UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22520
Oppenheimer Ultra-Short Duration Fund
(Exact name of registrant as specified in charter)
6803 South Tucson Way,
Centennial, Colorado 80112-3924
(Address of principal executive offices) (Zip code)
Arthur S. Gabinet
OFI Global Asset Management, Inc.
Two World Financial Center,
New York, New York 10281-1008
(Name and address of agent for service)
Registrant’s telephone number, including area code: (303) 768-3200
Date of fiscal year end: July 31
Date of reporting period: 1/31/2014
Item 1. Reports to Stockholders.
Class Y Shares
AVERAGE ANNUAL TOTAL RETURNS AT 1/31/14
Class Y Shares of the Fund | BofA Merrill Lynch 3- Month U.S. Treasury Bill Index | |||||||||
6-Month | 0.18% | 0.03% | ||||||||
1-Year | 0.38 | 0.08 | ||||||||
Since Inception (4/25/11) | 0.60 | 0.08 | ||||||||
| STANDARDIZED YIELDS | ||
For the 30 Days Ended 1/31/14 | ||
Class Y | 0.23% | |
Prior to November 27, 2013, the Fund’s name was Oppenheimer Short Duration Fund.
Performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Returns do not consider capital gains or income taxes on an individual’s investment. Returns for periods of less than one year are cumulative and not annualized. For performance data current to the most recent month-end, visit oppenheimerfunds.com or call 1.800.CALL OPP (225.5677). There is no sales charge for Class Y shares.
Standardized yield is based on the net asset value for the 30-day period ended 1/31/14 for Class Y shares. Each result is compounded semiannually and then annualized. Falling share prices will tend to artificially raise yields.
| 2 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
The Fund produced a cumulative total return of 0.18% over the six-month reporting period, compared to a 0.03% total return for the Fund’s benchmark, the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index (the “Index”), for the same period. Although a sustained U.S. economic recovery and expectations of a more moderately accommodative monetary policy drove longer-term interest rates higher, short-term rates remained anchored by the Federal Reserve’s (the “Fed”) target for the overnight federal funds rate of between 0% and 0.25%. Nonetheless, the Fund proved successful over the reporting period in generating higher levels of current income than most money market investments, together with no principal volatility.
MARKET OVERVIEW
In the months prior to the start of the reporting period, longer-term financial markets encountered heightened volatility stemming from remarks by the Fed’s chairman. These comments were widely interpreted as a signal that the central bank would begin to back away from its massive, open-ended quantitative easing program sooner than most analysts had expected. The shift to a less accommodative policy stance appeared to be triggered by an accelerating U.S. economic recovery in which the unemployment rate declined, housing markets recovered and manufacturing activity increased.
After weathering bouts of volatility in the immediate wake of the Fed chairman’s comments, financial markets generally stabilized over the summer when investors
came to recognize that plans to taper quantitative easing did not necessarily portend imminent increases in short-term interest rates. Meanwhile, labor markets continued to strengthen, as evidenced by a reduction in the unemployment rate to a multi-year low of 7.2% for August. In September, investors responded positively when the Fed unexpectedly refrained from reducing its monthly bond purchases due to policymakers’ lingering economic concerns. However, the domestic economy had expanded at a robust 4.1% annualized rate during the third quarter of the year.
Investors generally lowered their economic expectations in October in the midst of a 16-day U.S. government shutdown caused by Congress’s inability to agree on a funding resolution. At its October meeting, the Fed’s
| 3 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
policymaking arm again postponed any cutbacks in quantitative easing, reflecting reduced expectations for economic growth over the near to intermediate term. November told a different story: the economy appeared to gain momentum as the unemployment rate slid to 7.0% with the addition of more than 200,000 new jobs. In addition, manufacturing activity increased at its fastest pace in two years, contributing to further increases in long-term rates and driving several broad measures of stock market performance to record highs.
The Fed responded to the strengthening economy at its mid-December meeting by implementing a modest cutback in its bond purchasing program. However, the economy produced relatively lackluster data in December as only 75,000 new jobs were created during the month, the lowest monthly gain in three years. The unemployment rate slid to 6.7%, but the decline was mainly due to workers leaving the labor force.
In January 2014, investors worried that ongoing downturns in the emerging markets might dampen the U.S. economic recovery, leading to renewed volatility in stock and bond markets. However, corporate earnings growth generally remained strong, and the unemployment rate fell to 6.6% with the
addition of 113,000 jobs. As expected, the Fed announced an additional “measured” reduction in quantitative easing at its meeting in late January.
FUND REVIEW
In spite of increased demand for short-term securities from investors fleeing longer-term bonds in a rising interest rate environment, the Fund continued to generate consistent and competitive levels of current income.
Throughout the reporting period, we maintained the Fund’s weighted average maturity in a range we considered to be slightly longer than the Index, which measures three-month Treasury bills. This positioning enabled us to capture incrementally higher levels of income as yield differences widened along the Fund’s maturity spectrum. The Fund also benefited to a degree as its holdings became more seasoned, reaching maturities that made them eligible for purchase by traditional money market funds. From a portfolio composition perspective, we continued to avoid repurchase agreements due to uncertainty surrounding potential regulatory changes. Instead, we primarily favored corporate-backed instruments and, to a lesser degree, taxable municipal securities.
| 4 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
STRATEGY & OUTLOOK
We expect the Fed to continue to taper its quantitative easing program in the months ahead, but we also expect the central bank to maintain its current target for short-term interest rates for some time to come. Nonetheless, if the economic recovery gains
 |
Christopher Proctor, CFA Portfolio Manager | |
momentum, investors’ expectations of higher short-term rates may be reflected in the yield curve. Under these conditions, we believe that the Fund’s focus on short maturities should enable us to take advantage of higher yielding opportunities as they arise.
 |
Adam S. Wilde, CFA Portfolio Manager | |
The Fund’s performance is compared to the performance of the BofA Merrill Lynch 3-Month U.S. Treasury Bill Index, which measures returns of three-month Treasury Bills. The Index is unmanaged and cannot be purchased directly by investors. Index performance includes reinvestment of income, but does not reflect transaction costs, fees, expenses or taxes. Index performance is shown for illustrative purposes only as a benchmark for the Fund’s performance, and does not predict or depict performance of the Fund. The Fund’s performance reflects the effects of the Fund’s business and operating expenses.
The Fund’s investment strategy and focus can change over time. The mention of specific fund holdings does not constitute a recommendation by OppenheimerFunds, Inc. or its affiliates.
Before investing in any of the Oppenheimer funds, investors should carefully consider a fund’s investment objectives, risks, charges and expenses. Fund prospectuses and summary prospectuses contain this and other information about the funds, and may be obtained by asking your financial advisor, visiting oppenheimerfunds.com, or calling 1.800.CALL OPP (225.5677). Read prospectuses and summary prospectuses carefully before investing.
Shares of Oppenheimer funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.
| 5 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
PORTFOLIO ALLOCATION
|
| ||||
Short-Term Notes | 49.5 | % | |||
Non-Convertible Corporate Bonds and Notes | 43.8 | ||||
Certificates of Deposit | 6.7 | ||||
Investment Company Oppenheimer Institutional Money Market Fund | — | * | |||
*Represents a value of less than 0.005%.
Portfolio holdings and allocations are subject to change. Percentages are as of January 31, 2014, and are based on the total market value of investments.
| CREDIT RATING BREAKDOWN | NRSRO ONLY TOTAL | ||||
AAA | 0.0 | % | |||
AA | 13.2 | ||||
A | 44.8 | ||||
BBB | 25.3 | ||||
Unrated | 16.7 | ||||
Total | 100.0 | % | |||
The percentages above are based on the market value of the Fund’s securities as of January 31, 2014, and are subject to change. Except for securities labeled “Unrated” and except for certain securities issued or guaranteed by a foreign sovereign, all securities have been rated by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”), such as Standard & Poor’s (“S&P”). For securities rated only by an NRSRO other than S&P, OppenheimerFunds, Inc. (the “Sub-Adviser”) converts that rating to the equivalent S&P rating. If two or more NRSROs have assigned a rating to a security, the highest S&P equivalent rating is used. Unrated securities issued or guaranteed by a foreign sovereign are assigned a credit rating equal to the highest NRSRO rating assigned to that foreign sovereign. For securities not rated by an NRSRO, the Sub-Adviser uses its own credit analysis to assign ratings in categories similar to those of S&P. The use of similar categories is not an indication that the sub-adviser’s credit analysis process is consistent or comparable with any NRSRO’s process were that NRSRO to rate the same security. Fund assets invested in Oppenheimer Institutional Money Market Fund are assigned that fund’s S&P rating, which is currently AAA. For the purposes of this table, “investment-grade” securities are securities rated within the NRSROs’ four highest rating categories (AAA, AA, A and BBB). Unrated securities do not necessarily indicate low credit quality, and may or may not be the equivalent of investment-grade. Please consult the Fund’s prospectus and Statement of Additional Information for further information.
| 6 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
Fund Expenses. As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, which may include sales charges (loads) on purchase payments, contingent deferred sales charges on redemptions; and (2) ongoing costs, including management fees; distribution and service fees; and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning of the period and held for the entire 6-month period ended January 31, 2014.
Actual Expenses. The first section of the table provides information about actual account values and actual expenses. You may use the information in this section for the class of shares you hold, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00 = 8.60), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second section of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio for each class of shares, and an assumed rate of return of 5% per year for each class before expenses, which is not the actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or contingent deferred sales charges (loads), or a $12.00 fee imposed annually on accounts valued at less than $500.00 (subject to exceptions described in the Statement of Additional Information). Therefore, the “hypothetical” section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| 7 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| Actual | Beginning Account Value August 1, 2013 | Ending Account Value January 31, 2014 | Expenses Paid During 6 Months Ended January 31, 2014 | |||||||||||||||
Class A | $ | 1,000.00 | $ | 1,002.20 | $ | 1.87 | ||||||||||||
Class Y | 1,000.00 | 1,001.80 | 1.26 | |||||||||||||||
| Hypothetical | ||||||||||||||||||
(5% return before expenses) | ||||||||||||||||||
Class A | 1,000.00 | 1,023.34 | 1.89 | |||||||||||||||
Class Y | 1,000.00 | 1,023.95 | 1.28 | |||||||||||||||
Expenses are equal to the Fund’s annualized expense ratio for that class, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Those annualized expense ratios, excluding indirect expenses from affiliated funds, based on the 6-month period ended January 31, 2014 are as follows:
| Class | Expense Ratios | |||
Class A | 0.37 | % | ||
Class Y | 0.25 | |||
The expense ratios reflect voluntary and/or contractual waivers and/or reimbursements of expenses by the Fund’s Manager. Some of these undertakings may be modified or terminated at any time, as indicated in the Fund’s prospectus. The “Financial Highlights” tables in the Fund’s financial statements, included in this report, also show the gross expense ratios, without such waivers or reimbursements and reduction to custodian expenses, if applicable.
| 8 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| �� STATEMENTOF INVESTMENTS January 31, 2014 Unaudited |
| Principal Amount | Value | |||||||
Corporate Bonds and Notes—45.2% | ||||||||
Consumer Discretionary—8.0% | ||||||||
Automobiles—6.3% | ||||||||
American Honda Finance Corp.: | ||||||||
0.643% Sr. Unsec. Nts., 6/18/141,2 | $ | 3,500,000 | $ | 3,506,857 | ||||
1.00% Unsec. Nts., 8/11/151 | 4,607,000 | 4,644,109 | ||||||
Daimler Finance North America LLC: | ||||||||
0.842% Sr. Unsec. Nts., 1/9/151,2 | 1,000,000 | 1,003,820 | ||||||
0.857% Sr. Unsec. Nts., 3/28/141,2 | 1,095,000 | 1,096,000 | ||||||
1.30% Sr. Unsec. Nts., 7/31/151 | 5,560,000 | 5,619,448 | ||||||
1.65% Sr. Unsec. Nts., 4/10/151 | 2,000,000 | 2,025,220 | ||||||
1.875% Sr. Unsec. Nts., 9/15/141 | 2,750,000 | 2,773,944 | ||||||
2.30% Sr. Unsec. Nts., 1/9/151 | 1,000,000 | 1,015,456 | ||||||
Volkswagen International Finance NV: | ||||||||
0.565% Sr. Unsec. Nts., 11/18/151,2 | 3,000,000 | 3,003,468 | ||||||
0.837% Sr. Unsec. Nts., 11/20/141,2 | 1,600,000 | 1,606,030 | ||||||
0.996% Sr. Unsec. Nts., 3/21/141,2 | 6,850,000 | 6,857,432 | ||||||
1.625% Sr. Unsec. Nts., 3/22/151 | 5,000,000 | 5,058,985 | ||||||
|
| |||||||
| 38,210,769 | ||||||||
Media—1.7% | ||||||||
WPP Finance UK, 8% Sr. Unsec. Nts., 9/15/14
|
| 10,000,000
|
|
| 10,443,310
|
| ||
Consumer Staples—2.6% | ||||||||
Beverages—2.3% | ||||||||
Anheuser-Busch InBev Worldwide, Inc., 5.375% Sr. Unsec. Unsub. Nts., 11/15/14 | 9,523,000 | 9,886,940 | ||||||
Bottling Group LLC, 6.95% Sr. Unsec. Nts., 3/15/14 | 3,957,000 | 3,986,302 | ||||||
|
| |||||||
| 13,873,242 | ||||||||
Tobacco—0.3% | ||||||||
Altria Group, Inc., 7.75% Sr. Unsec. Nts., 2/6/14
|
| 2,096,000
|
|
| 2,096,419
|
| ||
Energy—2.7% | ||||||||
Oil, Gas & Consumable Fuels—2.7% | ||||||||
BP Capital Markets plc: | ||||||||
0.468% Sr. Unsec. Nts., 5/7/152 | 4,000,000 | 4,004,760 | ||||||
0.568% Sr. Unsec. Nts., 11/6/152 | 2,000,000 | 2,004,014 | ||||||
Husky Energy, Inc., 5.90% Sr. Unsec. Nts., 6/15/14 | 10,113,000 | 10,307,261 | ||||||
|
| |||||||
|
| 16,316,035
|
| ||||||
Financials—18.0% | ||||||||
Commercial Banks—11.3% | ||||||||
Bank of Nova Scotia: | ||||||||
1.85% Sr. Unsec. Nts., 1/12/15 | 5,800,000 | 5,883,149 | ||||||
2.05% Sr. Unsec. Nts., 10/7/15 | 4,500,000 | 4,623,259 | ||||||
Barclays Bank plc, 5.20% Sr. Unsec. Nts., 7/10/14 | 2,530,000 | 2,583,902 | ||||||
BNP Paribas SA, 2.995% Sr. Unsec. Nts., 12/20/142 | 3,121,000 | 3,190,661 | ||||||
Commonwealth Bank of Australia: | ||||||||
0.745% Sr. Unsec. Nts., 9/20/161,2,3 | 3,000,000 | 3,009,024 | ||||||
0.974% Sr. Unsec. Nts., 3/17/141,2 | 1,500,000 | 1,501,658 | ||||||
3.50% Sr. Unsec. Nts., 3/19/151,3 | 5,000,000 | 5,168,910 | ||||||
HSBC USA, Inc., 2.375% Sr. Unsec. Nts., 2/13/15 | 7,667,000 | 7,817,687 | ||||||
National Australia Bank Ltd., 3.75% Sr. Unsec. Nts., 3/2/151 | 2,400,000 | 2,486,078 | ||||||
| 9 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| STATEMENTOF INVESTMENTS Unaudited / Continued |
| Principal Amount | Value | |||||||
Commercial Banks (Continued) | ||||||||
Nordea Bank AB, 2.25% Sr. Unsec. Nts., 3/20/151 | $ | 8,000,000 | $ | 8,163,536 | ||||
Rabobank Nederland: | ||||||||
2.125% Sr. Unsec. Nts., 10/13/15 | 2,500,000 | 2,568,810 | ||||||
3.20% Sr. Unsec. Nts., 3/11/151 | 1,472,000 | 1,516,856 | ||||||
Royal Bank of Canada: | ||||||||
0.85% Sr. Unsec. Nts., 3/8/16 | 5,000,000 | 5,006,760 | ||||||
0.936% Sr. Unsec. Nts., 10/30/142 | 1,500,000 | 1,507,776 | ||||||
Wells Fargo Bank NA: | ||||||||
0.517% Sr. Unsec. Nts., 7/20/152 | 4,000,000 | 4,010,744 | ||||||
0.75% Sr. Unsec. Nts., 7/20/15 | 4,000,000 | 4,021,712 | ||||||
Westpac Banking Corp.: | ||||||||
0.668% Sr. Unsec. Nts., 11/25/162 | 5,000,000 | 5,009,015 | ||||||
0.977% Sr. Unsec. Nts., 3/31/141,2 | 1,500,000 | 1,501,674 | ||||||
|
| |||||||
| 69,571,211 | ||||||||
Consumer Finance—2.3% | ||||||||
American Express Credit Corp., 5.125% Sr. Unsec. Nts., 8/25/14 | 1,955,000 | 2,007,040 | ||||||
Capital One Financial Corp., 7.375% Sr. Unsec. Nts., 5/23/14 | 11,807,000 | 12,054,534 | ||||||
|
| |||||||
| 14,061,574 | ||||||||
Diversified Financial Services—4.4% | ||||||||
Bank of America Corp., 7.375% Sr. Unsec. Nts., 5/15/14 | 11,300,000 | 11,515,277 | ||||||
Citigroup, Inc., 6.01% Sr. Unsec. Nts., 1/15/15 | 10,667,000 | 11,198,771 | ||||||
ING Bank NV: | ||||||||
1.642% Sr. Unsec. Nts., 6/9/141,2 | 2,000,000 | 2,008,588 | ||||||
2.375% Sr. Unsec. Nts., 6/9/141 | 2,000,000 | 2,013,794 | ||||||
|
| |||||||
|
| 26,736,430
|
| ||||||
Industrials—5.6% | ||||||||
Aerospace & Defense—1.4% | ||||||||
BAE Systems Holdings, Inc., 4.95% Sr. Unsec. Nts., 6/1/141 | 8,347,000 | 8,465,652 | ||||||
Industrial Conglomerates—2.4% | ||||||||
General Electric Capital Corp.: | ||||||||
0.439% Sr. Unsec. Nts., 5/11/162 | 1,025,000 | 1,024,469 | ||||||
0.503% Sr. Unsec. Nts., 9/15/142 | 2,750,000 | 2,754,408 | ||||||
0.897% Sr. Unsec. Nts., 9/30/152 | 1,165,000 | 1,174,708 | ||||||
1.109% Sr. Unsec. Nts., 5/9/162 | 1,170,000 | 1,186,174 | ||||||
1.625% Sr. Unsec. Nts., 7/2/15 | 2,500,000 | 2,539,190 | ||||||
2.25% Sr. Unsec. Nts., 11/9/15 | 2,000,000 | 2,059,984 | ||||||
4.375% Sr. Unsec. Nts., 9/21/15 | 1,600,000 | 1,696,165 | ||||||
4.875% Sr. Unsec. Nts., 3/4/15 | 1,480,000 | 1,552,385 | ||||||
6.90% Sr. Unsec. Nts., 9/15/15 | 560,000 | 612,795 | ||||||
|
| |||||||
| 14,600,278 | ||||||||
Road & Rail—1.8% | ||||||||
Union Pacific Corp.: | ||||||||
4.875% Sr. Unsec. Nts., 1/15/15 | 2,410,000 | 2,509,767 | ||||||
5.125% Sr. Unsec. Nts., 2/15/14 | 8,874,000 | 8,885,554 | ||||||
|
| |||||||
|
| 11,395,321
|
| ||||||
Information Technology—3.4% | ||||||||
IT Services—1.0% | ||||||||
Xerox Corp., 8.25% Sr. Unsec. Nts., 5/15/14 | 5,817,000 | 5,935,765 | ||||||
| 10 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| Principal Amount | Value | |||||||
Office Electronics—0.7% | ||||||||
Xerox Corp., 4.25% Sr. Unsec. Nts., 2/15/15 | $ | 4,080,000 | $ | 4,222,225 | ||||
Software—1.7% | ||||||||
CA, Inc., 6.125% Sr. Unsec. Nts., 12/1/14
|
| 10,250,000
|
|
| 10,689,633
|
| ||
Materials—3.7% | ||||||||
Chemicals—1.9% | ||||||||
Ecolab, Inc., 4.875% Sr. Unsec. Nts., 2/15/15 | 3,595,000 | 3,746,292 | ||||||
Potash Corp. of Saskatchewan, Inc., 5.25% Sr. Unsec. Nts., 5/15/14 | 7,900,000 | 8,003,695 | ||||||
|
| |||||||
|
| 11,749,987
|
| ||||||
Metals & Mining—1.8% | ||||||||
Rio Tinto Finance USA Ltd., 4.005% Sr. Unsec. Nts., 5/1/14 | 8,347,000 | 8,514,625 | ||||||
Rio Tinto Finance USA plc, 0.794% Sr. Unsec. Nts., 6/19/152 | 2,500,000 | 2,506,415 | ||||||
|
| |||||||
|
| 11,021,040
|
| ||||||
Utilities—1.2% | ||||||||
Electric Utilities—0.9% | ||||||||
Duke Energy Corp., 6.30% Sr. Unsec. Nts., 2/1/14
|
| 5,224,000
|
|
| 5,224,000
|
| ||
Multi-Utilities—0.3% | ||||||||
Alliant Energy Corp., 4% Sr. Unsec. Nts., 10/15/14 | 2,238,000 | 2,290,827 | ||||||
|
| |||||||
Total Corporate Bonds and Notes (Cost $276,432,561) |
| 276,903,718
|
| |||||
Certificates of Deposit—6.2% | ||||||||
Credit Suisse, New York Branch: | ||||||||
0.458%, 1/6/152 | 5,000,000 | 4,999,770 | ||||||
0.46%, 1/13/152 | 2,500,000 | 2,500,117 | ||||||
Deutsche Bank AG, New York: | ||||||||
0.439%, 1/30/152 | 5,000,000 | 5,000,000 | ||||||
0.62%, 7/15/14 | 5,000,000 | 5,008,585 | ||||||
Skandinaviska Enskilda Banken AB, New York: | ||||||||
0.562%, 1/4/162 | 3,000,000 | 3,005,232 | ||||||
0.586%, 9/21/152 | 5,000,000 | 5,000,420 | ||||||
0.746%, 10/20/142 | 4,500,000 | 4,509,923 | ||||||
Swedbank AB, New York: | ||||||||
0.673%, 12/16/162 | 5,000,000 | 5,000,785 | ||||||
0.674%, 1/6/172 | 3,000,000 | 3,000,180 | ||||||
|
| |||||||
Total Certificates of Deposit (Cost $38,000,000)
|
| 38,025,012
|
| |||||
Short-Term Notes—48.3% | ||||||||
Banks—1.2% | ||||||||
Nordea Bank AB, 3.70%, 11/13/141 | 2,292,000 | 2,351,640 | ||||||
Societe Generale North America, Inc., 0.502%, 5/14/14 | 5,000,000 | 4,996,896 | ||||||
|
| |||||||
| 7,348,536 | ||||||||
Beverages—1.6% | ||||||||
SABMILLER Holdings, Inc.: | ||||||||
0.27%, 2/18/143 | 5,000,000 | 4,999,437 | ||||||
0.32%, 2/13/143 | 5,000,000 | 4,999,556 | ||||||
|
| |||||||
| 9,998,993 | ||||||||
| 11 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| STATEMENTOF INVESTMENTS Unaudited / Continued |
| Principal Amount | Value | |||||||
Building Products—1.6% | ||||||||
Holcim US Finance SARL: | ||||||||
0.40%, 2/4/143 | $ | 2,500,000 | $ | 2,499,972 | ||||
0.42%, 4/4/143 | 2,000,000 | 1,999,045 | ||||||
0.42%, 3/13/143 | 5,500,000 | 5,498,465 | ||||||
|
| |||||||
| 9,997,482 | ||||||||
Chemicals—6.2% | ||||||||
Airgas, Inc.: | ||||||||
0.33%, 4/17/143 | 4,000,000 | 3,997,585 | ||||||
0.34%, 4/14/143 | 1,500,000 | 1,499,139 | ||||||
0.35%, 3/3/143 | 5,000,000 | 4,999,005 | ||||||
Eastman Chemical Co.: | ||||||||
0.29%, 2/12/14-2/20/143 | 10,000,000 | 9,998,953 | ||||||
FMC Corp.: | ||||||||
0.28%, 2/3/143 | 2,500,000 | 2,500,000 | ||||||
0.28%, 2/10/143 | 4,898,000 | 4,897,733 | ||||||
0.29%, 2/18/143 | 10,000,000 | 9,998,792 | ||||||
|
| |||||||
| 37,891,207 | ||||||||
Diversified Telecommunication Services—1.6% | ||||||||
Comcast Corp., 0.25%, 2/14/14 | 10,000,000 | 9,999,236 | ||||||
Electric Utilities—1.1% | ||||||||
Northeast Utilities, 0.24%, 2/7/143 | 5,000,000 | 4,999,867 | ||||||
Sempra Energy, 0.21%, 2/3/143 | 1,500,000 | 1,500,000 | ||||||
|
| |||||||
| 6,499,867 | ||||||||
Energy Equipment & Services—0.3% | ||||||||
FMC Technologies, Inc., 0.26%, 2/13/143 | 2,000,000 | 1,999,856 | ||||||
Food Products—3.6% | ||||||||
Kroger Co., 0.21%, 2/3/143 | 12,000,000 | 12,000,000 | ||||||
Mondelez International, 0.472%, 10/15/14 | 10,000,000 | 9,964,520 | ||||||
|
| |||||||
| 21,964,520 | ||||||||
Insurance—2.7% | ||||||||
Prudential Financial, Inc.: | ||||||||
0.451%, 7/23/14 | 2,500,000 | 2,495,519 | ||||||
0.517%, 6/27/143 | 4,000,000 | 3,994,349 | ||||||
0.602%, 4/23/143 | 1,000,000 | 999,403 | ||||||
0.602%, 5/5/143 | 1,000,000 | 999,282 | ||||||
0.602%, 5/27/14 | 1,000,000 | 999,017 | ||||||
0.603%, 2/4/143 | 5,000,000 | 4,999,905 | ||||||
0.613%, 4/29/143 | 2,000,000 | 1,998,690 | ||||||
|
| |||||||
| 16,486,165 | ||||||||
Leasing & Factoring—5.0% | ||||||||
Hitachi Capital America Corp.: | ||||||||
0.32%, 2/28/14 | 1,000,000 | 999,778 | ||||||
0.32%, 2/24/14 | 15,000,000 | 14,997,200 | ||||||
0.33%, 2/5/14 | 2,000,000 | 1,999,963 | ||||||
Nissan Motor Acceptance Corp.: | ||||||||
0.26%, 2/25/143 | 1,510,000 | 1,509,760 | ||||||
0.28%, 3/3/143 | 10,000,000 | 9,997,822 | ||||||
| 12 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| Principal Amount | Value | |||||||
Leasing & Factoring (Continued) | ||||||||
Volkswagen International Finance NV, 0.737% Sr. Unsec. Nts., 5/20/141,2 | $ | 1,150,000 | $ | 1,150,119 | ||||
|
| |||||||
| 30,654,642 | ||||||||
Metals & Mining—2.0% | ||||||||
Glencore Funding LLC: | ||||||||
0.37%, 2/25/14 | 1,500,000 | 1,499,661 | ||||||
0.37%, 2/6/143 | 10,500,000 | 10,499,676 | ||||||
|
| |||||||
| 11,999,337 | ||||||||
Municipal—5.8% | ||||||||
Albany Industrial Development Agency Revenue Bonds, Albany Medical Center, 0.81%, 5/1/272 | 1,150,000 | 1,150,000 | ||||||
Albuquerque, NM Industrial Revenue Bonds, CVI Laser Corp. Project, Series 1998, 0.26%, 6/1/182 | 900,000 | 900,000 | ||||||
Grant Cnty., WV Commission Solid Waste Disposal Revenue Bonds, 0.35%, 2/3/14 | 4,500,000 | 4,500,000 | ||||||
Indiana Development Finance Authority Revenue Bonds, PSI Energy, Inc. Projects, 0.31%, 12/1/382 | 6,000,000 | 6,000,000 | ||||||
Jackson, TN Energy Authority Refunding Bonds, 0.60%, 4/1/14 | 1,875,000 | 1,876,575 | ||||||
LA Stadium & Exposition District Revenue Refunding Bonds, Series 2013A, 0.985%, 7/1/14 | 1,920,000 | 1,924,550 | ||||||
NY Metropolitan Transportation Authority Revenue Refunding Bonds, 0.614%, 11/1/152 | 3,000,000 | 2,997,210 | ||||||
Olathe, KS Industrial Development Revenue Bonds, Diamant Boart, Inc. Project, Series 1997B, 0.40%, 3/1/272 | 1,700,000 | 1,700,000 | ||||||
Union County, AR Industrial Development Revenue Bonds, Tin Fiber Project, 0.29%, 10/1/272 | 10,350,000 | 10,350,000 | ||||||
Valdosta-Lowndes County, GA Industrial Development Authority Revenue Bonds, Steeda Autosports, Inc. Project, 0.21%, 2/1/292 | 3,850,000 | 3,850,000 | ||||||
|
| |||||||
| 35,248,335 | ||||||||
Oil, Gas & Consumable Fuels—3.6% | ||||||||
Canadian Natural Resources: | ||||||||
0.23%, 2/6/141 | 1,000,000 | 999,981 | ||||||
0.28%, 3/4/141 | 11,000,000 | 10,997,519 | ||||||
Eni Finance USA, Inc.: | ||||||||
0.857%, 4/7/143 | 3,000,000 | 2,998,647 | ||||||
0.857%, 4/10/143 | 7,000,000 | 6,996,659 | ||||||
|
| |||||||
| 21,992,806 | ||||||||
Receivables Finance—3.7% | ||||||||
Arabella Finance LLC, 0.42%, 2/3/143 | 23,000,000 | 23,000,000 | ||||||
Special Purpose Financial—3.8% | ||||||||
Collateralized Commercial Paper II Co. LLC, 0.502%, 3/14/141 | 6,000,000 | 5,998,979 | ||||||
Northern Pines, 0.502%, 2/4/141 | 7,000,000 | 6,999,790 | ||||||
Omnicom Capital, Inc.: | ||||||||
0.22%, 2/3/143 | 550,000 | 550,000 | ||||||
0.26%, 2/24/143 | 10,000,000 | 9,998,483 | ||||||
|
| |||||||
| 23,547,252 | ||||||||
Telephone Utilities—1.1% | ||||||||
Vodafone Group plc, 0.25%, 2/21/14 | 7,000,000 | 6,999,125 | ||||||
| 13 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| STATEMENTOF INVESTMENTS Unaudited / Continued |
| Principal Amount | Value | |||||||||||
| ||||||||||||
Tobacco—2.7% | ||||||||||||
| ||||||||||||
BAT International Finance plc: | ||||||||||||
0.22%, 2/3/143 | $ | 1,560,000 | $ | 1,560,000 | ||||||||
0.26%, 2/21/143 | 8,000,000 | 7,998,960 | ||||||||||
0.26%, 2/28/143 | 6,800,000 | 6,798,772 | ||||||||||
|
| |||||||||||
| 16,357,732 | ||||||||||||
| ||||||||||||
Water Utilities—0.7% | ||||||||||||
| ||||||||||||
American water Capital Corp., 0.24%, 2/7/143 | 4,500,000 | 4,499,880 | ||||||||||
|
| |||||||||||
Total Short-Term Notes (Cost $296,451,415) | 296,484,971 | |||||||||||
| Shares | ||||||||||||
| ||||||||||||
Investment Company—0.0% | ||||||||||||
Oppenheimer Institutional Money Market Fund, Cl. E, 0.08%4,5 (Cost $34) | 34 | 34 | ||||||||||
| ||||||||||||
Total Investments, at Value (Cost $610,884,010) | 99.7 | % | 611,413,735 | |||||||||
| ||||||||||||
Assets in Excess of Other Liabilities | 0.3 | 2,126,657 | ||||||||||
|
| |||||||||||
Net Assets | 100.0 | % | $ | 613,540,392 | ||||||||
|
| |||||||||||
|
| |||||||||||
Footnotes to Statement of Investments 1. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $102,544,567 or 16.71% of the Fund’s net assets as of January 31, 2014. 2. Represents the current interest rate for a variable or increasing rate security. 3. Security issued in an exempt transaction without registration under the Securities Act of 1933. Such securities amount to $185,965,627 or 30.31% of the Fund’s net assets, and have been determined to be liquid pursuant to guidelines adopted by the Board of Trustees. 4. Is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended January 31, 2014, by virtue of the Fund owning at least 5% of the voting securities of the issuer or as a result of the Fund and the issuer having the same investment adviser. Transactions during the period in which the issuer was an affiliate are as follows: |
| |||||||||||
| Shares July 31, 2013 | Gross Additions | Gross Reductions | Shares January 31, 2014 | |||||||||||||
Oppenheimer Institutional Money Market Fund, Cl. E | — | 206,000,731 | 206,000,697 | 34 | ||||||||||||
| Value | Income | |||||||||||||||
Oppenheimer Institutional Money Market Fund, Cl. E | $ | 34 | $ | 1,795 | ||||||||||||
5. Rate shown is the 7-day yield as of January 31, 2014.
See accompanying Notes to Financial Statements. |
| |||||||||||||||
| 14 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
STATEMENT OF |
| ||||
Assets |
| |||
Investments, at value—see accompanying statement of investments: | ||||
Unaffiliated companies (cost $610,883,976) | $ | 611,413,701 | ||
Affiliated companies (cost $34) | 34 | |||
|
| |||
| 611,413,735 | ||||
| ||||
Cash | 53,247 | |||
| ||||
Receivables and other assets: | ||||
Interest and dividends | 2,996,594 | |||
Shares of beneficial interest sold | 8,969 | |||
Other | 48,934 | |||
|
| |||
Total assets | 614,521,479 | |||
| ||||
Liabilities | ||||
Payables and other liabilities: | ||||
Investments purchased | 931,230 | |||
Transfer and shareholder servicing agent fees | 25,693 | |||
Shareholder communications | 8,475 | |||
Trustees’ compensation | 6,251 | |||
Dividends | 17 | |||
Other | 9,421 | |||
|
| |||
Total liabilities | 981,087 | |||
| ||||
Net Assets | $ | 613,540,392 | ||
|
| |||
| ||||
Composition of Net Assets | ||||
Par value of shares of beneficial interest | $ | 61,208 | ||
| ||||
Additional paid-in capital | 612,926,956 | |||
| ||||
Accumulated net investment loss | (29,042) | |||
| ||||
Accumulated net realized gain on investments | 51,545 | |||
| ||||
Net unrealized appreciation on investments | 529,725 | |||
|
| |||
Net Assets | $ | 613,540,392 | ||
|
| |||
| ||||
Net Asset Value Per Share | ||||
Class A Shares: | ||||
| Net asset value and redemption price per share (based on net assets of $100,193 and 10,000 shares of beneficial interest outstanding) | $10.02 | |||
| ||||
Class Y Shares: | ||||
| Net asset value, redemption price and offering price per share (based on net assets of $613,440,199 and 61,198,428 shares of beneficial interest outstanding) | $10.02 | |||
See accompanying Notes to Financial Statements.
| 15 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
STATEMENT OF OPERATIONS For the Six Months Ended January 31, 2014 Unaudited |
| ||||
Investment Income |
| |||
Interest | $ | 1,690,399 | ||
| ||||
Dividends from affiliated companies | 1,795 | |||
|
| |||
Total investment income | 1,692,194 | |||
| ||||
Expenses |
| |||
Management fees | 868,420 | |||
| ||||
Transfer and shareholder servicing agent fees: | ||||
Class A | 26 | |||
Class Y | 144,711 | |||
| ||||
Shareholder communications - Class Y | 7,177 | |||
| ||||
Trustees’ compensation | 18,175 | |||
| ||||
Custodian fees and expenses | 1,529 | |||
| ||||
Other | 44,323 | |||
|
| |||
Total expenses | 1,084,361 | |||
Less waivers and reimbursements of expenses | (360,617) | |||
|
| |||
Net expenses | 723,744 | |||
| ||||
Net Investment Income | 968,450 | |||
| ||||
Realized and Unrealized Gain | ||||
Net realized gain on investments from unaffiliated companies | 20,078 | |||
| ||||
Net change in unrealized appreciation/depreciation on investments | 277,590 | |||
| ||||
Net Increase in Net Assets Resulting from Operations | $ | 1,266,118 | ||
|
| |||
See accompanying Notes to Financial Statements.
| 16 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
| Six Months Ended January 31, 2014 (Unaudited) | Year Ended July 31, 2013 | |||||||
| ||||||||
Operations | ||||||||
Net investment income | $ | 968,450 | $ | 1,508,876 | ||||
| ||||||||
Net realized gain | 20,078 | 97,134 | ||||||
| ||||||||
Net change in unrealized appreciation/depreciation | 277,590 | (44,820) | ||||||
|
| |||||||
Net increase in net assets resulting from operations | 1,266,118 | 1,561,190 | ||||||
| ||||||||
Dividends and/or Distributions to Shareholders | ||||||||
Dividends from net investment income: | ||||||||
Class A | (116) | (369) | ||||||
Class Y | (998,523) | (1,507,627) | ||||||
|
| |||||||
| (998,639) | (1,507,996) | |||||||
| ||||||||
Distributions from net realized gain: | ||||||||
Class A | — | (45) | ||||||
Class Y | — | (105,228) | ||||||
|
| |||||||
| — | (105,273) | |||||||
| ||||||||
Beneficial Interest Transactions | ||||||||
Net increase in net assets resulting from beneficial interest transactions: | ||||||||
Class A | — | — | ||||||
Class Y | 147,569,245 | 256,474,552 | ||||||
|
| |||||||
| 147,569,245 | 256,474,552 | |||||||
| ||||||||
Net Assets | ||||||||
Total increase | 147,836,724 | 256,422,473 | ||||||
| ||||||||
Beginning of period | 465,703,668 | 209,281,195 | ||||||
|
| |||||||
| End of period (including accumulated net investment income (loss) of $(29,042) and $1,147, respectively) | $ | 613,540,392 | $ | 465,703,668 | ||||
|
| |||||||
See accompanying Notes to Financial Statements.
| 17 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
|
| Class A | Six Months Ended January 31, 2014 (Unaudited) | Year Ended July 31, 2013 | Year Ended July 31, 2012 | Period Ended July 29, 20111 | ||||||||||||
| ||||||||||||||||
Per Share Operating Data | ||||||||||||||||
Net asset value, beginning of period | $ | 10.01 | $ | 10.01 | $ | 10.00 | $ | 10.00 | ||||||||
| ||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.01 | 0.04 | 0.05 | 0.003 | ||||||||||||
Net realized and unrealized gain | 0.01 | 0.003 | 0.02 | 0.003 | ||||||||||||
|
| |||||||||||||||
Total from investment operations | 0.02 | 0.04 | 0.07 | 0.003 | ||||||||||||
| ||||||||||||||||
Dividends and/or distributions to shareholders: | ||||||||||||||||
Dividends from net investment income | (0.01) | (0.04) | (0.05) | 0.003 | ||||||||||||
Distributions from net realized gain | 0.00 | (0.00)3 | (0.01) | 0.00 | ||||||||||||
|
| |||||||||||||||
Total dividends and/or distributions to shareholders | (0.01) | (0.04) | (0.06) | 0.003 | ||||||||||||
| ||||||||||||||||
Net asset value, end of period | $ | 10.02 | $ | 10.01 | $ | 10.01 | $ | 10.00 | ||||||||
|
| |||||||||||||||
|
| |||||||||||||||
| ||||||||||||||||
Total Return, at Net Asset Value4
| 0.22% | 0.42% | 0.63% | 0.00% | ||||||||||||
| ||||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 100 | $ | 100 | $ | 100 | $ | 100 | ||||||||
| ||||||||||||||||
Average net assets (in thousands) | $ | 100 | $ | 100 | $ | 100 | $ | 100 | ||||||||
| ||||||||||||||||
Ratios to average net assets:5 | ||||||||||||||||
Net investment income | 0.22% | 0.37% | 0.47% | 0.00%6 | ||||||||||||
Total expenses7 | 0.37% | 0.38% | 0.44% | 1.31% | ||||||||||||
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | 0.37% | 0.38% | 0.40% | 0.61% | ||||||||||||
| ||||||||||||||||
Portfolio turnover rate | 21% | 61% | 60% | 28% | ||||||||||||
1. For the period from April 25, 2011 (commencement of operations) to July 29, 2011 which represents the last business day of the Fund’s respective reporting period.
2. Per share amounts calculated based on the average shares outstanding during the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods less than one full year.
6. Less than 0.005%
7. Total expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended January 31, 2014 | 0.37 | % | ||||
Year Ended July 31, 2013 | 0.38 | % | ||||
Year Ended July 31, 2012 | 0.44 | % | ||||
Period Ended July 29, 2011 | 1.31 | % |
See accompanying Notes to Financial Statements.
| 18 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
|
| Class Y | Six Months Ended January 31, 2014 (Unaudited) | Year Ended July 31, 2013 | Year Ended July 31, 2012 | Period Ended July 29, 20111 | ||||||||||||
| ||||||||||||||||
Per Share Operating Data | ||||||||||||||||
Net asset value, beginning of period | $ | 10.02 | $ | 10.02 | $ | 10.00 | $ | 10.00 | ||||||||
| ||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.02 | 0.05 | 0.06 | 0.01 | ||||||||||||
Net realized and unrealized gain (loss) | 0.00 | 0.003 | 0.03 | 0.003 | ||||||||||||
|
| |||||||||||||||
Total from investment operations | 0.02 | 0.05 | 0.09 | 0.01 | ||||||||||||
| ||||||||||||||||
Dividends and/or distributions to shareholders: | ||||||||||||||||
Dividends from net investment income | (0.02) | (0.05) | (0.06) | (0.01) | ||||||||||||
Distributions from net realized gain | 0.00 | (0.00)3 | (0.01) | 0.00 | ||||||||||||
|
| |||||||||||||||
Total dividends and/or distributions to shareholders | (0.02) | (0.05) | (0.07) | (0.01) | ||||||||||||
| ||||||||||||||||
Net asset value, end of period | $ | 10.02 | $ | 10.02 | $ | 10.02 | $ | 10.00 | ||||||||
|
| |||||||||||||||
|
| |||||||||||||||
| ||||||||||||||||
Total Return, at Net Asset Value4 | 0.18% | 0.55% | 0.87% | 0.07% | ||||||||||||
| ||||||||||||||||
Ratios/Supplemental Data | ||||||||||||||||
Net assets, end of period (in thousands) | $ | 613,440 | $ | 465,604 | $ | 209,181 | $ | 10,005 | ||||||||
| ||||||||||||||||
Average net assets (in thousands) | $ | 568,064 | $ | 317,099 | $ | 146,078 | $ | 10,002 | ||||||||
| ||||||||||||||||
Ratios to average net assets:5 | ||||||||||||||||
Net investment income | 0.34% | 0.48% | 0.64% | 0.25% | ||||||||||||
Total expenses6 | 0.38% | 0.39% | 0.39% | 1.58% | ||||||||||||
Expenses after payments, waivers and/or reimbursements and reduction to custodian expenses | 0.25% | 0.25% | 0.25% | 0.36% | ||||||||||||
| ||||||||||||||||
Portfolio turnover rate | 21% | 61% | 60% | 28% | ||||||||||||
1. For the period from April 25, 2011 (commencement of operations) to July 29, 2011 which represents the last business day of the Fund’s respective reporting period.
2. Per share amounts calculated based on the average shares outstanding during the period.
3. Less than $0.005 per share.
4. 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.
5. Annualized for periods less than one full year.
6. Total expenses including indirect expenses from affiliated fund were as follows:
Six Months Ended January 31, 2014 | 0.38 | % | ||||
Year Ended July 31, 2013 | 0.39 | % | ||||
Year Ended July 31, 2012 | 0.39 | % | ||||
Period Ended July 29, 2011 | 1.58 | % |
See accompanying Notes to Financial Statements.
| 19 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
|
1. Significant Accounting Policies
Oppenheimer Ultra-Short Duration Fund (the “Fund”), formerly named Oppenheimer Short Duration Fund, is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The Fund’s investment objective is to seek income. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI. As of January 31, 2014, approximately 99.8% 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 and Class Y shares. Class A shares are sold at their offering price, which is the net asset value per share without any initial sales charge. Class Y shares are sold to certain institutional investors without a front-end sales charge, however, the intermediaries may impose charges on their accountholders who beneficially own Class Y shares. Both 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.
The following is a summary of significant accounting policies consistently followed by the Fund.
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 the investment adviser of IMMF, and the Sub-Adviser provides investment and related advisory services to IMMF. When applicable, the Fund’s 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 IMMF’s Class E expenses, including its management fee. The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in IMMF.
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 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
| 20 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
1. Significant Accounting Policies (Continued)
jurisdictions. The statute of limitations on the Fund’s tax return filings generally remain open for the three preceding fiscal reporting period ends.
During the fiscal year ended July 31, 2013, the Fund did not utilize any capital loss carryforward to offset capital gains realized in that fiscal year.
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 January 31, 2014 are noted in the following table. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities | $ | ��610,884,010 | ||
|
| |||
Gross unrealized appreciation | $ | 561,010 | ||
Gross unrealized depreciation | (31,285) | |||
|
| |||
Net unrealized appreciation | $ | 529,725 | ||
|
|
Trustees’ Compensation. The Board of Trustees has adopted a compensation deferral plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of “Other” within the asset section of the Statement of Assets and Liabilities. Deferral of trustees’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance 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 Fund’s fiscal year end. Therefore, a portion of the Fund’s distributions made to shareholders prior to the Fund’s fiscal year end may ultimately be categorized as a tax return of capital.
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NOTESTO FINANCIAL STATEMENTS Unaudited / Continued |
1. Significant Accounting Policies (Continued)
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.
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 overdraft at a rate equal to the 1 Month LIBOR Rate plus 2.00%. The “Reduction to custodian expenses” line item, if applicable, represents earnings on cash balances maintained by the Fund during the period. Such interest expense and other custodian fees may be paid with these earnings.
Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost.
Indemnifications. The Fund’s organizational documents provide current and former trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other. The preparation of financial statements in conformity with 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 Fund’s Board has adopted procedures for the valuation of the Fund’s 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 Committee’s fair valuation determinations are subject to review,
| 22 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
2. Securities Valuation (Continued)
approval and ratification by the Fund’s 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.
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 Fund’s assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the current day’s closing “bid” and “asked” prices, and if not, at the current day’s 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 Fund’s 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 company’s 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.
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.
| 23 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
NOTESTO FINANCIAL STATEMENTS Unaudited / Continued |
2. Securities Valuation (Continued)
| 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. |
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 Fund’s Board or (ii) as determined in good faith by the Manager’s 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 Fund’s 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 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 Fund’s investments as of the reporting period end. These
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2. Securities Valuation (Continued)
data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)
2) Level 2-inputs 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 3-significant unobservable inputs (including the Manager’s 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 Fund’s Statement of Assets and Liabilities as of January 31, 2014 based on valuation input level:
| Level 1— Unadjusted Quoted Prices | Level 2— Other Significant | Level 3— Significant Unobservable Inputs | Value | |||||||||||||
| ||||||||||||||||
Assets Table | ||||||||||||||||
Investments, at Value: | ||||||||||||||||
Corporate Bonds and Notes | $ | — | $ | 276,903,718 | $ | — | $ | 276,903,318 | ||||||||
Certificates of Deposit | — | 38,025,012 | — | 38,025,012 | ||||||||||||
Short-Term Notes | — | 296,484,971 | — | 296,484,971 | ||||||||||||
Investment Company | 34 | — | — | 34 | ||||||||||||
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Total Assets | $ | 34 | $ | 611,413,701 | $ | — | $ | 611,413,735 | ||||||||
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Currency contracts and forwards, if any, are reported at their unrealized appreciation/ depreciation at measurement date, which represents the change in the contract’s 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.
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 January 31, 2014 | Year Ended July 31, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| ||||||||||||||||
Class A | ||||||||||||||||
Sold | — | $ | — | — | $ | — | ||||||||||
Dividends and/or distributions reinvested | — | — | — | — | ||||||||||||
Redeemed | — | — | — | — | ||||||||||||
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| |||||||||||||||
Net increase | — | $ | — | — | $ | — | ||||||||||
|
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NOTESTO FINANCIAL STATEMENTS Unaudited / Continued |
3. Shares of Beneficial Interest (Continued)
| Six Months Ended January 31, 2014 | Year Ended July 31, 2013 | |||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||
| ||||||||||||||||
Class Y | ||||||||||||||||
Sold | 22,706,768 | $ | 227,521,818 | 28,754,480 | $ | 288,119,904 | ||||||||||
Dividends and/or distributions reinvested | 98,793 | 989,899 | 160,954 | 1,612,759 | ||||||||||||
Redeemed | (8,078,091 | ) | (80,942,472 | ) | (3,319,173 | ) | (33,258,111 | ) | ||||||||
|
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Net increase | 14,727,470 | $ | 147,569,245 | 25,596,261 | $ | 256,474,552 | ||||||||||
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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 January 31, 2014 were as follows:
| Purchases | Sales | |||||||
| ||||||||
Investment securities | $ | 118,677,834 | $ | 36,885,034 | ||||
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 of 0.30%.
Sub-Adviser Fees. The Manager has retained the Sub-Adviser to provide the day-to-day portfolio management of the Fund. Under the Sub-Advisory Agreement, the Manager pays the Sub-Adviser an annual fee in monthly installments, equal to a percentage of the investment management fee collected by the Manager from the Fund, which shall be calculated after any investment management fee waivers. The fee paid to the Sub-Adviser is paid by the Manager, not by the Fund.
Transfer Agent Fees. OFI Global (the “Transfer Agent”) serves as the transfer and shareholder servicing agent for the Fund. Fees incurred by the Fund with respect to these services are detailed in the Statement of Operations.
Sub-Transfer Agent Fees. The Transfer Agent has retained Shareholder Services, Inc., a wholly-owned subsidiary of OFI (the “Sub-Transfer Agent”), to provide the day-to-day transfer agent and shareholder servicing of the Fund. Under the Sub-Transfer Agency Agreement, the Transfer Agent pays the Sub-Transfer Agent an annual fee in monthly installments, equal to a percentage of the transfer agent fee collected by the Transfer Agent from the Fund, which shall be calculated after any applicable fee waivers. The fee paid to the Sub-Transfer Agent is paid by the Transfer Agent, not by the Fund.
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
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5. Fees and Other Transactions with Affiliates (Continued)
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.
Waivers and Reimbursements of Expenses. The Manager has contractually agreed to waive fees to limit the annual total expenses for Class A shares to 0.65% and for Class Y shares to 0.25% of average daily assets and to waive a portion of the advisory fee on Class A shares to the same extent that it waives any of the advisory fee on Class Y shares. During the six months ended January 31, 2014, the Manager waived fees and/or reimbursed the Fund $358,753 for Class Y shares.
The Manager will waive fees and/or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in IMMF. During the six months ended January 31, 2014, the Manager waived fees and/or reimbursed the Fund $1,864 for IMMF management fees.
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. Pending Litigation
Since 2009, seven class action lawsuits have been pending in the U.S. District Court for the District of Colorado against OppenheimerFunds, Inc. (“OFI”), OppenheimerFunds Distributor, Inc., the Fund’s principal underwriter and distributor (the “Distributor”), and certain funds (but not including the Fund) advised by OFI Global Asset Management, Inc. and distributed by the Distributor (the “Defendant Funds”). The 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. On March 5, 2014, the parties in six of these lawsuits executed stipulations and agreements of settlement resolving those actions. The settlements are subject to a variety of contingencies, including approval by the court. The settlements do not resolve a seventh outstanding lawsuit relating to Oppenheimer California Municipal Fund.
Other class action and individual lawsuits have been filed since 2008 in various state and federal courts against OFI and certain of its affiliates by investors seeking to recover
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NOTESTO FINANCIAL STATEMENTS Unaudited / Continued |
6. Pending Litigation (Continued)
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 OFI 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 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 court’s order approving the settlement. The settlement does not resolve other outstanding lawsuits against OFI and its affiliates relating to BLMIS.
On April 16, 2010, a lawsuit was filed in New York state court against (i) OFI, (ii) an affiliate of OFI and (iii) AAArdvark IV Funding Limited (“AAArdvark IV”), an entity advised by OFI’s affiliate, in connection with investments made by the plaintiffs in AAArdvark IV. Plaintiffs alleged breach of contract and common law fraud claims against the defendants and sought compensatory damages, costs and disbursements, including attorney fees. On April 11, 2013, the court granted defendants’ motion for summary judgment, dismissing plaintiffs’ fraud claim with prejudice and dismissing their contract claim without prejudice, and granted plaintiffs leave to replead their contract claim to assert a cause of action for specific performance within 30 days. On May 9, 2013, plaintiffs filed a notice of appeal from the court’s dismissal order. On January 7, 2014, the appellate court affirmed the trial court’s dismissal order. On July 15, 2011, a lawsuit was filed in New York state court against OFI, an affiliate of OFI and AAArdvark Funding Limited (“AAArdvark I”), an entity advised by OFI’s affiliate, in connection with investments made by the plaintiffs in AAArdvark I. The complaint alleges breach of contract and common law fraud claims 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 OFI, an affiliate of OFI and AAArdvark XS Funding Limited (“AAArdvark XS”), an entity advised by OFI’s affiliate, in connection with investments made by the plaintiffs in AAArdvark XS. The complaint alleged breach of contract against the defendants and sought compensatory damages, costs and disbursements, including attorney fees. On November 8, 2013, the parties filed a stipulation of discontinuance dismissing the lawsuit with prejudice.
OFI 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, OFI believes that these suits should not impair the ability of OFI or the Distributor to perform their respective duties to the Fund, and that the outcome of all of the suits
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6. Pending Litigation (Continued)
together should not have any material effect on the operations of any of the Oppenheimer mutual funds.
| 29 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited |
The Fund has entered into an investment advisory agreement with OFI Global Asset Management, Inc. (“OFI Global” or the “Adviser”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”) (“OFI Global” and “OFI” together the “Managers”) and OFI Global has entered into a sub-advisory agreement with OFI whereby OFI provides investment sub-advisory services to the Fund (collectively, the “Agreements”). Each year, the Board of Trustees (the “Board”), including a majority of the independent Trustees, is required to determine whether to renew the Agreements. The Investment Company Act of 1940, as amended, requires that the Board request and evaluate, and that the Managers provide, such information as may be reasonably necessary to evaluate the terms of the Agreements. 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 Adviser, Sub-Adviser 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 Managers, (iii) the fees and expenses of the Fund, including comparative expense information, (iv) the profitability of the Managers and their 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 Managers from their relationship with the Fund. The Board was aware that there are alternatives to retaining the Managers.
Outlined below is a summary of the principal information considered by the Board as well as the Board’s conclusions.
Nature, Quality and Extent of Services. The Board considered information 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 Sub-Adviser’s duties include providing the Fund with the services of the portfolio managers and the Sub-Adviser’s investment team, who provide research, analysis and other advisory services in regard to the Fund’s investments; securities trading services; oversight of third-party service providers; monitoring compliance with applicable Fund policies and procedures and adherence to the Fund’s investment restrictions; and risk management. The Managers are responsible for providing certain administrative services to the Fund as well. Those services include providing and supervising all administrative and clerical personnel who are necessary in order to provide effective corporate administration for the Fund; compiling and maintaining records with respect to the Fund’s operations; preparing and filing reports required by the Securities and Exchange Commission; preparing periodic reports regarding the operations of the Fund for its shareholders; preparing proxy materials for shareholder meetings; and preparing the registration statements required by Federal and state securities laws for the sale of the Fund’s shares. The Managers also provide the Fund with office space, facilities and equipment.
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 Sub-Adviser 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 Sub-Adviser’s advisory, administrative, accounting, legal, compliance
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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 Christopher Proctor and Adam Wilde, the portfolio managers for the Fund, and the Sub-Adviser’s investment team and analysts. The Board members also considered the totality of their experiences with the Managers as directors or trustees of the Fund and other funds advised by the Managers. The Board considered information regarding the quality of services provided by affiliates of the Managers, which its members have become knowledgeable about in connection with the renewal of the Fund’s 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 Fund, the Adviser and the Sub-Adviser. Throughout the year, the Manager provided information on the investment performance of the Fund, including comparative performance information. The Board also reviewed information, prepared by the Manager and by the independent consultant, comparing the Fund’s historical performance to relevant market indices and to the performance of other retail ultrashort bond funds. The Board noted that the Fund underperformed its performance category median for the one-year period. The Board considered that the Fund underperformed its performance category median as a result of the Fund’s stated conservative investment process and mandate. The Fund invests approximately 80% of its assets in money market eligible securities. The Board noted that in 2012, top performers in the Fund’s performance universe typically had a duration close to 1 year, MBS exposure, CMBS exposure, and a significantly higher exposure to corporate bonds, which would violate the risk parameters of the Fund’s mandate as a cash alternative.
Costs of Services by the Adviser. The Board reviewed the fees paid to the Manager and the other expenses borne by the Fund. The independent consultant provided comparative data in regard to the fees and expenses of the Fund and other retail ultrashort bond funds with comparable asset levels and distribution features. The Board noted that the Fund’s total expenses and its contractual management fees were lower than its peer group median and its category median. Within the total asset range of $100 to $250 million, the Fund’s effective fee rate was higher than its peer group median and equal to its category median. The Board also considered that the Manager has agreed to contractually limit the total annual expenses for Class A shares to 0.65% and for Class Y shares to 0.25% of average daily net assets, and to waive a portion of the advisory fee on Class A shares to the same extent that it waives any of the advisory fee on Class Y shares. This voluntary expense limitation may not be amended or withdrawn until one year after the date of the Fund’s prospectus.
Economies of Scale and Profits Realized by the Adviser and Sub-Adviser. The Board considered information regarding the Manager’s costs in serving as the Fund’s investment adviser, including the costs associated with the personnel and systems necessary to manage the Fund, and information regarding the Manager’s profitability from its relationship with the Fund. The Board reviewed whether the Manager may realize economies of scale in managing and supporting the Fund and whether those economies of scale benefit the Fund’s shareholders at the current level of Fund assets in relation to its management fee.
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BOARD APPROVAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-ADVISORY AGREEMENTS Unaudited / Continued |
Other Benefits to the Managers. In addition to considering the profits realized by the Managers, the Board considered information that was provided regarding the direct and indirect benefits the Managers receive as a result of their relationship with the Fund, including compensation paid to the Managers’ affiliates. The Board also considered that the Managers 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 Managers 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 Agreements through August 31, 2014. In arriving at its decision, the Board did not identify 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 Agreements, including the management fees, in light of all the surrounding circumstances.
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PORTFOLIO PROXY VOTING POLICIESAND PROCEDURES; UPDATES TO STATEMENTS OF INVESTMENTS Unaudited |
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which the Fund votes proxies relating to securities (“portfolio proxies”) held by the Fund. A description of the Fund’s Portfolio Proxy Voting Policies and Procedures is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.CALL OPP (225.5677), (ii) on the Fund’s website at oppenheimerfunds.com, and (iii) on the SEC’s website at www.sec.gov. In addition, the Fund is required to file Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. The Fund’s voting record is available (i) without charge, upon request, by calling the Fund toll-free at 1.800.CALL OPP (225.5677), and (ii) in the Form N-PX filing on the SEC’s website at www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC for the first quarter and the third quarter of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at www.sec.gov. Those forms may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Householding—Delivery 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 fund’s prospectus (or, if available, the fund’s 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.
| 33 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
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| Trustees and Officers | Sam Freedman, Chairman of the Board of Trustees and Trustee Edward L. Cameron, Trustee Jon S. Fossel, Trustee Richard F. Grabish, Trustee Beverly L. Hamilton, Trustee Victoria J. Herget, Trustee Robert J. Malone, Trustee F. William Marshall, Jr., Trustee Karen L. Stuckey, Trustee James D. Vaughn, Trustee William F. Glavin, Jr., Trustee, President and Principal Executive Officer Christopher Proctor, Vice President Adam S. Wilde, Vice President Arthur S. Gabinet, Secretary and Chief Legal Officer Christina M. Nasta, Vice President and Chief Business Officer Mark S. Vandehey, Vice President and Chief Compliance Officer Brian W. Wixted, Treasurer and Principal Financial & Accounting Officer | |||
| Manager | OFI Global Asset Management, Inc. | |||
| Sub-Adviser | OppenheimerFunds, Inc. | |||
| Distributor | OppenheimerFunds Distributor, Inc. | |||
| Transfer and Shareholder Servicing Agent | OFI Global Asset Management, Inc. | |||
| Sub-Transfer Agent | Shareholder Services, Inc. DBA OppenheimerFunds Services | |||
Independent Registered Public Accounting Firm | KPMG LLP | |||
| Counsel | K&L Gates LLP | |||
The financial statements included herein have been taken from the records of the Fund without examination of those records by the independent registered public accounting firm. | ||||
© 2014 OppenheimerFunds, Inc. All rights reserved.
| 34 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
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As an Oppenheimer fund shareholder, you are entitled to know how we protect your personal information and how we limit its disclosure.
Information Sources
We obtain nonpublic personal information about our shareholders from the following sources:
| — | Applications or other forms |
| — | When you create a user ID and password for online account access |
| — | When you enroll in eDocs Direct, our electronic document delivery service |
| — | Your transactions with us, our affiliates or others |
| — | A software program on our website, often referred to as a “cookie,” which indicates which parts of our site you’ve visited |
| — | When you set up challenge questions to reset your password online |
If you visit oppenheimerfunds.com and do not log on to the secure account information areas, we do not obtain any personal information about you. When you do log on to a secure area, we do obtain your user ID and password to identify you. We also use this information to provide you with products and services you have requested, to inform you about products and services that you may be interested in and assist you in other ways.
We do not collect personal information through our website unless you willingly provide it to us, either directly by email or in those areas of the website that request information. In order to update your personal information (including your mailing address, email address and phone number) you must first log on and visit your user profile.
If you have set your browser to warn you before accepting cookies, you will receive the warning message with each cookie. You can refuse cookies by turning them off in your browser. However, doing so may limit your access to certain sections of our website.
We use cookies to help us improve and manage our website. For example, cookies help us recognize new versus repeat visitors to the site, track the pages visited, and enable some special features on the website. This data helps us provide a better service for our website visitors.
Protection of Information
We do not disclose any non-public personal information (such as names on a customer list) about current or former customers to anyone, except as permitted by law.
Disclosure of Information
We send your financial advisor (as designated by you) copies of confirmations, account statements and other documents reporting activity in your fund accounts. We may also use details about you and your investments to help us, our financial service affiliates, or firms that jointly market their financial products and services with ours, to better serve your investment needs or suggest financial services or educational material that may be of interest to you. If this requires us to provide you with an opportunity to “opt in” or “opt out” of such information sharing with a firm not affiliated with us, you will receive notification on how to do so, before any such sharing takes place.
Right of Refusal
We will not disclose your personal information to unaffiliated third parties (except as permitted by law), unless we first offer you a reasonable opportunity to refuse or “opt out” of such disclosure.
| 35 | OPPENHEIMER ULTRA-SHORT DURATION FUND |
PRIVACY POLICY NOTICE (Continued) |
Internet Security and Encryption
In general, the email services provided by our website are encrypted and provide a secure and private means of communication with us. To protect your own privacy, confidential and/or personal information should only be communicated via email when you are advised that you are using a secure website. As a security measure, we do not include personal or account information in non-secure emails, and we advise you not to send such information to us in non-secure emails. Instead, you may take advantage of the secure features of our website to encrypt your email correspondence. To do this, you will need to use a browser that supports Secure Sockets Layer (SSL) protocol.
We do not guarantee or warrant that any part of our website, including files available for download, are free of viruses or other harmful code. It is your responsibility to take appropriate precautions, such as use of an anti-virus software package, to protect your computer hardware and software.
| — | All transactions, including redemptions, exchanges and purchases, are secured by SSL and 128-bit encryption. SSL is used to establish a secure connection between your PC and OppenheimerFunds’ server. It transmits information in an encrypted and scrambled format. |
| — | Encryption is achieved through an electronic scrambling technology that uses a “key” to code and then decode the data. Encryption acts like the cable converter box you may have on your television set. It scrambles data with a secret code so that no one can make sense of it while it is being transmitted. When the data reaches its destination, the same software unscrambles the data. |
| — | You can exit the secure area by either closing your browser, or for added security, you can use the Log Out button before you close your browser. |
Other Security Measures
We maintain physical, electronic and procedural safeguards to protect your personal account information. Our employees and agents have access to that information only so that they may offer you products or provide services, for example, when responding to your account questions.
How You Can Help
You can also do your part to keep your account information private and to prevent unauthorized transactions. If you obtain a user ID and password for your account, do not allow it to be used by anyone else. Also, take special precautions when accessing your account on a computer used by others.
Who We Are
This joint notice describes the privacy policies of the Oppenheimer funds, OppenheimerFunds, Inc., and each of its investment adviser subsidiaries, OppenheimerFunds Distributor, Inc. and OFI Global Trust Co. It applies to all Oppenheimer fund accounts you presently have, or may open in the future, using your Social Security number—whether or not you remain a shareholder of our funds. This notice was last updated November 2013. In the event it is updated or changed, we will post an updated notice on our website at oppenheimerfunds.com. If you have any questions about these privacy policies, write to us at P.O. Box 5270, Denver, CO 80217-5270, email us by clicking on the Contact Us section of our website at oppenheimerfunds.com or call us at 1.800.CALL OPP (225.5677).
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Item 2. Code of Ethics.
Not applicable to semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable to semiannual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable to semiannual reports.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments.
a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.
b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The Fund’s Governance Committee Provisions with Respect to Nominations of Directors/Trustees to the Respective Boards
None
Item 11. Controls and Procedures.
Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of 1/31/2014, the registrant’s principal executive officer and principal financial officer found the registrant’s disclosure controls and procedures to provide reasonable assurances that information required to be disclosed by the registrant in the reports that it files under the Securities Exchange Act of 1934 (a) is accumulated and communicated to registrant’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure, and (b) is recorded, processed, summarized and reported, within the time periods specified in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
| (a) | (1) Not applicable to semiannual reports. |
(2) Exhibits attached hereto.
(3) Not applicable.
| (b) | Exhibit attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer Ultra-Short Duration Fund
| By: | /s/ William F. Glavin, Jr. | |
| William F. Glavin, Jr. | ||
| Principal Executive Officer | ||
| Date: | 3/13/2014 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ William F. Glavin, Jr. | |
| William F. Glavin, Jr. | ||
| Principal Executive Officer | ||
| Date: | 3/13/2014 | |
| By: | /s/ Brian W. Wixted | |
| Brian W. Wixted | ||
| Principal Financial Officer | ||
| Date: | 3/13/2014 | |