|
|
|
28
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
STATEMENT OF
ASSETS AND LIABILITIES
November 30, 2012 / Unaudited
|
|
|
|
|
Assets
|
|
|
|
Investments, at valuesee accompanying statement of investments:
|
|
|
|
|
Unaffiliated companies (cost $88,067,105)
|
|
$
|
91,598,095
|
|
Affiliated companies (cost $3,366,439)
|
|
|
3,366,439
|
|
|
|
|
94,964,534
|
|
Unrealized appreciation on foreign currency exchange contracts
|
|
|
534,213
|
|
Appreciated swaps, at value (upfront payments $0)
|
|
|
19,030
|
|
Depreciated swaps, at value (upfront payments paid $603)
|
|
|
360
|
|
Receivables and other assets:
|
|
|
|
|
Closed foreign currency contracts
|
|
|
1,621,031
|
|
Interest and dividends
|
|
|
1,568,667
|
|
Investments sold
|
|
|
1,028,694
|
|
Shares of beneficial interest sold
|
|
|
380,051
|
|
Other
|
|
|
9,470
|
|
Total assets
|
|
|
100,126,050
|
|
Liabilities
|
|
|
|
Bank overdraft
|
|
|
31,322
|
|
Appreciated options written, at value (premiums received $264,032)
|
|
|
34,132
|
|
Depreciated swaptions written, at value (premiums received $2,299)
|
|
|
2,514
|
|
Unrealized depreciation on foreign currency exchange contracts
|
|
|
318,512
|
|
Depreciated swaps, at value (upfront payments $0)
|
|
|
2,344
|
|
Payables and other liabilities:
|
|
|
|
|
Investments purchased (including $970,737 purchased on a when-issued or delayed delivery basis)
|
|
|
3,630,853
|
|
Closed foreign currency contracts
|
|
|
184,791
|
|
Foreign capital gains tax
|
|
|
172,197
|
|
Dividends
|
|
|
91,869
|
|
Shares of beneficial interest redeemed
|
|
|
32,793
|
|
Distribution and service plan fees
|
|
|
16,848
|
|
Transfer and shareholder servicing agent fees
|
|
|
14,238
|
|
Futures margins
|
|
|
8,531
|
|
Trustees compensation
|
|
|
2,442
|
|
Other
|
|
|
18,744
|
|
Total liabilities
|
|
|
4,562,130
|
|
Net Assets
|
|
$
|
95,563,920
|
|
Composition of Net Assets
|
|
|
|
Par value of shares of beneficial interest
|
|
$
|
8,964
|
|
Additional paid-in capital
|
|
|
92,579,010
|
|
Accumulated net investment loss
|
|
|
(647,552
|
)
|
Accumulated net realized loss on investments and foreign currency transactions
|
|
|
(150,954
|
)
|
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies
|
|
|
3,774,452
|
|
Net Assets
|
|
$
|
95,563,920
|
|
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
29
|
|
STATEMENT OF
ASSETS AND LIABILITIES
Unaudited / Continued
|
|
|
|
|
Net Asset Value Per Share
|
|
|
|
Class A Shares:
|
|
|
|
|
Net asset value and redemption price per share (based on net assets of $64,099,797 and 6,012,660 shares of beneficial interest outstanding)
|
|
$
|
10.66
|
|
Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price)
|
|
$
|
11.19
|
|
Class C Shares:
|
|
|
|
|
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $18,380,598 and 1,723,461 shares of
beneficial interest outstanding)
|
|
$
|
10.66
|
|
Class I Shares:
|
|
|
|
|
Net asset value, redemption price and offering price per share (based on net assets of $10,121 and 950 shares of beneficial interest outstanding)
|
|
$
|
10.66
|
|
Class N Shares:
|
|
|
|
|
Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $2,211,879 and 207,442 shares of
beneficial interest outstanding)
|
|
$
|
10.66
|
|
Class Y Shares:
|
|
|
|
|
Net asset value, redemption price and offering price per share (based on net assets of $10,861,525 and 1,019,155 shares of beneficial interest outstanding)
|
|
$
|
10.66
|
|
See accompanying Notes to Financial Statements.
|
|
|
30
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
STATEMENT OF
OPERATIONS
For the Six Months Ended November 30, 2012 / Unaudited
|
|
|
|
|
Investment Income
|
|
|
|
Interest (net of foreign withholding taxes of $492)
|
|
$
|
2,700,277
|
|
Dividends from affiliated companies
|
|
|
2,449
|
|
Other income
|
|
|
1,089
|
|
Total investment income
|
|
|
2,703,815
|
|
Expenses
|
|
|
|
Management fees
|
|
|
312,197
|
|
Distribution and service plan fees:
|
|
|
|
|
Class A
|
|
|
45,837
|
|
Class C
|
|
|
73,804
|
|
Class N
|
|
|
4,419
|
|
Transfer and shareholder servicing agent fees:
|
|
|
|
|
Class A
|
|
|
47,036
|
|
Class C
|
|
|
21,909
|
|
Class I
|
|
|
1
|
|
Class N
|
|
|
2,122
|
|
Class Y
|
|
|
12,177
|
|
Shareholder communications:
|
|
|
|
|
Class A
|
|
|
6,434
|
|
Class C
|
|
|
3,052
|
|
Class N
|
|
|
315
|
|
Class Y
|
|
|
2,082
|
|
Custodian fees and expenses
|
|
|
29,720
|
|
Trustees compensation
|
|
|
6,016
|
|
Administration service fees
|
|
|
750
|
|
Other
|
|
|
28,680
|
|
Total expenses
|
|
|
596,551
|
|
Less waivers and reimbursements of expenses
|
|
|
(31,938
|
)
|
Net expenses
|
|
|
564,613
|
|
Net Investment Income
|
|
|
2,139,202
|
|
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
31
|
|
STATEMENT OF
OPERATIONS
Unaudited / Continued
|
|
|
|
|
Realized and Unrealized Gain (Loss)
|
|
|
|
Net realized gain (loss) on:
|
|
|
|
|
Investments from unaffiliated companies (including premiums on options exercised)
|
|
$
|
1,411,759
|
|
Closing and expiration of option contracts written
|
|
|
268,193
|
|
Closing and expiration of swaption contracts written
|
|
|
2,330
|
|
Closing and expiration of futures contracts
|
|
|
40,277
|
|
Foreign currency transactions
|
|
|
(1,622,584
|
)
|
Swap contracts
|
|
|
137,621
|
|
Net realized gain
|
|
|
237,596
|
|
Net change in unrealized appreciation/depreciation on:
|
|
|
|
|
Investments (net of foreign capital gains tax of $169,512)
|
|
|
4,445,429
|
|
Translation of assets and liabilities denominated in foreign currencies
|
|
|
2,075,034
|
|
Futures contracts
|
|
|
62,952
|
|
Option contracts written
|
|
|
317,994
|
|
Swaption contracts written
|
|
|
(707
|
)
|
Swap contracts
|
|
|
32,071
|
|
Net change in unrealized appreciation/depreciation
|
|
|
6,932,773
|
|
Net Increase in Net Assets Resulting from Operations
|
|
$
|
9,309,571
|
|
See accompanying Notes to Financial Statements.
|
|
|
32
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
STATEMENTS OF
CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
Six Months
Ended
November 30,
2012
(Unaudited)
|
|
|
Year Ended
May 31,
2012
|
|
Operations
|
|
|
|
|
|
|
Net investment income
|
|
$
|
2,139,202
|
|
|
$
|
3,504,589
|
|
Net realized gain (loss)
|
|
|
237,596
|
|
|
|
(1,800,256
|
)
|
Net change in unrealized appreciation/depreciation
|
|
|
6,932,773
|
|
|
|
(5,069,225
|
)
|
Net increase (decrease) in net assets resulting from operations
|
|
|
9,309,571
|
|
|
|
(3,364,892
|
)
|
Dividends and/or Distributions to Shareholders
|
|
|
|
|
|
|
Dividends from net investment income:
|
|
|
|
|
|
|
|
|
Class A
|
|
|
(1,514,254
|
)
|
|
|
(1,905,567
|
)
|
Class C
|
|
|
(330,982
|
)
|
|
|
(341,838
|
)
|
Class I
|
|
|
|
|
|
|
|
|
Class N
|
|
|
(44,577
|
)
|
|
|
(44,799
|
)
|
Class Y
|
|
|
(249,361
|
)
|
|
|
(237,666
|
)
|
|
|
|
(2,139,174
|
)
|
|
|
(2,529,870
|
)
|
Tax return of capital distribution:
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
|
|
|
(984,001
|
)
|
Class C
|
|
|
|
|
|
|
(176,519
|
)
|
Class I
|
|
|
|
|
|
|
|
|
Class N
|
|
|
|
|
|
|
(23,134
|
)
|
Class Y
|
|
|
|
|
|
|
(122,727
|
)
|
|
|
|
|
|
|
|
(1,306,381
|
)
|
Beneficial Interest Transactions
|
|
|
|
|
|
|
Net increase in net assets resulting from beneficial interest transactions:
|
|
|
|
|
|
|
|
|
Class A
|
|
|
7,761,984
|
|
|
|
12,549,989
|
|
Class C
|
|
|
5,053,896
|
|
|
|
5,915,186
|
|
Class I
|
|
|
10,000
|
|
|
|
|
|
Class N
|
|
|
608,083
|
|
|
|
1,041,324
|
|
Class Y
|
|
|
2,616,554
|
|
|
|
5,832,818
|
|
|
|
|
16,050,517
|
|
|
|
25,339,317
|
|
Net Assets
|
|
|
|
|
|
|
Total increase
|
|
|
23,220,914
|
|
|
|
18,138,174
|
|
Beginning of period
|
|
|
72,343,006
|
|
|
|
54,204,832
|
|
|
|
|
End of period (including accumulated net investment loss of $647,552 and $647,580, respectively)
|
|
$
|
95,563,920
|
|
|
$
|
72,343,006
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
33
|
|
FINANCIAL
HIGHLIGHTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
November 30,
2012
|
|
|
Year Ended May 31,
|
|
Class A
|
|
(Unaudited)
|
|
|
2012
|
|
|
2011
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Operating Data
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
|
$
|
10.00
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
2
|
|
|
.27
|
|
|
|
.56
|
|
|
|
.52
|
|
Net realized and unrealized gain (loss)
|
|
|
.94
|
|
|
|
(.94
|
)
|
|
|
.75
|
|
Total from investment operations
|
|
|
1.21
|
|
|
|
(.38
|
)
|
|
|
1.27
|
|
Dividends and/or distributions to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(.28
|
)
|
|
|
(.41
|
)
|
|
|
(.52
|
)
|
Tax return of capital distribution
|
|
|
|
|
|
|
(.21
|
)
|
|
|
|
|
Distributions from net realized gain
|
|
|
|
|
|
|
|
|
|
|
(.02
|
)
|
Total dividends and/or distributions to shareholders
|
|
|
(.28
|
)
|
|
|
(.62
|
)
|
|
|
(.54
|
)
|
Net asset value, end of period
|
|
$
|
10.66
|
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
Total Return, at Net Asset Value
3
|
|
|
12.49
|
%
|
|
|
(3.67
|
)%
|
|
|
12.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in thousands)
|
|
|
$64,100
|
|
|
|
$51,319
|
|
|
|
$43,912
|
|
Average net assets (in thousands)
|
|
|
$57,743
|
|
|
|
$48,137
|
|
|
|
$35,869
|
|
Ratios to average net assets:
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
5.23
|
%
|
|
|
5.49
|
%
|
|
|
5.31
|
%
|
Total expenses
5
|
|
|
1.25
|
%
|
|
|
1.26
|
%
|
|
|
1.26
|
%
|
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses
|
|
|
1.24
|
%
|
|
|
1.23
|
%
|
|
|
1.24
|
%
|
Portfolio turnover rate
|
|
|
45
|
%
|
|
|
93
|
%
|
|
|
80
|
%
|
1.
For the period from June 30, 2010 (commencement of operations) to May 31, 2011.
2.
Per share amounts calculated based on the average shares outstanding during the period.
3.
Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
4.
Annualized for periods less than one full year.
5.
Total expenses including indirect expenses from affiliated fund were as follows:
|
|
|
|
|
Six Months Ended November 30, 2012
|
|
|
1.25
|
%
|
Year Ended May 31, 2012
|
|
|
1.26
|
%
|
Period Ended May 31, 2011
|
|
|
1.26
|
%
|
See accompanying Notes to Financial Statements.
|
|
|
34
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
November 30,
2012
|
|
|
Year Ended May 31,
|
|
Class C
|
|
(Unaudited)
|
|
|
2012
|
|
|
2011
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Operating Data
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
|
$
|
10.00
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
2
|
|
|
.23
|
|
|
|
.48
|
|
|
|
.44
|
|
Net realized and unrealized gain (loss)
|
|
|
.94
|
|
|
|
(.94
|
)
|
|
|
.75
|
|
Total from investment operations
|
|
|
1.17
|
|
|
|
(.46
|
)
|
|
|
1.19
|
|
Dividends and/or distributions to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(.24
|
)
|
|
|
(.36
|
)
|
|
|
(.44
|
)
|
Tax return of capital distribution
|
|
|
|
|
|
|
(.18
|
)
|
|
|
|
|
Distributions from net realized gain
|
|
|
|
|
|
|
|
|
|
|
(.02
|
)
|
Total dividends and/or distributions to shareholders
|
|
|
(.24
|
)
|
|
|
(.54
|
)
|
|
|
(.46
|
)
|
Net asset value, end of period
|
|
$
|
10.66
|
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
Total Return, at Net Asset Value
3
|
|
|
12.06
|
%
|
|
|
(4.40
|
)%
|
|
|
12.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in thousands)
|
|
|
$18,381
|
|
|
|
$12,070
|
|
|
|
$7,241
|
|
Average net assets (in thousands)
|
|
|
$14,809
|
|
|
|
$9,819
|
|
|
|
$3,962
|
|
Ratios to average net assets:
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
4.46
|
%
|
|
|
4.73
|
%
|
|
|
4.56
|
%
|
Total expenses
5
|
|
|
2.23
|
%
|
|
|
2.36
|
%
|
|
|
2.46
|
%
|
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
|
|
2.00
|
%
|
Portfolio turnover rate
|
|
|
45
|
%
|
|
|
93
|
%
|
|
|
80
|
%
|
1.
For the period from June 30, 2010 (commencement of operations) to May 31, 2011.
2.
Per share amounts calculated based on the average shares outstanding during the period.
3.
Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
4.
Annualized for periods less than one full year.
5.
Total expenses including indirect expenses from affiliated fund were as follows:
|
|
|
|
|
Six Months Ended November 30, 2012
|
|
|
2.23
|
%
|
Year Ended May 31, 2012
|
|
|
2.36
|
%
|
Period Ended May 31, 2011
|
|
|
2.46
|
%
|
See accompanying Notes to Financial Statements.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
35
|
|
FINANCIAL
HIGHLIGHTS
Continued
|
|
|
|
|
|
|
Period Ended
November
30,
2012
1
|
|
Class I
|
|
(Unaudited)
|
|
Per Share Operating Data
|
|
|
|
Net asset value, beginning of period
|
|
|
$ 10.53
|
|
Income (loss) from investment operations:
|
|
|
|
|
Net investment income
2
|
|
|
.09
|
|
Net realized and unrealized gain
|
|
|
.04
|
|
|
|
|
|
|
Total from investment operations
|
|
|
.13
|
|
Dividends and/or distributions to shareholders:
|
|
|
|
|
Dividends from net investment income
|
|
|
|
|
Distributions from net realized gain
|
|
|
|
|
|
|
|
|
|
Total dividends and/or distributions to shareholders
|
|
|
|
|
Net asset value, end of period
|
|
|
$10.66
|
|
|
|
|
|
|
|
|
|
|
|
Total Return, at Net Asset Value
3
|
|
|
2.17
|
%
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
Net assets, end of period (in thousands)
|
|
|
$10
|
|
Average net assets (in thousands)
|
|
|
$10
|
|
Ratios to average net assets:
4
|
|
|
|
|
Net investment income
|
|
|
5.36
|
%
|
Total expenses
5
|
|
|
0.93
|
%
|
Expenses after payments, waivers and/or reimbursements and reduction to
custodian expenses
|
|
|
0.85
|
%
|
Portfolio turnover rate
|
|
|
45
|
%
|
1.
For the period from September 28, 2012 (inception of offering) to November 30, 2012. See Note 1 of the
accompanying Notes.
2.
Per share amounts calculated based on the average shares outstanding during the period.
3.
Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in
additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods less than
one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
4.
Annualized for periods less than one full year.
5.
Total expenses including indirect expenses from affiliated fund were as follows:
|
|
|
|
|
Period Ended November 30, 2012
|
|
|
0.93
|
%
|
See accompanying Notes to Financial Statements.
|
|
|
36
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
November 30,
2012
|
|
|
Year Ended May 31,
|
|
Class N
|
|
(Unaudited)
|
|
|
2012
|
|
|
2011
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Operating Data
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
|
$
|
10.00
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
2
|
|
|
.26
|
|
|
|
.53
|
|
|
|
.49
|
|
Net realized and unrealized gain (loss)
|
|
|
.93
|
|
|
|
(.94
|
)
|
|
|
.75
|
|
Total from investment operations
|
|
|
1.19
|
|
|
|
(.41
|
)
|
|
|
1.24
|
|
Dividends and/or distributions to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(.26
|
)
|
|
|
(.39
|
)
|
|
|
(.49
|
)
|
Tax return of capital distribution
|
|
|
|
|
|
|
(.20
|
)
|
|
|
|
|
Distributions from net realized gain
|
|
|
|
|
|
|
|
|
|
|
(.02
|
)
|
Total dividends and/or distributions to shareholders
|
|
|
(.26
|
)
|
|
|
(.59
|
)
|
|
|
(.51
|
)
|
Net asset value, end of period
|
|
$
|
10.66
|
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
Total Return, at Net Asset Value
3
|
|
|
12.34
|
%
|
|
|
(3.90
|
)%
|
|
|
12.59
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in thousands)
|
|
|
$2,212
|
|
|
|
$1,452
|
|
|
|
$538
|
|
Average net assets (in thousands)
|
|
|
$1,789
|
|
|
|
$1,154
|
|
|
|
$300
|
|
Ratios to average net assets:
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
4.97
|
%
|
|
|
5.23
|
%
|
|
|
5.06
|
%
|
Total expenses
5
|
|
|
1.67
|
%
|
|
|
1.69
|
%
|
|
|
2.07
|
%
|
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
|
|
1.50
|
%
|
Portfolio turnover rate
|
|
|
45
|
%
|
|
|
93
|
%
|
|
|
80
|
%
|
1.
For the period from June 30, 2010 (commencement of operations) to May 31, 2011.
2.
Per share amounts calculated based on the average shares outstanding during the period.
3.
Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
4.
Annualized for periods less than one full year.
5.
Total expenses including indirect expenses from affiliated fund were as follows:
|
|
|
|
|
Six Months Ended November 30, 2012
|
|
|
1.67
|
%
|
Year Ended May 31, 2012
|
|
|
1.69
|
%
|
Period Ended May 31, 2011
|
|
|
2.07
|
%
|
See accompanying Notes to Financial Statements.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
37
|
|
FINANCIAL
HIGHLIGHTS
Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
November 30,
2012
|
|
|
Year Ended May 31,
|
|
Class Y
|
|
(Unaudited)
|
|
|
2012
|
|
|
2011
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Share Operating Data
|
|
|
|
|
|
|
|
|
|
Net asset value, beginning of period
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
|
$
|
10.00
|
|
Income (loss) from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
2
|
|
|
.29
|
|
|
|
.59
|
|
|
|
.55
|
|
Net realized and unrealized gain (loss)
|
|
|
.93
|
|
|
|
(.94
|
)
|
|
|
.74
|
|
Total from investment operations
|
|
|
1.22
|
|
|
|
(.35
|
)
|
|
|
1.29
|
|
Dividends and/or distributions to shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from net investment income
|
|
|
(.29
|
)
|
|
|
(.43
|
)
|
|
|
(.54
|
)
|
Tax return of capital distribution
|
|
|
|
|
|
|
(.22
|
)
|
|
|
|
|
Distributions from net realized gain
|
|
|
|
|
|
|
|
|
|
|
(.02
|
)
|
Total dividends and/or distributions to shareholders
|
|
|
(.29
|
)
|
|
|
(.65
|
)
|
|
|
(.56
|
)
|
Net asset value, end of period
|
|
$
|
10.66
|
|
|
$
|
9.73
|
|
|
$
|
10.73
|
|
Total Return, at Net Asset Value
3
|
|
|
12.66
|
%
|
|
|
(3.37
|
)%
|
|
|
13.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in thousands)
|
|
|
$10,861
|
|
|
|
$7,502
|
|
|
|
$2,514
|
|
Average net assets (in thousands)
|
|
|
$9,034
|
|
|
|
$5,855
|
|
|
|
$883
|
|
Ratios to average net assets:
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
5.51
|
%
|
|
|
5.74
|
%
|
|
|
5.66
|
%
|
Total expenses
5
|
|
|
1.22
|
%
|
|
|
1.23
|
%
|
|
|
1.33
|
%
|
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses
|
|
|
0.95
|
%
|
|
|
0.95
|
%
|
|
|
0.95
|
%
|
Portfolio turnover rate
|
|
|
45
|
%
|
|
|
93
|
%
|
|
|
80
|
%
|
1.
For the period from June 30, 2010 (commencement of operations) to May 31, 2011.
2.
Per share amounts calculated based on the average shares outstanding during the period.
3.
Assumes an initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and
redemption at the net asset value calculated on the last business day of the fiscal period. Total returns are not annualized for periods less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
4.
Annualized for periods less than one full year.
5.
Total expenses including indirect expenses from affiliated fund were as follows:
|
|
|
|
|
Six Months Ended November 30, 2012
|
|
|
1.22
|
%
|
Year Ended May 31, 2012
|
|
|
1.23
|
%
|
Period Ended May 31, 2011
|
|
|
1.33
|
%
|
See accompanying Notes to Financial Statements.
|
|
|
38
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
NOTES TO
FINANCIAL STATEMENTS
November 30, 2012 / Unaudited
1. Significant Accounting Policies
Oppenheimer
Emerging Markets Debt Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Funds investment objective is to seek total return. The Funds
investment adviser is OppenheimerFunds, Inc. (the Manager). As of November 30, 2012, approximately 23% of the shares of the Fund were owned by the Manager, other funds advised or sub-advised by the Manager or an affiliate of the
Manager.
The Fund offers Class A, Class C, Class I, Class N and Class Y shares. Class A shares are sold at their
offering price, which is normally net asset value plus a front-end sales charge. Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are
sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class I and Class Y shares are sold to certain institutional investors or intermediaries without either a front-end sales charge or
a CDSC, however, the intermediaries may impose charges on their accountholders who beneficially own Class I and Class Y shares. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications,
directly attributable to that class. Class A, C and N shares have separate distribution and/or service plans under which they pay fees. Class I and Class Y shares do not pay such fees. Class I shares were first publicly offered on
September 28, 2012.
The following is a summary of significant accounting policies consistently followed by the Fund.
Structured Securities.
The Fund invests in structured securities whose market values, interest rates and/or redemption prices are linked to the
performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured securities are often
leveraged, increasing the volatility of each notes market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss when a structured security is sold or matures.
Securities on a When-Issued or Delayed Delivery Basis.
The Fund may purchase securities on a when-issued basis, and may purchase or sell
securities on a delayed delivery basis. When-issued or delayed delivery refers to securities whose terms and indenture are available and for which a market exists, but which are not available for immediate
delivery. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis normally takes place within six months and possibly as long as two years or more after the trade date. During this period, such securities do
not earn interest, are subject to market fluctuation and may increase or decrease in value prior to
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
39
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
1. Significant Accounting Policies
Continued
their delivery. The purchase of securities on a when-issued basis may increase the volatility of the Funds net asset value to the extent the Fund executes such transactions while remaining
substantially fully invested. When the Fund engages in when-issued or delayed delivery transactions, it relies on the buyer or seller, as the case may be, to complete the transaction. Their failure to do so may cause the Fund to lose the opportunity
to obtain or dispose of the security at a price and yield it considers advantageous. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase.
As of November 30, 2012, the Fund had purchased securities issued on a when-issued or delayed delivery basis as follows:
|
|
|
|
|
|
|
When-Issued or
Delayed Delivery
Basis Transactions
|
|
Purchased securities
|
|
$
|
970,737
|
|
Investment in Oppenheimer Institutional Money Market Fund.
The Fund is permitted to invest daily available cash balances in an affiliated money market fund. The Fund may invest the available cash in Class E shares of Oppenheimer Institutional Money Market Fund
(IMMF) to seek current income while preserving liquidity. IMMF is a registered open-end management investment company, regulated as a money market fund under the Investment Company Act of 1940, as amended. The Manager is also the
investment adviser of IMMF. When applicable, the Funds investment in IMMF is included in the Statement of Investments. Shares of IMMF are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional
share of IMMFs Class E expenses, including its management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Funds investment in IMMF.
Foreign Currency Translation.
The Funds accounting records are maintained in U.S. dollars. The values of securities denominated in foreign
currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the Exchange, normally 4:00 P.M. Eastern time, on each day the Exchange is open for
trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.
Reported net realized gains and losses from foreign currency transactions arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, exchange rate
fluctuations between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds books and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized appreciation and depreciation on the translation of assets and liabilities denominated in foreign currencies arise from changes in the values of assets and liabilities, including investments in
securities at fiscal period end, resulting from changes in exchange rates.
|
|
|
40
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
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 Funds Statement of Operations.
Allocation of Income, Expenses, Gains and Losses.
Income, expenses (other than those attributable to a specific class), gains and losses are allocated
on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.
Federal Taxes.
The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders. Therefore, no federal income or excise tax provision is required. The Fund
files income tax returns in U.S. federal and applicable state jurisdictions. The statute of limitations on the Funds tax return filings generally remain open for the three preceding fiscal reporting period ends.
During the fiscal year ended May 31, 2012, the did not utilize any capital loss carryforward to offset capital gains realized in that fiscal year.
Details of the fiscal year ended May 31, 2012 capital loss carryforwards are included in the table below. Capital loss carryforwards with no expiration, if any, must be utilized prior to those with expiration dates. Capital losses with no
expiration will be carried forward to future years if not offset by gains.
|
|
|
|
|
Expiring
|
|
|
|
No expiration
|
|
$
|
455,692
|
|
As of November 30, 2012, it is estimated that the capital loss carryforwards would be $218,096 which will not expire.
The estimated capital loss carryforward represents the carryforward as of the end of the last fiscal year, increased or decreased by capital losses or gains realized in the first six months of the current fiscal year. During the six months ended
November 30, 2012, it is estimated that the Fund will utilize $237,596 of capital loss carryforward to offset realized capital gains.
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment
income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund.
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of November 30, 2012 are noted in the following table. The primary difference between book and tax appreciation or depreciation of
securities and other investments, if
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
41
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
1. Significant Accounting Policies
Continued
applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
|
|
|
|
|
Federal tax cost of securities
|
|
$
|
91,439,729
|
|
Federal tax cost of other investments
|
|
|
(10,567,011
|
)
|
|
|
|
|
|
Total federal tax cost
|
|
$
|
80,872,718
|
|
|
|
|
|
|
Gross unrealized appreciation
|
|
$
|
5,521,128
|
|
Gross unrealized depreciation
|
|
|
(1,955,142
|
)
|
|
|
|
|
|
Net unrealized appreciation
|
|
$
|
3,565,986
|
|
|
|
|
|
|
Certain foreign countries impose a tax on capital gains which is accrued by the Fund based on unrealized appreciation, if
any, on affected securities. The tax is paid when the gain is realized.
Trustees Compensation.
The Board of
Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the
amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of Other within the asset section of the Statement
of Assets and Liabilities. Deferral of trustees fees under the plan will not affect the net assets of the Fund, and will not materially affect the Funds assets, liabilities or net investment income per share. Amounts will be deferred
until distributed in accordance with the compensation deferral plan.
Dividends and Distributions to Shareholders.
Dividends and distributions to shareholders, which are determined in accordance with income tax regulations and may differ from U.S. generally accepted accounting principles, are recorded on the ex-dividend date. Income distributions, if any, are
declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. The tax character of distributions is determined as of the Funds fiscal year end. Therefore, a portion of the Funds distributions made
to shareholders prior to the Funds fiscal year end may ultimately be categorized as a tax return of capital.
Investment Income.
Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where
the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is recognized on an accrual basis. Discount and premium, which are
included in interest income on the Statement of Operations, are amortized or accreted daily.
|
|
|
42
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
Custodian Fees.
Custodian fees and
expenses in the Statement of Operations may include interest expense incurred by the Fund on any cash overdrafts of its custodian account during the period. Such cash overdrafts may result from the effects of failed trades in portfolio
securities and from cash outflows resulting from unanticipated shareholder redemption activity. The Fund pays interest to its custodian on such cash overdrafts, to the extent they are not offset by positive cash balances maintained by the Fund, at a
rate equal to the Federal Funds Rate plus 0.50%. The Reduction to custodian expenses line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees
may be paid with these earnings.
Security Transactions.
Security transactions are recorded on the trade date. Realized gains and
losses on securities sold are determined on the basis of identified cost.
Indemnifications.
The Funds
organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also
enter into contracts that provide general indemnifications. The Funds maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such
claims is considered remote.
Other.
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
2. Securities Valuation
The Fund calculates the net asset value of its shares as of the close of the New York Stock Exchange (the Exchange), normally
4:00 P.M. Eastern time, on each day the Exchange is open for trading.
The Funds Board has adopted procedures for the
valuation of the Funds securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a
fair valuation for any security for which market quotations are not readily available. The Valuation Committees fair valuation determinations are subject to review, approval and ratification by the Funds Board at
its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and
Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or
dealers.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
43
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
2. Securities Valuation
Continued
The following methodologies are used to determine the market
value or the fair value of the types of securities described below:
Securities traded on a registered U.S. securities exchange
(including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Funds assets are
valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current days closing bid and asked prices, and if not, at the current
days closing bid price. A security of a foreign issuer traded on a foreign exchange but not listed on a registered U.S. securities exchange is valued based on the last sale price on the principal exchange on which the security is traded, as
identified by the third party pricing service used by the Manager, prior to the time when the Funds assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal
exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange,
obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority); (1) using a bid from the exchange,
(2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.
Shares
of a registered investment company that are not traded on an exchange are valued at that investment companys net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and
asset-backed securities are valued at the mean between the bid and asked prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the
evaluated prices.
Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost
adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the bid and
asked prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Structured
securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.
Forward foreign currency exchange contracts are valued utilizing current and forward currency rates obtained from third party pricing services. When the settlement date of a contract is an interim date for
which a quotation is not available, interpolated values are derived using the nearest dated forward currency rate.
Futures
contracts and futures options traded on a commodities or futures exchange will be valued at the final settlement price or official closing price on the principal exchange as
|
|
|
44
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Funds assets are valued.
A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided
below.
|
|
|
Security Type
|
|
Standard inputs generally considered by third-party
pricing vendors
|
Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities
|
|
Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield,
maturity, and other appropriate factors.
|
Loans
|
|
Information obtained from market participants regarding reported trade data and broker-dealer price quotations.
|
Event-linked bonds
|
|
Information obtained from market participants regarding reported trade data and broker-dealer price quotations.
|
Structured securities
|
|
Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate
spreads, commodities, or the occurrence of other specific events.
|
Swaps
|
|
Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual
security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates.
|
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the
good faith opinion of the Manager, the market value or price obtained does not constitute a readily available market quotation, or a significant event has occurred that would materially affect the value of the security the
security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Funds Board or (ii) as determined in
good faith by the Managers Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a
security. Fair value determinations by the Manager are subject to review, approval and ratification by the Funds Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair
valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate
securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted
quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be
assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing
appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
45
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
2. Securities Valuation
Continued
day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or
broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on
such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or
liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Funds investments as of the reporting
period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1)
|
|
Level 1unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
|
2)
|
|
Level 2inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market
corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)
|
3)
|
|
Level 3significant unobservable inputs (including the Managers own judgments about assumptions that market participants would use in pricing the asset or
liability).
|
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in
those securities.
The table below categorizes amounts that are included in the Funds Statement of Assets and Liabilities as of
November 30, 2012 based on valuation input level:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
Unadjusted
Quoted Prices
|
|
Level 2
Other Significant
Observable Inputs
|
|
Level 3
Significant
Unobservable
Inputs
|
|
Value
|
Assets Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments, at Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Obligations
|
|
|
$
|
|
|
|
|
$
|
399,762
|
|
|
|
$
|
|
|
|
|
$
|
399,762
|
|
Foreign Government Obligations
|
|
|
|
|
|
|
|
|
59,919,327
|
|
|
|
|
|
|
|
|
|
59,919,327
|
|
Loan Participations
|
|
|
|
|
|
|
|
|
334,125
|
|
|
|
|
|
|
|
|
|
334,125
|
|
Corporate Bonds and Notes
|
|
|
|
|
|
|
|
|
27,157,816
|
|
|
|
|
|
|
|
|
|
27,157,816
|
|
Structured Securities
|
|
|
|
|
|
|
|
|
3,700,565
|
|
|
|
|
|
|
|
|
|
3,700,565
|
|
Options Purchased
|
|
|
|
|
|
|
|
|
86,500
|
|
|
|
|
|
|
|
|
|
86,500
|
|
Investment Company
|
|
|
|
3,366,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,366,439
|
|
|
|
|
|
|
|
Total Investments, at Value
|
|
|
|
3,366,439
|
|
|
|
|
91,598,095
|
|
|
|
|
|
|
|
|
|
94,964,534
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
|
|
|
|
|
|
|
534,213
|
|
|
|
|
|
|
|
|
|
534,213
|
|
Appreciated swaps, at value
|
|
|
|
|
|
|
|
|
19,030
|
|
|
|
|
|
|
|
|
|
19,030
|
|
Depreciated swaps, at value
|
|
|
|
|
|
|
|
|
360
|
|
|
|
|
|
|
|
|
|
360
|
|
|
|
|
|
|
|
Total Assets
|
|
|
$
|
3,366,439
|
|
|
|
$
|
92,151,698
|
|
|
|
$
|
|
|
|
|
$
|
95,518,137
|
|
|
|
|
|
|
|
|
|
|
46
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
Unadjusted
Quoted Prices
|
|
Level 2
Other Significant
Observable Inputs
|
|
Level 3
Significant
Unobservable
Inputs
|
|
Value
|
Liabilities Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts
|
|
|
$
|
|
|
|
|
$
|
(318,512
|
)
|
|
|
$
|
|
|
|
|
$
|
(318,512
|
)
|
Futures margins
|
|
|
|
(8,531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,531
|
)
|
Depreciated swaps, at value
|
|
|
|
|
|
|
|
|
(2,344
|
)
|
|
|
|
|
|
|
|
|
(2,344
|
)
|
Appreciated options written, at value
|
|
|
|
|
|
|
|
|
(34,132
|
)
|
|
|
|
|
|
|
|
|
(34,132
|
)
|
Depreciated swaption written, at value
|
|
|
|
|
|
|
|
|
(2,514
|
)
|
|
|
|
|
|
|
|
|
(2,514
|
)
|
|
|
|
|
|
|
Total Liabilities
|
|
|
$
|
(8,531
|
)
|
|
|
$
|
(357,502
|
)
|
|
|
$
|
|
|
|
|
$
|
(366,033
|
)
|
|
|
|
|
|
|
Currency contracts and forwards, if any, are reported at their unrealized appreciation/depreciation at measurement date,
which represents the change in the contracts value from trade date. Futures, if any, are reported at their variation margin at measurement date, which represents the amount due to/from the Fund at that date. All additional assets and
liabilities included in the above table are reported at their market value at measurement date.
There have been no significant
changes to the fair valuation methodologies of the Fund during the period.
3. Shares of Beneficial Interest
The Fund has
authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended November 30, 2012
1
|
|
|
Year Ended May 31, 2012
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
1,236,178
|
|
|
$
|
12,885,306
|
|
|
|
2,692,216
|
|
|
$
|
27,822,066
|
|
Dividends and/or
distributions reinvested
|
|
|
87,560
|
|
|
|
912,360
|
|
|
|
151,570
|
|
|
|
1,536,703
|
|
Redeemed
|
|
|
(585,712
|
)
|
|
|
(6,035,682
|
)
|
|
|
(1,661,951
|
)
|
|
|
(16,808,780
|
)
|
|
|
|
|
|
Net increase
|
|
|
738,026
|
|
|
$
|
7,761,984
|
|
|
|
1,181,835
|
|
|
$
|
12,549,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
606,038
|
|
|
$
|
6,325,768
|
|
|
|
947,461
|
|
|
$
|
9,784,713
|
|
Dividends and/or
distributions reinvested
|
|
|
29,042
|
|
|
|
303,578
|
|
|
|
47,024
|
|
|
|
475,971
|
|
Redeemed
|
|
|
(151,804
|
)
|
|
|
(1,575,450
|
)
|
|
|
(428,796
|
)
|
|
|
(4,345,498
|
)
|
|
|
|
|
|
Net increase
|
|
|
483,276
|
|
|
$
|
5,053,896
|
|
|
|
565,689
|
|
|
$
|
5,915,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class I
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
950
|
|
|
$
|
10,000
|
|
|
|
|
|
|
$
|
|
|
Dividends and/or
distributions reinvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase
|
|
|
950
|
|
|
$
|
10,000
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
47
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
3. Shares of Beneficial Interest
Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended November 30, 2012
1
|
|
|
Year Ended May 31, 2012
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Class N
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
66,601
|
|
|
$
|
694,359
|
|
|
|
150,204
|
|
|
$
|
1,559,656
|
|
Dividends and/or
distributions reinvested
|
|
|
4,266
|
|
|
|
44,577
|
|
|
|
6,324
|
|
|
|
63,700
|
|
Redeemed
|
|
|
(12,621
|
)
|
|
|
(130,853
|
)
|
|
|
(57,482
|
)
|
|
|
(582,032
|
)
|
|
|
|
|
|
Net increase
|
|
|
58,246
|
|
|
$
|
608,083
|
|
|
|
99,046
|
|
|
$
|
1,041,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class Y
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold
|
|
|
644,141
|
|
|
$
|
6,709,376
|
|
|
|
1,121,786
|
|
|
$
|
11,652,045
|
|
Dividends and/or
distributions reinvested
|
|
|
21,981
|
|
|
|
229,458
|
|
|
|
28,892
|
|
|
|
292,314
|
|
Redeemed
|
|
|
(418,242
|
)
|
|
|
(4,322,280
|
)
|
|
|
(613,738
|
)
|
|
|
(6,111,541
|
)
|
|
|
|
|
|
Net increase
|
|
|
247,880
|
|
|
$
|
2,616,554
|
|
|
|
536,940
|
|
|
$
|
5,832,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
For the six months ended November 30, 2012 for Class A, Class C, Class N and Class Y shares, and for the
period from September 28, 2012 (inception of offering) to November 30, 2012 for Class I shares.
4. Purchases and Sales of Securities
The aggregate
cost of purchases and proceeds from sales of securities, other than short-term obligations and investments in IMMF, for the six months ended November 30, 2012, were as follows:
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
Sales
|
|
Investment securities
|
|
$
|
38,447,610
|
|
|
$
|
30,445,513
|
|
U.S. government and government agency obligations
|
|
|
331,866
|
|
|
|
|
|
5.
Fees and Other Transactions with Affiliates
Management Fees.
Under the investment advisory agreement, the Fund pays the Manager a management fee based on the daily net assets of the Fund at an annual rate as shown in the following table:
|
|
|
|
|
Fee Schedule
|
|
|
|
Up to $500 million
|
|
|
0.75
|
%
|
Next $500 million
|
|
|
0.70
|
|
Next $4 billion
|
|
|
0.65
|
|
Over $5 billion
|
|
|
0.60
|
|
Administration Service Fees.
The Fund pays the
Manager a fee of $1,500 per year for preparing and filing the Funds tax returns.
Transfer Agent Fees.
OppenheimerFunds Services
(OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the six months ended November 30, 2012, the Fund paid $79,013 to OFS for services to the
Fund.
|
|
|
48
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
Additionally, Class Y shares are subject to minimum fees of $10,000 annually for assets of $10
million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.
Distribution and Service Plan (12b-1) Fees.
Under its General Distributors Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the
Distributor) acts as the Funds principal underwriter in the continuous public offering of the Funds classes of shares.
Service Plan for Class A Shares.
The Fund has adopted a Service Plan (the Plan) for Class A shares under Rule 12b-1 of the
Investment Company Act of 1940. Under the Plan, the Fund reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made periodically at an annual rate of up to
0.25% of the daily net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions periodically for providing personal service and maintenance of
accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent periods. Fees incurred by the Fund under the Plan
are detailed in the Statement of Operations.
Distribution and Service Plans for Class C and Class N Shares.
The Fund has adopted Distribution
and Service Plans (the Plans) for Class C and Class N shares under Rule 12b-1 of the Investment Company Act of 1940 to compensate the Distributor for its services in connection with the distribution of those shares and servicing
accounts. Under the Plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% on Class C shares daily net assets and 0.25% on Class N shares daily net assets. The Distributor also receives a service fee of 0.25% per year
under each plan. If either the Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund
of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. Fees incurred by the Fund under the Plans are detailed in the Statement of Operations. The Distributor
determines its uncompensated expenses under the Plans at calendar quarter ends. The Distributors aggregate uncompensated expenses under the Plans at September 30, 2012 were as follows:
|
|
|
|
|
Class C
|
|
$
|
178,771
|
|
Class N
|
|
|
12,929
|
|
Sales Charges.
Front-end sales charges and
contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales
charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the following table for the period indicated.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
49
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
5. Fees and Other Transactions with Affiliates
Continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
Class A
Front-End
Sales Charges
Retained by
Distributor
|
|
|
Class A
Contingent
Deferred
Sales Charges
Retained by
Distributor
|
|
|
Class C
Contingent
Deferred
Sales Charges
Retained by
Distributor
|
|
|
Class N
Contingent
Deferred
Sales Charges
Retained by
Distributor
|
|
November 30, 2012
|
|
$
|
28,399
|
|
|
$
|
322
|
|
|
$
|
2,200
|
|
|
$
|
24
|
|
Waivers and Reimbursements of Expenses.
The
Manager has agreed to voluntarily waive a portion of its management fees and/or reimburse the Fund for certain expenses so that Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses will not exceed
1.25% of average annual net assets for Class A shares, 2.00% for Class C shares, 0.85% for Class I, 1.50% for Class N shares and 0.95% for Class Y shares. During the six months ended November 30, 2012, the Manager reimbursed the Fund $240,
$16,999, $1, $1,480 and $11,930 for Class A, Class C, Class I, Class N and Class Y shares, respectively.
The Manager will
waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Funds investment in IMMF. During the six months ended November 30, 2012, the Manager waived fees and/or reimbursed the Fund
$1,288 for IMMF management fees.
OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for Classes C,
N and Y shares to 0.35% of average annual net assets per class; this limit also applied to Class A shares prior to August 1, 2012. Effective August 1, 2012, OFS has voluntarily agreed to limit its fees for Class A shares to 0.30%
of average annual net assets of the class.
Some of these undertakings may be modified or terminated at any time; some may not be
modified or terminated until after one year from the date of the current prospectus, as indicated therein.
6. Risk Exposures and the Use of Derivative Instruments
The Funds investment objectives not only permit the Fund to purchase investment securities, they also allow the Fund to enter into various types of
derivatives contracts, including, but not limited to, futures contracts, forward foreign currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, and purchased and written options. In doing so, the Fund will employ
strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. Central to those strategies are features inherent to derivatives that make them more attractive for this
purpose than equity and debt securities: they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or
securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors.
|
|
|
50
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
Market Risk Factors.
In accordance with its
investment objectives, the Fund may use derivatives to increase or decrease its exposure to one or more of the following market risk factors:
Commodity Risk.
Commodity risk relates to the change in value of commodities or commodity indexes
as they relate to increases or decreases in the commodities market. Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.
Credit Risk.
Credit
risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
Equity Risk.
Equity
risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Foreign Exchange Rate Risk.
Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a
foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Interest Rate Risk.
Interest
rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued
fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from
changes in interest rates than obligations with shorter maturities.
Volatility
Risk.
Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instruments price over a defined time period. Large increases or
decreases in a financial instruments price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
The Funds actual exposures to these market risk factors during the period are discussed in further detail, by derivative type, below.
Risks of Investing in Derivatives.
The Funds use of derivatives can result in losses due to unanticipated changes in the market risk factors and
the overall market. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses
for the combined or hedged positions.
Derivatives may have little or no initial cash investment relative to their market value
exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of
the Funds performance.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
51
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
6. Risk Exposures and the Use of Derivative Instruments
Continued
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the
derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these
associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation
to the Fund. Associated risks can be different for each type of derivative and are discussed by each derivative type in the notes that follow.
Counterparty Credit Risk.
Certain derivative positions are subject to counterparty credit risk,
which is the risk that the counterparty will not fulfill its obligation to the Fund. The Funds derivative counterparties are financial institutions who are subject to market conditions that may weaken their financial position. The Fund intends
to enter into financial transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction. As of November 30, 2012, the maximum amount of loss that the Fund would incur if the counterparties to its
derivative transactions failed to perform would be $782,414, which represents gross payments to be received by the Fund on these derivative contracts were they to be unwound as of period end. To reduce this risk the Fund has entered into master
netting arrangements, established within the Funds International Swap and Derivatives Association, Inc. master agreements, which allow the Fund to net unrealized appreciation and depreciation for certain positions in swaps, over-the-counter
options, swaptions, and forward currency exchange contracts for each individual counterparty. The amount of loss that the Fund would incur taking into account these master netting arrangements would be $499,154 as of November 30, 2012. In
addition, the Fund may require that certain counterparties post cash and/or securities in collateral accounts to cover their net payment obligations for those derivative contracts subject to International Swap and Derivatives Association, Inc.
master agreements. If the counterparty fails to perform under these contracts and agreements, the cash and/or securities will be made available to the Fund.
As of November 30, 2012 the Fund has not required certain counterparties to post collateral.
Credit Related Contingent Features.
The Funds agreements with derivative counterparties
have several credit related contingent features that if triggered would allow its derivatives counterparties to close out and demand payment or additional collateral to cover their exposure from the Fund. Credit related
contingent features are established between the Fund and its derivatives counterparties to reduce the risk that the Fund will not fulfill its payment obligations to its counterparties. These triggering features include, but are not limited to, a
percentage decrease in the Funds net assets and or a percentage decrease in the Funds Net Asset Value or NAV. The contingent features are established within the Funds International Swap and Derivatives
|
|
|
52
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
Association, Inc. master agreements which govern certain positions in swaps, over-the-counter options and swaptions, and forward currency exchange contracts for each individual
counterparty.
As of November 30, 2012, the aggregate fair value of derivative instruments with credit related
contingent features in a net liability position was $286,596 for which collateral was not posted by the Fund. If a contingent feature would have been triggered as of November 30, 2012, the Fund could have been required to pay this amount in
cash to its counterparties. If the Fund fails to perform under these contracts and agreements, the cash and/or securities posted as collateral will be made available to the counterparty. Cash posted as collateral for these contracts, if any, is
reported on the Statement of Assets and Liabilities; securities posted as collateral, if any, are reported on the Statement of Investments.
Valuations of derivative instruments as of November 30, 2012 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
|
|
Liability Derivatives
|
|
Derivatives Not
Accounted for as
Hedging Instruments
|
|
Statement of Assets and
Liabilities Location
|
|
Value
|
|
|
|
|
Statement of Assets and
Liabilities Location
|
|
Value
|
|
Credit contracts
|
|
Depreciated swaps, at
value
|
|
$
|
360
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
Appreciated swaps, at
value
|
|
|
19,030
|
|
|
|
|
Depreciated swaps, at
value
|
|
$
|
2,344
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
Futures margins
|
|
|
8,531
|
*
|
Foreign exchange contracts
|
|
Closed currency
contracts
|
|
|
1,621,031
|
|
|
|
|
Closed currency
contracts
|
|
|
184,791
|
|
Foreign exchange contracts
|
|
Unrealized appreciation
on foreign currency
exchange contracts
|
|
|
534,213
|
|
|
|
|
Unrealized depreciation
on foreign currency
exchange contracts
|
|
|
318,512
|
|
Foreign exchange contracts
|
|
Investments, at value
|
|
|
86,500
|
**
|
|
|
|
Appreciated options
written, at value
|
|
|
34,132
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
Depreciated swaptions
written, at value
|
|
|
2,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
2,261,134
|
|
|
|
|
|
|
$
|
550,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Includes only the current days variation margin. Prior variation margin movements have been reflected in cash on the
Statement of Assets and Liabilities upon receipt or payment.
**Amounts relate to purchased options.
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
53
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
6. Risk Exposures and the Use of Derivative Instruments
Continued
The effect of derivative
instruments on the Statement of Operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Realized Gain or (Loss) Recognized on Derivatives
|
|
Derivatives
Not Accounted
for as Hedging
Instruments
|
|
Investments
from unaffiliated
companies
(including
premiums
on
options
exercised)*
|
|
|
Closing and
expiration
of swaption
contracts
written
|
|
|
Closing and
expiration
of option
contracts
written
|
|
|
Closing and
expiration
of futures
contracts
|
|
|
Foreign
currency
transactions
|
|
|
Swap
contracts
|
|
|
Total
|
|
Credit contracts
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
11,418
|
|
|
$
|
11,418
|
|
Equity contracts
|
|
|
(249,841
|
)
|
|
|
|
|
|
|
51,355
|
|
|
|
146,588
|
|
|
|
|
|
|
|
|
|
|
|
(51,898
|
)
|
Foreign exchange contracts
|
|
|
19,127
|
|
|
|
|
|
|
|
216,838
|
|
|
|
|
|
|
|
(117,678
|
)
|
|
|
|
|
|
|
118,287
|
|
Interest rate contracts
|
|
|
|
|
|
|
2,330
|
|
|
|
|
|
|
|
(106,311
|
)
|
|
|
|
|
|
|
126,203
|
|
|
|
22,222
|
|
|
|
|
|
|
Total
|
|
$
|
(230,714
|
)
|
|
$
|
2,330
|
|
|
$
|
268,193
|
|
|
$
|
40,277
|
|
|
$
|
(117,678
|
)
|
|
$
|
137,621
|
|
|
$
|
100,029
|
|
|
|
|
|
|
*Includes purchased option contracts, purchased swaption contracts and written option contracts exercised, if any.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Change in Unrealized Gain or (Loss) Recognized on Derivatives
|
|
Derivatives
Not Accounted
for as Hedging
Instruments
|
|
Investments*
|
|
|
Option
contracts
written
|
|
|
Swaption
contracts
written
|
|
|
Futures
contracts
|
|
|
Translation
of assets and
liabilities
denominated
in foreign
currencies
|
|
|
Swap
contracts
|
|
|
Total
|
|
Credit contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
18,250
|
|
|
$
|
18,250
|
|
Equity contracts
|
|
|
(31,177
|
)
|
|
|
27,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,164
|
)
|
Foreign exchange contracts
|
|
|
(251,071
|
)
|
|
|
290,981
|
|
|
|
|
|
|
|
|
|
|
|
(343,250
|
)
|
|
|
|
|
|
|
(303,340
|
)
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
(707
|
)
|
|
|
62,952
|
|
|
|
|
|
|
|
13,821
|
|
|
|
76,066
|
|
|
|
|
|
|
Total
|
|
$
|
(282,248
|
)
|
|
$
|
317,994
|
|
|
$
|
(707
|
)
|
|
$
|
62,952
|
|
|
$
|
(343,250
|
)
|
|
$
|
32,071
|
|
|
$
|
(213,188
|
)
|
|
|
|
|
|
*Includes purchased option contracts and purchased swaption contracts, if any.
Foreign Currency Exchange Contracts
The Fund may enter into foreign currency exchange contracts (forward contracts) for the purchase or sale of a foreign currency at
a negotiated rate at a future date.
Forward contracts are reported on a schedule following the Statement of Investments. The
unrealized appreciation (depreciation) is reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations within the change in unrealized appreciation (depreciation). At contract close, the
difference between the original cost of the contract and the value at the close date is recorded as a realized gain (loss) in the Statement of Operations.
The Fund has purchased and sold certain forward foreign currency exchange contracts of different currencies in order to acquire currencies to pay for or sell currencies to acquire related foreign
securities purchase and sale transactions, respectively, or to convert foreign currencies to U.S. dollars from related foreign securities transactions. These foreign
|
|
|
54
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
currency exchange contracts are negotiated at the current spot exchange rate with settlement typically within two business days thereafter.
The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the
future at a currently negotiated forward rate in order to take a positive investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward foreign currency exchange contracts with the obligation to purchase specified foreign currencies in the
future at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future
at a currently negotiated forward rate in order to take a negative investment perspective on the related currency. These forward foreign currency exchange contracts seek to increase exposure to foreign exchange rate risk.
The Fund has entered into forward foreign currency exchange contracts with the obligation to sell specified foreign currencies in the future
at a currently negotiated forward rate in order to decrease exposure to foreign exchange rate risk associated with foreign currency denominated securities held by the Fund.
During the six months ended November 30, 2012, the Fund had daily average contract amounts on forward foreign currency contracts to buy and sell of $40,733,758 and $32,766,093, respectively.
Additional associated risk to the Fund includes counterparty credit risk. Counterparty credit risk arises from the possibility that the
counterparty will default.
Futures Contracts
A futures contract is a commitment
to buy or sell a specific amount of a financial instrument, or currency, at a negotiated price on a stipulated future date. The Fund may buy and sell futures contracts and may also buy or write put or call options on these futures contracts.
Futures contracts traded on a commodities or futures exchange will be valued at the final settlement price or official closing
price on the principal exchange as reported by such principal exchange at its trading session ending at, or most recently prior to, the time when the Funds assets are valued.
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.
Futures contracts are reported on a schedule following the Statement of Investments. Securities held in collateralized
accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. Cash held by the broker to
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
55
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
6. Risk Exposures and the Use of Derivative Instruments
Continued
cover initial margin requirements on open futures contracts and the receivable and/or payable for the daily mark to market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is reported in the Statement of Operations. Realized gains (losses) are reported in the Statement of Operations at the closing or expiration of futures contracts.
The Fund has sold futures contracts on various bonds and notes to decrease exposure to interest rate risk.
The Fund has purchased futures contracts on various equity indexes to increase exposure to equity risk.
During the six months ended November 30, 2012, the Fund had an ending monthly average market value of $8,766,050 on futures contracts
sold.
Additional associated risks of entering into futures contracts (and related options) include the possibility that there may
be an illiquid market where the Fund is unable to liquidate the contract or enter into an offsetting position and, if used for hedging purposes, the risk that the price of the contract will correlate imperfectly with the prices of the Funds
securities.
Option
Activity
The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a
premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option.
Options
are valued daily based upon the last sale price on the principal exchange on which the option is traded. The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The
net change in unrealized appreciation or depreciation is reported in the Statement of Operations. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or
paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations.
The
Fund has purchased call options on currencies to increase exposure to foreign exchange rate risk. A purchased call option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.
The Fund has purchased put options on currencies to decrease exposure to foreign exchange rate risk. A purchased put option becomes more
valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has purchased put
options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the six months ended November 30, 2012, the Fund had an ending monthly average market value of $252,220 and $27,617 on purchased
call options and purchased put options, respectively.
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56
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OPPENHEIMER EMERGING MARKETS DEBT FUND
|
Options written, if any, are reported in a schedule following the Statement of Investments and
as a liability in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.
The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option
is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.
The Fund has written put options on currencies to increase exposure to foreign exchange rate risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates
relative to the strike price.
The Fund has written call options on currencies to decrease exposure to foreign exchange rate risk.
A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
The Fund has written put options on individual equity securities and/or equity indexes to increase exposure to equity risk. A written put option becomes more valuable as the price of the underlying financial
instrument appreciates relative to the strike price.
The Fund has written call options on individual equity securities and/or
equity indexes to decrease exposure to equity risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.
During the six months ended November 30, 2012, the Fund had an ending monthly average market value of $39,748 and $136,155 on written
call options and written put options, respectively.
Additional associated risks to the Fund include counterparty credit risk for
over-the-counter options and liquidity risk.
Written option activity for the six months ended November 30, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Call Options
|
|
|
Put Options
|
|
|
|
Number of
Contracts
|
|
|
Amount of
Premiums
|
|
|
Number of
Contracts
|
|
|
Amount of
Premiums
|
|
Options outstanding as of May 31, 2012
|
|
|
|
|
|
$
|
|
|
|
|
106,900,092
|
|
|
$
|
211 ,980
|
|
Options written
|
|
|
154,200,046
|
|
|
|
166,424
|
|
|
|
174,587,600
|
|
|
|
484,742
|
|
Options closed or expired
|
|
|
(73,450,000
|
)
|
|
|
(111,732
|
)
|
|
|
(148,537,692
|
)
|
|
|
(480,764
|
)
|
Options exercised
|
|
|
(46
|
)
|
|
|
(6,618
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of November 30, 2012
|
|
|
80,750,000
|
|
|
$
|
48,074
|
|
|
|
132,950,000
|
|
|
$
|
215,958
|
|
|
|
|
|
|
Swap Contracts
The Fund may enter into swap contract
agreements with a counterparty to exchange a series of cash flows based on either specified reference rates, or the occurrence of a credit event, over a specified period. Such contracts may include interest rate, equity, debt, index, total return,
credit and currency swaps.
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|
|
|
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OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
57
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
6. Risk Exposures and the Use of Derivative Instruments
Continued
Swaps are
marked to market daily using primarily quotations from pricing services, counterparties and brokers. Swap contracts are reported on a schedule following the Statement of Investments. The values of swap contracts are aggregated by positive and
negative values and disclosed separately on the Statement of Assets and Liabilities by contracts in unrealized appreciation and depreciation positions. Upfront payments paid or received, if any, affect the value of the respective swap. Therefore, to
determine the unrealized appreciation (depreciation) on swaps, upfront payments paid should be subtracted from, while upfront payments received should be added to, the value of contracts reported as an asset on the Statement of Assets and
Liabilities. Conversely, upfront payments paid should be added to, while upfront payments received should be subtracted from the value of contracts reported as a liability. The unrealized appreciation (depreciation) related to the change in the
valuation of the notional amount of the swap is combined with the accrued interest due to (owed by) the Fund at termination or settlement. The net change in this amount during the period is included on the Statement of Operations. The Fund also
records any periodic payments received from (paid to) the counterparty, including at termination, under such contracts as realized gain (loss) on the Statement of Operations.
Swap contract agreements are exposed to the market risk factor of the specific underlying reference asset. Swap contracts are typically more attractively priced compared to similar investments in related
cash securities because they isolate the risk to one market risk factor and eliminate the other market risk factors. Investments in cash securities (for instance bonds) have exposure to multiple risk factors (credit and interest rate risk). Because
swaps require little or no initial cash investment, they can expose the Fund to substantial risk in the isolated market risk factor.
Credit Default Swap Contracts.
A credit default swap is a bilateral contract that enables an
investor to buy or sell protection on a debt security against a defined-issuer credit event, such as the issuers failure to make timely payments of interest or principal on the debt security, bankruptcy or restructuring. The Fund may enter
into credit default swaps either by buying or selling protection on a single security or a basket of securities (the reference asset).
The buyer of protection pays a periodic fee to the seller of protection based on the notional amount of debt securities underlying the swap contract. The seller of protection agrees to compensate the buyer
of protection for future potential losses as a result of a credit event on the reference asset. The contract effectively transfers the credit event risk of the reference asset from the buyer of protection to the seller of protection.
The ongoing value of the contract will fluctuate throughout the term of the contract based primarily on the
credit risk of the reference asset. If the credit quality of the reference asset improves relative to the credit quality at contract initiation, the buyer of protection may have an unrealized loss greater than the anticipated periodic fee owed. This
unrealized loss would be the result of current credit protection being
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|
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58
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OPPENHEIMER EMERGING MARKETS DEBT FUND
|
cheaper than the cost of credit protection at contract initiation. If the buyer elects to terminate the contract prior to its maturity, and there has been no credit event, this unrealized loss
will become realized. If the contract is held to maturity, and there has been no credit event, the realized loss will be equal to the periodic fee paid over the life of the contract.
If there is a credit event, the buyer of protection can exercise its rights under the contract and receive a payment from the
seller of protection equal to the notional amount of the reference asset less the market value of the reference asset. Upon exercise of the contract the difference between the value of the underlying reference asset and the notional amount is
recorded as realized gain (loss) and is included on the Statement of Operations.
The Fund has sold credit
protection through credit default swaps to increase exposure to the credit risk of individual securities and/or, indexes that are either unavailable or considered to be less attractive in the bond market.
The Fund has purchased credit protection through credit default swaps to decrease exposure to the credit risk of individual
securities and/or, indexes.
For the six months ended November 30, 2012, the Fund had ending monthly average
notional amounts of $27,143 and $1,006,429 on credit default swaps to buy protection and credit default swaps to sell protection, respectively.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Interest Rate Swap Contracts.
An interest rate swap is an agreement between counterparties to
exchange periodic payments based on interest rates. One cash flow stream will typically be a floating rate payment based upon a specified interest rate while the other is typically a fixed interest rate.
The Fund has entered into interest rate swaps in which it pays a floating interest rate and receives a fixed interest rate in
order to increase exposure to interest rate risk. Typically, if relative interest rates rise, payments made by the Fund under a swap agreement will be greater than the payments received by the Fund.
For the six months ended November 30, 2012
,
the Fund had ending monthly average notional amounts of $6,152,354 on interest rate swaps which receive a fixed rate.
Additional associated risks to the Fund include counterparty credit risk and liquidity risk.
Swaption Transactions
The Fund may enter into a swaption contract which grants the purchaser the right, but not the obligation, to enter into a swap transaction at
preset terms detailed in the underlying agreement within a specified period of time. The purchaser pays a premium to the swaption writer who bears the risk of unfavorable changes in the preset terms on the underlying swap.
Swaptions are marked to market daily using primarily portfolio pricing services or quotations from counterparties and brokers. Purchased
swaptions are reported as a
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|
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|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
59
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
6. Risk Exposures and the Use of Derivative Instruments
Continued
component of investments in the Statement of Investments, the Statement of Assets and Liabilities and the Statement of Operations. Written swaptions are reported on a schedule following the
Statement of Investments and their value is reported as a separate asset or liability line item in the Statement of Assets and Liabilities. The net change in unrealized appreciation or depreciation on written swaptions is separately reported in the
Statement of Operations. When a swaption is exercised, the cost of the swap is adjusted by the amount of premium paid or received. Upon the expiration or closing of an unexercised swaption contract, a gain or loss is reported in the Statement of
Operations for the amount of the premium paid or received.
The Fund generally will incur a greater risk when it writes a swaption
than when it purchases a swaption. When the Fund writes a swaption it will become obligated, upon exercise of the swaption, according to the terms of the underlying agreement. Swaption contracts written by the Fund do not give rise to counterparty
credit risk as they obligate the Fund, not its counterparty, to perform. When the Fund purchases a swaption it only risks losing the amount of the premium it paid if the swaption expires unexercised. However, when the Fund exercises a purchased
swaption there is a risk that the counterparty will fail to perform or otherwise default on its obligations under the swaption contract.
The Fund has written swaptions which gives it the obligation, if exercised by the purchaser, to enter into an interest rate swap in which it pays a fixed interest rate and receives a floating interest rate
in order to decrease exposure to interest rate risk. A written swaption of this type becomes more valuable as the reference interest rate appreciates relative to the preset interest rate.
During the six months ended November 30, 2012, the Fund had an ending monthly average market value of $13,330 on written swaptions.
Written swaption activity for the six months ended November 30, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Call Swaptions
|
|
|
|
Number of
Contracts
|
|
|
Amount of
Premiums
|
|
Swaptions outstanding as of May 31, 2012
|
|
|
3,560,000
|
|
|
$
|
4,649
|
|
Swaptions written
|
|
|
1,745,000
|
|
|
|
2,299
|
|
Swaptions closed or expired
|
|
|
(1,800,000
|
)
|
|
|
(2,330
|
)
|
Swaptions exercised
|
|
|
(1,760,000
|
)
|
|
|
(2,319
|
)
|
|
|
|
|
|
Swaptions outstanding as of November 30, 2012
|
|
|
1,745,000
|
|
|
$
|
2,299
|
|
|
|
|
|
|
7.
Restricted Securities
As of November 30, 2012, investments in securities included issues that are restricted. A restricted security may
have a contractual restriction on its resale and is valued under methods approved by the Board of Trustees as reflecting fair value. Securities that are restricted are marked with an applicable footnote on the Statement of Investments. Restricted
securities are reported on a schedule following the Statement of Investments.
|
|
|
60
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
8. Subsequent Event
The Board of Trustees of the Fund recently approved a series of modifications to the Funds investment advisory and transfer agency arrangements in
connection with internal corporate restructuring efforts at OppenheimerFunds, Inc. (OFI). As a result of these modifications, on January 1, 2013 (the Effective Date), OFI Global Asset Management, Inc. (OFI
Global), a wholly-owned subsidiary of OFI, became the investment adviser and transfer agent to the Fund under the terms of the Funds advisory agreement and transfer agency agreement, respectively. OFI Global, in turn, entered into a
new sub-advisory agreement for the Fund, on the Effective Date, whereby OFI Global will have oversight and supervisory responsibilities and OFI will choose the Funds investments and provide related advisory services to the Fund. In addition,
on the Effective Date, OFI Global entered into a sub-transfer agency agreement with Shareholder Services, Inc. doing business as OppenheimerFunds Services, a wholly-owned subsidiary of OFI, under which it will be responsible for providing transfer
agency services to the Fund.
The realignment of advisory service responsibility between OFI Global and OFI did not result in any
change in the persons managing the assets of the Fund, the level or nature of the advisory services provided to the Fund, or the fees charged to the Fund.
9. Pending Litigation
Since 2009, a number of class action lawsuits have been pending in federal courts against OppenheimerFunds, Inc., the Funds Adviser
through December 31, 2012 and Sub-Adviser effective January 1, 2013, OppenheimerFunds Distributor, Inc., the Funds principal underwriter and distributor (the Distributor), and certain funds (but not including the Fund) advised by
the Manager and distributed by the Distributor (the Defendant Funds). Several of these lawsuits also name as defendants certain officers and current and former trustees of the respective Defendant Funds. The lawsuits raise claims under
federal securities law and allege, among other things, that the disclosure documents of the respective Defendant Funds contained misrepresentations and omissions and that the respective Defendant Funds investment policies were not followed.
The plaintiffs in these actions seek unspecified damages, equitable relief and awards of attorneys fees and litigation expenses. The Defendant Funds Boards of Trustees have also engaged counsel to represent the Funds and the present and
former Independent Trustees named in those suits.
Other class action and individual lawsuits have been filed since 2008 in
various state and federal courts against the Manager and certain of its affiliates by investors seeking to recover investments they allegedly lost as a result of the Ponzi scheme run by Bernard L. Madoff and his firm, Bernard L. Madoff
Investment Securities, LLC (BLMIS). Plaintiffs in these suits allege that they suffered losses as a result of their investments in several funds managed by an affiliate of the Manager and assert a variety of claims, including breach of
fiduciary duty, fraud, negligent misrepresentation, unjust enrichment, and violation of federal and state securities laws and regulations, among others. They seek unspecified damages, equitable relief and awards of attorneys fees and
litigation expenses. Neither the
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
61
|
|
NOTES
TO
FINANCIAL STATEMENTS
Unaudited / Continued
9. Pending Litigation
Continued
Distributor, nor any of the Oppenheimer mutual funds, their independent trustees or directors are named as defendants in these lawsuits. None of the Oppenheimer mutual funds invested in any funds
or accounts managed by Madoff or BLMIS. On February 28, 2011, a stipulation of partial settlement of three groups of consolidated putative class action lawsuits relating to these matters was filed in the U.S. District Court for the Southern
District of New York. On August 19, 2011, the court entered an order and final judgment approving the settlement as fair, reasonable and adequate. In September 2011, certain parties filed notices of appeal from the courts order approving
the settlement. The settlement does not resolve other outstanding lawsuits against the Manager and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark IV Funding Limited (AAArdvark IV), an entity advised by the
Managers affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs allege breach of contract against the defendants and seek compensatory damages, costs and disbursements, including attorney fees. On
July 15, 2011, a lawsuit was filed in New York state court against the Manager, an affiliate of the Manager and AAArdvark Funding Limited (AAArdvark I), an entity advised by the Managers affiliate, in connection with
investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees. On November 9, 2011, a lawsuit was filed in New
York state court against the Manager, an affiliate of the Manager and AAArdvark XS Funding Limited (AAArdvark XS), an entity advised by the Managers affiliate, in connection with investments made by the plaintiffs in AAArdvark XS.
The complaint alleges breach of contract against the defendants and seeks compensatory damages, costs and disbursements, including attorney fees.
The Manager believes the lawsuits and appeals described above are without legal merit and, with the exception of actions it has settled, is defending against them vigorously. While it is premature to render
any opinion as to the outcome in these lawsuits, or whether any costs that the Defendant Funds may bear in defending the suits might not be reimbursed by insurance, the Manager believes that these suits should not impair the ability of the Manager
or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
|
|
|
62
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
BOARD APPROVAL OF THE FUNDS INVESTMENT
ADVISORY AGREEMENT
Unaudited
Each year, the Board of Trustees (the Board), including a majority of the independent Trustees, is required to determine whether to renew the
Funds investment advisory agreement (the Agreement). The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Manager provide, such information as may be reasonably necessary to
evaluate the terms of the Agreement. The Board employs an independent consultant to prepare a report that provides information, including comparative information that the Board requests for that purpose. In addition to in-person meetings focused on
this evaluation, the Board receives information throughout the year regarding Fund services, fees, expenses and performance.
The
Manager and the independent consultant provided information to the Board on the following factors: (i) the nature, quality and extent of the Managers services, (ii) the investment performance of the Fund and the Manager,
(iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Manager and its affiliates, including an analysis of the cost of providing services, (v) whether economies of scale are
realized as the Fund grows and whether fee levels reflect these economies of scale for Fund investors and (vi) other benefits to the Manager from its relationship with the Fund. The Board was aware that there are alternatives to retaining the
Manager.
Outlined below is a summary of the principal information considered by the Board as well as the Boards
conclusions.
Nature, Quality and Extent of Services.
The Board considered information about the nature, quality and extent of the services provided to the Fund and information regarding the Managers key personnel who provide such services. The
Managers duties include providing the Fund with the services of the portfolio manager and the Managers investment team, who provide research, analysis and other advisory services in regard to the Funds investments; securities
trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Funds investment restrictions; and risk management. The Manager is responsible for providing
certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and
maintaining records with respect to the Funds operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Funds shares. The Manager also provides the Fund with office space, facilities and equipment.
|
|
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|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
63
|
|
BOARD APPROVAL OF THE FUNDS INVESTMENT
ADVISORY AGREEMENT
Unaudited / Continued
The Board also considered the quality of the services provided and the quality of the Managers resources that are available to the
Fund. The Board took account of the fact that the Manager has had over fifty years of experience as an investment adviser and that its assets under management rank it among the top mutual fund managers in the United States. The Board evaluated the
Managers advisory, administrative, accounting, legal, compliance services and risk management, and information the Board has received regarding the experience and professional qualifications of the Managers key personnel and the size and
functions of its staff. In its evaluation of the quality of the portfolio management services provided, the Board considered the experience of Sara Zervos the portfolio manager for the Fund, and the Managers investment team and analysts. The
Board members also considered the totality of their experiences with the Manager as directors or trustees of the Fund and other funds advised by the Manager. The Board considered information regarding the quality of services provided by affiliates
of the Manager, which its members have become knowledgeable about in connection with the renewal of the Funds service agreements. The Board concluded, in light of the Managers experience, reputation, personnel, operations and resources
that the Fund benefits from the services provided under the Agreement.
Investment Performance of the Manager.
Throughout the year, the Manager provided information on the investment performance of the Fund and the Manager, including comparative performance information. The Board also reviewed information, prepared
by the Manager and by the independent consultant, comparing the Funds historical performance to relevant market indices and to the performance of other retail front-end and no-load emerging markets debt funds. The Board noted that the Fund
underperformed its performance universe median for the one-year period and the period since the Funds inception. The Board noted that in 2011, the top performing funds in the Funds performance universe were funds denominated in U.S.
dollars, and that the Fund is a blend of emerging market debt denominated in local currencies as well as debt denominated in U.S. dollars. The Board also noted the Managers assertion that foreign currencies sold off quite dramatically in the
second half of 2011, and that emerging market currencies also suffered as global macroeconomic events caused investors to seek safe haven assets. The Board further considered that as volatility increased, the Manager pared back foreign currency
exposure to protect returns. The Board also considered that the Funds year-to-date performance as of April 30, 2012 was in the second quintile of its performance universe.
Costs of Services by the Manager.
The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The Board also considered the comparability
|
|
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64
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
of the fees charged and the services provided to the Fund to the fees and services for other clients or accounts advised by the Manager. The independent consultant provided comparative data in
regard to the fees and expenses of the Fund and other retail front-end load emerging markets debt funds with comparable asset levels and distribution features. The Board noted that the Funds actual and contractual management fees were higher
than its respective expense group median and average. The Board noted that the Funds total expenses were lower than its expense group median and average. The Board considered that the Manager has agreed to voluntarily limit the total annual
operating expenses after fee waiver and/or reimbursement for all classes of shares of the Fund so that total expenses, as percentage of average daily net assets, will not exceed the following annual rates: 1.25% for Class A Shares; 2.00% for
Class C Shares; 1.50% for Class N Shares; 0.95% for Class Y Shares; and 0.85% for Class I Shares. This waiver and/or reimbursement may not be amended or withdrawn until one year after the date of the Funds prospectus.
Economies of Scale and Profits Realized by the Manager.
The Board considered information regarding the Managers costs in serving as the Funds investment adviser, including the costs associated with the personnel and systems necessary to manage the
Fund, and information regarding the Managers profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund. The Board noted that the Fund currently
has management fee breakpoints, which are intended to share with Fund shareholders economies of scale that may exist as the Funds assets grow.
Other Benefits to the Manager.
In addition to considering the profits realized by the Manager,
the Board considered information that was provided regarding the direct and indirect benefits the Manager receives as a result of its relationship with the Fund, including compensation paid to the Managers affiliates. The Board also considered
that the Manager must be able to pay and retain experienced professional personnel at competitive rates to provide quality services to the Fund.
Conclusions.
These factors were also considered by the independent Trustees meeting separately
from the full Board, assisted by experienced counsel to the Fund and to the independent Trustees. Fund counsel and the independent Trustees counsel are independent of the Manager within the meaning and intent of the Securities and Exchange
Commission Rules.
Based on its review of the information it received and its evaluations described above, the Board, including a
majority of the independent Trustees, decided to continue the Agreement. In addition, the Board, including a majority of the Independent Trustees, approved the restructuring of the Funds investment advisory arrangement so that
|
|
|
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
|
|
65
|
|
BOARD APPROVAL OF THE FUNDS INVESTMENT
ADVISORY AGREEMENT
Unaudited / Continued
effective January 1, 2013, (i) OFI Global Asset Management, Inc. (OFI Global), a wholly owned subsidiary of the Manager, will serve as the investment adviser to the Fund in
place of the Manager under a Restated Advisory Agreement (Restated Advisory Agreement), and (ii) OFI Global will enter into a Sub-Advisory Agreement (Sub-Advisory Agreement) with the Manager to provide investment
sub-advisory services to the Fund. OFI Global will pay the Manager a percentage of the net investment advisory fee (after all applicable waivers have been deducted) that it receives from the Fund. The Agreement will continue until earlier of
August 31, 2013 or the effective date of the Restated Advisory Agreement between the Fund and OFI Global. The Restated Advisory Agreement and Sub-Advisory Agreement will continue until August 31, 2013.
In arriving at its decisions, the Board did not single out any factor or factors as being more important than others, but considered all of
the above information, and considered the terms and conditions of the Agreement, Restated Advisory Agreement and Sub-Advisory Agreement, including the management fees, in light of all the surrounding circumstances.
|
|
|
66
|
|
OPPENHEIMER EMERGING MARKETS DEBT FUND
|
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS
Unaudited
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities (portfolio proxies) held by the Fund. A description of the Funds Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.CALL OPP (225.5677), (ii) on the Funds website at oppenheimerfunds.com, and (iii) on the SECs website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record
for the 12 months ended June 30th, no later than August 31st of each year. The Funds voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.CALL OPP (225.5677), and (ii) in the
Form N-PX filing on the SECs website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with
the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Funds Form N-Q filings are available on the SECs website at www.sec.gov. Those forms may be reviewed and copied at the SECs Public Reference
Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
HouseholdingDelivery of Shareholder Documents
This is to inform you about OppenheimerFunds householding policy. If more than one member of your household maintains an account in a
particular fund, OppenheimerFunds will mail only one copy of the funds prospectus (or, if available, the funds summary prospectus), annual and semiannual report and privacy policy. The consolidation of these mailings, called
householding, benefits your fund through reduced mailing expense, and benefits you by reducing the volume of mail you receive from OppenheimerFunds. Householding does not affect the delivery of your account statements.
Please note that we will continue to household these mailings for as long as you remain an OppenheimerFunds shareholder, unless you request
otherwise. If you prefer to receive multiple copies of these materials, please call us at
1.800.CALL-OPP (225-5677)
. You may also
notify us in writing or via email. We will begin sending you individual copies of the prospectus (or, if available, the summary prospectus), reports and privacy policy within 30 days of receiving your request to stop householding.