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 811-21561
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OPPENHEIMER PRINCIPAL PROTECTED TRUST III
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(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: AUGUST 31
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Date of reporting period: FEBRUARY 28, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III(R) PORTFOLIO ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Equity 59.2%
Fixed Income 17.2
Money Market 18.3
Cash Equivalents 5.3*
The Fund seeks exposure to the equity markets by investing in the Oppenheimer
Main Street Fund. Information relating to the Oppenheimer Main Street's
portfolio holdings appears below.
*The Fund lends its portfolio securities from time to time in order to earn
additional income. The Fund's cash equivalent holdings at period end represent
the Fund's investment of collateral it has received for securities currently on
loan.
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2007, 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 19.8%
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Information Technology 19.7
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Health Care 12.5
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Consumer Discretionary 12.5
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Industrials 10.8
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Energy 9.2
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Consumer Staples 5.6
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Telecommunication Services 5.3
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Materials 3.8
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Utilities 0.8
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2007, and are based on the total market value of common stocks.
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12 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
TOP TEN COMMON STOCK INDUSTRIES
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Oil & Gas 8.3%
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Diversified Financial Services 6.7
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Pharmaceuticals 5.8
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Health Care Providers & Services 5.0
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Software 4.9
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Media 4.6
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Computers & Peripherals 4.6
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Industrial Conglomerates 4.2
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Insurance 4.2
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Diversified Telecommunication Services 4.1
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2007, 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. 2.8
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Citigroup, Inc. 2.5
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Microsoft Corp. 2.3
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AT&T, Inc. 2.3
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Bank of America Corp. 2.2
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Pfizer, Inc. 1.9
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JPMorgan Chase & Co. 1.9
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Johnson & Johnson 1.8
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International Business Machines Corp. 1.7
Portfolio holdings and allocations are subject to change. Percentages are as of
February 28, 2007, and are based on net assets.
For up-to-date Top 10 Fund holdings, please visit www.oppenheimerfunds.com
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13 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES
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Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
Cumulative total returns are not annualized. 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 the Manager,
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 (December 16, 2011) will be at least equal to a shareholder's
original investment (reduced by any adjustments to the warranty amount permitted
by the Warranty Agreement, and less any redemptions of Fund shares or
distributions taken in cash, sales charges, and extraordinary Fund expenses).
The Warranty is solely the obligation of the Warranty Provider to the Fund, not
the shareholders. The Warranty is dependent on the financial ability of the
Warranty Provider to make payment to the Fund on the Maturity Date. 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
Warranty increases the Fund's expenses that shareholders pay and could lower
Fund performance. Shareholders must redeem their shares in the Fund on, and
only on, the Maturity Date (expected to be December 16,
14 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES
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2011) 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 Warranty. After the Maturity Date,
shares of the Fund will not be covered under the terms of the 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 do not 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, the Fund is required to
accrue and declare a dividend on such phantom income. Thus, you will have
taxable income.
15 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES
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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.
All investments have risks to some degree. Stocks and S&P 500 Index Futures
fluctuate in price and their volatility at times may be great. If the issuer of
an S&P 500 Index Future does not pay the amount due, the Fund can lose money on
the investment. All investments have risks to some degree. Stocks fluctuate in
price and their volatility at times may be great. While principal and interest
payments on U.S. Treasury securities are guaranteed by the U.S. Government, the
price of such securities will fluctuate with changes in prevailing interest
rates. Zero-coupon U.S. Government securities are subject to greater
fluctuations in price from interest rate changes than typical debt securities
that pay interest on a regular basis.
The Fund offered its shares to the public from October 7, 2004 to December 10,
2004. From December 16, 2004, and until December 16, 2011, 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.
16 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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 February 28, 2007.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in
17 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
FUND EXPENSES
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the Statement of Additional Information). Therefore, the "hypothetical" lines of
the table are useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
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BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(9/1/06) (2/28/07) FEBRUARY 28, 2007
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Class A Actual $1,000.00 $1,061.60 $ 6.00
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Class A Hypothetical 1,000.00 1,018.99 5.87
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Class B Actual 1,000.00 1,057.10 10.35
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Class B Hypothetical 1,000.00 1,014.78 10.14
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Class C Actual 1,000.00 1,057.60 9.89
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Class C Hypothetical 1,000.00 1,015.22 9.69
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Class N Actual 1,000.00 1,060.60 7.13
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Class N Hypothetical 1,000.00 1,017.90 6.98
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 181/365
(to reflect the one-half year period). Those annualized expense ratios,
excluding all underlying fund expenses, based on the 6-month period ended
February 28, 2007 are as follows:
CLASS EXPENSE RATIOS
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Class A 1.17%
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Class B 2.02
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Class C 1.93
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Class N 1.39
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.
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18 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF INVESTMENTS February 28, 2007 / Unaudited
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VALUE
SHARES SEE NOTE 1
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INVESTMENTS IN AFFILIATED COMPANIES--91.4% 1
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MONEY MARKET--21.6%
Oppenheimer Institutional Money Market Fund,
Cl. E, 5.25% 2 14,162,912 $ 14,162,912
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U.S. EQUITY--69.8%
Oppenheimer Main Street Fund, Cl. Y 1,126,665 45,663,724
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Total Investments in Affiliated Companies
(Cost $54,931,074) 59,826,636
PRINCIPAL
AMOUNT
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U.S. GOVERNMENT OBLIGATIONS--20.3%
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U.S. Treasury Bonds, STRIPS, 4.72%, 2/15/12
3,4,5 (Cost $13,087,394) $ 16,490,000 13,258,636
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Total Investments, at Value (excluding
Investments Purchased with Cash Collateral
from Securities Loaned) (Cost $68,018,468) 73,085,272
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INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--6.2% 6
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JOINT REPURCHASE AGREEMENT--6.2%
Undivided interest of 0.03% in joint repurchase
agreement (Principal Amount/Value
$2,250,000,000, with a maturity value of
$2,250,332,656 with Banc of America Securities
LLC, 5.3225%, dated 2/28/07, to be repurchased
at $750,111 on 3/1/07, collateralized by U.S.
Agency Mortgages, 5%, 5/1/35, with a value of
$2,295,000,000 750,000 750,000
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Undivided interest of 0.10% in joint
repurchase agreement (Principal Amount/Value
$750,000,000, with a maturity value of
$750,111,250) with Morgan Stanley, 5.34%,
dated 2/28/07, to be repurchased at $750,111
on 3/1/07, collateralized by U.S. Agency
Mortgages, 0.00%-6.05%, 3/30/07-10/15/20, with
a value of $765,730,799 750,000 750,000
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Undivided interest of 0.13% in joint
repurchase agreement (Principal Amount/Value
$750,000,000 with a maturity value of
$750,111,510) with Barclays Capital, 5.3525%,
dated 2/28/07, to be repurchased at $1,000,149
on 3/1/07, collateralized by Private Label
CMOs, 0.00%-4.84%, 2/1/11-7/25/46, with a
value of $772,500,000 1,000,000 1,000,000
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Undivided interest of 0.17% in joint
repurchase agreement (Principal Amount/Value
$500,000,000, with a maturity value of
$500,074,028) with Nomura Securities, 5.33%,
dated 2/28/07, to be repurchased at $843,278
on 3/1/07, collateralized by U.S. Agency
Mortgages, 5.50%-6%, 1/1/36-6/1/36, with a
value of $510,000,000 843,153 843,153
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Undivided interest of 0.25% in joint
repurchase agreement (Principal Amount/Value
$300,000,000, with a maturity value of
$300,044,667) with GX Clarke, 5.36%, dated
2/28/07, to be repurchased at $750,112 on
3/1/07, collateralized by U.S. Agency
Mortgages, 0.00%-7.125%, 3/28/07-5/1/30, with
a value of $306,002,780 750,000 750,000
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Total Investments Purchased with Cash
Collateral from Securities Loaned
(Cost $4,093,153) 4,093,153
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TOTAL INVESTMENTS, AT VALUE (COST $72,111,621) 117.9% 77,178,425
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LIABILITIES IN EXCESS OF OTHER ASSETS (17.9) (11,733,620)
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NET ASSETS 100.0% $ 65,444,805
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19 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF INVESTMENTS Unaudited / Continued
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FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended February 28, 2007 by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
AUGUST 31, 2006 ADDITIONS REDUCTIONS FEBRUARY 28, 2007
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Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% -- 20,084,549 5,921,637 14,162,912
Oppenheimer Main Street Fund, Cl. Y 985,196 204,840 63,371 1,126,665
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN
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Oppenheimer Institutional Money
Market Fund, Cl. E, 5.25% $14,162,912 $ 211,315 $ --
Oppenheimer Main Street Fund, Cl. Y 45,663,724 594,302 22,641
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$59,826,636 $ 805,617 $ 22,641
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2. Rate shown is the 7-day yield as of February 28, 2007.
3. Zero coupon bond reflects effective yield on the date of purchase.
4. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $1,451,294. See Note 5 of accompanying Notes.
5. Partial or fully-loaned security. See Note 6 of accompanying Notes.
6. 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 6 of
accompanying Notes.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF ASSETS AND LIABILITIES Unaudited
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February 28, 2007
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ASSETS
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Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $17,180,547) $ 17,351,789
Affiliated companies (cost $54,931,074) 59,826,636
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77,178,425
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Cash 23,662
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Receivables and other assets:
Futures margins 130,017
Interest 60,371
Other 3,311
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Total assets 77,395,786
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LIABILITIES
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Return of collateral for securities loaned 4,093,153
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Payables and other liabilities:
Investments purchased 7,714,944
Warranty agreement fees 65,014
Shares of beneficial interest redeemed 28,087
Distribution and service plan fees 27,002
Shareholder communications 5,656
Transfer and shareholder servicing agent fees 4,650
Trustees' compensation 671
Other 11,804
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Total liabilities 11,950,981
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NET ASSETS $ 65,444,805
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COMPOSITION OF NET ASSETS
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Par value of shares of beneficial interest $ 2,024
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Additional paid-in capital 59,869,122
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Accumulated net investment income 25,182
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Accumulated net realized gain on investments 491,298
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Net unrealized appreciation on investments 5,057,179
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NET ASSETS $ 65,444,805
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21 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued
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NET ASSET VALUE PER SHARE
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Class A Shares:
Net asset value and redemption price per share (based on net assets of $31,593,803
and 976,378 shares of beneficial interest outstanding) $ 32.36
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 34.33
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Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $17,649,476 and 546,522 shares of beneficial
interest outstanding) $ 32.29
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Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $15,152,481 and 468,655 shares of beneficial
interest outstanding) $ 32.33
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Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and
offering price per share (based on net assets of $1,049,045 and 32,457 shares of beneficial
interest outstanding) $ 32.32
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF OPERATIONS Unaudited
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For the Six Months Ended February 28, 2007
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INVESTMENT INCOME
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Dividends from affiliated companies $ 805,617
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Interest 391,887
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Portfolio lending fees 3,234
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Other income 12
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Total investment income 1,200,750
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EXPENSES
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Management fees 168,589
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Distribution and service plan fees:
Class A 40,028
Class B 90,222
Class C 79,402
Class N 2,634
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Transfer and shareholder servicing agent fees:
Class A 10,158
Class B 10,304
Class C 4,897
Class N 254
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Shareholder communications:
Class A 8,172
Class B 8,036
Class C 4,066
Class N 173
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Warranty agreement fees 202,308
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Trustees' compensation 3,393
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Administration service fees 750
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Custodian fees and expenses 156
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Other 8,266
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Total expenses 641,808
Less reduction to custodian expenses (8)
Less waivers and reimbursements of expenses (109,026)
----------------
Net expenses 532,774
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NET INVESTMENT INCOME 667,976
23 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENT OF OPERATIONS Unaudited / Continued
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REALIZED AND UNREALIZED GAIN (LOSS)
- ---------------------------------------------------------------------------------------
Net realized gain on:
Investments:
Unaffiliated companies $ 199,903
Affiliated companies 22,641
Closing and expiration of futures contracts 640,630
Distributions received from affiliated companies 1,702,850
----------------
Net realized gain 2,566,024
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Net change in unrealized appreciation (depreciation) on:
Investments 967,640
Futures contracts (203,202)
----------------
Net change in unrealized appreciation 764,438
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,998,438
================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
STATEMENTS OF CHANGES IN NET ASSETS
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SIX MONTHS
ENDED
FEBRUARY 28, 2007 YEAR ENDED
(UNAUDITED) AUGUST 31, 2006
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OPERATIONS
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Net investment income $ 667,976 $ 879,446
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Net realized gain (loss) 2,566,024 (1,277,126)
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Net change in unrealized appreciation 764,438 2,735,426
------------------------------------
Net increase in net assets resulting from operations 3,998,438 2,337,746
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DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (534,201) (677,601)
Class B (150,553) (185,336)
Class C (128,262) (200,276)
Class N (15,712) (21,672)
------------------------------------
(828,728) (1,084,885)
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BENEFICIAL INTEREST TRANSACTIONS
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Net decrease in net assets resulting from beneficial interest transactions:
Class A (3,083,791) (8,348,380)
Class B (1,469,884) (2,923,013)
Class C (2,357,084) (5,026,483)
Class N (36,010) (422,464)
------------------------------------
(6,946,769) (16,720,340)
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NET ASSETS
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Total decrease (3,777,059) (15,467,479)
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Beginning of period 69,221,864 84,689,343
------------------------------------
End of period (including accumulated net investment income of $25,182 and $185,934,
respectively) $ 65,444,805 $ 69,221,864
====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
FINANCIAL HIGHLIGHTS
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SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 1
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PER SHARE OPERATING DATA
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Net asset value, beginning of period $ 30.99 $ 30.48 $ 30.00
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Income (loss) from investment operations:
Net investment income 2 .38 .47 .25
Net realized and unrealized gain 1.53 .58 .28
-------------------------------------
Total from investment operations 1.91 1.05 .53
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Dividends and/or distributions to shareholders:
Dividends from net investment income (.54) (.54) (.05)
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Net asset value, end of period $ 32.36 $ 30.99 $ 30.48
=====================================
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TOTAL RETURN, AT NET ASSET VALUE 3 6.16% 3.48% 1.76%
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RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 31,594 $ 33,229 $ 40,981
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 32,689 $ 37,258 $ 36,571
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.39% 1.53% 0.93%
Total expenses 5 1.50% 1.49% 1.45%
Expenses after payments and waivers and reduction to custodian expenses 1.17% 1.22% 1.20%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 133% 37%
1. For the period from October 7, 2004 (commencement of operations) to August
31, 2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses were as follows:
Six Months Ended February 28, 2007 1.50%
Year Ended August 31, 2006 1.76
Period Ended August 31, 2005 1.66
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 1
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.80 $ 30.29 $ 30.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .25 .21 .03
Net realized and unrealized gain 1.51 .58 .28
-------------------------------------
Total from investment operations 1.76 .79 .31
- ----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.28) (.02)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.29 $ 30.80 $ 30.29
=====================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.71% 2.62% 1.03%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 17,649 $ 18,246 $ 20,856
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 18,198 $ 19,663 $ 18,576
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.55% 0.70% 0.10%
Total expenses 5 2.34% 2.31% 2.27%
Expenses after payments and waivers and reduction to custodian expenses 2.02% 2.04% 2.02%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 133% 37%
1. For the period from October 7, 2004 (commencement of operations) to August
31, 2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses were as follows:
Six Months Ended February 28, 2007 2.34%
Year Ended August 31, 2006 2.58
Period Ended August 31, 2005 2.48
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 1
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.82 $ 30.31 $ 30.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .26 .24 .05
Net realized and unrealized gain 1.52 .57 .28
-------------------------------------
Total from investment operations 1.78 .81 .33
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.27) (.30) (.02)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.33 $ 30.82 $ 30.31
=====================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 5.76% 2.69% 1.11%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 15,153 $ 16,709 $ 21,414
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 16,007 $ 19,229 $ 18,591
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 1.63% 0.80% 0.17%
Total expenses 5 2.25% 2.24% 2.21%
Expenses after payments and waivers and reduction to custodian expenses 1.93% 1.97% 1.96%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 133% 37%
1. For the period from October 7, 2004 (commencement of operations) to August
31, 2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses were as follows:
Six Months Ended February 28, 2007 2.25%
Year Ended August 31, 2006 2.51
Period Ended August 31, 2005 2.42
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS N (UNAUDITED) 2006 2005 1
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 30.92 $ 30.43 $ 30.00
- -----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .36 .42 .19
Net realized and unrealized gain 1.52 .54 .28
-------------------------------------
Total from investment operations 1.88 .96 .47
- -----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.48) (.47) (.04)
- -----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.32 $ 30.92 $ 30.43
=====================================
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 6.06% 3.19% 1.57%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,049 $ 1,038 $ 1,438
- -----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,073 $ 1,167 $ 1,269
- -----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 2.22% 1.39% 0.69%
Total expenses 5 1.71% 1.74% 1.70%
Expenses after payments and waivers and reduction to custodian expenses 1.39% 1.47% 1.45%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 38% 133% 37%
1. For the period from October 7, 2004 (commencement of operations) to August
31, 2005.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
4. Annualized for periods of less than one full year.
5. Expenses paid including all underlying fund expenses were as follows:
Six Months Ended February 28, 2007 1.71%
Year Ended August 31, 2006 2.01
Period Ended August 31, 2005 1.91
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer Principal Protected Main Street Fund III (the Fund), a series of
Oppenheimer Principal Protected Trust III, 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 (October 7,
2004 to December 10, 2004). Shares are not offered during the Warranty Period
(December 16, 2004 to December 16, 2011) to the Maturity Date (December 16,
2011) 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 and Class C 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. 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 90 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.
30 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
The Financial Warranty is solely the obligation of the Warranty Provider. It is
possible that the financial position of the Warranty Provider may deteriorate
and it would be unable to satisfy its obligations under the Financial Warranty.
The Fund's assets and the obligations of the Warranty Provider under the
Warranty Agreement are not guaranteed by Merrill Lynch & Co., Inc. (the Warranty
Provider's parent company), the United States Government, the Manager, or any
other entity or person.
The Warranty Agreement requires the Manager, on behalf of the Fund, to
comply with certain agreed upon investment parameters in an attempt to limit the
Fund's risk. If the Manager fails to comply with the agreed-upon investment
parameters or otherwise fails to comply with certain requirements set forth in
the Warranty Agreement, the Warranty Provider may terminate its Financial
Warranty in certain limited circumstances. The Warranty Provider may monitor the
Fund's compliance with the Warranty Agreement solely to protect the interests of
the Warranty Provider and not the Fund's shareholders. The fee paid to the
Warranty Provider is an annual fee of 0.60% of the average daily net assets of
the Fund. If the Fund is required to make a complete and irreversible allocation
of its assets to the debt portfolio, the Warranty Fee will thereafter be reduced
to 0.35% of the average daily net assets of the Fund.
- --------------------------------------------------------------------------------
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 may invest most of the equity portfolio in Class Y shares of
Oppenheimer Main Street Fund. The Fund may also invest in Class E shares of
Oppenheimer Institutional Money Market Fund. Oppenheimer Main Street Fund and
Oppenheimer Institutional Money Market Fund are referred to individually as an
"Underlying Fund" and collectively as "the Underlying Funds". The Fund
calculates the net asset value of each class of shares based upon the net asset
value of the applicable Underlying Fund 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. Investments in open-end registered investment
companies (including underlying funds) are valued at that fund's net asset
value. The Fund may also invest a portion of the equity portfolio in futures
contracts. 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 trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
31 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") which seeks current income and
stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments. As a
shareholder, the Fund is subject to its proportional share of IMMF's Class E
expenses, including its management fee. The Manager will waive fees and/or
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
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.
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
32 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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.
As of February 28, 2007, the Fund had available for federal income tax
purposes an estimated capital loss carryforward of zero. This estimated capital
loss carryforward represents carryforward as of the end of the last fiscal year,
increased for losses deferred under tax accounting rules to the current fiscal
year and is increased or decreased by capital losses or gains realized in the
first six months of the current fiscal year. As of February 28, 2007, it is
estimated that the Fund will utilize $1,364,648 of capital loss carryforward to
offset realized capital gains. During the fiscal year ended August 31, 2006, the
Fund did not utilize any capital loss carryforward to offset capital gains
realized in that fiscal year.
As of August 31, 2006, the Fund had available for federal income tax purposes
post-October losses of $455,536 and unused capital loss carryforward as follows:
EXPIRING
-------------------------
2014 $909,112
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral 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 compensation deferral 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
33 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
SIX MONTHS ENDED FEBRUARY 28, 2007 YEAR ENDED AUGUST 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------
CLASS A
Dividends and/or distributions reinvested 15,324 $ 500,028 20,816 $ 632,174
Redeemed (111,338) (3,583,819) (292,745) (8,980,554)
-----------------------------------------------------
Net decrease (96,014) $ (3,083,791) (271,929) $ (8,348,380)
=====================================================
- ------------------------------------------------------------------------------------------------------------
CLASS B
Dividends and/or distributions reinvested 4,168 $ 135,974 5,515 $ 167,390
Redeemed (50,069) (1,605,858) (101,532) (3,090,403)
-----------------------------------------------------
Net decrease (45,901) $ (1,469,884) (96,017) $ (2,923,013)
=====================================================
- ------------------------------------------------------------------------------------------------------------
CLASS C
Dividends and/or distributions reinvested 2,906 $ 94,891 4,540 $ 137,803
Redeemed (76,480) (2,451,975) (168,794) (5,164,286)
-----------------------------------------------------
Net decrease (73,574) $ (2,357,084) (164,254) $ (5,026,483)
=====================================================
34 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS ENDED FEBRUARY 28, 2007 YEAR ENDED AUGUST 31, 2006
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
CLASS N
Dividends and/or distributions reinvested 472 $ 15,379 703 $ 21,342
Redeemed (1,575) (51,389) (14,380) (443,806)
---------------------------------------------------
Net decrease (1,103) $ (36,010) (13,677) $ (422,464)
===================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short- term obligations and money market funds, for the six months ended
February 28, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $ 8,390,795 $ 2,621,652
U.S. government and government
agency obligations 13,603,643 19,169,092
- --------------------------------------------------------------------------------
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. That fee will
apply during the Warranty Period and the Post-Warranty Period. The management
fee shall be reduced to 0.40% per annum of average annual net assets of the Fund
in any month during the Warranty Period following a month where the Fund's
investment in equity securities (including shares of the Underlying Fund) is, on
average, less than 10% of net assets. 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.
- --------------------------------------------------------------------------------
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 or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Fund. The Fund pays OFS a per account fee. For the six months ended
February 28, 2007, the Fund paid $26,628 to OFS for services to the Fund.
35 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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 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 determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at December 31,
2006 for Class B, Class C and Class N shares were $497,023, $22,323 and $13,592,
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
SIX MONTHS RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- --------------------------------------------------------------------------------------------------
February 28, 2007 $ -- $ -- $ 41,600 $ -- $ --
36 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager will reimburse the Fund for
expenses equal to the Underlying Fund expenses 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 six months ended February 28, 2007, the Manager reimbursed the Fund $105,016
for such Underlying Fund 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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the six months ended February 28, 2007, the Manager waived $4,010
for IMMF management fees.
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations at the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
37 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of February 28, 2007, the Fund had outstanding futures contracts as follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED
CONTRACT DESCRIPTION DATE CONTRACTS FEBRUARY 28, 2007 DEPRECIATION
- ----------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Standard & Poor's 500 Index 6/14/07 13 $ 4,619,875 $ 9,625
- --------------------------------------------------------------------------------
6. 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 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 February 28, 2007, the Fund
had on loan securities valued at $4,008,606, which are included in the Statement
of Assets and Liabilities as "Investments, at value" and, when applicable, as
"Receivable for Investments sold." Collateral of $4,093,153 was received for the
loans, all of which was received in cash and subsequently invested in approved
investments or held as cash.
- --------------------------------------------------------------------------------
7. RECENT ACCOUNTING PRONOUNCEMENTS
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
38 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
effective for fiscal years beginning after December 15, 2006. As of February 28,
2007, the Manager has evaluated the implications of FIN 48 and does not
currently anticipate a material impact to the Fund's financial statements. The
Manager will continue to monitor the Fund's tax positions prospectively for
potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of February 28, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
39 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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
40 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each year, the Board of Trustees (the "Board"), including a majority of the
independent Trustees, is required to determine whether to renew the Fund's
investment advisory agreement (the "Agreement"). The Investment Company Act of
1940, as amended, requires that the Board request and evaluate, and that the
Manager provide, such information as may be reasonably necessary to evaluate the
terms of the Agreement. The Board employs an independent consultant to prepare a
report that provides information, including comparative information that the
Board requests for that purpose. In addition, the Board receives information
throughout the year regarding Fund services, fees, expenses and performance.
The Manager and the independent consultant provided information to the
Board on the following factors: (i) the nature, quality and extent of the
Manager's services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense
information, (iv) the profitability of the Manager and its affiliates, including
an analysis of the cost of providing services, (v) whether economies of scale
are realized as the Fund grows and whether fee levels reflect these economies of
scale for Fund investors and (vi) other benefits to the Manager from its
relationship with the Fund. Outlined below is a summary of the principal
information considered by the Board as well as the Board's conclusions.
The Board was aware that there are alternatives to retaining the Manager.
NATURE, QUALITY AND EXTENT OF SERVICES. The Board considered information
about the nature and extent of the services provided to the Fund and information
regarding the Manager's key personnel who provide such services. The Manager's
duties include providing the Fund with the services of the portfolio managers
and the Manager's investment team, who provide research, analysis and other
advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
41 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
The Board also considered the quality of the services provided and the
quality of the Manager's resources that are available to the Fund. The Board
took account of the fact that the Manager has had over forty years of experience
as an investment adviser and that its assets under management rank it among the
top mutual fund managers in the United States. The Board evaluated the Manager's
administrative, accounting, legal and compliance services, and information the
Board has received regarding the experience and professional qualifications of
the Manager's key personnel and the size and functions of its staff providing
investment management services to the Fund. In its evaluation of the quality of
the portfolio management services provided, the Board considered the experience
of Angelo Manioudakis, Rudi Schadt and the Manager's Value and Core Fixed Income
investment teams and analysts. Mr. Manioudakis and Mr. Schadt have been
portfolio managers of the Fund since October 2004. The Board members also
considered the totality of their experiences with the Manager as directors or
trustees of the Fund and other funds advised by the Manager. In light of the
foregoing, the Board concluded that the Fund benefits from the services provided
under the Agreement as a result of the Manager's experience, reputation,
personnel, operations, and resources.
INVESTMENT PERFORMANCE OF THE MANAGER AND THE FUND. During the year, the
Manager provided information on the investment performance of the Fund and the
Manager at each Board meeting, including comparative performance information.
The Board also reviewed information, prepared by the Manager and by the
independent consultant, comparing the Fund's historical performance to relevant
market indices and to the performance of other retail front-end load and no-load
mixed-asset target allocation moderate funds (including both funds advised by
the Manager and funds advised by other investment advisers). The Board noted
that the Fund's one-year and since inception performance were below its peer
group median. The Board considered, the Manager's assertion that given the
Fund's unique, specialized structure and warranty features it is difficult to
find a truly comparable performance peer group for the Fund. The Board also
considered that the Fund had low equity exposure during its initial offering
period and that its portfolio allocation had shifted to a larger equity
allocation which should improve performance.
COSTS OF SERVICES AND PROFITS REALIZED BY THE MANAGER. The Board
considered information regarding the Manager's costs in serving as the Fund's
investment adviser, including the costs associated with the personnel and
systems necessary to manage the Fund, and information regarding the Manager's
profitability from its relationship with the Fund. The Board reviewed the fees
paid to the Manager and the other expenses borne by the Fund. The Board also
evaluated the comparability of the fees charged and the
42 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
services provided to the Fund to the fees and services for other clients or
accounts advised by the Manager. The independent consultant provided comparative
data in regard to the fees and expenses of the Fund, other mixed-asset target
allocation moderate funds, mixed-asset target allocation conservative funds,
mixed-asset target allocation growth funds and other funds with comparable asset
levels and distribution features. The Board noted that the Fund's contractual
and actual management fees are lower than its peer group median and that the
Funds' management fees and expenses are the lowest in its peer group.
ECONOMIES OF SCALE. The Board reviewed whether the Manager may realize
economies of scale in managing and supporting the Fund, whether those economies
of scale benefit the Fund's shareholders and the current level of Fund assets in
relation to the Fund's management fee.
OTHER BENEFITS TO THE MANAGER. In addition to considering the profits
realized by the Manager, the Board considered information that was provided
regarding the direct and indirect benefits the Manager receives as a result of
its relationship with the Fund, including compensation paid to the Manager's
affiliates. The Board also considered that the Manager must be able to pay and
retain experienced professional personnel at competitive rates to provide
services to the Fund and that maintaining the financial viability of the Manager
is important in order for the Manager to continue to provide quality services to
the Fund and its shareholders.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and to the independent Trustees. Fund counsel and the independent
Trustees' counsel are both independent of the Manager within the meaning and
intent of the Securities and Exchange Commission Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
decided to continue the Agreement for another year. In arriving at this
decision, the Board did not single out any factor or factors as being more
important than others, but considered all of the factors together. The Board
judged the terms and conditions of the Agreement, including the management fee,
in light of all of the surrounding circumstances.
43 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS FOR OPPENHEIMER MAIN STREET FUND
46 Statement of Investments
56 Statement of Assets and Liabilities
58 Statement of Operations
60 Statements of Changes in Net Assets
61 Financial Highlights
66 Notes to Financial Statements
45 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS February 28, 2007 / Unaudited
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--99.4%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--12.4%
- --------------------------------------------------------------------------------
AUTO COMPONENTS--0.2%
ArvinMeritor, Inc. 123,600 $ 2,256,936
- --------------------------------------------------------------------------------
Goodyear Tire & Rubber Co. (The) 1,2 129,500 3,188,290
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 137,300 12,878,740
- --------------------------------------------------------------------------------
Lear Corp. 1 91,900 3,392,948
-----------------
21,716,914
- --------------------------------------------------------------------------------
AUTOMOBILES--0.6%
General Motors Corp. 2 1,093,200 34,894,944
- --------------------------------------------------------------------------------
Harley-Davidson, Inc. 460,800 30,366,720
-----------------
65,261,664
- --------------------------------------------------------------------------------
DIVERSIFIED CONSUMER SERVICES--0.1%
Career Education Corp. 1 112,700 3,333,666
- --------------------------------------------------------------------------------
ITT Educational Services, Inc. 1 42,700 3,415,146
- --------------------------------------------------------------------------------
Jackson Hewitt Tax Service, Inc. 200 6,450
-----------------
6,755,262
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.5%
Carnival Corp. 190,900 8,861,578
- --------------------------------------------------------------------------------
Chipotle Mexican Grill, Inc., Cl. B 1 43,733 2,437,240
- --------------------------------------------------------------------------------
Jack in the Box, Inc. 1 28,700 1,961,358
- --------------------------------------------------------------------------------
Las Vegas Sands Corp. 1 4,900 422,772
- --------------------------------------------------------------------------------
McDonald's Corp. 93,200 4,074,704
- --------------------------------------------------------------------------------
Wendy's International, Inc. 94,500 3,032,505
- --------------------------------------------------------------------------------
Yum! Brands, Inc. 740,300 42,892,982
-----------------
63,683,139
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.1%
Snap-On, Inc. 62,300 3,121,230
- --------------------------------------------------------------------------------
Tempur-Pedic International, Inc. 2 113,800 2,832,482
-----------------
5,953,712
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--0.3%
Expedia, Inc. 1 15,276 $ 324,768
- --------------------------------------------------------------------------------
IAC/InterActiveCorp 1 535,200 20,979,840
- --------------------------------------------------------------------------------
Liberty Media Holding
Corp.-Interactive, Series A 1 359,600 8,475,772
- --------------------------------------------------------------------------------
NetFlix.com, Inc. 1,2 42,200 950,766
-----------------
30,731,146
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--0.1%
Hasbro, Inc. 123,100 3,482,499
- --------------------------------------------------------------------------------
Marvel Entertainment, Inc. 1 93,700 2,603,923
- --------------------------------------------------------------------------------
Mattel, Inc. 193,600 5,035,536
-----------------
11,121,958
- --------------------------------------------------------------------------------
MEDIA--4.6%
Clear Channel Communications, Inc. 1,724,500 62,392,410
- --------------------------------------------------------------------------------
Comcast Corp., Cl. A 1 1,530,600 39,367,032
- --------------------------------------------------------------------------------
DirecTV Group, Inc. (The) 1 771,600 17,407,296
- --------------------------------------------------------------------------------
EchoStar Communications Corp., Cl. A 1 294,100 11,940,460
- --------------------------------------------------------------------------------
Gannett Co., Inc. 92,000 5,635,920
- --------------------------------------------------------------------------------
Idearc, Inc. 91,065 3,096,210
- --------------------------------------------------------------------------------
Liberty Global, Inc., Series A 1 293,800 8,458,502
- --------------------------------------------------------------------------------
Liberty Media Holding
Corp.-Capital, Series A 1 405,263 43,719,772
- --------------------------------------------------------------------------------
Live Nation, Inc. 1 17,600 407,264
- --------------------------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 694,100 44,845,801
- --------------------------------------------------------------------------------
News Corp., Inc., Cl. A 2,460,000 55,423,800
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 510,700 52,913,627
- --------------------------------------------------------------------------------
Time Warner, Inc. 3,811,200 77,557,920
- --------------------------------------------------------------------------------
Viacom, Inc., Cl. B 1 608,438 23,753,420
- --------------------------------------------------------------------------------
Walt Disney Co. (The) 2,467,800 84,546,828
-----------------
531,466,262
- --------------------------------------------------------------------------------
MULTILINE RETAIL--2.6%
Big Lots, Inc. 1 150,800 3,774,524
- --------------------------------------------------------------------------------
Dillard's, Inc., Cl. A 15,300 511,020
46 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
MULTILINE RETAIL Continued
Dollar Tree Stores, Inc. 1 187,300 $ 6,388,803
- --------------------------------------------------------------------------------
Family Dollar Stores, Inc. 158,500 4,591,745
- --------------------------------------------------------------------------------
Federated Department Stores, Inc. 1,609,300 71,871,338
- --------------------------------------------------------------------------------
J.C. Penney Co., Inc. (Holding Co.) 687,300 55,746,903
- --------------------------------------------------------------------------------
Kohl's Corp. 1 1,000,500 69,024,495
- --------------------------------------------------------------------------------
Nordstrom, Inc. 1,182,200 62,762,998
- --------------------------------------------------------------------------------
Sears Holdings Corp. 1 115,400 20,800,850
- --------------------------------------------------------------------------------
Target Corp. 55,600 3,421,068
-----------------
298,893,744
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.9%
Aeropostale, Inc. 1 77,400 2,835,936
- --------------------------------------------------------------------------------
American Eagle Outfitters, Inc. 111,750 3,469,838
- --------------------------------------------------------------------------------
AutoZone, Inc. 1 31,700 3,971,693
- --------------------------------------------------------------------------------
Barnes & Noble, Inc. 78,700 3,221,978
- --------------------------------------------------------------------------------
Best Buy Co., Inc. 1,178,900 54,783,483
- --------------------------------------------------------------------------------
Brown Shoe Co., Inc. 45,300 2,323,890
- --------------------------------------------------------------------------------
Dress Barn, Inc. (The) 1 97,000 2,038,940
- --------------------------------------------------------------------------------
DSW, Inc., Cl. A 1,2 17,900 716,895
- --------------------------------------------------------------------------------
Gap, Inc. (The) 1,390,300 26,679,857
- --------------------------------------------------------------------------------
Gymboree Corp. 1 60,200 2,268,938
- --------------------------------------------------------------------------------
Home Depot, Inc. 2,524,100 99,954,360
- --------------------------------------------------------------------------------
Limited Brands, Inc. 51,150 1,415,832
- --------------------------------------------------------------------------------
Lowe's Cos., Inc. 408,700 13,307,272
- --------------------------------------------------------------------------------
Men's Wearhouse, Inc. (The) 9,850 436,158
- --------------------------------------------------------------------------------
Office Depot, Inc. 1 1,084,900 36,192,264
- --------------------------------------------------------------------------------
OfficeMax, Inc. 64,800 3,363,120
- --------------------------------------------------------------------------------
Payless ShoeSource, Inc. 1 88,500 2,734,650
- --------------------------------------------------------------------------------
RadioShack Corp. 96,100 2,399,617
- --------------------------------------------------------------------------------
Rent-A-Center, Inc. 1 77,600 2,197,632
- --------------------------------------------------------------------------------
Ross Stores, Inc. 109,700 3,594,869
- --------------------------------------------------------------------------------
Select Comfort Corp. 1,2 42,600 789,378
- --------------------------------------------------------------------------------
Staples, Inc. 698,200 18,167,164
- --------------------------------------------------------------------------------
TJX Cos., Inc. (The) 1,907,600 52,459,000
-----------------
339,322,764
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.4%
Coach, Inc. 1 979,500 $ 46,232,400
- --------------------------------------------------------------------------------
Jones Apparel Group, Inc. 16,900 556,348
- --------------------------------------------------------------------------------
Polo Ralph Lauren Corp., Cl. A 41,900 3,644,462
- --------------------------------------------------------------------------------
Wolverine World Wide, Inc. 41,900 1,162,725
-----------------
51,595,935
- --------------------------------------------------------------------------------
CONSUMER STAPLES--5.6%
- --------------------------------------------------------------------------------
BEVERAGES--0.7%
Coca-Cola Co. (The) 471,200 21,995,616
- --------------------------------------------------------------------------------
PepsiCo, Inc. 927,790 58,589,939
-----------------
80,585,555
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.5%
Kroger Co. (The) 1,940,110 49,802,624
- --------------------------------------------------------------------------------
Safeway, Inc. 1,374,600 47,519,922
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1,636,700 79,052,610
-----------------
176,375,156
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.3%
Campbell Soup Co. 50,700 2,070,081
- --------------------------------------------------------------------------------
ConAgra Foods, Inc. 557,600 14,068,248
- --------------------------------------------------------------------------------
Dean Foods Co. 1 23,900 1,076,456
- --------------------------------------------------------------------------------
Heinz (H.J.) Co. 194,100 8,903,367
- --------------------------------------------------------------------------------
Kraft Foods, Inc., Cl. A 302,600 9,658,992
- --------------------------------------------------------------------------------
Sara Lee Corp. 120,800 1,988,368
-----------------
37,765,512
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--1.2%
Energizer Holdings, Inc. 1 31,300 2,689,296
- --------------------------------------------------------------------------------
Procter & Gamble Co. (The) 2,028,985 128,820,258
-----------------
131,509,554
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.2%
Avon Products, Inc. 360,600 13,219,596
- --------------------------------------------------------------------------------
NBTY, Inc. 1 77,800 3,787,304
-----------------
17,006,900
47 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
TOBACCO--1.7%
Altria Group, Inc. 2,255,300 $ 190,076,684
- --------------------------------------------------------------------------------
Reynolds American, Inc. 44,000 2,686,200
- --------------------------------------------------------------------------------
UST, Inc. 65,900 3,826,154
-----------------
196,589,038
- --------------------------------------------------------------------------------
ENERGY--9.1%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--0.8%
BJ Services Co. 108,300 2,901,357
- --------------------------------------------------------------------------------
Grey Wolf, Inc. 1 169,800 1,135,962
- --------------------------------------------------------------------------------
Halliburton Co. 1,841,302 56,859,406
- --------------------------------------------------------------------------------
Lone Star Technologies, Inc. 1 49,700 2,362,241
- --------------------------------------------------------------------------------
Parker Drilling Co. 1 82,600 707,882
- --------------------------------------------------------------------------------
Schlumberger Ltd. 373,600 23,462,080
- --------------------------------------------------------------------------------
Seacor Holdings, Inc. 1 29,900 2,894,320
- --------------------------------------------------------------------------------
Tidewater, Inc. 56,600 2,941,502
- --------------------------------------------------------------------------------
Todco 1 70,500 2,402,640
-----------------
95,667,390
- --------------------------------------------------------------------------------
OIL & GAS--8.3%
Chevron Corp. 2,737,360 187,810,270
- --------------------------------------------------------------------------------
ConocoPhillips 2,255,696 147,567,632
- --------------------------------------------------------------------------------
Devon Energy Corp. 591,300 38,854,323
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 6,146,096 440,552,161
- --------------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 32,700 1,076,484
- --------------------------------------------------------------------------------
Frontier Oil Corp. 108,200 3,197,310
- --------------------------------------------------------------------------------
General Maritime Corp. 33,300 1,427,238
- --------------------------------------------------------------------------------
Hess Corp. 664,000 35,225,200
- --------------------------------------------------------------------------------
Holly Corp. 53,900 2,989,833
- --------------------------------------------------------------------------------
Kinder Morgan Management LLC 1 1 30
- --------------------------------------------------------------------------------
Marathon Oil Corp. 790,100 71,693,674
- --------------------------------------------------------------------------------
MGM Energy Corp. 1 23,748 110,659
- --------------------------------------------------------------------------------
OMI Corp. 59,200 1,318,384
- --------------------------------------------------------------------------------
Overseas Shipholding Group, Inc. 47,300 2,865,434
- --------------------------------------------------------------------------------
Paramount Resources Ltd., Cl. A 1 593,700 9,598,894
- --------------------------------------------------------------------------------
Sunoco, Inc. 65,900 4,251,868
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
OIL & GAS Continued
Tesoro Corp. 48,600 $ 4,429,404
- --------------------------------------------------------------------------------
USEC, Inc. 1 180,900 2,565,162
-----------------
955,533,960
- --------------------------------------------------------------------------------
FINANCIALS--19.7%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--3.8%
Ameriprise Financial, Inc. 831,900 48,632,874
- --------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The) 383,100 58,323,144
- --------------------------------------------------------------------------------
BlackRock, Inc. 112,800 17,939,712
- --------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The) 282,000 56,851,200
- --------------------------------------------------------------------------------
Janus Capital Group, Inc. 98,200 2,086,750
- --------------------------------------------------------------------------------
Knight Capital Group, Inc., Cl. A 1 94,300 1,490,883
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 652,600 47,835,580
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,419,100 118,750,288
- --------------------------------------------------------------------------------
Morgan Stanley 1,132,938 84,879,715
-----------------
436,790,146
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--2.8%
U.S. Bancorp 1,681,570 59,964,786
- --------------------------------------------------------------------------------
Wachovia Corp. 1,800,510 99,694,239
- --------------------------------------------------------------------------------
Wells Fargo & Co. 4,603,020 159,724,794
-----------------
319,383,819
- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.4%
AmeriCredit Corp. 1 267,900 6,542,118
- --------------------------------------------------------------------------------
Capital One Financial Corp. 452,900 34,909,532
- --------------------------------------------------------------------------------
First Marblehead Corp. (The) 54,350 2,453,359
- --------------------------------------------------------------------------------
World Acceptance Corp. 1 14,900 610,900
-----------------
44,515,909
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--6.7%
Bank of America Corp. 5,007,239 254,718,248
- --------------------------------------------------------------------------------
Chicago Mercantile Exchange (The) 14,400 7,763,472
48 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES Continued
Citigroup, Inc. 5,787,646 $ 291,697,358
- --------------------------------------------------------------------------------
International Securities Exchange, Inc., Cl. A 32,500 1,503,125
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. 4,326,296 213,719,022
- --------------------------------------------------------------------------------
NYSE Group, Inc. 1 89,500 7,598,550
-----------------
776,999,775
- --------------------------------------------------------------------------------
INSURANCE--4.2%
ACE Ltd. 426,600 23,957,856
- --------------------------------------------------------------------------------
Allstate Corp. 1,093,500 65,675,610
- --------------------------------------------------------------------------------
AMBAC Financial Group, Inc. 37,300 3,268,972
- --------------------------------------------------------------------------------
American International Group, Inc. 2,089,405 140,199,076
- --------------------------------------------------------------------------------
Assurant, Inc. 70,300 3,757,535
- --------------------------------------------------------------------------------
CNA Financial Corp. 1 34,800 1,428,888
- --------------------------------------------------------------------------------
Genworth Financial, Inc., Cl. A 100,100 3,540,537
- --------------------------------------------------------------------------------
Hanover Insurance Group, Inc. 33,400 1,568,798
- --------------------------------------------------------------------------------
Lincoln National Corp. 443,784 30,243,880
- --------------------------------------------------------------------------------
Loews Corp. 872,200 37,888,368
- --------------------------------------------------------------------------------
MBIA, Inc. 63,300 4,207,551
- --------------------------------------------------------------------------------
MetLife, Inc. 474,200 29,945,730
- --------------------------------------------------------------------------------
Nationwide Financial Services, Inc., Cl. A 34,300 1,838,480
- --------------------------------------------------------------------------------
Old Republic International Corp. 1,100 24,552
- --------------------------------------------------------------------------------
Partnerre Holdings Ltd. 16,700 1,160,316
- --------------------------------------------------------------------------------
Principal Financial Group, Inc. (The) 791,900 48,218,791
- --------------------------------------------------------------------------------
Prudential Financial, Inc. 106,000 9,639,640
- --------------------------------------------------------------------------------
RenaissanceRe Holdings Ltd. 20,900 1,071,752
- --------------------------------------------------------------------------------
Safeco Corp. 45,700 3,049,104
- --------------------------------------------------------------------------------
Safety Insurance Group, Inc. 1,700 72,199
- --------------------------------------------------------------------------------
Travelers Cos., Inc. (The) 1,464,200 74,322,792
- --------------------------------------------------------------------------------
Zenith National Insurance Corp. 17,900 861,885
-----------------
485,942,312
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--1.8%
Countrywide Financial Corp. 1,052,700 $ 40,297,356
- --------------------------------------------------------------------------------
Fannie Mae 1,487,200 84,368,856
- --------------------------------------------------------------------------------
Freddie Mac 1,087,142 69,772,774
- --------------------------------------------------------------------------------
MGIC Investment Corp. 43,100 2,601,085
- --------------------------------------------------------------------------------
PMI Group, Inc. (The) 88,800 4,162,056
- --------------------------------------------------------------------------------
Radian Group, Inc. 102,300 5,877,135
-----------------
207,079,262
- --------------------------------------------------------------------------------
HEALTH CARE--12.5%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--0.6%
Amgen, Inc. 1 479,100 30,786,966
- --------------------------------------------------------------------------------
Biogen Idec, Inc. 1 685,800 30,991,302
-----------------
61,778,268
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.7%
Advanced Medical Optics, Inc. 1 41,900 1,614,826
- --------------------------------------------------------------------------------
Edwards Lifesciences Corp. 1 40,700 2,054,129
- --------------------------------------------------------------------------------
Immucor, Inc. 1 80,100 2,382,174
- --------------------------------------------------------------------------------
Medtronic, Inc. 253,300 12,756,188
- --------------------------------------------------------------------------------
Mentor Corp. 54,500 2,616,545
- --------------------------------------------------------------------------------
Stryker Corp. 76,500 4,744,530
- --------------------------------------------------------------------------------
Zimmer Holdings, Inc. 1 627,500 52,917,075
-----------------
79,085,467
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--5.0%
Aetna, Inc. 1,644,900 72,819,723
- --------------------------------------------------------------------------------
AMERIGROUP Corp. 1 68,900 2,279,212
- --------------------------------------------------------------------------------
AmerisourceBergen Corp. 254,000 13,378,180
- --------------------------------------------------------------------------------
Caremark Rx, Inc. 1,332,900 82,093,311
- --------------------------------------------------------------------------------
Centene Corp. 1 71,400 1,722,168
- --------------------------------------------------------------------------------
CIGNA Corp. 339,000 48,307,500
- --------------------------------------------------------------------------------
Coventry Health Care, Inc. 1 68,100 3,706,002
- --------------------------------------------------------------------------------
Humana, Inc. 1 484,100 28,968,544
- --------------------------------------------------------------------------------
Laboratory Corp. of America Holdings 1 88,300 7,041,925
- --------------------------------------------------------------------------------
McKesson Corp. 869,600 48,488,896
49 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES Continued
Medco Health Solutions, Inc. 1 505,300 $ 34,163,333
- --------------------------------------------------------------------------------
UnitedHealth Group, Inc. 2,431,894 126,944,867
- --------------------------------------------------------------------------------
WellCare Health Plans, Inc. 1 28,300 2,323,713
- --------------------------------------------------------------------------------
WellPoint, Inc. 1 1,341,672 106,515,340
-----------------
578,752,714
- --------------------------------------------------------------------------------
LIFE SCIENCES TOOLS & SERVICES--0.4%
Applera Corp./Applied Biosystems Group 185,700 5,734,416
- --------------------------------------------------------------------------------
Thermo Fisher Scientific, Inc. 1 983,400 44,518,518
-----------------
50,252,934
- --------------------------------------------------------------------------------
PHARMACEUTICALS--5.8%
Abbott Laboratories 307,400 16,790,188
- --------------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. 1 35,700 1,114,197
- --------------------------------------------------------------------------------
Forest Laboratories, Inc. 1 1,207,200 62,484,672
- --------------------------------------------------------------------------------
Johnson & Johnson 3,330,144 209,965,579
- --------------------------------------------------------------------------------
King Pharmaceuticals, Inc. 1 124,400 2,320,060
- --------------------------------------------------------------------------------
Merck & Co., Inc. 3,050,150 134,694,624
- --------------------------------------------------------------------------------
Mylan Laboratories, Inc. 103,100 2,182,627
- --------------------------------------------------------------------------------
Pfizer, Inc. 8,856,045 221,046,883
- --------------------------------------------------------------------------------
ViroPharma, Inc. 1 35,700 571,200
- --------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc. 1 69,500 1,832,020
- --------------------------------------------------------------------------------
Wyeth 236,600 11,574,472
-----------------
664,576,522
- --------------------------------------------------------------------------------
INDUSTRIALS--10.7%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.4%
Boeing Co. 214,500 18,719,415
- --------------------------------------------------------------------------------
General Dynamics Corp. 908,000 69,425,680
- --------------------------------------------------------------------------------
Honeywell International, Inc. 1,707,100 79,277,724
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE Continued
Lockheed Martin Corp. 800,500 $ 77,872,640
- --------------------------------------------------------------------------------
Northrop Grumman Corp. 906,600 65,139,210
- --------------------------------------------------------------------------------
Raytheon Co. 1,389,400 74,402,370
- --------------------------------------------------------------------------------
United Technologies Corp. 175,600 11,524,628
-----------------
396,361,667
- --------------------------------------------------------------------------------
AIRLINES--0.1%
AMR Corp. 1 117,200 3,995,348
- --------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B 1,2 129,000 5,108,400
-----------------
9,103,748
- --------------------------------------------------------------------------------
BUILDING PRODUCTS--0.0%
Masco Corp. 6,600 197,010
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Administaff, Inc. 54,000 1,916,460
- --------------------------------------------------------------------------------
AMREP Corp. 2 12,500 1,129,875
- --------------------------------------------------------------------------------
Corrections Corp. of America 1 17,000 890,120
- --------------------------------------------------------------------------------
Covanta Holding Corp. 1 83,300 1,894,242
- --------------------------------------------------------------------------------
Deluxe Corp. 84,900 2,620,863
- --------------------------------------------------------------------------------
Harland (John H.) Co. 24,400 1,232,200
- --------------------------------------------------------------------------------
Ikon Office Solutions, Inc. 43,200 603,936
- --------------------------------------------------------------------------------
Labor Ready, Inc. 1 124,200 2,281,554
- --------------------------------------------------------------------------------
Manpower, Inc. 87,700 6,516,110
- --------------------------------------------------------------------------------
Volt Information Sciences, Inc. 1,2 21,150 723,119
- --------------------------------------------------------------------------------
Watson Wyatt & Co. Holdings 5,300 254,771
-----------------
20,063,250
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
Chicago Bridge & Iron Co. NV 84,100 2,500,293
- --------------------------------------------------------------------------------
EMCOR Group, Inc. 1 28,500 1,711,710
- --------------------------------------------------------------------------------
Granite Construction, Inc. 69,900 4,080,762
-----------------
8,292,765
50 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Acuity Brands, Inc. 66,800 $ 3,700,720
- --------------------------------------------------------------------------------
Belden CDT, Inc. 35,700 1,655,409
- --------------------------------------------------------------------------------
Emerson Electric Co. 152,600 6,575,534
-----------------
11,931,663
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--4.2%
3M Co. 679,400 50,329,952
- --------------------------------------------------------------------------------
General Electric Co. 9,299,300 324,731,556
- --------------------------------------------------------------------------------
Tyco International Ltd. 3,745,200 115,464,516
-----------------
490,526,024
- --------------------------------------------------------------------------------
MACHINERY--2.4%
AGCO Corp. 1 84,600 3,066,750
- --------------------------------------------------------------------------------
Caterpillar, Inc. 1,100,100 70,868,442
- --------------------------------------------------------------------------------
Cummins, Inc. 21,300 2,868,684
- --------------------------------------------------------------------------------
Danaher Corp. 791,600 56,710,224
- --------------------------------------------------------------------------------
Deere & Co. 536,300 58,145,646
- --------------------------------------------------------------------------------
Eaton Corp. 568,500 46,054,185
- --------------------------------------------------------------------------------
Gardner Denver, Inc. 1 5,500 186,285
- --------------------------------------------------------------------------------
Illinois Tool Works, Inc. 517,600 26,759,920
- --------------------------------------------------------------------------------
Ingersoll-Rand Co. Ltd., Cl. A 145,100 6,284,281
- --------------------------------------------------------------------------------
SPX Corp. 94,500 6,605,550
- --------------------------------------------------------------------------------
Toro Co. (The) 54,100 2,842,955
- --------------------------------------------------------------------------------
Valmont Industries, Inc. 12,600 714,672
- --------------------------------------------------------------------------------
Wabtec Corp. 14,800 476,560
-----------------
281,584,154
- --------------------------------------------------------------------------------
ROAD & RAIL--0.2%
CSX Corp. 425,000 16,009,750
- --------------------------------------------------------------------------------
Laidlaw International, Inc. 59,900 2,047,382
- --------------------------------------------------------------------------------
Swift Transportation Co., Inc. 1 20,600 634,274
-----------------
18,691,406
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--19.6%
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.7%
ADTRAN, Inc. 93,300 2,148,699
- --------------------------------------------------------------------------------
Arris Group, Inc. 1 195,300 2,566,242
- --------------------------------------------------------------------------------
Avaya, Inc. 1 287,500 3,530,500
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT Continued
Cisco Systems, Inc. 1 5,806,100 $ 150,610,234
- --------------------------------------------------------------------------------
CommScope, Inc. 1 76,700 2,950,649
- --------------------------------------------------------------------------------
InterDigital Communications Corp. 1 54,600 1,895,712
- --------------------------------------------------------------------------------
Motorola, Inc. 4,917,100 91,064,692
- --------------------------------------------------------------------------------
Polycom, Inc. 1 159,800 5,097,620
- --------------------------------------------------------------------------------
QUALCOMM, Inc. 1,325,375 53,386,105
- --------------------------------------------------------------------------------
UTStarcom, Inc. 1,2 273,700 2,528,988
-----------------
315,779,441
- --------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--4.6%
Apple, Inc. 1 140,900 11,921,549
- --------------------------------------------------------------------------------
Brocade Communications Systems, Inc. 1 324,900 2,927,349
- --------------------------------------------------------------------------------
Dell, Inc. 1 4,624,200 105,662,970
- --------------------------------------------------------------------------------
Diebold, Inc. 66,000 3,126,420
- --------------------------------------------------------------------------------
EMC Corp. 1 3,234,100 45,115,695
- --------------------------------------------------------------------------------
Emulex Corp. 1 126,500 2,264,350
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 3,429,000 135,034,020
- --------------------------------------------------------------------------------
International Business Machines Corp. 2,104,100 195,702,341
- --------------------------------------------------------------------------------
Lexmark International, Inc., Cl. A 1 55,000 3,330,800
- --------------------------------------------------------------------------------
NCR Corp. 1 7,100 328,020
- --------------------------------------------------------------------------------
Network Appliance, Inc. 1 515,400 19,930,518
-----------------
525,344,032
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.5%
Agilent Technologies, Inc. 1 1,501,400 47,624,408
- --------------------------------------------------------------------------------
Avnet, Inc. 1 65,400 2,391,678
- --------------------------------------------------------------------------------
AVX Corp. 33,700 514,936
- --------------------------------------------------------------------------------
Tech Data Corp. 1 74,400 2,773,632
- --------------------------------------------------------------------------------
Vishay Intertechnology, Inc. 1 126,500 1,802,625
-----------------
55,107,279
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.2%
Digital River, Inc. 1 32,500 1,800,175
- --------------------------------------------------------------------------------
Google, Inc., Cl. A 1 273,800 123,059,410
51 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES Continued
United Online, Inc. 181,900 $ 2,391,985
- --------------------------------------------------------------------------------
ValueClick, Inc. 1 80,600 2,135,900
- --------------------------------------------------------------------------------
VeriSign, Inc. 1 129,000 3,263,700
- --------------------------------------------------------------------------------
WebEx Communications, Inc. 1 7,000 304,010
- --------------------------------------------------------------------------------
Websense, Inc. 1 60,500 1,376,980
-----------------
134,332,160
- --------------------------------------------------------------------------------
IT SERVICES--1.9%
Acxiom Corp. 40,400 862,944
- --------------------------------------------------------------------------------
Automatic Data Processing, Inc. 133,700 6,656,923
- --------------------------------------------------------------------------------
Ceridian Corp. 1 92,500 3,017,350
- --------------------------------------------------------------------------------
Computer Sciences Corp. 1 83,982 4,445,167
- --------------------------------------------------------------------------------
Convergys Corp. 1 129,400 3,328,168
- --------------------------------------------------------------------------------
CSG Systems International, Inc. 1 41,400 1,020,924
- --------------------------------------------------------------------------------
DST Systems, Inc. 1 50,400 3,549,168
- --------------------------------------------------------------------------------
Electronic Data Systems Corp. 1,690,500 47,367,810
- --------------------------------------------------------------------------------
First Data Corp. 2,790,100 71,231,253
- --------------------------------------------------------------------------------
Fiserv, Inc. 1 63,300 3,352,368
- --------------------------------------------------------------------------------
Gartner, Inc., Cl. A 1 25,200 533,232
- --------------------------------------------------------------------------------
MPS Group, Inc. 1 84,100 1,204,312
- --------------------------------------------------------------------------------
Paychex, Inc. 1,015,600 41,263,828
- --------------------------------------------------------------------------------
Sabre Holdings Corp. 113,300 3,662,989
- --------------------------------------------------------------------------------
Western Union Co. 1,175,700 25,477,419
-----------------
216,973,855
- --------------------------------------------------------------------------------
OFFICE ELECTRONICS--0.5%
Xerox Corp. 1 3,737,000 64,537,990
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT--3.3%
Agere Systems, Inc. 1 115,900 2,539,369
- --------------------------------------------------------------------------------
Amkor Technology, Inc. 1 235,900 2,719,927
- --------------------------------------------------------------------------------
Analog Devices, Inc. 1,773,800 64,300,250
- --------------------------------------------------------------------------------
Applied Materials, Inc. 4,037,800 74,981,946
- --------------------------------------------------------------------------------
Atmel Corp. 1 67,200 372,288
- --------------------------------------------------------------------------------
Cymer, Inc. 1 52,600 2,186,056
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT Continued
Hittite Microwave Corp. 1 24,200 $ 1,014,948
- --------------------------------------------------------------------------------
Integrated Device Technology, Inc. 1 192,000 3,114,240
- --------------------------------------------------------------------------------
Intel Corp. 4,832,930 95,933,661
- --------------------------------------------------------------------------------
Linear Technology Corp. 103,900 3,448,441
- --------------------------------------------------------------------------------
Micrel, Inc. 1 129,500 1,509,970
- --------------------------------------------------------------------------------
National Semiconductor Corp. 172,800 4,427,136
- --------------------------------------------------------------------------------
Novellus Systems, Inc. 1 100,600 3,239,320
- --------------------------------------------------------------------------------
NVIDIA Corp. 1 960,900 29,787,900
- --------------------------------------------------------------------------------
Silicon Image, Inc. 1 178,200 1,569,942
- --------------------------------------------------------------------------------
Teradyne, Inc. 1 201,300 3,244,956
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 2,439,900 75,539,304
- --------------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,
Inc. 1 70,000 3,345,300
- --------------------------------------------------------------------------------
Verigy Ltd. 1 165,288 3,882,615
-----------------
377,157,569
- --------------------------------------------------------------------------------
SOFTWARE--4.9%
BEA Systems, Inc. 1 463,200 5,525,976
- --------------------------------------------------------------------------------
BMC Software, Inc. 1 222,300 6,860,178
- --------------------------------------------------------------------------------
CA, Inc. 1,505,700 39,223,485
- --------------------------------------------------------------------------------
Cadence Design Systems, Inc. 1 194,600 3,880,324
- --------------------------------------------------------------------------------
Cognos, Inc. 1 31,400 1,196,654
- --------------------------------------------------------------------------------
Compuware Corp. 1 346,300 3,168,645
- --------------------------------------------------------------------------------
Fair Isaac Corp. 110,500 4,312,815
- --------------------------------------------------------------------------------
Hyperion Solutions Corp. 1 74,300 3,183,012
- --------------------------------------------------------------------------------
Intuit, Inc. 1 1,613,800 47,623,238
- --------------------------------------------------------------------------------
McAfee, Inc. 1 116,200 3,499,944
- --------------------------------------------------------------------------------
Mentor Graphics Corp. 1 131,400 2,219,346
- --------------------------------------------------------------------------------
MICROS Systems, Inc. 1 30,900 1,722,984
- --------------------------------------------------------------------------------
Microsoft Corp. 9,380,354 264,244,572
- --------------------------------------------------------------------------------
MicroStrategy, Inc., Cl. A 1 20,000 2,521,400
- --------------------------------------------------------------------------------
Novell, Inc. 1 202,800 1,342,536
- --------------------------------------------------------------------------------
Oracle Corp. 1 6,586,800 108,221,124
52 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
SOFTWARE Continued
Sybase, Inc. 1 120,300 $ 3,006,297
- --------------------------------------------------------------------------------
Symantec Corp. 1 3,630,500 62,081,550
- --------------------------------------------------------------------------------
Synopsys, Inc. 1 210,200 5,376,916
- --------------------------------------------------------------------------------
TIBCO Software, Inc. 1 36,400 329,420
-----------------
569,540,416
- --------------------------------------------------------------------------------
MATERIALS--3.8%
- --------------------------------------------------------------------------------
CHEMICALS--1.1%
Albemarle Corp. 41,700 3,413,145
- --------------------------------------------------------------------------------
Ashland, Inc. 48,900 3,206,862
- --------------------------------------------------------------------------------
Dow Chemical Co. (The) 1,800,500 78,861,900
- --------------------------------------------------------------------------------
Fuller (H.B.) Co. 31,200 779,064
- --------------------------------------------------------------------------------
Hercules, Inc. 1 150,200 3,028,032
- --------------------------------------------------------------------------------
Lubrizol Corp. (The) 39,900 2,074,800
- --------------------------------------------------------------------------------
Lyondell Chemical Co. 123,200 3,925,152
- --------------------------------------------------------------------------------
NewMarket Corp. 37,600 1,650,264
- --------------------------------------------------------------------------------
OM Group, Inc. 1 51,700 2,619,639
- --------------------------------------------------------------------------------
PPG Industries, Inc. 136,600 9,049,750
- --------------------------------------------------------------------------------
Rohm & Haas Co. 388,030 20,511,266
- --------------------------------------------------------------------------------
W.R. Grace & Co. 1 29,600 729,344
-----------------
129,849,218
- --------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--0.0%
Headwaters, Inc. 1 98,700 2,326,359
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING--0.1%
Packaging Corp. of America 23,200 568,400
- --------------------------------------------------------------------------------
Pactiv Corp. 1 159,900 5,148,780
-----------------
5,717,180
- --------------------------------------------------------------------------------
METALS & MINING--2.6%
AK Steel Holding Corp. 1 214,600 4,963,698
- --------------------------------------------------------------------------------
Alcoa, Inc. 1,641,100 54,829,151
- --------------------------------------------------------------------------------
Carpenter Technology Corp. 1,100 130,405
- --------------------------------------------------------------------------------
Chaparral Steel Co. 59,200 2,949,936
- --------------------------------------------------------------------------------
Cleveland-Cliffs, Inc. 49,200 2,774,880
- --------------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold, Inc., Cl. B 427,700 24,554,257
- --------------------------------------------------------------------------------
Nucor Corp. 1,165,300 70,931,811
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
Phelps Dodge Corp. 616,100 $ 76,957,051
- --------------------------------------------------------------------------------
Quanex Corp. 55,550 2,171,450
- --------------------------------------------------------------------------------
Southern Copper Corp. 2 665,000 46,816,000
- --------------------------------------------------------------------------------
Steel Dynamics, Inc. 86,600 3,268,284
- --------------------------------------------------------------------------------
United States Steel Corp. 72,900 6,460,398
-----------------
296,807,321
- --------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.0%
Louisiana-Pacific Corp. 5,200 107,328
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--5.3%
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--4.1%
AT&T, Inc. 7,053,991 259,586,869
- --------------------------------------------------------------------------------
CenturyTel, Inc. 142,700 6,385,825
- --------------------------------------------------------------------------------
Citizens Communications Co. 153,600 2,314,752
- --------------------------------------------------------------------------------
Embarq Corp. 57,291 3,171,057
- --------------------------------------------------------------------------------
Qwest Communications International, Inc. 1 3,629,600 32,230,848
- --------------------------------------------------------------------------------
Verizon Communications, Inc. 4,415,300 165,264,679
-----------------
468,954,030
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.2%
Alltel Corp. 236,700 14,341,653
- --------------------------------------------------------------------------------
Sprint Nextel Corp. 6,213,431 119,794,950
- --------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 69,100 3,848,179
-----------------
137,984,782
- --------------------------------------------------------------------------------
UTILITIES--0.7%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.3%
Duke Energy Corp. 977,000 19,237,130
- --------------------------------------------------------------------------------
Edison International, Inc. 259,500 12,175,740
- --------------------------------------------------------------------------------
Progress Energy, Inc., Contingent Value
Obligation 1,3 680,100 210,831
-----------------
31,623,701
- --------------------------------------------------------------------------------
ENERGY TRADERS--0.0%
AES Corp. (The) 1 137,600 2,933,632
53 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF INVESTMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
GAS UTILITIES--0.0%
ONEOK, Inc. 32,000 $ 1,333,120
- --------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.4%
CenterPoint Energy, Inc. 165,900 2,959,656
- --------------------------------------------------------------------------------
PG&E Corp. 1,023,700 47,520,151
-----------------
50,479,807
-----------------
Total Common Stocks
(Cost $9,038,025,300) 11,446,333,600
- --------------------------------------------------------------------------------
PREFERRED STOCKS--0.0%
- --------------------------------------------------------------------------------
Wachovia Corp., Dividend Equalization
Preferred Shares 1
(Cost $0) 100,000 250
UNITS
- --------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- --------------------------------------------------------------------------------
Dime Bancorp, Inc. Wts., Exp. 1/2/10 1 485,800 67,040
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. Wts., Exp.
12/10/07 1 68,554 11,997
-----------------
Total Rights, Warrants and Certificates
(Cost $0) 79,037
SHARES
- --------------------------------------------------------------------------------
INVESTMENTS IN AFFILIATED COMPANIES--0.5%
- --------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund,
Cl. E, 5.25% 4,5
(Cost $58,270,847) 58,270,847 58,270,847
- --------------------------------------------------------------------------------
Total Investments, at Value (excluding
Investments Purchased with Cash Collateral
from Securities Loaned)
(Cost $9,096,296,147) 11,504,683,734
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--0.5% 6
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.5%
Undivided interest of 0.47% in joint
repurchase agreement (Principal Amount/
Value $1,060,000,000 with a maturity value
of $1,060,157,601) with Barclays Capital,
5.3525%, dated 2/28/07, to be repurchased at
$5,000,743 on 3/1/07, collateralized by AAA
Asset-Backed Securities, 0.00%,
2/15/14-11/25/46, with a value of
$1,091,800,000 $ 5,000,000 $ 5,000,000
- --------------------------------------------------------------------------------
Undivided interest of 1.45% in joint
repurchase agreement (Principal Amount/Value
$500,000,000, with a maturity value of
$500,074,028) with Nomura Securities, 5.33%,
dated 2/28/07, to be repurchased at
$7,241,540 on 3/1/07, collateralized by U.S.
Agency Mortgages, 5.50%-6%, 1/1/36-6/1/36,
with a value of $510,000,000 7,240,468 7,240,468
- --------------------------------------------------------------------------------
Undivided interest of 3.33% in joint
repurchase agreement (Principal Amount/Value
$750,000,000 with a maturity value of
$750,111,510) with Barclays Capital,
5.3525%, dated 2/28/07, to be repurchased at
$25,003,717 on 3/1/07, collateralized by
Private Label CMOs, 0.00%-4.84%,
2/1/11-7/25/46, with a value of $772,500,000 25,000,000 25,000,000
54 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS Continued
Undivided interest of 3.33% in joint
repurchase agreement (Principal
Amount/Value $750,000,000, with a maturity
value of $750,111,250) with Morgan Stanley,
5.34%, dated 2/28/07, to be repurchased at
$25,003,708 on 3/1/07, collateralized by
U.S. Agency Mortgages, 0.00%-6.05%,
3/30/07-10/15/20, with a value of
$765,730,799 $ 25,000,000 $ 25,000,000
VALUE
SEE NOTE 1
- --------------------------------------------------------------------------------
Total Investments Purchased with Cash
Collateral from Securities Loaned
(Cost $62,240,468) $ 62,240,468
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE
(COST $9,158,536,615) 100.4% 11,566,924,202
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (51,689,166)
--------------------------------
NET ASSETS 100.0% $ 11,515,235,036
================================
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 February
28, 2007 was $210,831, which represents less than 0.005% of the Fund's net
assets. See Note 6 of accompanying Notes.
4. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended February 28, 2007 by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
AUGUST 31, 2006 ADDITIONS REDUCTIONS FEBRUARY 28, 2007
- --------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.25% -- 825,409,324 767,138,477 58,270,847
VALUE DIVIDEND
SEE NOTE 1 INCOME
- --------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E, 5.25% $ 58,270,847 $ 1,240,397
5. Rate shown is the 7-day yield as of February 28, 2007.
6. 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.
55 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF ASSETS AND LIABILITIES Unaudited
- --------------------------------------------------------------------------------
February 28, 2007
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $9,100,265,768) $ 11,508,653,355
Affiliated companies (cost $58,270,847) 58,270,847
----------------
11,566,924,202
- ------------------------------------------------------------------------------------------------------------------------
Cash 7,339,071
- ------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 25,281,391
Investments sold 17,730,067
Shares of capital stock sold 5,254,029
Other 235,454
-----------------
Total assets 11,622,764,214
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned 62,534,082
- ------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed 36,192,749
Distribution and service plan fees 4,399,166
Transfer and shareholder servicing agent fees 1,542,325
Investments purchased 1,485,780
Shareholder communications 1,206,199
Directors' compensation 101,967
Other 66,910
-----------------
Total liabilities 107,529,178
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 11,515,235,036
=================
- ------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Par value of shares of capital stock $ 2,869,974
- ------------------------------------------------------------------------------------------------------------------------
Additional paid-in capital 8,817,523,618
- ------------------------------------------------------------------------------------------------------------------------
Accumulated net investment income 21,684,361
- ------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 264,769,496
- ------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 2,408,387,587
-----------------
NET ASSETS $ 11,515,235,036
=================
56 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
- ------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ------------------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $7,990,700,431
and 197,846,643 shares of capital stock outstanding) $ 40.39
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 42.85
- ------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,344,646,578 and 34,265,460 shares
of capital stock outstanding) $ 39.24
- ------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,134,243,769 and 28,989,060 shares
of capital stock outstanding) $ 39.13
- ------------------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $230,190,117 and 5,775,775 shares
of capital stock outstanding) $ 39.85
- ------------------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$815,454,141 and 20,120,454 shares of capital stock outstanding) $ 40.53
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
57 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENT OF OPERATIONS Unaudited
- --------------------------------------------------------------------------------
For the Six Months Ended February 28, 2007
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $3,108) $ 106,766,012
Affiliated companies 1,240,397
- ------------------------------------------------------------------------------------------------------------------------
Interest 567,776
- ------------------------------------------------------------------------------------------------------------------------
Portfolio lending fees 531,086
- ------------------------------------------------------------------------------------------------------------------------
Other income 345,032
----------------
Total investment income 109,450,303
- ------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------
Management fees 26,356,009
- ------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 9,805,565
Class B 7,054,616
Class C 5,703,614
Class N 554,099
- ------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 7,202,171
Class B 1,255,009
Class C 995,989
Class N 250,491
Class Y 74,107
- ------------------------------------------------------------------------------------------------------------------------
Shareholder communications:
Class A 731,511
Class B 299,527
Class C 89,531
Class N 7,604
- ------------------------------------------------------------------------------------------------------------------------
Directors' compensation 100,919
- ------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 31,840
- ------------------------------------------------------------------------------------------------------------------------
Administration service fees 750
- ------------------------------------------------------------------------------------------------------------------------
Other 174,773
-----------------
Total expenses 60,688,125
Less reduction to custodian expenses (2,567)
Less waivers and reimbursements of expenses (23,794)
-----------------
Net expenses 60,661,764
- ------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 48,788,539
58 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
- ------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain on:
Investments $ 624,618,127
Foreign currency transactions 334,082
-----------------
Net realized gain 624,952,209
- ------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 240,321,136
Translation of assets and liabilities denominated in foreign currencies (585,228)
-----------------
Net change in unrealized appreciation 239,735,908
- ------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 913,476,656
=================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
59 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
(UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------
Net investment income $ 48,788,539 $ 86,868,345
- ------------------------------------------------------------------------------------------------------------------------
Net realized gain 624,952,209 886,986,823
- ------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 239,735,908 18,438,234
-------------------------------------
Net increase in net assets resulting from operations 913,476,656 992,293,402
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A (73,116,272) (78,299,257)
Class B (985,052) (1,493,470)
Class C (2,391,159) (3,049,966)
Class N (1,498,556) (1,478,142)
Class Y (10,050,408) (7,871,769)
-------------------------------------
(88,041,447) (92,192,604)
- ------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (307,626,359) --
Class B (56,778,663) --
Class C (45,635,376) --
Class N (8,621,602) --
Class Y (28,797,341) --
-------------------------------------
(447,459,341) --
- ------------------------------------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital stock transactions:
Class A 51,277,038 (740,971,280)
Class B (162,034,799) (656,284,844)
Class C (13,193,554) (189,937,693)
Class N 15,935,401 14,934,343
Class Y 127,286,303 143,274,771
-------------------------------------
19,270,389 (1,428,984,703)
- ------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 397,246,257 (528,883,905)
- ------------------------------------------------------------------------------------------------------------------------
Beginning of period 11,117,988,779 11,646,872,684
-------------------------------------
End of period (including accumulated net investment income of
$21,684,361 and $60,937,269, respectively) $ 11,515,235,036 $ 11,117,988,779
=====================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS A (UNAUDITED) 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 39.12 $ 36.18 $ 32.78 $ 29.62 $ 27.90 $ 32.15
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .20 1 .35 1 .47 1 .26 .22 .16
Net realized and unrealized
gain (loss) 3.04 2.96 3.34 3.10 1.69 (4.29)
-------------------------------------------------------------------------------------------
Total from investment
operations 3.24 3.31 3.81 3.36 1.91 (4.13)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment
income (.38) (.37) (.41) (.20) (.19) (.07)
Distributions from net
realized gain (1.59) -- -- -- -- (.05)
-------------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (1.97) (.37) (.41) (.20) (.19) (.12)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 40.39 $ 39.12 $ 36.18 $ 32.78 $ 29.62 $ 27.90
===========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 2 8.34% 9.19% 11.68% 11.37% 6.93% (12.90)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $7,990,700 $7,680,186 $7,810,714 $7,384,256 $7,033,312 $6,443,983
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $8,072,922 $7,845,096 $7,759,230 $7,521,103 $6,310,359 $7,203,226
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 3
Net investment income 0.99% 0.93% 1.36% 0.75% 0.87% 0.52%
Total expenses 0.91% 4 0.92% 0.92% 0.93% 0.97% 0.99%
Expenses after payments and
waivers and reduction to
custodian expenses 0.90% 0.92% 0.92% 0.93% 0.97% 0.99%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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. Expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended February 28, 2007 0.91%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
61 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS B (UNAUDITED) 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 37.87 $ 34.99 $ 31.67 $ 28.68 $ 27.04 $ 31.34
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) .04 1 .05 1 .20 1 (.21) (.13) (.20)
Net realized and unrealized
gain (loss) 2.95 2.86 3.21 3.20 1.77 (4.05)
--------------------------------------------------------------------------------------------
Total from investment
operations 2.99 2.91 3.41 2.99 1.64 (4.25)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment
income (.03) (.03) (.09) -- -- --
Distributions from net
realized gain (1.59) -- -- -- -- (.05)
--------------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (1.62) (.03) (.09) -- -- (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 39.24 $ 37.87 $ 34.99 $ 31.67 $ 28.68 $ 27.04
============================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 2 7.93% 8.32% 10.79% 10.43% 6.06% (13.58)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $1,344,647 $1,453,679 $1,968,829 $2,558,206 $2,941,765 $3,510,800
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $1,424,713 $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) 0.21% 0.13% 0.59% (0.10)% 0.04% (0.25)%
Total expenses 1.68% 4,5 1.71% 4 1.72% 4 1.78% 4,6 1.81% 4 1.75% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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. Expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended February 28, 2007 1.68%
6. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS C (UNAUDITED) 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 37.81 $ 34.98 $ 31.71 $ 28.69 $ 27.03 $ 31.33
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income (loss) .05 1 .07 1 .21 1 (.03) -- (.11)
Net realized and unrealized
gain (loss) 2.94 2.85 3.22 3.05 1.66 (4.14)
--------------------------------------------------------------------------------------------
Total from investment
operations 2.99 2.92 3.43 3.02 1.66 (4.25)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment
income (.08) (.09) (.16) -- -- --
Distributions from net
realized gain (1.59) -- -- -- -- (.05)
--------------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (1.67) (.09) (.16) -- -- (.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 39.13 $ 37.81 $34.98 $ 31.71 $ 28.69 $ 27.03
============================================================================================
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 2 7.97% 8.36% 10.83% 10.53% 6.14% (13.58)%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $1,134,244 $1,107,962 $1,206,335 $1,241,930 $1,188,826 $1,198,517
- -----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $1,153,433 $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) 0.25% 0.18% 0.62% (0.01)% 0.09% (0.24)%
Total expenses 1.65% 4,5 1.67% 4 1.67% 4 1.70% 4,6 1.74% 4 1.75% 4
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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. Expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended February 28, 2007 1.65%
6. Voluntary waiver of transfer agent fees less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
63 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS N (UNAUDITED) 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 38.59 $ 35.71 $ 32.39 $ 29.33 $ 27.72 $ 32.09
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .14 1 .24 1 .35 1 .15 .20 .12
Net realized and unrealized
gain (loss) 2.99 2.92 3.30 3.05 1.65 (4.31)
-------------------------------------------------------------------------------------------
Total from investment
operations 3.13 3.16 3.65 3.20 1.85 (4.19)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment
income (.28) (.28) (.33) (.14) (.24) (.13)
Distributions from net
realized gain (1.59) -- -- -- -- (.05)
-------------------------------------------------------------------------------------------
Total dividends and/or
distributions
to shareholders (1.87) (.28) (.33) (.14) (.24) (.18)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 39.85 $ 38.59 $35.71 $ 32.39 $ 29.33 $ 27.72
===========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 2 8.16% 8.87% 11.30% 10.93% 6.78% (13.15)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in
thousands) $ 230,190 $ 207,339 $ 177,463 $ 150,955 $ 79,188 $ 43,464
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in
thousands) $ 224,086 $ 194,639 $ 168,866 $ 122,478 $ 60,950 $ 28,141
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 3
Net investment income 0.70% 0.63% 1.02% 0.38% 0.65% 0.28%
Total expenses 1.19% 4 1.22% 1.26% 1.31% 1.23% 1.24%
Expenses after payments and
waivers and reduction to
custodian expenses 1.19% 1.22% 1.26% 1.31% 1.18% 1.24%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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. Expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended February 28, 2007 1.19%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, 2007 AUGUST 31,
CLASS Y (UNAUDITED) 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $ 39.33 $ 36.38 $ 32.93 $ 29.75 $ 28.02 $ 32.28
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income .29 1 .52 1 .64 1 .34 .11 .19
Net realized and unrealized
gain (loss) 3.06 2.96 3.34 3.13 1.86 (4.28)
-------------------------------------------------------------------------------------------
Total from investment
operations 3.35 3.48 3.98 3.47 1.97 (4.09)
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions
to shareholders:
Dividends from net investment
income (.56) (.53) (.53) (.29) (.24) (.12)
Distributions from net
realized gain (1.59) -- -- -- -- (.05)
-------------------------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (2.15) (.53) (.53) (.29) (.24) (.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 40.53 $ 39.33 $ 36.38 $ 32.93 $ 29.75 $ 28.02
===========================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET
VALUE 2 8.58% 9.63% 12.15% 11.69% 7.11% (12.74)%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 815,454 $ 668,873 $ 483,532 $ 570,991 $ 441,460 $ 225,298
- ----------------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $ 765,742 $ 594,018 $ 496,349 $ 558,130 $ 242,029 $ 227,835
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net
assets: 3
Net investment income 1.43% 1.38% 1.82% 1.07% 1.01% 0.74%
Total expenses 0.48% 4 0.49% 0.53% 0.60% 0.87% 0.92%
Expenses after payments and
waivers and reduction to
custodian expenses 0.48% 0.49% 0.53% 0.60% 0.83% 0.78%
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 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. Expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended February 28, 2007 0.48%
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
65 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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
66 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
at its trading session ending at, or most recently prior to, the time when the
Fund's assets are valued. Options are valued daily based upon the last sale
price on the principal exchange on which the option is traded. 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. Investments in open-end registered
investment companies (including affiliated funds) are valued at that fund's net
asset value. 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.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") which seeks current income and
stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments. As a
shareholder, the Fund is subject to its proportional share of IMMF's Class E
expenses, including its management fee. The Manager will waive fees and/or
67 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
reimburse Fund expenses in an amount equal to the indirect management fees
incurred through the Fund's investment in IMMF.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
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. 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.
- --------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Board of Directors has adopted a compensation
deferral 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
68 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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 compensation deferral 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 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.
69 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
SIX MONTHS ENDED FEBRUARY 28, 2007 YEAR ENDED AUGUST 31, 2006
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------
CLASS A
Sold 11,177,856 $ 453,652,937 26,624,100 $ 1,007,441,844
Dividends and/or
distributions reinvested 8,913,069 355,987,931 1,913,771 71,938,634
Redeemed (18,575,389) (758,363,830) (48,081,986) (1,820,351,758)
---------------------------------------------------------------------
Net increase (decrease) 1,515,536 $ 51,277,038 (19,544,115) $ (740,971,280)
=====================================================================
- ----------------------------------------------------------------------------------------------------
CLASS B
Sold 1,690,848 $ 66,969,140 4,058,713 $ 149,179,170
Dividends and/or
distributions reinvested 1,421,760 55,277,996 38,325 1,403,097
Redeemed (7,229,371) (284,281,935) (21,981,611) (806,867,111)
---------------------------------------------------------------------
Net decrease (4,116,763) $ (162,034,799) (17,884,573) $ (656,284,844)
=====================================================================
- ----------------------------------------------------------------------------------------------------
CLASS C
Sold 1,339,496 $ 52,835,792 2,576,737 $ 94,490,367
Dividends and/or
distributions reinvested 1,087,128 42,137,072 72,361 2,644,058
Redeemed (2,737,181) (108,166,418) (7,833,508) (287,072,118)
---------------------------------------------------------------------
Net decrease (310,557) $ (13,193,554) (5,184,410) $ (189,937,693)
=====================================================================
- ----------------------------------------------------------------------------------------------------
CLASS N
Sold 1,009,875 $ 40,640,883 2,043,767 $ 76,211,483
Dividends and/or
distributions reinvested 249,507 9,840,566 38,592 1,434,091
Redeemed (857,129) (34,546,048) (1,677,909) (62,711,231)
---------------------------------------------------------------------
Net increase 402,253 $ 15,935,401 404,450 $ 14,934,343
=====================================================================
- ----------------------------------------------------------------------------------------------------
CLASS Y
Sold 3,785,407 $ 155,408,331 8,687,755 $ 331,059,516
Dividends and/or
distributions reinvested 944,172 37,804,657 202,236 7,618,220
Redeemed (1,613,341) (65,926,685) (5,178,566) (195,402,965)
---------------------------------------------------------------------
Net increase 3,116,238 $ 127,286,303 3,711,425 $ 143,274,771
=====================================================================
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and money market funds, for the six months ended
February 28, 2007, were as follows:
PURCHASES SALES
- --------------------------------------------------------------------------------
Investment securities $ 5,819,926,304 $ 6,263,542,942
70 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
- --------------------------------------------------------------------------------
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 average net assets as shown in the following table:
FEE SCHEDULE
-------------------------------
Up to $200 million 0.65%
Next $150 million 0.60
Next $150 million 0.55
Over $500 million 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 or the Transfer Agent), a
division of the Manager, acts as the transfer and shareholder servicing agent
for the Fund. The Fund pays OFS a per account fee. For the six months ended
February 28, 2007, the Fund paid $10,012,378 to OFS for services to the Fund.
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
71 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
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 determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at December 31,
2006 for Class B, Class C and Class N shares were $22,776,494, $34,764,109 and
$3,351,427, 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
SIX MONTHS ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------------------
February 28, 2007 $1,014,591 $16,952 $1,157,331 $21,999 $12,303
- --------------------------------------------------------------------------------
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.
The Manager will waive fees and/or reimburse Fund expenses in an amount
equal to the indirect management fees incurred through the Fund's investment in
IMMF. During the six months ended February 28, 2007, the Manager waived $23,794
for IMMF management fees.
- --------------------------------------------------------------------------------
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.
72 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
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 February 28, 2007, the Fund had no outstanding foreign currency
contracts.
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of February 28, 2007, 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 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 February 28, 2007, the Fund
had on loan securities valued at $62,499,551, which are included in the
Statement of Assets and Liabilities as "Investments, at value" and, when
applicable, as "Receivable for Investments sold." Collateral of $62,534,082 was
received for the loans, of which $62,240,468 was received in cash and
subsequently invested in approved investments or held as cash.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS
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
73 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND)
NOTES TO FINANCIAL STATEMENTS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENTS Continued
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 February 28, 2007, the Manager has evaluated the implications of
FIN 48 and does not currently anticipate a material impact to the Fund's
financial statements. The Manager will continue to monitor the Fund's tax
positions prospectively for potential future impacts.
In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of February 28, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
74 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
ITEM 2. CODE OF ETHICS.
Not applicable to semiannual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to semiannual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to semiannual reports.
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 February 28, 2007, 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) Not applicable to semiannual reports.
(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 III
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: April 10, 2007
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: April 10, 2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: April 10, 2007