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)
Registrants telephone number, including area code: (303) 768-3200
Date of fiscal year end: October 31
Date of reporting period: 1/31/2017
Item 1. Schedule of Investments.
STATEMENT OF INVESTMENTS January 31, 2017 Unaudited
Shares | Value | |||||||
Common Stocks89.3% | ||||||||
Consumer Discretionary7.6% |
||||||||
Automobiles1.1% |
||||||||
Ford Motor Co. |
3,792,500 | $ | 46,875,300 | |||||
General Motors Co. |
10,000 | 366,100 | ||||||
|
47,241,400
|
| ||||||
Hotels, Restaurants & Leisure1.1% |
||||||||
Extended Stay America, Inc.
|
|
2,840,000
|
|
|
46,036,400
|
| ||
Household Durables2.0% |
||||||||
CalAtlantic Group, Inc. |
1,742,500 | 60,760,975 | ||||||
PulteGroup, Inc. |
990,000 | 21,294,900 | ||||||
|
82,055,875
|
| ||||||
Media1.4% |
||||||||
Comcast Corp., Cl. A |
255,000 | 19,232,100 | ||||||
Time Warner, Inc. |
380,000 | 36,803,000 | ||||||
|
56,035,100
|
| ||||||
Multiline Retail1.2% |
||||||||
Kohls Corp. |
365,000 | 14,537,950 | ||||||
Macys, Inc. |
1,111,600 | 32,836,664 | ||||||
Target Corp. |
41,250 | 2,659,800 | ||||||
|
50,034,414
|
| ||||||
Specialty Retail0.8% |
||||||||
Signet Jewelers Ltd. |
212,500 | 16,504,875 | ||||||
Staples, Inc. |
1,890,000 | 17,388,000 | ||||||
|
33,892,875
|
| ||||||
Consumer Staples7.3% |
||||||||
Beverages1.2% |
||||||||
Coca-Cola Co. (The) |
620,000 | 25,773,400 | ||||||
Molson Coors Brewing Co., Cl. B |
230,000 | 22,199,600 | ||||||
|
47,973,000
|
| ||||||
Food & Staples Retailing2.2% |
||||||||
CVS Health Corp. |
60,000 | 4,728,600 | ||||||
Walgreens Boots Alliance, Inc. |
687,500 | 56,333,750 | ||||||
Wal-Mart Stores, Inc. |
486,750 | 32,485,695 | ||||||
|
93,548,045
|
| ||||||
Food Products2.1% |
||||||||
B&G Foods, Inc. |
63,000 | 2,794,050 | ||||||
Kraft Heinz Co. (The) |
537,500 | 47,993,375 | ||||||
Post Holdings, Inc.1 |
450,000 | 37,656,000 | ||||||
|
88,443,425
|
|
1 OPPENHEIMER EQUITY INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Shares | Value | |||||||
Household Products0.7% |
||||||||
Procter & Gamble Co. (The)
|
|
330,000
|
|
$
|
28,908,000
|
| ||
Tobacco1.1% |
||||||||
Philip Morris International, Inc.
|
|
477,500
|
|
|
45,902,075
|
| ||
Energy11.0% |
||||||||
Oil, Gas & Consumable Fuels11.0% |
||||||||
BP plc, Sponsored ADR |
1,702,500 | 61,255,950 | ||||||
Chevron Corp. |
987,500 | 109,958,125 | ||||||
Exxon Mobil Corp. |
950,000 | 79,695,500 | ||||||
Kinder Morgan, Inc. |
1,475,000 | 32,951,500 | ||||||
Marathon Oil Corp. |
2,800,000 | 46,900,000 | ||||||
Royal Dutch Shell plc, Cl. A, Sponsored ADR |
1,782,500 | 96,950,175 | ||||||
Williams Cos., Inc. (The) |
1,017,500 | 29,344,700 | ||||||
|
457,055,950
|
| ||||||
Financials28.9% |
||||||||
Capital Markets5.1% |
||||||||
Goldman Sachs Group, Inc. (The) |
257,500 | 59,049,900 | ||||||
KKR & Co. LP2 |
4,050,000 | 70,308,000 | ||||||
Morgan Stanley |
1,917,500 | 81,474,575 | ||||||
|
210,832,475
|
| ||||||
Commercial Banks11.0% |
||||||||
Bank of America Corp. |
530,000 | 11,999,200 | ||||||
CIT Group, Inc. |
7,500 | 308,925 | ||||||
Citigroup, Inc.3 |
3,880,000 | 216,620,400 | ||||||
JPMorgan Chase & Co.3 |
1,297,400 | 109,798,962 | ||||||
Wells Fargo & Co. |
2,070,000 | 116,603,100 | ||||||
|
455,330,587
|
| ||||||
Insurance4.6% |
||||||||
American International Group, Inc. |
1,000,000 | 64,260,000 | ||||||
Assured Guaranty Ltd. |
2,360,000 | 91,827,600 | ||||||
MetLife, Inc. |
675,000 | 36,726,750 | ||||||
|
192,814,350
|
| ||||||
Real Estate Investment Trusts (REITs)5.3% |
||||||||
Blackstone Mortgage Trust, Inc., Cl. A |
952,500 | 29,041,725 | ||||||
Colony NorthStar, Inc., Cl. A |
6,228,833 | 86,705,355 | ||||||
Communications Sales & Leasing, Inc. |
1,475,000 | 38,763,000 | ||||||
Starwood Property Trust, Inc. |
1,772,500 | 39,455,850 | ||||||
Two Harbors Investment Corp. |
2,950,000 | 25,871,500 | ||||||
|
219,837,430
|
| ||||||
Real Estate Management & Development0.6% |
||||||||
Realogy Holdings Corp. |
990,250 | 25,657,378 |
2 OPPENHEIMER EQUITY INCOME FUND
Shares | Value | |||||||
Thrifts & Mortgage Finance2.3% |
||||||||
MGIC Investment Corp.1 |
4,575,000 | $ | 48,723,750 | |||||
Radian Group, Inc. |
2,537,500 | 46,690,000 | ||||||
|
95,413,750
|
| ||||||
Health Care9.7% |
||||||||
Biotechnology2.1% |
||||||||
AbbVie, Inc. |
700,000 | 42,777,000 | ||||||
Gilead Sciences, Inc. |
615,000 | 44,556,750 | ||||||
|
87,333,750
|
| ||||||
Health Care Equipment & Supplies2.3% |
||||||||
Abbott Laboratories |
1,407,500 | 58,791,275 | ||||||
Medtronic plc |
500,000 | 38,010,000 | ||||||
|
96,801,275
|
| ||||||
Pharmaceuticals5.3% |
||||||||
Bristol-Myers Squibb Co. |
90,000 | 4,424,400 | ||||||
Johnson & Johnson |
344,750 | 39,042,937 | ||||||
Merck & Co., Inc. |
1,300,200 | 80,599,398 | ||||||
Pfizer, Inc.3 |
3,047,500 | 96,697,175 | ||||||
|
220,763,910
|
| ||||||
Industrials5.4% |
||||||||
Aerospace & Defense1.2% |
||||||||
General Dynamics Corp. |
140,750 | 25,487,010 | ||||||
United Technologies Corp. |
240,000 | 26,320,800 | ||||||
|
51,807,810
|
| ||||||
Airlines1.3% |
||||||||
United Continental Holdings, Inc.1
|
|
740,000
|
|
|
52,147,800
|
| ||
Commercial Services & Supplies0.2% |
||||||||
RR Donnelley & Sons Co.
|
|
582,500
|
|
|
9,989,875
|
| ||
Electrical Equipment0.9% |
||||||||
Eaton Corp. plc |
350,000 | 24,773,000 | ||||||
General Cable Corp. |
602,500 | 12,230,750 | ||||||
|
37,003,750
|
| ||||||
Industrial Conglomerates1.7% |
||||||||
General Electric Co.
|
|
2,332,500
|
|
|
69,275,250
|
| ||
Road & Rail0.1% |
||||||||
CSX Corp.
|
|
78,200
|
|
|
3,627,698
|
| ||
Information Technology10.8% |
||||||||
Communications Equipment1.5% |
||||||||
Cisco Systems, Inc. |
2,085,000 | 64,051,200 |
3 OPPENHEIMER EQUITY INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Shares | Value | |||||||
Internet Software & Services0.5% |
||||||||
Alphabet, Inc., Cl. C1
|
|
25,500
|
|
$
|
20,318,145
|
| ||
IT Services0.7% |
||||||||
International Business Machines Corp.
|
|
162,500
|
|
|
28,359,500
|
| ||
Semiconductors & Semiconductor Equipment2.5% |
||||||||
Intel Corp. |
967,500 | 35,623,350 | ||||||
Micron Technology, Inc.1 |
1,525,000 | 36,767,750 | ||||||
QUALCOMM, Inc. |
545,000 | 29,119,350 | ||||||
|
101,510,450
|
| ||||||
Software2.6% |
||||||||
Microsoft Corp. |
925,000 | 59,801,250 | ||||||
Oracle Corp. |
1,200,000 | 48,132,000 | ||||||
|
107,933,250
|
| ||||||
Technology Hardware, Storage & Peripherals3.0% |
||||||||
Apple, Inc. |
937,750 | 113,795,963 | ||||||
HP, Inc. |
762,500 | 11,475,625 | ||||||
|
125,271,588
|
| ||||||
Materials2.0% |
||||||||
Chemicals1.0% |
||||||||
Dow Chemical Co. (The) |
340,000 | 20,274,200 | ||||||
LyondellBasell Industries NV, Cl. A |
237,500 | 22,151,625 | ||||||
|
42,425,825
|
| ||||||
Containers & Packaging0.6% |
||||||||
International Paper Co.
|
|
392,500
|
|
|
22,215,500
|
| ||
Paper & Forest Products0.4% |
||||||||
Domtar Corp.
|
|
389,000
|
|
|
16,995,410
|
| ||
Telecommunication Services3.3% |
||||||||
Diversified Telecommunication Services3.3% |
||||||||
AT&T, Inc. |
2,550,000 | 107,508,000 | ||||||
CenturyLink, Inc. |
175,000 | 4,525,500 | ||||||
Frontier Communications Corp. |
2,875,000 | 10,033,750 | ||||||
Level 3 Communications, Inc.1 |
245,000 | 14,567,700 | ||||||
|
136,634,950
|
| ||||||
Utilities3.3% |
||||||||
Electric Utilities2.5% |
||||||||
American Electric Power Co., Inc. |
765,000 | 49,005,900 | ||||||
Exelon Corp. |
300,000 | 10,764,000 | ||||||
PPL Corp. |
1,250,000 | 43,550,000 | ||||||
|
103,319,900
|
|
4 OPPENHEIMER EQUITY INCOME FUND
Shares | Value | |||||||
Independent Power and Renewable Electricity Producers0.8% |
||||||||
NRG Energy, Inc. |
2,093,300 | $ | 34,623,182 | |||||
Total Common Stocks (Cost $2,918,137,604)
|
|
3,709,422,547
|
| |||||
Preferred Stocks8.2% | ||||||||
Allergan plc, 5.50% Cv., Series A |
107,741 | 85,275,924 | ||||||
Dominion Resources, Inc., 6.375% Cv. |
299,500 | 15,163,685 | ||||||
Exelon Corp., 6.50% Cv. |
769,875 | 38,162,704 | ||||||
Frontier Communications Corp., 11.125% Cv., Series A, Non-Vtg. |
1,000,000 | 73,110,000 | ||||||
iStar, Inc., 4.50% Cv., Non-Vtg. |
1,239,705 | 61,278,618 | ||||||
Post Holdings, Inc., 5.25% Cv. |
88,000 | 12,826,000 | ||||||
Teva Pharmaceutical Industries Ltd., 7% Cv., Non-Vtg. |
92,500 | 57,035,500 | ||||||
Total Preferred Stocks (Cost $414,895,785)
|
|
342,852,431
|
| |||||
Principal Amount | ||||||||
Mortgage-Backed Obligations0.0% | ||||||||
Banc of America Funding Trust, Series 2007-C, Cl. 1A4, 3.135%, 5/20/364 |
$ | 66,972 | 60,851 | |||||
Federal Home Loan Mortgage Corp. Gold Pool: |
||||||||
9.00%, 8/1/22 |
192 | 195 | ||||||
9.00%, 8/1/22 |
9 | 9 | ||||||
9.00%, 3/1/24 |
149 | 160 | ||||||
9.00%, 3/1/24 |
48 | 48 | ||||||
9.00%, 1/1/25 |
274 | 315 | ||||||
9.00%, 5/1/25 |
54 | 60 | ||||||
Federal Home Loan Mortgage Corp., Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Series 151, Cl. F, 9%, 5/15/21 | 2,413 | 2,602 | ||||||
Federal National Mortgage Assn. Pool, 8.50%, 7/1/32 |
4,334 | 4,703 | ||||||
Federal National Mortgage Assn., Real Estate Mtg. Investment Conduit Multiclass Pass-Through Certificates, Interest-Only Stripped Mtg.-Backed Security: | ||||||||
Series 2001-63, Cl. SD, 35.981%, 12/18/315 |
1,941 | 392 | ||||||
Series 2001-68, Cl. SC, 23.006%, 11/25/315 |
1,298 | 272 | ||||||
Series 2002-7, Cl. SK, 12.876%, 1/25/325 |
2,095 | 420 | ||||||
Series 2002-90, Cl. SY, 11.046%, 9/25/325 |
1,896 | 369 | ||||||
Government National Mortgage Assn. I Pool: |
||||||||
8.00%, 5/15/17 |
81 | 81 | ||||||
8.50%, 8/15/17 |
10 | 10 | ||||||
8.50%, 11/15/17 |
8 | 8 | ||||||
8.50%, 12/15/17 |
6 | 6 | ||||||
8.50%, 12/15/17 |
42 | 43 | ||||||
Government National Mortgage Assn. II Pool, 2%, 3/20/264 |
6,099 | 6,305 | ||||||
RALI Trust, Series 2006-QS13, Cl. 1A8, 6%, 9/25/36 |
20,847 | 17,574 | ||||||
Wells Fargo Mortgage-Backed Securities Trust, Series 2006-AR14, Cl. 1A2, |
||||||||
3.066%, 10/25/364 |
124,862 | 117,406 | ||||||
Total Mortgage-Backed Obligations (Cost $218,193) |
|
211,829
|
| |||||
Non-Convertible Corporate Bond and Note0.0% | ||||||||
Reynolds American, Inc., 7% Sr. Unsec. Nts., 8/4/416 (Cost $359,008)
|
|
354,000
|
|
|
422,604
|
| ||
Convertible Corporate Bonds and Notes1.5% | ||||||||
MGIC Investment Corp., 9% Cv. Jr. Sub. Nts., 4/1/636 |
17,245,000 | 22,321,497 |
5 OPPENHEIMER EQUITY INCOME FUND
STATEMENT OF INVESTMENTS Unaudited / Continued
Principal Amount | Value | |||||||||||||||||||||||
Convertible Corporate Bonds and Notes (Continued) | ||||||||||||||||||||||||
Navistar International Corp., 4.75% Cv. Sr. Sub. Nts., 4/15/19 |
$ | 40,500,000 | $ | 40,170,937 | ||||||||||||||||||||
Total Convertible Corporate Bonds and Notes (Cost $55,943,200) |
|
62,492,434
|
| |||||||||||||||||||||
Shares | ||||||||||||||||||||||||
Structured Securities1.3% | ||||||||||||||||||||||||
Barclays Bank plc, Alcoa, Inc. Equity Linked Nts., 10/4/17 | 248,452 | 8,219,673 | ||||||||||||||||||||||
Barclays Bank plc, Alphabet, Inc., Cl. C Yield Enhanced Equity Debt Securities, 3/20/17 | 12,496 | 9,987,068 | ||||||||||||||||||||||
Citigroup Global Markets Holdings, Inc., Alphabet, Inc. Equity Linked Nts., 3/2/176 | 13,207 | 10,572,823 | ||||||||||||||||||||||
Credit Suisse AG (London Branch), Alphabet, Inc. Equity Linked Nts., 2/23/176 | 13,212 | 10,586,204 | ||||||||||||||||||||||
Credit Suisse AG (London Branch), Alphabet, Inc. Equity Linked Nts., 3/3/176 |
|
16,427 | 13,154,014 | |||||||||||||||||||||
Total Structured Securities (Cost $51,851,077) |
|
52,519,782
|
| |||||||||||||||||||||
Exercise Price |
Expiration Date |
Contracts | ||||||||||||||||||||||
Exchange-Traded Options Purchased0.0% | ||||||||||||||||||||||||
Abbott Laboratories Put1 |
USD | 36.000 | 2/17/17 | USD | 10,000 | 40,000 | ||||||||||||||||||
Abbott Laboratories Put1 |
USD | 37.000 | 3/17/17 | USD | 2,000 | 42,000 | ||||||||||||||||||
Bank of America Corp. Put1 |
USD | 21.000 | 2/17/17 | USD | 1,000 | 7,000 | ||||||||||||||||||
Bristol-Myers Squibb Co. Put1 |
USD | 45.000 | 3/17/17 | USD | 11,000 | 594,000 | ||||||||||||||||||
Cisco Systems, Inc. Put1 |
USD | 28.000 | 2/17/17 | USD | 1,500 | 9,000 | ||||||||||||||||||
CSX Corp. Put1 |
USD | 35.000 | 2/17/17 | USD | 1,000 | 3,000 | ||||||||||||||||||
CVS Health Corp. Put1 |
USD | 76.500 | 2/17/17 | USD | 1,500 | 150,000 | ||||||||||||||||||
General Electric Co. Put1 |
USD | 29.000 | 2/17/17 | USD | 3,750 | 60,000 | ||||||||||||||||||
Johnson & Johnson Put1 |
USD | 108.000 | 2/17/17 | USD | 1,500 | 33,000 | ||||||||||||||||||
Johnson & Johnson Put1 |
USD | 110.000 | 2/17/17 | USD | 3,000 | 102,000 | ||||||||||||||||||
Marathon Oil Corp. Put1 |
USD | 16.000 | 3/17/17 | USD | 1,000 | 66,000 | ||||||||||||||||||
Merck & Co., Inc. Put1 |
USD | 60.000 | 2/17/17 | USD | 500 | 23,500 | ||||||||||||||||||
Micron Technology, Inc. Put1 |
USD | 21.500 | 2/17/17 | USD | 500 | 6,500 | ||||||||||||||||||
Microsoft Corp. Put1 |
USD | 60.000 | 3/17/17 | USD | 1,000 | 36,000 | ||||||||||||||||||
Wells Fargo & Co. Put1 |
USD | 50.000 | 2/17/17 | USD | 3,000 | 15,000 | ||||||||||||||||||
Wells Fargo & Co. Put1 |
USD | 50.000 | 3/17/17 | USD | 1,500 | 37,500 | ||||||||||||||||||
Total Exchange-Traded Options Purchased (Cost $1,735,929)
|
|
1,224,500
|
| |||||||||||||||||||||
Total Investments, at Value (Cost $3,443,140,796) |
|
100.3% | 4,169,146,127 | |||||||||||||||||||||
Net Other Assets (Liabilities) |
(0.3) | (14,248,509 | ) | |||||||||||||||||||||
Net Assets |
100.0% | $ | 4,154,897,618 | |||||||||||||||||||||
Footnotes to Statement of Investments
1. Non-income producing security.
2. Security is a Master Limited Partnership.
3. 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 $260,102,804. See Note 6 of the accompanying Notes.
4. Represents the current interest rate for a variable or increasing rate security.
6 OPPENHEIMER EQUITY INCOME FUND
Footnotes to Statement of Investments (Continued)
5. 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 $1,453 or less than 0.005% of the Funds net assets at period end.
6. 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 $57,057,142 or 1.37% of the Funds net assets at period end.
The following issuer is or was an affiliate, as defined in the Investment Company Act of 1940, 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. There were no affiliate securities held by the Fund at period end. Transactions during the period in which the issuer was an affiliate are as follows:
|
Shares October 31, 2016 |
Gross Additions |
Gross Reductions |
Shares January 31, 2017 |
||||||||||||||||||||
Oppenheimer Institutional Government Money Market Fund, Cl. E | | 201,580,079 | 201,580,079 | | ||||||||||||||||||||
|
Income | |||||||||||||||||||||||
Oppenheimer Institutional Government Money Market Fund, Cl. E | $ | 19,020 | ||||||||||||||||||||||
Exchange-Traded Options Written at January 31, 2017 | ||||||||||||||||||||||||||||
Description | Exercise Price |
Expiration Date |
Number of Contracts |
Premiums Received |
Value | |||||||||||||||||||||||
Abbott Laboratories Put |
USD | 40.000 | 2/17/17 | USD | (11,000 | ) | $ | 1,020,913 | $ | (165,000 | ) | |||||||||||||||||
Apple, Inc. Call |
USD | 125.000 | 2/17/17 | USD | (750 | ) | 68,693 | (71,250 | ) | |||||||||||||||||||
Assured Guaranty Ltd. Call |
USD | 39.000 | 2/17/17 | USD | (2,625 | ) | 272,403 | (181,125 | ) | |||||||||||||||||||
Assured Guaranty Ltd. Call |
USD | 40.000 | 2/17/17 | USD | (2,350 | ) | 149,656 | (70,500 | ) | |||||||||||||||||||
Bank of America Corp. Call |
USD | 22.000 | 2/17/17 | USD | (1,000 | ) | 91,913 | (89,000 | ) | |||||||||||||||||||
Bank of America Corp. Put |
USD | 23.000 | 2/17/17 | USD | (1,000 | ) | 69,958 | (67,000 | ) | |||||||||||||||||||
Bank of America Corp. Call |
USD | 23.000 | 2/17/17 | USD | (1,225 | ) | 54,714 | (39,200 | ) | |||||||||||||||||||
Bristol-Myers Squibb Co. Put |
USD | 50.000 | 2/17/17 | USD | (7,500 | ) | 1,279,704 | (1,275,000 | ) | |||||||||||||||||||
CenturyLink, Inc. Call |
USD | 26.000 | 2/17/17 | USD | (500 | ) | 33,229 | (30,000 | ) | |||||||||||||||||||
CenturyLink, Inc. Call |
USD | 25.000 | 2/17/17 | USD | (50 | ) | 5,022 | (5,450 | ) | |||||||||||||||||||
Chevron Corp. Call |
USD | 115.000 | 2/17/17 | USD | (1,250 | ) | 348,692 | (30,000 | ) | |||||||||||||||||||
Cisco Systems, Inc. Put |
USD | 30.000 | 2/17/17 | USD | (1,000 | ) | 67,958 | (34,000 | ) | |||||||||||||||||||
Coca-Cola Co. (The) Call |
USD | 42.000 | 2/17/17 | USD | (500 | ) | 14,069 | (16,000 | ) | |||||||||||||||||||
Comcast Corp. Call |
USD | 76.500 | 2/17/17 | USD | (500 | ) | 17,379 | (29,500 | ) | |||||||||||||||||||
CSX Corp. Call |
USD | 46.000 | 3/17/17 | USD | (535 | ) | 158,870 | (128,400 | ) | |||||||||||||||||||
CSX Corp. Call |
USD | 37.000 | 2/17/17 | USD | (95 | ) | 10,586 | (92,150 | ) | |||||||||||||||||||
CSX Corp. Call |
USD | 36.000 | 2/17/17 | USD | (150 | ) | 21,143 | (156,375 | ) | |||||||||||||||||||
CVS Caremark Corp. Put |
USD | 80.000 | 2/17/17 | USD | (1,000 | ) | 150,206 | (244,000 | ) |
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 | |||||||||||||||||||||||
Dow Chemical Co. (The) Call | USD | 57.500 | 2/17/17 | USD | (50 | ) | $ | 8,419 | $ | (12,400 | ) | |||||||||||||||||
Eaton Corp. plc Call | USD | 72.500 | 2/17/17 | USD | (500 | ) | 29,479 | (49,000 | ) | |||||||||||||||||||
Eaton Corp. plc Call | USD | 67.500 | 2/17/17 | USD | (100 | ) | 22,940 | (40,000 | ) | |||||||||||||||||||
Ford Motor Co. Call | USD | 13.000 | 2/17/17 | USD | (2,000 | ) | 73,917 | (10,000 | ) | |||||||||||||||||||
Ford Motor Co. Put | USD | 12.500 | 2/17/17 | USD | (250 | ) | 5,990 | (8,250 | ) | |||||||||||||||||||
Ford Motor Co. Put | USD | 13.000 | 2/17/17 | USD | (3,450 | ) | 248,255 | (231,150 | ) | |||||||||||||||||||
Frontier Communications Corp. Call | USD | 3.500 | 2/17/17 | USD | (250 | ) | 2,990 | (2,500 | ) | |||||||||||||||||||
General Cable Corp. Call | USD | 21.000 | 2/17/17 | USD | (625 | ) | 46,303 | (46,875 | ) | |||||||||||||||||||
General Dynamics Corp. Call | USD | 180.000 | 2/17/17 | USD | (300 | ) | 81,586 | (96,900 | ) | |||||||||||||||||||
General Dynamics Corp. Call | USD | 175.000 | 2/17/17 | USD | (325 | ) | 167,588 | (218,400 | ) | |||||||||||||||||||
General Electric Co. Put | USD | 31.000 | 2/17/17 | USD | (1,000 | ) | 67,958 | (151,000 | ) | |||||||||||||||||||
General Electric Co. Put | USD | 29.500 | 2/17/17 | USD | (1,000 | ) | 34,999 | (31,000 | ) | |||||||||||||||||||
General Electric Co. Put | USD | 30.000 | 2/17/17 | USD | (1,250 | ) | 52,963 | (71,250 | ) | |||||||||||||||||||
General Motors Co. Call | USD | 37.000 | 2/17/17 | USD | (100 | ) | 10,896 | (8,100 | ) | |||||||||||||||||||
HP, Inc. Call | USD | 15.000 | 2/17/17 | USD | (125 | ) | 4,995 | (4,375 | ) | |||||||||||||||||||
International Business Machines Corp. Call | USD | 180.000 | 2/17/17 | USD | (250 | ) | 32,389 | (9,500 | ) | |||||||||||||||||||
International Business Machines Corp. Call | USD | 185.000 | 3/17/17 | USD | (325 | ) | 20,624 | (15,925 | ) | |||||||||||||||||||
International Paper Co. Call | USD | 55.000 | 2/17/17 | USD | (750 | ) | 70,181 | (165,750 | ) | |||||||||||||||||||
Johnson & Johnson Put | USD | 115.000 | 2/17/17 | USD | (5,750 | ) | 1,174,964 | (1,391,500 | ) | |||||||||||||||||||
JPMorgan Chase & Co. Call | USD | 85.000 | 2/17/17 | USD | (824 | ) | 87,309 | (94,760 | ) | |||||||||||||||||||
Kinder Morgan, Inc. Call | USD | 23.000 | 2/17/17 | USD | (1,750 | ) | 66,038 | (29,750 | ) | |||||||||||||||||||
Kraft Heinz Co. (The) Call | USD | 92.500 | 2/17/17 | USD | (500 | ) | 23,674 | (27,500 | ) | |||||||||||||||||||
Kroger Co. (The) Put | USD | 35.000 | 2/17/17 | USD | (750 | ) | 91,468 | (103,125 | ) | |||||||||||||||||||
Marathon Oil Corp. Put | USD | 18.000 | 2/17/17 | USD | (1,000 | ) | 81,958 | (150,000 | ) | |||||||||||||||||||
Marathon Oil Corp. Call | USD | 18.000 | 2/17/17 | USD | (750 | ) | 30,719 | (13,500 | ) | |||||||||||||||||||
Marathon Oil Corp. Call | USD | 17.000 | 2/17/17 | USD | (1,000 | ) | 85,957 | (48,000 | ) | |||||||||||||||||||
Merck & Co., Inc. Put | USD | 61.500 | 2/17/17 | USD | (327 | ) | 30,024 | (30,738 | ) | |||||||||||||||||||
Merck & Co., Inc. Put | USD | 62.500 | 2/17/17 | USD | (173 | ) | 21,618 | (23,528 | ) | |||||||||||||||||||
Micron Technology, Inc. Call | USD | 22.000 | 2/17/17 | USD | (1,675 | ) | 169,540 | (381,900 | ) | |||||||||||||||||||
Micron Technology, Inc. Put | USD | 23.000 | 2/17/17 | USD | (500 | ) | 56,478 | (18,000 | ) | |||||||||||||||||||
Micron Technology, Inc. Call | USD | 21.000 | 2/17/17 | USD | (3,000 | ) | 452,411 | (960,000 | ) | |||||||||||||||||||
Microsoft Corp. Call | USD | 65.000 | 2/17/17 | USD | (1,000 | ) | 110,467 | (59,000 | ) | |||||||||||||||||||
Microsoft Corp. Put | USD | 62.500 | 2/17/17 | USD | (1,000 | ) | 144,957 | (34,000 | ) | |||||||||||||||||||
Molson Coors Brewing Co. Call | USD | 100.000 | 2/17/17 | USD | (50 | ) | 8,345 | (4,000 | ) | |||||||||||||||||||
Morgan Stanley Call | USD | 43.000 | 2/17/17 | USD | (1,700 | ) | 167,370 | (113,900 | ) | |||||||||||||||||||
NRG Energy, Inc. Call | USD | 13.000 | 2/17/17 | USD | (33 | ) | 2,127 | (11,352 | ) | |||||||||||||||||||
Philip Morris International, Inc. Call | USD | 92.500 | 2/17/17 | USD | (25 | ) | 2,913 | (10,250 | ) | |||||||||||||||||||
Post Holdings, Inc. Call | USD | 85.000 | 2/17/17 | USD | (300 | ) | 105,886 | (69,000 | ) | |||||||||||||||||||
PPL Corp. Call | USD | 34.000 | 3/17/17 | USD | (2,075 | ) | 167,099 | (249,000 | ) | |||||||||||||||||||
Procter & Gamble Co. (The) Call | USD | 88.500 | 2/17/17 | USD | (500 | ) | 11,625 | (25,000 | ) | |||||||||||||||||||
Radian Group, Inc. Call | USD | 19.000 | 2/17/17 | USD | (625 | ) | 20,762 | (12,500 | ) | |||||||||||||||||||
Time Warner, Inc. Call | USD | 95.000 | 2/17/17 | USD | (175 | ) | 41,457 | (43,750 | ) | |||||||||||||||||||
Time Warner, Inc. Call | USD | 97.500 | 2/17/17 | USD | (27 | ) | 1,848 | (3,240 | ) |
8 OPPENHEIMER EQUITY INCOME FUND
Exchange-Traded Options Written (Continued ) | ||||||||||||||||||||||||||||
Description | Exercise Price |
Expiration Date |
Number of Contracts |
Premiums Received |
Value | |||||||||||||||||||||||
United Continental Holdings, Inc. Call | USD | 75.000 | 2/17/17 | USD | (2,000 | ) | $ | 440,909 | $ | (120,000 | ) | |||||||||||||||||
United Technologies Corp. Call | USD | 110.000 | 2/17/17 | USD | (350 | ) | 87,396 | (40,600 | ) | |||||||||||||||||||
United Technologies Corp. Call | USD | 115.000 | 2/17/17 | USD | (250 | ) | 16,490 | (1,500 | ) | |||||||||||||||||||
United Technologies Corp. Call | USD | 111.000 | 2/17/17 | USD | (25 | ) | 2,486 | (1,675 | ) | |||||||||||||||||||
Wells Fargo & Co. Put | USD | 55.000 | 2/17/17 | USD | (4,000 | ) | 551,254 | (252,000 | ) | |||||||||||||||||||
Williams Cos., Inc. Call |
USD | 30.000 | 2/17/17 | USD | (50 | ) | 1,609 | (1,450 | ) | |||||||||||||||||||
Total of Exchange-Traded Options Written |
$ | 9,074,738 | $ | (8,220,843 | ) | |||||||||||||||||||||||
9 OPPENHEIMER EQUITY INCOME FUND
NOTES TO STATEMENT OF INVESTMENTS January 31, 2017 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 Funds investment objective is to seek total return. The Funds 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.
Foreign Currency Translation. The books and records of the Fund are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
(1) Market value of investment securities, other assets and liabilities at the exchange rates prevailing at Market Close as described in Note 3.
(2) Purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.
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 Funds Board has adopted procedures for the valuation of the Funds securities and has delegated the day-to-day responsibility for valuation determinations under those procedures to the Manager. The Manager has established a Valuation Committee which is responsible for determining a fair valuation for any security for which market quotations are not readily available. The Valuation Committees fair valuation determinations are subject to review, approval and ratification by the Funds Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined.
Valuation Methods and Inputs
Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers.
The following methodologies are used to determine the market value or the fair value of the types of securities described below:
Equity securities traded on a securities exchange (including exchange-traded derivatives other than futures and futures options) are valued based on the official closing price on the principal exchange on which the security is traded, as identified by the Manager, prior to the time when the Funds assets are valued. If the official closing price is unavailable, the security is valued at the last sale price on the principal exchange on which it is traded. If the official
10 OPPENHEIMER EQUITY INCOME FUND
3. Securities Valuation (Continued)
closing price or last sales 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 companys net asset value per share.
Corporate and government debt securities (of U.S. or foreign issuers) and municipal debt securities, event-linked bonds, loans, mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities are valued at the mean between the bid and asked prices utilizing evaluated prices obtained from third party pricing services or broker-dealers who may use matrix pricing methods to determine the evaluated prices.
Short-term money market type debt securities 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.
Security Type | Standard inputs generally considered by third-party pricing vendors | |
Corporate debt, government debt, municipal, mortgage- backed and asset-backed securities | Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, the credit quality, yield, maturity, and other appropriate factors. | |
Loans | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
Event-linked bonds | Information obtained from market participants regarding reported trade data and broker-dealer price quotations. | |
Structured securities | Relevant market information such as the price of underlying financial instruments, stock market indices, foreign currencies, interest rate spreads, commodities, or the occurrence of other specific events. | |
Swaps | Relevant market information, including underlying reference assets such as credit spreads, credit event probabilities, index values, individual security values, forward interest rates, variable interest rates, volatility measures, and forward currency rates. |
If a market value or price cannot be determined for a security using the methodologies described above, or if, in the good faith opinion of the Manager, the market value or price obtained does not constitute a readily available market quotation, or a significant event has occurred that would materially affect the value of the security, the security is fair valued either (i) by a standardized fair valuation methodology applicable to the security type or the significant event as previously approved by the Valuation Committee and the Funds Board or (ii) as determined in good faith by the Managers Valuation Committee.
11 OPPENHEIMER EQUITY INCOME FUND
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
3. Securities Valuation (Continued)
The Valuation Committee considers all relevant facts that are reasonably available, through either public information or information available to the Manager, when determining the fair value of a security. Fair value determinations by the Manager are subject to review, approval and ratification by the Funds Board at its next regularly scheduled meeting covering the calendar quarter in which the fair valuation was determined. Those fair valuation standardized methodologies include, but are not limited to, valuing securities at the last sale price or initially at cost and subsequently adjusting the value based on: changes in company specific fundamentals, changes in an appropriate securities index, or changes in the value of similar securities which may be further adjusted for any discounts related to security-specific resale restrictions. When possible, such methodologies use observable market inputs such as unadjusted quoted prices of similar securities, observable interest rates, currency rates and yield curves. The methodologies used for valuing securities are not necessarily an indication of the risks associated with investing in those securities nor can it be assured that the Fund can obtain the fair value assigned to a security if it were to sell the security.
To assess the continuing appropriateness of security valuations, the Manager, or its third party service provider who is subject to oversight by the Manager, regularly compares prior day prices, prices on comparable securities, and sale prices to the current day prices and challenges those prices exceeding certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, whether through a standardized fair valuation methodology or a fair valuation determination, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.
Classifications
Each investment asset or liability of the Fund is assigned a level at measurement date based on the significance and source of the inputs to its valuation. Various data inputs are used in determining the value of each of the Funds investments as of the reporting period end. These data inputs are categorized in the following hierarchy under applicable financial accounting standards:
1) Level 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 Managers own judgments about assumptions that market participants would use in pricing the asset or liability).
The inputs used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.
The table below categorizes amounts at period end based on valuation input level:
12 OPPENHEIMER EQUITY INCOME FUND
3. Securities Valuation (Continued)
Level 1 Unadjusted Quoted Prices |
Level 2 Other Significant |
Level 3 Significant Unobservable Inputs |
Value | |||||||||||||
Assets Table |
||||||||||||||||
Investments, at Value: |
||||||||||||||||
Common Stocks |
||||||||||||||||
Consumer Discretionary |
$ | 315,296,064 | $ | | $ | | $ | 315,296,064 | ||||||||
Consumer Staples |
304,774,545 | | | 304,774,545 | ||||||||||||
Energy |
457,055,950 | | | 457,055,950 | ||||||||||||
Financials |
1,199,885,970 | | | 1,199,885,970 | ||||||||||||
Health Care |
404,898,935 | | | 404,898,935 | ||||||||||||
Industrials |
223,852,183 | | | 223,852,183 | ||||||||||||
Information Technology |
447,444,133 | | | 447,444,133 | ||||||||||||
Materials |
81,636,735 | | | 81,636,735 | ||||||||||||
Telecommunication Services |
136,634,950 | | | 136,634,950 | ||||||||||||
Utilities |
137,943,082 | | | 137,943,082 | ||||||||||||
Preferred Stocks |
342,852,431 | | | 342,852,431 | ||||||||||||
Mortgage-Backed Obligations |
| 211,829 | | 211,829 | ||||||||||||
Non-Convertible Corporate Bond and Note |
| 422,604 | | 422,604 | ||||||||||||
Convertible Corporate Bonds and Notes |
| 62,492,434 | | 62,492,434 | ||||||||||||
Structured Securities |
| 52,519,782 | | 52,519,782 | ||||||||||||
Exchange-Traded Options Purchased |
1,224,500 | | | 1,224,500 | ||||||||||||
|
|
|||||||||||||||
Total Assets |
$ | 4,053,499,478 | $ | 115,646,649 | $ | | $ | 4,169,146,127 | ||||||||
|
|
|||||||||||||||
Liabilities Table |
||||||||||||||||
Other Financial Instruments: |
||||||||||||||||
Options written, at value |
$ | (8,220,843 | ) | $ | | $ | | $ | (8,220,843) | |||||||
|
|
|||||||||||||||
Total Liabilities |
$ | (8,220,843 | ) | $ | | $ | | $ | (8,220,843) | |||||||
|
|
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 contracts 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 Funds 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 Funds investment in the Affiliated Funds.
13 OPPENHEIMER EQUITY INCOME FUND
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
4. Investments and Risks (Continued)
Each of the Affiliated Funds in which the Fund invests has its own investment risks, and those risks can affect the value of the Funds investments and therefore the value of the Funds 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.
Investments in Money Market Instruments. The Fund is permitted to invest its free cash balances in money market instruments to provide liquidity or for defensive purposes. The Fund may invest in money market instruments by investing in Class E shares of Oppenheimer Institutional Government Money Market Fund (IGMMF), formerly known as Oppenheimer Institutional Money Market Fund, which is an Affiliated Fund. IGMMF is regulated as a money market fund under the 1940 Act, as amended. The Fund may also invest in money market instruments directly or in other affiliated or unaffiliated money market funds. At period end, the Fund had no holdings in IGMMF.
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 (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 partnerships 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 MLPs 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 notes market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying Statement of Operations 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 Funds 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
14 OPPENHEIMER EQUITY INCOME FUND
4. Investments and Risks (Continued)
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 companys 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 companys sector or industry, or changes in government regulations affecting the company or its industry.
5. Market Risk Factors
The Funds 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 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 instruments price over a defined time period. Large increases or decreases in a financial instruments price over a relative time period typically indicate greater volatility risk, while small increases or decreases in its price typically indicate lower volatility risk.
6. Use of Derivatives
The Funds 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
15 OPPENHEIMER EQUITY INCOME FUND
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
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 Funds 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 Funds initial investment.
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 Funds 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.
16 OPPENHEIMER EQUITY INCOME FUND
6. Use of Derivatives (Continued)
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 $965,561 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 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 $6,192,517 and $3,902,260 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 31, 2016 |
129,632 | $ | 7,155,512 | |||||
Options written |
468,005 | 52,262,155 | ||||||
Options closed or expired |
(264,840 | ) | (22,249,197) | |||||
Options exercised |
(254,933 | ) | (28,093,732) | |||||
|
|
|||||||
Options outstanding as of January 31, 2017 |
77,864 | $ | 9,074,738 | |||||
|
|
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
17 OPPENHEIMER EQUITY INCOME FUND
NOTES TO STATEMENT OF INVESTMENTS Unaudited / Continued
6. Use of Derivatives (Continued)
may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The Funds 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 brokers, futures commission merchants or clearinghouses customers, potentially resulting in losses to the Fund.
There is the risk that a broker, futures commission merchant or clearinghouse will decline to clear a transaction on the Funds 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 Funds 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.
18 OPPENHEIMER EQUITY INCOME FUND
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 |
$ | 3,499,925,420 | ||
Federal tax cost of other investments |
(9,074,738) | |||
|
|
|||
Total federal tax cost |
$ | 3,490,850,682 | ||
|
|
|||
Gross unrealized appreciation |
$ | 814,389,451 | ||
Gross unrealized depreciation |
(144,314,849) | |||
|
|
|||
Net unrealized appreciation |
$ | 670,074,602 | ||
|
|
19 OPPENHEIMER EQUITY INCOME FUND
Item 2. Controls and Procedures.
(a) | Based on their evaluation of the registrants disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR 270.30a-3(c)) as of 1/31/2017, the registrants principal executive officer and principal financial officer found the registrants 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 registrants 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 registrants internal controls over financial reporting that occurred during the registrants last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants 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: | 3/17/2017 |
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: | 3/17/2017 |
By: | /s/ Brian S. Petersen | |
Brian S. Petersen | ||
Principal Financial Officer | ||
Date: | 3/17/2017 |
Exhibit 99.CERT
Section 302 Certifications
CERTIFICATIONS
I, Arthur P. Steinmetz, certify that:
1. | I have reviewed this report on Form N-Q of Oppenheimer Equity Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of Trustees (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Arthur P. Steinmetz |
Arthur P. Steinmetz |
Principal Executive Officer |
Date: 3/17/2017 |
Exhibit 99.CERT
Section 302 Certifications
CERTIFICATIONS
I, Brian S. Petersen, certify that:
1. | I have reviewed this report on Form N-Q of Oppenheimer Equity Income Fund; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed to the registrants auditors and the audit committee of the registrants board of Trustees (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
/s/ Brian S. Petersen |
Brian S. Petersen |
Principal Financial Officer |
Date: 3/17/2017 |