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 811-21916
Oppenheimer SMA Core Bond Fund
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(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: December 31
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Date of reporting period: 12/31/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
DECEMBER 31, 2007
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Management
Oppenheimer Commentaries
SMA CORE BOND and
FUND Annual Report
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MANAGEMENT COMMENTARIES
Listing of Top Holdings
ANNUAL REPORT [GRAPHIC]
Fund Performance Discussion
Listing of Investments
Financial Statements
[LOGO] OPPENHEIMERFUNDS(R)
The Right Way to Invest
TOP HOLDINGS AND ALLOCATIONS
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CREDIT ALLOCATION
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Treasury 0.6%
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Agency 44.7
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AAA 28.9
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AA 3.1
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A 3.6
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BBB 4.3
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BB 3.5
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B 0.5
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Not Rated 2.7
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Other Securities 8.1
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2007, and are based on the total market value of investments.
Average credit quality and ratings include securities rated by a national rating
organization. As of that date, no securities held by the Fund were rated lower
than B.
CORPORATE BONDS & NOTES--TOP TEN INDUSTRIES
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Commercial Banks 4.0%
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Media 2.7
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Insurance 1.9
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Automobiles 1.1
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Diversified Financial Services 0.8
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Oil, Gas & Consumable Fuels 0.8
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Capital Markets 0.8
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Hotels, Restaurants & Leisure 0.6
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Consumer Finance 0.4
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Food & Staples Retailing 0.4
Portfolio holdings and allocations are subject to change. Percentages are as of
December 31, 2007, and are based on net assets.
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5 | OPPENHEIMER SMA CORE BOND FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED DECEMBER 31, 2007.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. Since its inception on July 23,
2007 through December 31, 2007, Oppenheimer SMA Core Bond Fund returned 4.61%.
We are encouraged by the fact that the bulk of the Fund's difficulties occurred
over a relatively short, concentrated timeframe at year-end. These difficulties
in the Fund were caused by adverse conditions in the financial markets that we
believed diverged somewhat from fundamental drivers in the second half of 2007.
The greater part of our difficulties occurred from mid-October through end
of November, when market liquidity evaporated and the sub-prime mortgage crisis
hit its peak. Although conditions improved slightly as the year ended, we were
unable to recoup these losses in so short a timeframe and as a result, the
Fund's full-period results suffered. As such, the most significant detractor
compressing the Fund's performance was the challenging market environment that
plagued the capital markets throughout the second half of 2007.
In addition to overall market conditions, another detractor to performance
was the composition of our investment-grade credit allocation, which worked
against us at year-end. In this area of the portfolio, we had emphasized
financial bonds at the expense of industrial names, based on our belief that the
wider spreads associated with industrials at that time indicated a higher level
of leveraged buyout (LBO) or "event" risk. Unfortunately, when the sub-prime
lending crisis peaked in mid-October, industrial bonds rallied while spreads on
financials widened dramatically and their values dropped. Similarly, our
decision to maximize our allocation to high-yield bonds detracted from
short-term returns after mid-October.
On the positive side, the makeup of our mortgage holdings helped mitigate
losses for the year. First, because we remained quite wary of sub-prime
mortgages throughout the period, we generally avoided this segment of the
market--a decision that helped support Fund returns given market events. Next,
what marginal exposure we did have to the sub-prime sector was comprised of
select, AAA-rated, short-term issues, which suffered less on a relative basis.
Otherwise, although our overall mortgage allocation lagged this year, it did so
less severely than the overall market. This advantage largely stemmed from our
focus on agency mortgage-backed securities, such as Fannie Mae and Freddie Mac
issues, where minimal credit risk and sounder guarantees helped these mortgages
fare better than the rest of the mortgage market as a whole. On the other hand,
performance suffered as a result of our decision late in the year to add to the
portfolio's commercial mortgage-backed securities (CMBS) and non-agency mortgage
holdings.
6 | OPPENHEIMER SMA CORE BOND FUND
Our interest rate strategy only mildly detracted from performance. Upon
inception, the Fund held less interest-rate risk, or duration, relative to the
benchmark, based on our conviction that both current rates as well as investors'
expectations for longer-term rates were lower than warranted by actual economic
fundamentals. When interest rates fell over the course of the second half of
2007, our interest-rate positioning imposed a marginally negative impact on our
performance versus the benchmark. Fortunately, because we were only slightly
short duration, the impact of our rate strategy proved to be minimal.
Despite the challenging backdrop that defined the Fund's first review
period, we view this recent period of difficulty as very short-term, considering
the long-term investment horizon we intend to employ when managing the Fund's
diverse portfolio of securities. Additionally, we are confident that our current
strategy and positioning for the Fund place it in an advantageous position for
the long term.
Specifically, we are convinced that economic fundamentals point toward a
greater likelihood of rising long-term rates rather than further rate declines.
As such, our slightly lower exposure to interest-rate risk should position the
Fund well for the rate environment we expect. Next, we believe select areas of
the market have been unduly shunned as a result of the sub-prime crisis despite
still-sound fundamental underpinnings, such as AAA-rated CMBS and AAA-rated
non-agency residential mortgages backed by prime borrowers. As such, we have
increased our exposure to these securities carefully and selectively.
In terms of the Fund's investment-grade credit allocation, we remain
confident in the cash flows of the companies backing our holdings in this area
of the market. Likewise, we are confident that our decision this year to
increase our exposure to specific areas of the high-yield credit sector,
particularly short maturity bonds, will reap long-term rewards. High-yield
spreads appear to be at or near historically wide levels given where we are in
the credit cycle, and as uncertainty diminishes and investors once again seek
incremental yield supported by sound fundamentals, we're convinced this sector
will again engage investors' interest, particularly as investors' appetite for
incremental yield returns more fully. Based on our longer-term perspective, we
believe that despite the recent brief period of difficulty, our disciplined
investment process--which drives the composition of the Fund's portfolio--will
fuel Oppenheimer SMA Core Bond Fund's long-term, competitive performance
potential and remain a vital element in THE RIGHT WAY TO INVEST.
7 | OPPENHEIMER SMA CORE BOND FUND
NOTES
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INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY CONTACTING
YOUR ADVISER OR THE "WRAP-FREE" PROGRAM SPONSOR. READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
Shares of the Fund incepted on 7/23/07.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
8 | OPPENHEIMER SMA CORE BOND FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs of
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 for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, July 23, 2007 (commencement of
operations) and held for the period ended December 31, 2007.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on July 1, 2007 and held for the six months ended December
31, 2007.
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, 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, and an assumed rate of return of 5%
per year 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 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
9 | OPPENHEIMER SMA CORE BOND FUND
FUND EXPENSES Continued
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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.
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ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
ACTUAL VALUE DECEMBER 31, 2007 DECEMBER 31, 2007 1,2
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$1,000.00 $1,046.10 $0.00
HYPOTHETICAL
(5% return before expenses)
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1,000.00 1,025.21 0.00
1. Actual expenses paid are equal to the Fund's annualized expense ratio for
that class, multiplied by the average account value over the period, multiplied
by 162/365 to reflect the period from July 23, 2007 (commencement of operations)
to December 31, 2007.
2. Hypothetical expenses paid 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).
The expense ratios, excluding indirect expenses from affiliated fund, for the
period from July 23, 2007 (commencement of operations) to December 31, 2007 is
as follows:
EXPENSE RATIO
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0.00%
The expense ratio reflects voluntary waivers or reimbursements of expenses by
the Fund's Manager that can be terminated at any time, without advance notice.
The "Financial Highlights" table in the Fund's financial statements, included in
this report, also show the gross expense ratio, without such waivers or
reimbursements and reduction to custodian expenses, if applicable.
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10 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS December 31, 2007
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PRINCIPAL
AMOUNT VALUE
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ASSET-BACKED SECURITIES--4.2%
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Capital One Prime Auto Receivables Trust, Automobile
Asset-Backed Certificates, Series 2005-1, Cl. A4, 5.048%, 4/15/11 1 $ 300,000 $ 298,911
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Citigroup Mortgage Loan Trust, Inc. 2006-WFH3, Asset-Backed
Pass-Through Certificates, Series 2006-W FH4, Cl. A1, 4.915%, 11/25/36 1 120,951 120,042
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CWABS Asset-Backed Certificates Trust 2005-11,
Asset-Backed Certificates, Series 2005-11, Cl. AF2, 4.657%, 2/25/36 40,000 39,759
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Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.,
Series 2007-3, Cl. A3, 5.378%, 6/15/12 1,2 260,000 258,861
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Honda Auto Receivables Owner Trust, Automobile Receivable Obligations,
Series 2005-2, Cl. A4, 4.15%, 10/15/10 60,000 59,822
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Merrill Lynch Mortgage Investors Trust 2006-WMC1,
Mtg. Asset-Backed Certificates, Series 2006-WMC1, Cl. A2B, 5.005%, 1/25/37 1 106,918 105,565
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Option One Mortgage Loan Trust, Asset-Backed Certificates,
Series 2006-2, Cl. 2A2, 4.965%, 7/1/36 1 130,000 126,589
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Structured Asset Investment Loan Trust, Mtg. Pass-Through Certificates,
Series 2006-BNC3, Cl. A2, 4.905%, 9/25/36 1 54,182 52,940
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Total Asset-Backed Securities (Cost $1,067,551) 1,062,489
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MORTGAGE-BACKED OBLIGATIONS--76.5%
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GOVERNMENT AGENCY--51.1%
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FHLMC/FNMA/SPONSORED--51.1%
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg.
Investment Conduit Multiclass Pass-Through Certificates:
Series 2351, Cl. PZ, 6.50%, 8/15/31 542,756 561,981
Series 2538, Cl. F, 5.628%, 12/15/32 1 188,142 189,500
Series 2592, Cl. F, 5.778%, 12/15/32 1 219,048 221,365
Series 2691, Cl. MG, 4.50%, 10/15/33 310,000 282,914
Series 2750, Cl. XG, 5%, 2/1/34 200,000 187,235
Series 2754, Cl. PE, 5%, 2/15/34 276,000 260,737
Series 2844, Cl. PE, 6.50%, 6/15/34 211,000 198,419
Series 2890, Cl. PE, 5%, 11/1/34 200,000 189,410
Series 2936, Cl. PE, 5%, 2/1/35 262,000 246,853
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Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 2989, Cl. TS, 7.582%, 6/15/25 3 915,264 72,706
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Federal National Mortgage Assn.:
4.50%, 11/25/19 770,474 758,027
4.50%, 5/25/19 4 776,170 763,631
5%, 3/25/18-9/25/33 1,854,787 1,847,437
5%, 1/1/22 5 260,000 260,284
5%, 11/25/33 6 1,027,599 1,004,335
5.50%, 11/25/32-5/25/34 2,936,505 2,940,321
5.50%, 1/1/22 5 200,000 202,594
6%, 12/25/33 1,037,049 1,055,350
6%, 1/1/22 5 460,000 470,709
11 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
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PRINCIPAL
AMOUNT VALUE
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FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates:
Trust 2001-74, Cl. QE, 6%, 12/25/31 $ 484,284 $ 495,760
Trust 2003-130, Cl. CS, 4.37%, 12/25/33 1 118,984 112,512
Trust 2005-59, Cl. NQ, 4.713%, 5/25/35 1 118,982 118,998
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Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security:
Trust 2003-26, Cl. XS, 10.603%, 3/25/23 3 1,071,303 112,186
Trust 2003-52, Cl. NS, 7.228%, 6/25/23 3 381,256 38,181
Trust 2006-43, Cl. SJ, 6.146%, 6/25/36 3 511,535 37,972
Trust 2543, Cl. UB, 9.104%, 11/15/21 3 631,175 51,487
Trust 342, Cl. 2, 3.515%, 9/1/33 3 628,969 147,264
Trust 351, Cl. 9, 8.812%, 10/1/34 3 720,103 171,527
Trust 354, Cl. 2, 5.133%, 11/1/34 3 242,826 58,633
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13,058,328
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NON-AGENCY--25.4%
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COMMERCIAL--9.9%
Banc of America Commercial Mortgage, Inc., Commercial Mtg.
Pass-Through Certificates, Series 2005-3, Cl. A2, 4.501%, 7/10/43 50,000 49,416
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Citigroup/Deutsche Bank 2007-CD4 Commercial Mortgage Trust,
Commercial Mtg. Pass-Through Certificates:
Series 2007-CD4, Cl. A2B, 5.205%, 12/11/49 260,000 259,959
Series 2007-CD4, Cl. A4, 5.322%, 12/1/49 120,000 119,873
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CitiMortgage Alternative Loan Trust 2006-A5:
Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 2006-A5, Cl. 1A1, 5.265%, 10/25/36 1 187,464 177,830
Real Estate Mtg. Investment Conduit Pass-Through Certificates,
Series 2006-A5, Cl. 1A13, 5.315%, 10/25/36 1 89,657 87,664
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Countrywide Asset-Backed Certificates, Inc., Home Equity
Asset-Backed Certificates, Series 2006-8, Cl. 2A1, 4.895%, 1/25/46 1 68,636 67,770
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Credit Suisse First Boston Mortgage Securities Corp.,
Commercial Mtg. Obligations, Series 2006-C1, Cl. A2, 5.512%, 2/15/39 160,000 161,685
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First Horizon Alternative Mortgage Securities Trust 2004-FA2,
Mtg. Pass-Through Certificates, Series 2004-FA2, Cl. 3A1, 6%, 1/25/35 48,179 46,375
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Greenwich Capital Commercial Funding Corp., Commercial
Mtg. Pass-Through Certificates, Series 2007-GG9, Cl. A2, 5.381%, 3/10/39 330,000 332,042
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JPMorgan Chase Commercial Mortgage Securities Corp.,
Commercial Mtg. Pass-Through Certificates:
Series 2006-CB14, Cl. A4, 5.481%, 12/12/44 360,000 364,796
Series 2007-LD12, Cl. A2, 5.827%, 2/15/51 250,000 255,333
Series 2007-LDPX, Cl. A2S, 5.305%, 1/15/49 140,000 140,204
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LB-UBS Commercial Mortgage Trust, Commercial
Mtg. Pass-Through Certificates:
Series 2007-C1, Cl. A2, 5.318%, 1/15/12 30,000 30,145
Series 2007-C1, Cl. A4, 5.424%, 2/11/40 100,000 100,626
12 | OPPENHEIMER SMA CORE BOND FUND
PRINCIPAL
AMOUNT VALUE
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COMMERCIAL Continued
WaMu, Mtg. Pass-Through Certificates:
Series 2003-AR9, Cl. 2A, 4.047%, 9/25/33 1 $ 87,249 $ 86,749
Series 2006-AR8, Cl. 2A1, 6.133%, 8/25/36 1 258,721 258,674
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2,539,141
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MANUFACTURED HOUSING--1.7%
Wells Fargo Mortgage-Backed Securities 2006-AR12 Trust,
Mtg. Pass-Through Certificates, Series 2006-AR12, Cl. 2A1, 6.102%, 9/25/36 1 205,783 206,238
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Wells Fargo Mortgage-Backed Securities 2006-AR2 Trust,
Mtg. Pass-Through Certificates, Series 2006-AR2, Cl. 2A5, 5.10%, 3/25/36 1 232,572 230,847
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437,085
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MULTIFAMILY--9.5%
Banc of America Mortgage Securities, Inc., CMO Pass-Through Certificates:
Series 2003-E, Cl. 2A2, 4.35%, 6/25/33 1 140,145 139,638
Series 2005-F, Cl. 2A3, 4.716%, 7/25/35 1 166,345 165,057
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Bear Stearns ARM Trust 2006-4, Mtg. Pass-Through Certificates,
Series 2006-4, Cl. 2A1, 5.802%, 10/25/36 1 91,469 92,172
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Citigroup Mortgage Loan Trust, Inc. 2006-AR5,
Mtg. Pass-Through Certificates, Series 2006-AR5, Cl. 1A3A, 5.894%, 7/25/36 1 71,312 71,946
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Countrywide Alternative Loan Trust, CMO:
Series 2004-28CB, Cl. 2A4, 5.75%, 1/25/35 140,000 133,826
Series 2008-85CB, Cl. 2A3, 5.50%, 2/25/36 110,000 104,486
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Countrywide Home Loans Servicing LP, Mtg. Pass-Through Certificates:
Series 2003-46, Cl. 1A2, 4.122%, 1/19/34 1 120,790 122,269
Series 2005-HYB1, Cl. 5A1, 4.995%, 3/25/35 1 158,519 154,903
Series 2007-HY1, Cl. 1A1, 5.695%, 4/25/37 1 172,695 173,444
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GMAC Mortgage Corp. Loan Trust, Mtg. Pass-Through Certificates:
Series 2004-J4, Cl. A7, 5.50%, 9/25/34 100,000 95,716
Series 2005-AR4, Cl. 2A1, 5.292%, 7/19/35 1 185,590 186,232
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GSR Mortgage Loan Trust 2005-AR7, Mtg. Pass-Through Certificates,
Series 2005-AR7, Cl. 3A1, 5.152%, 11/25/35 1 275,001 274,783
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Merrill Lynch Mortgage Investors Trust 2007-2, Mtg. Pass-Through
Certificates, Series 2007-2, Cl. 2A1, 6.007%, 6/25/37 1 226,205 227,460
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Wells Fargo Mortgage-Backed Securities 2004-AA Trust,
Mtg. Pass-Through Certificates, Series 2004-AA, Cl. 2A, 4.993%, 12/25/34 1 53,027 52,286
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Wells Fargo Mortgage-Backed Securities 2004-S Trust,
Mtg. Pass-Through Certificates, Series 2004-S, Cl. A1, 3.54%, 9/25/34 1 43,669 43,004
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Wells Fargo Mortgage-Backed Securities 2005-AR2 Trust,
Mtg. Pass-Through Certificates, Series 2005-AR2, Cl. 2A2, 4.547%, 3/25/35 1 33,033 32,769
13 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
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PRINCIPAL
AMOUNT VALUE
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MULTIFAMILY Continued
Wells Fargo Mortgage-Backed Securities 2005-AR4 Trust,
Mtg. Pass-Through Certificates, Series 2005-AR4, Cl. 2A2, 4.524%, 4/25/35 1 $ 53,734 $ 53,301
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Wells Fargo Mortgage-Backed Securities 2006-AR10 Trust,
Mtg. Pass-Through Certificates:
Series 2006-AR10, Cl. 2A1, 5.646%, 7/25/36 1 83,920 84,549
Series 2006-AR10, Cl. 4A1, 5.56%, 7/25/36 1 114,216 114,860
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Wells Fargo Mortgage-Backed Securities 2006-AR2 Trust,
Mtg. Pass-Through Certificates, Series 2006-AR2. Cl. 2A6, 5.10%, 3/25/36 1 48,118 47,761
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Wells Fargo Mortgage-Backed Securities 2006-AR6 Trust,
Mtg. Pass-Through Certificates, Series 2006-AR6, Cl. 3A1, 5.093%, 3/25/36 1 48,954 48,746
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2,419,208
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RESIDENTIAL--4.3%
Chase Mortgage Finance Trust Series 2005-S1, Multiclass Mtg.
Pass-Through Certificates, Series 2005-S1, Cl. 1A5, 5.50%, 5/25/35 60,000 58,996
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Countrywide Alternative Loan Trust, CMO,
Series 2005-18CB, Cl. A8, 5.50%, 5/25/36 140,000 135,111
- --------------------------------------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust 2006-AR,
Mtg. Pass-Through Certificates, Series 2006-AR, Cl. 5A3, 5.427%, 6/25/36 1 70,000 70,323
- --------------------------------------------------------------------------------------------------------------
STARM Mortgage Loan Trust 2007-S1, Mtg. Pass-Through Certificates,
Series 2007-S1, Cl. 3A1, 5.004%, 8/1/22 1 260,391 256,851
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WaMu, Mtg. Pass-Through Certificates:
Series 2006-AR12, Cl. 2A1, 5.75%, 10/25/36 1 251,176 249,655
Series 2007-HY6, Cl. 2A1, 5.702%, 6/25/37 1 163,253 161,205
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Wells Fargo Mortgage-Backed Securities 2006-AR5 Trust,
Mtg. Pass-Through Certificates, Series 2006-AR5, Cl. 2A2, 5.535%, 4/1/36 1 100,162 91,039
- --------------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage-Backed Securities 2003-6 Trust,
Mtg. Pass-Through Certificates, Series 2003-6, Cl. 1A1, 5%, 6/25/18 90,948 90,487
--------------
1,113,667
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Total Mortgage-Backed Obligations (Cost $19,165,166) 19,567,429
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U.S. GOVERNMENT OBLIGATIONS--0.3%
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U.S. Treasury Nts., 4.25%, 9/30/12 (Cost $84,592) 85,000 88,008
- --------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--14.3%
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Albertson's, Inc., 8% Sr. Unsec. Debs., 5/1/31 100,000 101,947
- --------------------------------------------------------------------------------------------------------------
Barclays Bank plc, 6.278% Perpetual Bonds 7 300,000 261,564
- --------------------------------------------------------------------------------------------------------------
Belo Corp., 8% Sr. Unsec. Unsub. Nts., 11/1/08 30,000 30,274
- --------------------------------------------------------------------------------------------------------------
Buckeye Partners LP, 4.625% Sr. Nts., 7/15/13 50,000 48,055
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Capmark Financial Group, Inc., 5.875% Nts., 5/10/12 8 200,000 158,456
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Chancellor Media CCU, 8% Sr. Unsec. Nts., 11/1/08 55,000 56,859
14 | OPPENHEIMER SMA CORE BOND FUND
PRINCIPAL
AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
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Citigroup, Inc., 8.30% Jr. Sub. Bonds, 12/21/57 1 $ 45,000 $ 47,122
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Clear Channel Communications, Inc., 6.25% Nts., 3/15/11 80,000 72,451
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Cox Enterprises, Inc., 4.375% Nts., 5/1/08 8 120,000 119,624
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CSC Holdings, Inc., 7.25% Sr. Unsec. Nts., 7/15/08 100,000 100,375
- --------------------------------------------------------------------------------------------------------------
Dillard's, Inc., 6.625% Unsec. Nts., 11/15/08 2 80,000 79,900
- --------------------------------------------------------------------------------------------------------------
Eastman Kodak Co., 3.625% Nts., Series A, 5/15/08 58,000 57,420
- --------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 9.75% Sr. Unsec. Nts., 9/15/10 220,000 210,045
- --------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8% Bonds, 11/1/31 90,000 75,678
- --------------------------------------------------------------------------------------------------------------
Goldman Sachs Capital, Inc. (The), 6.345% Sub. Bonds, 2/15/34 215,000 194,755
- --------------------------------------------------------------------------------------------------------------
HBOS plc, 6.413% Sub. Perpetual Bonds, Series A 7,8 400,000 326,393
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HSBC Finance Capital Trust IX, 5.911% Nts., 11/30/35 1 300,000 278,010
- --------------------------------------------------------------------------------------------------------------
Liberty Media LLC, 7.75% Sr. Nts., 7/15/09 150,000 153,856
- --------------------------------------------------------------------------------------------------------------
MetLife, Inc., 6.40% Jr. Unsec. Sub. Bonds, 12/15/66 1 210,000 193,064
- --------------------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 6% Sr. Sec. Nts., 10/1/09 155,000 155,000
- --------------------------------------------------------------------------------------------------------------
Monongahela Power Co., 7.36% Unsec. Nts., Series A, 1/15/10 50,000 52,713
- --------------------------------------------------------------------------------------------------------------
Popular North America, Inc.:
3.875% Sr. Bonds, Series E, 10/1/08 90,000 89,154
4.70% Nts., 6/30/09 60,000 59,430
- --------------------------------------------------------------------------------------------------------------
Prudential Holdings LLC, 8.695% Bonds, Series C, 12/18/23 8 100,000 120,063
- --------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25 8 150,000 177,321
- --------------------------------------------------------------------------------------------------------------
SLM Corp.:
3.95% Nts., Series A, 8/15/08 10,000 9,760
4% Nts., 1/15/09 105,000 101,178
- --------------------------------------------------------------------------------------------------------------
TEPPCO Partners LP, 6.125% Nts., 2/1/13 30,000 31,285
- --------------------------------------------------------------------------------------------------------------
Tribune Co., 5.50% Nts., Series E, 10/6/08 2 150,000 141,938
- --------------------------------------------------------------------------------------------------------------
Valero Logistics Operations LP, 6.05% Nts., 3/15/13 120,000 122,798
- --------------------------------------------------------------------------------------------------------------
Westar Energy, Inc., 7.125% Sr. Unsec. Nts., 8/1/09 25,000 25,809
--------------
Total Corporate Bonds and Notes (Cost $3,698,504) 3,652,297
SHARES
- --------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY--8.2%
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund,
Cl. E, 5.03% 9,10 (Cost $2,086,864) 2,086,864 2,086,864
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $26,102,677) 103.5% 26,457,087
- --------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (3.5) (892,432)
------------------------------
NET ASSETS 100.0% $ 25,564,655
==============================
INDUSTRY CLASSIFICATIONS ARE UNAUDITED.
15 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Represents the current interest rate for a variable or increasing rate
security.
2. Illiquid security. The aggregate value of illiquid securities as of December
31, 2007 was $480,699, which represents 1.88% of the Fund's net assets. See Note
7 of accompanying Notes.
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $689,956 or 2.70% of the Fund's net assets as
of December 31, 2007.
4. All or a portion of the security was segregated by the Fund in the amount of
$643,000, which represented 100.11% of the market value of securities sold
short. See Note 1 of accompanying Notes.
5. When-issued security or delayed delivery to be delivered and settled after
December 31, 2007. See Note 1 of accompanying Notes.
6. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $99,469. See Note 5 of accompanying Notes.
7. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
8. 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 $901,857 or 3.53% of the Fund's net assets
as of December 31, 2007.
9. Rate shown is the 7-day yield as of December 31, 2007.
10. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended December 31, 2007, 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 GROSS GROSS SHARES
JULY 23, 2007 ADDITIONS REDUCTIONS DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E -- 31,366,171 29,279,307 2,086,864
DIVIDEND
VALUE INCOME
- ---------------------------------------------------------------------------------------------------------
Oppenheimer Institutional
Money Market Fund, Cl. E $ 2,086,864 $ 164,577
PRINCIPAL
AMOUNT
SOLD SHORT VALUE
- ---------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS SOLD SHORT--(2.5)%
- ---------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.50%, 1/1/37 (Proceeds $639,966) $ (643,000) $ (642,297)
16 | OPPENHEIMER SMA CORE BOND FUND
- ---------------------------------------------------------------------------------------------
FUTURE CONTRACTS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ---------------------------------------------------------------------------------------------
UNREALIZED
NUMBER OF EXPIRATION APPRECIATION
CONTRACT DESCRIPTION BUY/SELL CONTRACTS DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------
U.S. Long Bonds Buy 22 3/19/08 $2,560,250 $ (17,101)
U.S. Treasury Nts., 2 yr. Sell 8 3/31/08 1,682,000 (2,099)
U.S. Treasury Nts., 5 yr. Sell 11 3/31/08 1,213,094 (3,266)
U.S. Treasury Nts., 10 yr. Buy 2 3/19/08 226,781 638
------------
$ (21,828)
============
- ------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
SWAP REFERENCE CREDIT AMOUNT RECEIVE TERMINATION PAID/
COUNTERPARTY ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
CDX.NA.IG.9 Index Sell $475 0.600% 12/20/12 $ (2,968) $ (3,491)
CDX.NA.IG.9 Index Sell 240 0.600 12/20/12 (1,807) (1,764)
Dillard's, Inc. Sell 45 1.900 12/20/08 -- (297)
iStar Financial, Inc. Sell 70 4.400 12/20/12 -- 1,212
Merrill Lynch & Co., Inc. Sell 255 0.680 9/20/08 -- (2,170)
Six Flags, Inc. Sell 65 8.250 12/20/08 -- (916)
- ------------------------------------------------------------------------------------------------------------------------------
Credit Suisse International:
ArvinMeritor, Inc. Sell 105 2.750 9/20/08 -- (375)
Beazer Homes USA, Inc. Sell 105 7.000 6/20/08 -- (3,700)
Intelsat Ltd. Sell 65 3.450 9/20/08 -- (358)
Pulte Homes, Inc. Sell 150 3.450 9/20/09 -- (1,666)
Quebecor World, Inc. Sell 100 2.600 9/20/08 -- (8,998)
Saks, Inc. Sell 105 2.000 9/20/08 -- (323)
The Goodyear Tire &
Rubber Co. Sell 100 1.550 9/20/08 -- 218
TXU Corp. Sell 20 5.910 12/20/12 -- 579
TXU Corp. Sell 20 6.050 12/20/12 -- 687
TXU Corp. Sell 25 6.000 12/20/12 -- 723
Vale Overseas Ltd. Sell 125 1.270 8/20/17 -- (560)
- ------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
ABX.HE.AA.06-2 Index Sell 30 0.170 5/25/46 (3,600) (11,435)
Capital One Bank Buy 40 1.800 12/20/12 -- 513
Capital One Bank Buy 75 1.700 12/20/12 -- 1,325
CDX.NA.IG.9 Index Sell 955 0.600 12/20/12 (5,755) (7,201)
CDX.NA.IG.9 Index Sell 475 0.600 12/20/12 (2,707) (3,581)
CDX.NA.HY.8 Index Sell 55 2.750 6/20/12 (4,774) (2,731)
17 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS: Continued
- ------------------------------------------------------------------------------------------------------------------------------
BUY/SELL NOTIONAL PAY/ PREMIUM
SWAP REFERENCE CREDIT AMOUNT RECEIVE TERMINATION PAID/
COUNTERPARTY ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
CDX.NA.HY.8 Index Sell $ 55 2.750% 6/20/12 $ (3,330) $ (2,731)
CDX.NA.HY.8 Index Sell 20 2.750 6/20/12 (2,414) (993)
CDX.NA.HY.8 Index Sell 55 2.750 6/20/12 (3,786) (2,731)
Centex Corp. Sell 100 1.550 9/20/09 -- (4,521)
Citigroup, Inc. Sell 150 1.200 9/20/08 -- (3,888)
Countrywide Home
Loans, Inc. Sell 65 3.250 9/20/08 -- (8,426)
CVRD Inco Ltd. Buy 125 0.660 9/20/17 -- (789)
Georgia-Pacific Corp. Sell 100 1.750 9/20/08 -- 633
Intelsat Ltd. Sell 25 2.850 9/20/08 -- (154)
iStar Financial, Inc. Sell 120 2.925 12/20/08 -- (2,289)
iStar Financial, Inc. Sell 70 3.000 12/20/08 -- (1,285)
iStar Financial, Inc. Sell 10 4.320 12/20/12 -- 112
Lehman Brothers
Holdings, Inc. Sell 130 1.410 9/20/08 -- 23
MBIA, Inc. Sell 125 1.300 9/20/08 -- (6,966)
Merrill Lynch & Co., Inc. Sell 125 1.850 6/20/08 -- 403
Owens-Illinois, Inc. Sell 55 1.250 9/20/08 -- 122
Standard Pacific Corp. Sell 105 6.400 9/20/08 -- (6,035)
The Bear Stearns Cos., Inc. Sell 255 2.350 9/20/08 -- 525
TXU Corp. Sell 190 2.550 9/20/08 -- (313)
Washington Mutual, Inc. Sell 15 4.500 12/20/08 -- (80)
Washington Mutual, Inc. Sell 80 4.500 12/20/08 -- (427)
- ------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
Capital One Bank Buy 45 1.800 12/20/12 -- 722
Dole Food Co., Inc. Sell 100 3.450 9/20/08 -- (316)
D.R. Horton, Inc. Sell 190 4.200 12/20/08 -- (92)
General Mills, Inc. Sell 190 0.400 12/20/12 -- (83)
K. Hovnanian
Enterprises, Inc. Sell 100 7.500 9/20/08 -- (9,867)
Levi Strauss & Co. Sell 100 1.600 9/20/08 -- (430)
Morgan Stanley Sell 255 0.640 9/20/08 -- (1,085)
Residential Capital LLC Sell 60 5.000 6/20/08 (7,800) (6,567)
Rite Aid Corp. Sell 100 3.250 9/20/08 -- (1,336)
Saks, Inc. Sell 100 1.700 9/20/08 -- (406)
Tenet Healthcare Corp. Sell 100 4.900 3/20/09 -- 1,801
Toys "R" Us, Inc. Sell 100 3.250 9/20/08 -- (742)
Univision
Communications, Inc. Sell 15 3.000 12/20/08 -- (93)
Univision
Communications, Inc. Sell 140 3.000 12/20/08 -- (529)
Washington Mutual, Inc. Sell 35 4.400 12/20/08 -- (319)
18 | OPPENHEIMER SMA CORE BOND FUND
BUY/SELL NOTIONAL PAY/ PREMIUM
SWAP REFERENCE CREDIT AMOUNT RECEIVE TERMINATION PAID/
COUNTERPARTY ENTITY PROTECTION (000S) FIXED RATE DATE (RECEIVED) VALUE
- ------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
ABX.HE.AA.06-2 Index Sell $ 40 0.170% 5/25/46 $ (4,000) $ (15,004)
CDX.NA.IG.9 Index Sell 295 0.600 12/20/12 (2,336) (2,234)
Countrywide Home
Loans, Inc. Sell 315 0.750 9/20/08 -- (41,570)
First Data Corp. Sell 105 3.600 9/20/08 -- 1,019
Ford Motor Co. Sell 190 6.050 12/20/17 -- (16,107)
General Motors Corp. Sell 130 5.050 12/20/17 -- (15,044)
Harrah's Operating Co., Inc. Sell 190 2.200 9/20/08 -- (1,045)
J.C. Penney Co., Inc. Sell 70 1.300 12/20/17 -- (2,765)
J.C. Penney Co., Inc. Sell 60 1.070 12/20/17 -- (3,370)
Kohl's Corp. Buy 105 0.870 12/20/17 -- 1,757
Kohl's Corp. Buy 90 0.660 12/20/17 -- 2,947
Lehman Brothers
Holdings, Inc. Sell 125 0.700 9/20/10 -- (2,102)
Lennar Corp. Sell 190 2.900 12/20/08 -- (7,233)
Residential Capital LLC Sell 15 5.000 6/20/08 (2,025) (1,804)
Residential Capital LLC Sell 15 5.000 6/20/08 (2,175) (1,804)
Residential Capital LLC Sell 35 5.000 6/20/08 (5,075) (4,210)
Residential Capital LLC Sell 150 6.120 9/20/08 -- (24,528)
Sara Lee Corp. Buy 190 0.418 9/20/12 -- (893)
----------------------
$ (54,552) $(237,451)
======================
- -------------------------------------------------------------------------------------------
INTEREST RATE SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- -------------------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- -------------------------------------------------------------------------------------------
Three-
Month USD
Credit Suisse International $280,000 BBA LIBOR 5.428% 8/7/17 $ 19,288
- -------------------------------------------------------------------------------------------
Three-
Month USD
Deutsche Bank AG 230,000 BBA LIBOR 5.445 8/8/17 17,564
---------
$ 36,852
=========
Index abbreviation is as follows:
BBA LIBOR British Bankers' Association London-Interbank Offered Rate
19 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAPS AS OF DECEMBER 31, 2007 ARE AS FOLLOWS:
- ---------------------------------------------------------------------------------------------------------------
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ---------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index minus
$400,000 CMBS AAA 8.5+ Index 20 basis points 6/1/08 $ 6,713
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index minus
100,000 CMBS AAA 8.5+ Index 25 basis points 5/1/08 1,674
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index plus
870,000 CMBS AAA 8.5+ Index 55 basis points 5/1/08 17,436
- ---------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index minus
270,000 CMBS AAA 8.5+ Index 45 basis points 2/1/08 4,709
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index plus
790,000 CMBS AAA 8.5+ Index 60 basis points 2/1/08 14,468
If positive, the
Total Return of the
If negative, the Lehman Brothers U.S.
absolute value of the CMBS AAA 8.5+
Lehman Brothers U.S. Index plus
60,000 CMBS AAA 8.5+ Index 25 basis points 2/1/08 1,081
20 | OPPENHEIMER SMA CORE BOND FUND
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ---------------------------------------------------------------------------------------------------------------
If negative, the If positive, the
absolute value of the Total Return of the
Lehman Brothers Lehman Brothers U.S. Lehman Brothers U.S.
Special Financing, Inc. $340,000 CMBS AAA 8.5+ Index CMBS AAA 8.5+ Index 2/1/08 $ 6,004
- ---------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers U.S.
Lehman Brothers U.S. CMBS AAA 8.5+ Index
800,000 CMBS AAA 8.5+ Index minus 40 basis points 6/1/08 12,232
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers U.S.
Lehman Brothers U.S. CMBS AAA 8.5+ Index
400,000 CMBS AAA 8.5+ Index plus 90 basis points 6/1/08 6,460
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers U.S.
Lehman Brothers U.S. CMBS AAA 8.5+ Index
648,000 CMBS AAA 8.5+ Index plus 65 basis points 1/31/08 10,363
If positive, the
If negative, the Total Return of the
absolute value of the Lehman Brothers U.S.
Lehman Brothers U.S. CMBS AAA 8.5+ Index
500,000 CMBS AAA 8.5+ Index plus 110 basis points 1/31/08 8,144
--------
$89,284
========
Index abbreviation is as follows:
CMBS Commercial Mortgage Backed Securities
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $24,015,813) $24,370,223
Affiliated companies (cost $2,086,864) 2,086,864
------------
26,457,087
- ---------------------------------------------------------------------------------------------------------
Cash 29,985
- ---------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $35,522) 113,888
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 639,966
Interest and dividends 157,169
Futures margins 9,985
Other 1,123
------------
Total assets 27,409,203
- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Short positions, at value (proceeds of $639,966)--see accompanying statement of investments 642,297
- ---------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $19,030) 225,203
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased on a when-issued or delayed delivery basis 930,049
Shareholder communications 826
Shares of beneficial interest redeemed 295
Trustees' compensation 159
Other 45,719
------------
Total liabilities 1,844,548
- ---------------------------------------------------------------------------------------------------------
NET ASSETS $25,564,655
============
- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 2,514
- ---------------------------------------------------------------------------------------------------------
Additional paid-in capital 25,134,989
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment gain 93,035
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 60,629
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments 273,488
------------
NET ASSETS--applicable to 2,513,728 shares of beneficial interest outstanding $25,564,655
============
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 10.17
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF OPERATIONS For the Period Ended December 31, 2007 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest $ 477,391
- --------------------------------------------------------------------------------
Dividends from affiliated companies 164,577
- --------------------------------------------------------------------------------
Fee income 149
------------
Total investment income 642,117
- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees 39,361
- --------------------------------------------------------------------------------
Legal, auditing and other professional fees 41,250
- --------------------------------------------------------------------------------
Shareholder communications 2,377
- --------------------------------------------------------------------------------
Trustees' compensation 267
- --------------------------------------------------------------------------------
Custodian fees and expenses 36
- --------------------------------------------------------------------------------
Other 2,108
------------
Total expenses 85,399
Less waivers and reimbursements of expenses (85,132)
------------
Net expenses 267
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME 641,850
- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments from unaffiliated companies 137,781
Closing and expiration of futures contracts 220,832
Short positions (2,285)
Swap contracts (122,168)
------------
Net realized gain 234,160
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments 354,410
Futures contracts (21,828)
Short positions (2,331)
Swap contracts (56,763)
------------
Net change in unrealized appreciation 273,488
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,149,498
============
1. For the period from July 23, 2007 (commencement of operations) to December
31, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23 | OPPENHEIMER SMA CORE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 2007 1
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 641,850
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain 234,160
- ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 273,488
--------------
Net increase in net assets resulting from operations 1,149,498
- ----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (642,334)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (80,012)
- ----------------------------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions 25,037,503
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase 25,464,655
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 100,000 2
--------------
End of period (including accumulated net investment gain of $93,035
for the period ended December 31, 2007) $ 25,564,655
==============
1. For the period from July 23, 2007 (commencement of operations) to December
31, 2007.
2. Reflects the value of the Manager's initial seed money investment on May 14,
2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24 | OPPENHEIMER SMA CORE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED DECEMBER 31, 2007 1
- --------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .26
Net realized and unrealized gain (loss) .20
----------------
Total from investment operations .46
- --------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.26)
Distributions from net realized gain (.03)
----------------
Total dividends and/or distributions to shareholders (.29)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 10.17
================
- --------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 4.61%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 25,565
- --------------------------------------------------------------------------------
Average net assets (in thousands) $ 25,034
- --------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 5.78%
Total expenses 0.77%
Expenses after payments, waivers and/or
reimbursements and reduction to custodian expenses 0.00% 5
- --------------------------------------------------------------------------------
Portfolio turnover rate 6 48%
1. For the period from July 23, 2007 (commencement of operations) to December
31, 2007.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
4. Annualized for periods less than one full year.
5. Less than 0.005%.
6. The portfolio turnover rate excludes purchase and sale transactions of To Be
Announced (TBA) mortgage related securities as follows:
PURCHASE TRANSACTIONS SALE TRANSACTIONS
-----------------------------------------------------------------------
Period Ended December 31, 2007 $21,170,290 $20,971,756
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25 | OPPENHEIMER SMA CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer SMA Core Bond Fund (the "Fund") is a registered investment company
organized as a Massachusetts Business Trust. The Fund is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended. The Fund's primary objective is to seek total return by investing
mainly in debt instruments. The Fund's investment adviser is OppenheimerFunds,
Inc. (the "Manager"). The Fund was organized on May 14, 2007 and began
operations on July 23, 2007.
Shares of the Fund may be purchased only by or on behalf of separately
managed account clients ("wrap-fee" accounts) who have retained OFI Private
Investments Inc. or certain of its affiliates (individually or collectively
referred to as "OFI PI"), to manage their accounts pursuant to an investment
management agreement with OFI PI and/or a managed account program sponsor as
part of a "wrap-fee" program. As of December 31, 2007, 100% of the shares were
owned by the Manager and its affiliates.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for trading. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities traded on a registered U.S.
securities exchange are valued based on the last sale price of the security
traded on that exchange prior to the time when the Fund's assets are valued.
Securities whose principal exchange is NASDAQ(R) are valued based on the closing
price reported by NASDAQ prior to the time when the Fund's assets are valued. In
the absence of a sale, the security is valued at the last sale price on the
prior trading day, if it is within the spread of the closing "bid" and "asked"
prices, and if not, at the closing bid price. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, as identified by the portfolio pricing service,
prior to the time when the Fund's assets are valued. In the absence of a sale,
the security is valued at the official closing price on the principal exchange.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of sixty days and all mortgage-backed securities, collateralized
mortgage obligations and other asset-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities for which market
quotations are not readily available are valued at their fair value. Securities
whose values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Shares of a registered investment company
that are not traded on an are valued at the acquired investment company's net
asset value per share. "Money market-type" debt instruments with remaining
maturities 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.
26 | OPPENHEIMER SMA CORE BOND FUND
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. The Fund may purchase
securities on a "when-issued" basis, and may purchase or sell securities on a
"delayed delivery" basis. "When-issued" or "delayed delivery" refers to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis
normally takes place within six months and possibly as long as two years or more
after the trade date. During this period, such securities do not earn interest,
are subject to market fluctuation and may increase or decrease in value prior to
their delivery. The purchase of securities on a when-issued basis may increase
the volatility of the Fund's net asset value to the extent the Fund executes
such transactions while remaining substantially fully invested. When the Fund
engages in when-issued or delayed delivery transactions, it relies on the buyer
or seller, as the case may be, to complete the transaction. Their failure to do
so may cause the Fund to lose the opportunity to obtain or dispose of the
security at a price and yield it considers advantageous. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase.
As of December 31, 2007, the Fund had purchased securities issued on a
when-issued or delayed delivery basis and sold securities issued on a delayed
delivery basis as follows:
WHEN-ISSUED OR DELAYED
DELIVERY BASIS TRANSACTIONS
------------------------------------------------------
Purchased securities $930,049
The Fund may enter into "forward roll" transactions with respect to
mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a
similar security (same type, coupon and maturity) at a later date at a set
price. During the period between the sale and the repurchase, the Fund will not
be entitled to receive interest and principal payments on the securities that
have been sold. The Fund records the incremental difference between the forward
purchase and sale of each forward roll as realized gain (loss) on investments or
as fee income in the case of such transactions that have an associated fee in
lieu of a difference in the forward purchase and sale price.
Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk. To assure its
future payment of the purchase price, the Fund maintains internally designated
assets with a market value equal to or greater than the payment obligation under
the roll.
- --------------------------------------------------------------------------------
SECURITIES SOLD SHORT. The Fund may short sale when-issued securities for future
settlement. The value of the open short position is recorded as a liability, and
the Fund records an unrealized gain or loss for the value of the open short
position. The Fund records a realized gain or loss when the short position is
closed out.
27 | OPPENHEIMER SMA CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") to seek current income while preserving
liquidity. IMMF is a registered open-end management investment company,
regulated as a money market fund under the Investment Company Act of 1940, as
amended. The Manager is also the investment adviser of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments. As a
shareholder, the Fund is subject to its proportional share of IMMF's Class E
expenses, including its management fee.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders. Therefore, no federal income or excise tax provision is
required. The Fund files income tax returns in U.S. federal and applicable state
jurisdictions. The statute of limitations on the Fund's tax return filings
remain open for the three preceding fiscal reporting period ends.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1 TAX PURPOSES
--------------------------------------------------------------------
$778 $41,440 $3,417 $388,376
1. The Fund had $3,417 of straddle losses which were deferred.
28 | OPPENHEIMER SMA CORE BOND FUND
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.
Accordingly, the following amounts have been reclassified for December 31, 2007.
Net assets of the Fund were unaffected by the reclassifications.
REDUCTION
REDUCTION TO ACCUMULATED NET
TO ACCUMULATED NET REALIZED GAIN
INVESTMENT LOSS ON INVESTMENTS
--------------------------------------------
$93,519 $93,519
The tax character of distributions paid during the period ended December 31,
2007 was as follows:
PERIOD ENDED
DECEMBER 31, 2007
--------------------------------------------
Distributions paid from:
Ordinary income $ 642,334
Long-term capital gain 80,012
---------
Total $ 722,346
=========
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 December 31, 2007 are noted below. 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 $ 26,102,677
Federal tax cost of other investments (895,640)
------------
Total federal tax cost $ 25,207,037
============
Gross unrealized appreciation $ 605,835
Gross unrealized depreciation (217,459)
------------
Net unrealized appreciation $ 388,376
============
29 | OPPENHEIMER SMA CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 to 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.
- --------------------------------------------------------------------------------
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. Market 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 overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
30 | OPPENHEIMER SMA CORE BOND FUND
- --------------------------------------------------------------------------------
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. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest. Transactions in shares of beneficial interest were as
follows:
PERIOD ENDED DECEMBER 31, 2007 1,2
SHARES AMOUNT
- ---------------------------------------------------------------
Sold 2,503,728 $ 25,037,500
Dividends and/or
distributions reinvested 104 1,055
Redeemed (104) (1,052)
-------------------------
Net increase 2,503,728 $ 25,037,503
=========================
1. For the period from July 23, 2007 (commencement of operations) to December
31, 2007.
2. The Fund sold 10,000 shares at a value of $100,000 to the Manager upon
seeding of the Fund on May 14, 2007.
- --------------------------------------------------------------------------------
3. 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 period ended
December 31, 2007, were as follows:
PURCHASES SALES
---------------------------------------------------------------
Investment securities $23,466,066 $ 6,621,120
U.S. government and government
agency obligations 279,943 199,014
To Be Announced (TBA)
mortgage-related securities 21,170,290 20,971,756
31 | OPPENHEIMER SMA CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. The Manager has contractually agreed to waive the entire amount
of its investment advisory fee, which is 0.35%, and the Fund does not pay any
other fee for the Manager's services. A portion of the "wrap-fee" that investors
pay to the "wrap-fee" program sponsor may be attributed to the management of the
Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services ("OFS"), a division of the
Manager, acts as the transfer and shareholder servicing agent for the Fund. The
Fund pays OFS a per account fee. For the period ended December 31, 2007, the
Fund paid no fees to OFS for services to the Fund.
- --------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all initial offering and
organizational costs associated with the registration and seeding of the Fund.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has contractually agreed to
waive all Management Fees and pay or reimburse all expenses of the Fund, except
extraordinary expenses, transfer agent fees and fees paid to the independent
Trustees. This agreement has no fixed term. Investors should be aware that even
though the Fund does not pay any fees or expenses to the Manager, investors will
pay a "wrap fee" to their program sponsor. During the period ended December 31,
2007, the Manager waived management fees in the amount of $39,361. During the
period ended December 31, 2007, the Manager reimbursed expenses in the amount of
$45,771.
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets. This
undertaking may be amended or withdrawn at any time.
- --------------------------------------------------------------------------------
5. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
financial instrument at a negotiated price on a stipulated future date. The Fund
may buy and sell futures contracts that relate to broadly based securities
indices (financial futures), debt securities (interest rate futures) and various
commodities (commodity index futures). The Fund may also buy or write put or
call options on these futures contracts.
Futures contracts traded on a commodities or futures exchange will be
valued at the final settlement price or official closing price on the principal
exchange as reported by such principal exchange at its trading session ending
at, or most recently prior to, the time when the Fund's assets are valued.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses.
32 | OPPENHEIMER SMA CORE BOND FUND
Futures contracts are reported on a schedule following the Statement of
Investments. Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. Cash held by the broker to cover initial margin requirements on
open futures contracts and the receivable and/or payable for the daily mark to
market for the variation margin are noted in the Statement of Assets and
Liabilities. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations. Realized gains (losses) are reported in
the Statement of Operations at the closing or expiration of futures contracts.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market where the Fund is unable to
liquidate the contract or enter into an offsetting position and, if used for
hedging purposes, the risk that the price of the contract will correlate
imperfectly with the prices of the Fund's securities.
- --------------------------------------------------------------------------------
6. SWAP CONTRACTS
The Fund may enter into swap contract agreements with a counterparty to exchange
a series of cash flows based on either specified reference rates, or the
occurrence of a credit event, over a specified period. Such contracts may
include interest rate, equity, debt, index, total return, credit and currency
swaps.
Swaps are marked to market daily using primarily quotations from pricing
services, counterparties and brokers. Swap contracts are reported on a schedule
following the Statement of Investments. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations.
Risks of entering into swap contracts include credit, market and liquidity
risk. Credit risk arises from the possibility that the counterparty will
default. If the counterparty defaults, the Fund's loss will consist of the net
amount of contractual payments that the Fund has not yet received. Market risk
is the risk that the value of the contract will depreciate due to unfavorable
changes in the reference asset. If there is an illiquid market for the
agreement, the Fund may be unable to close the contract prior to contract
termination.
- --------------------------------------------------------------------------------
CREDIT DEFAULT SWAP CONTRACTS. A credit default swap is a bilateral contract
that enables an investor to buy or sell protection against a defined-issuer
credit event. The Fund may enter into credit default swaps on a single security,
or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract and will receive a
payment from the seller of the contract equal to the notional value of the
credit default swap contract less the value of the underlying
33 | OPPENHEIMER SMA CORE BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. SWAP CONTRACTS Continued
security. In the event that the credit default swap is exercised due to a credit
event, the difference between the value of the underlying security and the
notional amount is recorded as realized gain (loss) and is included on the
Statement of Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events.
- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS. An interest rate swap is an agreement between
counter-parties to exchange periodic interest payments on the notional amount of
the contract. One cash flow stream will typically be a floating rate payment
based upon a specified index while the other is typically a fixed rate.
Interest rate swap agreements include interest rate risk. There is a risk,
based on movements of interest rates in the future, the payments made by the
Fund under a swap agreement will be greater than the payments it received.
- --------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS. A total return swap is an agreement between
counter-parties to exchange a set of future cash flows on the notional amount of
the contract. One cash flow is typically based on a reference interest rate or
index and the other on the total return of a reference asset such as a security,
a basket of securities, or an index. The total return includes appreciation or
depreciation on the reference asset, plus any interest or dividend payments.
- --------------------------------------------------------------------------------
7. ILLIQUID SECURITIES
As of December 31, 2007, investments in securities included issues that are
illiquid. Investments may be illiquid because they do not have an active trading
market, making it difficult to value them or dispose of them promptly at an
acceptable price. The Fund will not invest more than 15% of its net assets
(determined at the time of purchase and reviewed periodically) in illiquid
securities. Securities that are illiquid are marked with an applicable footnote
on the Statement of Investments.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In September 2006, Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of December
31, 2007, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.
34 | OPPENHEIMER SMA CORE BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER SMA CORE BOND FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer SMA Core Bond Fund, including the statement of investments, as of
December 31, 2007, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the period July 23, 2007
(commencement of operations) to December 31, 2007. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2007, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer SMA Core Bond Fund as of December 31, 2007, the results of its
operations, the statement of changes in net assets and the financial highlights
for the period July 23, 2007 (commencement of operations) to December 31, 2007,
in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 12, 2008
35 | OPPENHEIMER SMA CORE BOND FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record received information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $0.0318 per share were paid to shareholders
on December 28, 2007. Whether received in stock or in cash, the capital gain
distribution should be treated by shareholders as a gain from the sale of the
capital assets held for more than one year (long-term capital gains).
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended December 31, 2007, $451,272 or 70.26% of the ordinary distributions
paid by the Fund qualifies as an interest related dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
36 | OPPENHEIMER SMA CORE BOND FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
37 | OPPENHEIMER SMA CORE BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act of 1940, as amended, requires that a fund's Board of
Directors or Trustees, including a majority of the independent Board members,
request and evaluate, and that its Manager provide, such information as may be
reasonably necessary to evaluate the terms of the fund's investment advisory
agreement.
In approving the Fund's initial investment advisory agreement (the
"Agreement"), the Board of Trustees (the "Board") considered information
provided by the Manager on the following factors: (i) the nature, quality and
extent of the Manager's services to be provided, (ii) the fees and expenses of
the Fund, including estimated and comparative expense information, (iii) the
profitability of the Manager and its affiliates, including an analysis of the
anticipated cost of providing services by the Manager and its affiliates, (iv)
the extent to which economies of scale may be realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (v)
other benefits that the Manager may receive from its relationship with the Fund.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services to be provided to the Fund and information
regarding the Manager's key personnel who will provide such services. The
Manager's duties include providing the Fund with the services of the portfolio
managers and the Manager's investment team, who provide research, analysis and
other advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel 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 Manager also provides the Fund with office space, facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
expected to be provided by the Manager and the quality of the Manager's
resources that will be available to the Fund. The Board took account of the fact
that the Manager has had over forty years of experience as an investment adviser
and that its assets under management rank it among the top mutual fund managers
in the United States. The Board evaluated the Manager's administrative,
accounting, legal and compliance services, and information
38 | OPPENHEIMER SMA CORE BOND FUND
the Board has received regarding the experience and professional qualifications
of the Manager's personnel and the size and functions of its staff. In its
evaluation of the quality of the portfolio management services to be provided,
the Board considered the experience of Angelo Manioudakis, Benjamin J. Gord,
Geoffrey Caan, Antulio N. Bomfim, and Thomas Swaney, the portfolio managers for
the Fund, and the Manager's Core Plus investment team and analysts. The Board
members also considered their experiences with the Manager and its officers and
other personnel through their service on the boards of other funds advised by
the Manager. The Board considered information regarding the quality of services
provided by affiliates of the Manager, which its members have become
knowledgeable about in connection with other funds managed by the Manager. In
light of the foregoing, the Board concluded that the Fund will benefit from the
services to be provided under the Agreement and from the Manager's experience,
reputation, personnel, operations, and resources.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees to be paid to
the Manager and its affiliates and the other expenses that will be borne by the
Fund. The Board also evaluated the services to be provided, and the
comparability of the fees that, absent the waiver described below, would be
charged, to the Fund to the services and fees for other clients or accounts
advised by the Manager. The Manager has contractually agreed to waive all
Management Fees and pay or reimburse all expenses of the Fund, except
extraordinary expenses, transfer agent fees and fees paid to the Independent
Trustees. This agreement has no fixed term. Investors should be aware that even
though the Fund does not pay any fees or expenses to the Manager, investors will
pay a "wrap fee" to their program's sponsor and their program's sponsor has
retained OFI Private Investments Inc. or certain of its affiliates (individually
or collectively referred to as "OFI PI"), to manage their accounts for a
negotiated fee pursuant to an investment management agreement with OFI PI and/or
a managed account program sponsor.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
extent to which those economies of scale would benefit the Fund's shareholders.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's estimated 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 potential profitability from its
relationship with the Fund. The Board considered that the Manager must be able
to pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to provide
39 | OPPENHEIMER SMA CORE BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
significant services to the Fund and its shareholders. In addition to
considering the profits that may be realized by the Manager, the Board
considered information regarding the direct and indirect benefits the Manager
may receive as a result of its relationship with the Fund, including
compensation paid to the Manager's affiliates for services provided.
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services to be provided to
the Fund by the Manager would be a benefit to the Fund and in the best interest
of the Fund's shareholders and that the amount and structure of the compensation
to be received by the Manager and its affiliates are reasonable in relation to
the services to be provided. Accordingly, the Board approved the Agreement for
an initial period of two years. In arriving at this decision, the Board did not
single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the Agreement, including the management fee, in light of all of
the surrounding circumstances.
40 | OPPENHEIMER SMA CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS;
FUND, LENGTH OF SERVICE, AGE OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF PORTFOLIOS IN
THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON
TRUSTEES WAY, CENTENNIAL, COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN
INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION, RETIREMENT,
DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since
Chairman of the Board September 1995-December 2007); Director of Special Value
of Trustees and Trustee Opportunities Fund, LLC (registered investment company)
(since 2007) (affiliate of the Manager's parent company) (since September
Age: 64 2004); Member of Zurich Financial Investment Management Advisory
Council (insurance) (since October 2004); Chairman (since August
2007) and Trustee (since August 1991) of the Board of Trustees of
the Jackson Laboratory (non-profit); Treasurer and Trustee of the
Institute for Advanced Study (non-profit educational institute)
(since May 1992); Special Limited Partner of Odyssey Investment
Partners, LLC (private equity investment) (January 1999-
September 2004). Oversees 63 portfolios in the OppenheimerFunds
complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund
Trustee (since 2007) Advisors, Inc. (investment management company) (since January
Age: 68 2004); President of The Community Reinvestment Act Qualified
Investment Fund (investment management company) (since January
2004); Independent Chairman of the Board of Trustees of Quaker
Investment Trust (registered investment company) (since January
2004); Director of Internet Capital Group (information technology
company) (since October 2003); Chief Operating Officer and
Chief Financial Officer of Lincoln National Investment Companies,
Inc. (subsidiary of Lincoln National Corporation, a publicly
traded company) and Delaware Investments U.S., Inc. (investment
management subsidiary of Lincoln National Corporation) (1993-
2003); President, Chief Executive Officer and Trustee of Delaware
Investment Family of Funds (1993-2003); President and Board
Member of Lincoln National Convertible Securities Funds, Inc. and
the Lincoln National Income Funds, TDC (1993-2003); Chairman and
Chief Executive Officer of Retirement Financial Services, Inc.
(registered transfer agent and investment adviser and subsidiary
of Delaware Investments U.S., Inc.) (1993-2003); President and
Chief Executive Officer of Delaware Service Company, Inc.
(1995-2003); Chief Administrative Officer, Chief Financial
Officer, Vice Chairman and Director of Equitable Capital
Management Corporation (investment subsidiary of Equitable Life
Assurance Society) (1985-1992); Corporate Controller of Merrill
Lynch & Company (financial services holding company)
(1977-1985); held the following positions at the Colonial Penn
Group, Inc. (insurance company): Corporate Budget Director
(1974-1977), Assistant Treasurer (1972-1974) and Director of
Corporate Taxes (1969-1972); held the following positions at
Price Waterhouse & Company (financial services firm): Tax Manager
(1967-1969), Tax Senior (1965-1967) and Staff Accountant
(1963-1965); United States Marine Corps (1957-1959). Oversees 63
portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy
Trustee (since 2007) research foundation) (since 2005); Director of ICI Education
Age: 67 Foundation (education foundation) (October 1991-August 2006);
President of the Investment Company Institute (trade association)
(October 1991-June 2004); Director of ICI Mutual Insurance
Company (insurance company) (October 1991-June 2004). Oversees 53
portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 63
Trustee (since 2007) portfolios in the OppenheimerFunds complex.
Age: 74
41 | OPPENHEIMER SMA CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs
Trustee (since 2007) (since 2002) and Member (since 1979) of the National Academy of
Age: 69 Sciences; Council on Foreign Relations (since 2002); Director of
GSI Lumonics Inc. (precision medical equipment supplier) (since
2001); Senior Advisor of The Andrew W. Mellon Foundation (since
2001); Chair of Science Initiative Group (since 1999); Member of
the American Philosophical Society (since 1996); Trustee of
Woodward Academy (since 1983); Foreign Associate of Third World
Academy of Sciences; Director of the Institute for Advanced Study
(1991-2004); Director of Bankers Trust New York Corporation
(1994-1999); Provost at Duke University (1983-1991). Oversees 53
portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit)
Trustee (since 2007) (since October 1998); and Senior Vice President and General
Age: 65 Auditor of American Express Company (financial services company)
(July 1998-February 2003). Oversees 53 portfolios in the
OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held
Trustee (since 2007) financial advisor) (since January 2006); Director of Columbia
Age: 55 Equity Financial Corp. (privately-held financial advisor) (since
2002); Managing Director of Carmona Motley, Inc. (privately-held
financial advisor) (since January 2002); Managing Director of
Carmona Motley Hoffman Inc. (privately-held financial advisor)
(January 1998-December 2001); Member of the Finance and Budget
Committee of the Council on Foreign Relations, Member of the
Investment Committee of the Episcopal Church of America, Member
of the Investment Committee and Board of Human Rights Watch and
the Investment Committee of Historic Hudson Valley. Oversees 53
portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search
Trustee (since 2007) Group, Inc.") (corporate governance consulting and executive
Age: 76 recruiting) (since 1993); Life Trustee of International House
(non-profit educational organization); Former Trustee of The
Historical Society of the Town of Greenwich; Former Director of
Greenwich Hospital Association. Oversees 53 portfolios in the
OppenheimerFunds complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec
Trustee (since 2007) (since 1992) and Cathco (since 1996); Director of Lakes
Age: 66 Environmental Association (environmental protection
organization) (since 1996); Member of the Investment Committee of
the Associated Jewish Charities of Baltimore (since 1994);
Director of Fortis/Hartford mutual funds (1994-December 2001);
Director of C-TASC (a privately held bio-statistics company)
(since May 2007). Oversees 53 portfolios in the OppenheimerFunds
complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration
Trustee (since 2007) and production company) (since 1994); Vice President of American
Age: 60 Talc Company, Inc. (talc mining and milling) (since 1999);
Managing Member of Hole-in-the-Wall Ranch (cattle ranching)
(since 1979); Vice President, Secretary and Treasurer of Wold
Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the
Federal Reserve Bank of Kansas City (1993-1999); and Director of
PacifiCorp. (electric utility) (1995-1999). Oversees 53
portfolios in the OppenheimerFunds complex.
42 | OPPENHEIMER SMA CORE BOND FUND
- ----------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225
AND OFFICER LIBERTY STREET, 11TH FLOOR, NEW YORK, NEW YORK 10281-1008. MR.
MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR
AN INDEFINITE TERM, OR UNTIL HIS RESIGNATION, RETIREMENT, DEATH
OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager
Trustee, President and (since June 2001); President of the Manager (September
Principal Executive Officer 2000-March 2007); President and director or trustee of other
(since 2007) Oppenheimer funds; President and Director of Oppenheimer
Age: 58 Acquisition Corp. ("OAC") (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings, Inc. (holding
company subsidiary of the Manager) (since July 2001); Director
of OppenheimerFunds Distributor, Inc. (subsidiary of the
Manager) (November 2001-December 2006); Chairman and Director
of Shareholder Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries of the Manager)
(since July 2001); President and Director of OppenheimerFunds
Legacy Program (charitable trust program established by the
Manager) (since July 2001); Director of the following
investment advisory subsidiaries of the Manager: OFI
Institutional Asset Management, Inc., Centennial Asset
Management Corporation, Trinity Investment Management
Corporation and Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management Corporation and
OFI Private Investments, Inc. (since July 2001); President
(since November 2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive Vice
President of Massachusetts Mutual Life Insurance Company (OAC's
parent company) (since February 1997); Director of DLB
Acquisition Corporation (holding company parent of Babson
Capital Management LLC) (since June 1995); Chairman (since
October 2007) and Member of the Investment Company Institute's
Board of Governors (since October 2003). Oversees 102
portfolios in the OppenheimerFunds complex.
- ----------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS
OF THE FUND FOLLOWS: FOR MESSRS. ZACK, GILLESPIE AND MS. BLOOMBERG, TWO
WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW YORK
10281-1008, FOR MESSRS. VANDEHEY, WIXTED, PETERSEN, SZILAGYI
AND MS. IVES, 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
80112-3924; FOR MESSRS. MANIOUDAKIS, BOMFIM, CAAN, GORD AND
SWANEY, 470 ATLANTIC AVENUE, 11TH FLOOR, BOSTON, MASSACHUSETTS
02210. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS
OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
ANGELO G. MANIOUDAKIS, Senior Vice President of the Manager and of HarbourView Asset
Vice President and Portfolio Management Corporation (since April 2002) and of OFI
Manager (since 2007) Institutional Asset Management, Inc. (since June 2002); Vice
Age: 41 President of Oppenheimer Real Asset Management, Inc. (since
November 2006). Executive Director and portfolio manager for
MSIM/Miller, Anderson & Sherrerd (Morgan Stanley Asset
Management) (August 1993-April 2002). A portfolio manager and
officer of 15 portfolios in the OppenheimerFunds complex.
ANTULIO N. BOMFIM, Vice President of the Manager (since October 2003); Senior
Vice President and Portfolio Economist at the Board of Governors of the Federal Reserve
Manager (since 2007) System (June 1992-October 2003). A portfolio manager of 12
Age: 41 portfolios in the OppenheimerFunds complex.
43 | OPPENHEIMER SMA CORE BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
GEOFFREY CAAN, Vice President and Portfolio Manager of the Manager (since
Vice President and Portfolio August 2003); Vice President of ABN AMRO NA, Inc. (June
Manager (since 2007) 2002-August 2003); Vice President of Zurich Scudder Investments
Age: 38 (January 1999-June 2002). A portfolio manager of 12 portfolios
in the OppenheimerFunds complex.
BENJAMIN J. GORD, Vice President of the Manager (since April 2002) of HarbourView
Vice President and Portfolio Asset Management Corporation (since April 2002) and of OFI
Manager (since 2007) Institutional Asset Management, Inc. (as of June 2002);
Age: 45 Executive Director and senior fixed income analyst at Miller
Anderson & Sherrerd, a division of Morgan Stanley Investment
Management (April 1992-March 2002). A portfolio manager of 12
portfolios in the OppenheimerFunds complex.
THOMAS SWANEY, Vice President of the Manager (since April 2006); senior
Vice President and Portfolio analyst, high grade investment team (June 2002-March 2006);
Manager (since 2007) senior fixed income analyst at Miller Anderson & Sherrerd, a
Age: 35 division of Morgan Stanley Investment Management (May 1998-May
2002). A portfolio manager of 12 portfolios in the
OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the
Vice President and Chief Manager (since March 2004); Chief Compliance Officer of
Compliance Officer OppenheimerFunds Distributor, Inc., Centennial Asset Management
(since 2007) and Shareholder Services, Inc. (since March 2004); Vice
Age: 57 President of OppenheimerFunds Distributor, Inc., Centennial
Asset Management Corporation and Shareholder Services, Inc.
(since June 1983); Former Vice President and Director of
Internal Audit of the Manager (1997-February 2004). An officer
of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March
Treasurer and Principal 1999); Treasurer of the following: HarbourView Asset Management
Financial & Accounting Corporation, Shareholder Financial Services, Inc., Shareholder
Officer (since 2007) Services, Inc., Oppenheimer Real Asset Management, Inc. and
Age: 48 Oppenheimer Partnership Holdings, Inc. (since March 1999), OFI
Private Investments, Inc. (since March 2000), OppenheimerFunds
International Ltd. and OppenheimerFunds plc (since May 2000),
OFI Institutional Asset Management, Inc. (since November 2000),
and OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since June 2003); Treasurer and
Chief Financial Officer of OFI Trust Company (trust company sub-
sidiary of the Manager) (since May 2000); Assistant Treasurer of
the following: OAC (since March 1999), Centennial Asset
Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June 2003). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant
Assistant Treasurer Vice President of the Manager (August 2002-February 2007);
(since 2007) Manager/Financial Product Accounting of the Manager (November
Age: 37 1998-July 2002). An officer of 102 portfolios in the
OppenheimerFunds complex.
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer Director of Financial Reporting and Compliance of First Data
(since 2007) Corporation (April 2003-July 2004); Manager of Compliance of
Age: 37 Berger Financial Group LLC (May 2001-March 2003). An officer of
102 portfolios in the OppenheimerFunds complex.
44 | OPPENHEIMER SMA CORE BOND FUND
ROBERT G. ZACK, Executive Vice President (since January 2004) and General
Vice President and Secretary Counsel (since March 2002) of the Manager; General Counsel and
(since 2007) Director of the Distributor (since December 2001); General
Age: 59 Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of
HarbourView Asset Management Corporation (since December 2001);
Secretary and General Counsel of OAC (since November 2001);
Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services,
Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior
Vice President (May 1985-December 2003). An officer of 102
portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May
Assistant Secretary 2004); First Vice President (April 2001-April 2004), Associate
(since 2007) General Counsel (December 2000-April 2004) of UBS Financial
Age: 40 Services, Inc. An officer of 102 portfolios in the
OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager
Assistant Secretary (since September 2004); First Vice President (2000-September
(since 2007) 2004), Director (2000-September 2004) and Vice President
Age: 44 (1998-2000) of Merrill Lynch Investment Management. An officer
of 102 portfolios in the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager; Vice
(since 2007) President (since 1999) and Assistant Secretary (since October
Age: 42 2003) of the Distributor; Assistant Secretary of Centennial
Asset Management Corporation (since October 2003); Vice
President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy
Program and Shareholder Financial Services, Inc. (since December
2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 102 portfolios in the OppenheimerFunds
complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING 1.800.525.7048.
45 | OPPENHEIMER SMA CORE BOND FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that David Downes, the
Board's Audit Committee Chairman, is an audit committee financial expert and
that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $41,250 in fiscal 2007.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees in fiscal 2007.
The principal accountant for the audit of the registrant's annual financial
statements billed $110,000 in fiscal 2007 to the registrant's investment adviser
or any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant.
Such services include: internal control reviews
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant in fiscal 2007.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees fiscal 2007 to the registrant's investment
adviser or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant in fiscal 2007.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $110,000 in fiscal 2007 to the registrant and
the registrant's investment adviser or any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant related to non-audit fees. Those billings did
not include any prohibited non-audit services as defined by the Securities
Exchange Act of 1934.
(h) No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 12/31/2007, 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) Exhibit attached hereto.
(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 SMA Core Bond Fund
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 02/07/2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 02/07/2008
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 02/07/2008