PPR Voya Prime Rate Trust

The reporting period began at a volatile time, as comments from Federal Reserve (“Fed”) Chairman Ben Bernanke at a Congressional hearing in late May surprised the market when he indicated that tapering of the Fed’s asset purchase program might begin if the economy continued to show improvement. Fears about a possible slowdown in the world’s emerging economies were exacerbated by the prospect of quantitative easing, which has been a steady source of liquidity, coming to an end. As a result, risk assets sold off across the board, with emerging market debt absorbing the brunt of the selling, although investment grade credit was certainly not immune. Simultaneously, the intermediate and long-end of the U.S. Treasury curve steepened quite dramatically as investors began to price in the likelihood of higher interest rates in the future.

The final quarter of the reporting period marked a transition from expectations of tapering “very soon” to “tapering sometime later”, and this presented varying outcomes for fixed-rate, duration-sensitive debt markets. U.S ten-year Treasury yields, which

had risen to about 3.00%, moved closer to 2.60% as the prospects for Fed tapering abated when the Federal Open Market Committee (FOMC) decided to maintain its quantitative easing measures in September. A combination of Fed jaw-boning and the ascent of dovish Janet Yellen as successor to Ben Bernanke were among the factors leading to lower U.S. yields. However, while emerging market debt did improve from its earlier tail-spin over the second half of the period, it continued to lag developed market debt.

FUND REVIEW

Emerging market debt as an asset class had a rough time after the initial rate rise in U. S. Treasuries. While emerging market countries linked to a modestly improving European economy fared better, those in Latin America and Asia that harbor high current account deficits, slackening economies, or that face political unrest, continued to swoon but at a more gradual rate than previously. Many of the nations that appeared to benefit from the Fed’s extraordinarily accommodative stance performed poorly when tapering fears

peaked, and then rebounded somewhat in terms of the prices of their debt and currencies as tapering talk abated. Nevertheless, valuations in many cases now seem cheap, broadly speaking.

In this difficult environment for emerging market debt, most areas of the Fund experienced negative returns, with local-currency denominated bonds detracting the most from performance on an absolute basis. This was partially due to volatility in foreign currencies which, combined with emerging market yield volatility, was doubly negative for Fund performance. However, while emerging market volatility may persist in the near term as the market absorbs faster U.S. economic growth and near-term tapering, we believe yields and currencies have cheapened substantially and provide much more cushion for the long term. Emerging market corporate debt fared best for the Fund. Our asset allocation into corporates was a positive contributor, along with security selection in this asset class. Thus, our decision to avoid high grade emerging market sovereign debt for the first half of the year helped the Fund. The duration component of corporate debt created a slight negative return on an absolute return basis.

In terms of our local currency investments, our limited holdings in Indonesia, South Africa and Turkey were positive contributors on a relative basis, while our Brazil holdings detracted. Although we substantially reduced

the Fund’s holdings of Brazilian debt denominated in local currency over the reporting period, our overweight exposure to Brazilian interest rates detracted when local economic and fiscal concerns intensified. In terms of external debt, our exposure to Venezuela was the main driver of negative performance. Although local-denominated debt in Mexico detracted from absolute performance due to the rise in Mexican yields, which matched the U.S. yield curve move, our position in Mexican corporate bonds and U.S.-dollar denominated bonds performed positively. Other positive performers on an absolute basis included small positions in local-currency denominated bonds of Poland and South Korea.

STRATEGY & OUTLOOK

On February 4, 2014, the Fund will change its name to Oppenheimer Emerging Markets Local Debt Fund. Consistent with this change, the Fund’s investment strategy will be modified to reflect that the Fund will invest, under normal market conditions, determined by OppenheimerFunds, Inc. (the Sub-Adviser) in its discretion, at least 80% of its net assets (plus borrowings for investment purposes) in debt securities that are economically tied to emerging market countries and denominated in local (non-U.S.) currency. The new name reflects a single, purer strategy approach focused primarily on local currency denominated bonds. We believe a greater focus on local currencies will provide investors with a dedicated vehicle for

accessing the higher-yielding local markets in the developing world. Additionally, emerging markets have been increasingly issuing more sovereign and corporate debt denominated in local currencies, which we believe will continue to support a deeper, more liquid market in local currency bonds in the long term.

Spikes in market volatility may be difficult to stomach although such potential “value creation events” do seem to be more common since 2008. The second quarter sell-off of fixed income overall was acute, and its repercussions in emerging markets debt did not fully dissipate as the third quarter progressed. While we continue to believe that the U.S. dollar is likely to remain relatively strong in the near term, the outsized spike in emerging market debt yields is not fully justified, in our view. While short-term investor activity has contributed to volatility in the less liquid emerging market instruments during the “duration aversion shock”, we expect that fundamentals may reassert themselves over time. We still believe in the long-term case for emerging market debt, especially debt denominated in local currency. This asset class continues to grow in depth and breadth, a trend we believe may continue for years to come, and therefore we anticipate greater potential for attractive opportunities.

The abrupt change in market sentiment did lay bare some fundamental challenges to

countries with high current account deficits – challenges that a prolonged period of easy money in the U.S. may have masked to some degree. However, not all emerging market countries are experiencing fragilities. Most are at a low point cyclically in their economic cycle, but very few face structural problems. Looking forward, we believe it will be “alpha” rather than “beta” that will drive emerging market debt performance, and active management will be more important than ever. Moreover, we believe that active investment decisions along currency, rates, and credit are more likely to produce positive performance (alpha) during periods that investors differentiate among markets rather than the beta associated with broad risk aversion moves. In particular, with rising developed market bond yields presenting a headwind, country and currency selection (alpha) will be critical.

During periods of underperformance, it is important to ask what has changed and what has not changed. While the Fed may be closer to reducing its stimulative measures as the domestic economy expands, the amount of liquidity injected by Japan into global capital markets may be expected to replenish much of what the Fed would remove. We believe Japan can continue to be a source of meaningful liquidity for some time, and we think that both the Bank of England’s and the European Central Bank’s (“ECB”) forward guidance will remain dovish. The ECB cut its policy rate in November and Australia is in

easing mode. Meanwhile Brazil, Indonesia, and Turkey are already tightening monetary conditions in order to reduce their imbalances, while China’s clamp-down on credit expansion is warranted, in our view, and unlikely to lead to an unreasonable contraction. While most emerging market economies are below trend growth, Gross Domestic Product growth is positive and likely to improve with the recovery in the U.S. and Europe.

		Sara J. Zervos, Ph.D. Portfolio Manager

**Represents a value less than 0.005%.

Portfolio holdings and allocations are subject to change. Percentages are as of November 29, 2013, and are based on the total market value of investments.

*November 29, 2013, was the last business day of the Fund’s semiannual period. See Note 1 of the accompanying Notes to Financial Statements.

The percentages above are based on the market value of the Fund’s securities as of November 29, 2013, and are subject to change. Except for securities labeled “Unrated,” and except for certain securities issued or guaranteed by a foreign sovereign, all securities have been rated by at least one Nationally Recognized Statistical Rating Organization (“NRSRO”), such as Standard & Poor’s (“S&P”). For securities rated only by an NRSRO other than S&P, OppenheimerFunds, Inc. converts that rating to the equivalent S&P rating. If two or more NRSROs have assigned a rating to a security, the highest S&P equivalent rating is used. Unrated securities issued or guaranteed by a foreign sovereign are assigned a credit rating equal to the highest NRSRO rating assigned to that foreign sovereign. Fund assets invested in Oppenheimer Institutional Money Market Fund are assigned that fund’s S&P rating, which is currently AAA. For the purposes of this table, “investment-grade” securities are securities rated within the NRSROs’ four highest rating categories (AAA, AA, A and BBB). Unrated securities do not necessarily indicate low credit quality, and may or may not be the equivalent of investment-grade. Please consult the Fund’s prospectus and Statement of Additional Information for further information.