Annual Report August 31, 1997
O P P E N H E I M E R
Main Street
Income &
Growth Fund(R)
[Picture of trolley]
[Oppenheimer Logo]
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Report highlights
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[bullet] Financial companies led the Fund's performance, due to continued
consolidation within the sector.
[bullet] Pharmaceutical companies also benefited the Fund's performance, due to
the introduction of several major new drugs and the superior corporate earnings
these companies are reporting.
[bullet] Our bond portfolio appreciated because interest rates have declined in
the past several months.
[bullet] We look for stocks with two characteristics: They should have good
value in light of this expensive market and they need to have not only good, but
improving fundamentals.
Total returns include changes in share price and reinvestment of dividends and
capital gains distributions in a hypothetical investment for the periods shown.
In reviewing performance and rankings, please remember that past performance
does not guarantee future results. Investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account.
Contents -------------------------------
Total Returns
3 President's Letter -------------------------------
For the Period Ended 8/31/97(1)
4 Fund Performance Class A
1 year
6 An Interview -------------------------------
with the Fund's 31.09%
Managers -------------------------------
Class B
11 Statement of 1 year
Investments -------------------------------
30.12%
18 Statement of -------------------------------
Assets & Class C
Liabilities 1 year
-------------------------------
20 Statement of 30.07%
Operations -------------------------------
Class Y
21 Statements of 1 year
Changes in -------------------------------
Net Assets N/A
-------------------------------
22 Financial Highlights
24 Notes to Financial
Statements
31 Independent
Auditors' Report
32 Federal
Income Tax
Information
33 Officers & Directors
36 Information &
Services
2 Oppenheimer Main Street Income & Growth Fund
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[Photo of James C. Swain] [Photo of Bridget A. Macaskill]
James C. Swain Bridget A. Macaskill
Chairman President
Oppenheimer Main Street Oppenheimer Main Street
Income & Growth Fund Income & Growth Fund
Dear shareholder,
- --------------------------------------------------------------------------------
We would like to welcome you to the premier issue of our newly redesigned
shareholder reports. As you can see, we've changed the format to allow easier
access to the information you need to monitor your investments. Some notable
additions are "at-a-glance" report highlights and charts that let you quickly
assess how your Fund has performed. On the following pages, your portfolio team
discuss their current investment thinking, your Fund's strategies, and
performance. Before these commentaries, we'd like to share a few global
observations.
As we consider the world's financial markets over the past six months,
some global trends emerge. For example, inflation has hit its lowest level in
three decades worldwide, which has helped spur many bullish financial markets.
The United States has been a beneficiary of this low-inflation environment, as
well as of a strong dollar, robust corporate earnings and a healthy economy.
However, many financial analysts are now concerned that the United States has
reached a point in the business cycle where earnings could decline because
companies are unable to further reduce costs.
On the other hand, a wave of corporate restructuring throughout Europe has
resulted in some exciting changes and opportunities. Because a similar
restructuring took place in the United States ten years ago, European companies
have been able to enjoy the benefit of hindsight by following our footsteps.
Latin America, too, has begun to shift its economies more toward the U.S.
capitalist model and has reported positive earnings growth along the way.
With major changes occurring in today's economies around the globe, it's
more important than ever to maintain a diversified portfolio across different
countries and market sectors. Now is the time to speak to your financial adviser
to ensure that your assets are allocated properly, so you have the opportunity
to benefit from investments in both domestic and international funds. It's
important to remember that investing abroad can involve greater risk and
expenses-- including political and economic uncertainties--and should be
undertaken with a long-term approach in mind.
To keep in touch with our views on the markets, visit our website,
www.oppenheimerfunds.com, where you can access your account information and fund
performance data, 24 hours a day. The site also features prospectuses, timely
market updates and insightful commentaries. Our new shareholder reports and
presence on the Internet are just two examples of our commitment to keeping you
well informed.
Thank you for your confidence in OppenheimerFunds, The Right Way to
Invest. We look forward to helping you reach your investment goals in the
future.
/s/ James C. Swain /s/ Bridget A. Macaskill
- ------------------ ------------------------
James C. Swain Bridget A. Macaskill
September 22, 1997
3 Oppenheimer Main Street Income & Growth Fund
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Performance update
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Oppenheimer Main Street Income & Growth Fund is
designed for investors who are seeking high total return
from a diversified portfolio of equity and debt securities.
Oppenheimer Main Street Income & Growth Fund's Class A
shares have outperformed the S&P 500 Index for the 5-year
period ended September 30, 1997.(2) The Fund's good perfor-
mance can be attributed to the Fund's "barbell strategy" of
seeking growth through a wide variety of stocks from small,
medium and large companies, as well as owning income-
generating securities, such as bonds and convertibles, in
order to decrease volatility in the Fund.
Growth of $10,000
Over five years
(without sales charges)(2)
--------------------------
[Plot Points for Chart]
Oppenheimer
Main Street
Income & Growth Fund S&P 500
Class A Shares Index
-------------- -----
9/30/92 10,000.0 10,000.0
12,708.8 10,503.5
13,748.7 10,962.2
14,227.8 11,015.6
16,261.3 11,300.2
17,212.8 11,582.2
17,170.3 11,123.7
16,274.2 11,170.5
17,224.1 11,716.8
16,949.2 11,714.9
18,290.1 12,865.5
18,613.5 14,082.8
21,326.3 15,201.9
22,164.3 16,117.1
23,408.0 18,982.2
23,979.8 17,744.3
24,330.6 18,292.8
25,844.3 19,817.6
26,040.5 20,348.9
29,388.4 23,901.4
9/30/97 31,744.1 25,692.4
1. Total returns include changes in share price and reinvestment of dividends
and capital gains distributions in a hypothetical investment for the periods
shown. Class A returns include the current maximum initial sales charge of
5.75%. Class A shares were first publicly offered on 2/3/88. The Fund's maximum
sales charge for Class A shares was lower prior to 10/29/93, so actual
performance may have been higher. Class B returns include the applicable
contingent deferred sales charge of 5% (1-year) and 3% (since inception on
10/1/94). Class C returns include the contingent deferred sales charge of 1%
for the 1-year period and have been available since 12/1/93. Class Y shares
were first publicly offered on 11/1/96 and are not available for sale to
individual shareholders. Class Y return is cumulative since inception. An
explanation of the different performance calculations is in the Fund's
prospectus. Class B and C shares are subject to an annual 0.75% asset-based
sales charge.
- -------------------------------
Avg Annual Total Returns
- -------------------------------
For the Period Ended 9/30/97(1)
Class A
Since
1 year 5 year Inception
- -------------------------------
22.97% 24.49% 21.41%
- -------------------------------
Class B
Since
1 year 5 year Inception
- -------------------------------
24.47% N/A 20.99%
- -------------------------------
Class C
Since
1 year 5 year Inception
- -------------------------------
28.50% N/A 17.85%
- -------------------------------
Class Y
Since
1 year 5 year Inception
- -------------------------------
N/A N/A 29.43%
- -------------------------------
4 Oppenheimer Main Street Income & Growth Fund
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Portfolio review
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Sector Weightings(3)
[Pie Chart]
Consumer Non-Cyclical 22.1%
Financial 21.0
Technology 20.5
Consumer Cyclical 16.0
Industrial 7.7
Energy 6.3
Basic Materials 3.9
Utility 2.5
Oppenheimer Main Street Income & Growth Fund is for investors who are looking
for a high total return from a diversified portfolio of equity and debt
securities.
What We Look For
[bullet] High growth from stocks in high growth industries.
[bullet] Large companies with strong economies of scale.
[bullet] Dividend-paying stocks of quality companies for income.
[bullet] Underearning companies undergoing positive changes.
[bullet] Smaller "niche" companies.
Top 10 Stock Holdings(3)
................................................
IBM 4.3%
................................................
McDonald's Corp. 3.4
................................................
Travelers Group, Inc. 2.9
................................................
American Express Co. 2.8
................................................
Philip Morris Cos. 2.1
................................................
Anheuser-Busch Cos. 1.7
................................................
Morgan Stanley; Dean Witter, Discover & Co. 1.7
................................................
Merck & Co. 1.6
................................................
Johnson & Johnson 1.5
................................................
Time Warner, Inc. 1.5
................................................
2. Result as of a hypothetical $10,000 investment in Class A shares on
September 30, 1992. The S&P 500 is a broad-based unmanaged stock index
including daily reinvestment of dividends, and cannot be purchased directly by
investors. Past performance does not guarantee future results.
3. Portfolio is subject to change. Percentages are as of August 31, 1997 and
are based on total market value of stock holdings.
5 Oppenheimer Main Street Income & Growth Fund
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"Although the
market is
expensive,
we're still finding
what we think
are undervalued
stocks."
An interview with your Fund's managers
- --------------------------------------------------------------------------------
How did the Fund perform?
Oppenheimer Main Street Income & Growth Fund's Class A shares produced a total
return of 31.09%1 for the one- year period ending August 31, 1997, without
deducting sales charges. This same period was an exceptionally strong period in
the stock market, with the Standard & Poor's 500 Index up roughly 40%,2 and the
equity portion of the Fund up 38.7%.
Since we generate income through fixed-income securities as well as
through dividends, our allocation to bonds reduced the total return of the Fund
when compared to all equity indices, such as the S&P 500. Earlier in 1997, when
yields approached 7%, we purchased U.S. Treasuries. At that level, we believed
bonds were the most attractive instrument to generate income for the Fund.
Because interest rates have since fallen, our bond portfolio has appreciated in
value, although not as much as our equity portfolio. We continue to believe that
the Fund will benefit from our allocation to long-term bonds, which now
approximates 7% of the Fund.
Our lower allocation to equities versus other growth & income funds
resulted in a slight performance disadvantage. And while there is a shortage of
yield in the equity market, as a growth and income fund, we believe that bonds
are most appropriate for producing income in today's environment.
1. Includes changes in net asset value per share without deducting any sales
charges. Such performance would have been lower if sales charges were taken into
account. Past performance does not guarantee future results.
2. The S&P 500 is a broad-based unmanaged stock index including daily
reinvestment of dividends, and cannot be purchased directly by investors.
6 Oppenheimer Main Street Income & Growth Fund
<PAGE>
[Photo of Bob Milnamow and Mike Levine]
Portfolio Management
Team (l to r)
Bob Milnamow
(Fund Manager)
Mike Levine
What segments of the Fund performed particularly well? The best performing
segment of the Fund was in financial companies. The strong stock market,
combined with favorable spreads on lending activities, has produced strong
earnings for financial institutions. Continued consolidations in this sector, as
well as between banks and brokers, are lifting the values of remaining
acquisition targets. Thus, we believe, the potential for strong results in this
sector continues. Companies like American Express and Travelers have made
important contributions to the Fund's performance. Both of these companies are
well managed, with demanding cost controls and shareholder-driven managements.
Most recently, Travelers announced the acquisition of Salomon Brothers, and we
believe that Travelers' management will make this a positive financial
transaction for shareholders.
What about some other industries that performed well
for the Fund?
The pharmaceutical industry has also benefited the Fund. The introduction of
many innovative drugs is
driving double-digit revenue and earnings growth for many industry
participants. For example, Warner
Lambert has introduced Lipitor, a cholesterol-reducing
drug which has been rapidly gaining market share
based on its higher efficacy in patients. Warner Lambert
has also announced that it is rolling out Rezulin,
a breakthrough drug in the treatment of Type II
diabetes, the most common form of the disease.
7 Oppenheimer Main Street Income & Growth Fund
<PAGE>
"Our banking and
finance holdings
provided very
good returns..."
An interview with your Fund's managers
- --------------------------------------------------------------------------------
Rezulin's unique profile allows for better long-term control of blood glucose
levels, and could possibly decrease or delay the need for insulin treatment in
Type II diabetes. The worldwide diabetes market is a multi-billion-dollar
opportunity for breakthrough drugs.
Another industry that has helped the portfolio is the hotel industry.
Most travelers should recognize that many hotels are operating at higher
capacity levels while charging higher room rates. This is particularly evident
in full-service hotels, which cater to affluent leisure travelers as well as
business travelers with sufficient travel budgets. The profitability in this
segment is strong because room demand is high and rising and the supply of new
rooms is modest. Our holding in Marriott International has benefited from these
industry conditions, which we believe may continue.
Deregulation continues to be a positive for many industries and
companies as well. We have been invested in the radio industry, where the
largest companies in this industry are benefiting from the ability to operate
with larger market shares in their respective markets. Deregulation in the
telecommunications area appears to be benefiting many equipment suppliers that
sell to new competitors in local and long distance phone markets.
What is your current strategy?
Due to the significant move in the stock market over the past several years,
our equity strategy centers around being more selective and concentrated on
fewer issues, and to be opportunistic in terms of taking advantage of the
increased volatility evident in the current market.
8 Oppenheimer Main Street Income & Growth Fund
<PAGE>
"...benefiting
from the strong
stock market
and buoyant
economy."
We have found the market to be generally short-sighted with respect to some
companies that are experiencing problems, but we believe some of these
companies will not remain in trouble over the longer term. In our opinion,
McDonald's is an example of a company that is suffering from overcapacity in
the fast food segment in the United States, but continues to grow rapidly
outside the United States where opportunities are abundant. So we continue to
seek opportunities in this market despite the gains of the last few years.
What is your outlook?
We continue to be pleasantly surprised by the strength in the stock market.
However, we believe that the most recent percentage gains in the market are
unsustainable long-term. If the economy continues to grow moderately, with low
inflation and therefore no upward pressure on interest rates, our opinion is
that earnings are likely to determine the market's future gains. In the
meantime earnings gains are beginning to level off. Therefore, we believe that
our investment philosophy of investing in companies with the best relative
earnings gains is the best recipe for investing in this bull market.
9 Oppenheimer Main Street Income & Growth Fund
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Financials
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10 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments August 31, 1997
Market Value
Shares See Note 1
================================================================================
Common Stocks--85.8%
- --------------------------------------------------------------------------------
Basic Materials--3.3%
- --------------------------------------------------------------------------------
Chemicals--3.3%
Du Pont (E.I.) De Nemours & Co. 1,000,000 $62,312,500
- --------------------------------------------------------------------------------
International Flavors & Fragrances, Inc. 1,092,000 55,828,500
- --------------------------------------------------------------------------------
Monsanto Co. 2,065,500 90,752,906
- --------------------------------------------------------------------------------
Morton International, Inc. 1,300,000 43,225,000
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Olin Corp. 275,100 12,241,950
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Sigma-Aldrich Corp. 900,000 29,362,500
-----------
293,723,356
- --------------------------------------------------------------------------------
Consumer Cyclicals--13.8%
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Autos & Housing--0.7%
Oakwood Homes Corp. 345,200 9,363,550
- --------------------------------------------------------------------------------
Stanley Works (The) 1,182,500 50,330,156
-----------
59,693,706
- --------------------------------------------------------------------------------
Leisure & Entertainment--7.9%
Disney (Walt) Co. 455,000 34,949,687
- --------------------------------------------------------------------------------
Gaylord Entertainment Co., Cl. A 1,553,035 36,205,128
- --------------------------------------------------------------------------------
Hilton Hotels Corp. 2,485,000 76,258,437
- --------------------------------------------------------------------------------
ITT Corp. (New)(1) 800,000 50,250,000
- --------------------------------------------------------------------------------
Marriott International, Inc. 1,295,000 86,198,437
- --------------------------------------------------------------------------------
McDonald's Corp. 5,382,500 254,659,531
- --------------------------------------------------------------------------------
Mirage Resorts, Inc.(1) 1,700,000 45,581,250
- --------------------------------------------------------------------------------
Time Warner, Inc. 2,124,900 109,432,350
-----------
693,534,820
- --------------------------------------------------------------------------------
Media--1.6%
Cox Communications, Inc., Cl. A(1) 1,060,000 28,686,250
- --------------------------------------------------------------------------------
Evergreen Media Corp., Cl. A(1) 500,000 23,937,500
- --------------------------------------------------------------------------------
Omnicom Group, Inc. 1,027,900 69,640,225
- --------------------------------------------------------------------------------
Scholastic Corp.(1) 525,000 17,981,250
-----------
140,245,225
- --------------------------------------------------------------------------------
Retail: General--1.3%
Federated Department Stores, Inc.(1) 1,974,500 82,929,000
- --------------------------------------------------------------------------------
May Department Stores Cos. 629,400 33,869,587
-----------
116,798,587
11 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
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Retail: Specialty--2.3%
AutoZone, Inc.(1) 1,000,000 $28,250,000
- --------------------------------------------------------------------------------
CVS Corp. 889,000 50,117,375
- --------------------------------------------------------------------------------
Gap, Inc. (The) 2,250,000 99,984,375
- --------------------------------------------------------------------------------
Tiffany & Co. 509,100 23,036,775
-----------
201,388,525
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--19.0%
- --------------------------------------------------------------------------------
Beverages--2.2%
Anheuser-Busch Cos., Inc. 3,061,000 130,475,125
- --------------------------------------------------------------------------------
PepsiCo, Inc. 1,675,000 60,300,000
-----------
190,775,125
- --------------------------------------------------------------------------------
Food--3.0%
CPC International, Inc. 527,100 46,977,787
- --------------------------------------------------------------------------------
H.J. Heinz Co. 900,000 37,462,500
- --------------------------------------------------------------------------------
Nabisco Holdings Corp., Cl. A 1,069,600 44,388,400
- --------------------------------------------------------------------------------
Ralston-Ralston Purina Group 800,200 72,018,000
- --------------------------------------------------------------------------------
Unilever NV, NY Shares 300,000 60,375,000
-----------
261,221,687
- --------------------------------------------------------------------------------
Healthcare/Drugs--7.7%
American Home Products Corp. 1,000,000 72,000,000
- --------------------------------------------------------------------------------
Amgen, Inc.(1) 1,630,000 80,786,875
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,100,000 83,600,000
- --------------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(1) 300,000 10,687,500
- --------------------------------------------------------------------------------
Johnson & Johnson 2,000,000 113,375,000
- --------------------------------------------------------------------------------
Lilly (Eli) & Co. 416,000 43,524,000
- --------------------------------------------------------------------------------
Merck & Co., Inc. 1,305,000 119,815,312
- --------------------------------------------------------------------------------
Schering-Plough Corp. 1,544,800 74,150,400
- --------------------------------------------------------------------------------
Warner-Lambert Co. 600,000 76,237,500
-----------
674,176,587
- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--2.7%
Bard (C.R.), Inc. 1,075,000 37,087,500
- --------------------------------------------------------------------------------
Becton, Dickinson & Co. 819,200 39,270,400
- --------------------------------------------------------------------------------
Boston Scientific Corp.(1) 853,050 60,140,025
- --------------------------------------------------------------------------------
Cardinal Health, Inc. 493,400 32,687,750
- --------------------------------------------------------------------------------
HEALTHSOUTH Corp.(1) 1,500,000 37,406,250
- --------------------------------------------------------------------------------
Medtronic, Inc. 375,000 33,890,625
-----------
240,482,550
12 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Household Goods--0.6%
Avon Products, Inc. 883,800 $56,618,438
- --------------------------------------------------------------------------------
Tobacco--2.8%
Philip Morris Cos., Inc. 3,675,000 160,321,875
- --------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 2,500,000 87,031,250
-----------
247,353,125
- --------------------------------------------------------------------------------
Energy--5.5%
- --------------------------------------------------------------------------------
Energy Services & Producers--1.7%
Apache Corp. 750,000 29,765,625
- --------------------------------------------------------------------------------
Nabors Industries, Inc.(1) 700,000 24,106,250
- --------------------------------------------------------------------------------
Schlumberger Ltd. 1,220,000 92,948,750
-----------
146,820,625
- --------------------------------------------------------------------------------
Oil-Integrated--3.8%
Atlantic Richfield Co. 1,050,000 78,750,000
- --------------------------------------------------------------------------------
Exxon Corp. 1,300,000 79,543,750
- --------------------------------------------------------------------------------
Mobil Corp. 440,000 32,010,000
- --------------------------------------------------------------------------------
Royal Dutch Petroleum Co., NY Shares 740,000 37,555,000
- --------------------------------------------------------------------------------
Texaco, Inc. 675,000 77,793,750
- --------------------------------------------------------------------------------
Unocal Corp. 625,000 24,414,063
-----------
330,066,563
- --------------------------------------------------------------------------------
Financial--18.0%
- --------------------------------------------------------------------------------
Banks--7.2%
BankAmerica Corp. 1,200,000 78,975,000
- --------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 900,000 100,068,750
- --------------------------------------------------------------------------------
Citicorp 550,000 70,193,750
- --------------------------------------------------------------------------------
Commercial Federal Corp. 562,500 23,660,156
- --------------------------------------------------------------------------------
First America Bank Corp. 409,950 21,112,425
- --------------------------------------------------------------------------------
KeyCorp 600,000 36,375,000
- --------------------------------------------------------------------------------
Mellon Bank Corp. 435,000 20,934,375
- --------------------------------------------------------------------------------
Northern Trust Corp. 415,000 22,046,875
- --------------------------------------------------------------------------------
Societe Generale 500,000 62,026,983
- --------------------------------------------------------------------------------
Summit Bancorp 745,000 44,234,375
- --------------------------------------------------------------------------------
U.S. Bancorp. 350,700 30,708,169
- --------------------------------------------------------------------------------
Unibanco-Uniao de Bancos Brasileiros SA,
Sponsored GDR Representing 500 Units of
one Preferred Share of Unibanco and one
Preferred Share of Unibanco Ho1dings SA(1) 1,000,000 35,000,000
- --------------------------------------------------------------------------------
Union Planters Corp. 400,000 20,500,000
- --------------------------------------------------------------------------------
Wells Fargo & Co. 283,333 72,037,415
-----------
637,873,273
13 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Diversified Financial--8.9%
AMBAC Financial Group, Inc. 157,200 $12,703,725
- --------------------------------------------------------------------------------
American Express Co. 2,758,400 214,465,600
- --------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 977,200 56,738,675
- --------------------------------------------------------------------------------
Fannie Mae 1,006,000 44,264,000
- --------------------------------------------------------------------------------
MBNA Corp. 1,170,000 44,971,875
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 200,000 12,300,000
- --------------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 2,621,200 126,145,250
- --------------------------------------------------------------------------------
Student Loan Marketing Assn. 400,000 54,200,000
- --------------------------------------------------------------------------------
Travelers Group, Inc. 3,402,934 216,086,309
-----------
781,875,434
- --------------------------------------------------------------------------------
Insurance--1.9%
Allstate Corp. 1,130,500 82,597,156
- --------------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 890,000 32,206,875
- --------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 139,000 5,186,438
- --------------------------------------------------------------------------------
St. Paul Cos., Inc. 649,500 47,657,063
-----------
167,647,532
- --------------------------------------------------------------------------------
Industrial--6.5%
- --------------------------------------------------------------------------------
Electrical Equipment--3.6%
AMP, Inc. 1,175,000 58,750,000
- --------------------------------------------------------------------------------
Emerson Electric Co. 600,000 32,812,500
- --------------------------------------------------------------------------------
General Electric Co. 900,000 56,250,000
- --------------------------------------------------------------------------------
Grainger (W.W.), Inc. 504,500 44,805,906
- --------------------------------------------------------------------------------
Honeywell, Inc. 100,000 6,912,500
- --------------------------------------------------------------------------------
Hubbell, Inc., Cl. B 606,500 27,823,188
- --------------------------------------------------------------------------------
Raychem Corp. 433,100 40,305,369
- --------------------------------------------------------------------------------
Westinghouse Electric Corp. 2,062,000 53,096,500
-----------
320,755,963
- --------------------------------------------------------------------------------
Industrial Materials--0.2%
Bemis Co., Inc. 415,600 18,260,425
- --------------------------------------------------------------------------------
Industrial Services--1.3%
Donnelley (R.R.) & Sons Co. 1,100,000 42,831,250
- --------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. 1,526,850 74,433,938
-----------
117,265,188
- --------------------------------------------------------------------------------
Manufacturing--1.4%
American Standard Cos., Inc.(1) 950,000 44,650,000
- --------------------------------------------------------------------------------
Avery-Dennison Corp. 1,453,900 59,700,769
- --------------------------------------------------------------------------------
Sealed Air Corp.(1) 390,900 20,277,938
-----------
124,628,707
14 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Technology--17.6%
- --------------------------------------------------------------------------------
Computer Hardware--7.9%
Adaptec, Inc.(1) 1,440,000 $69,120,000
- --------------------------------------------------------------------------------
Cabletron Systems, Inc.(1) 1,815,000 54,903,750
- --------------------------------------------------------------------------------
Compaq Computer Corp.(1) 987,500 64,681,250
- --------------------------------------------------------------------------------
Diebold, Inc. 400,000 18,550,000
- --------------------------------------------------------------------------------
Hewlett-Packard Co. 660,000 40,466,250
- --------------------------------------------------------------------------------
International Business Machines Corp. 3,210,000 323,808,750
- --------------------------------------------------------------------------------
Seagate Technology, Inc.(1) 1,074,600 41,036,288
- --------------------------------------------------------------------------------
Sun Microsystems, Inc.(1) 1,700,000 81,600,000
-----------
694,166,288
- --------------------------------------------------------------------------------
Computer Software--2.8%
Automatic Data Processing, Inc. 500,000 22,781,250
- --------------------------------------------------------------------------------
BMC Software, Inc.(1) 810,000 50,726,250
- --------------------------------------------------------------------------------
First Data Corp. 1,853,600 76,113,450
- --------------------------------------------------------------------------------
Microsoft Corp.(1) 530,000 70,059,375
- --------------------------------------------------------------------------------
Sungard Data Systems, Inc.(1) 484,000 25,228,500
-----------
244,908,825
- --------------------------------------------------------------------------------
Electronics--3.1%
General Motors Corp., Cl. H 500,900 31,838,456
- --------------------------------------------------------------------------------
Intel Corp. 1,000,000 92,125,000
- --------------------------------------------------------------------------------
LSI Logic Corp.(1) 700,000 22,531,250
- --------------------------------------------------------------------------------
Solectron Corp.(1) 800,000 33,500,000
- --------------------------------------------------------------------------------
Texas Instruments, Inc. 215,000 24,429,375
- --------------------------------------------------------------------------------
Thermo Electron Corp.(1) 837,500 33,709,375
- --------------------------------------------------------------------------------
Waters Corp.(1) 500,000 16,656,250
- --------------------------------------------------------------------------------
Xilinx, Inc.(1) 450,000 21,375,000
-----------
276,164,706
- --------------------------------------------------------------------------------
Telecommunications-Technology--3.8%
ADC Telecommunications, Inc.(1) 600,000 22,275,000
- --------------------------------------------------------------------------------
Ascend Communications, Inc.(1) 800,000 33,950,000
- --------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 875,000 65,953,125
- --------------------------------------------------------------------------------
Lucent Technologies, Inc. 800,000 62,300,000
- --------------------------------------------------------------------------------
Millicom, Inc.(1) 75,000 --
- --------------------------------------------------------------------------------
QUALCOMM, Inc.(1) 350,000 16,187,500
- --------------------------------------------------------------------------------
Tellabs, Inc.(1) 880,000 52,525,000
- --------------------------------------------------------------------------------
WorldCom, Inc. 2,726,048 81,611,062
-----------
334,801,687
15 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Investments (Continued)
Market Value
Shares See Note 1
- --------------------------------------------------------------------------------
Utilities--2.1%
- --------------------------------------------------------------------------------
Gas Utilities--1.0%
Consolidated Natural Gas Co. 701,600 $41,438,250
- --------------------------------------------------------------------------------
Sonat, Inc. 950,000 47,321,875
-----------
88,760,125
- --------------------------------------------------------------------------------
Telephone Utilities--1.1%
GTE Corp. 1,000,000 44,562,500
- --------------------------------------------------------------------------------
SBC Communications, Inc. 520,000 28,275,000
- --------------------------------------------------------------------------------
Teleport Communications Group, Inc., Cl. A(1) 645,000 23,461,875
-----------
96,299,375
-----------
Total Common Stocks (Cost $5,766,939,363) 7,556,306,447
================================================================================
Other Securities--0.9%
- --------------------------------------------------------------------------------
Cia de Inversiones en Telecomunicaciones SA,
7% Provisionally Redeemable Income Debt
Exchangeable for Stock, 3/3/98(2) 225,000 14,540,625
- --------------------------------------------------------------------------------
Continental Airlines Finance Trust, 8.50% Cv.
Trust Originated Preferred Securities(2) 125,000 10,171,875
- --------------------------------------------------------------------------------
Houston Industries, Inc., 7% Automatic Common
Exchange Securities, Exchangeable for Time
Warner, Inc. Common Stock, 7/1/00 703,000 35,677,250
- --------------------------------------------------------------------------------
James River Corp. of Virginia, Depositary
Shares each representing a one-hundredth
interest in a share of Series P, 9% Cum. Cv.
Preferred Stock, Dividend Enhanced
Convertible Stock 500,000 19,062,500
-----------
Total Other Securities (Cost $60,806,633) 79,452,250
Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp.
6/99 (Cost $0) 18,750 --
Face
Amount
================================================================================
U.S. Government Obligations--6.8%
- --------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.50%, 11/15/26 $249,950,000 245,185,442
6.625%, 2/15/27 147,500,000 147,269,599
STRIPS, Zero Coupon, 6.929%, 5/15/21(3) 762,000,000 154,822,294
- --------------------------------------------------------------------------------
U.S. Treasury Nts., 5%, 1/31/98 50,000,000 49,890,648
-----------
Total U.S. Government Obligations (Cost $586,123,733) 597,167,983
16 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Face Market Value
Amount See Note 1
================================================================================
Convertible Corporate Bonds and Notes--0.6%
- --------------------------------------------------------------------------------
ALZA Corp., 5% Cv. Sub. Debs., 5/1/06 $12,800,000 $13,040,000
- --------------------------------------------------------------------------------
Continental Airlines, Inc., 6.75%
Cv. Sub. Nts., 4/15/06(2) 15,000,000 20,493,750
- --------------------------------------------------------------------------------
Corporate Express, Inc., 4.50% Cv. Sub. Nts., 7/1/00 10,000,000 9,200,000
- --------------------------------------------------------------------------------
Saks Holdings, Inc., 5.50% Cv. Sub. Nts., 9/15/06 4,800,000 4,254,000
- --------------------------------------------------------------------------------
Time Warner, Inc., Zero Coupon Cv. Sr. Sub. Nts.,
10.178%, 6/22/13(3) 20,000,000 9,500,000
-----------
Total Convertible Corporate Bonds and Notes
(Cost $51,650,380) 56,487,750
================================================================================
Short-Term Notes--5.1%
Associates Corp. of North America, 5.52%, 9/2/97(4) 100,000,000 99,984,667
- --------------------------------------------------------------------------------
CIESCO, L.P., 5.50%, 9/3/97(4) 50,000,000 49,984,722
- --------------------------------------------------------------------------------
CIESCO, L.P., 5.52%, 9/30/97(4) 50,000,000 49,777,667
- --------------------------------------------------------------------------------
Ford Motor Credit Co., 5.51%, 9/4/97(4) 50,000,000 49,977,042
- --------------------------------------------------------------------------------
General Electric Capital Corp., 5.50%, 9/8/97(4) 50,000,000 49,946,528
- --------------------------------------------------------------------------------
General Electric Capital Services, Inc.,
5.50%, 9/18/97(4) 50,000,000 49,870,139
- --------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 5.53%, 9/15/97(4) 50,000,000 49,892,472
- --------------------------------------------------------------------------------
Goldman Sachs Group, L.P., 5.60%, 9/12/97(4) 50,000,000 49,915,819
-----------
Total Short-Term Notes (Cost $449,349,056) 449,349,056
================================================================================
Repurchase Agreements--0.5%
- --------------------------------------------------------------------------------
Repurchase agreement with J.P. Morgan
Securities, Inc., 5.55%, dated 8/29/97, to be
repurchased at $46,628,737 on 9/2/97,
collateralized by U.S. Treasury Bonds,
7.25%-11.25%, 2/15/03-8/15/19, with a value
of $44,461,925 and U.S. Treasury Nts.,
5.875%, 10/31/98, with a value of $3,115,499
(Cost $46,600,000) 46,600,000 46,600,000
- --------------------------------------------------------------------------------
Total Investments, at Value (Cost $6,961,469,165) 99.7% 8,785,363,486
- --------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 26,219,659
---------- --------------
Net Assets 100.0 $8,811,583,145
========== ==============
1. Non-income producing security.
2. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board of
Directors. These securities amount to $45,206,250 or 0.51% of the Fund's net
assets, at August 31, 1997.
3. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
4. Short-term notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.
See accompanying Notes to Financial Statements.
17 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Assets and Liabilities August 31, 1997
================================================================================
Assets
Investments, at value (cost $6,961,469,165)--
see accompanying statement $8,785,363,486
- --------------------------------------------------------------------------------
Receivables:
Investments sold 38,951,695
Shares of capital stock sold 19,610,548
Interest and dividends 18,056,937
Daily variation on futures contracts--Note 5 119,250
- --------------------------------------------------------------------------------
Other 167,921
--------------
Total assets 8,862,269,837
================================================================================
Liabilities
Bank overdraft 3,282,404
- --------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 32,709,961
Shares of capital stock redeemed 8,103,035
Distribution and service plan fees 3,687,556
Transfer and shareholder servicing agent fees 1,340,737
Shareholder reports 833,993
Directors' fees 2,713
Other 726,293
--------------
Total liabilities 50,686,692
================================================================================
Net Assets $8,811,583,145
==============
================================================================================
Composition of Net Assets
Par value of shares of capital stock $ 2,609,937
- --------------------------------------------------------------------------------
Additional paid-in capital 6,568,618,744
- --------------------------------------------------------------------------------
Undistributed net investment income 17,874,940
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions 399,302,803
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and
translation of assets and liabilities denominated
in foreign currencies 1,823,176,721
--------------
Net assets $8,811,583,145
==============
18 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $4,457,349,230 and 131,610,122 shares of capital
stock outstanding) $33.87
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price) $35.94
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $3,307,851,818 and 98,285,988
shares of capital stock outstanding) $33.66
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable
contingent deferred sales charge) and offering price per
share (based on net assets of $1,030,131,940 and 30,618,749
shares of capital stock outstanding) $33.64
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per
share (based on net assets of $16,250,157 and 478,846 shares
of capital stock outstanding) $33.94
See accompanying Notes to Financial Statements.
19 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statement of Operations For the Year Ended August 31, 1997
================================================================================
Investment Income
Dividends (net of foreign withholding taxes of $381,901) $ 89,719,895
- --------------------------------------------------------------------------------
Interest 75,478,119
------------
Total income 165,198,014
================================================================================
Expenses
Distribution and service plan fees--Note 4:
Class A 9,363,505
Class B 26,361,853
Class C 9,012,625
- --------------------------------------------------------------------------------
Management fees--Note 4 34,036,569
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 6,936,594
Class B 4,648,686
Class C 1,630,109
Class Y 3,033
- --------------------------------------------------------------------------------
Shareholder reports 2,873,972
- --------------------------------------------------------------------------------
Registration and filing fees:
Class A 174,708
Class B 272,409
Class C 34,602
Class Y 4,552
- --------------------------------------------------------------------------------
Custodian fees and expenses 305,026
- --------------------------------------------------------------------------------
Legal and auditing fees 128,966
- --------------------------------------------------------------------------------
Directors' fees and expenses 84,269
- --------------------------------------------------------------------------------
Insurance expenses 34,028
- --------------------------------------------------------------------------------
Other 255,375
------------
Total expenses 96,160,881
================================================================================
Net Investment Income 69,037,133
================================================================================
Realized and Unrealized Gain
Net realized gain on:
Investments 395,924,250
Closing of futures contracts 32,337,089
Foreign currency transactions 8,205,249
--------------
Net realized gain 436,466,588
- --------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 1,409,166,629
Translation of assets and liabilities denominated in
foreign currencies 1,556,838
--------------
Net change 1,410,723,467
--------------
Net realized and unrealized gain 1,847,190,055
================================================================================
Net Increase in Net Assets Resulting from Operations $1,916,227,188
==============
See accompanying Notes to Financial Statements.
20 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended August 31, Year Ended
1997 1996(1) June 30, 1996
=====================================================================================================
<S> <C> <C> <C>
Operations
Net investment income $ 69,037,133 $ 11,737,246 $ 52,326,689
- -----------------------------------------------------------------------------------------------------
Net realized gain 436,466,588 38,637,876 384,233,192
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
or depreciation 1,410,723,467 (240,283,299) 352,369,554
-------------- -------------- --------------
Net increase (decrease) in net assets
resulting from operations 1,916,227,188 (189,908,177) 788,929,435
=====================================================================================================
Dividends and Distributions to Shareholders
Dividends from net investment income:
Class A (48,672,471) -- (40,531,298)
Class B (14,534,654) -- (11,334,670)
Class C (4,918,987) -- (5,305,754)
Class Y (39,313) -- --
- -----------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (230,404,395) -- (7,115,385)
Class B (151,242,446) -- (3,165,821)
Class C (54,897,836) -- (1,650,409)
Class Y (67) -- --
=====================================================================================================
Capital Stock Transactions
Net increase in net assets resulting from
capital stock transactions--Note 2:
Class A 576,537,290 98,647,005 790,272,185
Class B 898,948,324 169,401,905 986,624,829
Class C 114,188,051 27,973,044 178,504,196
Class Y 15,023,989 -- --
=====================================================================================================
Net Assets
Total increase 3,016,214,673 106,113,777 2,675,227,308
- -----------------------------------------------------------------------------------------------------
Beginning of period 5,795,368,472 5,689,254,695 3,014,027,387
-------------- -------------- --------------
End of period (including undistributed net
investment income of $17,874,940,
$17,097,695 and $1,372,571, respectively) $8,811,583,145 $5,795,368,472 $5,689,254,695
============== ============== ==============
</TABLE>
1. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
See accompanying Notes to Financial Statements.
21 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------------------
Year Ended August 31, Year Ended June 30,
1997 1996(3) 1996 1995 1994 1993
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning
of period $27.95 $28.89 $24.07 $20.40 $19.88 $15.46
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .39 .07 .40 .47 .37 .16
Net realized and unrealized
gain (loss) 7.91 (1.01) 4.93 3.66 2.50 6.65
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations 8.30 (.94) 5.33 4.13 2.87 6.81
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net
investment income (.40) -- (.43) (.46) (.36) (.19)
Distributions from net
realized gain (1.98) -- (.08) -- -- (2.20)
Distributions in excess of gains -- -- -- -- (1.99) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions to shareholders (2.38) -- (.51) (.46) (2.35) (2.39)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $33.87 $27.95 $28.89 $24.07 $20.40 $19.88
====== ====== ====== ====== ====== ======
====================================================================================================================================
Total Return, at Net
Asset Value(5) 31.09% (3.25)% 22.26% 20.52% 14.34% 46.38%
====================================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(in millions) $4,457 $3,143 $3,147 $1,924 $740 $58
- ------------------------------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $3,857 $3,090 $2,516 $1,319 $270 $39
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 1.29% 1.57%(6) 1.55% 2.31% 2.46% 1.02%
Expenses 0.94% 0.98%(6) 0.99% 1.07% 1.28% 1.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 61.7% 17.5% 92.6% 101.3% 199.4% 283.0%
Average brokerage
commission rate(8) $0.0604 $0.0590 $0.0571 -- -- --
</TABLE>
1. For the period from November 1, 1996 (inception of offering) to August 31,
1997.
2. For the period from December 1, 1993 (inception of offering) to June 30,
1994.
3. For the two months ended August 31, 1996. The Fund changed its fiscal year
end from June 30 to August 31.
4. For the period from October 1, 1994 (inception of offering) to June 30,
1995.
5. Assumes a hypothetical initial investment on the business day before the
first day of the fiscal period (or inception of offering), 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.
22 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class B Class C Class Y
- -------------------------------------------------- -------------------------------------------------------- ---------
Period
Ended
Year Ended August 31, Year Ended June 30, Year Ended August 31, Year Ended June 30, Aug. 31,
1997 1997(3) 1996 1995(4) 1997 1996(3) 1996 1995 1994(2) 1997(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$27.79 $28.77 $24.00 $21.49 $27.78 $28.75 $23.97 $20.33 $20.76 $29.55
- ------------------------------------------------------------------------------------------------------------------------------------
.17 .04 .23 .25 .16 .04 .21 .33 .13 .41
7.86 (1.02) 4.87 2.54 7.85 (1.01) 4.88 3.62 (.42) 6.30
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
8.03 (.98) 5.10 2.79 8.01 (.97) 5.09 3.95 (.29) 6.71
- ------------------------------------------------------------------------------------------------------------------------------------
(.18) -- (.25) (.28) (.17) -- (.23) (.31) (.14) (.34)
(1.98) -- (.08) -- (1.98) -- (.08) -- -- (1.98)
-- -- -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(2.16) -- (.33) (.28) (2.15) -- (.31) (.31) (.14) (2.32)
- ------------------------------------------------------------------------------------------------------------------------------------
$33.66 $27.79 $28.77 $24.00 $33.64 $27.78 $28.75 $23.97 $20.33 $33.94
====== ========= ========== ========= ========= ========= ========== ========= ========= =========
====================================================================================================================================
30.12% (3.41)% 21.34% 13.15% 30.07% (3.37)% 21.35% 19.63% (0.97)% 23.98%
====================================================================================================================================
$3,308 $1,909 $1,800 $628 $1,030 $744 $741 $462 $170 $16
- ------------------------------------------------------------------------------------------------------------------------------------
$2,642 $1,818 $1,155 $249 $904 $730 $588 $325 $72 $5
- ------------------------------------------------------------------------------------------------------------------------------------
0.53% 0.82%(6) 0.74% 1.25%(6) 0.54% 0.82%(6) 0.80% 1.57% 1.86%(6) 1.58%(6)
1.69% 1.74%(6) 1.76% 1.89%(6) 1.69% 1.73%(6) 1.74% 1.82% 2.11%(6) 0.65%(6)
- ------------------------------------------------------------------------------------------------------------------------------------
61.7% 17.5% 92.6% 101.3% 61.7% 17.5% 92.6% 101.3% 199.4% 61.7%
$0.0604 $0.0590 $0.0571 -- $0.0604 $0.0590 $0.0571 -- -- $0.0604
</TABLE>
6. Annualized.
7. The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average
of the market value of portfolio securities owned during the period. Securities
with a maturity or
expiration date at the time of acquisition of one year or less are excluded
from the calculation.
Purchases and sales of investment securities (excluding short-term securities)
for the period ended
August 31, 1997 were $5,941,676,446 and $3,997,312,471, respectively.
8. Total brokerage commissions paid on applicable purchases and sales of
portfolio securities for the period,
divided by the total number of related shares purchased and sold. Generally,
non-U.S. commissions are
lower than U.S. commissions when expressed as cents per share but higher when
expressed as a
percentage of transactions because of the lower per-share prices of many
non-U.S. securities.
See accompanying Notes to Financial Statements.
23 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies
Oppenheimer Main Street Income & Growth 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 high total return (which includes current
income and capital appreciation in the value of its shares) from equity and
debt securities. The Fund's investment adviser is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B, Class C and Class Y shares. Class B
and Class C shares may be subject to a contingent deferred sales charge. All
classes of shares have identical rights to earnings, assets and voting
privileges, except that each class has its own distribution and/or service
plan, expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Classes A, B and C 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.
- --------------------------------------------------------------------------------
Investment Valuation. Portfolio securities are valued at the close of the New
York Stock Exchange on each trading day. Listed and unlisted securities for
which such information is regularly reported are valued at the last sale price
of the day or, in the absence of sales, at values based on the closing bid or
the last sale price on the prior trading day. Long-term and short-term
"non-money market" debt securities are valued by a portfolio pricing service
approved by the Board of Directors. Such securities which cannot be valued by
an approved portfolio pricing service are valued using dealer-supplied
valuations provided the Manager is satisfied that the firm rendering the quotes
is reliable and that the quotes reflect current market value, or are valued
under consistently applied procedures established by the Board of Directors to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost
(or last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency exchange contracts are valued
based on the closing prices of the forward currency contract rates in the
London foreign exchange markets on a daily basis as provided by a reliable bank
or dealer. Options are valued based upon the last sale price on the principal
exchange on which the option is traded or, in the absence of any transactions
that day, the value is based upon the last sale price on the prior trading date
if it is within the spread between the closing bid and asked prices. If the
last sale price is outside the spread, the closing bid is used.
24 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Foreign Currency Translation. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of foreign securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions.
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.
- --------------------------------------------------------------------------------
Repurchase Agreements. The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is
required to be at least 102% of the resale price at the time of purchase. If
the seller of the agreement defaults and the value of the collateral declines,
or if the seller enters an insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
Allocation of Income, Expenses, and Gains and Losses. Income, expenses (other
than those attributable to a specific class) and gains and losses are allocated
daily 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 continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.
25 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
1. Significant Accounting Policies (continued)
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes primarily because of the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax purposes. The character of the
distributions made during the year from net investment income or net realized
gains may differ from its ultimate characterization for federal income tax
purposes. Also, due to timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the fiscal year in which the
income or realized gain was recorded by the Fund.
During the period ended August 31, 1997, the Fund adjusted the
classification of distributions to shareholders to reflect the differences
between financial statement amounts and distributions determined in accordance
with income tax regulations. Accordingly, during the period ended August 31,
1997, amounts have been reclassified to reflect a decrease in undistributed net
investment income of $94,463, an increase in accumulated net realized gain on
investments of $120,688, and a decrease in paid-in capital of $26,225.
- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life
of the respective securities, in accordance with federal income tax
requirements. Realized gains and losses on investments and unrealized
appreciation and depreciation are determined on an identified cost basis, which
is the same basis used for federal income tax purposes.
The preparation of financial statements in conformity with
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.
26 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
2. Capital Stock
The Fund has authorized 420 million shares of $.01 par value capital stock (200
million for Class A, 150 million for Class B, 50 million for Class C and 20
million for Class Y). Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Period Ended August 31,
Year Ended August 31, 1997(2) 1996(1) Year Ended June 30, 1996
----------------------------------- --------------------------------- -----------------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A:
Sold 33,556,681 $1,034,114,167 7,371,957 $ 205,620,158 45,286,889 $1,228,619,819
Dividends and
distributions
reinvested 9,085,326 266,799,418 -- -- 1,659,231 45,287,552
Redeemed (23,475,410) (724,376,295) (3,858,492) (106,973,153) (17,949,894) (483,635,186)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 19,166,597 $ 576,537,290 3,513,465 $ 98,647,005 28,996,226 $ 790,272,185
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 34,495,825 $1,058,128,830 7,450,147 $ 206,982,201 40,869,800 $1,108,078,820
Dividends and
distributions
reinvested 5,396,671 157,340,936 -- -- 503,255 13,692,209
Redeemed (10,274,858) (316,521,442) (1,363,728) (37,580,296) (4,980,225) (135,146,200)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 29,617,638 $ 898,948,324 6,086,419 $ 169,401,905 36,392,830 $ 986,624,829
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 7,368,632 $ 225,510,151 1,781,668 $ 49,599,528 10,384,545 $ 281,240,862
Dividends and
distributions
reinvested 1,933,297 56,297,865 -- -- 238,379 6,449,836
Redeemed (5,469,271) (167,619,965) (783,587) (21,626,484) (4,094,549) (109,186,502)
------------ -------------- ----------- -------------- ------------ --------------
Net increase 3,832,658 $ 114,188,051 998,081 $ 27,973,044 6,528,375 $ 178,504,196
============ ============== =========== ============== ============ ==============
- ------------------------------------------------------------------------------------------------------------------------
Class Y:
Sold 530,156 $ 16,705,572 -- $ -- -- $ --
Dividends and
distributions
reinvested 1,199 39,301 -- -- -- --
Redeemed (52,509) (1,720,884) -- -- -- --
------------ -------------- ----------- -------------- ------------ --------------
Net increase 478,846 $ 15,023,989 -- $ -- -- $ --
============ ============== =========== ============== ============ ==============
</TABLE>
1. The Fund changed its fiscal year end from June 30 to August 31.
2. For the year ended August 31, 1997 for Class A, Class B and Class C shares
and for the period from November 1, 1996 (inception of offering) to August 31,
1997 for Class Y shares.
27 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
Notes to Financial Statements (Continued)
3. Unrealized Gains and Losses on Investments
At August 31, 1997, net unrealized appreciation on investments of
$1,823,894,321 was composed of gross appreciation of $1,866,266,967, and gross
depreciation of $42,372,646.
================================================================================
4. Management Fees and Other Transactions with Affiliates
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for a fee of 0.65% of the first
$200 million of net assets of the Fund, 0.60% of the next $150 million, 0.55%
of the next $150 million and 0.45% of net assets in excess of $500 million.
For the year ended August 31, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $25,549,129, of which
$6,761,014 was retained by OppenheimerFunds Distributor, Inc. (OFDI), a
subsidiary of the Manager as general distributor, and by an affiliated
broker/dealer. Sales charges advanced to broker/dealers by OFDI on sales of the
Fund's Class B and Class C shares totaled $38,556,921 and $2,094,866,
respectively, of which $1,206,092 and $48,602, respectively, was paid to an
affiliated broker/dealer. During the year ended August 31, 1997, OFDI received
contingent deferred sales charges of $5,230,649 and $227,950 upon redemption of
Class B and Class C shares.
OppenheimerFunds Services (OFS), a division of the Manager, is
the transfer and shareholder servicing agent for the Fund and for other
registered investment companies. OFS's total costs of providing such services
are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares to
reimburse OFDI for a portion of its costs incurred in connection with the
personal service and maintenance of shareholder accounts that hold Class A
shares. Reimbursement is made quarterly at an annual rate that may not exceed
0.25% of the average annual net assets of Class A shares of the Fund. OFDI uses
the service fee to reimburse brokers, dealers, banks and other financial
institutions quarterly for providing personal service and maintenance of
accounts of their customers that hold Class A shares. During the year ended
August 31, 1997, OFDI paid $428,606 to an affiliated broker/dealer as
reimbursement for Class A personal service and maintenance expenses.
28 Oppenheimer Main Street Income & Growth Fund
<PAGE>
================================================================================
The Fund has adopted Distribution and Service Plans for Class B and Class C
shares to reimburse OFDI for its services and costs in distributing Class B and
Class C shares and servicing accounts. Under the Plans, the Fund pays OFDI an
annual asset-based sales charge of 0.75% per year on Class B and Class C
shares, as reimbursement for sales commissions paid from its own resources at
the time of sale and associated financing costs. OFDI also receives a service
fee of 0.25% per year as reimbursement for costs incurred in connection with
the personal service and maintenance of accounts that hold shares of the Fund,
including amounts paid to brokers, dealers, banks and other financial
institutions. Both fees are computed on the average annual net assets of Class
B and Class C shares, determined as of the close of each regular business day.
During the year ended August 31, 1997, OFDI paid $74,879 and $135,581,
respectively, to an affiliated broker/dealer as reimbursement for Class B and
Class C personal service and maintenance expenses and retained $22,635,581 and
$2,838,009, respectively, as reimbursement for Class B and Class C sales
commissions and service fee advances, as well as financing costs. If either
Plan is terminated by the Fund, the Board of Directors may allow the Fund to
continue payments of the asset-based sales charge to OFDI for distributing
shares before the Plan was terminated. At August 31, 1997, OFDI had incurred
unreimbursed expenses of $92,083,482 for Class B and $7,962,219 for Class C.
================================================================================
5. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts
to gain exposure to changes in interest rates as it may be more efficient or
cost effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation
margin) are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are recorded
as unrealized gains and losses. The Fund recognizes a realized gain or loss
when the contract is closed or expires.
29 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Notes to Financial Statements (Continued)
================================================================================
5. Futures Contracts (continued)
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 or payable for the
daily mark to market for variation margin.
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.
At August 31, 1997, the Fund had outstanding futures contracts
as follows:
Expiration Number of Valuation as of Unrealized
Contracts to Purchase Date Contracts August 31, 1997 Depreciation
- --------------------------------------------------------------------------------
Standard & Poor's 500 9/18/97 78 $35,220,900 $717,600
30 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Independent Auditors' Report
================================================================================
The Board of Directors and Shareholders of
Oppenheimer Main Street Income & Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Main Street Income & Growth Fund
as of August 31, 1997, the related statement of operations for the year then
ended, the statements of changes in net assets for the year then ended, for the
two months ended August 31, 1996 and the year ended June 30, 1996, and the
financial highlights for the period July 1, 1992 to August 31, 1997. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at August 31, 1997 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of Oppenheimer
Main Street Income & Growth Fund at August 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
September 22, 1997
31 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Federal Income Tax Information (Unaudited)
================================================================================
In early 1998, shareholders will receive information regarding all dividends
and distributions paid to them by the Fund during calendar year 1997.
Regulations of the U.S. Treasury Department require the Fund to report this
information to the Internal Revenue Service.
Distributions of $2.0779, $2.0120, $2.0105 and $2.0712 per share
were paid to Class A, Class B, Class C and Class Y shareholders, respectively,
on December 11, 1996, of which, for each class of shares, $1.3321 was
designated as a "capital gain distribution" for federal income tax purposes.
Whether received in stock or in cash, the capital gain distribution should be
treated by shareholders as a gain from the sale of capital assets held for more
than one year (long-term capital gain).
Dividends paid by the Fund during the year ended August 31, 1997
which are not designated as capital gain distributions should be multiplied by
38.56% to arrive at the net amount eligible for the corporate dividend-received
deduction.
The foregoing information is presented to assist shareholders in
reporting distributions received from the Fund to the Internal Revenue Service.
Because of the complexity of the federal regulations which may affect your
individual tax return and the many variations in state and local tax
regulations, we recommend that you consult your tax adviser for specific
guidance.
32 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Oppenheimer Main Street Income & Growth Fund
A series of Oppenheimer Main Street Funds, Inc.
================================================================================
Officers and Directors James C. Swain, Chairman and Chief Executive Officer
Bridget A. Macaskill, Director and President
Robert G. Avis, Director
William A. Baker, Director
Charles Conrad, Jr., Director
Jon S. Fossel, Director
Sam Freedman, Director Raymond J. Kalinowski, Director
C. Howard Kast, Director
Robert M. Kirchner, Director
Ned M. Steel, Director
George C. Bowen, Vice President, Treasurer
and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Robert C. Doll, Jr., Vice President
Robert J. Milnamow, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer Robert
G. Zack, Assistant Secretary
================================================================================
Investment Adviser OppenheimerFunds, Inc.
================================================================================
Distributor OppenheimerFunds Distributor, Inc.
================================================================================
Transfer and Shareholder OppenheimerFunds Services
Servicing Agent
================================================================================
Custodian of The Bank of New York
Portfolio Securities
================================================================================
Independent Auditors Deloitte & Touche LLP
================================================================================
Legal Counsel Myer, Swanson, Adams & Wolf, P.C.
This is a copy of a report to shareholders of
Oppenheimer Main Street Income & Growth Fund. This
report must be preceded or accompanied by a Prospectus
of Oppenheimer Main Street Income & Growth Fund. For
material information concerning the Fund, see the
Prospectus. Shares of Oppenheimer funds are not
deposits or obligations of any bank, are not guaranteed
by any bank, and are not insured by the FDIC or any
other agency, and involve investment risks, including
possible loss of the principal amount invested.
33 Oppenheimer Main Street Income & Growth Fund
<PAGE>
OppenheimerFunds Family
<TABLE>
<S> <C> <C>
==========================================================================================
Real Asset Funds
- ------------------------------------------------------------------------------------------
Real Asset Fund Gold & Special Minerals Fund
==========================================================================================
Stock Funds
- ------------------------------------------------------------------------------------------
Developing Markets Fund Quest Small Cap Value Fund Global Fund
Enterprise Fund Capital Appreciation Fund1 Quest Global Value Fund
International Growth Fund Quest Capital Value Fund Disciplined Value Fund
Discovery Fund Growth Fund Quest Value Fund
==========================================================================================
Stock & Bond Funds
- ------------------------------------------------------------------------------------------
Main Street Income & Quest Growth & Income Disciplined Allocation Fund
Growth Fund Value Fund Multiple Strategies Fund(2)
Quest Opportunity Value Fund Global Growth & Income Fund Bond Fund for Growth
Total Return Fund Equity Income Fund
==========================================================================================
Bond Funds
- ------------------------------------------------------------------------------------------
International Bond Fund Champion Income Fund U.S. Government Trust
High Yield Fund Strategic Income Fund Limited-Term Government Fund
Bond Fund
==========================================================================================
Municipal Funds
- ------------------------------------------------------------------------------------------
California Municipal Fund(3) Pennsylvania Municipal Fund(3) Rochester Division:
Florida Municipal Fund(3) Municipal Bond Fund Rochester Fund Municipals
New Jersey Municipal Fund(3) Insured Municipal Fund Limited Term New York
New York Municipal Fund(3) Intermediate Municipal Fund Municipal Fund
==========================================================================================
Money Market Funds(4)
- ------------------------------------------------------------------------------------------
Money Market Fund Cash Reserves
==========================================================================================
LifeSpan
- ------------------------------------------------------------------------------------------
Growth Fund Balanced Fund Income Fund
</TABLE>
1. On 12/18/96, the Fund's name was changed from "Target Fund."
2. On 3/16/97, the Fund's name was changed from "Asset Allocation Fund."
3. Available only to investors in certain states.
4. An investment in money market funds is neither insured nor guaranteed by the
U.S. government and there can be no assurance that a money market fund will be
able to maintain a stable net asset value of $1.00 per share.
Oppenheimer funds are distributed by OppenheimerFunds Distributor, Inc., Two
World Trade Center, New York, NY 10048-0203.
(C) Copyright 1997 OppenheimerFunds, Inc. All rights reserved.
34 Oppenheimer Main Street Income & Growth Fund
<PAGE>
Internet
24-hr access to account
information
- ---------------------------
www.oppenheimerfunds.com
- ---------------------------
General Information
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ---------------------------
1-800-525-7048
- ---------------------------
Account Transactions
Mon-Fri 8:30am-9pm ET
Sat 10am-4pm ET
- ---------------------------
1-800-852-8457
- ---------------------------
PhoneLink
24-hr automated information
and automated transactions
- ---------------------------
1-800-533-3310
- ---------------------------
Telecommunication Device
for the Deaf (TDD)
Mon-Fri 8:30am-2pm ET
- ---------------------------
1-800-843-4461
- ---------------------------
OppenheimerFunds
Information Hotline
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
- ---------------------------
1-800-835-3104
- ---------------------------
RA0700.001.0897 October 30, 1997
Information and services
- --------------------------------------------------------------------------------
As an Oppenheimer fund shareholder, you have some special privileges. Whether
it's automatic investment plans, informative newsletters and hotlines, or ready
account access, you can benefit from services designed to make investing
simple.
And when you need help, our Customer Service Representatives are only a
toll-free phone call away. They can provide information about your account and
handle administrative requests. You can reach them at our General Information
number.
When you want to make a transaction, you can do it easily by calling our
toll-free Telephone Transactions number. And, by enrolling in AccountLink, a
convenient service that "links" your OppenheimerFunds accounts and your bank
checking or savings account, you can use the Telephone Transactions number to
make investments.
For added convenience, you can get automated information with
OppenheimerFunds PhoneLink service, available 24 hours a day, 7 days a week.
PhoneLink gives you access to a variety of fund, account, and market
information. Of course, you can always speak with a Customer Service
Representative during the General Information hours shown at the left.
You can count on us whenever you need assistance. That's why the
International Customer Service Association, an independent, nonprofit
organization made up of over 3,200 customer service management professionals
from around the country, honored the Oppenheimer funds' transfer agent,
OppenheimerFunds Services, with their Award of Excellence in 1993.
So call us today, or visit us at our website at
www.oppenheimerfunds.com--we're here to help.
[OppenheimerFunds Logo]
Distributor, Inc.
