the
then-current NAV per share, which may be higher or lower than the Warranty
Amount. To receive at least the full Warranty Amount, you must maintain your
original investment in the Fund until the end of the seven-year term and
reinvest all dividends and distributions.
During the Warranty Period, there are substantial opportunity costs. Allocating
assets to U.S. Government securities reduces the Fund's ability to participate
fully in upward equity market movements. Therefore, it represents some loss of
opportunity, or opportunity cost, compared to a portfolio that is fully invested
in equities. In the event that the Fund's stock allocation declines
substantially, generally due to heavy stock market declines, then the Fund will
permanently shift all investments to fixed income securities and certain of the
Fund's expenses will be reduced. In the event of reallocation of 100% of the
Fund's assets to U.S. Government securities, the Fund will not be permitted to
allocate its assets to equity securities for the remainder of the Warranty
Period, which will eliminate the Fund's ability to participate in any upward
equity market movement.
While these fixed income securities (primarily U.S. Government securities) that
the Fund invests in don't pay income the traditional way, an income calculation
is made for tax purposes based on the purchase price and the time until the
security reaches par value. Like traditional interest payments, this amount is
reported as income for tax purposes. The zero coupon bonds the Fund invests in
do not pay interest income until maturity. However,
20 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES
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the Fund is required to accrue and declare a dividend on such phantom income.
Thus, you will have taxable income.
Distributions from the Fund are taxable whether or not you reinvest them in
additional shares of the Fund. The Fund is not obligated to replace the Warranty
Provider should it be unable to make the payments necessary to support the
Warranty Amount. The Financial Warranty increases the Fund's expenses that you
pay and therefore the Fund's expenses will generally be higher than a fund that
does not offer a Warranty.
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.
21 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND EXPENSES
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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; 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, 2006.
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 Portfolio'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 the
Statement
22 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FUND EXPENSES
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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.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(3/1/06) (8/31/06) AUGUST 31, 2006
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Class A Actual $1,000.00 $1,014.90 $5.04
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Class A Hypothetical 1,000.00 1,020.21 5.05
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Class B Actual 1,000.00 1,011.60 8.86
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Class B Hypothetical 1,000.00 1,016.43 8.88
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Class C Actual 1,000.00 1,011.60 8.86
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Class C Hypothetical 1,000.00 1,016.43 8.88
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,014.10 5.96
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,019.31 5.97
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 184/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended August
31, 2006 are as follows:
CLASS EXPENSE RATIOS
- -------------------------
Class A 0.99%
- -------------------------
Class B 1.74
- -------------------------
Class C 1.74
- -------------------------
Class N 1.17
The expense ratios reflect voluntary waivers or 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 waivers or
reimbursements.
- --------------------------------------------------------------------------------
23 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF INVESTMENTS August 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- ------------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--99.6% 1
- ------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y (Cost $150,397,702) 5,200,552 $204,537,707
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.9%
- ------------------------------------------------------------------------------------
Undivided interest of 0.35% in joint repurchase
agreement (Principal Amount /Value with a maturity
value of $500,507,285) with Cantor $500,435,000,
Fitzgerald & Co./Cantor Fitzgerald 5.20%, dated
8/31/06, to Securities, be repurchased at $1,764,255
on 9/1/06, collateralized by U.S. Treasury Bonds,
6.125%-8.50%, 2/15/20-11/15/27, with a value of
$511,207,010 (Cost $1,764,000) $1,764,000 1,764,000
- ------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $152,161,702) 100.5% 206,301,707
- ------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5) (998,459)
---------------------------
NET ASSETS 100.0% $205,303,248
===========================
FOOTNOTE TO STATEMENT OF INVESTMENTS
1. Represents ownership of an affiliated fund, at or during the period ended
August 31, 2006. Transactions during the period in which the issuer was an
affiliate are as follows:
SHARES GROSS GROSS SHARES
AUGUST 31, 2005 ADDITIONS REDUCTIONS AUGUST 31, 2006
- -----------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y 5,428,525 1,105,831 1,333,804 5,200,552
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME LOSS
- -------------------------------------------------------------------------------------------
Oppenheimer Main Street Fund, Cl. Y $204,537,707 $3,149,822 $557,671
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF ASSETS AND LIABILITIES August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value--see accompanying statement of
investments:
Unaffiliated companies (cost $1,764,000) $ 1,764,000
Affiliated companies (cost $150,397,702) 204,537,707
-------------
206,301,707
- --------------------------------------------------------------------------------
Cash 90,505
- --------------------------------------------------------------------------------
Receivables and other assets:
Interest 255
Other 7,940
-------------
Total assets 206,400,407
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 712,845
Warranty agreement fees 204,977
Distribution and service plan fees 87,021
Shareholder communications 24,564
Transfer and shareholder servicing agent fees 13,025
Trustees' compensation 5,134
Other 49,593
-------------
Total liabilities 1,097,159
- --------------------------------------------------------------------------------
NET ASSETS $205,303,248
=============
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 16,839
- --------------------------------------------------------------------------------
Additional paid-in capital 153,468,339
- --------------------------------------------------------------------------------
Accumulated net investment loss (89,761)
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,232,174)
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments 54,140,005
-------------
NET ASSETS $205,303,248
=============
25 | 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 $54,799,781 and 4,479,459 shares of
beneficial interest outstanding) $ 12.23
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price) $ 12.98
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $110,227,985 and 9,057,550
shares of beneficial interest outstanding) $ 12.17
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $35,733,086 and 2,929,954
shares of beneficial interest outstanding) $ 12.20
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $4,542,396 and 371,663
shares of beneficial interest outstanding) $ 12.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENT OF OPERATIONS For the Year Ended August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends from affiliated companies $ 3,149,822
- --------------------------------------------------------------------------------
Interest 292,287
- --------------------------------------------------------------------------------
Other income 72
------------
Total investment income 3,442,181
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 134,914
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 149,430
Class B 1,149,097
Class C 388,736
Class N 22,348
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 40,870
Class B 88,982
Class C 25,951
Class N 810
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 19,761
Class B 32,428
Class C 10,227
Class N 560
- --------------------------------------------------------------------------------
Warranty agreement fees 1,310,243
- --------------------------------------------------------------------------------
Trustees' compensation 7,135
- --------------------------------------------------------------------------------
Custodian fees and expenses 1,728
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 27,547
------------
Total expenses 3,412,267
Less reduction to custodian fees (232)
Less waivers and reimbursements of expenses (76,722)
------------
Net expenses 3,335,313
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 106,868
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies (354,650)
Affiliated companies 557,671
------------
Net realized gain 203,021
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments 14,942,095
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,251,984
============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2006 2005
- -----------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------
Net investment income $ 106,868 $ 1,146,783
- -----------------------------------------------------------------------------------
Net realized gain (loss) 203,021 (1,432,637)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation 14,942,095 15,647,720
----------------------------
Net increase in net assets resulting from operations 15,251,984 15,361,866
- -----------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------
Dividends from net investment income:
Class A (78,074) (740,479)
Class B (20,939) (334,234)
Class C (5,166) (60,042)
Class N (4,483) (37,650)
- -----------------------------------------------------------------------------------
Tax return of capital distribution from net
investment income:
Class A (476,878) (26,368)
Class B (127,894) (46,339)
Class C (31,550) (17,685)
Class N (27,384) (1,785)
- -----------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (116,398)
Class B -- (196,622)
Class C -- (77,353)
Class N -- (6,968)
- -----------------------------------------------------------------------------------
Tax return of capital distribution from net
realized gain:
Class A -- (243,697)
Class B -- (428,267)
Class C -- (163,449)
Class N -- (16,502)
- -----------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------
Net decrease in net assets resulting from
beneficial interest transactions:
Class A (13,502,136) (10,988,559)
Class B (14,393,299) (11,713,778)
Class C (8,227,940) (13,016,364)
Class N (70,695) (1,038,745)
- -----------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------
Total decrease (21,714,454) (23,909,418)
- -----------------------------------------------------------------------------------
Beginning of period 227,017,702 250,927,120
----------------------------
End of period (including accumulated net investment
loss of $89,761 and $109,396, respectively) $205,303,248 $227,017,702
============================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2006 2005 2004 2003 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.46 $ 10.88 $ 10.28 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .07 2 .11 2 .07 -- 3
Net realized and unrealized gain .80 .65 .64 .28
----------------------------------------------
Total from investment operations .87 .76 .71 .28
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.12) (.07) --
Tax return of capital distribution from
net investment income (.09) -- 3 -- --
Dividends from net realized gain -- (.02) (.02) --
Tax return of capital distribution from net realized gain -- (.04) (.02) --
----------------------------------------------
Total dividends and/or distributions to shareholders (.10) (.18) (.11) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.23 $ 11.46 $ 10.88 $ 10.28
==============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 7.67% 6.98% 6.87% 2.80%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $54,800 $64,304 $71,666 $78,758
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $60,071 $68,812 $78,668 $39,416
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income 0.62% 1.02% 0.65% 0.35%
Total expenses 6 1.03% 1.10% 1.14% 1.13%
Less reimbursement of management fees during offering period -- -- -- (0.32)%
Payments and waivers and reduction to custodian expenses (0.03)% (0.06)% (0.12)% --
----------------------------------------------
Net expenses 1.00% 1.04% 1.02% 0.81% 7
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 26% 122% 179% 12%
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods of less than one full year.
6. Expenses paid including all underlying fund expenses were as follows:
Year Ended August 31, 2006 1.50%
Year Ended August 31, 2005 1.52% 8
Year Ended August 31, 2004 1.60%
Period Ended August 31, 2003 1.38%
7. For this period reduction to custodian expenses was zero.
8. Restated since August 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED AUGUST 31, 2006 2005 2004 2003 1
- ----------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
Net asset value, beginning of period $11.40 $ 10.82 $ 10.28 $ 10.00
Income (loss) from investment operations: (.02) 2 .03 2 (.02) -- 3
Net investment income (loss)
Net realized and unrealized gain .80 .64 .63 .28
------------------------------------------------
Total from investment operations .78 .67 .61 .28
- ----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- 3 (.03) (.03) --
Tax return of capital distribution from net investment income (.01) -- 3 -- --
Dividends from net realized gain -- (.02) (.02) --
Tax return of capital distribution from net realized gain -- (.04) (.02) --
------------------------------------------------
Total dividends and/or distributions to shareholders (.01) (.09) (.07) --
- ----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.17 $ 11.40 $ 10.82 $ 10.28
================================================
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 6.89% 6.21% 5.94% 2.80%
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $110,228 $117,057 $122,411 $122,968
- ----------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $114,903 $120,928 $127,128 $ 64,461
- ----------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) (0.19)% 0.23% (0.14)% (0.20)%
Total expenses 6 1.78% 1.86% 1.89% 1.88%
Less reimbursement of management fees during offering period -- -- -- (0.32)%
- ----------------------------------------------------------------------------------------------------------------
Less reimbursement to maintain yield -- -- -- (0.31)%
- ----------------------------------------------------------------------------------------------------------------
Payments and waivers and reduction to custodian expenses (0.03)% (0.06)% (0.12)% --
------------------------------------------------
Net expenses 1.75% 1.80% 1.77% 1.25% 7
- ----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 26% 122% 179% 12%
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods of less than one full year.
6. Expenses paid including all underlying fund expenses were as follows:
Year Ended August 31, 2006 2.25%
Year Ended August 31, 2005 2.28% 8
Year Ended August 31, 2004 2.35%
Period Ended August 31, 2003 2.13%
7. For this period reduction to custodian expenses was zero.
8. Restated since August 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS C YEAR ENDED AUGUST 31, 2006 2005 2004 2003 1
- -----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 11.42 $ 10.82 $ 10.28 $ 10.00
- -----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.02) 2 .03 2 (.02) -- 3
Net realized and unrealized gain .81 .65 .64 .28
--------------------------------------------
Total from investment operations .79 .68 .62 .28
- -----------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- 3 (.02) (.04) --
Tax return of capital distribution from net investment income (.01) -- 3 -- --
Dividends from net realized gain -- (.02) (.02) --
Tax return of capital distribution from net realized gain -- (.04) (.02) --
--------------------------------------------
Total dividends and/or distributions to shareholders (.01) (.08) (.08) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 12.20 $ 11.42 $ 10.82 $ 10.28
============================================
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 6.93% 6.24% 5.95% 2.80%
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $35,733 $41,333 $51,741 $60,271
- -----------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $38,862 $46,152 $59,429 $31,946
- -----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) (0.14)% 0.29% (0.10)% (0.20)%
Total expenses 6 1.77% 1.85% 1.88% 1.88%
Less reimbursement of management fees during offering period -- -- -- (0.32)%
Less reimbursement to maintain yield -- -- -- (0.32)%
Payments and waivers and reduction to custodian expenses (0.03)% (0.06)% (0.12)% --
--------------------------------------------
Net expenses 1.74% 1.79% 1.76% 1.24% 7
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover rate 26% 122% 179% 12%
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods of less than one full year.
6. Expenses paid including all underlying fund expenses were as follows:
Year Ended August 31, 2006 2.24%
Year Ended August 31, 2005 2.27% 8
Year Ended August 31, 2004 2.34%
Period Ended August 31, 2003 2.13%
7. For this period reduction to custodian expenses was zero.
8. Restated since August 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED AUGUST 31, 2006 2005 2004 2003 1
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.45 $10.86 $10.28 $10.00
- ------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .04 2 .09 2 .05 -- 3
Net realized and unrealized gain .81 .65 .63 .28
-----------------------------------------
Total from investment operations .85 .74 .68 .28
- ------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.01) (.09) (.06) --
Tax return of capital distribution from net investment income (.07) -- 3 -- --
Dividends from net realized gain -- (.02) (.02) --
Tax return of capital distribution from net realized gain -- (.04) (.02) --
-----------------------------------------
Total dividends and/or distributions to shareholders (.08) (.15) (.10) --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.22 $11.45 $10.86 $10.28
=========================================
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN,AT NET ASSET VALUE 4 7.50% 6.85% 6.55% 2.80%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $4,542 $4,324 $5,109 $5,432
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $4,477 $4,659 $5,408 $3,713
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income 0.34% 0.77% 0.46% 0.06%
Total expenses 6 1.21% 1.28% 1.34% 1.38%
Less reimbursement of management fees during offering period -- -- -- (0.32)%
Payments and waivers and reduction to custodian expenses (0.03)% (0.06)% (0.12)% --
-----------------------------------------
Net expenses 1.18% 1.22% 1.22% 1.06% 7
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 26% 122% 179% 12%
1. For the period from June 2, 2003 (commencement of operations) to August 31,
2003.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods of less than one full year.
6. Expenses paid including all underlying fund expenses were as follows:
Year Ended August 31, 2006 1.68%
Year Ended August 31, 2005 1.70% 8
Year Ended August 31, 2004 1.80%
Period Ended August 31, 2003 1.63%
7. For this period reduction to custodian expenses was zero.
8. Restated since August 31, 2005.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | 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.
During the Warranty Period, the Fund will seek capital preservation in order to
have a net asset value on the Maturity Date at least equal to the Warranty
Amount. The Fund seeks high total return as a secondary objective. 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 allocate its assets between Oppenheimer Main Street Fund
(the Underlying 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 (the Warranty Amount). This value will include net income, if any, earned
by the Fund during the offering period and be reduced by adjustments permitted
under the Warranty Agreement, sales charges, applicable share of extraordinary
expenses and proportionately reduced for dividends and distributions paid in
cash and redemptions of Fund shares. To avoid a reduced Warranty Amount,
shareholders must reinvest all dividends and distributions received from the
Fund to purchase additional shares of the Fund and must not redeem any shares of
the Fund during the Warranty Period. If the value of the Fund's assets on the
Maturity Date is insufficient to result in the value of each shareholder's
account being at least equal to the shareholder's Warranty Amount, the Warranty
Provider will pay the Fund an amount equal to the excess of his or her Warranty
Amount over his or her account value. The Financial Warranty is
33 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
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 sixty 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 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
34 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
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 1,2,3 TAX PURPOSES
- ------------------------------------------------------------------------
$-- $-- $1,992,779 $53,900,610
1. As of August 31, 2006, the Fund had $1,992,779 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of August 31, 2006, details
of the capital loss carryforward were as follows:
EXPIRING
---------------------
2014 $1,992,779
2. During the fiscal year ended August 31, 2006, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended August 31, 2005, the Fund did not utilize any
capital loss carryforward.
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, 2006. Net assets of the
Fund were unaffected by the reclassifications.
35 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
REDUCTION TO
REDUCTION TO ACCUMULATED NET
PAID-IN CAPITAL INVESTMENT LOSS
---------------------------------
$685,135 $685,135
The tax character of distributions paid during the years ended August 31, 2006
and August 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
------------------------------------------------------------
Distributions paid from:
Ordinary income $108,662 $1,172,405
Long-term capital gain -- 397,341
Return of capital 663,706 944,092
---------------------------------
Total $772,368 $2,513,838
=================================
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, 2006 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.
Federal tax cost of securities $152,401,097
============
Gross unrealized appreciation $ 53,900,610
Gross unrealized depreciation --
------------
Net unrealized appreciation $ 53,900,610
============
- --------------------------------------------------------------------------------
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 the Fund or in 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.
36 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide
current and former trustees and officers with a limited indemnification against
liabilities arising in connection with the performance of their duties to the
Fund. In the normal course of business, the Fund may also enter into contracts
that provide general indemnifications. The Fund's maximum exposure under these
arrangements is unknown as this would be dependent on future claims that may be
made against the Fund. The risk of material loss from such claims is considered
remote.
- --------------------------------------------------------------------------------
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.
37 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------
CLASS A
Sold 6,556 $ 79,128 1 -- $ --
Dividends and/or
distributions reinvested 43,093 505,045 89,132 1,017,885
Redeemed (1,179,635) (14,086,309) (1,068,185) (12,006,444)
----------------------------------------------------------
Net decrease (1,129,986) $(13,502,136) (979,053) $(10,988,559)
==========================================================
- -------------------------------------------------------------------------------------
CLASS B
Dividends and/or
distributions reinvested 10,834 $ 126,979 74,867 $ 854,981
Redeemed (1,218,645) (14,520,278) (1,121,129) (12,568,759)
----------------------------------------------------------
Net decrease (1,207,811) $(14,393,299) (1,046,262) $(11,713,778)
==========================================================
- -------------------------------------------------------------------------------------
CLASS C
Dividends and/or
distributions reinvested 2,288 $ 26,884 20,067 $ 229,565
Redeemed (691,022) (8,254,824) (1,182,239) (13,245,929)
----------------------------------------------------------
Net decrease (688,734) $ (8,227,940) (1,162,172) $(13,016,364)
==========================================================
- -------------------------------------------------------------------------------------
CLASS N
Dividends and/or
distributions reinvested 2,716 $ 31,858 5,502 $ 62,890
Redeemed (8,595) (102,553) (98,232) (1,101,635)
----------------------------------------------------------
Net decrease (5,879) $ (70,695) (92,730) $ (1,038,745)
==========================================================
1. Result of a broker correction to a shareholder transaction.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended August 31, 2006, were as
follows:
PURCHASES SALES
------------------------------------------------------------
Investment securities $40,886,066 $49,684,431
U.S. government and government
agency obligations 15,699,080 43,315,230
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 0.50% of the average annual net assets of the Fund reduced by the
amount of advisory fees paid to the Manager by the Underlying Fund relating to
the Fund's assets invested in
38 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
the Underlying Fund. However, the management fees shall not be reduced below
zero. Management fees 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 expenses after waivers and reductions to 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 expenses after waivers and reductions 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. The Manager
voluntarily waived its management fee during the Offering Period. 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.
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. 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, 2006, the Fund paid
$158,454 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
periodically 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 periodically 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
periods. 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
39 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
shares and servicing accounts. Under the plans, the Fund pays the Distributor an
annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25%
on Class N shares. The Distributor also receives a service fee of 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, 2006 for Class B, Class C and Class N shares were $3,065,230,
$811,090 and $91,045, 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 following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------
August 31, 2006 $-- $-- $252,360 $-- $--
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS 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, 2006, the Manager reimbursed the Fund $76,722. 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 annual net assets per class. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the
40 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
evaluation of tax positions taken in the course of preparing the Fund's tax
returns to determine whether it is "more-likely-than-not" that tax positions
taken in the Fund's tax return will be ultimately sustained. A tax liability and
expense must be recorded in respect of any tax position that, in Management's
judgment, will not be fully realized. FIN 48 is effective for fiscal years
beginning after December 15, 2006. As of August 31, 2006, the Manager is
evaluating the implications of FIN 48. Its impact in the Fund's financial
statements has not yet been determined.
- --------------------------------------------------------------------------------
6. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
41 | 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, 2006, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented. 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of August 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. 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, 2006, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, 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 16, 2006
42 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Dividends, if any, paid by the Fund during the fiscal year ended August 31,
2006 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, 2006 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.
$1,110,137 of the Fund's fiscal year taxable income may be eligible for the
lower individual income tax rates. In early 2007, shareholders of record will
receive information regarding the percentage of distributions that are eligible
for lower individual income tax rates.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended August 31, 2006, $7,407 or 0.96% of the ordinary distributions paid
by the Fund qualifies as an interest related dividend.
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.
43 | 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 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 voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing 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.
44 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS;
THE FUND, LENGTH OF SERVICE, OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER
AGE OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY
OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW
TRUSTEES IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH TRUSTEE SERVES FOR AN
INDEFINITE TERM, OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
WILLIAM L. ARMSTRONG, President, Colorado Christian University (since
Chairman of the Board of 2006); Chairman of the following private
Trustees (since 2003), Trustee mortgage banking companies: Cherry Creek
(since 2003) Mortgage Company (since 1991), Centennial State
Age: 69 Mortgage Company (since 1994), and The El Paso
Mortgage Company (since 1993); Chairman of the
following private companies: Ambassador Media
Corporation (since 1984) and Broadway Ventures
(since 1984); Director of the following:
Helmerich & Payne, Inc. (oil and gas
drilling/production company) (since 1992),
Campus Crusade for Christ (since 1991) and The
Lynde and Harry Bradley Foundation, Inc.
(non-profit organization) (since 2002); former
Chairman of the following: Transland Financial
Services, Inc. (private mortgage banking
company) (1997-2003), Great Frontier Insurance
(insurance agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate
brokerage) (1994-2000) and Frontier Title
(title insurance agency) (1995-2000); former
Director of the following: UNUMProvident
(insurance company) (1991-2004), Storage
Technology Corporation (computer equipment
company) (1991-2003) and International Family
Entertainment (television channel)(1992-1997);
U.S. Senator (January 1979-January 1991).
Oversees 38 portfolios in the OppenheimerFunds
complex.
ROBERT G. AVIS, Director and President of A.G. Edwards Capital,
Trustee (since 2003) Inc. (General Partner of private equity funds)
Age: 75 (until February 2001); Chairman, President and
Chief Executive Officer of A.G. Edwards
Capital, Inc. (until March 2000); Director of
A.G. Edwards & Sons, Inc. (brokerage company)
(until 2000) and A.G. Edwards Trust Company
(investment adviser) (until 2000); Vice
Chairman and Director of A.G. Edwards, Inc.
(until March 1999); Vice Chairman of A.G.
Edwards & Sons, Inc. (until March 1999);
Chairman of A.G. Edwards Trust Company (until
March 1999) and A.G.E. Asset Management
(investment adviser) (until March 1999).
Oversees 38 portfolios in the OppenheimerFunds
complex.
GEORGE C. BOWEN, Assistant Secretary and Director of Centennial
Trustee (since 2003) Asset Management Corporation (December
Age: 70 1991-April 1999); President, Treasurer and
Director of Centennial Capital Corporation
(June 1989-April 1999); Chief Executive Officer
and Director of MultiSource Services, Inc.
(March 1996-April 1999); Mr. Bowen held several
positions with the Manager and with subsidiary
or affiliated companies of the Manager
(September 1987-April 1999). Oversees 38
portfolios in the OppenheimerFunds complex.
EDWARD L. CAMERON, Member of The Life Guard of Mount Vernon
Trustee (since 2003) (George Washington historical site) (since June
Age: 68 2000); Director of Genetic ID, Inc. (biotech
company) (March 2001-May 2002); Partner at
PricewaterhouseCoopers LLP (accounting firm)
(July 1974-June 1999); Chairman of Price
Waterhouse LLP Global Investment Management
Industry Services Group (accounting firm) (July
1994-June 1998). Oversees 38 portfolios in the
OppenheimerFunds complex.
JON S. FOSSEL, Director of UNUMProvident (insurance company)
Trustee (since 2003) (since June 2002); Director of Northwestern
Age: 64 Energy Corp. (public utility corporation)
(since November 2004); Director of P.R.
Pharmaceuticals (October 1999-October 2003);
Director of Rocky Mountain Elk Foundation
(non-profit organization) (February
1998-February 2003 and since February 2005);
Chairman and Director (until October 1996) and
President and Chief Executive Officer (until
October 1995) of the Manager; President, Chief
Executive Officer and Director of the
following: Oppenheimer
45 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
JON S. FOSSEL, Acquisition Corp. ("OAC") (parent holding
Continued company of the Manager), Shareholders Services,
Inc. and Shareholder Financial Services, Inc.
(until October 1995). Oversees 38 portfolios in
the OppenheimerFunds complex.
SAM FREEDMAN, Director of Colorado UpLIFT (charitable
Trustee (since 2003) organization) (since September 1984). Mr.
Age: 66 Freedman held several positions with the
Manager and with subsidiary or affiliated
companies of the Manager (until October 1994).
Oversees 38 portfolios in the OppenheimerFunds
complex.
BEVERLY L. HAMILTON, Trustee of Monterey Institute for International
Trustee (since 2003) Studies (educational organization) (since
Age: 60 February 2000); Board Member of Middlebury
College (educational organization) (since
December 2005); Director of The California
Endowment (philanthropic organization) (since
April 2002); Director (February 2002-2005) and
Chairman of Trustees (since 2006) of the
Community Hospital of Monterey Peninsula;
Director (October 1991-2005) and Vice Chairman
(since 2006) of American Funds' Emerging
Markets Growth Fund, Inc. (mutual fund);
President of ARCO Investment Management Company
(February 1991-April 2000); Member of the
investment committees of The Rockefeller
Foundation (since 2001) and The University of
Michigan (since 2000); Advisor at Credit Suisse
First Boston's Sprout venture capital unit
(venture capital fund) (1994-January 2005);
Trustee of MassMutual Institutional Funds
(investment company) (1996-June 2004); Trustee
of MML Series Investment Fund (investment
company) (April 1989-June 2004); Member of the
investment committee of Hartford Hospital
(2000-2003); and Advisor to Unilever (Holland)
pension fund (2000-2003). Oversees 38
portfolios in the OppenheimerFunds complex.
ROBERT J. MALONE, Director of Jones International University
Trustee (since 2003) (educational organization) (since August 2005);
Age: 62 Chairman, Chief Executive Officer and Director
of Steele Street State Bank (commercial
banking) (since August 2003); Director of
Colorado UpLIFT (charitable organization)
(since 1986); Trustee of the Gallagher Family
Foundation (non-profit organization) (since
2000); Former Chairman of U.S. Bank-Colorado
(subsidiary of U.S. Bancorp and formerly
Colorado National Bank) (July 1996-April 1999);
Director of Commercial Assets, Inc. (real
estate investment trust) (1993-2000); Director
of Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and gas
exploration) (1997-February 2004). Oversees 38
portfolios in the OppenheimerFunds complex.
F. WILLIAM MARSHALL, JR., Trustee of MassMutual Select Funds (formerly
Trustee (since 2003) MassMutual Institutional Funds) (investment
Age: 64 company) (since 1996) and MML Series Investment
Fund (investment company) (since 1996); Trustee
(since 1987) and Chairman (1994-2005) of the
Investment Committee of the Worcester Polytech
Institute (private university); President and
Treasurer of the SIS Funds (private charitable
fund) (since January 1999); Chairman of SIS &
Family Bank, F.S.B. (formerly SIS Bank)
(commercial bank) (January 1999-July 1999); and
Executive Vice President of Peoples Heritage
Financial Group, Inc. (commercial bank)
(January 1999-July 1999). Oversees 40
portfolios in the OppenheimerFunds complex.
- --------------------------------------------------------------------------------
INTERESTED TRUSTEE AND THE ADDRESS OF MR. MURPHY IS TWO WORLD
OFFICER FINANCIAL CENTER, 225 LIBERTY STREET, 11TH
FLOOR, NEW YORK, NEW YORK 10281-1008. MR.
MURPHY SERVES AS A TRUSTEE FOR AN INDEF-INITE
TERM, OR UNTIL HIS RESIGNATION, RETIREMENT,
DEATH OR REMOVAL AND AS AN OFFICER FOR AN
INDEFINITE TERM, OR UNTIL HIS RESIGNATION,
RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN
INTERESTED TRUSTEE DUE TO HIS POSITIONS WITH
OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
46 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director
Trustee, President and (since June 2001) and President (since
Principal Executive Officer September 2000) of the Manager; President and
(since 2003) director or trustee of other Oppenheimer funds;
Age: 57 President and Director of OAC and of
Oppenheimer Partnership Holdings, Inc. (holding
company subsidiary of the Manager) (since July
2001); Director of OppenheimerFunds
Distributor, Inc. (subsidiary of the Manager)
(since November 2001); Chairman and Director of
Shareholder Services, Inc. and of Shareholder
Financial Services, Inc. (transfer agent
subsidiaries of the Manager) (since July 2001);
President and Director of OppenheimerFunds
Legacy Program (charitable trust program
established by the Manager) (since July 2001);
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 2001) and
Director (since July 2001) of Oppenheimer Real
Asset Management, Inc.; Executive Vice
President of Massachusetts Mutual Life
Insurance Company (OAC's parent company) (since
February 1997); Director of DLB Acquisition
Corporation (holding company parent of Babson
Capital Management LLC) (since June 1995);
Member of the Investment Company Institute's
Board of Governors (since October 3, 2003);
Chief Operating Officer of the Manager
(September 2000-June 2001); President and
Trustee of MML Series Investment Fund and
MassMutual Select Funds (open-end investment
companies) (November 1999-November 2001);
Director of C.M. Life Insurance Company
(September 1999-August 2000); President, Chief
Executive Officer and Director of MML Bay State
Life Insurance Company (September 1999-August
2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned subsidiary
of Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 91 portfolios in the OppenheimerFunds
complex.
- --------------------------------------------------------------------------------
OTHER OFFICERS OF THE THE ADDRESSES OF THE OFFICERS IN THE CHART
FUND BELOW ARE AS FOLLOWS: FOR MESSRS. MANIOUDAKIS,
SCHADT, ZACK, GILLESPIE AND MS. BLOOMBERG, TWO
WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW
YORK, NEW YORK 10281-1008, FOR MESSRS.
VANDEHEY, WIXTED, PETERSEN, SZILAGYI AND MS.
IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924. EACH OFFICER SERVES FOR AN
INDEFINITE TERM OR UNTIL HIS OR HER
RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager (since
Vice President and Portfolio April 2002), of HarbourView Asset Management
Manager (since 2003) Corporation (since April, 2002 and of OFI
Age: 39 Institutional Asset Management, Inc. (since
June 2002); Executive Director and portfolio
manager for Miller, Anderson & Sherrerd, a
division of Morgan Stanley Investment
Management (August 1993-April 2002). An officer
of 15 portfolios in the OppenheimerFunds
complex.
RUDI W. SCHADT, Vice President, Director of Research in Product
Vice President and Portfolio Design and Risk Management of the Manager.
Manager (since 2004) Prior to joining the Manager in February 2002
Age: 48 he was a Director and Senior Quantitative
Analyst (2000-2001) at UBS Asset Management
prior to which he was an Associate Director of
Research (since June 1999) and Senior
Researcher and Portfolio Manager (from June
1997) at State Street Global Advisors. An
officer of 7 portfolios in the OppenheimerFunds
complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance
Vice President and Chief Officer of the Manager (since March 2004); Vice
Compliance Officer President of OppenheimerFunds Distributor,
(since 2004) Inc., Centennial Asset Management Corporation
Age: 56 and Shareholder Services, Inc. (since June
1983); Vice President and Director of Internal
Audit of the Manager (1997-February 2004). An
officer of 91 portfolios in the
OppenheimerFunds complex.
47 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, Senior Vice President and Treasurer of the
Treasurer and Principal Manager (since March 1999); Treasurer of the
Financial and Accounting following: HarbourView Asset Management
Officer (since 2003) Corporation, Shareholder Financial Services,
Age: 47 Inc., Shareholder Services, Inc., Oppenheimer
Real Asset Management Corporation, and
Oppenheimer Partnership Holdings, Inc. (since
March 1999), OFI Private Investments, Inc.
(since March 2000), OppenheimerFunds
International Ltd. and OppenheimerFunds plc
(since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and
OppenheimerFunds Legacy Program (since June
2003); Treasurer and Chief Financial Officer of
OFI Trust Company (trust company subsidiary of
the Manager) (since May 2000); Assistant
Treasurer of the following: OAC (since March
1999), Centennial Asset Management Corporation
(March 1999-October 2003) and OppenheimerFunds
Legacy Program (April 2000-June 2003);
Principal and Chief Operating Officer of
Bankers Trust Company-Mutual Fund Services
Division (March 1995-March 1999). An officer of
91 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since
Assistant Treasurer August 2002); Manager/Financial Product
(since 2004) Accounting of the Manager (November 1998-July
Age: 36 2002). An officer of 91 portfolios in the
OppenheimerFunds complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since
Assistant Treasurer July 2004); Director of Financial Reporting and
(since 2005) Compliance of First Data Corporation (April
Age: 36 2003-July 2004); Manager of Compliance of
Berger Financial Group LLC (May 2001-March
2003); Director of Mutual Fund Operations at
American Data Services, Inc. (September
2000-May 2001). An officer of 91 portfolios in
the OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004)
Vice President and Secretary and General Counsel (since March 2002) of the
(since 2003) Manager; General Counsel and Director of the
Age: 58 Distributor (since December 2001); General
Counsel of Centennial Asset Management
Corporation (since December 2001); Senior Vice
President and General Counsel of HarbourView
Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC
(since November 2001); Assistant Secretary
(since September 1997) and Director (since
November 2001) of OppenheimerFunds
International Ltd. and OppenheimerFunds plc;
Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December
2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior
Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and
Shareholder Services, Inc. (since December
2001); Senior Vice President, General Counsel
and Director of OFI Private Investments, Inc.
and OFI Trust Company (since November 2001);
Vice President of OppenheimerFunds Legacy
Program (since June 2003); Senior Vice
President and General Counsel of OFI
Institutional Asset Management, Inc. (since
November 2001); Director of OppenheimerFunds
(Asia) Limited (since December 2003); 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
the following: Shareholder Services, Inc. (May
1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001),
and OppenheimerFunds International Ltd.
(September 1997-November 2001). An officer of
91 portfolios in the OppenheimerFunds complex.
48 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
LISA I. BLOOMBERG, Vice President and Associate Counsel of the
Assistant Secretary Manager (since May 2004); First Vice President
(since 2004) (April 2001-April 2004), Associate General
Age: 38 Counsel (December 2000-April 2004), Corporate
Vice President (May 1999-April 2001) and
Assistant General Counsel (May 1999-December
2000) of UBS Financial Services Inc. (formerly,
PaineWebber Incorporated). An officer of 91
portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior
Assistant Secretary Counsel and Assistant Secretary (since October
(since 2001) 2003) of the Manager; Vice President (since
Age: 40 1999) and Assistant Secretary (since October
2003) of the Distributor; Assistant Secretary
of Centennial Asset Management Corporation
(since October 2003); Vice President and
Assistant Secretary of Shareholder Services,
Inc. (since 1999); Assistant Secretary of
OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August
1994-October 2003). An officer of 91 portfolios
in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General
Assistant Secretary Counsel of the Manager (since September 2004);
(since 2004) First Vice President (2000-September 2004),
Age: 42 Director (2000-September 2004) and Vice
President (1998-2000) of Merrill Lynch
Investment Management. An officer of 91
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
49 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FOR OPPENHEIMER MAIN STREET FUND
(UNDERLYING FUND)
53 Statement of Investments
64 Statement of Assets and Liabilities
66 Statement of Operations
68 Statements of Changes in Net Assets
69 Financial Highlights
74 Notes to Financial Statements
84 Report of Independent Registered Public Accounting Firm
52 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS August 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--99.5%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--7.8%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.0%
ArvinMeritor, Inc. 66,600 $ 989,010
- --------------------------------------------------------------------------------
Autoliv, Inc. 46,200 2,611,224
- --------------------------------------------------------------------------------
Tenneco, Inc. 1 48,800 1,110,200
-------------
4,710,434
- --------------------------------------------------------------------------------
AUTOMOBILES--0.1%
Harley-Davidson, Inc. 193,300 11,309,983
- --------------------------------------------------------------------------------
Thor Industries, Inc. 32,900 1,387,722
-------------
12,697,705
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.0%
Jackson Hewitt Tax Service, Inc. 32,000 1,011,200
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.8%
Choice Hotels International, Inc. 23,800 902,258
- --------------------------------------------------------------------------------
Darden Restaurants, Inc. 71,100 2,516,940
- --------------------------------------------------------------------------------
Domino's Pizza, Inc. 15,200 371,640
- --------------------------------------------------------------------------------
International Game Technology 887,900 34,343,972
- --------------------------------------------------------------------------------
Jack in the Box, Inc. 1 27,700 1,329,046
- --------------------------------------------------------------------------------
Marriott International, Inc., Cl. A 194,300 7,317,338
- --------------------------------------------------------------------------------
McDonald's Corp. 1,272,500 45,682,750
- --------------------------------------------------------------------------------
MGM Mirage, Inc. 1 295,800 10,554,144
- --------------------------------------------------------------------------------
Starbucks Corp. 1 842,400 26,122,824
- --------------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. 441,200 23,498,312
- --------------------------------------------------------------------------------
Vail Resorts, Inc. 1 30,200 1,136,124
- --------------------------------------------------------------------------------
WMS Industries, Inc. 1 20,000 536,000
- --------------------------------------------------------------------------------
Wyndham Worldwide Corp. 1 78,700 2,302,762
- --------------------------------------------------------------------------------
Yum! Brands, Inc. 944,400 46,162,272
-------------
202,776,382
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.1%
Ethan Allen Interiors, Inc. 31,400 $ 1,059,750
- --------------------------------------------------------------------------------
Furniture Brands International, Inc. 2 59,400 1,137,510
- --------------------------------------------------------------------------------
Leggett & Platt, Inc. 97,600 2,249,680
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 1 40,600 651,630
-------------
5,098,570
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.1%
Liberty Media Holding Corp.-Interactive, Series A 1 725,900 13,835,654
- --------------------------------------------------------------------------------
MEDIA--2.7%
CBS Corp., Cl. B 609,700 17,406,935
- --------------------------------------------------------------------------------
Clear Channel Communications, Inc. 1,724,500 50,079,480
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 1 335,500 11,742,500
- --------------------------------------------------------------------------------
DirecTV Group, Inc. (The) 1 1,330,900 25,007,611
- --------------------------------------------------------------------------------
Gannett Co., Inc. 766,100 43,552,785
- --------------------------------------------------------------------------------
Liberty Media Holding Corp.-Capital, Series A 1 134,313 11,595,241
- --------------------------------------------------------------------------------
Live Nation 1 29,800 625,204
- --------------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 805,000 45,007,550
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 1,059,500 20,162,285
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 394,500 34,487,190
- --------------------------------------------------------------------------------
Time Warner, Inc. 339,400 5,640,828
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1 213,338 7,744,169
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 1,065,900 31,603,935
-------------
304,655,713
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.0%
Big Lots, Inc. 1 150,800 2,767,180
- --------------------------------------------------------------------------------
Dillard's, Inc., Cl. A 131,400 4,097,052
- --------------------------------------------------------------------------------
Dollar Tree Stores, Inc. 1 187,300 5,390,494
- --------------------------------------------------------------------------------
Family Dollar Stores, Inc. 158,500 4,052,845
- --------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.) 744,400 46,926,976
53 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MULTILINE RETAIL Continued
Nordstrom, Inc. 1,152,400 $ 43,042,140
-------------
106,276,687
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--1.9%
AnnTaylor Stores Corp. 1 73,400 2,921,320
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 124,800 4,537,728
- --------------------------------------------------------------------------------
Charming Shoppes, Inc. 1 118,000 1,552,880
- --------------------------------------------------------------------------------
Christopher & Banks Corp. 42,100 1,025,135
- --------------------------------------------------------------------------------
Circuit City Stores, Inc./
Circuit City Group 192,100 4,535,481
- --------------------------------------------------------------------------------
Dress Barn, Inc. (The) 1 53,300 940,745
- --------------------------------------------------------------------------------
Gap, Inc. (The) 1,863,700 31,328,797
- --------------------------------------------------------------------------------
Group 1 Automotive, Inc. 23,700 1,073,610
- --------------------------------------------------------------------------------
Guess?, Inc. 1 51,400 2,097,120
- --------------------------------------------------------------------------------
Gymboree Corp. 1 37,000 1,241,350
- --------------------------------------------------------------------------------
Home Depot, Inc. 793,000 27,191,970
- --------------------------------------------------------------------------------
Limited Brands, Inc. 913,050 23,492,777
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 1,143,100 30,932,286
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 99,750 3,536,138
- --------------------------------------------------------------------------------
Michaels Stores, Inc. 116,800 5,028,240
- --------------------------------------------------------------------------------
Office Depot, Inc. 1 1,192,500 43,931,700
- --------------------------------------------------------------------------------
Office Max, Inc. 64,800 2,691,144
- --------------------------------------------------------------------------------
Pantry, Inc. (The) 1 20,300 951,258
- --------------------------------------------------------------------------------
Payless ShoeSource, Inc. 1 80,200 1,881,492
- --------------------------------------------------------------------------------
RadioShack Corp. 33,800 610,428
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. 1 71,800 1,945,780
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The) 366,400 9,801,200
- --------------------------------------------------------------------------------
Tween Brands, Inc. 1 61,000 2,077,660
-------------
205,326,239
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.1%
Brown Shoe Co., Inc. 31,200 996,840
- --------------------------------------------------------------------------------
Columbia Sportswear Co. 1 22,400 1,093,568
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS Continued
Liz Claiborne, Inc. 92,300 $ 3,449,251
- --------------------------------------------------------------------------------
Phillips/Van Heusen Corp. 48,000 1,854,720
- --------------------------------------------------------------------------------
Skechers U.S.A., Inc., Cl. A 1 49,000 1,109,360
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 29,000 731,670
-------------
9,235,409
- --------------------------------------------------------------------------------
CONSUMER STAPLES--8.1%
- --------------------------------------------------------------------------------
BEVERAGES--2.2%
Coca-Cola Co. (The) 2,523,900 113,095,959
- --------------------------------------------------------------------------------
Pepsi Bottling Group, Inc. (The) 287,900 10,079,379
- --------------------------------------------------------------------------------
PepsiCo, Inc. 1,959,230 127,898,534
-------------
251,073,872
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.1%
Costco Wholesale Corp. 699,700 32,738,963
- --------------------------------------------------------------------------------
Longs Drug Stores, Inc. 24,500 1,113,035
- --------------------------------------------------------------------------------
Safeway, Inc. 1,319,300 40,805,949
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1,042,800 46,634,016
-------------
121,291,963
- --------------------------------------------------------------------------------
FOOD PRODUCTS--1.3%
Campbell Soup Co. 831,200 31,228,184
- --------------------------------------------------------------------------------
ConAgra Foods, Inc. 1,909,600 45,448,480
- --------------------------------------------------------------------------------
Dean Foods Co. 1 68,300 2,706,046
- --------------------------------------------------------------------------------
Del Monte Foods Co. 142,000 1,576,200
- --------------------------------------------------------------------------------
Flowers Foods, Inc. 23,200 629,880
- --------------------------------------------------------------------------------
General Mills, Inc. 464,000 25,162,720
- --------------------------------------------------------------------------------
Heinz (H.J.) Co. 567,500 23,744,200
- --------------------------------------------------------------------------------
Kellogg Co. 194,100 9,840,870
- --------------------------------------------------------------------------------
Kraft Foods, Inc., Cl. A 2 169,400 5,744,354
-------------
146,080,934
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.7%
Colgate-Palmolive Co. 1,080,300 64,666,758
54 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS Continued
Procter & Gamble Co. (The) 1,955,385 $ 121,038,332
---------------
185,705,090
- --------------------------------------------------------------------------------
TOBACCO--1.8%
Altria Group, Inc. 1,956,700 163,443,151
- --------------------------------------------------------------------------------
Loews Corp./Carolina Group 105,100 6,018,026
- --------------------------------------------------------------------------------
Reynolds American, Inc. 457,200 29,750,004
---------------
199,211,181
- --------------------------------------------------------------------------------
ENERGY--12.7%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.7%
Grey Wolf, Inc. 1 156,700 1,145,477
- --------------------------------------------------------------------------------
NS Group, Inc. 1 46,600 2,121,232
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1,092,700 66,982,510
- --------------------------------------------------------------------------------
Tidewater, Inc. 39,600 1,885,356
- --------------------------------------------------------------------------------
Veritas DGC, Inc. 1 53,600 3,192,952
- --------------------------------------------------------------------------------
W-H Energy Services, Inc. 1 22,200 1,120,434
---------------
76,447,961
- --------------------------------------------------------------------------------
OIL & GAS--12.0%
Anadarko Petroleum Corp. 1,023,300 48,003,003
- --------------------------------------------------------------------------------
Apache Corp. 701,400 45,787,392
- --------------------------------------------------------------------------------
Canadian Natural Resources Ltd. 271,840 14,272,030
- --------------------------------------------------------------------------------
Chesapeake Energy Corp. 687,400 21,701,218
- --------------------------------------------------------------------------------
Chevron Corp. 2,819,360 181,566,784
- --------------------------------------------------------------------------------
Cimarex Energy Co. 91,300 3,496,790
- --------------------------------------------------------------------------------
Comstock Resources, Inc. 1 62,200 1,788,872
- --------------------------------------------------------------------------------
ConocoPhillips 2,267,696 143,839,957
- --------------------------------------------------------------------------------
Devon Energy Corp. 1,018,900 63,671,061
- --------------------------------------------------------------------------------
EOG Resources, Inc. 730,900 47,376,938
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 6,293,596 425,887,641
- --------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 15,900 571,128
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Frontier Oil Corp. 127,200 $ 4,159,440
- --------------------------------------------------------------------------------
General Maritime Corp. 24,500 920,220
- --------------------------------------------------------------------------------
Hess Corp. 787,400 36,047,172
- --------------------------------------------------------------------------------
Holly Corp. 41,200 1,887,784
- --------------------------------------------------------------------------------
Marathon Oil Corp. 784,401 65,497,425
- --------------------------------------------------------------------------------
Occidental Petroleum Corp. 1,561,804 79,636,386
- --------------------------------------------------------------------------------
OMI Corp. 59,200 1,333,184
- --------------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 36,800 2,454,560
- --------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 628,500 19,560,662
- --------------------------------------------------------------------------------
Pogo Producing Co. 75,700 3,361,837
- --------------------------------------------------------------------------------
St. Mary Land & Exploration Co. 44,300 1,807,440
- --------------------------------------------------------------------------------
Sunoco, Inc. 123,900 8,909,649
- --------------------------------------------------------------------------------
Tesoro Corp. 79,800 5,155,878
- --------------------------------------------------------------------------------
Valero Energy Corp. 1,165,674 66,909,688
- --------------------------------------------------------------------------------
W&T Offshore, Inc. 39,800 1,277,182
- --------------------------------------------------------------------------------
XTO Energy, Inc. 774,200 35,435,134
---------------
1,332,316,455
- --------------------------------------------------------------------------------
FINANCIALS--23.0%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--4.8%
Ameriprise Financial, Inc. 421,300 19,266,049
- --------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 324,100 10,938,375
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The) 385,900 50,302,065
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 709,900 105,526,635
- --------------------------------------------------------------------------------
Greenhill & Co., Inc. 2 24,400 1,342,732
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 126,000 2,240,280
- --------------------------------------------------------------------------------
Jefferies Group, Inc. 125,400 3,124,968
- --------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1 35,200 614,592
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 1,076,000 68,659,560
- --------------------------------------------------------------------------------
55 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Continued
- -------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CAPITAL MARKETS Continued
Mellon Financial Corp. 1,268,100 $ 47,211,363
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,512,200 111,192,066
- --------------------------------------------------------------------------------
Morgan Stanley 1,632,538 107,404,675
- --------------------------------------------------------------------------------
Northern Trust Corp. 5,700 319,143
- --------------------------------------------------------------------------------
Piper Jaffray Cos., Inc. 1 20,000 1,171,600
- --------------------------------------------------------------------------------
Raymond James Financial, Inc. 44,200 1,225,224
-------------
530,539,327
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--4.9%
BB&T Corp. 583,700 24,982,360
- --------------------------------------------------------------------------------
Comerica, Inc. 140,600 8,049,350
- --------------------------------------------------------------------------------
Huntington Bancshares, Inc. 153,700 3,676,504
- --------------------------------------------------------------------------------
KeyCorp 600,200 22,081,358
- --------------------------------------------------------------------------------
M&T Bank Corp. 258,100 31,606,926
- --------------------------------------------------------------------------------
National City Corp. 1,247,000 43,121,260
- --------------------------------------------------------------------------------
North Fork Bancorporation, Inc. 62,500 1,715,000
- --------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 324,300 22,957,197
- --------------------------------------------------------------------------------
SunTrust Banks, Inc. 648,500 49,545,400
- --------------------------------------------------------------------------------
TCF Financial Corp. 84,800 2,210,736
- --------------------------------------------------------------------------------
TD Banknorth, Inc. 17,000 503,200
- --------------------------------------------------------------------------------
U.S. Bancorp 3,432,470 110,079,313
- --------------------------------------------------------------------------------
Wachovia Corp. 2,240,000 122,371,200
- --------------------------------------------------------------------------------
Wells Fargo & Co. 3,119,400 108,399,150
-------------
551,298,954
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.4%
American Express Co. 777,600 40,855,104
- --------------------------------------------------------------------------------
AmeriCredit Corp. 1 275,600 6,473,844
-------------
47,328,948
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--6.5%
Bank of America Corp 5,165,939 265,890,880
- --------------------------------------------------------------------------------
CIT Group, Inc. 518,100 23,345,586
- --------------------------------------------------------------------------------
Citigroup, Inc. 5,248,546 259,015,745
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
International Securities
Exchange, Inc., Cl. A 29,000 $ 1,233,950
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 3,857,496 176,133,267
-------------
725,619,428
- --------------------------------------------------------------------------------
INSURANCE--5.4%
ACE Ltd. 763,500 41,122,110
- --------------------------------------------------------------------------------
AFLAC, Inc. 279,400 12,592,558
- --------------------------------------------------------------------------------
Allstate Corp. 1,456,600 84,395,404
- --------------------------------------------------------------------------------
American International Group, Inc. 1,093,505 69,787,489
- --------------------------------------------------------------------------------
AmerUs Group Co. 76,600 5,193,480
- --------------------------------------------------------------------------------
Aon Corp. 430,300 14,875,471
- --------------------------------------------------------------------------------
Assurant, Inc. 92,200 4,743,690
- --------------------------------------------------------------------------------
Berkley (W.R.) Corp. 71,600 2,506,000
- --------------------------------------------------------------------------------
Chubb Corp. 872,900 43,784,664
- --------------------------------------------------------------------------------
Cincinnati Financial Corp. 47,500 2,216,350
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 452,000 15,562,360
- --------------------------------------------------------------------------------
Hanover Insurance Group, Inc. 73,200 3,257,400
- --------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 641,500 55,079,190
- --------------------------------------------------------------------------------
LandAmerica Financial Group, Inc. 39,200 2,479,008
- --------------------------------------------------------------------------------
Lincoln National Corp. 683,484 41,487,479
- --------------------------------------------------------------------------------
Loews Corp. 213,500 8,215,480
- --------------------------------------------------------------------------------
MBIA, Inc. 79,500 4,899,585
- --------------------------------------------------------------------------------
Old Republic International Corp. 116,300 2,430,670
- --------------------------------------------------------------------------------
Principal Financial Group, Inc. (The) 983,000 52,334,920
- --------------------------------------------------------------------------------
Progressive Corp. 252,100 6,199,139
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 807,300 59,263,893
- --------------------------------------------------------------------------------
Safeco Corp. 47,100 2,718,141
- --------------------------------------------------------------------------------
Safety Insurance Group, Inc. 27,000 1,388,340
56 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INSURANCE Continued
St. Paul Travelers Cos., Inc. (The) 1,462,800 $ 64,216,920
-------------
600,749,741
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--0.1%
CB Richard Ellis Group, Inc., Cl. A 1 146,400 3,367,200
- --------------------------------------------------------------------------------
Jones Lang LaSalle, Inc. 46,300 3,854,938
- --------------------------------------------------------------------------------
Realogy Corp. 1 98,375 2,105,225
- --------------------------------------------------------------------------------
Trammell Crow Co. 1 22,600 777,892
-------------
10,105,255
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.9%
Astoria Financial Corp. 171,250 5,257,375
- --------------------------------------------------------------------------------
BankUnited Financial Corp., Cl. A 39,400 1,015,338
- --------------------------------------------------------------------------------
Countrywide Financial Corp. 248,000 8,382,400
- --------------------------------------------------------------------------------
Golden West Financial Corp. 162,800 12,289,772
- --------------------------------------------------------------------------------
Hudson City Bancorp, Inc. 250,500 3,271,530
- --------------------------------------------------------------------------------
MGIC Investment Corp. 42,400 2,453,688
- --------------------------------------------------------------------------------
New York Community Bancorp, Inc. 70,300 1,153,623
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 88,800 3,839,712
- --------------------------------------------------------------------------------
Radian Group, Inc. 104,100 6,233,508
- --------------------------------------------------------------------------------
Washington Mutual, Inc. 1,243,029 52,070,485
- --------------------------------------------------------------------------------
Webster Financial Corp. 10,100 477,124
-------------
96,444,555
- --------------------------------------------------------------------------------
HEALTH CARE--12.1%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.6%
Amgen, Inc. 1 769,600 52,278,928
- --------------------------------------------------------------------------------
Applera Corp./Applied Biosystems Group 223,600 6,853,340
- --------------------------------------------------------------------------------
Gilead Sciences, Inc. 1 134,373 8,519,248
-------------
67,651,516
- -------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.1%
Becton, Dickinson & Co. 675,700 $ 47,096,290
- --------------------------------------------------------------------------------
Edwards Lifesciences Corp. 1 35,900 1,676,171
- --------------------------------------------------------------------------------
Hospira, Inc. 1 33,600 1,230,768
- --------------------------------------------------------------------------------
Medtronic, Inc. 1,507,600 70,706,440
-------------
120,709,669
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--4.7%
AmerisourceBergen Corp. 321,300 14,188,608
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 996,400 67,177,288
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 1,111,700 64,411,898
- --------------------------------------------------------------------------------
CIGNA Corp. 123,000 13,907,610
- --------------------------------------------------------------------------------
Express Scripts, Inc. 1 124,800 10,493,184
- --------------------------------------------------------------------------------
Genesis HealthCare Corp. 1 2,200 100,188
- --------------------------------------------------------------------------------
HCA, Inc. 793,800 39,150,216
- --------------------------------------------------------------------------------
Healthways, Inc. 1 1,700 87,754
- --------------------------------------------------------------------------------
Humana, Inc. 1 159,200 9,700,056
- --------------------------------------------------------------------------------
Laboratory Corp. of America Holdings 1 88,300 6,041,486
- --------------------------------------------------------------------------------
Magellan Health Services, Inc. 1 14,400 692,208
- --------------------------------------------------------------------------------
Manor Care, Inc. 67,300 3,513,060
- --------------------------------------------------------------------------------
McKesson Corp. 1,047,100 53,192,680
- --------------------------------------------------------------------------------
Pediatrix Medical Group, Inc. 1 58,000 2,656,400
- --------------------------------------------------------------------------------
Quest Diagnostics, Inc. 362,700 23,314,356
- --------------------------------------------------------------------------------
Sierra Health Services, Inc. 1 123,600 5,302,440
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 2,289,794 118,954,798
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 1,111,572 86,046,789
-------------
518,931,019
- --------------------------------------------------------------------------------
HEALTH CARE TECHNOLOGY--0.0%
Emdeon Corp. 1 172,100 2,039,385
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.7%
Abbott Laboratories 1,747,500 85,103,250
- --------------------------------------------------------------------------------
Alpharma, Inc., Cl. A 86,300 1,807,122
57 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
PHARMACEUTICALS Continued
Andrx Corp. 1 74,400 $ 1,773,696
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,776,800 38,645,400
- --------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1 56,300 1,859,589
- --------------------------------------------------------------------------------
Johnson & Johnson 2,762,944 178,651,959
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 348,400 5,651,048
- --------------------------------------------------------------------------------
Merck & Co., Inc. 3,380,250 137,069,138
- --------------------------------------------------------------------------------
Pfizer, Inc. 5,765,545 158,898,420
- --------------------------------------------------------------------------------
Sciele Pharma, Inc. 1 35,300 617,750
- --------------------------------------------------------------------------------
Wyeth 582,800 28,382,360
-------------
638,459,732
- --------------------------------------------------------------------------------
INDUSTRIALS--13.2%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.9%
Alliant Techsystems, Inc. 1 58,700 4,489,963
- --------------------------------------------------------------------------------
Armor Holdings, Inc. 1 28,500 1,506,795
- --------------------------------------------------------------------------------
Boeing Co. 1,322,400 99,047,760
- --------------------------------------------------------------------------------
General Dynamics Corp. 908,000 61,335,400
- --------------------------------------------------------------------------------
Honeywell International, Inc. 656,100 25,404,192
- --------------------------------------------------------------------------------
Lockheed Martin Corp. 917,600 75,793,760
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 949,700 63,449,457
- --------------------------------------------------------------------------------
Orbital Sciences Corp. 1 40,700 736,263
- --------------------------------------------------------------------------------
Raytheon Co. 1,330,800 62,827,068
- --------------------------------------------------------------------------------
United Technologies Corp. 512,100 32,113,791
-------------
426,704,449
- --------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--0.9%
EGL, Inc. 1 54,700 1,672,179
- --------------------------------------------------------------------------------
FedEx Corp. 420,500 42,483,115
- --------------------------------------------------------------------------------
United Parcel Service, Inc., Cl. B 831,600 58,253,580
-------------
102,408,874
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
AIRLINES--0.2%
AMR Corp. 1 102,100 $ 2,108,365
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 129,000 3,236,610
- --------------------------------------------------------------------------------
Southwest Airlines Co. 1,016,300 17,602,316
- --------------------------------------------------------------------------------
US Airways Group, Inc. 1 61,100 2,581,475
-------------
25,528,766
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.4%
Masco Corp. 1,645,100 45,092,191
- --------------------------------------------------------------------------------
USG Corp. 1 67,800 3,457,800
-------------
48,549,991
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.5%
Administaff, Inc. 36,200 1,250,710
- --------------------------------------------------------------------------------
Cendant Corp. 393,500 759,455
- --------------------------------------------------------------------------------
Harland (John H.) Co. 24,400 911,584
- --------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 43,200 615,600
- --------------------------------------------------------------------------------
Manpower, Inc. 96,400 5,698,204
- --------------------------------------------------------------------------------
Republic Services, Inc. 108,000 4,188,240
- --------------------------------------------------------------------------------
Robert Half International, Inc. 120,700 3,734,458
- --------------------------------------------------------------------------------
Waste Management, Inc. 1,087,500 37,279,500
-------------
54,437,751
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
EMCOR Group, Inc. 1 24,600 1,363,824
- --------------------------------------------------------------------------------
Granite Construction, Inc. 69,900 3,750,135
- --------------------------------------------------------------------------------
Quanta Services, Inc. 1 148,100 2,625,813
-------------
7,739,772
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.9%
Acuity Brands, Inc. 66,800 2,854,364
- --------------------------------------------------------------------------------
Belden CDT, Inc. 35,700 1,275,918
- --------------------------------------------------------------------------------
Cooper Industries Ltd., Cl. A 38,300 3,136,004
- --------------------------------------------------------------------------------
Emerson Electric Co. 692,300 56,872,445
- --------------------------------------------------------------------------------
General Cable Corp. 1 40,100 1,545,053
58 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT Continued
Hubbell, Inc., Cl. B 28,000 $ 1,302,000
- --------------------------------------------------------------------------------
Rockwell Automation, Inc. 502,100 28,308,398
- --------------------------------------------------------------------------------
Smith (A.O.) Corp. 25,400 1,018,794
-------------
96,312,976
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--3.9%
3M Co. 1,406,100 100,817,370
- --------------------------------------------------------------------------------
General Electric Co. 8,884,500 302,606,070
- --------------------------------------------------------------------------------
Textron, Inc. 187,500 15,723,750
- --------------------------------------------------------------------------------
Tyco International Ltd. 529,700 13,851,655
-------------
432,998,845
- --------------------------------------------------------------------------------
MACHINERY--1.9%
AGCO Corp. 1 67,900 1,687,315
- --------------------------------------------------------------------------------
Caterpillar, Inc. 652,100 43,266,835
- --------------------------------------------------------------------------------
Crane Co. 20,700 827,586
- --------------------------------------------------------------------------------
Cummins, Inc. 24,300 2,790,126
- --------------------------------------------------------------------------------
Danaher Corp. 522,300 34,623,267
- --------------------------------------------------------------------------------
Eaton Corp. 586,600 39,008,900
- --------------------------------------------------------------------------------
Flowserve Corp. 1 38,300 1,958,662
- --------------------------------------------------------------------------------
Illinois Tool Works, Inc. 1,256,600 55,164,740
- --------------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd., Cl. A 285,500 10,854,710
- --------------------------------------------------------------------------------
Kaydon Corp. 31,600 1,204,276
- --------------------------------------------------------------------------------
Manitowoc Co., Inc. (The) 39,100 1,728,220
- --------------------------------------------------------------------------------
Paccar, Inc. 103,350 5,650,145
- --------------------------------------------------------------------------------
SPX Corp. 116,200 6,135,360
- --------------------------------------------------------------------------------
Toro Co. (The) 59,800 2,392,598
- --------------------------------------------------------------------------------
Trinity Industries, Inc. 51,500 1,718,040
- --------------------------------------------------------------------------------
Valmont Industries, Inc. 12,600 657,216
- --------------------------------------------------------------------------------
Wabtec Corp. 57,400 1,619,254
-------------
211,287,250
- --------------------------------------------------------------------------------
ROAD & RAIL--0.5%
Arkansas Best Corp. 29,100 1,284,765
- --------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 168,700 11,294,465
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ROAD & RAIL Continued
CSX Corp. 1,197,800 $ 36,197,516
- --------------------------------------------------------------------------------
Dollar Thrifty
Automotive Group, Inc. 1 13,100 559,108
- --------------------------------------------------------------------------------
Laidlaw International, Inc. 72,400 1,954,800
- --------------------------------------------------------------------------------
Norfolk Southern Corp. 37,100 1,585,283
- --------------------------------------------------------------------------------
Ryder Systems, Inc. 61,300 3,029,446
- --------------------------------------------------------------------------------
Swift Transportation Co., Inc. 1 60,700 1,407,633
-------------
57,313,016
- --------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS--0.0%
Applied Industrial Technologies, Inc. 51,350 1,161,024
- --------------------------------------------------------------------------------
WESCO International, Inc. 1 25,500 1,491,750
-------------
2,652,774
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--15.9%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.6%
Cisco Systems, Inc. 1 6,481,500 142,528,185
- --------------------------------------------------------------------------------
CommScope, Inc. 1 76,700 2,240,407
- --------------------------------------------------------------------------------
InterDigital
Communications Corp. 1 31,800 1,056,714
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. 1 3,420,300 7,969,299
- --------------------------------------------------------------------------------
Motorola, Inc. 3,830,700 89,561,766
- --------------------------------------------------------------------------------
Polycom, Inc. 1 159,800 3,801,642
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1,211,875 45,651,331
-------------
292,809,344
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--4.0%
Apple Computer, Inc. 1 209,000 14,180,650
- --------------------------------------------------------------------------------
Dell, Inc. 1 4,411,500 99,479,325
- --------------------------------------------------------------------------------
EMC Corp. 1 3,263,200 38,016,280
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 4,215,000 154,100,400
- --------------------------------------------------------------------------------
International Business Machines Corp. 1,473,700 119,325,489
- --------------------------------------------------------------------------------
Komag, Inc. 1 25,200 906,192
59 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS Continued
NCR Corp. 1 83,200 $ 2,894,528
- --------------------------------------------------------------------------------
Western Digital Corp. 1 545,000 9,973,500
-------------
438,876,364
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.4%
Agilent Technologies, Inc. 1 984,300 31,655,088
- --------------------------------------------------------------------------------
Brightpoint, Inc. 75,000 1,248,000
- --------------------------------------------------------------------------------
Mettler-Toledo International, Inc. 1 11,900 725,186
- --------------------------------------------------------------------------------
Plexus Corp. 1 66,800 1,323,976
- --------------------------------------------------------------------------------
Solectron Corp. 1 1,192,900 3,745,706
- --------------------------------------------------------------------------------
Tech Data Corp. 1 74,400 2,595,816
-------------
41,293,772
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--0.7%
Digital Insight Corp. 1 22,700 590,427
- --------------------------------------------------------------------------------
EarthLink, Inc. 1 238,200 1,750,770
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 193,100 73,094,143
- --------------------------------------------------------------------------------
RealNetworks, Inc. 1 111,700 1,232,051
- --------------------------------------------------------------------------------
United Online, Inc. 198,000 2,271,060
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 129,000 2,610,960
-------------
81,549,411
- --------------------------------------------------------------------------------
IT SERVICES--1.1%
Affiliated Computer
Services, Inc., Cl. A 1 54,400 2,792,896
- --------------------------------------------------------------------------------
Ceridian Corp. 1 92,500 2,207,975
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 473,682 22,443,053
- --------------------------------------------------------------------------------
Convergys Corp. 1 144,500 3,015,715
- --------------------------------------------------------------------------------
CSG Systems International, Inc. 1 41,400 1,114,488
- --------------------------------------------------------------------------------
First Data Corp. 1,678,200 72,112,254
- --------------------------------------------------------------------------------
Fiserv, Inc. 1 154,500 6,824,265
- --------------------------------------------------------------------------------
MoneyGram International, Inc. 57,200 1,796,080
- --------------------------------------------------------------------------------
MPS Group, Inc. 1 84,100 1,182,446
- --------------------------------------------------------------------------------
Paychex, Inc. 219,600 7,885,836
-------------
121,375,008
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.3%
Xerox Corp. 1 2,565,400 $ 37,993,574
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.2%
Analog Devices, Inc. 391,700 12,001,688
- --------------------------------------------------------------------------------
Applied Materials, Inc. 896,600 15,134,608
- --------------------------------------------------------------------------------
Atmel Corp. 1 326,800 1,885,636
- --------------------------------------------------------------------------------
Cymer, Inc. 1 63,700 2,621,255
- --------------------------------------------------------------------------------
Freescale
Semiconductor, Inc., Cl. B 1 1,608,566 49,720,775
- --------------------------------------------------------------------------------
Intel Corp. 5,691,200 111,206,048
- --------------------------------------------------------------------------------
Intersil Corp., Cl. A 133,500 3,384,225
- --------------------------------------------------------------------------------
Lam Research Corp. 1 156,500 6,696,635
- --------------------------------------------------------------------------------
MEMC Electronic Materials, Inc. 1 107,500 4,158,100
- --------------------------------------------------------------------------------
Micron Technology, Inc. 1 2,270,700 39,237,696
- --------------------------------------------------------------------------------
OmniVision Technologies, Inc. 1,2 124,300 2,063,380
- --------------------------------------------------------------------------------
ON Semiconductor Corp. 1 226,200 1,359,462
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 3,186,200 103,838,258
- --------------------------------------------------------------------------------
Zoran Corp. 1 72,600 1,293,732
-------------
354,601,498
- --------------------------------------------------------------------------------
SOFTWARE--3.6%
BEA Systems, Inc. 1 561,100 7,703,903
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 222,300 5,917,626
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 142,100 2,334,703
- --------------------------------------------------------------------------------
Fair Isaac Corp. 110,500 3,868,605
- --------------------------------------------------------------------------------
Intuit, Inc. 1 1,194,100 36,085,702
- --------------------------------------------------------------------------------
Mentor Graphics Corp. 1 42,400 614,800
- --------------------------------------------------------------------------------
Microsoft Corp. 8,636,654 221,875,641
- --------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1 10,000 912,000
- --------------------------------------------------------------------------------
Oracle Corp. 1 6,817,200 106,689,180
- --------------------------------------------------------------------------------
Reynolds & Reynolds Co., Cl. A 30,900 1,185,324
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 210,200 3,985,392
60 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
TIBCO Software, Inc. 1 330,500 $ 2,597,730
-------------
393,770,606
- --------------------------------------------------------------------------------
MATERIALS--2.7%
- --------------------------------------------------------------------------------
CHEMICALS--0.9%
Air Products & Chemicals, Inc. 573,200 37,997,428
- --------------------------------------------------------------------------------
Ecolab, Inc. 88,300 3,936,414
- --------------------------------------------------------------------------------
Fuller (H.B.) Co. 53,800 1,034,574
- --------------------------------------------------------------------------------
Hercules, Inc. 1 74,100 1,155,960
- --------------------------------------------------------------------------------
NewMarket Corp. 21,500 1,331,495
- --------------------------------------------------------------------------------
OM Group, Inc. 1 35,300 1,412,000
- --------------------------------------------------------------------------------
PPG Industries, Inc. 437,400 27,713,664
- --------------------------------------------------------------------------------
Rohm & Haas Co. 559,600 24,678,360
- --------------------------------------------------------------------------------
Tronox, Inc., Cl. B 61,363 791,583
-------------
100,051,478
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.0%
Eagle Materials, Inc. 32,900 1,179,465
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.1%
Packaging Corp. of America 39,700 918,658
- --------------------------------------------------------------------------------
Pactiv Corp. 1 159,900 4,274,127
- --------------------------------------------------------------------------------
Temple-Inland, Inc. 63,100 2,809,212
-------------
8,001,997
- --------------------------------------------------------------------------------
METALS & MINING--1.7%
AK Steel Holding Corp. 1 214,600 2,706,106
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 52,300 5,012,432
- --------------------------------------------------------------------------------
Chaparral Steel Co. 1 18,300 1,306,986
- --------------------------------------------------------------------------------
Commercial Metals Co. 79,400 1,714,246
- --------------------------------------------------------------------------------
Freeport-McMoRan
Copper & Gold, Inc., Cl. B 818,200 47,627,422
- --------------------------------------------------------------------------------
Nucor Corp. 993,100 48,532,797
- --------------------------------------------------------------------------------
Phelps Dodge Corp. 452,200 40,471,900
- --------------------------------------------------------------------------------
Quanex Corp. 73,650 2,528,405
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
Reliance Steel & Aluminum Co. 154,200 $ 5,053,134
- --------------------------------------------------------------------------------
Ryerson, Inc. 42,100 891,678
- --------------------------------------------------------------------------------
Schnitzer Steel Industries, Inc. 34,000 1,079,500
- --------------------------------------------------------------------------------
Southern Copper Corp. 2 265,300 24,492,496
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 57,300 3,024,867
- --------------------------------------------------------------------------------
United States Steel Corp. 72,900 4,240,593
- --------------------------------------------------------------------------------
Worthington Industries, Inc. 129,800 2,480,478
-------------
191,163,040
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.0%
MeadWestvaco Corp. 14,425 368,559
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.6%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--2.1%
AT&T, Inc. 1,152,836 35,887,785
- --------------------------------------------------------------------------------
BellSouth Corp. 1,250,800 50,932,576
- --------------------------------------------------------------------------------
CenturyTel, Inc. 142,700 5,682,314
- --------------------------------------------------------------------------------
Citizens Communications Co. 322,500 4,447,275
- --------------------------------------------------------------------------------
Embarq Corp. 1 93,991 4,431,676
- --------------------------------------------------------------------------------
Qwest Communications International, Inc. 1 6,894,400 60,739,664
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 1,910,000 67,193,800
-------------
229,315,090
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.5%
Leap Wireless International, Inc. 1 15,700 726,282
- --------------------------------------------------------------------------------
Sprint Nextel Corp. 3,316,831 56,120,781
-------------
56,847,063
- --------------------------------------------------------------------------------
UTILITIES--1.4%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.5%
American Electric Power Co., Inc. 1,264,000 46,110,720
61 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES Continued
Edison International, Inc. 168,200 $ 7,340,248
- --------------------------------------------------------------------------------
Progress Energy, Inc. 45,000 1,994,850
- --------------------------------------------------------------------------------
Progress Energy, Inc.,
Contingent Value
Obligation 1,3 680,100 210,831
----------------
55,656,649
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.1%
Constellation Energy
Group, Inc. 172,780 10,382,350
- --------------------------------------------------------------------------------
Mirant Corp. 1 6,987 202,413
----------------
10,584,763
- --------------------------------------------------------------------------------
GAS UTILITIES--0.1%
ONEOK, Inc. 124,000 4,745,480
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.7%
Alliant Energy Corp. 70,300 2,572,277
- --------------------------------------------------------------------------------
Avista Corp. 26,100 632,664
- --------------------------------------------------------------------------------
Duke Energy Corp. 1,228,400 36,852,000
- --------------------------------------------------------------------------------
PG&E Corp. 1,011,800 42,424,773
----------------
82,481,714
----------------
Total Common Stocks
(Cost $8,887,651,244) 11,056,228,317
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Wachovia Corp.,
Dividend Equalization
Preferred
Shares 1 (Cost $0) 100,000 200
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Dime Bancorp, Inc.
Wts., Exp. 1/2/10 1 485,800 58,296
- --------------------------------------------------------------------------------
Lucent Technologies,
Inc. Wts., Exp.
12/10/07 1 68,554 16,110
----------------
Total Rights, Warrants
and Certificates (Cost $0) 74,406
PRINICPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.5%
- --------------------------------------------------------------------------------
Undivided interest of 4.86% in joint repurchase
agreement (Principal Amount/Value
$1,235,729,000, with a maturity value of
$1,235,908,181) with UBS Warburg
LLC, 5.22%, dated 8/31/06, to be
repurchased at $60,067,709 on
9/1/06, collateralized by Federal
National Mortgage Assn., 6%-7%,
3/1/36-8/1/36, with a value
of $1,262,388,232
(Cost $60,059,000) $60,059,000 $ 60,059,000
- --------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments
Purchased with Cash Collateral
from Securities Loaned)
(Cost $8,947,710,244) 11,116,361,923
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--0.3% 4
- --------------------------------------------------------------------------------
Joint Repurchase Agreements--0.3%
Undivided interest of 0.47% in joint repurchase
agreement (Principal Amount/Value $3,200,000,000,
with a maturity value of $3,200,470,222) with
Nomura Securities, 5.29%, dated 8/31/06,
to be repurchased at $15,161,897 on
9/1/06, collateralized by U.S. Agency
Mortgages, 0.00%-22.12%,
3/15/14-6/25/43, with
a value of $3,264,000,000 15,159,669 15,159,669
- --------------------------------------------------------------------------------
Undivided interest of 2% in joint repurchase
agreement (Principal Amount/Value $1,000,000,000
with a maturity value of $1,000,147,222) with
ING Financial Markets LLC, 5.30%, dated 8/31/06,
to be repurchased at $20,002,944 on 9/1/06,
collateralized by U.S. Agency Mortgages,
4.50%-6.50%, 10/1/18-8/1/36, with a value
of $1,020,000,530 20,000,000 20,000,000
----------------
Total Investments Purchased
with Cash Collateral from
Securities Loaned (Cost $35,159,669) 35,159,669
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $8,982,869,913) 100.3% 11,151,521,592
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS (0.3) (33,532,813)
------------------------------
NET ASSETS 100.0% $11,117,988,779
==============================
62 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Partial or fully-loaned security. See Note 7 of accompanying Notes.
3. Illiquid security. The aggregate value of illiquid securities as of August
31, 2006 was $210,831, which represents less than 0.005% of the Fund's net
assets. See Note 6 of accompanying Notes.
4. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 7 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF ASSETS AND LIABILITIES August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
- --------------------------------------------------------------------------------
Investments, at value (cost $8,982,869,913)--
see accompanying statement of investments $11,151,521,592
- --------------------------------------------------------------------------------
Cash 6,489,068
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 31,455,426
Interest and dividends 23,922,875
Shares of capital stock sold 3,170,662
Other 248,188
----------------
Total assets 11,216,807,811
- --------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------
Return of collateral for securities loaned 35,159,669
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 38,768,650
Shares of capital stock redeemed 17,072,256
Distribution and service plan fees 4,337,993
Transfer and shareholder servicing agent fees 1,776,936
Shareholder communications 1,388,003
Directors' compensation 180,682
Other 134,843
----------------
Total liabilities 98,819,032
----------------
NET ASSETS $11,117,988,779
================
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- --------------------------------------------------------------------------------
Par value of shares of capital stock $ 2,863,907
- --------------------------------------------------------------------------------
Additional paid-in capital 8,798,259,296
- --------------------------------------------------------------------------------
Accumulated net investment income 60,937,269
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 87,276,628
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 2,168,651,679
- --------------------------------------------------------------------------------
NET ASSETS $11,117,988,779
================
64 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on
net assets of $7,680,185,754 and 196,331,107 shares of
capital stock outstanding) $39.12
Maximum offering price per share (net asset value plus
sales charge of 5.75% of offering price) $41.51
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $1,453,678,953 and
38,382,223 shares of capital stock outstanding) $37.87
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $1,107,961,412 and
29,299,617 shares of capital stock outstanding) $37.81
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $207,339,336 and
5,373,522 shares of capital stock outstanding) $38.59
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $668,823,324 and 17,004,216
shares of capital stock outstanding) $39.33
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF OPERATIONS For the Year Ended August 31, 2006
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $126,160) $209,366,981
- --------------------------------------------------------------------------------
Interest 2,782,808
- --------------------------------------------------------------------------------
Other income 402,396
- --------------------------------------------------------------------------------
Portfolio lending fees 240,310
-------------
Total investment income 212,792,495
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 52,454,061
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 19,214,558
Class B 16,846,996
Class C 11,606,867
Class N 971,045
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 15,025,246
Class B 3,525,610
Class C 2,172,783
Class N 493,473
Class Y 145,370
- --------------------------------------------------------------------------------
Shareholder communications:
Class A 1,806,216
Class B 711,081
Class C 231,054
Class N 16,585
- --------------------------------------------------------------------------------
Directors' compensation 158,294
- --------------------------------------------------------------------------------
Custodian fees and expenses 87,691
- --------------------------------------------------------------------------------
Administration service fees 1,500
- --------------------------------------------------------------------------------
Other 458,954
-------------
Total expenses 125,927,384
Less reduction to custodian expenses (3,234)
-------------
Net expenses 125,924,150
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 86,868,345
66 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- --------------------------------------------------------------------------------
Net realized gain on:
Investments $884,229,163
Foreign currency transactions 2,757,660
-------------
Net realized gain 886,986,823
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 20,468,867
Translation of assets and liabilities denominated in foreign
currencies (2,030,633)
-------------
Net change in unrealized appreciation 18,438,234
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $992,293,402
=============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
67 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2006 2005
- -----------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------
Net investment income $ 86,868,345 $ 137,515,097
- -----------------------------------------------------------------------------------------
Net realized gain 886,986,823 555,738,759
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation 18,438,234 607,039,907
----------------------------------
Net increase in net assets resulting from operations 992,293,402 1,300,293,763
- -----------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (78,299,257) (92,759,936)
Class B (1,493,470) (6,840,949)
Class C (3,049,966) (6,104,306)
Class N (1,478,142) (1,600,231)
Class Y (7,871,769) (9,431,972)
- -----------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital stock transactions:
Class A (740,971,280) (330,754,330)
Class B (656,284,844) (825,679,905)
Class C (189,937,693) (158,653,723)
Class N 14,934,343 10,302,309
Class Y 143,274,771 (138,236,214)
- -----------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------
Total decrease (528,883,905) (259,465,494)
- -----------------------------------------------------------------------------------------
Beginning of period 11,646,872,684 11,906,338,178
----------------------------------
End of period (including accumulated net investment
income of $60,937,269 and $66,534,667, respectively) $11,117,988,779 $11,646,872,684
==================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.18 $ 32.78 $ 29.62 $ 27.90 $ 32.15
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .35 1 .47 1 .26 .22 .16
Net realized and unrealized gain (loss) 2.96 3.34 3.10 1.69 (4.29)
-------------------------------------------------------------------------------
Total from investment operations 3.31 3.81 3.36 1.91 (4.13)
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.37) (.41) (.20) (.19) (.07)
Distributions from net realized gain -- -- -- -- (.05)
-------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.37) (.41) (.20) (.19) (.12)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 39.12 $ 36.18 $ 32.78 $ 29.62 $ 27.90
===============================================================================
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.19% 11.68% 11.37% 6.93% (12.90)%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $7,680,186 $7,810,714 $7,384,256 $7,033,312 $6,443,983
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $7,845,096 $7,759,230 $7,521,103 $6,310,359 $7,203,226
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.93% 1.36% 0.75% 0.87% 0.52%
Total expenses 0.92% 4 0.92% 4 0.93% 4,5 0.97% 4 0.99% 4
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 79% 76% 94% 78%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. 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.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
69 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS B YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 34.99 $ 31.67 $ 28.68 $ 27.04 $ 31.34
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .05 1 .20 1 (.21) (.13) (.20)
Net realized and unrealized gain (loss) 2.86 3.21 3.20 1.77 (4.05)
---------------------------------------------------------------------------
Total from investment operations 2.91 3.41 2.99 1.64 (4.25)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.03) (.09) -- -- --
Distributions from net realized gain -- -- -- -- (.05)
---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.03) (.09) -- -- (.05)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 37.87 $ 34.99 $ 31.67 $ 28.68 $ 27.04
===========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 8.32% 10.79% 10.43% 6.06% (13.58)%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,453,679 $1,968,829 $2,558,206 $2,941,765 $3,510,800
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,685,648 $2,295,269 $2,884,434 $2,964,666 $4,607,653
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.13% 0.59% (0.10)% 0.04% (0.25)%
Total expenses 1.71% 4 1.72% 4 1.78% 4,5 1.81% 4 1.75% 4
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 79% 76% 94% 78%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. 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.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS C YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 34.98 $ 31.71 $ 28.69 $ 27.03 $ 31.33
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .07 1 .21 1 (.03) -- (.11)
Net realized and unrealized gain (loss) 2.85 3.22 3.05 1.66 (4.14)
---------------------------------------------------------------------------
Total from investment operations 2.92 3.43 3.02 1.66 (4.25)
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.09) (.16) -- -- --
Distributions from net realized gain -- -- -- -- (.05)
---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.09) (.16) -- -- (.05)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 37.81 $ 34.98 $ 31.71 $ 28.69 $ 27.03
===========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 8.36% 10.83% 10.53% 6.14% (13.58)%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,107,962 $1,206,335 $1,241,930 $1,188,826 $1,198,517
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $1,163,337 $1,250,845 $1,278,659 $1,111,131 $1,432,566
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) 0.18% 0.62% (0.01)% 0.09% (0.24)%
Total expenses 1.67% 4 1.67% 4 1.70% 4,5 1.74% 4 1.75% 4
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 79% 76% 94% 78%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. 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.
3. Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%.
5. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
71 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS N YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 35.71 $ 32.39 $ 29.33 $ 27.72 $ 32.09
- ----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .24 1 .35 1 .15 .20 .12
Net realized and unrealized gain (loss) 2.92 3.30 3.05 1.65 (4.31)
--------------------------------------------------------
Total from investment operations 3.16 3.65 3.20 1.85 (4.19)
- ----------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.28) (.33) (.14) (.24) (.13)
Distributions from net realized gain -- -- -- -- (.05)
--------------------------------------------------------
Total dividends and/or distributions
to shareholders (.28) (.33) (.14) (.24) (.18)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of period $ 38.59 $ 35.71 $ 32.39 $ 29.33 $ 27.72
========================================================
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 8.87% 11.30% 10.93% 6.78% (13.15)%
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $207,339 $177,463 $150,955 $79,188 $43,464
- ----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $194,639 $168,866 $122,478 $60,950 $28,141
- ----------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.63% 1.02% 0.38% 0.65% 0.28%
Total expenses 1.22% 1.26% 1.31% 1.23% 1.24%
Expenses after payments and waivers
and reduction to custodian expenses 1.22% 1.26% 1.31% 1.18% 1.24%
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 79% 76% 94% 78%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. 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.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
72 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
CLASS Y YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 36.38 $ 32.93 $ 29.75 $ 28.02 $ 32.28
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .52 1 .64 1 .34 .11 .19
Net realized and unrealized gain (loss) 2.96 3.34 3.13 1.86 (4.28)
----------------------------------------------------------
Total from investment operations 3.48 3.98 3.47 1.97 (4.09)
- ------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income (.53) (.53) (.29) (.24) (.12)
Distributions from net realized gain -- -- -- -- (.05)
----------------------------------------------------------
Total dividends and/or distributions
to shareholders (.53) (.53) (.29) (.24) (.17)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 39.33 $ 36.38 $ 32.93 $ 29.75 $ 28.02
==========================================================
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 9.63% 12.15% 11.69% 7.11% (12.74)%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $668,823 $483,532 $570,991 $441,460 $225,298
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $594,018 $496,349 $558,130 $242,029 $227,835
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 1.38% 1.82% 1.07% 1.01% 0.74%
Total expenses 0.49% 0.53% 0.60% 0.87% 0.92%
Expenses after payments and waivers
and reduction to custodian expenses 0.49% 0.53% 0.60% 0.83% 0.78%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 79% 76% 94% 78%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. 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.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
73 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Main Street Fund (the Fund) is a separate series of Oppenheimer Main
Street Funds, Inc., an open-end management investment company registered under
the Investment Company Act of 1940, as amended. The Fund's investment objective
is to seek a high total return. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are 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 are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
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. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares 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. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Directors. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ(R) prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its
74 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
trading session ending at, or most recently prior to, the time when the Fund's
assets are valued. Securities (including restricted securities) for which market
quotations are not readily available are valued at their fair value. Foreign and
domestic securities whose values have been materially affected by what the
Manager identifies as a significant event occurring before the Fund's assets are
valued but after the close of their respective exchanges will be fair valued.
Fair value is determined in good faith using consistently applied procedures
under the supervision of the Board of Directors. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars 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. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Directors.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. 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.
75 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 1,2 TAX PURPOSES
----------------------------------------------------------------------
$61,133,133 $200,536,986 $-- $2,055,391,319
1. During the fiscal year ended August 31, 2006, the Fund utilized $669,602,504
of capital loss carryforward to offset capital gains realized in that fiscal
year. a
a. Includes $489,935 of capital loss carryforwards acquired in the
September 4, 2003 merger of Oppenheimer Trinity Core Fund.
2. During the fiscal year ended August 31, 2005, the Fund utilized $557,605,412
of capital loss carryforward to offset capital gains realized in that fiscal
year. b
b. Includes $489,935 of capital loss carryforwards acquired in the
September 4, 2003 merger of Oppenheimer Trinity Core Fund.
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, 2006.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL INCOME ON INVESTMENTS 3
---------------------------------------------------
$28,913,271 $273,139 $28,640,132
3. $28,423,336, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.
The tax character of distributions paid during the years ended August 31, 2006
and August 31, 2005 was as follows:
76 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
------------------------------------------------------------
Distributions paid from:
Ordinary income $92,192,604 $116,737,394
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, 2006 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.
Federal tax cost of securities $9,096,130,273
==============
Gross unrealized appreciation $2,141,287,659
Gross unrealized depreciation (85,896,340)
--------------
Net unrealized appreciation $2,055,391,319
==============
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Board of Directors has adopted a deferred
compensation plan for independent directors that enables directors 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
Director under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Director. The Fund purchases shares of the funds selected for
deferral by the Director 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 directors' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated
77 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
shareholder redemption activity. The Fund pays interest to its custodian on such
cash overdrafts, to the extent they are not offset by positive cash balances
maintained by the Fund, at a rate equal to the Federal Funds Rate plus 0.50%.
The "Reduction to custodian expenses" line item, if applicable, represents
earnings on cash balances maintained by the Fund during the period. Such
interest expense and other custodian fees may be paid with these earnings.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
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 CAPITAL STOCK
The Fund has authorized 840 million shares of $.01 par value capital stock of
each class. Transactions in shares of capital stock were as follows:
YEAR ENDED AUGUST 31, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
CLASS A
Sold 26,624,100 $ 1,007,441,844 42,130,880 $ 1,462,992,163
Dividends and/or
distributions reinvested 1,913,771 71,938,634 2,447,641 85,153,420
Redeemed (48,081,986) (1,820,351,758) (53,958,588) (1,878,899,913)
--------------------------------------------------------------
Net decrease (19,544,115) $ (740,971,280) (9,380,067) $ (330,754,330)
==============================================================
- -----------------------------------------------------------------------------------------
CLASS B
Sold 4,058,713 $ 149,179,170 6,104,800 $ 205,311,660
Dividends and/or
distributions reinvested 38,325 1,403,097 186,907 6,324,963
Redeemed (21,981,611) (806,867,111) (30,807,076) (1,037,316,528)
--------------------------------------------------------------
Net decrease (17,884,573) $ (656,284,844) (24,515,369) $ (825,679,905)
==============================================================
78 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
YEAR ENDED AUGUST 31, 2006 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
CLASS C
Sold 2,576,737 $ 94,490,367 3,496,633 $ 117,639,447
Dividends and/or
distributions reinvested 72,361 2,644,058 155,120 5,247,695
Redeemed (7,833,508) (287,072,118) (8,335,048) (281,540,865)
--------------------------------------------------------------
Net decrease (5,184,410) $(189,937,693) (4,683,295) $(158,653,723)
==============================================================
- -----------------------------------------------------------------------------------------
CLASS N
Sold 2,043,767 $ 76,211,483 1,948,358 $ 66,956,350
Dividends and/or
distributions reinvested 38,592 1,434,091 45,108 1,553,077
Redeemed (1,677,909) (62,711,231) (1,684,370) (58,207,118)
--------------------------------------------------------------
Net increase 404,450 $ 14,934,343 309,096 $ 10,302,309
==============================================================
- -----------------------------------------------------------------------------------------
CLASS Y
Sold 8,687,755 $ 331,059,516 11,089,312 $ 389,600,005
Dividends and/or
distributions reinvested 202,236 7,618,220 270,489 9,431,944
Redeemed (5,178,566) (195,402,965) (15,404,677) (537,268,163)
--------------------------------------------------------------
Net increase (decrease) 3,711,425 $ 143,274,771 (4,044,876) $(138,236,214)
==============================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended August 31, 2006, were as
follows:
PURCHASES SALES
-----------------------------------------------------------
Investment securities $9,544,262,280 $10,940,974,355
- --------------------------------------------------------------------------------
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
average annual rate as shown in the following table:
FEE SCHEDULE
----------------------------------------
Up to $200 million of net assets 0.65%
Next $150 million of net assets 0.60
Next $150 million of net assets 0.55
Over $500 million of net assets 0.45
- --------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. 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, 2006, the Fund paid
$21,576,257 to OFS for services to the Fund.
79 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
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
periodically 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 periodically 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
periods. 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% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 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 Directors and its independent directors 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, 2006 for Class B, Class C
and Class N shares were $25,080,059, $33,510,768 and $3,136,495, 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 following table for the period
indicated.
80 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
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, 2006 $2,227,854 $48,214 $3,727,258 $107,245 $68,399
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
As of August 31, 2006, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of August 31, 2006, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
7. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value
81 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. SECURITIES LENDING Continued
of the loaned securities is determined at the close of business each day. If the
Fund is undercollateralized at the close of business due to an increase in
market value of securities on loan, additional collateral is requested from the
borrowing counterparty and is delivered to the Fund on the next business day.
Cash collateral may be invested in approved investments and the Fund bears the
risk of any loss in value of these investments. The Fund retains a portion of
the interest earned from the collateral. If the borrower defaults on its
obligation to return the securities loaned because of insolvency or other
reasons, the Fund could experience delays and cost in recovering the securities
loaned or in gaining access to the collateral. The Fund continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of August 31, 2006,
the Fund had on loan securities valued at $35,274,309, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Investments sold." Collateral of $35,159,669 was received for
the loans, all of which was received in cash and subsequently invested in
approved investments or held as cash.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
August 31, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
82 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
83 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF OPPENHEIMER MAIN STREET FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer Main Street Fund, a series of Oppenheimer Main Street Funds, Inc.,
including the statement of investments, as of August 31, 2006, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of August 31, 2006, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. 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 Main Street Fund as of August 31, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
October 16, 2006
84 | 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, are audit committee financial experts and that
Messrs. Cameron and Bowen are "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $13,000 in fiscal 2006 and $12,250 in fiscal 2005.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees 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 2006 and $5,000 in fiscal 2005 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 services include: seed money audit.
(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 during the last two fiscal years 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.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $1,574 for fiscal 2006 and no such fees in fiscal 2005 to the
registrant.
The principal accountant for the audit of the registrant's annual financial
statements billed $2,625 in fiscal 2006 and no such fees in 2005 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 the cost to the principal accountant of attending audit
committee meetings and consultations regarding the registrant's retirement plan
with respect to its trustees.
(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.
Under applicable laws, pre-approval of non-audit services maybe 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 $4,199 in fiscal 2006 and $5,000 in fiscal
2005 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 accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the
Board and, in such cases where required, to shareholders. Recommendations
for trustee nominees should, at a minimum, be accompanied by the
following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the 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 08/31/2006, the registrant's principal executive officer and
principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the 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.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Principal Protected Trust
By: /S/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 10/16/2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /S/ John V. Murphy
----------------------------
John V. Murphy
Principal Executive Officer
Date: 10/16/2006
By: /S/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 10/16/2006