<PAGE> 1
ANNUAL REPORT AUGUST 31, 1998
OPPENHEIMER
MAIN STREET INCOME
& GROWTH FUND(R)
[PHOTO]
[OPPENHEIMERFUNDS LOGO]
THE RIGHT WAY TO INVEST
<PAGE> 2
CONTENTS
3 President's Letter
4 An Interview
with Your Fund's
Managers
9 Fund Performance
13 Financial
Statements
37 Independent
Auditors' Report
38 Federal Income
Tax Information
39 Officers and
Directors
40 Information and
Services
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
- - FOUR-STAR MORNINGSTAR: The Fund's Class A shares have earned an overall 4-star
ranking (****) from Morningstar for the combined 3-, 5- and 10-year periods
ended September 30, 1998, among 2,678 (3-year), 1,584 (5-year), and 713
(10-year) domestic equity funds.(1)
- - THE FUND'S NEW MANAGEMENT TEAM employs a highly disciplined investment
approach that combines quantitative analysis with portfolio manager judgment.
AVG ANNUAL TOTAL RETURNS
For the 1-Year Period Ended 8/31/98
<TABLE>
<CAPTION>
CLASS A
Without With
Sales Chg.(2) Sales Chg.(3)
<S> <C>
3.68% (2.28)%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Without With
Sales Chg.(2) Sales Chg.(3)
<S> <C>
2.86% (1.90)%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Without With
Sales Chg.(2) Sales Chg.(3)
<S> <C>
2.91% 1.95%
</TABLE>
<TABLE>
<CAPTION>
CLASS Y
Without With
Sales Chg.(2) Sales Chg.(3)
<S> <C>
3.88% 3.88%
</TABLE>
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. BECAUSE OF ONGOING
MARKET VOLATILITY, THE FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL
SHORT-TERM CHANGES. FOR UPDATES ON THE FUND'S PERFORMANCE, PLEASE CONTACT YOUR
FINANCIAL ADVISOR, CALL US AT 1-800-525-7048 OR VISIT OUR WEBSITE,
WWW.OPPENHEIMERFUNDS.COM.
1. Source: Morningstar mutual funds, 9/30/98. Morningstar, Inc. ranks mutual
funds in broad investment classes, based on risk adjusted returns after
considering sales charges and expenses. Return and risk are measured as
performance above and below 90-day U.S. Treasury bill returns, respectively.
Current star rankings are based on the weighted average of 3-, 5- and 10-year
(if applicable) rankings for a fund or class and are subject to change monthly.
Top 10%: 5 stars. Next 22.5%: 4 stars. Middle 35%: 3 stars. Next 22.5%: 2 stars.
Bottom 10%: 1 star. The Fund's rankings were 3 stars (3-year), 3 stars (5-year)
and 5 stars (10-year) weighted 20%/30%/50%, respectively.
2. 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.
3. Class A return includes the current maximum initial sales charge of 5.75%.
Class B return includes the applicable contingent deferred sales charge of 5%.
Class C return includes the contingent deferred sales charge of 1%. Class Y
shares are not available for sale to individual shareholders. An explanation of
the different performance calculations is in the Fund's prospectus. Class B and
C shares are subject to a 0.75% annual asset-based sales charge.
2 Oppenheimer Main Street Income & Growth Fund
<PAGE> 3
[PHOTO]
JAMES C. SWAIN
Chairman
Oppenheimer Main Street
Income & Growth Fund
[PHOTO]
BRIDGET A. MACASKILL
President
Oppenheimer Main Street
Income & Growth Fund
DEAR SHAREHOLDER,
- --------------------------------------------------------------------------------
The performance of the financial markets over the past several months could be
viewed as "A Tale of Two Markets." Until mid-July, the excitement surrounding
the stock market's continued ascent to new record highs overshadowed the
favorable economic environment that existed for bonds: low inflation and
declining interest rates. However, since that time, stocks have declined sharply
amid heightened volatility. Yet, the bond market remains poised to benefit from
the same positive economic conditions that existed earlier in the year.
Why have stocks faltered lately? The financial crises in Asia and Russia
have negatively affected the earnings of some large U.S. corporations and have
contributed to a slow-down in U.S. economic growth. Although slower economic
growth has been negative for stocks, it should not adversely impact bonds.
That's because slower economic growth generally means fewer inflationary
pressures and less likelihood that interest rates will rise.
What should you do during this period of relative uncertainty? If you have
well-defined long-term financial goals and an investment strategy designed to
achieve them, we encourage you to stay the course. However, if you feel your
financial plan is out-of-date or incomplete, now is the time to make
improvements. The best way to cope with short-term volatility is to adhere to a
long-term plan that contains proven strategies, such as diversification among
various financial markets, geographic regions, investment styles and individual
securities. A long-term plan will give you the focus and perspective you need to
put short-term volatility in its proper context.
As longstanding advocates of financial planning, we have been encouraged
by our shareholders' rational responses to the latest market events. Many of you
tell us that you have a long-term strategy in place, which includes diversifying
your investment portfolio among a number of different asset classes in
accordance with your tolerance for risk. At OppenheimerFunds, our portfolio
management teams include seasoned professionals who have encountered extreme
market volatility in the past, giving them the perspective required to address
risks and take advantage of opportunities in turbulent markets. In our view,
having a well-defined set of financial goals, a disciplined long-term strategy
and the help of experienced investment professionals are all fundamental parts
of The Right Way to Invest.
Sincerely,
/s/ JAMES C. SWAIN /s/ BRIDGET A. MACASKILL
James C. Swain Bridget A. Macaskill
September 22, 1998
3 Oppenheimer Main Street Income & Growth Fund
<PAGE> 4
"OUR INVESTMENT APPROACH COMBINES...BOTH A TOP DOWN AND BOTTOM UP PERSPECTIVE."
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
HOW DID THE FUND PERFORM DURING THE 12-MONTH PERIOD THAT ENDED AUGUST 31, 1998?
We are pleased with Oppenheimer Main Street Income & Growth Fund's performance.
Favorable conditions in the U.S. stock market during most of the period were one
factor supporting the Fund's positive returns. Another important factor was the
Fund's stock selection process, which enabled us to add value to the portfolio.
WHY HAS THE STOCK MARKET BECOME INCREASINGLY VOLATILE IN RECENT MONTHS?
The U.S. stock market appears to have experienced a shift in investor
expectations. For the past several years, the stock market's rise has been
fueled by high corporate earnings growth rates and declining interest rates.
Investors have become accustomed to large stock market gains, driven by a
favorable domestic and international economic environment. During the past
several months, however, investors have been reacting to increasing global
tensions, as well as signs of a slower domestic economy, which negatively
impacted earnings growth. This impact has had a varying effect across market
sectors, and we have seen a flight to high quality stocks with more stable
earnings expectations.
HOW WAS THE FUND MANAGED IN THIS ENVIRONMENT?
Between September 1, 1997, and April 1998, the Fund used a flexible investment
style that favored solid, consistent growth companies available at reasonable
prices. The Fund's previous manager searched for individual companies which he
believed to have superior growth prospects among the entire universe of stocks,
rather than focusing on just one or two market sectors. Typically, these
compa-
4 Oppenheimer Main Street Income & Growth Fund
<PAGE> 5
[PHOTO]
PORTFOLIO MANAGEMENT
TEAM (L TO R)
Charles Albers
Nikolaos Monoyios
nies' growth potential was the result of business changes such as new
management, new products, new markets or a reorganization. In addition, when
market conditions warranted, the Fund invested in income-producing securities,
such as bonds, to help offset potential stock market volatility.
When we joined OppenheimerFunds as the Fund's new portfolio managers in
April of this year, we adopted the disciplined investment approach that we have
developed and refined over the past 25 years. Our investment approach combines
quantitative analysis and portfolio manager judgement to evaluate the portfolio,
from both a top down and bottom up perspective.
On the quantitative side, we have developed sophisticated mathematical
models that evaluate statistics across individual stocks. These models assign a
ranking to each of 2000 stocks according to its prospects for the next several
months. The models incorporate fundamental data regarding earnings and
valuation, as well as special considerations such as the effect of stock
buy-backs or offerings. In addition to our stock selection models, we also have
models that help us to forecast which areas of the stock market offer the best
prospects. For example, the models help us decide whether to favor growth stocks
or value stocks, large-cap stocks or smaller stocks, etc. Along the same lines,
the models also help us to identify which industries and market sectors are
likely to contain the most attractive investment opportunities.
5 Oppenheimer Main Street Income & Growth Fund
<PAGE> 6
AVG ANNUAL TOTAL RETURNS
For the Periods Ended 9/30/98(1)
<TABLE>
<CAPTION>
CLASS A
1 year 5 year 10 year
<S> <C> <C>
(1.14)% 14.04% 20.56%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
Since
1 year 5 year Inception
<S> <C> <C>
(0.74)% N/A 16.63%
</TABLE>
<TABLE>
<CAPTION>
CLASS C
Since
1 year 5 year Inception
<S> <C> <C>
3.14% N/A 14.87%
</TABLE>
<TABLE>
<CAPTION>
CLASS Y
Since
1 year 5 year Inception
<S> <C> <C>
5.11% N/A 17.45%
</TABLE>
AN INTERVIEW WITH YOUR FUND'S MANAGERS
- --------------------------------------------------------------------------------
Before any investment decision is made, we carefully examine the stocks
recommended by the models. Portfolio manager judgement is a crucial part of our
system. We evaluate such factors as each company's quality of management,
competitive forces and legal or accounting issues. We also take into
consideration the trading costs associated with each stock that we are
evaluating for purchase.
WHAT CHANGES HAVE BEEN MADE TO THE FUND'S PORTFOLIO AS A RESULT OF THE
MANAGEMENT CHANGE?
Although we bring a new investment style to the Fund, our overall investment
philosophy is consistent with the Fund's objectives and policies. Accordingly,
since the management change in April 1998, the portfolio turnover has been
roughly 55% on an annualized basis. In addition, we have reduced the Fund's
current cash position to about 6% of the portfolio.
In the Fund's equity portion, we have increased the current average market
capitalization to approximately $50 billion due to our preference for large-cap
stocks in the current environment. These stocks include high-quality,
domestic-oriented companies in the telecommunications, retail, pharmaceutical,
and automobile industries. We have also increased the Fund's exposure to
utilities and transportation companies.
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
10/3/94). Class C returns include the contingent deferred sales charge of 1%
since inception on 12/1/93. Class Y shares were first publicly offered on
11/1/96 and are not available for sale to individual shareholders. An
explanation of the different performance calculations is in the Fund's
prospectus. Class B and C shares are subject to a 0.75% annual asset-based sales
charge.
6 Oppenheimer Main Street Income & Growth Fund
<PAGE> 7
We reduced the Fund's exposure to certain consumer stocks with high
international exposure. In our opinion, these stocks had become overvalued, and
were vulnerable to any deterioration in the international economic environment.
We have also minimized our already modest weightings in basic industry, energy
and other economically sensitive sectors that are affected by slower growth and
declining commodity prices.
WHAT IS YOUR OUTLOOK FOR THE STOCK MARKET OVER THE FORESEEABLE FUTURE?
We are cautiously optimistic. On one hand, we've recently seen marked volatility
in the U.S. stock market, which is likely to continue. And, so far in 1998,
earnings reports have been generally worse than most analysts expected. This is
largely the result of the Asian crisis and heightened domestic and international
competitive pressures.
On the other hand, the U.S. economy continues to grow, albeit more slowly
than it did earlier this year. Inflation remains low and, perhaps most
important, interest rates are stable. In fact, if the economy weakens further,
interest rates could move lower.
In the meantime, we believe our disciplined investment approach should
continue to uncover high-quality stocks in those sectors of the marketplace most
likely to
7 Oppenheimer Main Street Income & Growth Fund
<PAGE> 8
ASSET ALLOCATION(2)
[PIE CHART]
<TABLE>
<S> <C>
- - Stocks 91.5%
- - Cash Equivalents 5.7
- - Bonds 2.8
</TABLE>
support long-term gains. Even if the stock market continued to experience
periods of heightened volatility, we believe that such a disciplined approach
should serve our shareholders well in the months and years ahead. That approach,
combined with the risk-reduction benefits of diversification, are important
parts of The Right Way to Invest.
<TABLE>
<CAPTION>
TOP FIVE INDUSTRIES(2)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Healthcare/Drugs 10.0% Diversified Financial 8.2
- ---------------------------------------------------------------------
Telephone Utilities 9.3 Computer Software/Services 5.9
- ---------------------------------------------------------------------
Banks 9.2
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TOP TEN STOCK HOLDINGS(2)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Microsoft Corp. 3.0% AT&T Corp. 2.4%
- ---------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.7 IBM Corp. 2.4
- ---------------------------------------------------------------------
Merck & Co., Inc. 2.6 American Express Co. 2.4
- ---------------------------------------------------------------------
Cisco Systems, Inc. 2.4 Bristol-Myers Squibb Co. 1.9
- ---------------------------------------------------------------------
Travelers Group, Inc. 2.4 Time Warner, Inc. 1.8
- ---------------------------------------------------------------------
</TABLE>
2. Portfolio is subject to change. Percentages are as of August 31, 1998 and are
based on total market value of investments.
8 Oppenheimer Main Street Income & Growth Fund
<PAGE> 9
FUND PERFORMANCE
- --------------------------------------------------------------------------------
HOW HAS THE FUND PERFORMED? Below is a discussion by the Manager of the Fund's
performance during its fiscal year ended August 31, 1998, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index.
- MANAGEMENT'S DISCUSSION OF PERFORMANCE. During the fiscal year ended
August 31, 1998, Oppenheimer Main Street Income & Growth Fund's performance was
affected by a number of factors, including the strong performance of the U.S.
stock market over most of the period. The Fund's growth-oriented investment
style and focus on large-capitalization stocks enabled it to participate in some
of the reporting period's top-performing market sectors. However, during the
last few months of the fiscal yearend, investors were reacting to increasing
global tensions, as well as signs of a slower domestic economy, which negatively
impacted earnings growth. The Fund's portfolio holdings, allocations and
strategies are subject to change.
- COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow
show the performance of a hypothetical $10,000 investment in each class of
shares of the Fund held until August 31, 1998. In the case of Class A shares,
performance is measured from the commencement of operations on February 3, 1988;
in the case of Class B shares, from the inception of the class on October 3,
1994; in the case of Class C shares, from the inception of the class on December
1, 1993; and in the case of Class Y shares, from the inception of the class on
November 1, 1996. The graphs reflect the deduction of the 5.75% maximum initial
sales charge on Class A shares, the applicable contingent deferred sales charge
for Class B and Class C shares, and reinvestment of all dividends and capital
distributions.
The Fund's performance is compared to the performance of the Standard &
Poor's ("S&P") 500 Index. The S&P 500 Index is a broad based index of equity
securities widely regarded as a general measurement of the performance of the
U.S. equity securities market. Index performance reflects the reinvestment of
dividends but does not consider the effect of capital gains or transaction cost,
and none of the data in the graphs shows the effect of taxes. The Fund's
performance reflects the effects of Fund business and operating expenses. While
index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in the S&P 500 index, which tend to be securities of larger,
well-capitalized companies.
9 Oppenheimer Main Street Income & Growth Fund
<PAGE> 10
FUND PERFORMANCE
- --------------------------------------------------------------------------------
Class A Shares
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Income & Growth Fund (Class A) and S&P 500
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Oppenheimer Main S&P 500
Street Income
& Growth Fund
DATE Class A
<S> <C> <C>
2.3.88 9425 1000
9984 10815
6.30.89 11858 13034
12933 15178
6.30.91 14304 16297
19952 18479
6.30.93 29206 20993
33392 21287
6.30.95 40244 26828
8.31.96(1) 49203 33798
47602 32988
62402 4639
8.31.98 64696 50148
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS A SHARES OF THE FUND AT 8/31/98(2)
1 Year -2.28% 5 Year 13.34% 10 Year 20.11%
CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Income & Growth Fund (Class B) and S&P 500
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Oppenheimer Main S&P 500
Street Income
& Growth Fund
DATE Class B
<S> <C> <C>
10.3.94 10000 10000
6.30.95 11341 12017
13762 15139
8.31.96(1) 13293 14776
8.31.97 17298 20778
8.31.98 17492 22462
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS B SHARES OF THE FUND AT 8/31/98(3)
1 Year -1.90% Life 15.37%
The returns and the ending account values in the graphs show change in share
value and include reinvestment of all dividends and capital gains distributions.
The performance information in the graphs for S&P 500 Index for Class A begins
on 1/31/88, for Class B begins on 9/30/94, for Class C begins on 11/30/93 and
for Class Y begins on 10/31/96.
1. The Fund changed its fiscal year end from 6/30 to 8/31.
2. The inception date of the Fund's Class A shares was 2/3/88. The Class A
returns are shown net of the applicable 5.75% maximum initial sales charge.
10 Oppenheimer Main Street Income & Growth Fund
<PAGE> 11
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Income & Growth Fund (Class C) and S&P 500
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Oppenheimer Main S&P 500
Street Income
& Growth Fund
DATE Class C
<S> <C> <C>
12.1.93 10000 10000
6.30.94 9856 9779
6.30.95 11789 12324
8.31.96(1) 14308 15526
13825 15154
8.31.97 17981 21310
8.31.98 18505 23036
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS C SHARES OF THE FUND AT 8/31/98(4)
1 Year 1.95% Life 13.83%
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer Main Street Income & Growth Fund (Class Y) and S&P 500
[The following chart was represented as a line graph in the printed material.]
<TABLE>
<CAPTION>
Oppenheimer Main S&P 500
Street Income
& Growth Fund
DATE Class Y
<S> <C> <C>
11.1.96 10000 10000
8.31.97 12398 12957
8.31.98 12879 14006
</TABLE>
AVERAGE ANNUAL TOTAL RETURN OF CLASS Y SHARES OF THE FUND AT 8/31/98(5)
1 Year 3.88% Life 14.80%
3. Class B shares of the Fund were first publicly offered on 10/3/94. The
average annual total returns are shown net of the applicable 5% and 3%
contingent deferred sales charge, respectively for the 1-year period and for the
life of the class. The ending account value in the graph is net of the
applicable 3% contingent deferred sales charge.
4. Class C shares of the Fund were first publicly offered on 12/1/93. The 1-year
return is shown net of the applicable 1% contingent deferred sales charge.
5. Class Y shares of the Fund, first publicly offered on 11/1/96, are offered at
net asset value without sales charge to certain institutional investors.
Past performance is not predictive of future performance. Graphs are not drawn
to same scale.
11 Oppenheimer Main Street Income & Growth Fund
<PAGE> 12
FINANCIALS
- --------------------------------------------------------------------------------
12 Oppenheimer Main Street Income & Growth Fund
<PAGE> 13
STATEMENT OF INVESTMENTS August 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS--91.1%
- -----------------------------------------------------------------------------------------------
BASIC MATERIALS--2.2%
- -----------------------------------------------------------------------------------------------
CHEMICALS--2.2%
Du Pont (E.I.) De Nemours & Co. 600,000 $ 34,612,500
- -----------------------------------------------------------------------------------------------
Monsanto Co. 2,506,800 137,090,625
- -----------------------------------------------------------------------------------------------
PPG Industries, Inc. 240,000 12,195,000
- -----------------------------------------------------------------------------------------------
Rohm & Haas Co. 224,000 19,334,000
- -----------------------------------------------------------------------------------------------
Sigma-Aldrich Corp. 750,000 20,812,500
- -----------------------------------------------------------------------------------------------
Solutia, Inc. 300,000 6,731,250
-------------
230,775,875
- -----------------------------------------------------------------------------------------------
CONSUMER CYCLICALS--17.7%
- -----------------------------------------------------------------------------------------------
AUTOS & HOUSING--1.8%
Ford Motor Co. 2,230,000 98,120,000
- -----------------------------------------------------------------------------------------------
General Motors Corp. 1,150,000 66,412,500
- -----------------------------------------------------------------------------------------------
Hertz Corp., Cl. A 150,000 5,662,500
- -----------------------------------------------------------------------------------------------
Stanley Works (The) 308,100 12,131,437
-------------
182,326,437
- -----------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--5.3%
Alaska Air Group, Inc.(1) 450,000 17,521,875
- -----------------------------------------------------------------------------------------------
America West Holdings Corp., Cl. B(1) 300,000 5,831,250
- -----------------------------------------------------------------------------------------------
AMR Corp.(1) 472,000 25,724,000
- -----------------------------------------------------------------------------------------------
ASA Holdings, Inc. 100,000 3,425,000
- -----------------------------------------------------------------------------------------------
Carnival Corp. 670,000 19,346,250
- -----------------------------------------------------------------------------------------------
Comair Holdings, Inc. 150,000 3,815,625
- -----------------------------------------------------------------------------------------------
Continental Airlines, Inc., Cl. B(1) 100,000 4,125,000
- -----------------------------------------------------------------------------------------------
Delta Air Lines, Inc. 180,000 18,360,000
- -----------------------------------------------------------------------------------------------
Hilton Hotels Corp. 699,000 14,504,250
- -----------------------------------------------------------------------------------------------
King World Productions, Inc.(1) 110,000 2,310,000
- -----------------------------------------------------------------------------------------------
Marriott International, Inc., Cl. A 3,340,600 93,745,587
- -----------------------------------------------------------------------------------------------
Mattel, Inc. 540,000 17,482,500
- -----------------------------------------------------------------------------------------------
McDonald's Corp. 2,401,100 134,611,669
- -----------------------------------------------------------------------------------------------
Time Warner, Inc. 2,255,180 181,260,092
-------------
542,063,098
- -----------------------------------------------------------------------------------------------
MEDIA--2.6%
American Greetings Corp., Cl. A 102,000 3,735,750
- -----------------------------------------------------------------------------------------------
Cox Communications, Inc., Cl. A(1) 1,317,100 55,318,200
- -----------------------------------------------------------------------------------------------
Gannett Co., Inc. 600,000 35,400,000
- -----------------------------------------------------------------------------------------------
New York Times Co., Cl. A 800,000 23,200,000
- -----------------------------------------------------------------------------------------------
Omnicom Group, Inc. 2,155,800 102,669,975
</TABLE>
13 Oppenheimer Main Street Income & Growth Fund
<PAGE> 14
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
MEDIA (CONTINUED)
Tele-Communications, Inc. (New),
Liberty Media Group, Series A(1) 660,000 $ 21,573,750
- -----------------------------------------------------------------------------------------------
Tribune Co. 450,000 28,996,875
-------------
270,894,550
- -----------------------------------------------------------------------------------------------
RETAIL: GENERAL--4.4%
CVS Corp. 1,796,000 65,329,500
- -----------------------------------------------------------------------------------------------
Dollar General Corp. 290,000 7,793,750
- -----------------------------------------------------------------------------------------------
Federated Department Stores, Inc.(1) 580,000 25,266,250
- -----------------------------------------------------------------------------------------------
Jones Apparel Group, Inc.(1) 815,700 15,804,187
- -----------------------------------------------------------------------------------------------
Kohl's Corp.(1) 100,000 4,543,750
- -----------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 110,000 3,135,000
- -----------------------------------------------------------------------------------------------
May Department Stores Cos. 450,000 25,312,500
- -----------------------------------------------------------------------------------------------
Mohawk Industries, Inc.(1) 180,000 4,781,250
- -----------------------------------------------------------------------------------------------
Penney (J.C.) Co., Inc. 300,000 14,868,750
- -----------------------------------------------------------------------------------------------
Shaw Industries, Inc. 450,000 6,806,250
- -----------------------------------------------------------------------------------------------
VF Corp. 160,100 6,063,787
- -----------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 4,675,000 274,656,250
-------------
454,361,224
- -----------------------------------------------------------------------------------------------
RETAIL: SPECIALTY--3.6%
Abercrombie & Fitch Co., Cl. A(1) 350,000 15,050,000
- -----------------------------------------------------------------------------------------------
Best Buy Co., Inc.(1) 200,000 7,875,000
- -----------------------------------------------------------------------------------------------
Costco Cos., Inc.(1) 320,000 15,060,000
- -----------------------------------------------------------------------------------------------
Footstar, Inc.(1) 100,000 2,912,500
- -----------------------------------------------------------------------------------------------
Gap, Inc. 2,675,000 136,592,187
- -----------------------------------------------------------------------------------------------
Home Depot, Inc. 2,900,000 111,650,000
- -----------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 520,000 18,232,500
- -----------------------------------------------------------------------------------------------
Polo Ralph Lauren Corp.(1) 300,000 6,581,250
- -----------------------------------------------------------------------------------------------
Proffitt's, Inc.(1) 200,000 5,100,000
- -----------------------------------------------------------------------------------------------
Staples, Inc.(1) 250,000 6,781,250
- -----------------------------------------------------------------------------------------------
Tandy Corp. 250,000 13,640,625
- -----------------------------------------------------------------------------------------------
Tiffany & Co. 867,000 32,241,562
-------------
371,716,874
- -----------------------------------------------------------------------------------------------
CONSUMER NON-CYCLICALS--16.6%
- -----------------------------------------------------------------------------------------------
BEVERAGES--1.1%
Anheuser-Busch Cos., Inc. 2,433,500 112,245,187
- -----------------------------------------------------------------------------------------------
FOOD--2.6%
Agribrands International, Inc.(1) 171,960 5,008,335
- -----------------------------------------------------------------------------------------------
Albertson's, Inc. 580,000 29,326,250
- -----------------------------------------------------------------------------------------------
Bestfoods 530,800 26,639,525
</TABLE>
14 Oppenheimer Main Street Income & Growth Fund
<PAGE> 15
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
FOOD (CONTINUED)
H.J. Heinz Co. 1,625,000 $ 86,632,813
- -----------------------------------------------------------------------------------------------
Safeway, Inc.(1) 860,100 33,866,438
- -----------------------------------------------------------------------------------------------
Unilever NV, NY Shares 1,300,000 82,387,500
--------------
263,860,861
- -----------------------------------------------------------------------------------------------
HEALTHCARE/DRUGS--10.1%
Abbott Laboratories 3,100,000 119,350,000
- -----------------------------------------------------------------------------------------------
American Home Products Corp. 3,100,000 155,387,500
- -----------------------------------------------------------------------------------------------
Amgen, Inc.(1) 350,000 21,306,250
- -----------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 2,000,000 195,750,000
- -----------------------------------------------------------------------------------------------
Johnson & Johnson 945,000 65,205,000
- -----------------------------------------------------------------------------------------------
Merck & Co., Inc. 2,280,000 264,337,500
- -----------------------------------------------------------------------------------------------
Mylan Laboratories, Inc. 300,000 6,862,500
- -----------------------------------------------------------------------------------------------
Schering-Plough Corp. 1,960,800 168,628,800
- -----------------------------------------------------------------------------------------------
Warner Lambert Co. 600,000 39,150,000
--------------
1,035,977,550
- -----------------------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES & SERVICES--1.1%
Allegiance Corp. 582,000 16,441,500
- -----------------------------------------------------------------------------------------------
Arterial Vascular Engineering, Inc.(1) 450,000 15,750,000
- -----------------------------------------------------------------------------------------------
Becton, Dickinson & Co. 832,400 27,729,325
- -----------------------------------------------------------------------------------------------
Biomet, Inc. 300,000 8,062,500
- -----------------------------------------------------------------------------------------------
Cardinal Health, Inc. 365,300 31,963,750
- -----------------------------------------------------------------------------------------------
Lincare Holdings, Inc.(1) 300,000 10,181,250
- -----------------------------------------------------------------------------------------------
Tenet Healthcare Corp.(1) 52,200 1,347,413
--------------
111,475,738
- -----------------------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.3%
Kimberly-Clark Corp. 680,000 25,925,000
- -----------------------------------------------------------------------------------------------
TOBACCO--1.4%
Fortune Brands, Inc. 320,000 8,820,000
- -----------------------------------------------------------------------------------------------
Philip Morris Cos., Inc. 3,375,000 140,273,438
--------------
149,093,438
- -----------------------------------------------------------------------------------------------
ENERGY--3.7%
- -----------------------------------------------------------------------------------------------
ENERGY SERVICES & PRODUCERS--3.3%
Apache Corp. 1,300,000 29,737,500
- -----------------------------------------------------------------------------------------------
Baker Hughes, Inc. 2,182,140 39,824,055
- -----------------------------------------------------------------------------------------------
Chieftain International, Inc.(1) 190,200 2,662,800
- -----------------------------------------------------------------------------------------------
Dresser Industries, Inc. 750,000 19,171,875
- -----------------------------------------------------------------------------------------------
Halliburton Co. 1,671,900 44,409,844
</TABLE>
15 Oppenheimer Main Street Income & Growth Fund
<PAGE> 16
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ENERGY SERVICES & PRODUCERS (CONTINUED)
Nabors Industries, Inc.(1) 800,000 $ 9,450,000
- -----------------------------------------------------------------------------------------------
Oryx Energy Co. 300,000 3,731,250
- -----------------------------------------------------------------------------------------------
Paramount Resources Ltd. 144,400 1,061,651
- -----------------------------------------------------------------------------------------------
Santa Fe International Corp. 251,400 3,393,900
- -----------------------------------------------------------------------------------------------
Schlumberger Ltd. 3,930,000 172,183,125
- -----------------------------------------------------------------------------------------------
Smith International, Inc.(1) 225,000 3,965,625
- -----------------------------------------------------------------------------------------------
Tesoro Petroleum Corp.(1) 450,000 5,793,750
- -----------------------------------------------------------------------------------------------
Transocean Offshore, Inc. 200,000 4,912,500
-------------
340,297,875
- -----------------------------------------------------------------------------------------------
OIL-INTEGRATED--0.4%
Berkley Petroleum Corp.(1) 1,573,800 8,300,803
- -----------------------------------------------------------------------------------------------
Canadian 88 Energy Corp.(1) 2,421,900 7,354,725
- -----------------------------------------------------------------------------------------------
Canadian Natural Resources Ltd.(1) 270,000 3,193,391
- -----------------------------------------------------------------------------------------------
Frontier Oil Corp.(1) 850,900 4,573,588
- -----------------------------------------------------------------------------------------------
Newport Petroleum Corp.(1) 1,934,000 5,007,582
- -----------------------------------------------------------------------------------------------
Vastar Resources, Inc. 307,200 11,673,600
-------------
40,103,689
- -----------------------------------------------------------------------------------------------
FINANCIAL--20.2%
- -----------------------------------------------------------------------------------------------
BANKS--9.3%
AmSouth Bancorp 320,000 11,000,000
- -----------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The) 800,000 19,350,000
- -----------------------------------------------------------------------------------------------
BankAmerica Corp. 1,200,000 76,875,000
- -----------------------------------------------------------------------------------------------
BB&T Corp. 690,000 19,449,375
- -----------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New) 1,700,000 90,100,000
- -----------------------------------------------------------------------------------------------
Citicorp 700,000 75,687,500
- -----------------------------------------------------------------------------------------------
Comerica, Inc. 220,000 11,495,000
- -----------------------------------------------------------------------------------------------
Commercial Federal Corp. 767,750 16,890,500
- -----------------------------------------------------------------------------------------------
Credit Suisse Group 270,000 47,322,832
- -----------------------------------------------------------------------------------------------
Dime Bancorp, Inc. 430,000 8,170,000
- -----------------------------------------------------------------------------------------------
First Chicago NBD Corp. 917,100 58,121,213
- -----------------------------------------------------------------------------------------------
First Union Corp. 1,200,000 58,200,000
- -----------------------------------------------------------------------------------------------
Fleet Financial Group, Inc. 1,000,000 65,562,500
- -----------------------------------------------------------------------------------------------
Mellon Bank Corp. 844,200 43,898,400
- -----------------------------------------------------------------------------------------------
National City Corp. 450,000 26,437,500
- -----------------------------------------------------------------------------------------------
Northern Trust Corp. 540,000 30,105,000
- -----------------------------------------------------------------------------------------------
Old Kent Financial Corp. 230,000 7,417,500
- -----------------------------------------------------------------------------------------------
Regions Financial Corp. 370,000 12,811,250
- -----------------------------------------------------------------------------------------------
Summit Bancorp 1,167,500 39,840,938
- -----------------------------------------------------------------------------------------------
UBS AG(1) 85,000 27,445,099
</TABLE>
16 Oppenheimer Main Street Income & Growth Fund
<PAGE> 17
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS (CONTINUED)
Unibanco-Uniao de Bancos Brasileiros SA, Sponsored GDR 800,000 $ 12,000,000
- -----------------------------------------------------------------------------------------------
Wachovia Corp. 300,000 21,993,750
- -----------------------------------------------------------------------------------------------
Wells Fargo & Co. 618,333 174,292,614
-------------
954,465,971
- -----------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL--8.2%
AMBAC Financial Group, Inc. 320,000 15,100,000
- -----------------------------------------------------------------------------------------------
American Express Co. 3,158,400 246,355,200
- -----------------------------------------------------------------------------------------------
Associates First Capital Corp., Cl. A 577,200 34,126,950
- -----------------------------------------------------------------------------------------------
Fannie Mae 1,606,000 91,240,875
- -----------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,020,000 67,320,000
- -----------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 2,071,200 120,259,050
- -----------------------------------------------------------------------------------------------
PaineWebber Group, Inc. 430,000 14,942,500
- -----------------------------------------------------------------------------------------------
Price (T. Rowe) Associates, Inc. 200,000 6,087,500
- -----------------------------------------------------------------------------------------------
Travelers Group, Inc. 5,654,401 250,914,044
-------------
846,346,119
- -----------------------------------------------------------------------------------------------
INSURANCE--2.7%
Allmerica Financial Corp. 200,000 11,925,000
- -----------------------------------------------------------------------------------------------
Allstate Corp. 3,155,200 118,320,000
- -----------------------------------------------------------------------------------------------
Chubb Corp. 226,000 14,125,000
- -----------------------------------------------------------------------------------------------
Cigna Corp. 494,000 28,744,625
- -----------------------------------------------------------------------------------------------
General Re Corp. 156,000 32,370,000
- -----------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 308,000 13,783,000
- -----------------------------------------------------------------------------------------------
Hartford Life, Inc., Cl. A 430,000 22,037,500
- -----------------------------------------------------------------------------------------------
Jefferson-Pilot Corp. 97,800 5,550,150
- -----------------------------------------------------------------------------------------------
Lincoln National Corp. 260,000 22,360,000
- -----------------------------------------------------------------------------------------------
Old Republic International Corp. 500,000 11,156,250
-------------
280,371,525
- -----------------------------------------------------------------------------------------------
INDUSTRIAL--6.4%
- -----------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--2.1%
Berg Electronics Corp.(1) 127,200 4,134,000
- -----------------------------------------------------------------------------------------------
General Electric Co. 1,834,500 146,760,000
- -----------------------------------------------------------------------------------------------
Grainger (W.W.), Inc. 1,135,000 44,477,813
- -----------------------------------------------------------------------------------------------
Honeywell, Inc. 360,000 22,500,000
-------------
217,871,813
- -----------------------------------------------------------------------------------------------
INDUSTRIAL MATERIALS--0.2%
Lafarge Corp. 200,000 5,712,500
- -----------------------------------------------------------------------------------------------
Vulcan Materials Co. 100,000 11,150,000
-------------
16,862,500
</TABLE>
17 Oppenheimer Main Street Income & Growth Fund
<PAGE> 18
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (Continued)
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL SERVICES--1.9%
Donnelley (R.R.) & Sons Co. 1,325,000 $ 48,031,250
- -----------------------------------------------------------------------------------------------
H&R Block, Inc. 260,000 10,172,500
- -----------------------------------------------------------------------------------------------
IMS Health, Inc. 200,000 11,000,000
- -----------------------------------------------------------------------------------------------
Interpublic Group of Cos., Inc. 1,676,850 95,580,450
- -----------------------------------------------------------------------------------------------
NCR Corp.(1) 400,000 10,575,000
- -----------------------------------------------------------------------------------------------
Nielsen Media Research 66,666 599,994
- -----------------------------------------------------------------------------------------------
Republic Services, Inc.(1) 428,200 6,904,725
- -----------------------------------------------------------------------------------------------
Waste Management, Inc. (New)(1) 400,000 17,650,000
-------------
200,513,919
- -----------------------------------------------------------------------------------------------
MANUFACTURING--1.9%
AlliedSignal, Inc. 800,000 27,450,000
- -----------------------------------------------------------------------------------------------
Avery-Dennison Corp. 1,569,900 84,284,006
- -----------------------------------------------------------------------------------------------
Herman Miller, Inc. 300,000 6,150,000
- -----------------------------------------------------------------------------------------------
Minnesota Mining & Manufacturing Co. 500,000 34,250,000
- -----------------------------------------------------------------------------------------------
United Technologies Corp. 560,900 40,700,306
-------------
192,834,312
- -----------------------------------------------------------------------------------------------
TRANSPORTATION--0.3%
Burlington Northern Santa Fe Corp. 230,000 21,404,375
- -----------------------------------------------------------------------------------------------
CNF Transportation, Inc. 250,000 7,812,500
-------------
29,216,875
- -----------------------------------------------------------------------------------------------
TECHNOLOGY--13.4%
- -----------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Lockheed Martin Corp. 250,000 21,859,375
- -----------------------------------------------------------------------------------------------
COMPUTER HARDWARE--3.4%
International Business Machines Corp. 2,210,000 248,901,250
- -----------------------------------------------------------------------------------------------
Komag, Inc.(1) 1,243,000 3,418,250
- -----------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A(1) 300,000 18,168,750
- -----------------------------------------------------------------------------------------------
Storage Technology Corp. (New)(1) 1,700,000 36,975,000
- -----------------------------------------------------------------------------------------------
Sun Microsystems, Inc.(1) 980,000 38,832,500
- -----------------------------------------------------------------------------------------------
Symbol Technologies, Inc. 88,000 3,608,000
-------------
349,903,750
- -----------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES--6.0%
Automatic Data Processing, Inc. 1,377,900 87,841,125
- -----------------------------------------------------------------------------------------------
BMC Software, Inc.(1) 2,120,000 89,702,500
- -----------------------------------------------------------------------------------------------
Cadence Design Systems, Inc.(1) 1,800,000 38,025,000
</TABLE>
18 Oppenheimer Main Street Income & Growth Fund
<PAGE> 19
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES (CONTINUED)
Compuware Corp.(1) 440,000 $ 19,992,500
- -----------------------------------------------------------------------------------------------
Microsoft Corp.(1) 3,200,000 307,000,000
- -----------------------------------------------------------------------------------------------
Sabre Group Holdings, Inc.(1) 300,000 9,600,000
- -----------------------------------------------------------------------------------------------
Sapient Corp.(1) 300,000 11,718,750
- -----------------------------------------------------------------------------------------------
Sungard Data Systems, Inc.(1) 1,612,000 51,080,250
-------------
614,960,125
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-TECHNOLOGY--3.8%
CIENA Corp.(1) 1,433,800 40,325,625
- -----------------------------------------------------------------------------------------------
Cisco Systems, Inc.(1) 3,075,000 251,765,625
- -----------------------------------------------------------------------------------------------
Lucent Technologies, Inc. 1,002,800 71,073,450
- -----------------------------------------------------------------------------------------------
Tellabs, Inc.(1) 780,000 32,955,000
-------------
396,119,700
- -----------------------------------------------------------------------------------------------
UTILITIES--10.9%
- -----------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.5%
BEC Energy 150,000 5,943,750
- -----------------------------------------------------------------------------------------------
DTE Energy Co. 180,000 7,582,500
- -----------------------------------------------------------------------------------------------
Duke Energy Corp. 500,000 31,187,500
- -----------------------------------------------------------------------------------------------
Energy East Corp. 200,000 9,000,000
- -----------------------------------------------------------------------------------------------
Florida Progress Corp. 400,000 16,875,000
- -----------------------------------------------------------------------------------------------
FPL Group, Inc. 418,000 27,823,125
- -----------------------------------------------------------------------------------------------
PG&E Corp. 1,100,000 35,337,500
- -----------------------------------------------------------------------------------------------
Pinnacle West Capital Corp. 120,000 5,182,500
- -----------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 400,000 14,650,000
- -----------------------------------------------------------------------------------------------
SCANA Corp. 200,000 6,137,500
-------------
159,719,375
- -----------------------------------------------------------------------------------------------
TELEPHONE UTILITIES--9.4%
Ameritech Corp. 2,480,000 116,870,000
- -----------------------------------------------------------------------------------------------
AT&T Corp. 4,969,582 249,100,298
- -----------------------------------------------------------------------------------------------
Bell Atlantic Corp. 3,040,000 134,140,000
- -----------------------------------------------------------------------------------------------
BellSouth Corp. 2,470,000 169,349,375
- -----------------------------------------------------------------------------------------------
Century Telephone Enterprises, Inc. 200,000 9,075,000
- -----------------------------------------------------------------------------------------------
GTE Corp. 1,000,000 50,000,000
- -----------------------------------------------------------------------------------------------
MCI Communications Corp. 1,000,000 50,000,000
- -----------------------------------------------------------------------------------------------
Sprint Corp. 1,100,000 73,768,750
- -----------------------------------------------------------------------------------------------
U S West, Inc. 1,260,000 65,520,000
- -----------------------------------------------------------------------------------------------
WorldCom, Inc. 1,170,500 47,917,344
--------------
965,740,767
--------------
Total Common Stocks (Cost $8,283,490,286) 9,377,903,522
</TABLE>
19 Oppenheimer Main Street Income & Growth Fund
<PAGE> 20
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
SHARES SEE NOTE 1
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS--0.1%
- ----------------------------------------------------------------------------------------------------------------
Tesoro Petroleum Corp., 7.25% Cv. Preferred (Cost $17,531,250)(1) 1,100,000 $ 15,675,000
- ----------------------------------------------------------------------------------------------------------------
OTHER SECURITIES--0.8%
- ----------------------------------------------------------------------------------------------------------------
Continental Airlines Finance Trust, 8.50% Cv.
Trust Originated Preferred Securities(2) 125,000 11,468,750
- ----------------------------------------------------------------------------------------------------------------
Houston Industries, Inc., 7% Automatic Common
Exchange Securities, Exchangeable for Time Warner, Inc.
Common Stock, 7/1/00 703,000 50,264,500
- ----------------------------------------------------------------------------------------------------------------
Union Pacific Capital Trust, 6.25% Cum. Term Income
Deferrable Equity Securities, Non-Vtg.(1) 350,300 15,632,138
------------
Total Other Securities (Cost $56,059,009) 77,365,388
<CAPTION>
UNITS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ----------------------------------------------------------------------------------------------------------------
American Satellite Network, Inc. Wts., Exp. 6/99 18,750 --
- ----------------------------------------------------------------------------------------------------------------
Iwerks Entertainment, Inc. Wts., Exp. 7/99 16,400 --
------------
Total Rights, Warrants and Certificates (Cost $0) --
<CAPTION>
FACE
AMOUNT
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--2.7%
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.50%, 11/15/26 $ 57,950,000 66,787,433
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.625%, 2/15/27 64,300,000 75,391,814
- ----------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, STRIPS, 6.929%, 5/15/21(3) 462,000,000 132,428,604
------------
Total U.S. Government Obligations (Cost $216,836,931) 274,607,851
- ----------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--0.1%
- ----------------------------------------------------------------------------------------------------------------
Saks Holdings, Inc., 5.50% Cv. Sub. Nts., 9/15/06
(Cost $9,279,396) 10,000,000 9,562,500
- ----------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--3.1%(4)
- ----------------------------------------------------------------------------------------------------------------
Baxter International, Inc., 5.55%, 9/2/98 20,000,000 19,996,917
- ----------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, 5.53%, 9/22/98 50,000,000 49,838,708
- ----------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.36%, 9/1/98 25,300,000 25,300,000
- ----------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.54%, 9/4/98 50,000,000 49,976,917
- ----------------------------------------------------------------------------------------------------------------
Household Finance Corp., 5.53%, 9/11/98 50,000,000 49,923,195
- ----------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.52%, 10/6/98 25,000,000 24,865,833
- ----------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.52%, 9/14/98 50,000,000 49,900,333
- ----------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc., 5.525%, 9/16/98 50,000,000 49,884,896
------------
Total Short-Term Notes (Cost $319,686,799) 319,686,799
</TABLE>
20 Oppenheimer Main Street Income & Growth Fund
<PAGE> 21
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT SEE NOTE 1
================================================================================================================
REPURCHASE AGREEMENTS--2.6%
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase agreement with Salomon Smith Barney Holdings, Inc., 5.75%, dated
8/31/98, to be repurchased at $273,043,604 on 9/1/98, collateralized by U.S.
Treasury Nts., 5.375%-8%, 10/31/98-2/15/05, with
a value of $280,238,094 (Cost $273,000,000) $273,000,000 $ 273,000,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $9,175,883,671) 100.5% 10,347,801,060
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.5) (48,731,149)
------------ ----------------
NET ASSETS 100.0% $ 10,299,069,911
============ ================
</TABLE>
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 $11,468,750 or 0.11% of the Fund's net
assets as of August 31, 1998.
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.
21 Oppenheimer Main Street Income & Growth Fund
<PAGE> 22
STATEMENT OF ASSETS AND LIABILITIES August 31, 1998
<TABLE>
<CAPTION>
================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $9,175,883,671)--see accompanying statement $10,347,801,060
- ----------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 1,562
- ----------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 128,960,019
Shares of capital stock sold 29,513,487
Interest and dividends 12,465,884
- ----------------------------------------------------------------------------------------------------------------
Other 151,807
---------------
Total assets 10,518,893,819
================================================================================================================
LIABILITIES
Bank overdraft 9,208,146
- ----------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 163,687,601
Shares of capital stock redeemed 38,139,374
Distribution and service plan fees 4,951,592
Transfer and shareholder servicing agent fees 1,935,922
Shareholder reports 1,068,027
Custodian fees 109,873
Other 723,373
---------------
Total liabilities 219,823,908
================================================================================================================
NET ASSETS $10,299,069,911
===============
================================================================================================================
COMPOSITION OF NET ASSETS
Par value of shares of capital stock $ 3,199,462
- ----------------------------------------------------------------------------------------------------------------
Additional paid-in capital 8,629,761,057
- ----------------------------------------------------------------------------------------------------------------
Undistributed net investment income 7,487,787
- ----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions 486,700,405
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,171,921,200
---------------
Net assets $10,299,069,911
===============
</TABLE>
22 Oppenheimer Main Street Income & Growth Fund
<PAGE> 23
<TABLE>
<S> <C>
================================================================================================================
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$4,932,816,908 and 152,645,006 shares of capital stock outstanding) $32.32
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $34.29
- ----------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $4,168,497,546 and
129,966,667 shares of capital stock outstanding) $32.07
- ----------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $1,144,692,103 and
35,695,727 shares of capital stock outstanding) $32.07
- ----------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $53,063,354 and 1,638,791 shares of capital stock outstanding) $32.38
</TABLE>
See accompanying Notes to Financial Statements.
23 Oppenheimer Main Street Income & Growth Fund
<PAGE> 24
STATEMENT OF OPERATIONS For The Year Ended August 31, 1998
<TABLE>
<CAPTION>
================================================================================================================
<S> <C>
INVESTMENT INCOME
Dividends (net of foreign withholding taxes of $253,942) $ 110,298,808
- ----------------------------------------------------------------------------------------------------------------
Interest 71,098,024
-------------
Total income 181,396,832
================================================================================================================
EXPENSES
Distribution and service plan fees--Note 4:
Class A 12,600,768
Class B 41,203,918
Class C 11,840,338
- ----------------------------------------------------------------------------------------------------------------
Management fees--Note 4 48,131,633
- ----------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A 7,854,040
Class B 6,220,384
Class C 1,789,236
Class Y 50,984
- ----------------------------------------------------------------------------------------------------------------
Shareholder reports 2,885,039
- ----------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 365,003
Class B 449,061
Class C 87,496
Class Y 13,467
- ----------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 415,564
- ----------------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 126,566
- ----------------------------------------------------------------------------------------------------------------
Directors' fees and expenses 82,371
- ----------------------------------------------------------------------------------------------------------------
Insurance expenses 33,336
- ----------------------------------------------------------------------------------------------------------------
Other 323,606
-------------
Total expenses 134,472,810
================================================================================================================
NET INVESTMENT INCOME 46,924,022
================================================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 754,933,055
Closing of futures contracts 13,019,737
Foreign currency transactions (3,896,784)
-------------
Net realized gain 764,056,008
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments (654,291,621)
Translation of assets and liabilities denominated in foreign currencies 3,036,100
-------------
Net change (651,255,521)
-------------
Net realized and unrealized gain 112,800,487
================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 159,724,509
=============
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer Main Street Income & Growth Fund
<PAGE> 25
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997
===============================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 46,924,022 $ 69,037,133
- ---------------------------------------------------------------------------------------------------------------
Net realized gain 764,056,008 436,466,588
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation (651,255,521) 1,410,723,467
--------------- --------------
Net increase in net assets resulting from operations 159,724,509 1,916,227,188
===============================================================================================================
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (45,226,904) (48,672,471)
Class B (8,782,796) (14,534,654)
Class C (2,469,141) (4,918,987)
Class Y (333,013) (39,313)
- ---------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (337,281,891) (230,404,395)
Class B (260,785,205) (151,242,446)
Class C (77,385,259) (54,897,836)
Class Y (1,708,194) (67)
===============================================================================================================
CAPITAL STOCK TRANSACTIONS
Net increase in net assets resulting from
capital stock transactions--Note 2:
Class A 728,868,147 576,537,290
Class B 1,112,912,778 898,948,324
Class C 178,104,386 114,188,051
Class Y 41,849,349 15,023,989
===============================================================================================================
NET ASSETS
Total increase 1,487,486,766 3,016,214,673
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 8,811,583,145 5,795,368,472
---------------- --------------
End of period (including undistributed net investment
income of $7,487,787 and $17,874,940, respectively) $10,299,069,911 $8,811,583,145
=============== ==============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer Main Street Income & Growth Fund
<PAGE> 26
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR
ENDED
YEAR ENDED AUGUST 31, JUNE 30,
1998 1997 1996(3) 1996
===============================================================================================================
<S> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $33.87 $27.95 $28.89 $24.07
- ---------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .29 .39 .07 .40
Net realized and unrealized gain (loss) .99 7.91 (1.01) 4.93
------ ------ ------ ------
Total income (loss) from
investment operations 1.28 8.30 (.94) 5.33
- ---------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.33) (.40) -- (.43)
Distributions from net realized gain (2.50) (1.98) -- (.08)
Distributions in excess of gains -- -- -- --
------ ------ ------ ------
Total dividends and distributions
to shareholders (2.83) (2.38) -- (.51)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $32.32 $33.87 $27.95 $28.89
====== ====== ====== ======
===============================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 3.68% 31.09% (3.25)% 22.26%
===============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $4,933 $4,457 $3,143 $3,147
- ---------------------------------------------------------------------------------------------------------------
Average net assets (in millions) $5,184 $3,857 $3,090 $2,516
- ---------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.83% 1.29% 1.57%(6) 1.55%
Expenses 0.90% 0.94% 0.98%(6) 0.99%
- ---------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 80.9% 61.7% 17.5% 92.6%
</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 3, 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.
26 Oppenheimer Main Street Income & Growth Fund
<PAGE> 27
<TABLE>
<CAPTION>
CLASS B
- ---------------------- ----------------------------------------------------------------------------
YEAR ENDED AUGUST 31, YEAR ENDED JUNE 30,
1995 1994 1998 1997 1996(3) 1998 1995(4)
=============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$20.40 $19.88 $33.66 $27.79 $28.77 $24.00 $21.49
- -------------------------------------------------------------------------------------------------------------
.47 .37 .04 .17 .04 .23 .25
3.66 2.50 .96 7.86 (1.02) 4.87 2.54
- ------ ------ ------ ------ ------ ------ ------
4.13 2.87 1.00 8.03 (.98) 5.10 2.79
- -------------------------------------------------------------------------------------------------------------
(.46) (.36) (.09) (.18) -- (.25) (.28)
-- -- (2.50) (1.98) -- (.08) --
-- (1.99) -- -- -- -- --
- ------ ------ ------ ------ ------ ------ ------
(.46) (2.35) (2.59) (2.16) -- (.33) (.28)
- -------------------------------------------------------------------------------------------------------------
$24.07 $20.40 $32.07 $33.66 $27.79 $28.77 $24.00
====== ====== ====== ====== ====== ====== ======
=============================================================================================================
20.52% 14.34% 2.86% 30.12% (3.41)% 21.34% 13.41%
=============================================================================================================
$1,924 $740 $4,168 $3,308 $1,909 $1,800 $628
- -------------------------------------------------------------------------------------------------------------
$1,319 $270 $4,123 $2,642 $1,818 $1,155 $249
- -------------------------------------------------------------------------------------------------------------
2.31% 2.46% 0.06% 0.53% 0.82%(6) 0.74% 1.25%(6)
1.07% 1.28% 1.66% 1.69% 1.74%(6) 1.76% 1.89%(6)
- -------------------------------------------------------------------------------------------------------------
101.3% 199.4% 80.9% 61.7% 17.5% 92.6% 101.3%
</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, 1998 were $9,184,157,377 and $7,816,215,033, respectively.
27 Oppenheimer Main Street Income & Growth Fund
<PAGE> 28
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------
YEAR ENDED AUGUST 31,
1998 1997 1996(3)
=================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $33.64 $27.78 $28.75
- ------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .03 .16 .04
Net realized and unrealized gain (loss) .98 7.85 (1.01)
------- ------ ------
Total income (loss) from investment operations 1.01 8.01 (.97)
- ------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.08) (.17) --
Distributions from net realized gain (2.50) (1.98) --
Distributions in excess of gains -- -- --
------- ------ ------
Total dividends and distributions
to shareholders (2.58) (2.15) --
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $32.07 $33.64 $27.78
======= ====== ======
================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(5) 2.91% 30.07% (3.37)%
================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in millions) $1,145 $1,030 $744
- ------------------------------------------------------------------------------------------------
Average net assets (in millions) $1,184 $ 904 $730
- ------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 0.07% 0.54% 0.82%(6)
Expenses 1.65% 1.69% 1.73%(6)
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate(7) 80.9% 61.7% 17.5%
</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 3, 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.
28 Oppenheimer Main Street Income & Growth Fund
<PAGE> 29
<TABLE>
<CAPTION>
CLASS Y
- --------------------------------------- -----------------------
YEAR ENDED JUNE 30, YEAR ENDED AUGUST 31,
1996 1995 1994(2) 1998 1997(1)
=========================================================================
<S> <C> <C> <C> <C>
$23.97 $20.33 $20.76 $33.94 $29.55
- -------------------------------------------------------------------------
.21 .33 .13 .38 .41
4.88 3.62 (.42) .97 6.30
- ------ ----- ------ ------ ------
5.09 3.95 (.29) 1.35 6.71
- -------------------------------------------------------------------------
(.23) (.31) (.14) (.41) (.34)
(.08) -- -- (2.50) (1.98)
-- -- -- -- --
- ------ ----- ------ ------ ------
(.31) (.31) (.14) (2.91) (2.32)
- -------------------------------------------------------------------------
$28.75 $23.97 $20.33 $32.38 $33.94
====== ====== ====== ====== ======
=========================================================================
21.35% 19.63% (1.44)% 3.88% 23.98%
=========================================================================
$741 $462 $170 $53 $16
- -------------------------------------------------------------------------
$588 $325 $ 72 $37 $ 5
- -------------------------------------------------------------------------
0.80% 1.57% 1.86%(6) 1.02% 1.58%(6)
1.74% 1.82% 2.11%(6) 0.67% 0.65%(6)
- -------------------------------------------------------------------------
92.6% 101.3% 199.4% 80.9% 61.7%
</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, 1998 were $9,184,157,377 and $7,816,215,033, respectively.
See accompanying Notes to Financial Statements.
29 Oppenheimer Main Street Income & Growth Fund
<PAGE> 30
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 advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B, Class C and Class Y shares. Class A
shares are sold with a front-end sales charge. 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 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.
30 Oppenheimer Main Street Income & Growth Fund
<PAGE> 31
================================================================================
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, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), 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.
31 Oppenheimer Main Street Income & Growth Fund
<PAGE> 32
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.
The Fund adjusts 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
year ended August 31, 1998, amounts have been reclassified to reflect a decrease
in undistributed net investment income of $499,321, a decrease in paid-in
capital of $2,822, and an increase in accumulated net realized gain of $502,143.
- --------------------------------------------------------------------------------
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.
32 Oppenheimer Main Street Income & Growth Fund
<PAGE> 33
================================================================================
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>
YEAR ENDED AUGUST 31, 1998 YEAR ENDED AUGUST 31, 1997(1)
------------------------------ -------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 36,063,568 $1,301,502,710 33,556,681 $1,034,114,167
Dividends and
distributions reinvested 11,155,518 367,256,659 9,085,326 266,799,418
Redeemed (26,184,202) (939,891,222) (23,475,410) (724,376,295)
---------- -------------- ------------ --------------
Net increase 21,034,884 $ 728,868,147 19,166,597 $ 576,537,290
========== ============== ============ ==============
- ---------------------------------------------------------------------------------------------------------------
Class B:
Sold 37,520,500 $1,345,971,561 34,495,825 $1,058,128,830
Dividends and
distributions reinvested 7,843,422 255,472,251 5,396,671 157,340,936
Redeemed (13,683,243) (488,531,034) (10,274,858) (316,521,442)
---------- -------------- ------------ --------------
Net increase 31,680,679 $1,112,912,778 29,617,638 $ 898,948,324
========== ============== ============ ==============
- ---------------------------------------------------------------------------------------------------------------
Class C:
Sold 8,806,101 $ 317,722,662 7,368,632 $ 225,510,151
Dividends and
distributions reinvested 2,313,726 75,333,277 1,933,297 56,297,865
Redeemed (6,042,849) (214,951,553) (5,469,271) (167,619,965)
---------- -------------- ------------ --------------
Net increase 5,076,978 $ 178,104,386 3,832,658 $ 114,188,051
========== ============== ============ ==============
- ---------------------------------------------------------------------------------------------------------------
Class Y:
Sold 1,573,594 $ 56,981,398 530,156 $ 16,705,572
Dividends and
distributions reinvested 61,592 2,041,207 1,199 39,301
Redeemed (475,241) (17,173,256) (52,509) (1,720,884)
---------- -------------- ------------ --------------
Net increase 1,159,945 $ 41,849,349 478,846 $ 15,023,989
========== ============== =========== ==============
</TABLE>
1. 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.
33 Oppenheimer Main Street Income & Growth Fund
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
As of August 31, 1998, net unrealized appreciation on investments of
$1,171,917,389 was composed of gross appreciation of $1,864,273,965, and gross
depreciation of $692,356,576.
================================================================================
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 average annual net assets in excess of $500
million.
For the year ended August 31, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled $28,733,281, of which
$7,556,176 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 $46,216,219 and $2,725,789,
respectively, of which $1,938,908 and $72,599, respectively, was paid to an
affiliated broker/dealer. During the year ended August 31, 1998, OFDI received
contingent deferred sales charges of $6,598,236 and $185,210, respectively, upon
redemption of Class B and Class C shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the Manager, is the
transfer and shareholder servicing agent for the Fund and other Oppenheimer
funds. OFS's total costs of providing such services are allocated ratably to
these funds.
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, 1998, OFDI paid $635,016
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.
The Fund has adopted Distribution and Service Plans for Class B and
Class C shares to reimburse OFDI for its 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 for its
services rendered in distributing Class B and Class C shares. OFDI also receives
a service fee of 0.25% per year to reimburse dealers for providing personal
services for accounts that hold Class B and Class C shares. Each fee is computed
on the average annual net assets of Class B or Class C shares, determined as of
the close of each regular business day.
34 Oppenheimer Main Street Income & Growth Fund
<PAGE> 35
================================================================================
During the year ended August 31, 1998, OFDI paid $176,564 and $200,516,
respectively, to an affiliated broker/dealer as reimbursement for Class B and
Class C personal service and maintenance expenses and retained $33,656,266 and
$3,657,022, 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. As of August 31, 1998, OFDI had incurred excess
distribution and servicing costs of $112,213,838 for Class B and $10,871,517 for
Class C.
================================================================================
5. FORWARD CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to seek to manage foreign currency risks. They
may also be used to tactically shift portfolio currency risk.
The Fund generally enters into forward contracts as a hedge upon the
purchase or sale of a security denominated in a foreign currency. In addition,
the Fund may enter into such contracts as a hedge against changes in foreign
currency exchange rates on portfolio positions.
Forward 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. The Fund will realize a
gain or loss upon the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on
outstanding forward contracts are noted in the Statement of Investments where
applicable. Unrealized appreciation or depreciation on forward contracts is
reported in the Statement of Assets and Liabilities. Realized gains and losses
are reported with all other foreign currency gains and losses in the Fund's
Statement of Operations.
Risks include the potential inability of the counter party to meet
the terms of the contract and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
As of August 31, 1998, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED
EXPIRATION DATE AMOUNT (000S) AUGUST 31, 1998 APPRECIATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
- ---------------------
Canadian Dollar (CAD) 9/1/98 477,347 CAD $303,614 $1,562
</TABLE>
35 Oppenheimer Main Street Income & Growth Fund
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (Continued)
================================================================================
6. 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 buy and
sell futures contracts, primarily to hedge the various commodities exposures
inherent in its holdings of structured notes that are linked to commodities
indices. 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 or decreases in commodity prices and the resulting negative
effect on the value of fixed rate portfolio securities. The Fund may also
purchase futures contracts without owning the underlying fixed-income security
as an efficient or cost effective means to gain exposure to changes in interest
rates or commodity prices. The Fund will then either purchase the underlying
fixed-income security or close out the futures contract.
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.
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.
================================================================================
7. BANK BORROWINGS
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other Oppenheimer funds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended August
31, 1998.
36 Oppenheimer Main Street Income & Growth Fund
<PAGE> 37
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, 1998, the related statement of operations for the year then ended,
the statements of changes in net assets for the two years then ended, and the
financial highlights for the period July 1, 1993, to August 31, 1998. 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, 1998, by correspondence with the custodian and brokers; and
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, 1998, 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, 1998
37 Oppenheimer Main Street Income & Growth Fund
<PAGE> 38
FEDERAL INCOME TAX INFORMATION (Unaudited)
================================================================================
In early 1999, shareholders will receive information regarding all dividends and
distributions paid to them by the Fund during calendar year 1998. Regulations of
the U.S. Treasury Department require the Fund to report this information to the
Internal Revenue Service.
Distributions of $2.6043, $2.5401, $2.5385 and $2.6183 per share were
paid to Class A, Class B, Class C and Class Y shareholders, respectively, on
December 12, 1997, of which, for each class of shares, $0.8964 was designated as
a capital gain distribution in the "28% Rate Group" and $0.9526 was designated
as a capital gain distribution in the "20% Rate Group" 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.
Dividends paid by the Fund during the year ended August 31, 1998
which are not designated as capital gain distributions should be multiplied by
94.54% 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 advisor for specific
guidance.
38 Oppenheimer Main Street Income & Growth Fund
<PAGE> 39
OPPENHEIMER MAIN STREET INCOME & GROWTH FUND
A Series of Oppenheimer Main Street Funds, Inc.
<TABLE>
======================================================================================
<S> <C>
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, Director, Vice President,
Treasurer and Assistant Secretary
Andrew J. Donohue, Vice President and Secretary
Charles Albers, Vice President
Nikolaos D. Monoyios, Vice President
Robert J. Bishop, Assistant Treasurer
Scott T. Farrar, Assistant Treasurer
Robert G. Zack, Assistant Secretary
======================================================================================
INVESTMENT ADVISOR 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.
</TABLE>
39 Oppenheimer Main Street Income & Growth Fund
<PAGE> 40
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INFORMATION HOTLINE
24 hours a day, timely and
insightful messages on the
economy and issues that
affect your investments
1-800-835-3104
INFORMATION AND SERVICES
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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 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 or by visiting our website. And, by
enrolling in AccountLink, a convenient service that "links" your Oppenheimer
funds accounts and your bank checking or saving account, you can use the
Telephone Transactions number or website 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]
RA0700.001.0898 October 30, 1998
