N-Q 1 d248273dnq.htm OPPENHEIMER EQUITY INCOME FUND Oppenheimer Equity Income Fund

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS

OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-04797

 

 

Oppenheimer Equity Income Fund

(Exact name of registrant as specified in charter)

 

 

6803 South Tucson Way, Centennial, Colorado 80112-3924

(Address of principal executive offices) (Zip code)

 

 

Cynthia Lo Bessette

OFI Global Asset Management, Inc.

225 Liberty Street, New York, New York 10281-1008

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: (303) 768-3200

Date of fiscal year end: October 31

Date of reporting period: 7/31/2016

 

 

 

Item 1. Schedule of Investments.

 

STATEMENT OF INVESTMENTS July 31, 2016 Unaudited

 

     Shares      Value  
Common Stocks—88.5%                

Consumer Discretionary—9.3%

                  

Auto Components—0.3%

                  

Lear Corp.

 

      120,000       $ 13,614,000   

Automobiles—2.8%

                  

Ford Motor Co.

      4,800,000         60,768,000   

General Motors Co.1

      1,937,500         61,108,750   
               

 

 121,876,750

 

   

 

Hotels, Restaurants & Leisure—1.0%

                  

Extended Stay America, Inc.

 

     

 

 2,875,000

 

   

 

     

 

 40,710,000

 

   

 

Household Durables—2.8%

                  

Beazer Homes USA, Inc.2,3

      1,387,500         13,306,125   

CalAtlantic Group, Inc.

      1,560,000         56,487,600   

MDC Holdings, Inc.

      895,000         23,556,400   

PulteGroup, Inc.

      1,305,000         27,639,900   
               

 

 120,990,025

 

   

 

Media—0.3%

                  

Comcast Corp., Cl. A

 

     

 

 205,000

 

   

 

     

 

 13,786,250

 

   

 

Multiline Retail—1.4%

                  

Kohl’s Corp.

      525,000         21,834,750   

Macy’s, Inc.

      655,000         23,468,650   

Target Corp.

      215,000         16,195,950   
               

 

 61,499,350

 

   

 

Specialty Retail—0.7%

                  

Best Buy Co., Inc.

      400,000         13,440,000   

Signet Jewelers Ltd.

      45,250                   3,977,927   

Staples, Inc.

      1,200,000         11,148,000   
               

 

 28,565,927

 

   

 

Consumer Staples—6.4%

                  

Beverages—1.0%

                  

Coca-Cola Co. (The)

      400,000         17,452,000   

Molson Coors Brewing Co., Cl. B

      240,000         24,518,400   
               

 

 41,970,400

 

   

 

Food & Staples Retailing—1.9%

                  

Walgreens Boots Alliance, Inc.

      617,500         48,936,875   

Wal-Mart Stores, Inc.

      450,000         32,836,500   
               

 

 81,773,375

 

   

 

Food Products—1.7%

                  

Kraft Heinz Co. (The)

      750,000         64,792,500   

Pinnacle Foods, Inc.

      207,500         10,418,575   
               

 

 75,211,075

 

   

 

Household Products—0.7%

                  

Procter & Gamble Co. (The)

 

     

 

 350,000

 

   

 

     

 

 29,956,500

 

   

 

Tobacco—1.1%

                  

Philip Morris International, Inc.

      480,000         48,124,800   

 

1        OPPENHEIMER EQUITY INCOME FUND

STATEMENT OF INVESTMENTS Unaudited / Continued

 

      Shares      Value  

Energy—9.1%

                  

Oil, Gas & Consumable Fuels—9.1%

                  

BP plc, Sponsored ADR

      1,587,500       $ 54,610,000   

Chevron Corp.1

      1,015,000         104,017,200   

Exxon Mobil Corp.

      890,000         79,165,500   

Kinder Morgan, Inc.

      1,340,000         27,242,200   

Marathon Oil Corp.

      2,275,000         31,031,000   

Royal Dutch Shell plc, Cl. A, Sponsored ADR

      1,625,000         84,158,750   

Williams Cos., Inc. (The)

      575,000         13,782,750   
               

 

 394,007,400

 

   

 

Financials—31.7%

                  

Capital Markets—5.3%

                  

Goldman Sachs Group, Inc. (The)1

      532,500         84,566,325   

KKR & Co. LP4

      4,232,500         61,117,300   

Morgan Stanley

      2,690,000         77,283,700   

NorthStar Asset Management Group, Inc.

      525,000                   6,226,500   
               

 

 229,193,825

 

   

 

Commercial Banks—11.8%

                  

Bank of America Corp.

      3,375,000         48,903,750   

Citigroup, Inc.1

      4,750,000         208,097,500   

JPMorgan Chase & Co.

      2,425,000         155,127,250   

Wells Fargo & Co.

      2,050,000         98,338,500   
               

 

 510,467,000

 

   

 

Insurance—7.3%

                  

American International Group, Inc.

      982,500         53,487,300   

Assured Guaranty Ltd.

      5,657,500         151,564,425   

MBIA, Inc.2,3

      2,875,000         24,265,000   

MetLife, Inc.

      2,050,000         87,617,000   
               

 

 316,933,725

 

   

 

Real Estate Investment Trusts (REITs)—5.1%

                  

Blackstone Mortgage Trust, Inc., Cl. A

      1,222,500         35,464,725   

Colony Capital, Inc., Cl. A

      2,875,000         51,117,500   

Communications Sales & Leasing, Inc.

      1,425,000         44,289,000   

iStar, Inc.2

      1,030,000         10,670,800   

NorthStar Realty Finance Corp.

      1,550,000         20,770,000   

Starwood Property Trust, Inc.

      1,500,000         32,700,000   

Two Harbors Investment Corp.

      2,815,000         24,631,250   
               

 

 219,643,275

 

   

 

Real Estate Management & Development—0.3%

                  

Realogy Holdings Corp.2

 

     

 

 390,000

 

   

 

     

 

 12,086,100

 

   

 

Thrifts & Mortgage Finance—1.9%

                  

MGIC Investment Corp.2

      3,775,000         27,142,250   

Radian Group, Inc.

      4,375,000         56,437,500   
               

 

 83,579,750

 

   

 

Health Care—9.2%

                  

Biotechnology—1.2%

                  

AbbVie, Inc.

      787,500         52,156,125   

 

2        OPPENHEIMER EQUITY INCOME FUND

         

 

      Shares      Value  

Biotechnology (Continued)

                  

Gilead Sciences, Inc.

      37,500       $ 2,980,125   
               

 

 55,136,250

 

   

 

Health Care Equipment & Supplies—1.7%

                  

Abbott Laboratories

      760,000         34,010,000   

Medtronic plc

      450,000         39,433,500   
               

 

 73,443,500

 

   

 

Health Care Providers & Services—0.1%

                  

Aetna, Inc.

 

     

 

 28,750

 

   

 

     

 

 3,312,288

 

   

 

Pharmaceuticals—6.2%

                  

Allergan plc2

      7,500         1,897,125   

Johnson & Johnson1

      32,500         4,069,975   

Merck & Co., Inc.

      2,025,000         118,786,500   

Pfizer, Inc.

      3,000,000         110,670,000   

Roche Holding AG, Sponsored ADR

      825,000         26,474,250   

Teva Pharmaceutical Industries Ltd., Sponsored ADR

      130,000                   6,955,000   
               

 

 268,852,850

 

   

 

Industrials—6.1%

                  

Aerospace & Defense—0.6%

                  

General Dynamics Corp.

      52,500         7,711,725   

Honeywell International, Inc.

      8,750         1,017,887   

United Technologies Corp.

      157,000         16,901,050   
               

 

 25,630,662

 

   

 

Airlines—1.5%

                  

United Continental Holdings, Inc.2

 

     

 

 1,377,500

 

   

 

     

 

 64,590,975

 

   

 

Commercial Services & Supplies—1.0%

                  

R.R. Donnelley & Sons Co.

 

     

 

 2,250,000

 

   

 

     

 

 40,320,000

 

   

 

Electrical Equipment—1.2%

                  

Eaton Corp. plc

      360,000         22,827,600   

General Cable Corp.1

      2,041,500         30,071,295   
               

 

 52,898,895

 

   

 

Industrial Conglomerates—1.5%

                  

General Electric Co.

 

     

 

 2,122,500

 

   

 

     

 

 66,094,650

 

   

 

Road & Rail—0.3%

                  

CSX Corp.

 

     

 

 502,500

 

   

 

     

 

 14,235,825

 

   

 

Information Technology—10.5%

                  

Communications Equipment—1.4%

                  

Cisco Systems, Inc.

 

     

 

 2,037,500

 

   

 

     

 

 62,204,875

 

   

 

Internet Software & Services—1.1%

                  

Alphabet, Inc., Cl. C2

 

     

 

 60,750

 

   

 

     

 

 46,703,993

 

   

 

IT Services—0.6%

                  

First Data Corp., Cl. A2

      250,000         3,100,000   

International Business Machines Corp.

      147,500         23,691,450   
        26,791,450   

 

3        OPPENHEIMER EQUITY INCOME FUND

STATEMENT OF INVESTMENTS Unaudited / Continued

 

      Shares      Value  

Semiconductors & Semiconductor Equipment—2.3%

                  

Cypress Semiconductor Corp.

      1,125,000       $ 13,095,000   

Intel Corp.

      595,000         20,741,700   

Micron Technology, Inc.2

      1,300,000         17,862,000   

QUALCOMM, Inc.

      750,000         46,935,000   
               

 

 98,633,700

 

   

 

Software—2.5%

                  

Microsoft Corp.

      1,400,000         79,352,000   

Oracle Corp.

      650,000         26,676,000   
               

 

 106,028,000

 

   

 

Technology Hardware, Storage & Peripherals—2.6%

                  

Apple, Inc.

      1,015,000         105,773,150   

HP, Inc.

      615,000         8,616,150   
               

 

 114,389,300

 

   

 

Materials—1.4%

                  

Chemicals—0.4%

                  

LyondellBasell Industries NV, Cl. A

 

     

 

 245,000

 

   

 

     

 

 18,438,700

 

   

 

Containers & Packaging—0.5%

                  

International Paper Co.

 

     

 

 475,000

 

   

 

     

 

 21,759,750

 

   

 

Paper & Forest Products—0.5%

                  

Domtar Corp.

 

     

 

 492,500

 

   

 

     

 

 19,389,725

 

   

 

Telecommunication Services—2.1%

                  

Diversified Telecommunication Services—2.1%

                  

AT&T, Inc.

      1,440,000         62,337,600   

Frontier Communications Corp.

      5,300,000         27,560,000   
               

 

 89,897,600

 

   

 

Utilities—2.7%

                  

Electric Utilities—2.3%

                  

American Electric Power Co., Inc.

      712,500         49,376,250   

Exelon Corp.

      87,500                   3,262,000   

PPL Corp.

      1,250,000         47,137,500   
               

 

 99,775,750

 

   

 

Independent Power and Renewable Electricity Producers—0.4%

                  

NRG Energy, Inc.

      1,375,000         19,030,000   

Total Common Stocks (Cost $3,255,095,824)

 

              

 

 3,831,548,265

 

   

 

Preferred Stocks—9.8%

                  

Allergan plc, 5.50% Cv., Series A

      104,500         93,667,530   

American Homes 4 Rent, 5% Cum., Series B, Non-Vtg.

      572,531         15,801,856   

Dominion Resources, Inc., 6.375% Cv.

      294,490         15,354,709   

Exelon Corp., 6.50% Cv.

      745,000         37,287,250   

Frontier Communications Corp., 11.125% Cv., Series A, Non-Vtg.

      883,275         87,338,232   

iStar, Inc., 4.50% Cv., Non-Vtg.

      1,189,950         57,700,675   

Post Holdings, Inc., 5.25% Cv.

      322,510         49,344,030   

Teva Pharmaceutical Industries Ltd., 7% Cv., Non-Vtg.

      77,500         68,820,000   

Total Preferred Stocks (Cost $419,850,421)

         425,314,282   

 

4        OPPENHEIMER EQUITY INCOME FUND

         

 

     Units      Value  

Rights, Warrants and Certificates—0.0%

                  

Kinder Morgan, Inc. Wts., Strike Price $40, Exp. 5/25/17 (Cost $6,512,479)

 

     

 

 2,600,000

 

   

 

    $

 

 78,000

 

   

 

     Principal Amount         

Mortgage-Backed Obligations—0.0%

                  

Banc of America Funding Trust, Series 2007-C, Cl. 1A4, 3.019%, 5/20/365

   $ 75,675         68,428   

Federal Home Loan Mortgage Corp. Gold Pool:

      

9.00%, 8/1/22

      262         266   

9.00%, 8/1/22

      10         11   

9.00%, 3/1/24

      180         195   

9.00%, 3/1/24

      59         60   

9.00%, 1/1/25

      288         339   

9.00%, 5/1/25

      61         70   
Federal Home Loan Mortgage Corp., Principal-Only Stripped Mtg.-Backed Security, Series 176, Cl. PO, 4.215%, 6/1/266      22,223         20,659   
Federal Home Loan Mortgage Corp., Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Series 151, Cl. F, 9%, 5/15/21      2,879         3,141   

Federal National Mortgage Assn. Pool, 8.50%, 7/1/32

      4,486         4,915   

Federal National Mortgage Assn., Interest-Only Stripped Mtg.-Backed Security:

      

Series 343, Cl. 18, 0.00%, 5/25/347,8

      21,961         4,526   

Series 351, Cl. 10, 0.00%, 4/25/347,8

      35,307         7,033   

Series 351, Cl. 8, 0.00%, 4/25/347,8

      77,343         15,358   

Series 356, Cl. 10, 0.00%, 6/25/357,8

      55,577         10,185   

Series 356, Cl. 12, 0.00%, 2/25/357,8

      27,168         4,987   
Federal National Mortgage Assn., Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security:      

Series 2001-63, Cl. SD, 26.423%, 12/18/317

      2,174         450   

Series 2001-68, Cl. SC, 27.149%, 11/25/317

      1,438         296   

Series 2002-7, Cl. SK, 21.595%, 1/25/327

      2,396         460   

Series 2002-90, Cl. SY, 31.989%, 9/25/327

      2,138         460   

Government National Mortgage Assn. I Pool:

      

8.00%, 5/15/17

      643         648   

8.50%, 8/15/17

      55         56   

8.50%, 11/15/17

      55         55   

8.50%, 12/15/17

      57         58   

8.50%, 12/15/17

      185         187   

Government National Mortgage Assn. II Pool, 2%, 3/20/265

      6,411         6,645   

RALI Trust, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36

      23,103         19,057   

Wells Fargo Mortgage-Backed Securities Trust, Series 2006-AR14, Cl. 1A2, 5.722%, 10/25/365

      137,839         132,621   

Total Mortgage-Backed Obligations (Cost $360,329)

 

        

 

 301,166

 

   

 

Non-Convertible Corporate Bonds and Notes—0.2%

                  

Frontier Communications Corp., 8.25% Sr. Unsec. Nts., 4/15/17

      465,000         487,669   

Glencore Finance Canada Ltd., 5.80% Sr. Unsec. Unsub. Nts., 11/15/169

      78,000         78,906   

J.C. Penney Corp., Inc., 5.65% Sr. Unsec. Nts., 6/1/20

      4,776,500         4,615,293   

Kinross Gold Corp., 3.625% Sr. Unsec. Nts., 9/1/16

      419,000         421,095   

Quest Diagnostics, Inc., 5.75% Sr. Unsec. Nts., 1/30/40

      51,000         60,044   

Reynolds American, Inc., 7% Sr. Unsec. Nts., 8/4/419

      354,000         450,637   

Total Non-Convertible Corporate Bonds and Notes (Cost $5,211,895)

                   6,113,644   

 

5        OPPENHEIMER EQUITY INCOME FUND

STATEMENT OF INVESTMENTS Unaudited / Continued

 

     Principal Amount     Value  

Convertible Corporate Bonds and Notes—1.8%

                 

MGIC Investment Corp.:

     

2.00% Cv. Sr. Unsec. Nts., 4/1/20

    $ 1,585,000      $ 1,921,812   

9.00% Cv. Jr. Sub. Nts., 4/1/639

      24,035,000        28,286,191   

Navistar International Corp., 4.75% Cv. Sr. Sub. Nts., 4/15/19

      77,403,000        49,102,528   

Total Convertible Corporate Bonds and Notes (Cost $100,230,119)

 

       

 

 79,310,531

 

   

 

     Shares        

Structured Security—0.2%

                 

Barclays Bank plc, Alcoa, Inc. Equity Linked Nts., 10/4/17 (Cost $9,376,579)

 

     

 

 248,452

 

   

 

    

 

 8,727,655

 

   

 

Total Investments, at Value (Cost $3,796,637,646)

      100.5 %      4,351,393,543   

Net Other Assets (Liabilities)

      (0.5 )      (23,697,121 ) 

Net Assets

      100.0 %    $     4,327,696,422   
                

Footnotes to Statement of Investments

1. All or a portion of the security position is held in segregated accounts and pledged to cover margin requirements with respect to outstanding written options. The aggregate market value of such securities is $285,449,465. See Note 6 of the accompanying Notes.

2. Non-income producing security.

3. Is or was an affiliate, as defined in the Investment Company Act of 1940, as amended, at or during the reporting period, 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 reporting period in which the issuer was an affiliate are as follows:

 

     Shares
October 30,
2015a		      Gross
Additions		     Gross
Reductions		     

Shares

July 31, 2016

  

 

  

Beazer Homes USA, Inc.b

      2,403,663         295,100        1,311,263         1,387,500   

MBIA, Inc.b

      9,370,000         150,300        6,645,300         2,875,000   

Oppenheimer Institutional Money

Market Fund, Cl. E

      3,336,037         487,300,031        490,636,068         —   
            Value     Income      Realized Gain
(Loss)		  

 

  

Beazer Homes USA, Inc.b

       $ — c    $ —       $ (16,046,082 ) 

MBIA, Inc.b

         — c      —         (22,219,985 ) 

Oppenheimer Institutional Money Market Fund, Cl. E

         —        32,800         —   
     

 

 

  

Total

       $ —      $ 32,800       $ (38,266,067 ) 
     

 

 

  

a. Represents the last business day of the Fund’s reporting period. See Note 2 of the accompanying Notes.

b. No longer an affiliate at period end.

c. The security is no longer an affiliate; therefore, the value has been excluded from this table.

4. Security is a Master Limited Partnership.

5. Represents the current interest rate for a variable or increasing rate security.

6. Principal-Only Strips represent the right to receive the monthly principal payments on an underlying pool of mortgage loans. The value of these securities generally increases as interest rates decline and prepayment rates rise. The price of these securities is typically more volatile than that of coupon-bearing bonds of the same maturity. Interest rates disclosed represent current yields based upon the current cost basis and estimated timing of future cash flows.

These securities amount to $20,659 or less than 0.005% of the Fund’s net assets at period end.

 

6        OPPENHEIMER EQUITY INCOME FUND

         

 

Footnotes to Statement of Investments (Continued)

7. 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 $43,755 or less than 0.005% of the Fund’s net assets at period end.

8. Interest rate is less than 0.0005%.

9. 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 $28,815,734 or 0.67% of the Fund’s net assets at period end.

 

Exchange-Traded Options Written at July 31, 2016                             
Description            Exercise
Price		      Expiration
Date		              Number
of Contracts		             Premiums
Received		                      Value  

Abbott Laboratories Call

      USD         44.000         8/19/16         USD         (800 )    $ 58,721       $ (90,400 ) 

Abbott Laboratories Call

      USD         45.000         9/16/16         USD         (100 )      9,896         (10,200 ) 

Abbott Laboratories Call

      USD         43.000         8/19/16         USD         (300 )      20,338         (57,900 ) 

AbbVie, Inc. Call

      USD         67.500         8/19/16         USD         (750 )      41,774         (32,250 ) 

Aetna, Inc. Call

      USD         120.000         8/19/16         USD         (150 )      27,584         (15,600 ) 

American Electric Power Co., Inc. Call

      USD         70.000         8/19/16         USD         (5,000 )      560,429         (200,000 ) 

AT & T, Inc. Call

      USD         42.000         8/19/16         USD         (2,213 )      203,735         (320,885 ) 

AT & T, Inc. Call

      USD         43.000         8/19/16         USD         (9,455 )      811,519         (614,575 ) 

AT & T, Inc. Call

      USD         43.500         8/19/16         USD         (100 )      3,396         (4,000 ) 

AT & T, Inc. Call

      USD         44.000         9/16/16         USD         (50 )      1,023         (2,400 ) 

AT & T, Inc. Call

      USD         43.000         9/16/16         USD         (2,500 )      314,892         (255,000 ) 

Bank of America Corp. Call

      USD         14.000         8/19/16         USD         (500 )      12,729         (31,000 ) 

Beazer Homes USA, Inc. Call

      USD         8.000         8/19/16         USD         (250 )      14,897         (41,250 ) 

Best Buy Co., Inc. Call

      USD         32.000         8/19/16         USD         (1,000 )      57,843         (184,000 ) 

Best Buy Co., Inc. Call

      USD         31.000         8/19/16         USD         (3,000 )      343,986         (744,000 ) 

CalAtlantic Group, Inc. Call

      USD         40.000         8/19/16         USD         (350 )      46,685         (3,500 ) 

CalAtlantic Group, Inc. Call

      USD         42.000         8/19/16         USD         (250 )      21,182         (3,750 ) 

Chevron Corp. Call

      USD         105.000         8/19/16         USD         (2,630 )      807,641         (131,500 ) 

Chevron Corp. Call

      USD         105.000         9/16/16         USD         (2,500 )      892,379         (267,500 ) 

Chevron Corp. Call

      USD         110.000         8/19/16         USD         (1,000 )      80,618         (4,000 ) 

Chevron Corp. Call

      USD         100.000         8/19/16         USD         (2,650 )      1,866,777         (781,750 ) 

Chevron Corp. Call

      USD         106.000         8/19/16         USD         (1,000 )      210,765         (30,000 ) 

Cisco Systems, Inc. Call

      USD         29.000         8/19/16         USD         (925 )      112,810         (169,275 ) 

Cisco Systems, Inc. Call

      USD         30.500         8/19/16         USD         (250 )      11,590         (20,250 ) 

Cisco Systems, Inc. Call

      USD         30.000         8/19/16         USD         (250 )      7,990         (27,250 ) 

Cisco Systems, Inc. Call

      USD         31.500         8/19/16         USD         (750 )      34,591         (29,250 ) 

Citigroup, Inc. Call

      USD         45.000         10/21/16         USD         (250 )      49,239         (39,750 ) 

Coca-Cola Co. (The) Call

      USD         45.000         8/19/16         USD         (475 )      52,480         (2,850 ) 

Comcast Corp. Call

      USD         67.500         8/19/16         USD         (250 )      30,989         (19,750 ) 

Comcast Corp. Call

      USD         70.000         8/19/16         USD         (250 )      9,490         (2,500 ) 

Communications Sales & Leasing, Inc. Call

      USD         30.000         8/19/16         USD         (350 )      35,017         (50,750 ) 

CSX Corp. Call

      USD         30.000         8/19/16         USD         (4,000 )      150,430         (40,000 ) 

Cypress Semiconductor Corp. Call

      USD         12.000         9/16/16         USD         (1,250 )      84,860         (86,250 ) 

Cypress Semiconductor Corp. Call

      USD         11.000         8/19/16         USD         (2,500 )      198,950         (232,500 ) 

 

 

7        OPPENHEIMER EQUITY INCOME FUND

STATEMENT OF INVESTMENTS Unaudited / Continued

 

Exchange-Traded Options Written (Continued)                             
Description            Exercise
Price		      Expiration
Date		              Number
of Contracts		             Premiums
Received		                      Value  

Cypress Semiconductor Corp. Call

      USD         12.000         8/19/16         USD         (3,500 )    $ 191,759       $ (140,000 ) 

Exxon Mobil Corp. Call

      USD         90.000         8/19/16         USD         (1,750 )      884,610         (96,250 ) 

Exxon Mobil Corp. Call

      USD         90.000         9/16/16         USD         (50 )      4,648         (6,100 ) 

Exxon Mobil Corp. Call

      USD         94.000         8/19/16         USD         (50 )      9,823         (200 ) 

Exxon Mobil Corp. Call

      USD         95.000         8/19/16         USD         (2,675 )      433,014         (8,025 ) 

Exxon Mobil Corp. Call

      USD         92.500         8/19/16         USD         (3,225 )      1,012,422         (32,250 ) 

Exxon Mobil Corp. Call

      USD         95.000         10/21/16         USD         (1,000 )      239,944         (45,000 ) 

First Data Corp. Call

      USD         12.000         8/19/16         USD         (200 )      11,792         (18,000 ) 

First Data Corp. Call

      USD         13.000         8/19/16         USD         (500 )      15,364         (19,500 ) 

Ford Motor Co. Call

      USD         14.000         8/19/16         USD         (250 )      3,410         (500 ) 

General Cable Corp. Call

      USD         14.000         8/19/16         USD         (250 )      30,489         (33,125 ) 

General Cable Corp. Call

      USD         12.000         8/19/16         USD         (100 )      9,896         (26,250 ) 

General Cable Corp. Call

      USD         16.000         8/19/16         USD         (250 )      12,670         (11,250 ) 

General Dynamics Corp. Call

      USD         150.000         8/19/16         USD         (250 )      22,984         (22,500 ) 

General Electric Co. Call

      USD         31.000         8/19/16         USD         (1,550 )      220,657         (80,600 ) 

General Electric Co. Call

      USD         32.000         8/19/16         USD         (1,000 )      46,559         (12,000 ) 

HP, Inc. Call

      USD         13.000         8/19/16         USD         (250 )      24,614         (28,750 ) 

Intel Corp. Call

      USD         36.000         8/19/16         USD         (250 )      11,364         (2,250 ) 

Intel Corp. Call

      USD         35.000         8/19/16         USD         (200 )      5,492         (7,000 ) 

Intel Corp. Call

      USD         36.000         9/16/16         USD         (300 )      7,788         (9,300 ) 

Intel Corp. Call

      USD         35.000         9/16/16         USD         (100 )      6,796         (7,000 ) 

Intel Corp. Call

      USD         35.500         8/19/16         USD         (500 )      30,979         (9,000 ) 

International Business Machines Corp. Call

      USD         165.000         9/16/16         USD         (25 )      3,249         (3,075 ) 

International Business Machines Corp. Call

      USD         165.000         8/19/16         USD         (125 )      9,620         (5,250 ) 

International Business Machines Corp. Call

      USD         160.000         8/19/16         USD         (130 )      46,803         (26,260 ) 

Johnson & Johnson Call

      USD         126.000         8/19/16         USD         (325 )      32,161         (21,775 ) 

JPMorgan Chase & Co. Call

      USD         65.000         8/19/16         USD         (250 )      14,740         (12,750 ) 

Kinder Morgan, Inc. Call

      USD         20.000         8/19/16         USD         (8,500 )      965,375         (552,500 ) 

Kinder Morgan, Inc. Call

      USD         19.000         8/19/16         USD         (2,650 )      240,033         (360,400 ) 

Kinder Morgan, Inc. Call

      USD         21.000         8/19/16         USD         (2,000 )      135,936         (42,000 ) 

Kinder Morgan, Inc. Call

      USD         22.000         8/19/16         USD         (250 )      17,865         (1,500 ) 

Kraft Heinz Co. (The) Call

      USD         87.500         8/19/16         USD         (1,125 )      346,697         (153,000 ) 

Kraft Heinz Co. (The) Call

      USD         85.000         8/19/16         USD         (2,175 )      1,000,265         (576,375 ) 

Kraft Heinz Co. (The) Call

      USD         90.000         8/19/16         USD         (1,000 )      181,956         (65,000 ) 

Marathon Oil Corp. Call

      USD         14.000         8/19/16         USD         (500 )      101,978         (24,500 ) 

Marathon Oil Corp. Call

      USD         13.500         8/19/16         USD         (250 )      18,489         (18,250 ) 

Marathon Oil Corp. Call

      USD         14.500         8/19/16         USD         (750 )      65,718         (24,000 ) 

Marathon Oil Corp. Call

      USD         16.000         8/19/16         USD         (1,500 )      96,554         (10,500 ) 

Marathon Oil Corp. Call

      USD         15.000         8/19/16         USD         (12,750 )      1,381,381         (255,000 ) 

MDC Holdings, Inc. Call

      USD         27.000         8/19/16         USD         (1,000 )      43,741         (40,000 ) 

MDC Holdings, Inc. Call

      USD         28.000         8/19/16         USD         (250 )      7,240         (6,250 ) 

MDC Holdings, Inc. Call

      USD         26.000         8/19/16         USD         (250 )      20,234         (19,375 ) 

Merck & Co., Inc. Call

      USD         61.000         8/19/16         USD         (250 )      9,900         (2,500 ) 

MetLife, Inc. Call

      USD         45.000         8/19/16         USD         (250 )      10,382         (5,000 ) 

MGIC Investment Corp. Call

      USD         6.000         8/19/16         USD         (1,000 )      44,083         (119,500 ) 

MGIC Investment Corp. Call

      USD         7.000         8/19/16         USD         (350 )      5,992         (11,200 ) 

Micron Technology, Inc. Call

      USD         15.000         8/19/16         USD         (750 )      27,858         (12,000 ) 

Micron Technology, Inc. Call

      USD         13.000         8/19/16         USD         (2,750 )      233,973         (277,750 ) 

 

8        OPPENHEIMER EQUITY INCOME FUND

         

 

Exchange-Traded Options Written (Continued)                             
Description            Exercise
Price		     

Expiration

Date

              Number
of Contracts		     Premiums
Received		      Value  

Micron Technology, Inc. Call

      USD         14.000         8/19/16         USD         (550 )    $ 21,977       $ (23,650 ) 

Microsoft Corp. Call

      USD         56.500         8/19/16         USD         (250 )      11,615         (20,750 ) 

Molson Coors Brewing Co. Call

      USD         100.000         8/19/16         USD         (250 )      69,592         (107,250 ) 

Molson Coors Brewing Co. Call

      USD         90.000         8/19/16         USD         (50 )      29,022         (63,150 ) 

Molson Coors Brewing Co. Call

      USD         95.000         8/19/16         USD         (100 )      37,275         (74,000 ) 

NRG Energy, Inc. Call

      USD         15.000         8/19/16         USD         (175 )      23,268         (4,375 ) 

NRG Energy, Inc. Call

      USD         16.000         8/19/16         USD         (1,250 )      61,008         (12,500 ) 

Oracle Corp. Call

      USD         40.000         8/19/16         USD         (175 )      24,713         (21,525 ) 

Oracle Corp. Call

      USD         42.000         9/16/16         USD         (50 )      3,198         (3,050 ) 

Oracle Corp. Call

      USD         41.000         8/19/16         USD         (150 )      11,993         (8,400 ) 

Pfizer, Inc. Call

      USD         36.000         8/19/16         USD         (125 )      6,745         (12,625 ) 

Pfizer, Inc. Call

      USD         37.000         8/19/16         USD         (1,000 )      29,619         (44,000 ) 

Philip Morris International, Inc. Call

      USD         105.000         8/19/16         USD         (1,010 )      122,786         (4,040 ) 

Philip Morris International, Inc. Call

      USD         100.000         8/19/16         USD         (90 )      17,276         (10,980 ) 

Pinnacle Foods, Inc. Call

      USD         47.500         8/19/16         USD         (2,075 )      180,122         (591,375 ) 

PPL Corp. Call

      USD         39.000         8/19/16         USD         (325 )      11,212         (1,625 ) 

Procter & Gamble Co. (The) Call

      USD         85.000         8/19/16         USD         (110 )      13,446         (18,810 ) 

PulteGroup, Inc. Call

      USD         21.000         8/19/16         USD         (1,000 )      43,478         (66,000 ) 

PulteGroup, Inc. Call

      USD         22.000         8/19/16         USD         (250 )      7,740         (5,500 ) 

QUALCOMM, Inc. Call

      USD         52.500         8/19/16         USD         (50 )      9,598         (50,500 ) 

QUALCOMM, Inc. Call

      USD         62.500         8/19/16         USD         (750 )      35,204         (75,000 ) 

Realogy Holdings Corp. Call

      USD         30.000         8/19/16         USD         (400 )      45,650         (62,400 ) 

Realogy Holdings Corp. Call

      USD         32.500         8/19/16         USD         (50 )      1,287         (1,750 ) 

Signet Jewelers Ltd. Call

      USD         90.000         8/19/16         USD         (75 )      24,227         (16,500 ) 

Signet Jewelers Ltd. Call

      USD         90.000         9/16/16         USD         (20 )      7,339         (7,400 ) 

Signet Jewelers Ltd. Call

      USD         95.000         8/19/16         USD         (52 )      10,149         (2,392 ) 

Staples, Inc. Call

      USD         9.000         8/19/16         USD         (1,125 )      50,221         (56,250 ) 

Target Corp. Call

      USD         80.000         8/19/16         USD         (250 )      12,512         (3,750 ) 

Walgreens Boots Alliance, Inc. Call

      USD         85.000         8/19/16         USD         (849 )      72,591         (6,792 ) 

Wal-Mart Stores, Inc. Call

      USD         75.000         8/19/16         USD         (1,500 )      126,997         (61,500 ) 

Williams Cos., Inc. (The) Call

      USD         22.000         8/19/16         USD         (512 )      104,681         (99,840 ) 

Williams Cos., Inc. (The) Call

      USD         21.000         8/19/16         USD         (488 )      75,178         (146,400 ) 

Williams Cos., Inc. (The) Call

      USD         25.000         8/19/16         USD         (1,000 )      48,008         (65,000 ) 

Total of Exchange-Traded Options Written

                  $     16,836,269       $   (9,555,474 ) 
                               

 

9        OPPENHEIMER EQUITY INCOME FUND

NOTES TO STATEMENT OF INVESTMENTS July 31, 2016 Unaudited

 

 

1. Organization

Oppenheimer Equity Income Fund (the “Fund”) is a diversified open-end management investment company registered under the Investment Company Act of 1940 (“1940 Act”), as amended. The Fund’s investment objective is to seek total return. The Fund’s investment adviser is OFI Global Asset Management, Inc. (“OFI Global” or the “Manager”), a wholly-owned subsidiary of OppenheimerFunds, Inc. (“OFI” or the “Sub-Adviser”). The Manager has entered into a sub-advisory agreement with OFI.

 

 

2. Significant Accounting Policies

Security Valuation. All investments in securities are recorded at their estimated fair value, as described in Note 3.

Reporting Period End Date. The last day of the Fund’s reporting period is the last day the New York Stock Exchange was open for trading during the period. The Fund’s financial statements have been presented through that date to maintain consistency with the Fund’s net asset value calculations used for shareholder transactions.

Foreign Currency Translation. The Fund’s accounting records are maintained in U.S. dollars. The values of securities denominated in foreign currencies and amounts related to the purchase and sale of foreign securities and foreign investment income are translated into U.S. dollars as of the close of the New York Stock Exchange (the “Exchange”), normally 4:00 P.M. Eastern time, on each day the Exchange is open for trading. Foreign exchange rates may be valued primarily using a reliable bank, dealer or service authorized by the Board of Trustees.

 

 

3. Securities Valuation

The Fund calculates the net asset value of its shares as of 4:00 P.M. Eastern time, on each day the New York Stock Exchange (the “Exchange”) is open for trading, except in the case of a scheduled early closing of the Exchange, in which case the Fund will calculate net asset value of the shares as of the scheduled early closing time of the Exchange.

The Fund’s Board has adopted procedures for the valuation of the Fund’s securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a “fair valuation” for any security for which market quotations are not “readily available.” The Valuation Committee’s fair valuation determinations are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.

Valuation Methods and Inputs

Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.

The following methodologies are used to determine the market value or the fair value of the types of securities described below:

 

10        OPPENHEIMER EQUITY INCOME FUND

         

 

 

3. Securities Valuation (Continued)

Securities traded on a registered U.S. securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the last sale price of the security reported on the principal exchange on which it is traded, prior to the time when the Fund’s assets are valued. In the absence of a sale, the security is valued at the mean between the bid and asked price on the principal exchange or, if not available from the principal exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the principal exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer. A security of a foreign issuer traded on a foreign exchange, but not listed on a registered U.S. securities exchange, is valued based on the last sale price on the principal exchange on which the security is traded, as identified by the third party pricing service used by the Manager, prior to the time when the Fund’s assets are valued. If the last sale price is unavailable, the security is valued at the most recent official closing price on the principal exchange on which it is traded. If the last sales price or official closing price for a foreign security is not available, the security is valued at the mean between the bid and asked price per the exchange or, if not available from the exchange, obtained from two dealers. If bid and asked prices are not available from either the exchange or two dealers, the security is valued by using one of the following methodologies (listed in order of priority): (1) a bid from the exchange, (2) the mean between the bid and asked price as provided by a single dealer, or (3) a bid from a single dealer.

Shares of a registered investment company that are not traded on an exchange are valued at that investment company’s net asset value per share.

Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.

Short-term money market type debt securities with a remaining maturity of sixty days or less are valued at cost adjusted by the amortization of discount or premium to maturity (amortized cost), which approximates market value. Short-term debt securities with a remaining maturity in excess of sixty days are valued at the mean between the “bid” and “asked” prices utilizing evaluated prices obtained from third party pricing services or broker-dealers.

Structured securities, swaps, swaptions, and other over-the-counter derivatives are valued utilizing evaluated prices obtained from third party pricing services or broker-dealers.

A description of the standard inputs that may generally be considered by the third party pricing vendors in determining their evaluated prices is provided below.

 

11        OPPENHEIMER EQUITY INCOME FUND

NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued

 

 

3. Securities Valuation (Continued)

Security Type    Standard inputs generally considered by third-party pricing vendors
Corporate debt, government debt, municipal, mortgage-backed and asset-backed securities    Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors.
Loans    Information obtained from market participants regarding reported trade data and broker-dealer price quotations.
Event-linked bonds    Information obtained from market participants regarding reported trade data and broker-dealer price quotations.
Structured securities    Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events.
Swaps    Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates.

If a market value or price cannot be determined for a security using the methodologies described above, or if, in the “good faith” opinion of the Manager, the market value or price obtained does not constitute a “readily available market quotation,” or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Fund’s Board or (ii) as determined in good faith by the Manager’s Valuation Committee. The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Fund’s Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.

To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair

 

12        OPPENHEIMER EQUITY INCOME FUND

         

 

 

3. Securities Valuation (Continued)

valuation determinations on a regular basis after considering all relevant information that is reasonably available.

Classifications

Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Fund’s investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:

1) Level 1-unadjusted quoted prices in active markets for identical assets or liabilities (including securities actively traded on a securities exchange)

2) Level 2-inputs other than unadjusted quoted prices that are observable for the asset or liability (such as unadjusted quoted prices for similar assets and market corroborated inputs such as interest rates, prepayment speeds, credit risks, etc.)

3) Level 3-significant unobservable inputs (including the Manager’s own judgments about assumptions that market participants would use in pricing the asset or liability).

The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.

The Fund classifies each of its investments in investment companies which are publicly offered as Level 1. Investment companies that are not publicly offered are measured using net asset value as a practical expedient, and are not classified in the fair value hierarchy.

The table below categorizes amounts at period end based on valuation input level:

 

      Level 1—
Unadjusted
Quoted Prices		      Level 2—
Other Significant
Observable Inputs		      Level 3—
Significant
Unobservable
Inputs		      Value  

Assets Table

            

Investments, at Value:

            

Common Stocks

            

  Consumer Discretionary

    $ 401,042,302       $ —       $                     —       $ 401,042,302   

  Consumer Staples

      277,036,150         —         —         277,036,150   

  Energy

      394,007,400         —         —         394,007,400   

  Financials

          1,371,903,675         —         —                 1,371,903,675   

  Health Care

      400,744,888         —         —         400,744,888   

  Industrials

      263,771,007         —         —         263,771,007   

  Information Technology

      454,751,318         —         —         454,751,318   

  Materials

      59,588,175         —         —         59,588,175   

  Telecommunication Services

      89,897,600         —         —         89,897,600   

  Utilities

      118,805,750         —         —         118,805,750   

Preferred Stocks

      367,613,607                 57,700,675         —         425,314,282   

Rights, Warrants and Certificates

      78,000         —         —         78,000   

Mortgage-Backed Obligations

      —         301,166         —         301,166   

Non-Convertible Corporate Bonds and Notes

      —         6,113,644         —         6,113,644   

 

13        OPPENHEIMER EQUITY INCOME FUND

NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued

 

 

3. Securities Valuation (Continued)

    

Level 1—

Unadjusted

Quoted Prices

    

Level 2—

Other Significant

Observable Inputs

     

Level 3—

Significant

Unobservable

Inputs

      Value  

 

  

Investments, at Value: (Continued)

           

Convertible Corporate Bonds and Notes

    $ —      $ 79,310,531       $ —       $ 79,310,531   

Structured Security

      —        8,727,655         —         8,727,655   
  

 

 

  

Total Assets

    $     4,199,239,872      $ 152,153,671       $ —       $     4,351,393,543   
  

 

 

  

Liabilities Table

           

Other Financial Instruments:

           

Options written, at value

    $ (9,555,474 )    $ —       $ —       $ (9,555,474)   
  

 

 

  

Total Liabilities

    $ (9,555,474 )    $ —       $ —       $ (9,555,474)   
  

 

 

  

Forward currency exchange contracts and futures contracts, if any, are reported at their unrealized appreciation/depreciation at measurement date, which represents the change in the contract’s value from trade date. All additional assets and liabilities included in the above table are reported at their market value at measurement date.

 

 

4. Investments and Risks

Investments in Affiliated Funds. The Fund is permitted to invest in other mutual funds advised by the Manager (“Affiliated Funds”). Affiliated Funds are open-end management investment companies registered under the 1940 Act, as amended. The Manager is the investment adviser of, and the Sub-Adviser provides investment and related advisory services to, the Affiliated Funds. When applicable, the Fund’s investments in Affiliated Funds are included in the Statement of Investments. Shares of Affiliated Funds are valued at their net asset value per share. As a shareholder, the Fund is subject to its proportional share of the Affiliated Funds’ expenses, including their management fee. The Manager will waive fees and/ or reimburse Fund expenses in an amount equal to the indirect management fees incurred through the Fund’s investment in the Affiliated Funds.

Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Fund’s investments and therefore the value of the Fund’s shares. To the extent that the Fund invests more of its assets in one Affiliated Fund than in another, the Fund will have greater exposure to the risks of that Affiliated Fund.

Investment in Oppenheimer Institutional Money Market Fund. The Fund is permitted to invest daily available cash balances in a money market Affiliated 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 or for defensive purposes. IMMF is regulated as a money market fund under the Investment Company Act of 1940, as amended.

Master Limited Partnerships (“MLPs”). MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. MLP common units are registered with the Securities and Exchange Commission (“SEC”), and are freely tradable on securities exchanges such as the NYSE and the NASDAQ Stock Market

 

14        OPPENHEIMER EQUITY INCOME FUND

         

 

 

4. Investments and Risks (Continued)

(“NASDAQ”), or in the over-the-counter (“OTC”) market. An MLP consists of one or more general partners, who conduct the business, and one or more limited partners, who contribute capital. MLP common unit holders have a limited role in the partnership’s operations and management. The Fund, as a limited partner, normally would not be liable for the debts of the MLP beyond the amounts the Fund has contributed, but would not be shielded to the same extent that a shareholder of a corporation would be. In certain circumstances creditors of an MLP would have the right to seek return of capital distributed to a limited partner. This right of an MLP’s creditors would continue after the Fund sold its investment in the MLP.

Structured Securities. The Fund invests in structured securities whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured securities are often leveraged, increasing the volatility of each note’s market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations in the annual and semiannual reports. The Fund records a realized gain or loss when a structured security is sold or matures.

Equity Security Risk. Stocks and other equity securities fluctuate in price. The value of the Fund’s portfolio may be affected by changes in the equity markets generally. Equity markets may experience significant short-term volatility and may fall sharply at times. Different markets may behave differently from each other and U.S. equity markets may move in the opposite direction from one or more foreign stock markets. Adverse events in any part of the equity or fixed-income markets may have unexpected negative effects on other market segments.

The prices of individual equity securities generally do not all move in the same direction at the same time and a variety of factors can affect the price of a particular company’s securities. These factors may include, but are not limited to, poor earnings reports, a loss of customers, litigation against the company, general unfavorable performance of the company’s sector or industry, or changes in government regulations affecting the company or its industry.

 

 

5. Market Risk Factors

The Fund’s investments in securities and/or financial derivatives may expose the Fund to various market risk factors:

Commodity Risk. Commodity risk relates to the change in value of commodities or commodity indexes as they relate to increases or decreases in the commodities market.

Commodities are physical assets that have tangible properties. Examples of these types of assets are crude oil, heating oil, metals, livestock, and agricultural products.

Credit Risk. Credit risk relates to the ability of the issuer of debt to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield debt securities are subject to credit risk to a greater extent than lower-yield, higher-quality

 

15        OPPENHEIMER EQUITY INCOME FUND

NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued

 

 

5. Market Risk Factors (Continued)

securities.

Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.

Foreign Exchange Rate Risk. Foreign exchange rate risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.

Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.

Volatility Risk. Volatility risk refers to the magnitude of the movement, but not the direction of the movement, in a financial instrument’s price over a defined time period. Large increases or decreases in a financial instrument’s price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.

 

 

6. Use of Derivatives

The Fund’s investment objective not only permits the Fund to purchase investment securities, it also allows the Fund to enter into various types of derivatives contracts, including, but not limited to, futures contracts, forward currency exchange contracts, credit default swaps, interest rate swaps, total return swaps, variance swaps and purchased and written options. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market risk factors. These instruments may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of effecting a similar response to market factors. Such contracts may be entered into through a bilateral over-the-counter (“OTC”) transaction, or through a securities or futures exchange and cleared through a clearinghouse.

Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost due to unanticipated changes in the market risk factors and the overall market. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance. In instances where the Fund is using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Fund, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions. Some derivatives have the potential for unlimited loss, regardless of the size of the Fund’s initial investment.

 

16        OPPENHEIMER EQUITY INCOME FUND

         

 

 

6. Use of Derivatives (Continued)

Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objectives, but are the additional risks from investing in derivatives. Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.

The Fund’s actual exposures to these market risk factors and associated risks during the period are discussed in further detail, by derivative type, below.

Option Activity

The Fund may buy and sell put and call options, or write put and call options. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security, currency or other underlying financial instrument at a fixed price, upon exercise of the option.

Options can be traded through an exchange or through a privately negotiated arrangement with a dealer in an OTC transaction. Options traded through an exchange are generally cleared through a clearinghouse (such as The Options Clearing Corporation). The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations in the annual and semiannual reports. When an option is exercised, the cost of the security purchased or the proceeds of the security sale are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations in the annual and semiannual reports.

The Fund has purchased put options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A purchased put option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.

During the reporting period, the Fund had an ending monthly average market value of $524,513 on purchased put options.

Options written, if any, are reported in a schedule following the Statement of Investments and as a liability in the Statement of Assets and Liabilities in the annual and semiannual reports. Securities held in collateral accounts to cover potential obligations with respect to outstanding written options are noted in the Statement of Investments.

The risk in writing a call option is that the market price of the security increases and if the option is exercised, the Fund must either purchase the security at a higher price for delivery or, if the Fund owns the underlying security, give up the opportunity for profit. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk that there may be an illiquid market where the Fund is unable to close the contract.

The Fund has written put options on individual equity securities and/or equity indexes to

 

17        OPPENHEIMER EQUITY INCOME FUND

NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued

 

 

6. Use of Derivatives (Continued)

increase exposure to equity risk. A written put option becomes more valuable as the price of the underlying financial instrument appreciates relative to the strike price.

The Fund has written call options on individual equity securities and/or equity indexes to decrease exposure to equity risk. A written call option becomes more valuable as the price of the underlying financial instrument depreciates relative to the strike price.

During the reporting period, the Fund had an ending monthly average market value of $5,951,345 and $3,292,956 on written call options and written put options, respectively.

Additional associated risks to the Fund include counterparty credit risk and liquidity risk.

Written option activity for the reporting period was as follows:

 

     Number of
Contracts		      Amount of
Premiums		  

 

  

Options outstanding as of October 30, 2015

      78,716        $             15,606,997     

Options written

      648,323          77,780,634     

Options closed or expired

      (314,982 )       (34,511,692)    

Options exercised

      (288,548 )       (42,039,670)    
  

 

 

  

Options outstanding as of July 31, 2016

      123,509        $ 16,836,269     
  

 

 

  

Counterparty Credit Risk. Derivative positions are subject to the risk that the counterparty will not fulfill its obligation to the Fund. The Fund intends to enter into derivative transactions with counterparties that the Manager believes to be creditworthy at the time of the transaction.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statement of Assets and Liabilities in the annual and semiannual reports. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.

The Fund’s risk of loss from counterparty credit risk on exchange-traded derivatives cleared through a clearinghouse and for centrally cleared swaps is generally considered lower than as compared to OTC derivatives. However, counterparty credit risk exists with respect to initial and variation margin deposited/paid by the Fund that is held in futures commission merchant, broker and/or clearinghouse accounts for such exchange-traded derivatives and for centrally cleared swaps.

With respect to centrally cleared swaps, such transactions will be submitted for clearing, and if cleared, will be held in accounts at futures commission merchants or brokers that are members of clearinghouses. While brokers, futures commission merchants and clearinghouses are required to segregate customer margin from their own assets, in the event that a broker, futures commission merchant or clearinghouse becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the broker, futures commission merchant or clearinghouse for all its customers, U.S. bankruptcy laws will typically allocate that shortfall on a pro-rata basis across all the broker’s, futures commission merchant’s or clearinghouse’s customers, potentially resulting in losses to the Fund.

 

18        OPPENHEIMER EQUITY INCOME FUND

         

 

 

6. Use of Derivatives (Continued)

There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Fund’s behalf, and the Fund may be required to pay a termination fee to the executing broker with whom the Fund initially enters into the transaction.

Clearinghouses may also be permitted to terminate centrally cleared swaps at any time. The Fund is also subject to the risk that the broker or futures commission merchant will improperly use the Fund’s assets deposited/paid as initial or variation margin to satisfy payment obligations of another customer. In the event of a default by another customer of the broker or futures commission merchant, the Fund might not receive its variation margin payments from the clearinghouse, due to the manner in which variation margin payments are aggregated for all customers of the broker/futures commission merchant.

Collateral and margin requirements differ by type of derivative. Margin requirements are established by the broker, futures commission merchant or clearinghouse for exchange-traded and cleared derivatives, including centrally cleared swaps. Brokers, futures commission merchants and clearinghouses can ask for margin in excess of the regulatory minimum, or increase the margin amount, in certain circumstances.

For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund, if any, is reported separately on the Statement of Assets and Liabilities in the annual and semiannual reports as cash pledged as collateral. Non-cash collateral pledged by the Fund, if any, is noted in the Statement of Investments. Generally, the amount of collateral due from or to a party must exceed a minimum transfer amount threshold (e.g. $250,000) before a transfer has to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty nonperformance.

 

 

7. Federal Taxes

The approximate 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 at period end 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.

 

Federal tax cost of securities

      $ 3,848,117,446     

Federal tax cost of other investments

      (16,836,269)    
  

 

 

  

Total federal tax cost

      $   3,831,281,177     
  

 

 

  

Gross unrealized appreciation

      $ 689,113,870     

Gross unrealized depreciation

      (178,556,978)    
  

 

 

  

Net unrealized appreciation

      $ 510,556,892     
  

 

 

  

 

19        OPPENHEIMER EQUITY INCOME FUND

Item 2. Controls and Procedures.

 

  (a) 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 7/31/2016, 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 the 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.

 

  (b) There have been no significant changes in the registrant’s internal controls over financial reporting that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

Exhibits 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 Equity Income Fund

 

By:  

/s/ Arthur P. Steinmetz

  Arthur P. Steinmetz
  Principal Executive Officer
Date:   9/14/2016

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/ Arthur P. Steinmetz

  Arthur P. Steinmetz
  Principal Executive Officer
Date:   9/14/2016

 

By:  

/S/ Brian S. Petersen

  Brian S. Petersen
  Principal Financial Officer
Date:   9/14/2016