N-CSRS 1 rs771_31954ncsrs.txt RS771_31954NCSRS 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 OPPENHEIMER PRINCIPAL PROTECTED TRUST III, CONSISTING OF OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III (Exact name of registrant as specified in charter) 6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924 (Address of principal executive offices) (Zip code) ROBERT G. ZACK, ESQ. OPPENHEIMERFUNDS, INC. TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008 (Name and address of agent for service) Registrant's telephone number, including area code: (303) 768-3200 Date of fiscal year end: AUGUST 31 Date of reporting period: FEBRUARY 28, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. TOP HOLDINGS AND ALLOCATIONS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III(R) PORTFOLIO ALLOCATION [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.] Equity 57.9% Fixed Income 26.2 Cash Equivalents 15.9 The Fund seeks exposure to the equity markets by investing in the Oppenheimer Main Street Fund(R). Information relating to the Oppenheimer Main Street Fund's(R) portfolio holdings appears below. Portfolio holdings and allocations are subject to change. Percentages are as of February 28, 2006 and are based on the total market value of investments. -------------------------------------------------------------------------------- OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND) SECTOR ALLOCATION -------------------------------------------------------------------------------- Financials 20.7% -------------------------------------------------------------------------------- Information Technology 19.5 -------------------------------------------------------------------------------- Health Care 13.6 -------------------------------------------------------------------------------- Industrials 11.2 -------------------------------------------------------------------------------- Consumer Discretionary 10.7 -------------------------------------------------------------------------------- Energy 10.4 -------------------------------------------------------------------------------- Consumer Staples 6.9 -------------------------------------------------------------------------------- Telecommunication Services 3.3 -------------------------------------------------------------------------------- Materials 2.7 -------------------------------------------------------------------------------- Utilities 1.0 Portfolio holdings and allocations are subject to change. Percentages are as of February 28, 2006, and are based on the total market value of common stocks. -------------------------------------------------------------------------------- 11 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III TOP HOLDINGS AND ALLOCATIONS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND) TOP TEN COMMON STOCK INDUSTRIES -------------------------------------------------------------------------------- Oil & Gas 9.9% -------------------------------------------------------------------------------- Diversified Financial Services 8.5 -------------------------------------------------------------------------------- Commercial Banks 5.2 -------------------------------------------------------------------------------- Health Care Providers & Services 5.0 -------------------------------------------------------------------------------- Pharmaceuticals 5.0 -------------------------------------------------------------------------------- Insurance 4.9 -------------------------------------------------------------------------------- Semiconductors & Semiconductor Equipment 4.7 -------------------------------------------------------------------------------- Computers & Peripherals 4.5 -------------------------------------------------------------------------------- Software 4.2 -------------------------------------------------------------------------------- Aerospace & Defense 3.5 Portfolio holdings and allocations are subject to change. Percentages are as of February 28, 2006, and are based on net assets. OPPENHEIMER MAIN STREET FUND(R) (UNDERLYING FUND) TOP TEN COMMON STOCK HOLDINGS -------------------------------------------------------------------------------- Exxon Mobil Corp. 3.3% -------------------------------------------------------------------------------- General Electric Co. 2.8 -------------------------------------------------------------------------------- Citigroup, Inc. 2.1 -------------------------------------------------------------------------------- Microsoft Corp. 2.1 -------------------------------------------------------------------------------- Bank of America Corp. 1.9 -------------------------------------------------------------------------------- Pfizer, Inc. 1.7 -------------------------------------------------------------------------------- Intel Corp. 1.4 -------------------------------------------------------------------------------- Johnson & Johnson 1.4 -------------------------------------------------------------------------------- Procter & Gamble Co. (The) 1.4 -------------------------------------------------------------------------------- JPMorgan Chase & Co. 1.3 Portfolio holdings and allocations are subject to change. Percentages are as of February 28, 2006, and are based on net assets. For up-to-date Top 10 Fund holdings, please visit www.oppenheimerfunds.com -------------------------------------------------------------------------------- 12 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES -------------------------------------------------------------------------------- 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 to shareholders. The warranty does not guarantee performance of the Fund. The ability of the Fund to maintain the value of your original investment is dependent on the ability of the warranty provider to make a payment to the Fund on the maturity date. The principal risks of an investment in the Fund during the Warranty Period and the Post-Warranty Period are those generally attributable to investing in stocks and debt securities. Because the Fund invests in both stocks and debt securities during the Warranty Period, the Fund may underperform stock funds when stocks are in favor and underperform bond funds when debt securities are in favor. 13 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES -------------------------------------------------------------------------------- Shareholders could lose money by investing in this Fund. A shareholder's warranted amount will be reduced, as more fully described in the prospectus, if the shareholder takes any dividends or distributions in cash instead of reinvesting them in additional shares of the Fund, redeems any shares before the Maturity Date, if there are extraordinary expenses incurred by the Fund (as such expenses are not covered by the Warranty Agreement), if the Fund or the Manager fails to perform certain obligations under the Warranty Agreement, or if the warranty provider fails to or is unable to meet its obligations under the Warranty Agreement. The warranty is solely the obligation of the warranty provider. It is possible that the financial position of the warranty provider may deteriorate. Shareholders could lose money if the warranty provider fails to or is unable to perform its obligations under the warranty. The Fund's assets and the obligations of the warranty provider are not guaranteed by Merrill Lynch & Co., Inc. (the warranty provider's parent company), the United States Government, the Manager or any other entity or person. The lack of a guarantee of the warranty provider's obligations under the warranty presents some risks to shareholders if the warranty provider fails or is unable to honor its obligations to the Fund on the Maturity Date under the warranty. Distributions from the Fund are taxable whether or not you reinvest them in additional shares of the Fund. The warranty provider's obligation to make payment to the Fund is not guaranteed by any entity and the Fund is not obligated to replace the warranty provider should it be unable to make the payments necessary to support the warranted amount. The warranty agreement fees increase the Fund's expenses that you pay and therefore the expenses of this Fund will be higher than the expenses of a Fund that does not offer principal protection. The Fund offered its shares to the public from 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. 14 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III FUND EXPENSES -------------------------------------------------------------------------------- FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and redemption fees, if any; and (2) ongoing costs, including management fees; 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, 2006. ACTUAL EXPENSES. The "actual" lines of the table provide information about actual account values and actual expenses. You may use the information on this line for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the "actual" line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the 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 15 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III FUND EXPENSES -------------------------------------------------------------------------------- the Statement of Additional Information). Therefore, the "hypothetical" lines of the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -------------------------------------------------------------------------------- BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE 6 MONTHS ENDED (9/1/05) (2/28/06) FEBRUARY 28, 2006 -------------------------------------------------------------------------------- Class A Actual $1,000.00 $1,027.10 $ 6.25 -------------------------------------------------------------------------------- Class A Hypothetical 1,000.00 1,018.65 6.23 -------------------------------------------------------------------------------- Class B Actual 1,000.00 1,022.90 10.44 -------------------------------------------------------------------------------- Class B Hypothetical 1,000.00 1,014.53 10.39 -------------------------------------------------------------------------------- Class C Actual 1,000.00 1,023.20 10.03 -------------------------------------------------------------------------------- Class C Hypothetical 1,000.00 1,014.93 9.99 -------------------------------------------------------------------------------- Class N Actual 1,000.00 1,025.90 7.41 -------------------------------------------------------------------------------- Class N Hypothetical 1,000.00 1,017.50 7.38 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 based on the 6-month period ended February 28, 2006 are as follows: CLASS EXPENSE RATIOS ------------------------- Class A 1.24% ------------------------- Class B 2.07 ------------------------- Class C 1.99 ------------------------- Class N 1.47 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. -------------------------------------------------------------------------------- 16 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III STATEMENT OF INVESTMENTS February 28, 2006 / Unaudited --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ---------------------------------------------------------------------------------------------------------------------------------- INVESTMENTS IN AFFILIATED COMPANIES--58.1% ---------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 1 (Cost $42,200,342) 1,179,204 $ 45,387,569
PRINCIPAL AMOUNT ---------------------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--26.4% ---------------------------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts., STRIPS, 4.44%, 2/15/12 2,3 (Cost $20,733,861) $ 26,940,000 20,595,819 ---------------------------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--15.9% 4 ---------------------------------------------------------------------------------------------------------------------------------- Undivided interest of 1.14% in joint repurchase agreement (Principal Amount/ Value $1,088,683,000, with a maturity value of $1,088,819,993) with UBS Warburg LLC, 4.53%, dated 2/28/06, to be repurchased at $12,449,566 on 3/1/06, collateralized by Federal National Mortgage Assn., 5%, 3/1/34, with a value of $1,113,530,100 (Cost $12,448,000) 12,448,000 12,448,000 ---------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $75,382,203) 100.4% 78,431,388 ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES IN EXCESS OF OTHER ASSETS (0.4) (318,821) ------------------------------- NET ASSETS 100.0% $ 78,112,567 ===============================
FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Represents ownership of an affiliated fund, at or during the period ended February 28, 2006. Transactions during the period in which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES AUGUST 31, 2005 ADDITIONS REDUCTIONS FEBRUARY 28, 2006 ---------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y 1,044,231 181,175 46,202 1,179,204
VALUE DIVIDEND REALIZED SEE NOTE 1 INCOME GAIN ---------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Main Street Fund, Cl. Y $ 45,387,569 $ 553,589 $ 98,990
2. Zero coupon bond reflects effective yield on the date of purchase. 3. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts. The aggregate market value of such securities is $1,379,935. See Note 5 of Notes to Financial Statements. 4. The Fund may have elements of risk due to concentrated investments. Such concentrations may subject the Fund to additional risks. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 17 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III STATEMENT OF ASSETS AND LIABILITIES Unaudited -------------------------------------------------------------------------------- February 28, 2006 -------------------------------------------------------------------------------- ASSETS -------------------------------------------------------------------------------- Investments, at value (including cost and market value of $12,448,000 in repurchase agreements)--see accompanying statement of investments: Unaffiliated companies (cost $33,181,861) $ 33,043,819 Affiliated companies (cost $42,200,342) 45,387,569 -------------- 78,431,388 -------------------------------------------------------------------------------- Cash 41,607 -------------------------------------------------------------------------------- Receivables and other assets: Interest 1,566 Other 3,558 -------------- Total assets 78,478,119 -------------------------------------------------------------------------------- LIABILITIES -------------------------------------------------------------------------------- Payables and other liabilities: Shares of beneficial interest redeemed 117,707 Futures margins 98,600 Warranty agreement fees 77,103 Distribution and service plan fees 31,948 Legal, auditing and other professional fees 17,126 Shareholder communications 10,404 Transfer and shareholder servicing agent fees 5,518 Trustees' compensation 1,445 Other 5,701 -------------- Total liabilities 365,552 -------------------------------------------------------------------------------- NET ASSETS $78,112,567 ============== -------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS -------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 2,542 -------------------------------------------------------------------------------- Additional paid-in capital 76,031,159 -------------------------------------------------------------------------------- Accumulated net investment income 64,938 -------------------------------------------------------------------------------- Accumulated net realized loss on investments (1,185,034) -------------------------------------------------------------------------------- Net unrealized appreciation on investments 3,198,962 -------------------------------------------------------------------------------- NET ASSETS $ 78,112,567 ============== 18 | 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 $37,744,311 and 1,227,003 shares of beneficial interest outstanding) $ 30.76 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 32.64 --------------------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $20,018,324 and 652,058 shares of beneficial interest outstanding) $ 30.70 --------------------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $19,305,728 and 628,693 shares of beneficial interest outstanding) $ 30.71 --------------------------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,044,204 and 33,968 shares of beneficial interest outstanding) $ 30.74
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 19 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III STATEMENT OF OPERATIONS Unaudited -------------------------------------------------------------------------------- For the Six Months Ended February 28, 2006 -------------------------------------------------------------------------------- INVESTMENT INCOME -------------------------------------------------------------------------------- Interest $ 869,195 -------------------------------------------------------------------------------- Dividends from affiliated companies 553,589 ------------- Total investment income 1,422,784 -------------------------------------------------------------------------------- EXPENSES -------------------------------------------------------------------------------- Management fees 202,692 -------------------------------------------------------------------------------- Distribution and service plan fees: Class A 47,900 Class B 101,219 Class C 102,296 Class N 3,244 -------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 11,901 Class B 10,923 Class C 6,154 Class N 304 -------------------------------------------------------------------------------- Shareholder communications: Class A 5,472 Class B 5,865 Class C 3,020 Class N 142 -------------------------------------------------------------------------------- Warranty agreement fees 243,231 -------------------------------------------------------------------------------- Trustees' compensation 2,440 -------------------------------------------------------------------------------- Custodian fees and expenses 1,192 -------------------------------------------------------------------------------- Administration service fees 750 -------------------------------------------------------------------------------- Other 11,865 ------------- Total expenses 760,610 Less waivers and reimbursements of expenses (96,276) ------------- Net expenses 664,334 -------------------------------------------------------------------------------- NET INVESTMENT INCOME 758,450 20 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -------------------------------------------------------------------------------- Net realized gain (loss) on: Investments: Unaffiliated companies $ (708,535) Affiliated companies 98,990 Closing and expiration of futures contracts 222,111 ------------- Net realized loss (387,434) -------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 1,553,645 Futures contracts 88,002 ------------- Net change in unrealized appreciation 1,641,647 -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,012,663 ============= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 21 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 28, 2006 PERIOD ENDED (UNAUDITED) AUGUST 31, 2005 1 ------------------------------------------------------------------------------------------------------------------------ OPERATIONS ------------------------------------------------------------------------------------------------------------------------ Net investment income $ 758,450 $ 359,599 ------------------------------------------------------------------------------------------------------------------------ Net realized loss (387,434) (797,600) ------------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation 1,641,647 1,557,315 ---------------------------------------- Net increase in net assets resulting from operations 2,012,663 1,119,314 ------------------------------------------------------------------------------------------------------------------------ DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------------ Dividends from net investment income: Class A (677,601) (66,038) Class B (185,336) (13,002) Class C (200,276) (16,445) Class N (21,672) (2,062) ------------------------------------------------------------------------------------------------------------------------ BENEFICIAL INTEREST TRANSACTIONS ------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from beneficial interest transactions: Class A (3,602,027) 40,270,940 Class B (1,107,383) 20,664,488 Class C (2,385,375) 21,209,500 Class N (409,769) 1,419,648 ------------------------------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------------------------------ Total increase (decrease) (6,576,776) 84,586,343 ------------------------------------------------------------------------------------------------------------------------ Beginning of period 84,689,343 103,000 2 ---------------------------------------- End of period (including accumulated net investment income of $64,938 and $391,373, respectively) $ 78,112,567 $ 84,689,343 ========================================
1. For the period from October 7, 2004 (commencement of operations) to August 31, 2005. 2. Reflects the value of the Manager's seed money investment on September 2, 2004. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
CLASS A CLASS B SIX MONTHS PERIOD SIX MONTHS PERIOD ENDED ENDED ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, FEBRUARY 28, 2006 AUGUST 31, (UNAUDITED) 2005 1 (UNAUDITED) 2005 1 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 30.48 $ 30.00 $ 30.29 $ 30.00 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .34 .25 .22 .03 Net realized and unrealized gain .48 .28 .47 .28 ------------------------------------------------------------------------ Total from investment operations .82 .53 .69 .31 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.54) (.05) (.28) (.02) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 30.76 $ 30.48 $ 30.70 $ 30.29 ======================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 2.71% 1.76% 2.29% 1.03% -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 37,744 $ 40,981 $ 20,019 $ 20,856 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 39,382 $ 36,571 $ 20,407 $ 18,576 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 2.27% 0.93% 1.43% 0.10% Total expenses 1.47% 5 1.45% 5 2.31% 6 2.27% 6 Expenses after payments and waivers and reduction to custodian expenses 1.24% 1.20% 2.07% 2.02% -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 66% 37% 66% 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 was as follows: Six Months Ended February 28, 2006 1.71% Period Ended August 31, 2005 1.66% 6. Expenses paid including all underlying fund expenses was as follows: Six Months Ended February 28, 2006 2.55% Period Ended August 31, 2005 2.48% SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 23 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
CLASS C CLASS N SIX MONTHS PERIOD SIX MONTHS PERIOD ENDED ENDED ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, FEBRUARY 28, 2006 AUGUST 31, (UNAUDITED) 2005 1 (UNAUDITED) 2005 1 -------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 30.31 $ 30.00 $ 30.43 $ 30.00 -------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income 2 .23 .05 .32 .19 Net realized and unrealized gain .47 .28 .46 .28 ------------------------------------------------------------------------ Total from investment operations .70 .33 .78 .47 -------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.30) (.02) (.47) (.04) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 30.71 $ 30.31 $ 30.74 $ 30.43 ======================================================================== -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 2.32% 1.11% 2.59% 1.57% -------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 19,306 $ 21,414 $ 1,044 $ 1,438 -------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 20,617 $ 18,591 $ 1,306 $ 1,269 -------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 1.53% 0.17% 2.14% 0.69% Total expenses 2.23% 5 2.21% 5 1.71% 6 1.70% 6 Expenses after payments and waivers and reduction to custodian expenses 1.99% 1.96% 1.47% 1.45% -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 66% 37% 66% 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 was as follows: Six Months Ended February 28, 2006 2.47% Period Ended August 31, 2005 2.42% 6. Expenses paid including all underlying fund expenses was as follows: Six Months Ended February 28, 2006 1.95% Period Ended August 31, 2005 1.91% SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | 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. 25 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued The Financial Warranty is solely the obligation of the Warranty Provider. It is possible that the financial position of the Warranty Provider may deteriorate and it would be unable to satisfy its obligations under the Financial Warranty. The Fund's assets and the obligations of the Warranty Provider under the Warranty Agreement are not guaranteed by Merrill Lynch & Co., Inc. (the Warranty Provider's parent company), the United States Government, the Manager, or any other entity or person. The Warranty Agreement requires the Manager, on behalf of the Fund, to comply with certain agreed upon investment parameters in an attempt to limit the Fund's risk. If the Manager fails to comply with the agreed-upon investment parameters or otherwise fails to comply with certain requirements set forth in the Warranty Agreement, the Warranty Provider may terminate its Financial Warranty in certain limited circumstances. The Warranty Provider may monitor the Fund's compliance with the Warranty Agreement solely to protect the interests of the Warranty Provider and not the Fund's shareholders. The fee paid to the Warranty Provider is an annual fee of 0.60% of the average daily net assets of the Fund. If the Fund is required to make a complete and irreversible allocation of its assets to the debt portfolio, the Warranty Fee will thereafter be reduced to 0.35% of the average daily net assets of the Fund. -------------------------------------------------------------------------------- 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 Underlying Fund). The net asset value of the Underlying Fund is determined as of the close of the New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. The net asset value per share is determined by dividing the value of the Fund's net assets attributable to a class by the number of shares of that class that are outstanding. 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. 26 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- 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. As of February 28, 2006, the Fund had available for federal income tax purposes an estimated capital loss carryforward of $1,055,870 expiring by 2014. 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, 2006, it is estimated that the Fund will not utilize any capital loss carryforward to offset realized capital gains. During the year ended August 31, 2005, the Fund did not utilize any capital loss carryforward to offset capital gains realized in that fiscal period. As of August 31, 2005, the Fund had available for federal income tax purposes post-October losses of $668,436. -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in 27 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually. -------------------------------------------------------------------------------- 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. 28 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- 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, 2006 PERIOD ENDED AUGUST 31, 2005 1,2 SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------------------- CLASS A Sold -- $ -- 1,409,972 $ 42,344,087 Dividends and/or distributions reinvested 20,816 632,174 2,071 62,286 Redeemed (138,134) (4,234,201) (71,055) (2,135,433) ------------------------------------------------------------ Net increase (decrease) (117,318) $ (3,602,027) 1,340,988 $ 40,270,940 ============================================================ ---------------------------------------------------------------------------------------------------------------------- CLASS B Sold -- $ -- 718,613 $ 21,566,270 Dividends and/or distributions reinvested 5,515 167,390 390 11,721 Redeemed (41,897) (1,274,773) (30,596) (913,503) ------------------------------------------------------------ Net increase (decrease) (36,382) $ (1,107,383) 688,407 $ 20,664,488 ============================================================ ---------------------------------------------------------------------------------------------------------------------- CLASS C Sold -- $ -- 728,238 $ 21,857,729 Dividends and/or distributions reinvested 4,540 137,803 377 11,343 Redeemed (82,330) (2,523,178) (22,165) (659,572) ------------------------------------------------------------ Net increase (decrease) (77,790) $ (2,385,375) 706,450 $ 21,209,500 ============================================================ ---------------------------------------------------------------------------------------------------------------------- CLASS N Sold -- $ -- 50,935 $ 1,529,775 Dividends and/or distributions reinvested 702 21,342 68 2,033 Redeemed (13,971) (431,111) (3,799) (112,160) ------------------------------------------------------------ Net increase (decrease) (13,269) $ (409,769) 47,204 $ 1,419,648 ============================================================
1. For the period from October 7, 2004 (commencement of operations) to August 31, 2005. 2. The Fund sold 3,333 shares of Class A at a value of $100,000 and 33 shares of Class B, Class C and Class N at a value of $1,000, respectively, to the Manager upon seeding of the Fund on September 2, 2004. 29 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended February 28, 2006, were as follows: PURCHASES SALES ------------------------------------------------------------------------- Investment securities $ 6,984,494 $ 1,765,398 U.S. government and government agency obligations 39,177,671 56,249,206 ------------------------------------------------------------------------- 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 reducitons 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), 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, 2006, the Fund paid $29,182 to OFS for services to the Fund. -------------------------------------------------------------------------------- OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and organizational costs associated with the registration and seeding of the Fund. -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. 30 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- 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's aggregate uncompensated expenses under the plan at February 28, 2006 for Class B and Class N shares were $654,316 and $11,114, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations. -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
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, 2006 $ -- $ -- $ 39,412 $ 1,731 $ 649
-------------------------------------------------------------------------------- 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, 2006, the Manager reimbursed the Fund $96,276 for such Underlying Fund expenses. 31 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. 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 invest in futures contracts on the S&P 500 Index to maintain liquity to meet shareholder redemptions and minimize trading costs. The Fund seeks to maintain a position in futures contracts on the S&P 500 Index sufficient to allow the Fund to increase or decrease the percentage of the Fund's assets invested in the equity portfolio as permitted by the Warranty Agreement with minimal impact on the trading activities of the Underlying Fund. 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 as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. 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, 2006, the Fund had outstanding futures contracts as follows:
EXPIRATION NUMBER OF VALUATION AS OF UNREALIZED CONTRACT DESCRIPTION DATE CONTRACTS FEBRUARY 28, 2006 APPRECIATION ---------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE Standard & Poor's 500 Index 3/16/06 34 $ 10,900,400 $ 149,777
32 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- 6. LITIGATION A complaint was filed as a putative class action against the Manager and the Transfer Agent (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. The complaint alleged, among other things, that the Manager charged excessive fees for distribution and other costs, and that by permitting and/or participating in those actions, the Directors/Trustees and the Officers of the funds breached their fiduciary duties to fund shareholders under the Investment Company Act of 1940 and at common law. The plaintiffs sought unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. Seven of the eight counts in the complaint, including the claims against certain of the Oppenheimer funds, as nominal defendants, and against certain present and former Directors, Trustees and Officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, by court order dated March 10, 2006, in response to motions to dismiss the suit that had been filed by the defendants. The remaining count against the Manager and the Transfer Agent was dismissed with prejudice by court order dated April 5, 2006. The time in which plaintiffs may file an appeal to those decisions has not yet lapsed. 33 | 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. 34 | 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, 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. NATURE, QUALITY, AND EXTENT OF SERVICES. The Board considered information on the nature and extent of the services provided to the Fund and information regarding the Manager's key personnel that 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 that 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. 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 35 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III BOARD APPROVAL OF THE FUND'S INVESTMENT ADVISORY AGREEMENT Unaudited / Continued -------------------------------------------------------------------------------- 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. The Board also considered compliance reports from the Fund's Chief Compliance Officer. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Angelo Manioudakis and Rudi Schadt and the Manager's Investment Grade investment team and analysts. Messrs. Manioudakis and Schadt have had over 14 and 13 years of experience, respectively, managing fixed income, equity, international and risk management investments. 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 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 balanced target maturity funds (including both funds advised by the Manager and funds advised by other investment advisers). The Board noted that the Fund's performance had been below its peer group average during the period since its inception in October 2004. The Board also considered that the Fund had low equity exposure during that initial period and that its portfolio allocation had shifted to a nearly 50% equity allocation. The Board concluded that it was reasonable to allow the Manager additional time to develop the Fund's performance record, given the Fund's recent inception date. 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, including the Fund's fee and expense reduction and reimbursement arrangements. The Board also evaluated the comparability of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. 36 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III The independent consultant provided comparative data in regard to the fees and expenses of the Fund, other balanced target maturity funds and other funds with comparable asset levels and distribution features. The Board noted that the Fund's contractual and actual management fees and its total expenses are all lower than its peer group median and average. In light of this, the Board concluded that the management fee was reasonable. ECONOMIES OF SCALE. The Board reviewed whether the Fund's advisory fee shares with shareholders economies of scale that the Manager may realize in managing and supporting the Fund. The Board noted the Fund's shares are not being offered for sale after the offering period. 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 significant 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 advisory 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 advisory agreement, including the management fee, in light of all of the surrounding circumstances. 37 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III FINANCIAL STATEMENTS FOR OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) FEBRUARY 28, 2006/UNAUDITED 40 Statement of Investments 51 Statement of Assets and Liabilities 53 Statement of Operations 55 Statements of Changes in Net Assets 56 Financial Highlights 61 Notes to Financial Statements 39 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS February 28, 2006 / Unaudited --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMON STOCKS--99.2% ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER DISCRETIONARY--10.6% ------------------------------------------------------------------------------------------------------------------------------------ AUTO COMPONENTS--0.3% Dana Corp. 240,200 $ 422,752 ------------------------------------------------------------------------------------------------------------------------------------ Goodyear Tire & Rubber Co. (The) 1,2 317,500 4,549,775 ------------------------------------------------------------------------------------------------------------------------------------ Johnson Controls, Inc. 307,500 21,915,525 ------------------------------------------------------------------------------------------------------------------------------------ TRW Automotive Holdings Corp. 1 61,200 1,566,720 ------------------------------------------------------------------------------------------------------------------------------------ Visteon Corp. 1 213,900 996,774 ------------------ 29,451,546 ------------------------------------------------------------------------------------------------------------------------------------ AUTOMOBILES--0.6% Ford Motor Co. 4,156,126 33,124,324 ------------------------------------------------------------------------------------------------------------------------------------ Harley-Davidson, Inc. 611,100 32,088,861 ------------------ 65,213,185 ------------------------------------------------------------------------------------------------------------------------------------ DISTRIBUTORS--0.0% Genuine Parts Co. 32,300 1,437,996 ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED CONSUMER SERVICES--0.2% Apollo Group, Inc., Cl. A 1 277,100 13,683,198 ------------------------------------------------------------------------------------------------------------------------------------ Career Education Corp. 1 132,100 4,338,164 ------------------------------------------------------------------------------------------------------------------------------------ Weight Watchers International, Inc. 1 62,200 3,263,634 ------------------ 21,284,996 ------------------------------------------------------------------------------------------------------------------------------------ HOTELS, RESTAURANTS & LEISURE--0.6% Choice Hotels International, Inc. 43,800 1,950,414 ------------------------------------------------------------------------------------------------------------------------------------ International Game Technology 205,800 7,361,466 ------------------------------------------------------------------------------------------------------------------------------------ McDonald's Corp. 965,100 33,691,641 ------------------------------------------------------------------------------------------------------------------------------------ Six Flags, Inc. 1,2 50,300 530,665 ------------------------------------------------------------------------------------------------------------------------------------ Starbucks Corp. 1 132,000 4,794,240 ------------------------------------------------------------------------------------------------------------------------------------ Yum! Brands, Inc. 503,100 23,997,870 ------------------ 72,326,296 ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD DURABLES--0.1% American Greetings Corp., Cl. A 84,500 1,772,810 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD DURABLES Continued Beazer Homes USA, Inc. 2 81,400 $ 5,164,830 ------------------------------------------------------------------------------------------------------------------------------------ Lennar Corp., Cl. A 25,500 1,526,430 ------------------------------------------------------------------------------------------------------------------------------------ MDC Holdings, Inc. 28,800 1,765,152 ------------------------------------------------------------------------------------------------------------------------------------ Whirlpool Corp. 6,400 574,656 ------------------ 10,803,878 ------------------------------------------------------------------------------------------------------------------------------------ INTERNET & CATALOG RETAIL--0.4% eBay, Inc. 1 1,191,300 47,723,478 ------------------------------------------------------------------------------------------------------------------------------------ LEISURE EQUIPMENT & PRODUCTS--0.0% Hasbro, Inc. 227,700 4,620,033 ------------------------------------------------------------------------------------------------------------------------------------ MEDIA--3.1% CBS Corp., Cl. B 965,638 23,619,505 ------------------------------------------------------------------------------------------------------------------------------------ Clear Channel Communications, Inc. 1,363,500 38,587,050 ------------------------------------------------------------------------------------------------------------------------------------ Comcast Corp., Cl. A 1 92,355 2,477,885 ------------------------------------------------------------------------------------------------------------------------------------ Gannett Co., Inc. 594,100 36,929,256 ------------------------------------------------------------------------------------------------------------------------------------ Liberty Media Corp., Cl. A 1 2,067,600 17,037,024 ------------------------------------------------------------------------------------------------------------------------------------ Live Nation 1 116,225 2,074,616 ------------------------------------------------------------------------------------------------------------------------------------ McGraw-Hill Cos., Inc. (The) 320,500 17,015,345 ------------------------------------------------------------------------------------------------------------------------------------ News Corp., Inc., Cl. A 2,513,400 40,918,152 ------------------------------------------------------------------------------------------------------------------------------------ Omnicom Group, Inc. 253,500 20,234,370 ------------------------------------------------------------------------------------------------------------------------------------ R.H. Donnelley Corp. 1 26,800 1,634,800 ------------------------------------------------------------------------------------------------------------------------------------ Time Warner, Inc. 4,807,400 83,216,094 ------------------------------------------------------------------------------------------------------------------------------------ Viacom, Inc., Cl. B 1 965,638 38,586,894 ------------------------------------------------------------------------------------------------------------------------------------ Walt Disney Co. (The) 1,404,200 39,303,558 ------------------ 361,634,549 ------------------------------------------------------------------------------------------------------------------------------------ MULTILINE RETAIL--1.6% Dollar General Corp. 165,900 2,889,978 ------------------------------------------------------------------------------------------------------------------------------------ Dollar Tree Stores, Inc. 1 187,300 5,135,766 ------------------------------------------------------------------------------------------------------------------------------------ Federated Department Stores, Inc. 491,000 34,880,640 ------------------------------------------------------------------------------------------------------------------------------------ J.C. Penney Co., Inc. (Holding Co.) 660,500 38,731,720 ------------------------------------------------------------------------------------------------------------------------------------ Kohl's Corp. 1 511,100 24,589,021 ------------------------------------------------------------------------------------------------------------------------------------ Nordstrom, Inc. 831,900 31,612,200 ------------------------------------------------------------------------------------------------------------------------------------ Saks, Inc. 1 121,500 2,296,350 ------------------------------------------------------------------------------------------------------------------------------------ Sears Holdings Corp. 1 58,100 6,998,145
40 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ MULTILINE RETAIL Continued Target Corp. 789,400 $ 42,943,360 ------------------ 190,077,180 ------------------------------------------------------------------------------------------------------------------------------------ SPECIALTY RETAIL--3.3% American Eagle Outfitters, Inc. 213,300 5,426,352 ------------------------------------------------------------------------------------------------------------------------------------ AnnTaylor Stores Corp. 1 60,000 2,178,000 ------------------------------------------------------------------------------------------------------------------------------------ AutoNation, Inc. 1 267,000 5,582,970 ------------------------------------------------------------------------------------------------------------------------------------ Barnes & Noble, Inc. 124,800 5,375,136 ------------------------------------------------------------------------------------------------------------------------------------ Bed Bath & Beyond, Inc. 1 368,600 13,284,344 ------------------------------------------------------------------------------------------------------------------------------------ Best Buy Co., Inc. 756,500 40,745,090 ------------------------------------------------------------------------------------------------------------------------------------ Building Materials Holding Corp. 22,800 1,534,440 ------------------------------------------------------------------------------------------------------------------------------------ Chico's FAS, Inc. 1 87,800 4,130,990 ------------------------------------------------------------------------------------------------------------------------------------ Children's Place Retail Stores, Inc. 1 42,300 1,974,141 ------------------------------------------------------------------------------------------------------------------------------------ Circuit City Stores, Inc./ Circuit City Group 192,100 4,616,163 ------------------------------------------------------------------------------------------------------------------------------------ Claire's Stores, Inc. 107,400 3,441,096 ------------------------------------------------------------------------------------------------------------------------------------ Gap, Inc. (The) 1,866,000 34,595,640 ------------------------------------------------------------------------------------------------------------------------------------ Home Depot, Inc. 2,628,000 110,770,200 ------------------------------------------------------------------------------------------------------------------------------------ Lowe's Cos., Inc. 924,000 62,998,320 ------------------------------------------------------------------------------------------------------------------------------------ Men's Wearhouse, Inc. (The) 1 99,750 3,124,170 ------------------------------------------------------------------------------------------------------------------------------------ Office Depot, Inc. 1 398,500 14,218,480 ------------------------------------------------------------------------------------------------------------------------------------ Payless ShoeSource, Inc. 1 7,700 182,490 ------------------------------------------------------------------------------------------------------------------------------------ Sports Authority, Inc. (The) 1 55,700 2,038,063 ------------------------------------------------------------------------------------------------------------------------------------ Staples, Inc. 1 1,978,650 48,556,071 ------------------------------------------------------------------------------------------------------------------------------------ Talbots, Inc. (The) 57,700 1,538,282 ------------------------------------------------------------------------------------------------------------------------------------ Tiffany & Co. 19,400 720,322 ------------------------------------------------------------------------------------------------------------------------------------ TJX Cos., Inc. (The) 606,400 14,850,736 ------------------------------------------------------------------------------------------------------------------------------------ Too, Inc. 1 61,000 1,856,230 ------------------------------------------------------------------------------------------------------------------------------------ Zale Corp. 1 38,200 995,110 ------------------ 384,732,836 ------------------------------------------------------------------------------------------------------------------------------------ TEXTILES, APPAREL & LUXURY GOODS--0.4% Coach, Inc. 1 876,900 31,322,868 ------------------------------------------------------------------------------------------------------------------------------------ Jones Apparel Group, Inc. 80,000 2,313,600 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ TEXTILES, APPAREL & LUXURY GOODS Continued Liz Claiborne, Inc. 44,300 $ 1,596,129 ------------------------------------------------------------------------------------------------------------------------------------ Nike, Inc., Cl. B 88,100 7,645,318 ------------------------------------------------------------------------------------------------------------------------------------ Phillips/Van Heusen Corp. 30,400 1,079,200 ------------------------------------------------------------------------------------------------------------------------------------ Timberland Co., Cl. A 1 151,300 5,303,065 ------------------ 49,260,180 ------------------------------------------------------------------------------------------------------------------------------------ CONSUMER STAPLES--6.8% ------------------------------------------------------------------------------------------------------------------------------------ BEVERAGES--0.9% Brown-Forman Corp., Cl. B 1,200 84,432 ------------------------------------------------------------------------------------------------------------------------------------ Coca-Cola Co. (The) 1,025,600 43,044,432 ------------------------------------------------------------------------------------------------------------------------------------ Pepsi Bottling Group, Inc. (The) 287,900 8,452,744 ------------------------------------------------------------------------------------------------------------------------------------ PepsiCo, Inc. 851,330 50,322,116 ------------------ 101,903,724 ------------------------------------------------------------------------------------------------------------------------------------ FOOD & STAPLES RETAILING--2.0% Albertson's, Inc. 182,900 4,652,976 ------------------------------------------------------------------------------------------------------------------------------------ Costco Wholesale Corp. 300,800 15,425,024 ------------------------------------------------------------------------------------------------------------------------------------ CVS Corp. 184,700 5,232,551 ------------------------------------------------------------------------------------------------------------------------------------ Kroger Co. (The) 1 1,715,900 34,386,636 ------------------------------------------------------------------------------------------------------------------------------------ Performance Food Group Co. 1 14,600 428,802 ------------------------------------------------------------------------------------------------------------------------------------ Safeway, Inc. 1,607,800 39,085,618 ------------------------------------------------------------------------------------------------------------------------------------ SUPERVALU, Inc. 156,100 4,932,760 ------------------------------------------------------------------------------------------------------------------------------------ Sysco Corp. 341,900 10,287,771 ------------------------------------------------------------------------------------------------------------------------------------ Wal-Mart Stores, Inc. 2,038,900 92,484,504 ------------------------------------------------------------------------------------------------------------------------------------ Walgreen Co. 226,600 10,165,276 ------------------------------------------------------------------------------------------------------------------------------------ Whole Foods Market, Inc. 257,118 16,424,698 ------------------ 233,506,616 ------------------------------------------------------------------------------------------------------------------------------------ FOOD PRODUCTS--0.6% Archer-Daniels-Midland Co. 308,100 9,772,932 ------------------------------------------------------------------------------------------------------------------------------------ Campbell Soup Co. 338,600 10,540,618 ------------------------------------------------------------------------------------------------------------------------------------ Dean Foods Co. 1 111,200 4,166,664 ------------------------------------------------------------------------------------------------------------------------------------ Del Monte Foods Co. 60,100 653,888 ------------------------------------------------------------------------------------------------------------------------------------ General Mills, Inc. 405,500 19,970,875 ------------------------------------------------------------------------------------------------------------------------------------ Heinz (H.J.) Co. 293,800 11,126,206
41 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS Unaudited / Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ FOOD PRODUCTS Continued Pilgrim's Pride Corp., Cl. B 134,200 $ 3,094,652 ------------------------------------------------------------------------------------------------------------------------------------ Sara Lee Corp. 926,000 16,362,420 ------------------------------------------------------------------------------------------------------------------------------------ Wm. Wrigley Jr. Co. 2,800 177,912 ------------------ 75,866,167 ------------------------------------------------------------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS--1.5% Energizer Holdings, Inc. 1 58,300 3,184,929 ------------------------------------------------------------------------------------------------------------------------------------ Kimberly-Clark Corp. 106,700 6,314,506 ------------------------------------------------------------------------------------------------------------------------------------ Procter & Gamble Co. (The) 2,663,785 159,640,635 ------------------ 169,140,070 ------------------------------------------------------------------------------------------------------------------------------------ PERSONAL PRODUCTS--0.2% Avon Products, Inc. 782,000 22,560,700 ------------------------------------------------------------------------------------------------------------------------------------ TOBACCO--1.6% Altria Group, Inc. 2,088,700 150,177,530 ------------------------------------------------------------------------------------------------------------------------------------ Loews Corp./Carolina Group 55,900 2,654,691 ------------------------------------------------------------------------------------------------------------------------------------ Reynolds American, Inc. 358,300 38,033,545 ------------------ 190,865,766 ------------------------------------------------------------------------------------------------------------------------------------ ENERGY--10.4% ------------------------------------------------------------------------------------------------------------------------------------ ENERGY EQUIPMENT & SERVICES--0.5% Grey Wolf, Inc. 1 271,500 1,884,210 ------------------------------------------------------------------------------------------------------------------------------------ Halliburton Co. 248,600 16,904,800 ------------------------------------------------------------------------------------------------------------------------------------ Lone Star Technologies,Inc. 1 41,500 2,062,550 ------------------------------------------------------------------------------------------------------------------------------------ NS Group, Inc. 1 46,600 1,900,814 ------------------------------------------------------------------------------------------------------------------------------------ Transocean, Inc. 1 333,400 24,731,612 ------------------------------------------------------------------------------------------------------------------------------------ Universal Compression Holdings, Inc. 1 29,200 1,277,500 ------------------------------------------------------------------------------------------------------------------------------------ Veritas DGC, Inc. 1 57,400 2,418,262 ------------------ 51,179,748 ------------------------------------------------------------------------------------------------------------------------------------ OIL & GAS--9.9% Amerada Hess Corp. 158,700 21,949,797 ------------------------------------------------------------------------------------------------------------------------------------ Anadarko Petroleum Corp. 449,900 44,612,084 ------------------------------------------------------------------------------------------------------------------------------------ Apache Corp. 498,200 33,339,544 ------------------------------------------------------------------------------------------------------------------------------------ Burlington Resources, Inc. 664,700 59,942,646 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ OIL & GAS Continued Canadian Natural Resources Ltd. 271,840 $ 14,851,991 ------------------------------------------------------------------------------------------------------------------------------------ Chevron Corp. 2,195,660 124,010,877 ------------------------------------------------------------------------------------------------------------------------------------ Comstock Resources, Inc. 1 62,200 1,747,820 ------------------------------------------------------------------------------------------------------------------------------------ ConocoPhillips 1,855,382 113,104,087 ------------------------------------------------------------------------------------------------------------------------------------ Devon Energy Corp. 655,800 38,449,554 ------------------------------------------------------------------------------------------------------------------------------------ EOG Resources, Inc. 585,800 39,482,920 ------------------------------------------------------------------------------------------------------------------------------------ Exxon Mobil Corp. 6,409,196 380,513,967 ------------------------------------------------------------------------------------------------------------------------------------ General Maritime Corp. 32,800 1,201,464 ------------------------------------------------------------------------------------------------------------------------------------ Giant Industries, Inc. 1 29,700 1,728,540 ------------------------------------------------------------------------------------------------------------------------------------ KCS Energy, Inc. 1 78,300 1,847,880 ------------------------------------------------------------------------------------------------------------------------------------ Kerr-McGee Corp. 287,409 28,079,859 ------------------------------------------------------------------------------------------------------------------------------------ Marathon Oil Corp. 538,801 38,039,306 ------------------------------------------------------------------------------------------------------------------------------------ Murphy Oil Corp. 35,900 1,682,633 ------------------------------------------------------------------------------------------------------------------------------------ Occidental Petroleum Corp. 502,802 46,026,495 ------------------------------------------------------------------------------------------------------------------------------------ OMI Corp. 59,200 1,036,000 ------------------------------------------------------------------------------------------------------------------------------------ Overseas Shipholding Group, Inc. 89,000 4,500,730 ------------------------------------------------------------------------------------------------------------------------------------ Paramount Resources Ltd., Cl. A 1 848,000 27,235,690 ------------------------------------------------------------------------------------------------------------------------------------ Remington Oil & Gas Corp. 1 49,600 2,078,240 ------------------------------------------------------------------------------------------------------------------------------------ Sunoco, Inc. 453,700 33,619,170 ------------------------------------------------------------------------------------------------------------------------------------ Swift Energy Co. 1 50,300 1,949,628 ------------------------------------------------------------------------------------------------------------------------------------ Talisman Energy, Inc. 269,800 14,175,510 ------------------------------------------------------------------------------------------------------------------------------------ Tesoro Corp. 99,200 5,992,672 ------------------------------------------------------------------------------------------------------------------------------------ Trilogy Energy Trust 111,600 1,825,548 ------------------------------------------------------------------------------------------------------------------------------------ Valero Energy Corp. 710,774 38,232,533 ------------------------------------------------------------------------------------------------------------------------------------ Whiting Petroleum Corp. 1 48,700 1,977,220 ------------------------------------------------------------------------------------------------------------------------------------ XTO Energy, Inc. 759,000 31,794,510 ------------------ 1,155,028,915 ------------------------------------------------------------------------------------------------------------------------------------ FINANCIALS--20.5% ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL MARKETS--0.7% Ameriprise Financial, Inc. 421,300 19,160,724 ------------------------------------------------------------------------------------------------------------------------------------ Bank of New York Co., Inc. (The) 944,000 32,322,560
42 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ CAPITAL MARKETS Continued Mellon Financial Corp. 501,300 $ 18,091,917 ------------------------------------------------------------------------------------------------------------------------------------ Northern Trust Corp. 225,700 11,898,904 ------------------------------------------------------------------------------------------------------------------------------------ TD Ameritrade Holding Corp. 22,300 485,248 ------------------ 81,959,353 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL BANKS--5.2% Astoria Financial Corp. 171,250 4,909,738 ------------------------------------------------------------------------------------------------------------------------------------ Bank of America Corp. 4,791,039 219,669,138 ------------------------------------------------------------------------------------------------------------------------------------ BB&T Corp. 500,600 19,788,718 ------------------------------------------------------------------------------------------------------------------------------------ Comerica, Inc. 140,600 8,059,192 ------------------------------------------------------------------------------------------------------------------------------------ Fifth Third Bancorp 27,500 1,062,875 ------------------------------------------------------------------------------------------------------------------------------------ Golden West Financial Corp. 162,800 11,563,684 ------------------------------------------------------------------------------------------------------------------------------------ KeyCorp 383,200 14,281,864 ------------------------------------------------------------------------------------------------------------------------------------ M&T Bank Corp. 91,900 10,329,560 ------------------------------------------------------------------------------------------------------------------------------------ National City Corp. 879,800 30,617,040 ------------------------------------------------------------------------------------------------------------------------------------ North Fork Bancorporation, Inc. 62,500 1,596,250 ------------------------------------------------------------------------------------------------------------------------------------ PNC Financial Services Group, Inc. 163,900 11,530,365 ------------------------------------------------------------------------------------------------------------------------------------ Regions Financial Corp. 363,525 12,643,400 ------------------------------------------------------------------------------------------------------------------------------------ SunTrust Banks, Inc. 374,200 27,080,854 ------------------------------------------------------------------------------------------------------------------------------------ U.S. Bancorp 2,261,270 69,895,856 ------------------------------------------------------------------------------------------------------------------------------------ UnionBanCal Corp. 131,500 9,085,335 ------------------------------------------------------------------------------------------------------------------------------------ Wachovia Corp. 1,349,700 75,677,679 ------------------------------------------------------------------------------------------------------------------------------------ Washington Mutual, Inc. 418,929 17,888,268 ------------------------------------------------------------------------------------------------------------------------------------ Wells Fargo & Co. 967,100 62,087,820 ------------------ 607,767,636 ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES--8.5% American Express Co. 717,000 38,631,960 ------------------------------------------------------------------------------------------------------------------------------------ AmeriCredit Corp. 1 275,600 8,130,200 ------------------------------------------------------------------------------------------------------------------------------------ Capital One Financial Corp. 537,819 47,112,944 ------------------------------------------------------------------------------------------------------------------------------------ Chicago Mercantile Exchange (The) 75,700 32,217,920 ------------------------------------------------------------------------------------------------------------------------------------ CIT Group, Inc. 506,000 27,207,620 ------------------------------------------------------------------------------------------------------------------------------------ Citigroup, Inc. 5,362,246 248,647,347 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES Continued Goldman Sachs Group, Inc. (The) 653,900 $ 92,389,531 ------------------------------------------------------------------------------------------------------------------------------------ Janus Capital Group, Inc. 1 140,400 3,078,972 ------------------------------------------------------------------------------------------------------------------------------------ JPMorgan Chase & Co. 3,730,496 153,472,605 ------------------------------------------------------------------------------------------------------------------------------------ Lehman Brothers Holdings, Inc. 494,600 72,186,870 ------------------------------------------------------------------------------------------------------------------------------------ Merrill Lynch & Co., Inc. 1,275,900 98,512,239 ------------------------------------------------------------------------------------------------------------------------------------ Moody's Corp. 86,800 5,815,600 ------------------------------------------------------------------------------------------------------------------------------------ Morgan Stanley 1,609,600 96,028,736 ------------------------------------------------------------------------------------------------------------------------------------ Schwab (Charles) Corp. 2,136,100 34,626,181 ------------------------------------------------------------------------------------------------------------------------------------ State Street Corp. 449,300 28,072,264 ------------------------------------------------------------------------------------------------------------------------------------ T. Rowe Price Group, Inc. 24,700 1,896,466 ------------------ 988,027,455 ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE--4.9% ACE Ltd. 60,800 3,388,384 ------------------------------------------------------------------------------------------------------------------------------------ AFLAC, Inc. 332,100 15,359,625 ------------------------------------------------------------------------------------------------------------------------------------ Allstate Corp. 820,200 44,930,556 ------------------------------------------------------------------------------------------------------------------------------------ American International Group, Inc. 2,045,505 135,739,712 ------------------------------------------------------------------------------------------------------------------------------------ AmerUs Group Co. 76,600 4,615,150 ------------------------------------------------------------------------------------------------------------------------------------ Aon Corp. 750,600 29,731,266 ------------------------------------------------------------------------------------------------------------------------------------ Chubb Corp. 296,300 28,370,725 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity National Financial, Inc. 162,184 6,124,068 ------------------------------------------------------------------------------------------------------------------------------------ Fidelity National Title Group, Inc., Cl. A 39,232 929,798 ------------------------------------------------------------------------------------------------------------------------------------ Genworth Financial, Inc., Cl. A 774,500 24,644,590 ------------------------------------------------------------------------------------------------------------------------------------ Hartford Financial Services Group, Inc. (The) 528,600 43,546,068 ------------------------------------------------------------------------------------------------------------------------------------ Jefferson-Pilot Corp. 3,100 186,775 ------------------------------------------------------------------------------------------------------------------------------------ LandAmerica Financial Group, Inc. 18,000 1,200,600 ------------------------------------------------------------------------------------------------------------------------------------ Lincoln National Corp. 35,500 2,015,335 ------------------------------------------------------------------------------------------------------------------------------------ Loews Corp. 136,300 12,575,038 ------------------------------------------------------------------------------------------------------------------------------------ Marsh & McLennan Cos., Inc. 137,200 4,240,852
43 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS Unaudited / Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ INSURANCE Continued MBIA, Inc. 110,000 $ 6,461,400 ------------------------------------------------------------------------------------------------------------------------------------ MetLife, Inc. 891,600 44,686,992 ------------------------------------------------------------------------------------------------------------------------------------ Principal Financial Group, Inc. (The) 844,000 41,119,680 ------------------------------------------------------------------------------------------------------------------------------------ Progressive Corp. 229,100 24,616,795 ------------------------------------------------------------------------------------------------------------------------------------ Prudential Financial, Inc. 581,900 44,829,576 ------------------------------------------------------------------------------------------------------------------------------------ Safeco Corp. 2,200 113,322 ------------------------------------------------------------------------------------------------------------------------------------ St. Paul Travelers Cos., Inc. (The) 1,152,100 49,517,258 ------------------------------------------------------------------------------------------------------------------------------------ StanCorp Financial Group, Inc. 75,400 4,079,140 ------------------------------------------------------------------------------------------------------------------------------------ Zenith National Insurance Corp. 44,500 2,291,750 ------------------ 575,314,455 ------------------------------------------------------------------------------------------------------------------------------------ THRIFTS & MORTGAGE FINANCE--1.2% Accredited Home Lenders Holding Co. 1 44,100 2,350,971 ------------------------------------------------------------------------------------------------------------------------------------ Countrywide Financial Corp. 1,095,700 37,779,736 ------------------------------------------------------------------------------------------------------------------------------------ Fannie Mae 862,800 47,177,904 ------------------------------------------------------------------------------------------------------------------------------------ Freddie Mac 460,700 31,046,573 ------------------------------------------------------------------------------------------------------------------------------------ Fremont General Corp. 12,100 287,012 ------------------------------------------------------------------------------------------------------------------------------------ MGIC Investment Corp. 95,200 6,069,000 ------------------------------------------------------------------------------------------------------------------------------------ PMI Group, Inc. (The) 72,800 3,152,240 ------------------------------------------------------------------------------------------------------------------------------------ Radian Group, Inc. 104,100 5,907,675 ------------------ 133,771,111 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE--13.5% ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY--2.3% Abgenix, Inc. 1 129,800 2,886,752 ------------------------------------------------------------------------------------------------------------------------------------ Alkermes, Inc. 1 115,400 2,932,314 ------------------------------------------------------------------------------------------------------------------------------------ Amgen, Inc. 1 1,536,800 116,013,032 ------------------------------------------------------------------------------------------------------------------------------------ Applera Corp./Applied Biosystems Group 223,600 6,321,172 ------------------------------------------------------------------------------------------------------------------------------------ Biogen Idec, Inc. 1 204,500 9,662,625 ------------------------------------------------------------------------------------------------------------------------------------ Genentech, Inc. 1 175,300 15,021,457 ------------------------------------------------------------------------------------------------------------------------------------ Genzyme Corp. (General Division) 1 116,400 8,071,176 ------------------------------------------------------------------------------------------------------------------------------------ Gilead Sciences, Inc. 1 606,900 37,791,663 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ BIOTECHNOLOGY Continued Sepracor, Inc. 1 8,600 $ 492,866 ------------------------------------------------------------------------------------------------------------------------------------ Techne Corp. 1 43,300 2,575,051 ------------------------------------------------------------------------------------------------------------------------------------ Wyeth 1,287,900 64,137,420 ------------------ 265,905,528 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT & SUPPLIES--1.2% Baxter International, Inc. 676,600 25,609,310 ------------------------------------------------------------------------------------------------------------------------------------ Becton, Dickinson & Co. 514,400 32,844,440 ------------------------------------------------------------------------------------------------------------------------------------ Boston Scientific Corp. 1 545,600 13,323,552 ------------------------------------------------------------------------------------------------------------------------------------ Guidant Corp. 247,000 18,959,720 ------------------------------------------------------------------------------------------------------------------------------------ Kinetic Concepts, Inc. 1 47,500 1,762,250 ------------------------------------------------------------------------------------------------------------------------------------ Medtronic, Inc. 754,400 40,699,880 ------------------------------------------------------------------------------------------------------------------------------------ Mentor Corp. 87,700 3,774,608 ------------------------------------------------------------------------------------------------------------------------------------ Millipore Corp. 1 35,400 2,454,282 ------------------------------------------------------------------------------------------------------------------------------------ PerkinElmer, Inc. 36,800 875,472 ------------------------------------------------------------------------------------------------------------------------------------ Waters Corp. 1 68,700 2,935,551 ------------------ 143,239,065 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES--5.0% Aetna, Inc. 763,800 38,953,800 ------------------------------------------------------------------------------------------------------------------------------------ AmerisourceBergen Corp. 174,800 8,039,052 ------------------------------------------------------------------------------------------------------------------------------------ Beverly Enterprises, Inc. 1 55,000 679,800 ------------------------------------------------------------------------------------------------------------------------------------ Cardinal Health, Inc. 630,100 45,745,260 ------------------------------------------------------------------------------------------------------------------------------------ Caremark Rx, Inc. 1 1,017,000 50,595,750 ------------------------------------------------------------------------------------------------------------------------------------ CIGNA Corp. 376,900 46,264,475 ------------------------------------------------------------------------------------------------------------------------------------ Coventry Health Care, Inc. 1 93,800 5,592,356 ------------------------------------------------------------------------------------------------------------------------------------ Express Scripts, Inc. 1 382,000 33,337,140 ------------------------------------------------------------------------------------------------------------------------------------ Genesis HealthCare Corp. 1 37,500 1,490,625 ------------------------------------------------------------------------------------------------------------------------------------ HCA, Inc. 941,000 45,073,900 ------------------------------------------------------------------------------------------------------------------------------------ Health Net, Inc. 1 107,700 5,164,215 ------------------------------------------------------------------------------------------------------------------------------------ Healthways, Inc. 1 46,200 2,012,010 ------------------------------------------------------------------------------------------------------------------------------------ Humana, Inc. 1 159,200 8,225,864 ------------------------------------------------------------------------------------------------------------------------------------ IMS Health, Inc. 35,100 845,910 ------------------------------------------------------------------------------------------------------------------------------------ Manor Care, Inc. 56,700 2,344,545 ------------------------------------------------------------------------------------------------------------------------------------ McKesson Corp. 862,600 46,692,538
44 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ HEALTH CARE PROVIDERS & SERVICES Continued Medco Health Solutions, Inc. 1 811,429 $ 45,212,824 ------------------------------------------------------------------------------------------------------------------------------------ Pediatrix Medical Group, Inc. 1 50,400 4,756,752 ------------------------------------------------------------------------------------------------------------------------------------ Quest Diagnostics, Inc. 510,800 27,005,996 ------------------------------------------------------------------------------------------------------------------------------------ Schein (Henry), Inc. 1 104,800 4,888,920 ------------------------------------------------------------------------------------------------------------------------------------ Sierra Health Services, Inc. 1 123,600 5,152,884 ------------------------------------------------------------------------------------------------------------------------------------ UnitedHealth Group, Inc. 1 1,324,994 77,154,401 ------------------------------------------------------------------------------------------------------------------------------------ WellCare Health Plans, Inc. 1 41,400 1,612,530 ------------------------------------------------------------------------------------------------------------------------------------ WellPoint, Inc. 1 1,016,672 78,070,243 ------------------ 584,911,790 ------------------------------------------------------------------------------------------------------------------------------------ PHARMACEUTICALS--5.0% Abbott Laboratories 436,100 19,266,898 ------------------------------------------------------------------------------------------------------------------------------------ Allergan, Inc. 285,200 30,875,752 ------------------------------------------------------------------------------------------------------------------------------------ Alpharma, Inc., Cl. A 86,300 2,610,575 ------------------------------------------------------------------------------------------------------------------------------------ Andrx Corp. 1 74,400 1,458,240 ------------------------------------------------------------------------------------------------------------------------------------ Bristol-Myers Squibb Co. 997,100 23,033,010 ------------------------------------------------------------------------------------------------------------------------------------ Eli Lilly & Co. 189,400 10,534,428 ------------------------------------------------------------------------------------------------------------------------------------ Endo Pharmaceuticals Holdings, Inc. 1 56,300 1,774,576 ------------------------------------------------------------------------------------------------------------------------------------ Forest Laboratories, Inc. 1 584,100 26,810,190 ------------------------------------------------------------------------------------------------------------------------------------ Johnson & Johnson 2,905,244 167,487,317 ------------------------------------------------------------------------------------------------------------------------------------ King Pharmaceuticals, Inc. 1 348,400 5,661,500 ------------------------------------------------------------------------------------------------------------------------------------ Kos Pharmaceuticals, Inc. 1 88,100 3,864,947 ------------------------------------------------------------------------------------------------------------------------------------ Medicis Pharmaceutical Corp., Cl. A 22,100 628,524 ------------------------------------------------------------------------------------------------------------------------------------ Merck & Co., Inc. 2,298,400 80,122,224 ------------------------------------------------------------------------------------------------------------------------------------ Pfizer, Inc. 7,567,745 198,199,242 ------------------------------------------------------------------------------------------------------------------------------------ Watson Pharmaceuticals, Inc. 1 142,700 4,278,146 ------------------ 576,605,569 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIALS--11.2% ------------------------------------------------------------------------------------------------------------------------------------ AEROSPACE & DEFENSE--3.5% Alliant Techsystems, Inc. 1 58,700 $ 4,485,854 ------------------------------------------------------------------------------------------------------------------------------------ BE Aerospace, Inc. 1 77,700 1,864,023 ------------------------------------------------------------------------------------------------------------------------------------ Boeing Co. 1,385,800 100,733,802 ------------------------------------------------------------------------------------------------------------------------------------ General Dynamics Corp. 286,500 35,316,855 ------------------------------------------------------------------------------------------------------------------------------------ Honeywell International, Inc. 1,015,300 41,576,535 ------------------------------------------------------------------------------------------------------------------------------------ Lockheed Martin Corp. 702,600 51,198,462 ------------------------------------------------------------------------------------------------------------------------------------ Northrop Grumman Corp. 857,600 54,972,160 ------------------------------------------------------------------------------------------------------------------------------------ Precision Castparts Corp. 165,600 8,783,424 ------------------------------------------------------------------------------------------------------------------------------------ Raytheon Co. 1,191,500 51,711,100 ------------------------------------------------------------------------------------------------------------------------------------ United Technologies Corp. 937,000 54,814,500 ------------------ 405,456,715 ------------------------------------------------------------------------------------------------------------------------------------ AIR FREIGHT & LOGISTICS--0.1% FedEx Corp. 29,900 3,206,476 ------------------------------------------------------------------------------------------------------------------------------------ United Parcel Service, Inc., Cl. B 71,300 5,326,823 ------------------ 8,533,299 ------------------------------------------------------------------------------------------------------------------------------------ AIRLINES--0.1% Alaska Air Group, Inc. 1 69,600 2,230,680 ------------------------------------------------------------------------------------------------------------------------------------ AMR Corp. 1,2 300,700 7,547,570 ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Cl. B 1,2 121,600 2,833,280 ------------------------------------------------------------------------------------------------------------------------------------ Southwest Airlines Co. 177,300 2,973,321 ------------------ 15,584,851 ------------------------------------------------------------------------------------------------------------------------------------ BUILDING PRODUCTS--0.3% Masco Corp. 750,300 23,401,857 ------------------------------------------------------------------------------------------------------------------------------------ USG Corp. 1,2 94,300 7,966,464 ------------------ 31,368,321 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES--0.8% Administaff, Inc. 36,200 1,717,690 ------------------------------------------------------------------------------------------------------------------------------------ Cendant Corp. 2,610,800 43,391,496
45 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS Unaudited / Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMMERCIAL SERVICES & SUPPLIES Continued Corporate Executive Board Co. 11,300 $ 1,130,000 ------------------------------------------------------------------------------------------------------------------------------------ Dun & Bradstreet Corp. 1 41,400 3,011,436 ------------------------------------------------------------------------------------------------------------------------------------ Manpower, Inc. 96,400 5,170,896 ------------------------------------------------------------------------------------------------------------------------------------ PHH Corp. 1 72,230 2,065,056 ------------------------------------------------------------------------------------------------------------------------------------ Pitney Bowes, Inc. 223,400 9,548,116 ------------------------------------------------------------------------------------------------------------------------------------ Robert Half International, Inc. 116,700 4,191,864 ------------------------------------------------------------------------------------------------------------------------------------ Waste Management, Inc. 642,700 21,376,202 ------------------ 91,602,756 ------------------------------------------------------------------------------------------------------------------------------------ CONSTRUCTION & ENGINEERING--0.1% Quanta Services, Inc. 1 148,100 2,027,489 ------------------------------------------------------------------------------------------------------------------------------------ URS Corp. 1 158,200 6,895,938 ------------------ 8,923,427 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT--0.5% Emerson Electric Co. 309,600 25,328,376 ------------------------------------------------------------------------------------------------------------------------------------ Rockwell Automation, Inc. 515,900 35,168,903 ------------------------------------------------------------------------------------------------------------------------------------ Roper Industries, Inc. 74,000 3,335,180 ------------------ 63,832,459 ------------------------------------------------------------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES--3.4% 3M Co. 331,000 24,358,290 ------------------------------------------------------------------------------------------------------------------------------------ General Electric Co. 9,758,900 320,775,043 ------------------------------------------------------------------------------------------------------------------------------------ Teleflex, Inc. 12,500 808,125 ------------------------------------------------------------------------------------------------------------------------------------ Tyco International Ltd. 1,879,900 48,482,621 ------------------ 394,424,079 ------------------------------------------------------------------------------------------------------------------------------------ MACHINERY--1.6% Caterpillar, Inc. 525,400 38,396,232 ------------------------------------------------------------------------------------------------------------------------------------ Danaher Corp. 253,800 15,375,204 ------------------------------------------------------------------------------------------------------------------------------------ Deere & Co. 475,600 36,274,012 ------------------------------------------------------------------------------------------------------------------------------------ Flowserve Corp. 1 111,600 5,736,240 ------------------------------------------------------------------------------------------------------------------------------------ Illinois Tool Works, Inc. 465,900 39,992,856 ------------------------------------------------------------------------------------------------------------------------------------ Ingersoll-Rand Co. Ltd., Cl. A 670,600 27,514,718 ------------------------------------------------------------------------------------------------------------------------------------ ITT Industries, Inc. 149,200 7,833,000 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ MACHINERY Continued Parker-Hannifin Corp. 57,700 $ 4,510,409 ------------------------------------------------------------------------------------------------------------------------------------ SPX Corp. 116,200 5,722,850 ------------------------------------------------------------------------------------------------------------------------------------ Terex Corp. 1 85,200 6,743,580 ------------------ 188,099,101 ------------------------------------------------------------------------------------------------------------------------------------ ROAD & RAIL--0.8% Burlington Northern Santa Fe Corp. 459,400 36,127,216 ------------------------------------------------------------------------------------------------------------------------------------ CSX Corp. 18,300 1,013,454 ------------------------------------------------------------------------------------------------------------------------------------ Landstar System, Inc. 64,500 3,005,055 ------------------------------------------------------------------------------------------------------------------------------------ Norfolk Southern Corp. 918,900 47,029,302 ------------------ 87,175,027 ------------------------------------------------------------------------------------------------------------------------------------ TRADING COMPANIES & DISTRIBUTORS--0.0% United Rentals, Inc. 1 86,800 2,829,680 ------------------------------------------------------------------------------------------------------------------------------------ INFORMATION TECHNOLOGY--19.3% ------------------------------------------------------------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT--3.3% ADTRAN, Inc. 133,000 3,660,160 ------------------------------------------------------------------------------------------------------------------------------------ Avaya, Inc. 1 364,400 4,052,128 ------------------------------------------------------------------------------------------------------------------------------------ Brocade Communications Systems, Inc. 1 687,200 3,621,544 ------------------------------------------------------------------------------------------------------------------------------------ Cisco Systems, Inc. 1 6,514,000 131,843,360 ------------------------------------------------------------------------------------------------------------------------------------ Corning, Inc. 1 1,296,200 31,640,242 ------------------------------------------------------------------------------------------------------------------------------------ Emulex Corp. 1 109,100 1,941,980 ------------------------------------------------------------------------------------------------------------------------------------ Harris Corp. 17,900 817,672 ------------------------------------------------------------------------------------------------------------------------------------ Juniper Networks, Inc. 1 936,700 17,225,913 ------------------------------------------------------------------------------------------------------------------------------------ Lucent Technologies, Inc. 1 10,444,700 29,245,160 ------------------------------------------------------------------------------------------------------------------------------------ Motorola, Inc. 3,628,900 77,658,460 ------------------------------------------------------------------------------------------------------------------------------------ Polycom, Inc. 1 40,000 776,800 ------------------------------------------------------------------------------------------------------------------------------------ QLogic Corp. 1 140,100 5,763,714 ------------------------------------------------------------------------------------------------------------------------------------ QUALCOMM, Inc. 1,654,475 78,107,765 ------------------ 386,354,898 ------------------------------------------------------------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS--4.5% Apple Computer, Inc. 1 566,000 38,793,640 ------------------------------------------------------------------------------------------------------------------------------------ Dell, Inc. 1 3,544,400 102,787,600 ------------------------------------------------------------------------------------------------------------------------------------ EMC Corp. 1 4,480,900 62,822,218 ------------------------------------------------------------------------------------------------------------------------------------ Hewlett-Packard Co. 3,896,900 127,857,289
46 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ COMPUTERS & PERIPHERALS Continued Intermec, Inc. 1 15,500 $ 475,540 ------------------------------------------------------------------------------------------------------------------------------------ International Business Machines Corp. 1,778,400 142,698,816 ------------------------------------------------------------------------------------------------------------------------------------ Lexmark International, Inc., Cl. A 1 133,100 6,267,679 ------------------------------------------------------------------------------------------------------------------------------------ NCR Corp. 1 199,300 7,989,937 ------------------------------------------------------------------------------------------------------------------------------------ Network Appliance, Inc. 1 274,800 9,112,368 ------------------------------------------------------------------------------------------------------------------------------------ Palm, Inc. 1 68,100 2,812,530 ------------------------------------------------------------------------------------------------------------------------------------ SanDisk Corp. 1 82,300 4,965,982 ------------------------------------------------------------------------------------------------------------------------------------ Sun Microsystems, Inc. 1 1,512,800 6,308,376 ------------------------------------------------------------------------------------------------------------------------------------ Western Digital Corp. 1 545,000 12,126,250 ------------------ 525,018,225 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--0.7% Agilent Technologies, Inc. 1 1,036,400 37,310,400 ------------------------------------------------------------------------------------------------------------------------------------ Arrow Electronics, Inc. 1 170,500 5,931,695 ------------------------------------------------------------------------------------------------------------------------------------ Avnet, Inc. 1 226,100 5,681,893 ------------------------------------------------------------------------------------------------------------------------------------ CDW Corp. 1 57,300 3,258,078 ------------------------------------------------------------------------------------------------------------------------------------ Jabil Circuit, Inc. 1 185,100 7,006,035 ------------------------------------------------------------------------------------------------------------------------------------ Komag, Inc. 1 72,000 3,372,480 ------------------------------------------------------------------------------------------------------------------------------------ Mettler-Toledo International, Inc. 1 11,900 720,664 ------------------------------------------------------------------------------------------------------------------------------------ Sanmina-SCI Corp. 1 1,157,800 4,469,108 ------------------------------------------------------------------------------------------------------------------------------------ Solectron Corp. 1 1,427,100 5,151,831 ------------------------------------------------------------------------------------------------------------------------------------ Tech Data Corp. 1 41,700 1,731,801 ------------------ 74,633,985 ------------------------------------------------------------------------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES--0.7% Check Point Software Technologies Ltd. 1 188,100 3,999,006 ------------------------------------------------------------------------------------------------------------------------------------ Digital River, Inc. 1 64,800 2,439,072 ------------------------------------------------------------------------------------------------------------------------------------ EarthLink, Inc. 1 367,400 3,644,608 ------------------------------------------------------------------------------------------------------------------------------------ Google, Inc., Cl. A 1 84,700 30,713,914 ------------------------------------------------------------------------------------------------------------------------------------ Internet Security Systems, Inc. 1 115,000 2,680,650 ------------------------------------------------------------------------------------------------------------------------------------ MicroStrategy, Inc., Cl. A 1 24,700 2,264,496 ------------------------------------------------------------------------------------------------------------------------------------ United Online, Inc. 267,900 3,217,479 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ INTERNET SOFTWARE & SERVICES Continued Websense, Inc. 1 34,900 $ 2,157,169 ------------------------------------------------------------------------------------------------------------------------------------ Yahoo!, Inc. 1 781,300 25,048,478 ----------------- 76,164,872 ------------------------------------------------------------------------------------------------------------------------------------ IT SERVICES--0.9% Automatic Data Processing, Inc. 132,400 6,115,556 ------------------------------------------------------------------------------------------------------------------------------------ CACI International, Inc., Cl. A 1 51,300 3,091,851 ------------------------------------------------------------------------------------------------------------------------------------ Ceridian Corp. 1 135,800 3,511,788 ------------------------------------------------------------------------------------------------------------------------------------ CheckFree Corp. 1 77,800 3,847,988 ------------------------------------------------------------------------------------------------------------------------------------ Computer Sciences Corp. 1 138,300 7,515,222 ------------------------------------------------------------------------------------------------------------------------------------ CSG Systems International, Inc. 1 10,400 228,592 ------------------------------------------------------------------------------------------------------------------------------------ Electronic Data Systems Corp. 336,800 8,992,560 ------------------------------------------------------------------------------------------------------------------------------------ First Data Corp. 1,329,100 59,982,283 ------------------------------------------------------------------------------------------------------------------------------------ Fiserv, Inc. 1 154,500 6,411,750 ------------------------------------------------------------------------------------------------------------------------------------ Global Payments, Inc. 74,700 3,888,882 ------------------------------------------------------------------------------------------------------------------------------------ Sabre Holdings Corp. 221,400 5,342,382 ------------------ 108,928,854 ------------------------------------------------------------------------------------------------------------------------------------ OFFICE ELECTRONICS--0.3% Xerox Corp. 1 2,565,400 38,224,460 ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--4.7% Advanced Micro Devices, Inc. 1 638,500 24,690,795 ------------------------------------------------------------------------------------------------------------------------------------ Analog Devices, Inc. 1,091,600 41,633,624 ------------------------------------------------------------------------------------------------------------------------------------ Applied Materials, Inc. 2,467,100 45,246,614 ------------------------------------------------------------------------------------------------------------------------------------ Broadcom Corp., Cl. A 1 1,128,450 50,881,811 ------------------------------------------------------------------------------------------------------------------------------------ Cymer, Inc. 1 56,600 2,545,868 ------------------------------------------------------------------------------------------------------------------------------------ Fairchild Semiconductor International, Inc., Cl. A 1 102,400 1,779,712 ------------------------------------------------------------------------------------------------------------------------------------ Freescale Semiconductor, Inc., Cl. B 1 1,265,266 34,212,793 ------------------------------------------------------------------------------------------------------------------------------------ Intel Corp. 8,144,400 167,774,640 ------------------------------------------------------------------------------------------------------------------------------------ Intersil Corp., Cl. A 214,600 6,081,764 ------------------------------------------------------------------------------------------------------------------------------------ KLA-Tencor Corp. 517,200 27,013,356
47 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS Unaudited / Continued --------------------------------------------------------------------------------
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Continued Lam Research Corp. 1 156,500 $ 6,745,150 ------------------------------------------------------------------------------------------------------------------------------------ Linear Technology Corp. 196,000 7,224,560 ------------------------------------------------------------------------------------------------------------------------------------ LSI Logic Corp. 1 652,700 6,363,825 ------------------------------------------------------------------------------------------------------------------------------------ Micrel, Inc. 1 106,000 1,480,820 ------------------------------------------------------------------------------------------------------------------------------------ Microchip Technology, Inc. 201,500 7,092,800 ------------------------------------------------------------------------------------------------------------------------------------ Microsemi Corp. 1 62,900 1,934,175 ------------------------------------------------------------------------------------------------------------------------------------ National Semiconductor Corp. 287,600 8,067,180 ------------------------------------------------------------------------------------------------------------------------------------ Novellus Systems, Inc. 1 217,700 5,819,121 ------------------------------------------------------------------------------------------------------------------------------------ NVIDIA Corp. 1 185,000 8,719,050 ------------------------------------------------------------------------------------------------------------------------------------ OmniVision Technologies, Inc. 1,2 124,300 3,169,650 ------------------------------------------------------------------------------------------------------------------------------------ Texas Instruments, Inc. 3,064,000 91,460,400 ------------------------------------------------------------------------------------------------------------------------------------ Zoran Corp. 1 33,700 666,586 ------------------ 550,604,294 ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE--4.2% Adobe Systems, Inc. 1 202,800 7,832,136 ------------------------------------------------------------------------------------------------------------------------------------ Autodesk, Inc. 1 646,300 24,333,195 ------------------------------------------------------------------------------------------------------------------------------------ BEA Systems, Inc. 1 561,100 6,435,817 ------------------------------------------------------------------------------------------------------------------------------------ BMC Software, Inc. 1 274,100 5,994,567 ------------------------------------------------------------------------------------------------------------------------------------ CA, Inc. 1,323,580 35,948,433 ------------------------------------------------------------------------------------------------------------------------------------ Cadence Design Systems, Inc. 1 341,300 6,058,075 ------------------------------------------------------------------------------------------------------------------------------------ Citrix Systems, Inc. 1 138,600 4,485,096 ------------------------------------------------------------------------------------------------------------------------------------ Compuware Corp. 1 626,200 5,141,102 ------------------------------------------------------------------------------------------------------------------------------------ Fair Isaac Corp. 110,500 4,709,510 ------------------------------------------------------------------------------------------------------------------------------------ Hyperion Solutions Corp. 1 143,700 4,821,135 ------------------------------------------------------------------------------------------------------------------------------------ Intuit, Inc. 1 138,900 6,747,762 ------------------------------------------------------------------------------------------------------------------------------------ McAfee, Inc. 1 194,600 4,526,396 ------------------------------------------------------------------------------------------------------------------------------------ Microsoft Corp. 9,188,000 247,157,200 ------------------------------------------------------------------------------------------------------------------------------------ Novell, Inc. 1 658,800 6,265,188 ------------------------------------------------------------------------------------------------------------------------------------ Oracle Corp. 1 4,434,200 55,072,764 ------------------------------------------------------------------------------------------------------------------------------------ Parametric Technology Corp. 1 154,560 2,352,403 ------------------------------------------------------------------------------------------------------------------------------------ Red Hat, Inc. 1 226,900 6,096,803 VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ SOFTWARE Continued Reynolds & Reynolds Co., Cl. A 12,300 $ 340,710 ------------------------------------------------------------------------------------------------------------------------------------ Symantec Corp. 1 2,788,218 47,093,002 ------------------------------------------------------------------------------------------------------------------------------------ Synopsys, Inc. 1 400,300 8,754,561 ------------------ 490,165,855 ------------------------------------------------------------------------------------------------------------------------------------ MATERIALS--2.7% ------------------------------------------------------------------------------------------------------------------------------------ CHEMICALS--1.3% Agrium, Inc. 179,500 4,471,345 ------------------------------------------------------------------------------------------------------------------------------------ Dow Chemical Co. (The) 1,306,500 56,218,695 ------------------------------------------------------------------------------------------------------------------------------------ E.I. du Pont de Nemours & Co. 400,800 16,128,192 ------------------------------------------------------------------------------------------------------------------------------------ FMC Corp. 1 18,400 1,118,904 ------------------------------------------------------------------------------------------------------------------------------------ Lubrizol Corp. (The) 20,600 891,156 ------------------------------------------------------------------------------------------------------------------------------------ Lyondell Chemical Co. 218,300 4,566,836 ------------------------------------------------------------------------------------------------------------------------------------ Monsanto Co. 336,200 28,200,456 ------------------------------------------------------------------------------------------------------------------------------------ PPG Industries, Inc. 334,300 20,268,609 ------------------------------------------------------------------------------------------------------------------------------------ Rohm & Haas Co. 349,900 17,407,525 ------------------------------------------------------------------------------------------------------------------------------------ Scotts Miracle-Gro Co. (The), Cl. A 63,600 3,045,804 ------------------ 152,317,522 ------------------------------------------------------------------------------------------------------------------------------------ CONSTRUCTION MATERIALS--0.0% Texas Industries, Inc. 35,900 2,177,694 ------------------------------------------------------------------------------------------------------------------------------------ CONTAINERS & PACKAGING--0.1% Sealed Air Corp. 1 72,300 4,112,424 ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING--1.1% AK Steel Holding Corp. 1 303,200 3,365,520 ------------------------------------------------------------------------------------------------------------------------------------ Alcoa, Inc. 224,800 6,591,136 ------------------------------------------------------------------------------------------------------------------------------------ Carpenter Technology Corp. 52,300 4,371,757 ------------------------------------------------------------------------------------------------------------------------------------ Commercial Metals Co. 52,100 2,359,609 ------------------------------------------------------------------------------------------------------------------------------------ Freeport-McMoRan Copper & Gold, Inc., Cl. B 630,200 31,907,026 ------------------------------------------------------------------------------------------------------------------------------------ Nucor Corp. 481,500 41,433,075 ------------------------------------------------------------------------------------------------------------------------------------ Phelps Dodge Corp. 166,700 23,004,600 ------------------------------------------------------------------------------------------------------------------------------------ Quanex Corp. 49,100 3,047,637 ------------------------------------------------------------------------------------------------------------------------------------ Reliance Steel & Aluminum Co. 77,100 6,352,269
48 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ METALS & MINING Continued Steel Dynamics, Inc. 57,300 $ 2,635,800 ------------------------------------------------------------------------------------------------------------------------------------ United States Steel Corp. 13,800 752,100 ------------------------------------------------------------------------------------------------------------------------------------ Worthington Industries, Inc. 81,700 1,601,320 ------------------ 127,421,849 ------------------------------------------------------------------------------------------------------------------------------------ PAPER & FOREST PRODUCTS--0.2% International Paper Co. 129,900 4,256,823 ------------------------------------------------------------------------------------------------------------------------------------ Louisiana-Pacific Corp. 81,200 2,308,516 ------------------------------------------------------------------------------------------------------------------------------------ MeadWestvaco Corp. 163,600 4,551,352 ------------------------------------------------------------------------------------------------------------------------------------ Weyerhaeuser Co. 221,700 15,139,893 ------------------ 26,256,584 ------------------------------------------------------------------------------------------------------------------------------------ TELECOMMUNICATION SERVICES--3.2% ------------------------------------------------------------------------------------------------------------------------------------ DIVERSIFIED TELECOMMUNICATION SERVICES--3.2% American Tower Corp. 1 465,400 14,813,682 ------------------------------------------------------------------------------------------------------------------------------------ AT&T, Inc. 2,347,036 64,754,723 ------------------------------------------------------------------------------------------------------------------------------------ BellSouth Corp. 1,661,900 52,482,802 ------------------------------------------------------------------------------------------------------------------------------------ CenturyTel, Inc. 142,700 5,134,346 ------------------------------------------------------------------------------------------------------------------------------------ Crown Castle International Corp. 1 153,200 4,802,820 ------------------------------------------------------------------------------------------------------------------------------------ Qwest Communications International, Inc. 1 4,420,100 27,935,032 ------------------------------------------------------------------------------------------------------------------------------------ Sprint Nextel Corp. 4,415,831 106,112,419 ------------------------------------------------------------------------------------------------------------------------------------ Verizon Communications, Inc. 2,963,210 99,860,177 ------------------ 375,896,001 ------------------------------------------------------------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES--0.0% Dobson Communications Corp., Cl. A 1 254,200 1,840,408 ------------------------------------------------------------------------------------------------------------------------------------ UTILITIES--1.0% ------------------------------------------------------------------------------------------------------------------------------------ ELECTRIC UTILITIES--1.0% AES Corp. (The) 1 285,900 4,946,070 ------------------------------------------------------------------------------------------------------------------------------------ Constellation Energy Group, Inc. 313,380 18,407,941 ------------------------------------------------------------------------------------------------------------------------------------ DPL, Inc. 38,500 1,036,420 ------------------------------------------------------------------------------------------------------------------------------------ Edison International, Inc. 540,800 23,989,888 ------------------------------------------------------------------------------------------------------------------------------------ Entergy Corp. 48,200 3,494,982 ------------------ VALUE SHARES SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ ELECTRIC UTILITIES Continued Exelon Corp. 60,800 $ 3,472,288 ------------------------------------------------------------------------------------------------------------------------------------ FirstEnergy Corp. 83,600 4,270,288 ------------------------------------------------------------------------------------------------------------------------------------ PG&E Corp. 831,600 31,642,380 ------------------------------------------------------------------------------------------------------------------------------------ Pinnacle West Capital Corp. 5,000 205,250 ------------------------------------------------------------------------------------------------------------------------------------ Progress Energy, Inc. 45,600 2,023,728 ------------------------------------------------------------------------------------------------------------------------------------ Progress Energy, Inc., Contingent Value Obligation 1,3 680,100 210,831 ------------------------------------------------------------------------------------------------------------------------------------ TXU Corp. 452,600 23,711,712 ------------------ 117,411,778 ------------------ Total Common Stocks (Cost $9,182,580,832) 11,551,479,239 ------------------------------------------------------------------------------------------------------------------------------------ PREFERRED STOCKS--0.0% ------------------------------------------------------------------------------------------------------------------------------------ Wachovia Corp., Dividend Equalization Preferred Shares 1,3 (Cost $0) 100,000 320
UNITS ------------------------------------------------------------------------------------------------------------------------------------ RIGHTS, WARRANTS AND CERTIFICATES--0.0% ------------------------------------------------------------------------------------------------------------------------------------ Dime Bancorp, Inc. Wts., Exp. 1/2/10 1 485,800 68,012 ------------------------------------------------------------------------------------------------------------------------------------ Lucent Technologies, Inc. Wts., Exp. 12/10/07 1 68,554 39,419 ------------------ Total Rights, Warrants and Certificates (Cost $0) 107,431
PRINCIPAL AMOUNT ------------------------------------------------------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--0.5% ------------------------------------------------------------------------------------------------------------------------------------ Undivided interest of 3.81% in joint repurchase agreement (Principal Amount/ Value $1,413,415,000, with a maturity value of $1,413,592,855) with UBS Warburg LLC, 4.53%, dated 2/28/06, to be repurchased at $53,852,776 on 3/1/06, collateralized by Federal National Mortgage Assn., 5%, 6/1/35, with a value of $1,445,671,427 (Cost $53,846,000) $ 53,846,000 53,846,000
49 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF INVESTMENTS Unaudited / Continued --------------------------------------------------------------------------------
VALUE SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ Total Investments, at Value (excluding Investments Purchased with Cash Collateral from Securities Loaned) (Cost $9,236,426,832) $ 11,605,432,990
PRINCIPAL AMOUNT ------------------------------------------------------------------------------------------------------------------------------------ INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--0.2% ------------------------------------------------------------------------------------------------------------------------------------ JOINT REPURCHASE AGREEMENTS--0.2% Undivided interest of 2.83% in joint repurchase agreement (Principal Amount/Value $1,000,000,000, with a maturity value of $1,000,127,292) with Bank of America NA, 4.5825%, dated 2/28/06, to be repurchased at $28,313,347 on 3/1/06, collateralized by U.S. Agency Mortgages, 5%--6%, 3/1/34--10/1/35, with a value of $1,023,918,877 4 $ 28,309,743 28,309,743 ------------------------------------------------------------------------------------------------------------------------------------ MASTER FLOATING NOTE--0.0% Bear Stearns, 4.68%, 3/1/06 4 500,000 500,000 ------------------------------------------------------------------------------------------------------------------------------------ Total Investments Purchased with Cash Collateral from Securities Loaned (Cost $28,809,743) 28,809,743
VALUE SEE NOTE 1 ------------------------------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENTS, AT VALUE (COST $9,265,236,575) 99.9% $ 11,634,242,733 ------------------------------------------------------------------------------------------------------------------------------------ OTHER ASSETS NET OF LIABILITIES 0.1 8,883,242 -------------------------- NET ASSETS 100.0% $ 11,643,125,975 ==========================
FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Partial or fully-loaned security. See Note 7 of Notes to Financial Statements. 3. Illiquid security. The aggregate value of illiquid securities as of February 28, 2006 was $211,151, which represents less than 0.005% of the Fund's net assets. See Note 6 of Notes to Financial Statements. 4. The security has 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 Notes to Financial Statements. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 50 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF ASSETS AND LIABILITIES Unaudited -------------------------------------------------------------------------------- February 28, 2006 ------------------------------------------------------------------------------------------------------------------ ASSETS ------------------------------------------------------------------------------------------------------------------ Investments, at value (including securities loaned of $27,967,782) (cost $9,265,236,575)--see accompanying statement of investments $ 11,634,242,733 ------------------------------------------------------------------------------------------------------------------ Cash 5,385,794 ------------------------------------------------------------------------------------------------------------------ Receivables and other assets: Investments sold 236,314,753 Interest and dividends 20,630,263 Shares of capital stock sold 3,678,430 Other 295,655 ------------------ Total assets 11,900,547,628 ------------------------------------------------------------------------------------------------------------------ LIABILITIES ------------------------------------------------------------------------------------------------------------------ Return of collateral for securities loaned 28,809,743 ------------------------------------------------------------------------------------------------------------------ Payables and other liabilities: Investments purchased 196,180,589 Shares of capital stock redeemed 24,869,349 Distribution and service plan fees 4,434,700 Transfer and shareholder servicing agent fees 1,748,967 Shareholder communications 1,090,674 Directors' compensation 194,961 Other 92,670 ------------------ Total liabilities 257,421,653 ------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 11,643,125,975 ================== ------------------------------------------------------------------------------------------------------------------ COMPOSITION OF NET ASSETS ------------------------------------------------------------------------------------------------------------------ Par value of shares of capital stock $ 3,057,521 ------------------------------------------------------------------------------------------------------------------ Additional paid-in capital 9,502,543,218 ------------------------------------------------------------------------------------------------------------------ Accumulated net investment income 17,196,501 ------------------------------------------------------------------------------------------------------------------ Accumulated net realized loss on investments and foreign currency transactions (248,678,566) ------------------------------------------------------------------------------------------------------------------ Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 2,369,007,301 ------------------ NET ASSETS $ 11,643,125,975 ==================
51 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF ASSETS AND LIABILITIES Unaudited / Continued -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE PER SHARE ------------------------------------------------------------------------------------------------------------------ Class A Shares: Net asset value and redemption price per share (based on net assets of $7,930,616,641 and 206,732,070 shares of capital stock outstanding) $ 38.36 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $ 40.70 ------------------------------------------------------------------------------------------------------------------ Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,722,236,771 and 46,188,208 shares of capital stock outstanding) $ 37.29 ------------------------------------------------------------------------------------------------------------------ Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $1,178,245,154 and 31,653,703 shares of capital stock outstanding) $ 37.22 ----------------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $196,733,060 and 5,191,283 shares of capital stock outstanding) $ 37.90 ------------------------------------------------------------------------------------------------------------------ Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $615,294,349 and 15,986,803 shares of capital stock outstanding) $ 38.49
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 52 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF OPERATIONS Unaudited -------------------------------------------------------------------------------- For the Six Months Ended February 28, 2006 ------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME ------------------------------------------------------------------------------------------------------------------ Dividends (net of foreign withholding taxes of $114,435) $ 105,465,945 ------------------------------------------------------------------------------------------------------------------ Interest 1,193,499 ------------------------------------------------------------------------------------------------------------------ Other income 402,396 ------------------------------------------------------------------------------------------------------------------ Portfolio lending fees 20,980 ------------------ Total investment income 107,082,820 ------------------------------------------------------------------------------------------------------------------ EXPENSES ------------------------------------------------------------------------------------------------------------------ Management fees 26,392,566 ------------------------------------------------------------------------------------------------------------------ Distribution and service plan fees: Class A 9,613,022 Class B 9,025,988 Class C 5,895,058 Class N 467,978 ------------------------------------------------------------------------------------------------------------------ Transfer and shareholder servicing agent fees: Class A 7,765,216 Class B 2,046,878 Class C 1,144,228 Class N 239,327 Class Y 74,312 ------------------------------------------------------------------------------------------------------------------ Shareholder communications: Class A 802,067 Class B 340,832 Class C 96,030 Class N 8,262 ------------------------------------------------------------------------------------------------------------------ Directors' compensation 67,010 ------------------------------------------------------------------------------------------------------------------ Custodian fees and expenses 62,190 ------------------------------------------------------------------------------------------------------------------ Administration service fees 750 ------------------------------------------------------------------------------------------------------------------ Other 186,552 ------------------ Total expenses 64,228,266 ------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME 42,854,554
53 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) STATEMENT OF OPERATIONS Unaudited / Continued -------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) ------------------------------------------------------------------------------------------------------------------ Net realized gain on: Investments $ 520,616,700 Foreign currency transactions 1,774,797 ------------------ Net realized gain 522,391,497 ------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation (depreciation) on: Investments 219,963,943 Translation of assets and liabilities denominated in foreign currencies (1,170,087) ------------------ Net change in unrealized appreciation 218,793,856 ------------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 784,039,907 ==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 54 | 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, 2006 AUGUST 31, (UNAUDITED) 2005 ------------------------------------------------------------------------------------------------------------------ OPERATIONS ------------------------------------------------------------------------------------------------------------------ Net investment income $ 42,854,554 $ 137,515,097 ------------------------------------------------------------------------------------------------------------------ Net realized gain 522,391,497 555,738,759 ------------------------------------------------------------------------------------------------------------------ Net change in unrealized appreciation 218,793,856 607,039,907 -------------------------------------- Net increase in net assets resulting from operations 784,039,907 1,300,293,763 ------------------------------------------------------------------------------------------------------------------ DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS ------------------------------------------------------------------------------------------------------------------ Dividends from net investment income: Class A (78,299,412) (92,759,936) Class B (1,493,431) (6,840,949) Class C (3,049,966) (6,104,306) Class N (1,478,142) (1,600,231) Class Y (7,871,769) (9,431,972) ------------------------------------------------------------------------------------------------------------------ CAPITAL STOCK TRANSACTIONS ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from capital stock transactions: Class A (340,842,144) (330,754,330) Class B (362,612,001) (825,679,905) Class C (101,979,218) (158,653,723) Class N 7,984,073 10,302,309 Class Y 101,855,394 (138,236,214) ------------------------------------------------------------------------------------------------------------------ NET ASSETS ------------------------------------------------------------------------------------------------------------------ Total decrease (3,746,709) (259,465,494) ------------------------------------------------------------------------------------------------------------------ Beginning of period 11,646,872,684 11,906,338,178 -------------------------------------- End of period (including accumulated net investment income of $17,196,501 and $66,534,667, respectively) $ 11,643,125,975 $ 11,646,872,684 ======================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 55 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, CLASS A (UNAUDITED) 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 36.18 $ 32.78 $ 29.62 $ 27.90 $ 32.15 $ 45.41 ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .17 1 .47 1 .26 .22 .16 .14 Net realized and unrealized gain (loss) 2.38 3.34 3.10 1.69 (4.29) (11.18) ------------------------------------------------------------------------------------------------ Total from investment operations 2.55 3.81 3.36 1.91 (4.13) (11.04) ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.37) (.41) (.20) (.19) (.07) (.12) Distributions from net realized gain -- -- -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.37) (.41) (.20) (.19) (.12) (2.22) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 38.36 $ 36.18 $ 32.78 $ 29.62 $ 27.90 $ 32.15 ================================================================================================ ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 7.07% 11.68% 11.37% 6.93% (12.90)% (24.85)% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 7,930,617 $ 7,810,714 $ 7,384,256 $ 7,033,312 $ 6,443,983 $ 7,320,747 ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 7,909,680 $ 7,759,230 $ 7,521,103 $ 6,310,359 $ 7,203,226 $ 7,954,409 ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 0.93% 1.36% 0.75% 0.87% 0.52% 0.47% Total expenses 0.93% 0.92% 4 0.93% 4,5 0.97% 4 0.99% 4 0.86% 4 ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 40% 79% 76% 94% 78% 76%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 56 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, CLASS B (UNAUDITED) 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 34.99 $ 31.67 $ 28.68 $ 27.04 $ 31.34 $ 44.50 ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) .02 1 .20 1 (.21) (.13) (.20) (.13) Net realized and unrealized gain (loss) 2.31 3.21 3.20 1.77 (4.05) (10.93) ------------------------------------------------------------------------------------------------ Total from investment operations 2.33 3.41 2.99 1.64 (4.25) (11.06) ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.03) (.09) -- -- -- -- Distributions from net realized gain -- -- -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.03) (.09) -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 37.29 $ 34.99 $ 31.67 $ 28.68 $ 27.04 $ 31.34 ================================================================================================ ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 6.66% 10.79% 10.43% 6.06% (13.58)% (25.39)% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 1,722,237 $ 1,968,829 $ 2,558,206 $ 2,941,765 $ 3,510,800 $ 5,404,510 ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 1,821,344 $ 2,295,269 $ 2,884,434 $ 2,964,666 $ 4,607,653 $ 6,630,335 ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income (loss) 0.13% 0.59% (0.10)% 0.04% (0.25)% (0.29)% Total expenses 1.73% 1.72% 4 1.78% 4,5 1.81% 4 1.75% 4 1.61% 4 ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 40% 79% 76% 94% 78% 76%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 57 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, CLASS C (UNAUDITED) 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 34.98 $ 31.71 $ 28.69 $ 27.03 $ 31.33 $ 44.50 ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income (loss) .03 1 .21 1 (.03) -- (.11) (.11) Net realized and unrealized gain (loss) 2.30 3.22 3.05 1.66 (4.14) (10.96) ------------------------------------------------------------------------------------------------ Total from investment operations 2.33 3.43 3.02 1.66 (4.25) (11.07) ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.09) (.16) -- -- -- -- Distributions from net realized gain -- -- -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------ Total dividends and/or distributions to shareholders (.09) (.16) -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 37.22 $ 34.98 $ 31.71 $ 28.69 $ 27.03 $ 31.33 ================================================================================================ ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 6.67% 10.83% 10.53% 6.14% (13.58)% (25.42)% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 1,178,245 $ 1,206,335 $ 1,241,930 $ 1,188,826 $ 1,198,517 $ 1,562,452 ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 1,191,623 $ 1,250,845 $ 1,278,659 $ 1,111,131 $ 1,432,566 $ 1,825,540 ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income (loss) 0.18% 0.62% (0.01)% 0.09% (0.24)% (0.29)% Total expenses 1.67% 1.67% 4 1.70% 4,5 1.74% 4 1.75% 4 1.61% 4 ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 40% 79% 76% 94% 78% 76%
1. Per share amounts calculated based on the average shares outstanding during the period. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 58 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, CLASS N (UNAUDITED) 2005 2004 2003 2002 2001 1 ----------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 35.71 $ 32.39 $ 29.33 $ 27.72 $ 32.09 $ 34.36 ----------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .11 2 .35 2 .15 .20 .12 .02 Net realized and unrealized gain (loss) 2.36 3.30 3.05 1.65 (4.31) (2.29) ----------------------------------------------------------------------------------------------- Total from investment operations 2.47 3.65 3.20 1.85 (4.19) (2.27) ----------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.28) (.33) (.14) (.24) (.13) -- Distributions from net realized gain -- -- -- -- (.05) -- ----------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.28) (.33) (.14) (.24) (.18) -- ----------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 37.90 $ 35.71 $ 32.39 $ 29.33 $ 27.72 $ 32.09 =============================================================================================== ----------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 6.92% 11.30% 10.93% 6.78% (13.15)% (6.61)% ----------------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ----------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 196,733 $ 177,463 $ 150,955 $ 79,188 $ 43,464 $ 7,641 ----------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 189,193 $ 168,866 $ 122,478 $ 60,950 $ 28,141 $ 2,672 ----------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 0.63% 1.02% 0.38% 0.65% 0.28% 0.36% Total expenses 1.22% 1.26% 1.31% 1.23% 1.24% 1.16% Expenses after payments and waivers and reduction to custodian expenses 1.22% 1.26% 1.31% 1.18% 1.24% 1.16% ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 40% 79% 76% 94% 78% 76%
1. For the period from March 1, 2001 (inception of offering) to August 31, 2001. 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. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 59 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------
SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, 2006 AUGUST 31, CLASS Y (UNAUDITED) 2005 2004 2003 2002 2001 ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 36.38 $ 32.93 $ 29.75 $ 28.02 $ 32.28 $ 45.64 ------------------------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations Net investment income .25 1 .64 1 .34 .11 .19 .17 Net realized and unrealized gain (loss) 2.39 3.34 3.13 1.86 (4.28) (11.22) ------------------------------------------------------------------------------------------------ Total from investment operations 2.64 3.98 3.47 1.97 (4.09) (11.05) ------------------------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.53) (.53) (.29) (.24) (.12) (.21) Distributions from net realized gain -- -- -- -- (.05) (2.10) ------------------------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.53) (.53) (.29) (.24) (.17) (2.31) ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 38.49 $36.38 $ 32.93 $ 29.75 $ 28.02 $ 32.28 ================================================================================================ ------------------------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 7.29% 12.15% 11.69% 7.11% (12.74)% (24.76)% ------------------------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 615,294 $ 483,532 $ 570,991 $ 441,460 $ 225,298 $ 225,475 ------------------------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 543,106 $ 496,349 $ 558,130 $ 242,029 $ 227,835 $ 239,222 ------------------------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 1.37% 1.82% 1.07% 1.01% 0.74% 0.60% Total expenses 0.49% 0.53% 0.60% 0.87% 0.92% 0.79% 4 Expenses after payments and waivers and reduction to custodian expenses 0.49% 0.53% 0.60% 0.83% 0.78% 0.73% ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 40% 79% 76% 94% 78% 76%
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. Added since August 31, 2001 to reflect expenses before reduction to custodian expenses and voluntary waiver of transfer agent fees. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 60 | 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 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 at its trading session 61 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued ending at, or most recently prior to, the time when the Fund's assets are valued. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Directors. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Foreign exchange rates may be valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Directors. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. 62 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III 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. As of February 28, 2006, the Fund had available for federal income tax purposes an estimated capital loss carryforward of $146,721,072 expiring by 2014. 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, 2006, it is estimated that the Fund will utilize $522,391,497 of capital loss carryforward to offset realized capital gains. During the year ended August 31, 2005, the Fund did utilize $557,605,412 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. As of August 31, 2005, the Fund had available for federal income tax purposes unused capital loss carryforward as follows: EXPIRING -------------------------- 2011 $669,112,569 -------------------------------------------------------------------------------- DIRECTORS' COMPENSATION. The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Director under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Director. The Fund purchases shares of the funds selected for deferral by the Director in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of directors' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. 63 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued 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. At February 28, 2006, the Fund had $1,602 of such earnings on cash balances available to offset future custodian fees or interest expenses incurred during the next fiscal year. -------------------------------------------------------------------------------- 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 directors 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. 64 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III -------------------------------------------------------------------------------- 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, 2006 YEAR ENDED AUGUST 31, 2005 SHARES AMOUNT SHARES AMOUNT -------------------------------------------------------------------------------------------------------- CLASS A Sold 14,548,765 $ 539,995,702 42,130,880 $ 1,462,992,163 Dividends and/or distributions reinvested 1,913,779 71,938,942 2,447,641 85,153,420 Redeemed (25,605,696) (952,776,788) (53,958,588) (1,878,899,913) ------------------------------------------------------------------------- Net decrease (9,143,152) $ (340,842,144) (9,380,067) $ (330,754,330) ========================================================================= -------------------------------------------------------------------------------------------------------- CLASS B Sold 2,082,419 $ 75,123,706 6,104,800 $ 205,311,660 Dividends and/or distributions reinvested 38,326 1,403,129 186,907 6,324,963 Redeemed (12,199,333) (439,138,836) (30,807,076) (1,037,316,528) ------------------------------------------------------------------------- Net decrease (10,078,588) $ (362,612,001) (24,515,369) $ (825,679,905) ========================================================================= -------------------------------------------------------------------------------------------------------- CLASS C Sold 1,325,150 $ 47,698,265 3,496,633 $ 117,639,447 Dividends and/or distributions reinvested 72,361 2,644,057 155,120 5,247,695 Redeemed (4,227,835) (152,321,540) (8,335,048) (281,540,865) ------------------------------------------------------------------------- Net decrease (2,830,324) $ (101,979,218) (4,683,295) $ (158,653,723) ========================================================================= -------------------------------------------------------------------------------------------------------- CLASS N Sold 1,109,074 $ 40,633,256 1,948,358 $ 66,956,350 Dividends and/or distributions reinvested 38,592 1,434,091 45,108 1,553,077 Redeemed (925,455) (34,083,274) (1,684,370) (58,207,118) ------------------------------------------------------------------------- Net increase 222,211 $ 7,984,073 309,096 $ 10,302,309 ========================================================================= -------------------------------------------------------------------------------------------------------- CLASS Y Sold 4,334,554 $ 162,378,335 11,089,312 $ 389,600,005 Dividends and/or distributions reinvested 202,236 7,618,220 270,489 9,431,944 Redeemed (1,842,778) (68,141,161) (15,404,677) (537,268,163) ------------------------------------------------------------------------- Net increase (decrease) 2,694,012 $ 101,855,394 (4,044,876) $ (138,236,214) =========================================================================
-------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the six months ended February 28, 2006, were as follows: PURCHASES SALES ---------------------------------------------------------------- Investment securities $4,658,085,475 $5,397,644,672 65 | 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 AFFILITATES 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 0.65% of the first $200 million of average annual net assets of the Fund, 0.60% of the next $150 million, 0.55% of the next $150 million, and 0.45% of average annual net assets in excess of $500 million. -------------------------------------------------------------------------------- ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the six months ended February 28, 2006, the Fund paid $11,511,705 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 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 66 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III such termination. The Distributor's aggregate uncompensated expenses under the plan at February 28, 2006 for Class B, Class C and Class N shares were $29,620,181, $34,086,891 and $2,842,386, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations. -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated.
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, 2006 $ -- $ 5,225 $ 1,986,307 $ 41,106 $ 41,727
-------------------------------------------------------------------------------- WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. This undertaking may be amended or withdrawn at any time. -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using prevailing foreign currency exchange rates. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. The Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of February 28, 2006, the Fund had no outstanding foreign currency contracts. 67 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III OPPENHEIMER MAIN STREET FUND (UNDERLYING FUND) NOTES TO FINANCIAL STATEMENTS Unaudited / Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 6. ILLIQUID SECURITIES As of February 28, 2006, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. Securities that are illiquid are marked with the applicable footnote on the Statement of Investments. -------------------------------------------------------------------------------- 7. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of U.S. Treasury obligations 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 of the funds and any additional required collateral is delivered to the Fund on the next business day. 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. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from 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, 2006, the Fund had on loan securities valued at $27,967,782. Collateral of $28,809,743 was received for the loans, all of which was received in cash and subsequently invested in approved instruments. -------------------------------------------------------------------------------- 8. LITIGATION A complaint was filed as a putative class action against the Manager and the Transfer Agent (and other defendants) in the U.S. District Court for the Southern District of New York on January 10, 2005 and was amended on March 4, 2005. The complaint alleged, among other things, that the Manager charged excessive fees for distribution and other costs, and that by permitting and/or participating in those actions, the Directors/ Trustees and the Officers of the funds breached their fiduciary duties to fund shareholders under the Investment Company Act of 1940 and at common law. The plaintiffs sought unspecified damages, an accounting of all fees paid, and an award of attorneys' fees and litigation expenses. Seven of the eight counts in the complaint, including the claims against certain of the Oppenheimer funds, as nominal defendants, and against certain present and former Directors, Trustees and Officers of the funds, and the Distributor, as defendants, were dismissed with prejudice, by court order dated March 10, 2006, in response to motions to dismiss the suit that had been filed by the defendants. The remaining count against the Manager and the Transfer Agent was dismissed with 68 | OPPENHEIMER PRINCIPAL PROTECTED MAIN STREET FUND III prejudice by court order dated April 5, 2006. The time in which plaintiffs may file an appeal to those decisions has not yet lapsed. 69 | 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, 2006, the registrant's principal executive officer and principal financial officer found the registrant's disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission. There have been no changes in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a) (1) 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, consisting of Oppenheimer Principal Protected Main Street Fund III By: /s/ John V. Murphy ------------------------------- John V. Murphy Principal Executive Officer Date: April 19, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John V. Murphy ------------------------------- John V. Murphy Principal Executive Officer Date: April 19, 2006 By: /s/ Brian W. Wixted ------------------------------- Brian W. Wixted Principal Financial Officer Date: April 19, 2006