UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08299
OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
(Exact name of registrant as specified in charter)
6803 SOUTH TUCSON WAY, CENTENNIAL, COLORADO 80112-3924
(Address of principal executive offices) (Zip code)
ROBERT G. ZACK, ESQ.
OPPENHEIMERFUNDS, INC.
TWO WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1008
(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
Date of fiscal year end: AUGUST
Date of reporting period: 08/31/2006
ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN GEOGRAPHICAL HOLDINGS
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Canada 35.8%
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Korea, Republic of South 8.8
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Australia 8.6
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Japan 7.8
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India 6.9
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Cayman Islands 6.7
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Hong Kong 5.2
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China 5.0
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Germany 3.2
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Norway 2.8
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of investments.
TOP TEN COMMON STOCK HOLDINGS
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EuroZinc Mining Corp. 4.0%
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Kenedix, Inc. 2.9
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HudBay Minerals, Inc. 2.6
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Paladin Resources Ltd. 2.4
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First Quantum Minerals Ltd. 2.4
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RISA Partners, Inc. 2.0
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Rio Narcea Gold Mines Ltd. 1.9
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Tencent Holdings Ltd. 1.9
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Equinox Minerals Ltd. 1.9
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Xinao Gas Holdings Ltd. 1.8
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on net assets.
For more current Fund holdings, please visit www.oppenheimerfunds.com.
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9 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
TOP HOLDINGS AND ALLOCATIONS
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REGIONAL ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Asia 43.3%
United States/Canada 37.0
Europe 9.6
Latin America 9.2
Emerging Europe 0.9
Portfolio holdings and allocations are subject to change. Percentages are as of
August 31, 2006, and are based on the total market value of investments.
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10 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED AUGUST 31, 2006, FOLLOWED BY
A GRAPHICAL COMPARISON OF THE FUND'S PERFORMANCE TO AN APPROPRIATE BROAD-BASED
MARKET INDEX.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE. During the fiscal year, despite
May's global sell-off, Oppenheimer International Small Company Fund delivered
strong performance for our shareholders in absolute terms as well as relative to
its benchmark. Strong stock selection was the most significant contributing
factor to the Fund's performance. In terms of sectors, the Fund benefited most
from exposure to basic materials, particularly mining companies, and information
technology, where select internet stocks performed well.
Four mining companies, the Canadian-based EuroZinc Mining Corp., HudBay
Minerals, Inc., and First Quantum Minerals Ltd., along with a fourth, Australia
based Paladin Resources Ltd., made significant contributions to performance. All
have benefited from the recovery of a 20-year bear market in mining companies
which decimated the supply response and eroded skilled manpower and capital
equipment. Recent demand for commodities has been unprecedented, and in the last
year, the prices of commodities like copper, zinc, and uranium have more than
doubled. At the beginning of our fiscal year, the market incorrectly anticipated
that commodity prices had peaked and this sentiment was reflected in the price
of mining stocks. But prices had not peaked and mining companies have
subsequently benefited from tight supply and growing demand.
Opera Software ASA creates internet browsers similar to Microsoft, Inc.'s
INTERNET EXPLORER. Unlike the competition, Opera Software's browser is also
being used in diverse applications like cell phones, Sony play stations, and
internet-enabled home appliances where the products have limited memory and
computing power. The market began to recognize the opportunity, and the stock
rose accordingly. We continue to hold all of these mining and information
technology stocks.
We also held some stocks which hurt performance. Xinhua Finance Ltd.,
China's leading financial information company, was hardest hit. The company
provides diverse services to the Chinese business community including a stock
market index, a debt rating agency, a business news service similar to Reuters
in the U.S., and investor relations for Chinese firms which wish to market
themselves to foreign investors. The stock fell on a combination of settlement,
technical, and valuation issues. As it is a Chinese business listed on the
Japanese stock exchange, few Japanese analysts want to follow the stock.
Moreover, settlement of trades in Xinhua Finance can be challenging. Also, the
firm's merger and acquisition activity has made the price-to-earnings (P/E)
ratio look high, although on a price-to-cash-flow basis the stock is not
expensive. Xinhua's stock price is also dependent upon the Chinese financial
markets opening up to foreign investors and that has been slow in coming. We
believe the company is positioned to benefit from the China story, and took
advantage of the sell-off to add to our position.
11 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND PERFORMANCE DISCUSSION
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Two of our holdings in Korea failed to deliver on the basic thesis behind
our original purchase and we sold both. Yedang Entertainment Co. Ltd. and Fantom
Co. Ltd., both involved in online music entertainment in Korea, did poorly. The
online music market in Korea disappointed as the online portals needed took too
long to be set up and the revenues were far less than expected. We have since
exited both stocks.
Railpower Technologies Corp., a Canadian company that has created a hybrid
energy technology system for rail locomotives, also disappointed. Railpower is
in the commercial phase of a patented hybrid locomotive which could
significantly reduce operating costs. Unfortunately, while their technology is
world class, the company experienced problems starting up their production of
locomotives, and a significant sell-off of the stock ensued. We believe the
technology is sound and that the manufacturing issue can and will be resolved
over time, and we continue to hold the stock.
In closing, we'd like to remind shareholders that investing in foreign
markets, especially in the securities of emerging countries, poses considerable
risks, including heightened volatility, political and economic uncertainty and
currency fluctuations.
COMPARING THE FUND'S PERFORMANCE TO THE MARKET. The graphs that follow show the
performance of a hypothetical $10,000 investment in each class of shares of the
Fund held until August 31, 2006. In the case of Class A, Class B and Class C
shares, performance is measured from the inception of the Classes on November
17, 1997. In the case of Class N shares, performance is measured from inception
of the Class on March 1, 2001. In the case of Class Y shares, performance is
measured from inception of the Class on September 7, 2005. The Fund's
performance reflects the deduction of the maximum initial sales charge on Class
A shares, the applicable contingent deferred sales charge on Class B, Class C
and Class N shares, and reinvestments of all dividends and capital gains
distributions. Past performance cannot guarantee future results.
The Fund's performance is compared to the performances of the HSBC James
Capel World excluding U.S. Smaller Companies Index (WexUS) and the Morgan
Stanley Capital International (MSCI) EAFE Index. The performance of small
foreign companies is represented by WexUS, an index comprised of small
international securities in Europe, UK, Southeast Asia, Japan, Australia and New
Zealand. The performance of large international companies is represented by MSCI
EAFE Index, which is comprised of common stocks issued in Europe, Australia and
the Far East. Index performance reflects the reinvestment of income but does not
consider the effect of transaction costs, and none of the data in the graphs
shows the effect of taxes. The Fund's performance reflects the effects of the
Fund's business and operating expenses. While index comparisons may be useful to
provide a benchmark for the Fund's performance, it must be noted that the Fund's
investments are not limited to the investments in either index.
12 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
CLASS A SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class A)
HSBC James Capel World excluding U.S. Smaller Companies Index
MSCI EAFE Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer HSBC James Capel
International World excluding
Small Company Fund U.S. Smaller MSCI EAFE
(Class A) Companies Index Index
11/17/1997 $ 9,425 $ 10,000 $ 10,000
11/30/1997 $ 9,529 $ 10,000 $ 10,000
02/28/1998 $ 10,509 $ 10,806 $ 11,233
05/31/1998 $ 12,187 $ 11,582 $ 11,622
08/31/1998 $ 10,858 $ 9,432 $ 10,370
11/30/1998 $ 11,800 $ 9,886 $ 11,678
02/28/1999 $ 12,646 $ 10,135 $ 11,822
05/31/1999 $ 14,648 $ 10,839 $ 12,163
08/31/1999 $ 17,708 $ 12,418 $ 13,069
11/30/1999 $ 18,461 $ 12,869 $ 14,180
02/29/2000 $ 22,241 $ 14,425 $ 14,868
05/31/2000 $ 18,284 $ 12,637 $ 14,283
08/31/2000 $ 18,714 $ 13,051 $ 14,352
11/30/2000 $ 13,013 $ 11,054 $ 12,839
02/28/2001 $ 11,953 $ 11,503 $ 12,296
05/31/2001 $ 11,545 $ 10,914 $ 11,864
08/31/2001 $ 10,387 $ 10,023 $ 10,896
11/30/2001 $ 10,189 $ 9,621 $ 10,416
02/28/2002 $ 11,134 $ 9,347 $ 9,992
05/31/2002 $ 12,265 $ 10,542 $ 10,758
08/31/2002 $ 10,615 $ 9,211 $ 9,296
11/30/2002 $ 9,937 $ 8,678 $ 9,144
02/28/2003 $ 9,219 $ 8,402 $ 8,276
05/31/2003 $ 11,307 $ 10,002 $ 9,473
08/31/2003 $ 13,981 $ 11,263 $ 10,186
11/30/2003 $ 16,881 $ 13,119 $ 11,407
02/29/2004 $ 18,742 $ 15,203 $ 12,764
05/31/2004 $ 19,076 $ 14,875 $ 12,600
08/31/2004 $ 18,902 $ 14,933 $ 12,538
11/30/2004 $ 21,977 $ 17,422 $ 14,220
02/28/2005 $ 24,593 $ 19,461 $ 15,206
05/31/2005 $ 24,401 $ 18,153 $ 14,520
08/31/2005 $ 26,719 $ 19,925 $ 15,559
11/30/2005 $ 29,229 $ 20,287 $ 16,171
02/28/2006 $ 33,990 $ 23,255 $ 17,929
05/31/2006 $ 36,413 $ 24,105 $ 18,696
08/31/2006 $ 35,666 $ 24,073 $ 19,414
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year 25.81% 5-Year 26.48% Since Inception (11/17/97) 15.57%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 18 FOR
FURTHER INFORMATION.
13 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND PERFORMANCE DISCUSSION
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CLASS B SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class B)
HSBC James Capel World excluding U.S. Smaller Companies Index
MSCI EAFE Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer HSBC James Capel
International World excluding
Small Company Fund U.S. Smaller MSCI EAFE
(Class B) Companies Index Index
11/17/1997 $ 10,000 $ 10,000 $ 10,000
11/30/1997 $ 10,110 $ 10,000 $ 10,000
02/28/1998 $ 11,130 $ 10,806 $ 11,233
05/31/1998 $ 12,880 $ 11,582 $ 11,622
08/31/1998 $ 11,450 $ 9,432 $ 10,370
11/30/1998 $ 12,420 $ 9,886 $ 11,678
02/28/1999 $ 13,273 $ 10,135 $ 11,822
05/31/1999 $ 15,349 $ 10,839 $ 12,163
08/31/1999 $ 18,523 $ 12,418 $ 13,069
11/30/1999 $ 19,275 $ 12,869 $ 14,180
02/29/2000 $ 23,180 $ 14,425 $ 14,868
05/31/2000 $ 19,017 $ 12,637 $ 14,283
08/31/2000 $ 19,445 $ 13,051 $ 14,352
11/30/2000 $ 13,491 $ 11,054 $ 12,839
02/28/2001 $ 12,377 $ 11,503 $ 12,296
05/31/2001 $ 11,909 $ 10,914 $ 11,864
08/31/2001 $ 10,697 $ 10,023 $ 10,896
11/30/2001 $ 10,477 $ 9,621 $ 10,416
02/28/2002 $ 11,424 $ 9,347 $ 9,992
05/31/2002 $ 12,570 $ 10,542 $ 10,758
08/31/2002 $ 10,859 $ 9,211 $ 9,296
11/30/2002 $ 10,127 $ 8,678 $ 9,144
02/28/2003 $ 9,396 $ 8,402 $ 8,276
05/31/2003 $ 11,493 $ 10,002 $ 9,473
08/31/2003 $ 14,184 $ 11,263 $ 10,186
11/30/2003 $ 17,111 $ 13,119 $ 11,407
02/29/2004 $ 18,998 $ 15,203 $ 12,764
05/31/2004 $ 19,336 $ 14,875 $ 12,600
08/31/2004 $ 19,160 $ 14,933 $ 12,538
11/30/2004 $ 22,277 $ 17,422 $ 14,220
02/28/2005 $ 24,928 $ 19,461 $ 15,206
05/31/2005 $ 24,734 $ 18,153 $ 14,520
08/31/2005 $ 27,083 $ 19,925 $ 15,559
11/30/2005 $ 29,628 $ 20,287 $ 16,171
02/28/2006 $ 34,454 $ 23,255 $ 17,929
05/31/2006 $ 36,910 $ 24,105 $ 18,696
08/31/2006 $ 36,153 $ 24,073 $ 19,414
AVERAGE ANNUAL TOTAL RETURNS OF CLASS B SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year 27.29% 5-Year 26.75% Since Inception (11/17/97) 15.75%
14 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
CLASS C SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class C)
HSBC James Capel World excluding U.S. Smaller Companies Index
MSCI EAFE Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer HSBC James Capel
International World excluding
Small Company Fund U.S. Smaller MSCI EAFE
(Class C) Companies Index Index
11/17/1997 $ 10,000 $ 10,000 $ 10,000
11/30/1997 $ 10,110 $ 10,000 $ 10,000
02/28/1998 $ 11,130 $ 10,806 $ 11,233
05/31/1998 $ 12,870 $ 11,582 $ 11,622
08/31/1998 $ 11,450 $ 9,432 $ 10,370
11/30/1998 $ 12,420 $ 9,886 $ 11,678
02/28/1999 $ 13,273 $ 10,135 $ 11,822
05/31/1999 $ 15,349 $ 10,839 $ 12,163
08/31/1999 $ 18,523 $ 12,418 $ 13,069
11/30/1999 $ 19,265 $ 12,869 $ 14,180
02/29/2000 $ 23,173 $ 14,425 $ 14,868
05/31/2000 $ 19,016 $ 12,637 $ 14,283
08/31/2000 $ 19,445 $ 13,051 $ 14,352
11/30/2000 $ 13,496 $ 11,054 $ 12,839
02/28/2001 $ 12,377 $ 11,503 $ 12,296
05/31/2001 $ 11,908 $ 10,914 $ 11,864
08/31/2001 $ 10,709 $ 10,023 $ 10,896
11/30/2001 $ 10,488 $ 9,621 $ 10,416
02/28/2002 $ 11,420 $ 9,347 $ 9,992
05/31/2002 $ 12,566 $ 10,542 $ 10,758
08/31/2002 $ 10,854 $ 9,211 $ 9,296
11/30/2002 $ 10,135 $ 8,678 $ 9,144
02/28/2003 $ 9,390 $ 8,402 $ 8,276
05/31/2003 $ 11,489 $ 10,002 $ 9,473
08/31/2003 $ 14,181 $ 11,263 $ 10,186
11/30/2003 $ 17,095 $ 13,119 $ 11,407
02/29/2004 $ 18,940 $ 15,203 $ 12,764
05/31/2004 $ 19,231 $ 14,875 $ 12,600
08/31/2004 $ 19,010 $ 14,933 $ 12,538
11/30/2004 $ 22,063 $ 17,422 $ 14,220
02/28/2005 $ 24,654 $ 19,461 $ 15,206
05/31/2005 $ 24,386 $ 18,153 $ 14,520
08/31/2005 $ 26,657 $ 19,925 $ 15,559
11/30/2005 $ 29,097 $ 20,287 $ 16,171
02/28/2006 $ 33,774 $ 23,255 $ 17,929
05/31/2006 $ 36,102 $ 24,105 $ 18,696
08/31/2006 $ 35,300 $ 24,073 $ 19,414
AVERAGE ANNUAL TOTAL RETURNS OF CLASS C SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year 31.42% 5-Year 26.94% Since Inception (11/17/97) 15.43%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 18 FOR
FURTHER INFORMATION.
15 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND PERFORMANCE DISCUSSION
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CLASS N SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class N)
HSBC James Capel World excluding U.S. Smaller Companies Index
MSCI EAFE Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer HSBC James Capel
International World excluding
Small Company Fund U.S. Smaller MSCI EAFE
(Class N) Companies Index Index
03/01/2001 $ 10,000 $ 10,000 $ 10,000
05/31/2001 $ 9,637 $ 9,488 $ 9,648
08/31/2001 $ 8,667 $ 8,714 $ 8,861
11/30/2001 $ 8,502 $ 8,364 $ 8,471
02/28/2002 $ 9,276 $ 8,126 $ 8,126
05/31/2002 $ 10,218 $ 9,165 $ 8,749
08/31/2002 $ 8,840 $ 8,007 $ 7,560
11/30/2002 $ 8,268 $ 7,545 $ 7,437
02/28/2003 $ 7,663 $ 7,304 $ 6,730
05/31/2003 $ 9,377 $ 8,695 $ 7,704
08/31/2003 $ 11,596 $ 9,792 $ 8,284
11/30/2003 $ 13,993 $ 11,405 $ 9,277
02/29/2004 $ 15,518 $ 13,216 $ 10,380
05/31/2004 $ 15,766 $ 12,932 $ 10,247
08/31/2004 $ 15,619 $ 12,982 $ 10,197
11/30/2004 $ 18,137 $ 15,145 $ 11,564
02/28/2005 $ 20,280 $ 16,918 $ 12,366
05/31/2005 $ 20,096 $ 15,781 $ 11,809
08/31/2005 $ 21,986 $ 17,321 $ 12,653
11/30/2005 $ 24,037 $ 17,636 $ 13,151
02/28/2006 $ 27,918 $ 20,216 $ 14,580
05/31/2006 $ 29,882 $ 20,956 $ 15,204
08/31/2006 $ 29,253 $ 20,928 $ 15,789
AVERAGE ANNUAL TOTAL RETURNS OF CLASS N SHARES WITH SALES CHARGE OF THE FUND AT
8/31/06
1-Year 32.06% 5-Year 27.54% Since Inception (3/1/01) 21.55%
16 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
CLASS Y SHARES
COMPARISON OF CHANGE IN VALUE OF $10,000 HYPOTHETICAL INVESTMENTS IN:
Oppenheimer International Small Company Fund (Class Y)
HSBC James Capel World excluding U.S. Smaller Companies Index
MSCI EAFE Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Oppenheimer HSBC James Capel
International World excluding
Small Company Fund U.S. Smaller MSCI EAFE
(Class Y) Companies Index Index
09/07/2005 $ 10,000 $ 10,000 $ 10,000
11/30/2005 $ 10,671 $ 10,182 $ 10,394
02/28/2006 $ 12,420 $ 11,671 $ 11,523
05/31/2006 $ 13,316 $ 12,098 $ 12,016
08/31/2006 $ 13,060 $ 12,082 $ 12,478
AVERAGE ANNUAL TOTAL RETURNS OF CLASS Y SHARES OF THE FUND AT 8/31/06
1-Year N/A 5-Year N/A Since Inception (9/7/05) 30.60%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT
GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN
INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE QUOTED. FOR PERFORMANCE
DATA CURRENT TO THE MOST RECENT MONTH END, VISIT US AT WWW.OPPENHEIMERFUNDS.COM,
OR CALL US AT 1.800.525.7048. FUND RETURNS INCLUDE CHANGES IN SHARE PRICE,
REINVESTED DISTRIBUTIONS, AND THE APPLICABLE SALES CHARGE: FOR CLASS A SHARES,
THE CURRENT MAXIMUM INITIAL SALES CHARGE OF 5.75%; FOR CLASS B SHARES, THE
CONTINGENT DEFERRED SALES CHARGE OF 5% (1-YEAR) AND 2% (5-YEAR); AND FOR CLASS C
AND N SHARES, THE CONTINGENT 1% DEFERRED SALES CHARGE FOR THE 1-YEAR PERIOD.
THERE IS NO SALES CHARGE FOR CLASS Y SHARES. BECAUSE CLASS B SHARES CONVERT TO
CLASS A SHARES 72 MONTHS AFTER PURCHASE, SINCE-INCEPTION RETURNS FOR CLASS B
SHARES USES CLASS A PERFORMANCE FOR THE PERIOD AFTER CONVERSION. SEE PAGE 18 FOR
FURTHER INFORMATION.
17 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES
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Total returns and the ending account values in the graphs include changes in
share price and reinvestment of dividends and capital gains distributions in a
hypothetical investment for the periods shown. The Fund's total returns shown do
not reflect the deduction of income taxes on an individual's investment. Taxes
may reduce your actual investment returns on income or gains paid by the Fund or
any gains you may realize if you sell your shares.
INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY ASKING YOUR
FINANCIAL ADVISOR, CALLING US AT 1.800.525.7048 OR VISITING OUR WEBSITE AT
WWW.OPPENHEIMERFUNDS.COM. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
The Fund's investment strategy and focus can change over time. The mention of
specific fund holdings does not constitute a recommendation by OppenheimerFunds,
Inc.
CLASS A shares of the Fund were first publicly offered on 11/17/97. Unless
otherwise noted, Class A returns include the maximum initial sales charge of
5.75%.
CLASS B shares of the Fund were first publicly offered on 11/17/97. Unless
otherwise noted, Class B returns include the applicable contingent deferred
sales charge of 5% (1-year) and 2% (5-year). Because Class B shares convert to
Class A shares 72 months after purchase, the "since-inception" return for Class
B uses Class A performance for the period after conversion. Class B shares are
subject to a 0.75% annual asset-based sales charge.
CLASS C shares of the Fund were first publicly offered on 11/17/97. Unless
otherwise noted, Class C returns include the contingent deferred sales charge of
1% for the 1-year period. Class C shares are subject to a 0.75% annual
asset-based sales charge.
CLASS N shares of the Fund were first publicly offered on 3/1/01. Class N shares
are offered only through retirement plans. Unless otherwise noted, Class N
returns include the contingent deferred sales charge of 1% for the 1-year
period. Class N shares are subject to an annual 0.25% asset-based sales charge.
18 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES
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CLASS Y shares of the Fund were first publicly offered on 9/7/05. Class Y shares
are offered principally to certain institutional investors under special
agreement with the Distributor and are not subject to a sales charge.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
19 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
FUND EXPENSES. As a shareholder of the Fund, you incur two types of costs: (1)
transaction costs, which may include sales charges (loads) on purchase payments,
contingent deferred sales charges on redemptions; and redemption fees, if any;
and (2) ongoing costs, including management fees; distribution and service fees;
and other Fund expenses. These examples are intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000.00 invested at the beginning
of the period and held for the entire 6-month period ended August 31, 2006.
ACTUAL EXPENSES. The "actual" lines of the table provide information about
actual account values and actual expenses. You may use the information on this
line for the class of shares you hold, together with the amount you invested, to
estimate the expense that you paid over the period. Simply divide your account
value by $1,000.00 (for example, an $8,600.00 account value divided by $1,000.00
= 8.60), then multiply the result by the number in the "actual" line under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES. The "hypothetical" lines of the
table provide information about hypothetical account values and hypothetical
expenses based on the Fund's actual expense ratio for each class of shares, and
an assumed rate of return of 5% per year before expenses, which is not the
Fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical example for
the class of shares you hold with the 5% hypothetical examples that appear in
the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), redemption fees, or a $12.00 fee
imposed annually on accounts valued at less than $500.00 (subject to
20 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FUND EXPENSES
- --------------------------------------------------------------------------------
exceptions described in the Statement of Additional Information). Therefore, the
"hypothetical" lines of the table are useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different
funds. In addition, if these transactional costs were included, your costs would
have been higher.
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE 6 MONTHS ENDED
(3/1/06) (8/31/06) AUGUST 31, 2006
- --------------------------------------------------------------------------------
Class A Actual $1,000.00 $1,049.30 $ 6.16
- --------------------------------------------------------------------------------
Class A Hypothetical 1,000.00 1,019.21 6.07
- --------------------------------------------------------------------------------
Class B Actual 1,000.00 1,044.70 10.72
- --------------------------------------------------------------------------------
Class B Hypothetical 1,000.00 1,014.77 10.57
- --------------------------------------------------------------------------------
Class C Actual 1,000.00 1,045.20 10.31
- --------------------------------------------------------------------------------
Class C Hypothetical 1,000.00 1,015.17 10.16
- --------------------------------------------------------------------------------
Class N Actual 1,000.00 1,047.80 8.24
- --------------------------------------------------------------------------------
Class N Hypothetical 1,000.00 1,017.19 8.12
- --------------------------------------------------------------------------------
Class Y Actual 1,000.00 1,051.50 4.20
- --------------------------------------------------------------------------------
Class Y Hypothetical 1,000.00 1,021.12 4.13
Hypothetical assumes 5% annual return before expenses.
Expenses are equal to the Fund's annualized expense ratio for that class,
multiplied by the average account value over the period, multiplied by 184/365
(to reflect the one-half year period). Those annualized expense ratios based on
the 6-month period ended August 31, 2006 are as follows:
CLASS EXPENSE RATIOS
- --------------------------
Class A 1.19%
- --------------------------
Class B 2.07
- --------------------------
Class C 1.99
- --------------------------
Class N 1.59
- --------------------------
Class Y 0.81
- --------------------------------------------------------------------------------
21 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF INVESTMENTS August 31, 2006
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--98.8%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--8.3%
- --------------------------------------------------------------------------------
HOUSEHOLD DURABLES--1.9%
Gafisa SA 1 2,000,000 $ 26,492,537
- --------------------------------------------------------------------------------
Greentown China
Holdings Ltd. 1 7,000,000 8,208,557
---------------
34,701,094
- --------------------------------------------------------------------------------
INTERNET & CATALOG RETAIL--1.1%
Submarino SA 1,000,000 20,522,388
- --------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS--1.5%
Li Ning Co. Ltd. 25,000,000 27,355,428
- --------------------------------------------------------------------------------
MEDIA--1.6%
Balaji Telefilms Ltd. 1,124,482 3,161,888
- --------------------------------------------------------------------------------
Television Eighteen
India Ltd. 625,001 8,050,405
- --------------------------------------------------------------------------------
Village Roadshow Ltd. 5,000,000 9,352,859
- --------------------------------------------------------------------------------
Village Roadshow
Ltd., Cl. A, Preference 5,000,000 8,551,185
---------------
29,116,337
- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.7%
Parkson Retail
Group Ltd. 5,000,000 16,715,420
- --------------------------------------------------------------------------------
Robinson Department
Store Public Co. Ltd. 1 50,000,000 15,034,593
---------------
31,750,013
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--0.3%
Shinwa Art Auction
Co. Ltd. 2 1,500 5,060,899
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--0.2%
Himatsingka Seide
Ltd. 1,500,000 3,805,200
- --------------------------------------------------------------------------------
CONSUMER STAPLES--3.5%
- --------------------------------------------------------------------------------
BEVERAGES--0.2%
Serm Suk Public Co.
Ltd. 8,000,000 4,065,993
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--1.2%
Wumart Stores, Inc.,
Series H 6,000,000 20,960,585
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
FOOD PRODUCTS--2.1%
China Vanguard
Group Ltd. 2 110,000,000 $ 27,580,443
- --------------------------------------------------------------------------------
Crown Confectionery
Co. Ltd. 2 110,000 11,500,052
---------------
39,080,495
- --------------------------------------------------------------------------------
ENERGY--15.9%
- --------------------------------------------------------------------------------
OIL & GAS--15.9%
Addax Petroleum
Corp. 1,3 1,000,000 24,482,041
- --------------------------------------------------------------------------------
Addax Petroleum
Corp. 250,000 6,120,510
- --------------------------------------------------------------------------------
Bear Ridge Resources
Ltd. 1 2,000,000 8,432,100
- --------------------------------------------------------------------------------
Calvalley Petroleum,
Inc., Cl. A 1 4,500,000 25,649,145
- --------------------------------------------------------------------------------
Centurion Energy
International, Inc. 1 4,000,000 26,599,113
- --------------------------------------------------------------------------------
Cyries Energy, Inc. 1 1,250,000 15,210,803
- --------------------------------------------------------------------------------
Great Eastern
Shipping Co. Ltd. 3,000,000 17,448,157
- --------------------------------------------------------------------------------
Gulf Keystone
Petroleum Ltd. 1,2 16,000,000 19,116,527
- --------------------------------------------------------------------------------
Paladin Resources Ltd. 1 11,000,000 44,511,972
- --------------------------------------------------------------------------------
Petrolifera Petroleum
Ltd. 1 1,000,000 18,411,291
- --------------------------------------------------------------------------------
Solana Resources
Ltd. 1,2 8,000,000 9,843,481
- --------------------------------------------------------------------------------
Sterling Energy plc 1 60,000,000 23,419,650
- --------------------------------------------------------------------------------
SXR Uranium One,
Inc. 1 3,500,000 27,707,410
- --------------------------------------------------------------------------------
UrAsia Energy Ltd. 1 10,000,000 26,237,221
---------------
293,189,421
- --------------------------------------------------------------------------------
FINANCIALS--9.0%
- --------------------------------------------------------------------------------
CAPITAL MARKETS--2.0%
RISA Partners, Inc. 2 9,000 36,722,177
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--0.9%
Karnataka Bank Ltd. 2 7,000,000 16,606,855
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.0%
KIWOOM.COM
Securities Co. Ltd. 600,000 18,225,320
22 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
REAL ESTATE MANAGEMENT & DEVELOPMENT--5.1%
Guangzhou R&F
Properties Co. Ltd.,
Series H 4,000,000 $ 20,109,936
- --------------------------------------------------------------------------------
Hoosiers Corp. 16,000 21,261,553
- --------------------------------------------------------------------------------
Kenedix, Inc. 11,000 53,034,627
---------------
94,406,116
- --------------------------------------------------------------------------------
HEALTH CARE--3.7%
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.1%
Imaging Dynamics
Co. Ltd. 1,2 2,000,000 6,423,595
- --------------------------------------------------------------------------------
Imaging Dynamics
Co. Ltd. 1,2 4,000,000 12,847,191
---------------
19,270,786
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--2.2%
Apollo Hospitals
Enterprise Ltd. 1,500,000 14,200,602
- --------------------------------------------------------------------------------
Arques Industries
AG 2 1,700,000 26,527,449
---------------
40,728,051
- --------------------------------------------------------------------------------
PHARMACEUTICALS--0.4%
Norwood Abbey
Ltd. 1,2 14,000,000 2,030,906
- --------------------------------------------------------------------------------
Norwood
Immunology Ltd. 1,2,4 15,000,000 5,712,110
---------------
7,743,016
- --------------------------------------------------------------------------------
INDUSTRIALS--9.2%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--3.5%
SBI VeriTrans Co.
Ltd. 1,2 9,750 9,384,982
- --------------------------------------------------------------------------------
Wirecard AG 2 5,000,000 32,413,042
- --------------------------------------------------------------------------------
Xinhua Finance
Ltd. 1,2 5,000 2,491,588
- --------------------------------------------------------------------------------
Xinhua Finance
Ltd., Sponsored
ADR 1,2 4,000,000 19,960,000
---------------
64,249,612
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--3.3%
IVRCL
Infrastructures &
Projects Ltd. 2 6,000,000 $ 29,745,353
- --------------------------------------------------------------------------------
Nagarjuna
Construction Co.
Ltd. 2,716,000 17,016,220
- --------------------------------------------------------------------------------
Nagarjuna
Construction Co.
Ltd., GDR 1,4 2,262,000 13,956,540
---------------
60,718,113
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.3%
Beijing Enterprises
Holdings Ltd., Cl. H 15,000,000 24,265,281
- --------------------------------------------------------------------------------
MACHINERY--1.1%
Electrovaya, Inc. 1 2,716,500 417,810
- --------------------------------------------------------------------------------
Fong's Industries
Co. Ltd. 16,000,000 10,574,432
- --------------------------------------------------------------------------------
Railpower
Technologies
Corp. 1,2 5,000,000 8,775,898
---------------
19,768,140
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--16.3%
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.3%
Manine Media
Co. Ltd. 1,2 2,256,470 6,604,682
- --------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--7.3%
auFeminin.com
SA 1,2 600,000 18,141,054
- --------------------------------------------------------------------------------
CDNetworks Co.
Ltd. 1,2 600,000 20,409,862
- --------------------------------------------------------------------------------
Empas Corp. 1,2 900,000 10,719,859
- --------------------------------------------------------------------------------
Mobilians Co.
Ltd. 2 1,554,094 8,997,620
- --------------------------------------------------------------------------------
Neowiz Corp. 300,000 22,881,825
- --------------------------------------------------------------------------------
Opera Software
ASA 1,2 8,000,000 18,222,082
- --------------------------------------------------------------------------------
Tencent Holdings Ltd. 16,000,000 34,973,802
---------------
134,346,104
23 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
IT SERVICES--1.6%
Travelsky
Technology Ltd.,
Cl. H 2 25,000,000 $ 29,251,985
- --------------------------------------------------------------------------------
SOFTWARE--7.1%
Ahnlab, Inc. 2 1,000,000 20,493,082
- --------------------------------------------------------------------------------
Certicom Corp. 1,2 3,000,000 17,099,430
- --------------------------------------------------------------------------------
Duzon Digital
Ware Co. Ltd. 2 1,200,000 22,327,969
- --------------------------------------------------------------------------------
Fast Search &
Transfer ASA 1 9,000,000 29,468,523
- --------------------------------------------------------------------------------
Intelligent Wave, Inc. 2 16,000 15,385,987
- --------------------------------------------------------------------------------
MacDonald,
Dettwiler &
Associates Ltd. 1 250,000 8,651,497
- --------------------------------------------------------------------------------
Ninetowns Digital
World Trade
Holdings Ltd.,
ADR 1,2 3,000,000 14,430,000
- --------------------------------------------------------------------------------
Trolltech ASA 1 1,219,000 3,624,992
---------------
131,481,480
- --------------------------------------------------------------------------------
MATERIALS--27.7%
- --------------------------------------------------------------------------------
CHEMICALS--0.5%
Allen-Vanguard
Corp. 1,2 2,400,000 5,406,677
- --------------------------------------------------------------------------------
Hikal Ltd. 446,722 3,501,490
---------------
8,908,167
- --------------------------------------------------------------------------------
METALS & MINING--27.2%
Alamos Gold, Inc. 1 3,000,000 24,156,338
- --------------------------------------------------------------------------------
Anvil Mining Ltd. 1,2 3,000,000 24,699,177
- --------------------------------------------------------------------------------
Baffinland Iron
Mines Corp. 1 1,800,000 3,403,601
- --------------------------------------------------------------------------------
Bema Gold Corp. 1 4,000,000 21,677,373
- --------------------------------------------------------------------------------
Eldorado Gold Corp. 1 4,000,000 19,795,531
- --------------------------------------------------------------------------------
Equinox Minerals
Ltd. 1,2,3 24,000,000 34,741,699
- --------------------------------------------------------------------------------
EuroZinc Mining
Corp. 1 26,000,000 73,627,070
- --------------------------------------------------------------------------------
First Quantum
Minerals Ltd. 800,000 43,499,502
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
METALS & MINING Continued
Fortescue Metals
Group Ltd. 1 3,500,000 $ 26,248,977
- --------------------------------------------------------------------------------
HudBay Minerals,
Inc. 1 3,500,000 47,530,082
- --------------------------------------------------------------------------------
IAMGOLD Corp. 1,000,000 10,980,000
- --------------------------------------------------------------------------------
Ivernia, Inc. 1 9,050,000 8,924,726
- --------------------------------------------------------------------------------
Ivernia, Inc. 1,4 3,200,000 3,155,704
- --------------------------------------------------------------------------------
Kimberley Diamond
Co. NL 1 10,000,000 7,579,954
- --------------------------------------------------------------------------------
Macarthur Coal Ltd. 6,500,000 24,764,079
- --------------------------------------------------------------------------------
Minara Resources Ltd. 12,000,000 32,608,683
- --------------------------------------------------------------------------------
Miramar Mining
Corp. 1,2 4,000,000 16,791,821
- --------------------------------------------------------------------------------
Olympus Pacific
Minerals, Inc. 1,2 13,000,000 5,763,141
- --------------------------------------------------------------------------------
Rio Narcea Gold
Mines Ltd. 1,2 14,000,000 35,085,497
- --------------------------------------------------------------------------------
Stornoway Diamond
Corp. 1 3,600,000 3,550,167
- --------------------------------------------------------------------------------
Tenke Mining Corp. 1 2,000,000 23,052,565
- --------------------------------------------------------------------------------
Tiberon Minerals Ltd. 1 2,000,000 4,668,416
- --------------------------------------------------------------------------------
Tiberon Minerals Ltd. 1,3 3,000,000 7,002,624
---------------
503,306,727
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.0%
- --------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.0%
Danal Co. Ltd. 1,2 2,300,000 19,356,080
- --------------------------------------------------------------------------------
UTILITIES--4.2%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.0%
Geodynamics Ltd. 1 3,000,000 2,336,306
- --------------------------------------------------------------------------------
Sayano-Shushenskaya
Hydro-Power Station 9,850,000 8,766,500
- --------------------------------------------------------------------------------
Volzhskaya
Hydroelectric Power
Station OJSC 4,500,000 1,203,750
- --------------------------------------------------------------------------------
Zhigulyovskaya
Hydraulic Power
Station 4 36,000,000 7,290,000
---------------
19,596,556
24 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
VALUE
SHARES SEE NOTE 1
- --------------------------------------------------------------------------------
GAS UTILITIES--1.8%
Xinao Gas Holdings
Ltd. 35,000,000 $ 33,302,260
- --------------------------------------------------------------------------------
WATER UTILITIES--1.4%
Guangdong
Investment Ltd. 65,000,000 25,240,282
---------------
Total Common
Stocks
(Cost $1,475,316,656) 1,823,705,643
VALUE
DATE STRIKE CONTRACTS SEE NOTE 1
- ------------------------------------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
- ------------------------------------------------------------------------------------------------------------
Norwood Immunology Ltd. Call 1 (Cost $0) 12/31/06 0.57GBP 1,250,000 $ 352
UNITS
- ------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- ------------------------------------------------------------------------------------------------------------
Goodpack Ltd. Wts., Exp. 4/13/07 1 (Cost $8,752) 242,000 106,103
PRINCIPAL
AMOUNT
- ------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.2%
- ------------------------------------------------------------------------------------------------------------
Undivided interest of 2.54% in joint repurchase agreement (Principal
Amount/Value $886,796,000, with a maturity value of $886,924,585) with
UBS Warburg LLC, 5.22%, dated 8/31/06, to be repurchased at $22,510,264
on 9/1/06, collateralized by Federal National Mortgage Assn., 5%-5.50%,
9/1/35-12/1/35, with a value of $906,809,462 (Cost $22,507,000) $ 22,507,000 22,507,000
- ------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,497,832,408) 100.0% 1,846,319,098
- ------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (0.0) (642,668)
---------------------------------
NET ASSETS 100.0% $ 1,845,676,430
=================================
25 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Non-income producing security.
2. Represents ownership of at least 5% of the voting securities of the issuer,
and is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended August 31, 2006. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES GROSS GROSS SHARES
AUGUST 31, 2005 ADDITIONS REDUCTIONS AUGUST 31, 2006
- ---------------------------------------------------------------------------------------------------------------------------------
Ahnlab, Inc. 750,000 250,000 -- 1,000,000
Allen-Vanguard Corp. 2,400,000 -- -- 2,400,000
Anvil Mining Ltd. -- 3,000,000* -- 3,000,000
Arques Industries AG -- 1,700,000 -- 1,700,000
auFeminin.com SA 600,000 -- -- 600,000
Bluecord Technology Corp. 966,476 -- 966,476 --
CDNetworks Co. Ltd. -- 600,000 -- 600,000
Certicom Corp. 2,500,000 500,000 -- 3,000,000
China Vanguard Group Ltd. (formerly B&B Group Holdings Ltd.) 32,000,000 78,000,000 -- 110,000,000
Crown Confectionery Co. Ltd. 90,000 20,000 -- 110,000
Danal Co. Ltd. 1,200,000 1,100,000 -- 2,300,000
Duzon Digital Ware Co. Ltd. 600,000 600,000* -- 1,200,000
Electrovaya, Inc.** 4,000,000 -- 1,283,500 2,716,500
Emotion Corp. 300,000 362,682 662,682 --
Empas Corp. -- 900,000 -- 900,000
Equinox Minerals Ltd. -- 24,000,000 -- 24,000,000
Gulf Keystone Petroleum Ltd. 9,750,000 6,250,000 -- 16,000,000
HudBay Minerals, Inc.** -- 4,000,000 500,000 3,500,000
Imaging Dynamics Co. Ltd. 2,000,000 -- -- 2,000,000
Imaging Dynamics Co. Ltd. 4,000,000 -- -- 4,000,000
Intelligent Wave, Inc. 5,000 11,000*** -- 16,000
IVRCL Infrastructures & Projects Ltd. -- 6,000,000* -- 6,000,000
Karnataka Bank Ltd. 4,500,000 2,500,000 -- 7,000,000
Manine Media Co. Ltd. -- 2,256,470* -- 2,256,470
Miramar Mining Corp. -- 4,000,000 -- 4,000,000
Mobilians Co. Ltd. 1,000,000 654,094* 100,000 1,554,094
Neowiz Corp.** 400,000 152,600 252,600 300,000
Ninetowns Digital World Trade Holdings Ltd., ADR 1,250,000 1,751,800 1,800 3,000,000
Norwood Abbey Ltd. 8,225,000 5,775,000 -- 14,000,000
Norwood Immunology Ltd. 5,000,000 10,000,000 -- 15,000,000
Olympus Pacific Minerals, Inc. -- 13,000,000 -- 13,000,000
Opera Software ASA 8,000,000 -- -- 8,000,000
Railpower Technologies Corp. 1,250,000 3,750,000 -- 5,000,000
Rio Narcea Gold Mines Ltd. 6,000,000 8,000,000 -- 14,000,000
RISA Partners, Inc. -- 9,000 -- 9,000
SBI VeriTrans Co. Ltd. 604 9,146*** -- 9,750
Shinwa Art Auction Co. Ltd. -- 1,500*** -- 1,500
Solana Resources Ltd. -- 8,000,000 -- 8,000,000
SXR Uranium One, Inc. (formerly Southern Cross Resources, Inc.)** 8,500,000 1,800,000 6,800,000 3,500,000
Trafficmaster plc 10,000,000 -- 10,000,000 --
Travelsky Technology Ltd., Cl. H 13,000,000 12,000,000 -- 25,000,000
Wirecard AG -- 5,000,000*** -- 5,000,000
Xillix Technologies Corp. 15,000,000 -- 15,000,000 --
26 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
SHARES GROSS GROSS SHARES
AUGUST 31, 2005 ADDITIONS REDUCTIONS AUGUST 31, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
Xinhua Finance Ltd. 5,000 1,340 1,340* 5,000
Xinhua Finance Ltd., Sponsored ADR -- 4,000,000 -- 4,000,000
Yedang Entertainment Co. Ltd. 1,000,000 400,000 1,400,000 --
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Ahnlab, Inc. $ 20,493,082 $ 307,992 $ --
Allen-Vanguard Corp. 5,406,677 -- --
Anvil Mining Ltd. 24,699,177 -- --
Arques Industries AG 26,527,449 357,523 --
auFeminin.com SA 18,141,054 -- --
Bluecord Technology Corp. -- -- (4,101,001)
CDNetworks Co. Ltd. 20,409,862 -- --
Certicom Corp. 17,099,430 -- --
China Vanguard Group Ltd. (formerly B&B Group Holdings Ltd.) 27,580,443 132,828 --
Crown Confectionery Co. Ltd. 11,500,052 94,593 --
Danal Co. Ltd. 19,356,080 -- --
Duzon Digital Ware Co. Ltd. 22,327,969 269,578 --
Electrovaya, Inc.** -- -- (1,874,465)
Emotion Corp. -- -- (8,311,227)
Empas Corp. 10,719,859 -- --
Equinox Minerals Ltd. 34,741,699 -- --
Gulf Keystone Petroleum Ltd. 19,116,527 -- --
HudBay Minerals, Inc.** -- -- 3,649,522
Imaging Dynamics Co. Ltd. 6,423,595 -- --
Imaging Dynamics Co. Ltd. 12,847,191 -- --
Intelligent Wave, Inc. 15,385,987 63,981 --
IVRCL Infrastructures & Projects Ltd. 29,745,353 -- --
Karnataka Bank Ltd. 16,606,855 453,701 --
Manine Media Co. Ltd. 6,604,682 -- --
Miramar Mining Corp. 16,791,821 -- --
Mobilians Co. Ltd. 8,997,620 3 (433,679)
Neowiz Corp.** -- -- 10,228,684
Ninetowns Digital World Trade Holdings Ltd., ADR 14,430,000 -- (5,346)
Norwood Abbey Ltd. 2,030,906 -- --
Norwood Immunology Ltd. 5,712,110 -- --
Olympus Pacific Minerals, Inc. 5,763,141 -- --
Opera Software ASA 18,222,082 -- --
Railpower Technologies Corp. 8,775,898 -- --
Rio Narcea Gold Mines Ltd. 35,085,497 -- --
RISA Partners, Inc. 36,722,177 53,462 --
SBI VeriTrans Co. Ltd. 9,384,982 -- --
Shinwa Art Auction Co. Ltd. 5,060,899 -- --
Solana Resources Ltd. 9,843,481 -- --
SXR Uranium One, Inc. (formerly Southern Cross Resources, Inc.)** -- -- --
Trafficmaster plc -- -- (6,751,501)
Travelsky Technology Ltd., Cl. H 29,251,985 718,593 --
Wirecard AG 32,413,042 -- --
27 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
VALUE DIVIDEND REALIZED
SEE NOTE 1 INCOME GAIN (LOSS)
- ----------------------------------------------------------------------------------------------------------------------------------
Xillix Technologies Corp. $ -- $ -- $ (8,074,598)
Xinhua Finance Ltd. 2,491,588 -- --
Xinhua Finance Ltd., Sponsored ADR 19,960,000 -- --
Yedang Entertainment Co. Ltd. -- -- (2,264,555)
-------------------------------------------------
$ 626,670,252 $ 2,452,254 $ (17,938,166)
=================================================
* Result of a corporate action.
** No longer an affiliate as of August 31, 2006.
*** All or a portion of the transactions were the result of a stock split or
dividend.
3. 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 $66,226,364 or 3.59% of the Fund's net
assets as of August 31, 2006.
4. Illiquid security. The aggregate value of illiquid securities as of August
31, 2006 was $30,114,354, which represents 1.63% of the Fund's net assets. See
Note 6 of accompanying Notes.
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
GEOGRAPHIC HOLDINGS VALUE PERCENT
- ------------------------------------------------------------------------
Canada $ 660,420,247 35.8%
Korea, Republic of South 161,516,351 8.8
Australia 157,984,921 8.6
Japan 143,341,813 7.8
India 127,492,710 6.9
Cayman Islands 123,211,933 6.7
Hong Kong 96,755,415 5.2
China 92,961,063 5.0
Germany 58,940,491 3.2
Norway 51,315,597 2.8
United Kingdom 48,248,639 2.6
Brazil 47,014,925 2.5
United States 22,507,000 1.2
Thailand 19,100,586 1.0
France 18,141,054 1.0
Russia 17,260,250 0.9
Singapore 106,103 0.0
--------------------------------
Total $ 1,846,319,098 100.0%
================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES August 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $898,731,409) $ 1,219,648,846
Affiliated companies (cost $599,100,999) 626,670,252
----------------
1,846,319,098
- -------------------------------------------------------------------------------------------------
Cash 94,296
- -------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 4,652,370
Interest and dividends 471,317
Investments sold 38,864
Other 18,191
----------------
Total assets 1,851,594,136
- -------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 16
- -------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed 3,768,961
Distribution and service plan fees 700,703
Foreign capital gains tax 682,480
Transfer and shareholder servicing agent fees 261,255
Shareholder communications 157,716
Trustees' compensation 97,587
Other 248,988
----------------
Total liabilities 5,917,706
- -------------------------------------------------------------------------------------------------
NET ASSETS $ 1,845,676,430
================
- -------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- -------------------------------------------------------------------------------------------------
Paid-in capital $ 1,488,208,327
- -------------------------------------------------------------------------------------------------
Accumulated net investment loss (6,323,790)
- -------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 15,987,124
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies 347,804,769
----------------
NET ASSETS $ 1,845,676,430
================
29 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- --------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $1,330,250,855 and 56,838,966 shares of beneficial interest
outstanding) $23.40
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price) $24.83
- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $124,504,765 and 5,549,853 shares of beneficial interest
outstanding) $22.43
- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $242,408,130 and 10,801,586 shares of beneficial interest
outstanding) $22.44
- --------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $51,761,278 and 2,271,204 shares of beneficial interest
outstanding) $22.79
- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $96,751,402 and 4,121,933 shares of beneficial
interest outstanding) $23.47
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS For the Year Ended August 31, 2006
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
INVESTMENT INCOME
- -------------------------------------------------------------------------------------
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $433,583) $ 9,309,839
Affiliated companies (net of foreign withholding taxes of $204,708) 2,452,254
- -------------------------------------------------------------------------------------
Interest 2,430,161
- -------------------------------------------------------------------------------------
Other income 9,577
- -------------------------------------------------------------------------------------
Portfolio lending fees 349
-------------
Total investment income 14,202,180
- -------------------------------------------------------------------------------------
EXPENSES
- -------------------------------------------------------------------------------------
Management fees 10,933,455
- -------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 2,648,779
Class B 1,145,096
Class C 1,839,611
Class N 190,318
- -------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,589,921
Class B 293,184
Class C 359,258
Class N 102,941
Class Y 8,960
- -------------------------------------------------------------------------------------
Shareholder communications:
Class A 232,727
Class B 52,143
Class C 53,132
Class N 5,453
Class Y 596
- -------------------------------------------------------------------------------------
Custodian fees and expenses 594,799
- -------------------------------------------------------------------------------------
Trustees' compensation 88,456
- -------------------------------------------------------------------------------------
Other 103,570
-------------
Total expenses 20,242,399
Less reduction to custodian expenses (2,538)
-------------
Net expenses 20,239,861
- -------------------------------------------------------------------------------------
NET INVESTMENT LOSS (6,037,681)
31 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS Continued
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments:
Unaffiliated companies $ 74,303,670
Affiliated companies (17,938,166)
Foreign currency transactions 13,323,051
--------------
Net realized gain 69,688,555
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments (net of foreign capital gains tax of $403,420) 212,257,352
Translation of assets and liabilities denominated in foreign currencies 33,622,973
--------------
Net change in unrealized appreciation 245,880,325
- ----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 309,531,199
==============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2006 2005
- -----------------------------------------------------------------------------------------------------------------
OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment loss $ (6,037,681) $ (1,640,625)
- -----------------------------------------------------------------------------------------------------------------
Net realized gain 69,688,555 78,637,389
- -----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 245,880,325 71,289,803
-----------------------------------
Net increase in net assets resulting from operations 309,531,199 148,286,567
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A -- (1,819,047)
Class B -- --
Class C -- (41,765)
Class N -- (36,939)
Class Y -- --
- -----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A (78,465,497) (5,454,270)
Class B (9,877,066) (1,056,552)
Class C (12,481,158) (901,322)
Class N (2,719,549) (131,786)
Class Y (2,218,004) --
- -----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A 622,905,053 245,743,351
Class B 27,567,174 16,989,797
Class C 132,578,217 37,805,237
Class N 30,341,396 9,886,814
Class Y 94,327,942 --
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Total increase 1,111,489,707 449,270,085
- -----------------------------------------------------------------------------------------------------------------
Beginning of period 734,186,723 284,916,638
-----------------------------------
End of period (including accumulated net investment loss
of $6,323,790 and $2,901,241, respectively) $ 1,845,676,430 $ 734,186,723
===================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
CLASS A YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.48 $ 14.14 $ 10.51 $ 7.98 $ 7.89
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.05) 1 (.02) 1 (.04) .01 .01
Net realized and unrealized gain 6.15 5.78 3.73 2.52 .16
-------------------------------------------------------------------
Total from investment operations 6.10 5.76 3.69 2.53 .17
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.11) (.06) -- (.08)
Distributions from net realized gain (2.18) (.31) -- -- --
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.18) (.42) (.06) -- (.08)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.40 $ 19.48 $ 14.14 $ 10.51 $ 7.98
===================================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 33.49% 41.35% 35.20% 31.70% 2.20%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 1,330,251 $ 552,861 $ 204,938 $ 132,342 $ 40,089
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 1,098,056 $ 353,479 $ 207,202 $ 48,879 $ 35,136
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.24)% (0.12)% (0.26)% 0.29% (0.17)%
Total expenses 1.20% 1.31% 1.34% 1.69% 2.16%
Expenses after payments and waivers
and reduction to custodian expenses 1.20% 1.31% 1.34% 1.60% 1.88%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 51% 124% 53% 62%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
CLASS B YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.91 $ 13.77 $ 10.28 $ 7.87 $ 7.77
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.24) 1 (.17) 1 (.13) (.02) (.07)
Net realized and unrealized gain 5.94 5.62 3.62 2.43 .19
-------------------------------------------------------------------
Total from investment operations 5.70 5.45 3.49 2.41 .12
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- -- (.02)
Distributions from net realized gain (2.18) (.31) -- -- --
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.18) (.31) -- -- (.02)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.43 $ 18.91 $ 13.77 $ 10.28 $ 7.87
===================================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 32.29% 40.07% 33.95% 30.62% 1.51%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 124,505 $ 78,469 $ 43,478 $ 23,355 $ 18,859
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 114,900 $ 60,395 $ 37,393 $ 16,884 $ 16,868
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (1.11)% (1.02)% (1.14)% (0.28)% (0.94)%
Total expenses 2.09% 2.23% 2.35% 2.85% 2.93%
Expenses after payments and waivers
and reduction to custodian expenses 2.09% 2.23% 2.31% 2.38% 2.65%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 51% 124% 53% 62%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS Continued
- --------------------------------------------------------------------------------
CLASS C YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 18.90 $ 13.76 $ 10.27 $ 7.86 $ 7.77
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.23) 1 (.16) 1 (.09) (.02) (.06)
Net realized and unrealized gain 5.95 5.63 3.59 2.43 .16
-------------------------------------------------------------------
Total from investment operations 5.72 5.47 3.50 2.41 .10
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.02) (.01) -- (.01)
Distributions from net realized gain (2.18) (.31) -- -- --
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.18) (.33) (.01) -- (.01)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.44 $ 18.90 $ 13.76 $ 10.27 $ 7.86
===================================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 32.42% 40.23% 34.05% 30.66% 1.35%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 242,408 $ 86,184 $ 32,401 $ 12,793 $ 6,558
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 184,832 $ 55,819 $ 26,486 $ 7,489 $ 6,180
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (1.06)% (0.96)% (1.00)% (0.38)% (0.95)%
Total expenses 2.01% 2.14% 2.19% 2.69% 2.94%
Expenses after payments and waivers
and reduction to custodian expenses 2.01% 2.14% 2.19% 2.39% 2.66%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 51% 124% 53% 62%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
CLASS N YEAR ENDED AUGUST 31, 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 19.08 $ 13.90 $ 10.35 $ 7.89 $ 7.87
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) (.14) 1 (.09) 1 (.05) (.03) .08
Net realized and unrealized gain 6.03 5.67 3.64 2.49 .07
-------------------------------------------------------------------
Total from investment operations 5.89 5.58 3.59 2.46 .15
- ---------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- (.09) (.04) -- (.13)
Distributions from net realized gain (2.18) (.31) -- -- --
-------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (2.18) (.40) (.04) -- (.13)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.79 $ 19.08 $ 13.90 $ 10.35 $ 7.89
===================================================================
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 33.06% 40.76% 34.70% 31.18% 1.99%
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 51,761 $ 16,673 $ 4,101 $ 1,128 $ 406
- ---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 38,262 $ 9,698 $ 2,531 $ 625 $ 151
- ---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss) (0.63)% (0.51)% (0.50)% 0.25% (0.33)%
Total expenses 1.57% 1.75% 1.78% 1.96% 2.32%
Expenses after payments and waivers
and reduction to custodian expenses 1.57% 1.68% 1.75% 1.90% 2.04%
- ---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 35% 51% 124% 53% 62%
1. Per share amounts calculated based on the average shares outstanding during
the period.
2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
3. Annualized for periods of less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS Continued
- ----------------------------------------------------------------------------
CLASS Y PERIOD ENDED AUGUST 31, 2006 1
- ----------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ----------------------------------------------------------------------------
Net asset value, beginning of period $ 19.97
- ----------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .01
Net realized and unrealized gain 5.67
------------
Total from investment operations 5.68
- ----------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income --
Distributions from net realized gain (2.18)
------------
Total dividends and/or distributions to shareholders (2.18)
- ----------------------------------------------------------------------------
Net asset value, end of period $ 23.47
============
- ----------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 30.60%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 96,751
- ----------------------------------------------------------------------------
Average net assets (in thousands) $ 43,043
- ----------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 0.03%
Total expenses 0.82% 5
- ----------------------------------------------------------------------------
Portfolio turnover rate 35%
1. For the period from September 7, 2005 (inception of offering) to August 31,
2006.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
4. Annualized for periods of less than one full year.
5. Reduction to custodian expenses less than 0.01%.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer International Small Company Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek long-term capital
appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager).
The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The Fund assesses a 2% fee on the proceeds of
fund shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund) within 30 days of their purchase. The fee, which is retained
by the Fund, is accounted for as an addition to paid-in capital.
The following is a summary of significant accounting policies consistently
followed by the Fund.
- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of the New York Stock Exchange (the "Exchange"), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic exchanges are valued based on the last sale
price of the security traded on that exchange prior to the time when the Fund's
assets are valued. Securities traded on NASDAQ(R) are valued based on the
closing price provided by NASDAQ prior to the time when the Fund's assets are
valued. In the absence of a sale, the security is valued at the last sale price
on the prior trading day, if it is within the spread of the closing "bid" and
"asked" prices, and if not, at the closing bid price. Securities traded on
foreign exchanges are valued based on the last sale price on the principal
exchange on which the security is traded, as identified by the portfolio pricing
service, prior to the time when the Fund's assets are valued. In the absence of
a sale, the security is valued at the official closing price on the principal
exchange. Corporate, government and municipal debt instruments having a
remaining maturity in excess of sixty days and all mortgage-backed securities
39 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
will be valued at the mean between the "bid" and "asked" prices. Futures
contracts traded on a commodities or futures exchange will be valued at the
final settlement price or official closing price on the principal exchange as
reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. Securities
(including restricted securities) for which market quotations are not readily
available are valued at their fair value. Foreign and domestic securities whose
values have been materially affected by what the Manager identifies as a
significant event occurring before the Fund's assets are valued but after the
close of their respective exchanges will be fair valued. Fair value is
determined in good faith using consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
- --------------------------------------------------------------------------------
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 business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.
The effect of changes in foreign currency exchange rates on investments is
separately identified from the fluctuations arising from changes in market
values of securities held and reported with all other foreign currency gains and
losses in the Fund's Statement of Operations.
- --------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.
40 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.
The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.
NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES
------------------------------------------------------------------------
$23,051,816 $2,804,202 $582,987 $332,287,068
1. The Fund had $582,987 of post-October foreign currency losses which were
deferred.
2. During the fiscal year ended August 31, 2006, the Fund did not utilize any
capital loss carryforward.
3. During the fiscal year ended August 31, 2005, the Fund did not utilize any
capital loss carryforward.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for August 31, 2006. Net assets of the
Fund were unaffected by the reclassifications.
REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED NET
INCREASE TO NET INVESTMENT REALIZED GAIN
PAID-IN CAPITAL LOSS ON INVESTMENTS 4
---------------------------------------------------
$4,312,577 $2,615,132 $6,927,709
4. $4,312,577, including $692,855 of long-term capital gain, was distributed in
connection with Fund share redemptions.
41 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
The tax character of distributions paid during the years ended August 31, 2006
and August 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
AUGUST 31, 2006 AUGUST 31, 2005
-------------------------------------------------------------
Distributions paid from:
Ordinary income $ 52,234,915 $ 1,896,893
Long-term capital gain 53,526,359 7,544,788
----------------------------------
Total $ 105,761,274 $ 9,441,681
==================================
The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2006 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.
Federal tax cost of securities $ 1,513,350,109
Federal tax cost of other investments (28,902)
----------------
Total federal tax cost $ 1,513,321,207
================
Gross unrealized appreciation $ 460,972,773
Gross unrealized depreciation (128,685,705)
----------------
Net unrealized appreciation $ 332,287,068
================
Certain foreign countries impose a tax on capital gains which is accrued by the
Fund based on unrealized appreciation, if any, on affected securities. The tax
is paid when the gain is realized.
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended August
31, 2006, the Fund's projected benefit obligations were increased by $62,456 and
payments of $3,388 were made to retired trustees, resulting in an accumulated
liability of $80,424 as of August 31, 2006.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of the annual compensation they are entitled to receive from the Fund.
For purposes of determining the amount owed to the Trustee under the plan,
deferred amounts are treated as though equal dollar amounts had been invested in
shares of the Fund or in other Oppenheimer funds selected by the Trustee. The
Fund purchases shares of the funds selected for deferral by the Trustee in
amounts equal to his or her deemed investment, resulting in a Fund asset equal
to the deferred compensation liability. Such assets are included as a component
of "Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of trustees' fees under the plan will not affect the net assets of the
Fund, and will not
42 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
materially affect the Fund's assets, liabilities or net investment income per
share. Amounts will be deferred until distributed in accordance to the Plan.
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income and capital gain distributions, if
any, are declared and paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
- --------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.
- --------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.
- --------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.
- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial interest were as
follows:
43 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued
YEAR ENDED AUGUST 31, 2006 1 YEAR ENDED AUGUST 31, 2005
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
CLASS A
Sold 45,786,785 $ 1,019,057,904 19,910,644 $ 350,648,595
Dividends and/or
distributions reinvested 3,562,149 69,639,992 400,661 6,462,659
Redeemed (20,894,266) (465,792,843) 2 (6,423,668) (111,367,903) 3
------------------------------------------------------------------
Net increase 28,454,668 $ 622,905,053 13,887,637 $ 245,743,351
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS B
Sold 2,914,524 $ 61,689,329 2,035,409 $ 34,453,596
Dividends and/or
distributions reinvested 481,417 9,079,521 62,820 990,049
Redeemed (1,996,614) (43,201,676) 2 (1,106,018) (18,453,848) 3
------------------------------------------------------------------
Net increase 1,399,327 $ 27,567,174 992,211 $ 16,989,797
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS C
Sold 7,743,971 $ 166,349,265 3,030,714 $ 51,797,437
Dividends and/or
distributions reinvested 548,252 10,340,014 52,750 830,810
Redeemed (2,050,959) (44,111,062) 2 (877,446) (14,823,010) 3
------------------------------------------------------------------
Net increase 6,241,264 $132,578,217 2,206,018 $ 37,805,237
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS N
Sold 1,895,944 $ 41,657,866 706,297 $ 12,113,529
Dividends and/or
distributions reinvested 133,242 2,543,611 10,338 163,864
Redeemed (631,651) (13,860,081) 2 (138,073) (2,390,579) 3
------------------------------------------------------------------
Net increase 1,397,535 $ 30,341,396 578,562 $ 9,886,814
==================================================================
- ---------------------------------------------------------------------------------------------
CLASS Y
Sold 7,062,894 $ 158,790,428 -- $ --
Dividends and/or
distributions reinvested 113,389 2,217,895 -- --
Redeemed (3,054,350) (66,680,381) 2 -- --
------------------------------------------------------------------
Net increase 4,121,933 $ 94,327,942 -- $ --
==================================================================
1. For the year ended August 31, 2006, for Class A, Class B, Class C and Class N
shares and for the period from September 7, 2005 (inception of offering) to
August 31, 2006, for Class Y shares.
2. Net of redemption fees of $70,860, $7,415, $11,928, $2,469, and $2,778 for
Class A, Class B, Class C, Class N and Class Y, respectively.
3. Net of redemption fees of $16,984, $2,902, $2,682 and $466 for Class A, Class
B, Class C and Class N, respectively.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended August 31, 2006, were as
follows:
44 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
PURCHASES SALES
-------------------------------------------------------
Investment securities $1,303,711,937 $497,168,438
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
average annual rate as shown in the following table:
FEE SCHEDULE
------------------------------------------
Up to $250 million of net assets 0.80%
Next $250 million of net assets 0.77
Next $500 million of net assets 0.75
Next $1 billion of net assets 0.69
Over $2 billion of net assets 0.67
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended August 31, 2006, the Fund paid
$2,209,681 to OFS for services to the Fund.
Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum for assets of $10 million or more. The Class Y shares are subject to the
minimum fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.
- --------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
periodically at an annual rate of up to 0.25% of the average annual net assets
of Class A shares of the Fund. The Distributor currently uses all of those fees
to pay dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
periods. Fees incurred by the Fund under the plan are detailed in the Statement
of Operations.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of up to 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Fund or by the shareholders of a
45 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
class, the Board of Trustees and its independent trustees must determine whether
the Distributor shall be entitled to payment from the Fund of all or a portion
of the service fee and/or asset-based sales charge in respect to shares sold
prior to the effective date of such termination. The Distributor's aggregate
uncompensated expenses under the plan at August 31, 2006 for Class B, Class C
and Class N shares were $1,546,043, $2,411,079 and $421,745, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.
- --------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table for the period
indicated.
CLASS A CLASS B CLASS C CLASS N
CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT
FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES
RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY
YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR
- -----------------------------------------------------------------------------------------------
August 31, 2006 $995,950 $44,057 $155,576 $114,253 $29,360
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation or
depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.
46 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
As of August 31, 2006, the Fund had outstanding foreign currency contracts as
follows:
CONTRACT VALUATION AS OF
EXPIRATION AMOUNT AUGUST 31, UNREALIZED
CONTRACT DESCRIPTION DATE (000S) 2006 DEPRECIATION
- -------------------------------------------------------------------------------
CONTRACTS TO SELL
U.S. Dollar 9/5/06 45 $28,918 $16
- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES
As of August 31, 2006, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 10% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. Securities that are
illiquid are marked with the applicable footnote on the Statement of
Investments.
- --------------------------------------------------------------------------------
7. SECURITIES LENDING
The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is delivered to the Fund on the next business day. Cash
collateral may be invested in approved investments and the Fund bears the risk
of any loss in value of these investments. The Fund retains a portion of the
interest earned from the collateral. If the borrower defaults on its obligation
to return the securities loaned because of insolvency or other reasons, the Fund
could experience delays and cost in recovering the securities loaned or in
gaining access to the collateral. The Fund continues to receive the economic
benefit of interest or dividends paid on the securities loaned in the form of a
substitute payment received from the borrower. As of August 31, 2006, the Fund
had no securities on loan.
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT
In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
August 31, 2006, the
47 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. RECENT ACCOUNTING PRONOUNCEMENT Continued
Manager is evaluating the implications of FIN 48. Its impact in the Fund's
financial statements has not yet been determined.
- --------------------------------------------------------------------------------
9. LITIGATION
A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.
In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.
The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.
48 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS
OF OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer International Small Company Fund, including the statement of
investments, as of August 31, 2006, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights for each
of the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 2006, by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer International Small Company Fund as of August 31, 2006, the results
of its operations for the year then ended, the changes in its net assets for
each of the years in the two-year period then ended, and the financial
highlights for each of the years in the five-year period then ended, in
conformity with U.S. generally accepted accounting principles.
KPMG LLP
Denver, Colorado
October 16, 2006
49 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2007, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2006. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
Capital gain distributions of $1.1009 per share were paid to Class A,
Class B, Class C, Class N and Class Y shareholders, respectively, on December 5,
2005. Whether received in stock or in cash, the capital gain distribution should
be treated by shareholders as a gain from the sale of the capital assets held
for more than one year (long-term capital gains).
None of the dividends paid by the Fund during the fiscal year ended August
31, 2006 are eligible for the corporate dividend-received deduction.
A portion, if any, of the dividends paid by the Fund during the fiscal
year ended August 31, 2006 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent tax
legislation. $11,581,744 of the Fund's fiscal year taxable income may be
eligible for the lower individual income tax rates. In early 2007, shareholders
of record will receive information regarding the percentage of distributions
that are eligible for lower individual income tax rates.
The Fund has elected the application of Section 853 of the Internal
Revenue Code to permit shareholders to take a federal income tax credit or
deduction, at their option, on a per share basis for an aggregate amount of
$514,512 of foreign income taxes paid by the Fund during the fiscal year ended
August 31, 2006. A separate notice will be mailed to each shareholder, which
will reflect the proportionate share of such foreign taxes which must be treated
by shareholders as gross income for federal income tax purposes.
Gross income of $4,315,111 was derived from sources within foreign
countries or possessions of the United States.
Recent tax legislation allows a regulated investment company to designate
distributions not designated as capital gain distributions, as either interest
related dividends or short-term capital gain dividends, both of which are exempt
from the U.S. withholding tax applicable to non U.S. taxpayers. For the fiscal
year ended August 31, 2006, $37,395,248 or 71.59% of the short-term capital gain
distribution paid by the Fund qualifies as a short-term capital gain dividend.
The foregoing information is presented to assist shareholders in reporting
distributions received from the Fund to the Internal Revenue Service. Because of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we recommend
that you consult your tax advisor for specific guidance.
50 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30, no later than August 31 of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
51 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD;
FUND, LENGTH OF SERVICE, AGE NUMBER OF PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL, COLORADO
TRUSTEES 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
CLAYTON K. YEUTTER, Director of American Commercial Lines (barge company) (since January 2005); Attorney at Hogan
Chairman of the Board & Hartson (law firm) (since June 1993); Director of Covanta Holding Corp. (waste-to-energy
of Trustees (since 2003), company) (since 2002); Director of Weyerhaeuser Corp. (1999-April 2004); Director of
Trustee (since 1997) Caterpillar, Inc. (1993-December 2002); Director of ConAgra Foods (1993-2001); Director of
Age: 75 Texas Instruments (1993-2001); Director of FMC Corporation (1993-2001). Oversees 43
portfolios in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2005) Director of ICI Education Foundation (education foundation) (October 1991-August 2006);
Age: 65 President of the Investment Company Institute (trade association) (October 1991-June 2004);
Director of ICI Mutual Insurance Company (insurance company) (October 1991-June 2004).
Oversees 43 portfolios in the OppenheimerFunds complex.
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 53 portfolios in the
Trustee (since 1997) OppenheimerFunds complex.
Age: 73
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since
Trustee (since 1999) 1979) of the National Academy of Sciences; Council on Foreign Relations (since 2002);
Age: 68 Director of GSI Lumonics Inc. (precision medical equipment supplier) (since 2001); Senior
Advisor of The Andrew W. Mellon Foundation (since 2001); Chair of Science Initiative Group
(since 1999); Member of the American Philosophical Society (since 1996); Trustee of Woodward
Academy (since 1983); Foreign Associate of Third World Academy of Sciences; Director of the
Institute for Advanced Study (1991-2004); Director of Bankers Trust New York Corporation
(1994-1999); Provost at Duke University (1983-1991). Oversees 43 portfolios in the
OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior
Trustee (since 2004) Vice President and General Auditor of American Express Company (financial services company)
Age: 63 (July 1998-February 2003). Oversees 43 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Director of Columbia Equity Financial Corp. (privately-held financial adviser) (since 2002);
Trustee (since 2002) Managing Director of Carmona Motley, Inc. (privately-held financial adviser) (since January
Age: 54 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial adviser)
(January 1998-December 2001); Member of the Finance and Budget Committee of the Council on
Foreign Relations, the Investment Committee of the Episcopal Church of America, the
Investment Committee and Board of Human Rights Watch and the Investment Committee of Historic
Hudson Valley. Oversees 43 portfolios in the OppenheimerFunds complex.
52 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
KENNETH A. RANDALL, Director of Dominion Resources, Inc. (electric utility holding company) (February
Trustee (since 1997) 1972-October 2005); Former Director of Prime Retail, Inc. (real estate investment trust),
Age: 79 Dominion Energy Inc. (electric power and oil & gas producer), Lumberman's Mutual Casualty
Company, American Motorists Insurance Company and American Manufacturers Mutual Insurance
Company; Former President and Chief Executive Officer of The Conference Board, Inc.
(international economic and business research). Oversees 43 portfolios in the
OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of The Directorship Search Group, Inc. (corporate governance consulting and
Trustee (since 1997) executive recruiting) (since 1993); Life Trustee of International House (non-profit
Age: 74 educational organization); Founder, Chairman and Chief Executive Officer of Russell Reynolds
Associates, Inc. (1969-1993); Banker at J.P. Morgan & Co. (1958-1966); 1st Lt. Strategic Air
Command, U.S. Air Force (1954-1958). Oversees 43 portfolios in the OppenheimerFunds complex.
JOSEPH M.WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since
Trustee (since 2005) 1996); Director of Lakes Environmental Association (since 1996); Member of the Investment
Age: 65 Committee of the Associated Jewish Charities of Baltimore (since 1994); Director of
Fortis/Hartford mutual funds (1994-December 2001). Oversees 43 portfolios in the
OppenheimerFunds complex.
PETER I.WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company)
Trustee (since 2005) (since 1994); Vice President, Secretary and Treasurer of Wold Trona Company, Inc. (soda ash
Age: 58 processing and production) (since 1996); Vice President of Wold Talc Company, Inc. (talc
mining) (since 1999); Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since
1979); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City
(1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 43
portfolios in the OppenheimerFunds complex.
BRIAN F.WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of
Trustee (since 2005) Special Value Opportunities Fund, LLC (registered investment company) (since September 2004);
Age: 63 Member of Zurich Financial Investment Advisory Board (insurance) (since October 2004); Board
of Governing Trustees of The Jackson Laboratory (non-profit) (since August 1990); Trustee of
the Institute for Advanced Study (non-profit educational institute) (since May 1992); Special
Limited Partner of Odyssey Investment Partners, LLC (private equity investment) (January
1999-September 2004); Trustee of Research Foundation of AIMR (2000-2002) (investment
research, non-profit); Governor, Jerome Levy Economics Institute of Bard College (August
1990-September 2001) (economics research); Director of Ray & Berendtson, Inc. (May 2000-April
2002) (executive search firm). Oversees 53 portfolios in the OppenheimerFunds complex.
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INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW
AND OFFICER YORK, NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL
HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR
UNTIL HIS RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE
TO HIS POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
53 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director (since June 2001) and President (since
Trustee, President and September 2000) of the Manager; President and a director or trustee of other Oppenheimer
Principal Executive Officer funds; President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent
(since 2001) holding company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of
Age: 57 the Manager) (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of
the Manager) (since November 2001); Chairman and Director of Shareholder Services, Inc. and
of Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since
July 2001); President and Director of OppenheimerFunds Legacy Program (charitable trust
program established by the Manager) (since July 2001); Director of the following investment
advisory subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial
Asset Management Corporation, Trinity Investment Management Corporation and Tremont Capital
Management, Inc. (since November 2001), HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001); President (since November 1, 2001) and Director
(since July 2001) of Oppenheimer Real Asset Management, Inc.; Executive Vice President of
Massachusetts Mutual Life Insurance Company (OAC's parent company) (since February 1997);
Director of DLB Acquisition Corporation (holding company parent of Babson Capital Management
LLC) (since June 1995); Member of the Investment Company Institute's Board of Governors
(since October 3, 2003); Chief Operating Officer of the Manager (September 2000-June 2001);
President and Trustee of MML Series Investment Fund and MassMutual Select Funds (open-end
investment companies) (November 1999-November 2001); Director of C.M. Life Insurance Company
(September 1999-August 2000); President, Chief Executive Officer and Director of MML Bay
State Life Insurance Company (September 1999-August 2000); Director of Emerald Isle Bancorp
and Hibernia Savings Bank (wholly-owned subsidiary of Emerald Isle Bancorp) (June 1989-June
1998). Oversees 91 portfolios in the OppenheimerFunds complex.
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OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. SAH, ZACK,
OF THE FUND GILLESPIE AND MS. BLOOMBERG, TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, NEW YORK, NEW
YORK 10281-1008, FOR MESSRS. VANDEHEY,WIXTED, PETERSEN, SZILAGYI AND MS. IVES, 6803 S. TUCSON
WAY, CENTENNIAL, COLORADO 80112-3924. EACH OFFICER SERVES FOR AN INDEFINITE TERM OR UNTIL HIS
OR HER RESIGNATION, RETIREMENT, DEATH OR REMOVAL.
ROHIT SAH, Vice President of the Manager since January 2004; an officer of 1 portfolio in the
Vice President (since 2004) OppenheimerFunds complex. Formerly Assistant Vice President and Assistant Portfolio Manager
Age: 41 of the Manager (December 2000 - December 2003). An equity analyst of the Manager (June
1996-December 2000). An officer of 1 portfolio in the OppenheimerFunds complex.
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice
Vice President and Chief President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Compliance Officer Shareholder Services, Inc. (since June 1983). Former Vice President and Director of Internal
(since 2004) Audit of the Manager (1997-February 2004). An officer of 91 portfolios in the
Age: 56 OppenheimerFunds complex.
54 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer and Principal following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Financial and Accounting Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and Oppenheimer
Officer (since 1999) Partnership Holdings, Inc. (since March 1999), OFI Private Investments, Inc. (since March
Age: 47 2000), OppenheimerFunds International Ltd. (since May 2000), OppenheimerFunds plc (since May
2000), OFI Institutional Asset Management, Inc. (since November 2000), and OppenheimerFunds
Legacy Program (charitable trust program established by the Manager) (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company (trust company subsidiary of the
Manager) (since May 2000); Assistant Treasurer of the following: OAC (since March 1999),
Centennial Asset Management Corporation (March 1999-October 2003) and OppenheimerFunds Legacy
Program (April 2000-June 2003); Principal and Chief Operating Officer of Bankers Trust
Company-Mutual Fund Services Division (March 1995-March 1999). An officer of 91 portfolios in
the OppenheimerFunds complex.
BRIAN S. PETERSEN, Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer Accounting of the Manager (November 1998-July 2002). An officer of 91 portfolios in the
(since 2004) OppenheimerFunds complex.
Age: 36
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting
Assistant Treasurer and Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of
(since 2005) Berger Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at
Age: 36 American Data Services, Inc. (September 2000-May 2001). An officer of 91 portfolios in the
OppenheimerFunds complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2001) Manager; General Counsel and Director of the Distributor (since December 2001); General
Age: 58 Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
President and General Counsel of HarbourView Asset Management Corporation (since December
2001); Secretary and General Counsel of OAC (since November 2001); Assistant Secretary (since
September 1997) and Director (since November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer Partnership Holdings, Inc.
(since December 2002); Director of Oppenheimer Real Asset Management, Inc. (since November
2001); Senior Vice President, General Counsel and Director of Shareholder Financial Services,
Inc. and Shareholder Services, Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI Trust Company (since November
2001); Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset Management, Inc. (since November
2001); Director of OppenheimerFunds (Asia) Limited (since December 2003); Senior Vice
President (May 1985-December 2003), Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager; Assistant Secretary of the
following: Shareholder Services, Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001), and OppenheimerFunds International Ltd.
(September 1997-November 2001). An officer of 91 portfolios in the OppenheimerFunds complex.
55 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice
(since 2004) President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS
Age: 38 Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 91 portfolios in
the OppenheimerFunds complex.
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October
Assistant Secretary 2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October
(since 2001) 2003) of the Distributor; Assistant Secretary of Centennial Asset Management Corporation
Age: 40 (since October 2003); Vice President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy Program and Shareholder
Financial Services, Inc. (since December 2001); Assistant Counsel of the Manager (August
1994-October 2003). An officer of 91 portfolios in the OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First
Assistant Secretary Vice President (2000-September 2004), Director (2000-September 2004) and Vice President
(since 2004) (1998-2000) of Merrill Lynch Investment Management. An officer of 91 portfolios in the
Age: 42 OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
56 | OPPENHEIMER INTERNATIONAL SMALL COMPANY FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that the registrant does
not have an audit committee financial expert serving on its Audit Committee. In
this regard, no member of the Audit Committee was identified as having all of
the technical attributes identified in Instruction 2(b) to Item 3 of Form N-CSR
to qualify as an "audit committee
financial expert," whether through the type of specialized education or
experience described in that Instruction. The Board has concluded that while the
members of the Audit Committee collectively have the necessary attributes and
experience required to serve effectively as an Audit Committee, no single member
possesses all of the required technical attributes through the particular
methods of education or experience set forth in the Instructions to be
designated as an audit committee financial expert.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $18,000 in fiscal 2006 and $18,000 in fiscal 2005.
(b) Audit-Related Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $75,000 in fiscal 2006 and $132,059 in fiscal 2005 to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
Such services include: internal control reviews.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $201 in fiscal 2006 and no such fees in fiscal 2005.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during fiscal 2006 and $5,000 during fiscal 2005
to the registrant's investment adviser or any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services to the
registrant.
Such services include: Venezuelan tax filing and filing form 5500.
(d) All Other Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years.
The principal accountant for the audit of the registrant's annual financial
statements billed $8,000 in fiscal 2006 and no such fees in 2005 to the
registrant's investment
adviser or any entity controlling, controlled by, or under common control with
the adviser that provides ongoing services to the registrant.
Such fees would include the cost to the principal accountant of attending audit
committee meetings and consultations regarding the registrant's retirement plan
with respect to its trustees.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $83,201 in fiscal 2006 and $137,059 in fiscal
2005 to the registrant and the registrant's investment adviser or any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) The registrant's audit committee of the board of trustees has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser, and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and
whether the individual would be deemed an "audit committee financial
expert" within the meaning of applicable SEC rules. The Committee also
considers whether the individual's background, skills, and experience will
complement the background, skills, and experience of other nominees and
will contribute to the Board. There are no differences in the manner in
which the Committee evaluates nominees for trustees based on whether the
nominee is recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 08/31/2006, the registrant's principal executive officer and
principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the registrant in the reports that it files under the Securities
Exchange Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer International Small Company Fund
By: /S/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 10/16/2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /S/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 10/16/2006
By: /S/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 10/16/2006