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 811-21917
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Oppenheimer SMA International Bond Fund
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(Exact name of registrant as specified in charter)
6803 South Tucson Way, Centennial, Colorado 80112-3924
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(Address of principal executive offices) (Zip code)
Robert G. Zack, Esq.
OppenheimerFunds, Inc.
Two World Financial Center, New York, New York 10281-1008
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(Name and address of agent for service)
Registrant's telephone number, including area code: (303) 768-3200
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Date of fiscal year end: September 30
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Date of reporting period: 09/30/2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
TOP HOLDINGS AND ALLOCATIONS
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TOP TEN GEOGRAPHICAL HOLDINGS
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United States 42.5%
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Germany 7.4
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United Kingdom 7.2
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Japan 6.9
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France 5.0
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Italy 4.9
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Turkey 3.6
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Australia 3.5
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Canada 3.0
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Colombia 2.5
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2007, and are based on the total market value of investments.
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REGIONAL ALLOCATION
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
United States/Canada 45.5%
Europe 31.5
Asia 11.7
Latin America 6.4
Middle East/Africa 3.8
Emerging Europe 0.9
Supranational 0.2
Portfolio holdings and allocations are subject to change. Percentages are as of
September 30, 2007, and are based on the total market value of investments.
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5 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
FUND PERFORMANCE DISCUSSION
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HOW HAS THE FUND PERFORMED? BELOW IS A DISCUSSION BY OPPENHEIMERFUNDS, INC., OF
THE FUND'S PERFORMANCE DURING ITS FISCAL YEAR ENDED SEPTEMBER 30, 2007.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE. Divergent U.S. and global economic
trends drove international fixed-income performance in the months before the
Fund's inception. U.S. economic growth had slowed as housing markets softened in
response to high prices in many regions and higher short-term interest rates
from the Federal Reserve Board (the "Fed") over the past several years. At the
same time, inflationary pressures remained above the Fed's comfort zone due to a
robust labor market and, in the spring of 2007, escalating energy prices. The
combination of slowing economic growth and stubborn inflation kept the Fed on
the sidelines, and the overnight federal funds rate remained at 5.25% when the
reporting period began. At the same time, more robust economic growth in Europe
had caused the European Central Bank to raise short-term interest rates, making
yields from European bonds more attractive than those in the United States.
Similarly, bond yields in many emerging markets were higher than those in the
United States.
When the Fund began operations in late July 2007, turmoil in the U.S.
sub-prime mortgage sector, where delinquencies and defaults previously had
surged unexpectedly, appeared to spread to other parts of the U.S. economy. This
development sparked a repricing of risk, in which investors engaged in a "flight
to quality." A number of highly leveraged hedge funds were forced to liquidate
holdings to raise cash for redemption requests and margin calls, leading to
bouts of illiqidity in several sectors of the U.S. bond market. The Fed
intervened in mid-August, reducing a key interest rate to promote market
liquidity. The Fed followed up in September with a reduction in the Federal
Funds rate, which ended the reporting period at 4.75%.
As investors rushed for the exits in the midst of the U.S. credit crisis,
selling pressure increased in the non-government sectors of international bond
markets, often regardless of sound underlying credit conditions. This led to
sharp declines in emerging-market credits during July and parts of August.
However, bond prices rebounded quickly as investors recognized that credit
problems among U.S. homeowners had little bearing on market conditions in other
parts of the world. Consequently, by the end of the reporting period, most
international bonds had recovered most, if not all, of their previous losses. In
the meantime, the U.S. dollar continued to weaken relative to most other
currencies, making overseas investments valuable for U.S. investors.
Robust results from emerging-market bonds combined to drive the Fund's
strong relative performance over the reporting period. We focused primarily on
markets where the rate of inflation and long-term bond yields have been falling
due to improved credit and economic fundamentals. Among Latin American markets,
Brazil and, to a lesser extent,
6 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
Mexico have produced attractive returns as these nations drew down debt, reduced
their budget deficits and became more significant participants in world trade.
In Eastern Europe, Turkey has prospered through reforms designed to help it
qualify for inclusion in the European Union, helping to support bond prices. We
also have found attractive opportunities in bonds from Russia and other parts of
the former Soviet Union.
Among developed markets, we have maintained relatively light exposure to
Japan, where bond yields have remained very low in a persistently weak economic
environment. We also have largely avoided bonds and currencies of industrialized
commodity producers, such as Canada, Australia and New Zealand, where we believe
high current account deficits may lead to heightened volatility. Otherwise, we
have attempted to diversify holdings across the developed nations of Europe,
where robust economic growth has led to higher bond yields. To manage risks in
this environment, we generally have favored government securities over corporate
debt, and we have maintained a neutral duration.
Finally, the Fund benefited during the reporting period from unhedged
currency exposure as the U.S. dollar continued to deteriorate relative to most
foreign currencies.
We currently expect global economic growth to remain strong, particularly
in the emerging markets, and we have seen no evidence that the decline of the
U.S. dollar is complete. However, we are aware that some emerging markets have
already posted impressive rallies, and further gains may be more modest.
Accordingly, to reduce risks, we recently trimmed the Fund's positions in some
emerging markets. Indeed, anticipating challenges and opportunities in
international fixed-income markets is central to what makes Oppenheimer SMA
International Bond Fund part of THE RIGHT WAY TO INVEST.
7 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES
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INVESTORS SHOULD CONSIDER THE FUND'S INVESTMENT OBJECTIVES, RISKS, AND OTHER
CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE FUND'S PROSPECTUS CONTAINS
THIS AND OTHER INFORMATION ABOUT THE FUND, AND MAY BE OBTAINED BY 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.
Shares of the Fund were first publicly offered on 7/23/07.
An explanation of the calculation of performance is in the Fund's Statement of
Additional Information.
8 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
FUND EXPENSES
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FUND EXPENSES. As a shareholder of the Fund, you incur costs of distribution and
service fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples for Actual Expenses are based on an investment of $1,000.00
invested at the beginning of the period, July 23, 2007 (commencement of
operations) and held for the period ended September 30, 2007.
The Hypothetical Examples for Comparison Purposes are based on an investment of
$1,000.00 invested on April 1, 2007 and held for the six months ended September
30, 2007.
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, 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, 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 with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as front-end
or contingent deferred sales charges (loads), or a $12.00 fee imposed annually
on accounts valued at less than $500.00 (subject to exceptions described in the
Statement of Additional Information). Therefore, the "hypothetical" lines of the
table are useful in comparing ongoing costs
9 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
FUND EXPENSES Continued
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only, and will not help you determine the relative total costs of owning
different funds. In addition, if these transactional costs were included, your
costs would have been higher.
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ENDING EXPENSES
BEGINNING ACCOUNT PAID DURING
ACCOUNT VALUE 6 MONTHS ENDED
VALUE (9/30/07) SEPTEMBER 30, 2007 1,2
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Actual $ 1,000.00 $ 1,031.90 $ 0.00
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Hypothetical 1,000.00 1,025.07 0.00
Hypothetical assumes 5% annual return before expenses.
1. Actual expenses paid are equal to the Fund's annualized expense ratio for
that class, multiplied by the average account value over the period, multiplied
by 70/365 [to reflect the period from July 23, 2007 (commencement of operations)
to September 30, 2007].
2. Hypothetical expenses paid are equal to the Fund's annualized expense ratio
for that class, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the one-half year period).
The annualized expense ratio for the period from July 23, 2007 (commencement of
operations) to September 30, 2007 is as follows:
EXPENSE RATIO
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0.00%
The expense ratio reflects voluntary waivers or reimbursements by the Fund's
Manager that can be terminated at any time, without advance notice. The
"Financial Highlights" tables in the Fund's financial statements, included in
this report, also show the gross expense ratio, without such waivers or
reimbursements and reduction to custodian expenses, if applicable.
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10 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS September 30, 2007
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PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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U.S. GOVERNMENT OBLIGATIONS--1.9%
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U.S. Treasury Bills, 4.83%, 12/6/07 1 (Cost $993,492) $ 1,000,000 $ 993,341
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FOREIGN GOVERNMENT OBLIGATIONS--57.8%
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ARGENTINA--0.4%
Argentina (Republic of) Bonds:
Series GDP, 7.24%, 12/15/35 2 100,000 13,050
Series V, 7%, 3/28/11 130,000 122,099
Series VII, 7%, 9/12/13 55,000 47,903
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Neuquen (Province Del) Sr. Sec. Nts., 8.656%, 10/18/14 3 25,000 25,375
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208,427
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AUSTRALIA--3.9%
New South Wales Treasury Corp. Sr. Unsec. Nts., Series 17RG, 5.50%, 3/1/17 [AUD] 635,000 521,518
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Queensland Treasury Corp. Unsec. Nts., Series 09G, 6%, 7/14/09 [AUD] 1,660,000 1,456,192
--------------
1,977,710
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AUSTRIA--0.7%
Austria (Republic of) Unsec. Unsub. Nts., Series E, 4%, 9/15/16 [EUR] 244,000 337,992
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BELGIUM--2.2%
Belgium (Kingdom of) Bonds, Series 44, 5%, 3/28/35 [EUR] 230,000 342,178
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Belgium (Kingdom of) Treasury Bills, 4.151%, 11/15/07 2 [EUR] 570,000 809,012
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1,151,190
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BRAZIL--1.2%
Brazil (Federal Republic of) Bonds:
6%, 1/17/17 175,000 177,800
8%, 1/15/18 180,000 201,330
8.875%, 10/14/19 200,000 249,500
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628,630
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CANADA--3.2%
Canada (Government of) Treasury Bills:
4.563%, 12/27/07 2,4 [CAD] 1,150,000 1,145,138
4.628%, 11/1/07 2,5 [CAD] 515,000 515,981
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1,661,119
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COLOMBIA--2.7%
Colombia (Republic of) Bonds:
10.75%, 1/15/13 125,000 153,125
12%, 10/22/15 [COP] 1,980,000,000 1,101,748
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Colombia (Republic of) Nts., 8.25%, 12/22/14 95,000 107,350
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1,362,223
11 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued
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PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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COSTA RICA--0.1%
Costa Rica (Republic of) Unsec. Bonds, 9.995%, 8/1/20 $ 25,000 $ 32,531
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DENMARK--0.6%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK] 480,000 91,083
4%, 11/15/15 [DKK] 350,000 65,247
7%, 11/10/24 [DKK] 125,000 30,552
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Denmark (Kingdom of) Nts., 4%, 8/15/08 [DKK] 505,000 96,240
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283,122
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EL SALVADOR--0.1%
El Salvador (Republic of) Bonds, 7.65%, 6/15/35 3 40,000 45,000
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FRANCE--5.5%
France (Government of) Obligations Assimilables du Tresor Bonds:
3.25%, 4/25/16 [EUR] 1,090,000 1,430,908
4%, 10/25/38 [EUR] 750,000 954,881
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France (Government of) Treasury Bills, 4.009%, 10/18/07 2 [EUR] 310,000 441,269
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2,827,058
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GERMANY--8.1%
Germany (Federal Republic of) Bonds:
Series 03, 3.75%, 7/4/13 [EUR] 510,000 710,505
Series 05, 4%, 1/4/37 [EUR] 905,000 1,170,490
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Germany (Federal Republic of) Treasury Bills,
Series 0707, 3.933%, 1/16/08 2 [EUR] 1,610,000 2,269,712
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4,150,707
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GHANA--0.1%
Ghana (Republic of) Bonds, 8.50%, 10/4/17 6,7 40,000 40,800
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GREECE--1.5%
Greece (Republic of) Bonds, 4.60%, 5/20/13 [EUR] 530,000 763,504
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INDONESIA--0.3%
Indonesia (Republic of) Nts., 7.25%, 4/20/15 3 80,000 85,000
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Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/35 3 45,000 53,213
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138,213
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ITALY--5.4%
Italy (Republic of) Nts., Certificati di Credito del Tesoro, 4.40%, 7/1/09 8 [EUR] 1,930,000 2,763,465
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JAPAN--7.5%
Japan (Government of) Bonds:
2 yr., Series 252, 0.80%, 1/15/09 7 [JPY] 170,000,000 1,480,279
10 yr., Series 245, 0.90%, 12/20/12 7 [JPY] 79,000,000 676,643
10 yr., Series 268, 1.50%, 3/20/15 7 [JPY] 84,000,000 736,229
30 yr., Series 25, 2.30%, 12/20/36 7 [JPY] 114,000,000 966,298
--------------
3,859,449
12 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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MEXICO--0.6%
United Mexican States Bonds, Series A, 6.375%, 1/16/13 $ 300,000 $ 316,200
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PANAMA--0.4%
Panama (Republic of) Bonds:
6.70%, 1/26/36 30,000 30,975
7.25%, 3/15/15 170,000 182,750
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213,725
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PHILIPPINES--0.9%
Philippines (Republic of the) Unsec. Bonds, 9%, 2/15/13 405,000 463,725
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SPAIN--1.7%
Spain (Government of) Treasury Bills, 4.058%, 10/19/07 2 [EUR] 610,000 868,277
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THE NETHERLANDS--0.9%
Netherlands (Kingdom of the) Bonds, 5%, 7/15/11 [EUR] 330,000 484,019
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TURKEY--3.9%
Turkey (Republic of) Bonds, 6.75%, 4/3/18 7 125,000 125,000
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Turkey (Republic of) Nts.:
7.25%, 3/15/15 205,000 214,738
16%, 3/7/12 [TRY] 2,005,000 1,674,928
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2,014,666
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UKRAINE--0.4%
Ukraine (Republic of) Unsec. Unsub. Nts., 6.875%, 3/4/11 180,000 184,928
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UNITED KINGDOM--5.0%
United Kingdom Treasury Bonds:
5%, 3/7/08 9 [GBP] 375,000 766,365
6%, 12/7/28 [GBP] 430,000 1,021,624
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United Kingdom Treasury Nts., 4%, 3/7/09 [GBP] 385,000 776,719
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2,564,708
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URUGUAY--0.5%
Uruguay (Oriental Republic of) Unsec. Bonds, 8%, 11/18/22 245,000 273,175
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Total Foreign Government Obligations (Cost $28,749,647) 29,614,563
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CORPORATE BONDS AND NOTES--8.1%
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AES Dominicana Energia Finance SA, 11% Sr. Nts., 12/13/15 3 55,000 56,513
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Alrosa Finance SA, 8.875% Nts., 11/17/14 3 95,000 104,681
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Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/26 3 68,545 69,573
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BA Covered Bond Issuer, 4.25% Sec. Nts., 4/5/17 [EUR] 205,000 279,185
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Banco BMG SA, 9.15% Nts., 1/15/16 3 60,000 63,750
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Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/16 3 35,000 34,738
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C10 Capital SPV Ltd., 6.722% Unsec. Perpetual Debs. 3,10 40,000 38,486
13 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued
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PRINCIPAL VALUE
AMOUNT SEE NOTE 1
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CORPORATE BONDS AND NOTES Continued
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Coriolanus Ltd., 10.62% Sec. Nts., 8/10/10 6 $ 100,000 $ 95,900
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Eirles Two Ltd., 6.793% Sec. Nts., Series 335, 4/30/12 6,8 100,000 99,690
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Gaz Capital (Gazprom), 7.288% Sr. Unsec.Bonds, 8/16/37 3 130,000 138,288
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HBOS Treasury Services plc:
4.375% Sr. Sec. Nts., 7/13/16 [EUR] 650,000 897,208
4.50% Sr. Sec. Nts., 7/13/21 [EUR] 405,000 550,208
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ICICI Bank Ltd.:
6.375% Bonds, 4/30/22 3,8 70,000 65,562
6.625% Nts., 10/3/12 6,7 70,000 70,245
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IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/24 3 70,606 83,668
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National Gas Co., 6.05% Nts., 1/15/36 3 40,000 38,092
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National Power Corp.:
6.875% Nts., 11/2/16 3 20,000 19,850
9.625% Unsec. Bonds, 5/15/28 35,000 42,087
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TGI International Ltd., 9.50% Nts., 10/3/17 6,7 60,000 60,600
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WM Covered Bond Program:
3.875% Sec. Nts., Series 1, 9/27/11 [EUR] 495,000 682,659
4% Sec. Mtg. Nts., Series 2, 9/27/16 [EUR] 485,000 643,812
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Total Corporate Bonds and Notes (Cost $4,098,316) 4,134,795
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STRUCTURED SECURITIES--0.2%
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Citigroup Global Markets Holdings, Inc., Dominican Republic Unsec.
Credit Linked Nts., 9.342%, 8/11/08 2,7 [DOP] 1,500,000 41,466
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Deutsche Bank AG, Egypt (The Arab Republic of) Total Return Linked
Nts., 7.725%, 9/16/08 2 [EGP] 475,000 79,448
--------------
Total Structured Securities (Cost $119,573) 120,914
EXPIRATION STRIKE
DATES PRICE CONTRACTS
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OPTIONS PURCHASED--0.1%
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Brazilian Real (BRR) Call 11 12/21/07 1.81 600,000 4,850
- -------------------------------------------------------------------------------------------------------------------
Credit Suisse International
Basket of Currencies Call 11 11/19/07 $ 90.86 860,000 86
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Credit Suisse International
Basket of Currencies Call 11 12/12/07 1.02 1,740,000 5,072
- -------------------------------------------------------------------------------------------------------------------
Euro (EUR) Call 11 12/21/07 1.41 1,210,000 34,850
--------------
Total Options Purchased (Cost $50,000) 44,858
14 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
VALUE
SHARES SEE NOTE 1
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INVESTMENTS IN AFFILIATED COMPANIES--41.4%
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Oppenheimer Institutional Money Market Fund, Cl. E, 5.37% 12,13
(Cost $21,228,294) 21,228,294 $ 21,228,294
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TOTAL INVESTMENTS, AT VALUE (COST $55,239,322) 109.5% 56,136,765
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS (9.5) (4,853,193)
----------------------------
NET ASSETS 100.0% $ 51,283,572
============================
FOOTNOTES TO STATEMENT OF INVESTMENTS
Principal amount is reported in U.S. Dollars (USD), except for those denoted in
the following currencies:
AUD Australian Dollar
CAD Canadian Dollar
COP Colombian Peso
DKK Danish Krone
DOP Dominican Republic Peso
EGP Egyptian Pounds
EUR Euro
GBP British Pound Sterling
JPY Japanese Yen
TRY New Turkish Lira
1. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures contracts. The aggregate market
value of such securities is $192,112. See Note 6 of accompanying Notes.
2. Zero coupon bond reflects effective yield on the date of purchase.
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 $921,789 or 1.80% of the Fund's net assets
as of September 30, 2007.
4. A sufficient amount of liquid assets has been designated to cover outstanding
written put options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO PUT DATES PRICE RECEIVED SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
British Pound Sterling (GBP) 7,000 10/1/07 $ 2.0245 $ 52 $ --
British Pound Sterling (GBP) 8,000 10/2/07 2.0135 60 --
British Pound Sterling (GBP) 8,000 10/5/07 2.0335 71 37
Euro (EUR) 40,000 10/4/07 1.4190 219 115
Euro (EUR) 65,000 10/5/07 1.4188 403 213
------------------
$ 805 $ 365
==================
5. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:
CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE
SUBJECT TO CALL DATES PRICE RECEIVED SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
British Pound Sterling (GBP) 7,000 10/1/07 $ 2.0245 $ 52 $ 149
British Pound Sterling (GBP) 8,000 10/2/07 2.0135 60 258
British Pound Sterling (GBP) 8,000 10/5/07 2.0335 71 145
Euro (EUR) 40,000 10/4/07 1.4190 219 443
Euro (EUR) 65,000 10/5/07 1.4188 403 747
------------------
$ 805 $ 1,742
==================
6. Illiquid security. The aggregate value of illiquid securities as of September
30, 2007 was $367,235, which represents 0.72% of the Fund's net assets. See Note
11 of accompanying Notes.
7. When-issued security or forward commitment to be delivered and settled after
September 30, 2007. See Note 1 of accompanying Notes.
8. Represents the current interest rate for a variable or increasing rate
security.
9. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.
15 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF INVESTMENTS Continued
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS Continued
10. This bond has no contractual maturity date, is not redeemable and
contractually pays an indefinite stream of interest. Rate reported represents
the current interest rate for this variable rate security.
11. Non-income producing security.
12. Rate shown is the 7-day yield as of September 30, 2007.
13. Is or was an affiliate, as defined in the Investment Company Act of 1940, at
or during the period ended September 30, 2007, by virtue of the Fund owning at
least 5% of the voting securities of the issuer or as a result of the Fund and
the issuer having the same investment advisor. Transactions during the period in
which the issuer was an affiliate are as follows:
SHARES
SHARES GROSS GROSS SEPTEMBER 30,
JULY 23, 2007 ADDITIONS REDUCTIONS 2007
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E -- 71,782,147 50,553,853 21,228,294
VALUE DIVIDEND
SEE NOTE 1 INCOME
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Institutional Money Market Fund, Cl. E $21,228,294 $234,983
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
GEOGRAPHIC HOLDINGS VALUE PERCENT
- --------------------------------------------------------------------------------
United States $ 23,872,149 42.5%
Germany 4,150,707 7.4
United Kingdom 4,012,124 7.2
Japan 3,859,449 6.9
France 2,827,058 5.0
Italy 2,763,465 4.9
Turkey 2,014,666 3.6
Australia 1,977,710 3.5
Canada 1,661,119 3.0
Colombia 1,422,823 2.5
Belgium 1,151,190 2.1
Spain 868,277 1.5
Greece 763,504 1.4
Brazil 692,380 1.2
Philippines 525,662 0.9
The Netherlands 484,019 0.9
Mexico 354,686 0.6
Russia 338,869 0.6
Austria 337,992 0.6
Denmark 283,122 0.5
Uruguay 273,175 0.5
Argentina 243,165 0.4
Panama 213,725 0.4
Ukraine 184,928 0.3
Dominican Republic 167,552 0.3
Indonesia 138,213 0.2
India 135,807 0.2
Supranational 99,690 0.2
Peru 83,668 0.2
Egypt 79,448 0.1
El Salvador 45,000 0.1
Ghana 40,800 0.1
Trinidad & Tobago 38,092 0.1
Costa Rica 32,531 0.1
-----------------------
Total $ 56,136,765 100.0%
=======================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES September 30, 2007
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------------------------------
Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $34,011,028) $ 34,908,471
Affiliated companies (cost $21,228,294) 21,228,294
--------------
56,136,765
- ------------------------------------------------------------------------------------------------------
Cash 72,559
- ------------------------------------------------------------------------------------------------------
Cash used for collateral on futures 50,000
- ------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 463,150
- ------------------------------------------------------------------------------------------------------
Swaps, at value 37,271
- ------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends 514,932
Closed foreign currency contracts 385,926
Investments sold 279,406
Due from Manager 40,745
Futures margins 562
Other 34,514
--------------
Total assets 58,015,830
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Bank overdraft-foreign currencies (cost $46,014) 46,032
- ------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $1,610)--
see accompanying statement of investments 2,107
- ------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 389,859
- ------------------------------------------------------------------------------------------------------
Swaps, at value (premiums received $2,912) 26,408
- ------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $716,290 purchased on a when-issued
basis or forward commitment) 5,795,809
Closed foreign currency contracts 247,816
Dividends 196,431
Trustees' compensation 265
Shares of beneficial interest redeemed 231
Other 27,300
--------------
Total liabilities 6,732,258
- ------------------------------------------------------------------------------------------------------
NET ASSETS $ 51,283,572
==============
17 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES Continued
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest $ 5,016
- ------------------------------------------------------------------------------------------------------
Additional paid-in capital 50,153,900
- ------------------------------------------------------------------------------------------------------
Accumulated net investment income 113,581
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 45,256
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies 965,819
--------------
NET ASSETS--applicable to 5,015,897 shares of beneficial interest outstanding $ 51,283,572
==============
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, REDEMPTION PRICE PER SHARE AND OFFERING PRICE PER SHARE $ 10.22
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF OPERATIONS For the Period Ended September 30, 2007 1
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $1,078) $ 251,421
- ------------------------------------------------------------------------------------------------------
Dividends from affiliated companies 234,983
--------------
Total investment income 486,404
- ------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------
Management fees 45,536
- ------------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 27,000
- ------------------------------------------------------------------------------------------------------
Interest expense 13,986
- ------------------------------------------------------------------------------------------------------
Custodian fees and expenses 300
- ------------------------------------------------------------------------------------------------------
Trustees' compensation 265
- ------------------------------------------------------------------------------------------------------
Shareholder communications 86
- ------------------------------------------------------------------------------------------------------
Other 1,040
--------------
Total expenses 88,213
Less waivers and reimbursements of expenses (87,948)
--------------
Net expenses 265
- ------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 486,139
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments (including premiums on options exercised) 69,257
Closing and expiration of option contracts written 12,678
Closing and expiration of futures contracts (18,507)
Foreign currency transactions 113,562
Swap contracts (18,216)
--------------
Net realized gain 158,774
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments from unaffiliated companies 133,024
Translation of assets and liabilities denominated in foreign currencies 803,278
Futures contracts 16,239
Option contracts written (497)
Swap contracts 13,775
--------------
Net change in unrealized appreciation 965,819
- ------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,610,732
==============
1. For the period from July 23, 2007 (commencement of operations) to September
30, 2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2007 1
- -------------------------------------------------------------------------------------------------------
OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $ 486,139
- -------------------------------------------------------------------------------------------------------
Net realized gain 158,774
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation 965,819
---------------
Net increase in net assets resulting from operations 1,610,732
- -------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
Dividends from net investment income (486,076)
- -------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions 50,058,916
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
Total increase 51,183,572
- -------------------------------------------------------------------------------------------------------
Beginning of period 100,000 2
---------------
End of period (including accumulated net investment income of $113,581
for the period ended September 30, 2007) $ 51,283,572
===============
1. For the period from July 23, 2007 (commencement of operations) to September
30, 2007.
2. Reflects the value of the Manager's initial seed money investment on May 14,
2007.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED SEPTEMBER 30, 2007 1
- ------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
- ------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
- ------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income 2 .10
Net realized and unrealized gain .22
--------------
Total from investment operations .32
- ------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income (.10)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.22
==============
- ------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3 3.19%
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 51,284
- ------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 50,199
- ------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income 5.05%
Total expenses 0.92%
Expenses after payments, waivers and/or
reimbursements and reduction to
custodian expenses 0.00%
- ------------------------------------------------------------------------------------------------------
Portfolio turnover rate 30%
1. For the period from July 23, 2007 (commencement of operations) to September
30, 2007.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year. Returns do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
4. Annualized for periods less than one full year.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer SMA International Bond Fund (the Fund) is a registered investment
company organized as a Massachusetts Business Trust. The Fund is registered as a
non-diversified, open-end management investment company under the Investment
Company Act of 1940, as amended. The Fund's primary objective is to seek total
return. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).
As of September 30, 2007, 100% of the shares of were owned by the Manager
and its affiliates.
Shares of the Fund may be purchased only by or on behalf of separately
managed account clients ("wrap-fee" accounts) who have retained OFI Private
Investments Inc. or certain of its affiliates (individually or collectively
referred to as "OFI PI"), to manage their accounts pursuant to an investment
management agreement with OFI PI and/or a managed account program sponsor as
part of a "wrap-fee" program.
- --------------------------------------------------------------------------------
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
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. Options are
valued daily based upon the last sale price on the principal exchange on which
the option is traded. 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. Investments in
open-end registered investment companies (including affiliated funds) are valued
at that
22 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
fund's net asset value. Short-term "money market type" debt securities with
remaining maturities of sixty days or less are valued at amortized cost (which
approximates market value).
- --------------------------------------------------------------------------------
STRUCTURED SECURITIES. The Fund invests in structured securities whose market
values, interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured securities are often
leveraged, increasing the volatility of each securities' market value relative
to the change in the underlying linked financial element or event. Fluctuations
in value of these securities are recorded as unrealized gains and losses in the
accompanying Statement of Operations. The Fund records a realized gain or loss
when a structured security is sold, matures or expires.
- --------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment take place generally at least ten days or more after the
trade date. Normally the settlement date occurs within six months after the
trade date; however, the Fund may, from time to time, purchase securities whose
settlement date extends six months or more beyond trade date. During this
period, such securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The Fund
maintains internally designated assets with a market value equal to or greater
than the amount of its purchase commitments. The purchase of securities on a
when-issued basis or forward commitment may increase the volatility of the
Fund's net asset value to the extent the Fund executes such transactions while
remaining substantially fully invested. The Fund may also sell securities that
it purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of September 30, 2007, the Fund had purchased $716,290
of securities issued on a when-issued basis or forward commitment.
- --------------------------------------------------------------------------------
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
23 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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.
- --------------------------------------------------------------------------------
INVESTMENT IN OPPENHEIMER INSTITUTIONAL MONEY MARKET FUND. The Fund is permitted
to invest daily available cash balances in an affiliated money market fund. The
Fund may invest the available cash in Class E shares of Oppenheimer
Institutional Money Market Fund ("IMMF") which seeks current income and
stability of principal. IMMF is a registered open-end management investment
company, regulated as a money market fund under the Investment Company Act of
1940, as amended. The Manager is also the investment advisor of IMMF. The Fund's
investment in IMMF is included in the Statement of Investments, if applicable.
As a shareholder, the Fund is subject to its proportional share of IMMF's Class
E expenses, including its management fee.
- --------------------------------------------------------------------------------
INVESTMENTS WITH OFF-BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures, options and other derivatives)
that may have off-balance sheet market risk. Off-balance sheet market risk
exists when the maximum potential loss on a particular financial instrument is
greater than the value of such financial instrument, as reflected in the Fund's
Statement of Assets and Liabilities.
- --------------------------------------------------------------------------------
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 TAX PURPOSES
--------------------------------------------------------------------
$279,030 $27,816 $-- $817,810
1. During the period ended September 30, 2007, the Fund did not utilize any
capital loss carryforward.
24 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for September 30, 2007. Net assets of
the Fund were unaffected by the reclassifications.
REDUCTION TO
ACCUMULATED NET
INCREASE TO ACCUMULATED REALIZED GAIN ON
NET INVESTMENT INCOME INVESTMENTS
---------------------------------------------------
$113,518 $113,518
The tax character of distributions paid during the period ended September 30,
2007 was as follows:
PERIOD ENDED
SEPTEMBER 30, 2007
--------------------------------------------------------
Distributions paid from:
Ordinary income $486,076
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 September 30, 2007 are noted below. The
primary difference between book and tax appreciation or depreciation of
securities and other investments, if applicable, is attributable to the tax
deferral of losses or tax realization of financial statement unrealized gain or
loss.
Federal tax cost of securities $55,238,945
Federal tax cost of other investments 8,906,528
-----------
Total federal tax cost $64,145,473
===========
Gross unrealized appreciation $ 1,008,668
Gross unrealized depreciation (190,858)
-----------
Net unrealized appreciation $ 817,810
===========
- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a compensation
deferral plan for independent trustees that enables trustees to elect to defer
receipt of all or a portion of the annual compensation they are entitled to
receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the compensation deferral plan.
25 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
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 distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.
- --------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend
date or upon ex-dividend notification in the case of certain foreign dividends
where the ex-dividend date may have passed. Non-cash dividends included in
dividend income, if any, are recorded at the fair market value of the securities
received. Interest income, 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.
26 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $0.001 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED SEPTEMBER 30, 2007 1,2
SHARES AMOUNT
- ---------------------------------------------------------------
Sold 5,005,903 $50,058,970
Dividends and/or
distributions reinvested 54 544
Redeemed (60) (598)
-------------------------
Net increase 5,005,897 $50,058,916
=========================
1. For the period from July 23, 2007 (commencement of operations) to September
30, 2007.
2. The Fund sold 10,000 shares at a value of $100,000 to the Manager upon
seeding of the Fund on May 14, 2007.
- --------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations and investments in IMMF, for the period ended
September 30, 2007, were as follows:
PURCHASES SALES
- ----------------------------------------------------------------
Investment securities $29,612,627 $6,420,195
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. The Manager has contractually agreed to waive the entire amount
of its advisory fee, which is 0.48%, and the Fund does not pay any other fee for
the Manager's services. A portion of the "wrap-fee" that investors pay to the
"wrap-fee" program sponsor may be attributed to the management of the Fund.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the period ended September 30, 2007, the Fund paid no
fees to OFS for services to the Fund.
- --------------------------------------------------------------------------------
OFFERING AND ORGANIZATIONAL COSTS. The Manager paid all offering and
organizational costs associated with the registration and seeding of the Fund.
- --------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. The Manager has contractually agreed to
waive all Management Fees and pay or reimburse all expenses of the Fund, except
extraordinary expenses, transfer agent fees and fees paid to the independent
Trustees. This agreement has no fixed term. Investors should be aware that even
though the Fund does not pay any fees or expenses to the Manager, investors will
pay a "wrap fee" to their program sponsor. During the period ended September 30,
2007, the Manager waived management fees in the amount of $45,536. During the
period ended September 30, 2007, the Manager reimbursed expenses in the amount
of $42,412.
27 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees 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.
As of September 30, 2007, the Fund had outstanding foreign currency contracts as
follows:
CONTRACT VALUATION AS
EXPIRATION AMOUNT OF SEPTEMBER UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) 30, 2007 APPRECIATION DEPRECIATION
- ----------------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso (ARP) 10/24/07 1,600 ARP $ 505,963 $ -- $ 3,348
10/11/07-
Australian Dollar (AUD) 12/21/07 265 AUD 234,358 16,122 --
Brazilian Real (BRR) 11/5/07 6,505 BRR 3,534,449 61,881 --
10/1/07-
British Pound Sterling (GBP) 10/11/07 177 GBP 363,138 3,501 55
10/1/07-
Canadian Dollar (CAD) 12/21/07 430 CAD 433,017 12,780 --
Chilean Peso (CLP) 10/22/07 92,000 CLP 180,070 1,186 --
Danish Krone (DKK) 10/2/07 135 DKK 25,806 218 --
Dominican Republic Peso (DOP) 10/9/07 1,389 DOP 41,599 -- 377
10/1/07-
Euro (EUR) 12/27/07 5,023 EUR 7,165,195 70,756 --
Indian Rupee (INR) 10/15/07 20,500 INR 514,332 7,909 --
10/2/07-
Japanese Yen (JPY) 10/11/07 964,726 JPY 8,407,186 131,360 29,644
28 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
CONTRACT VALUATION AS
EXPIRATION AMOUNT OF SEPTEMBER UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000S) 30, 2007 APPRECIATION DEPRECIATION
- ----------------------------------------------------------------------------------------------------------
Malaysian Ringgit (MYR) 12/17/07 960 MYR $ 282,676 $ 6,316 $ --
Mexican Nuevo Peso (MXN) 11/26/07 4,500 MXN 409,869 5,391 --
New Turkish Lira (TRY) 10/24/07 675 TRY 554,645 12,171 --
New Zealand Dollar (NZD) 12/21/07 296 NZD 222,525 15,348 66
Norwegian Krone (NOK) 1/29/08 3,860 NOK 714,996 36,705 --
Polish Zloty (PLZ) 10/10/07 750 PLZ 283,829 13,811 --
Singapore Dollar (SGD) 2/5/08 840 SGD 570,603 7,617 --
South African Rand (ZAR) 10/15/07 3,700 ZAR 535,899 22,038 --
South Korean Won (KRW) 2/1/08 158,000 KRW 173,408 853 --
Swedish Krone (SEK) 10/10/07 5,100 SEK 791,688 22,870 --
10/11/07-
Swiss Franc (CHF) 11/8/07 535 CHF 460,882 6,538 --
-------------------------
455,371 33,490
-------------------------
CONTRACTS TO SELL
10/9/07-
Australian Dollar (AUD) 10/10/07 1,540 AUD 1,365,915 -- 22,246
Brazilian Real (BRR) 11/5/07 435 BRR 236,354 -- 17,100
10/1/07-
British Pound Sterling (GBP) 10/9/07 50 GBP 102,286 -- 1,490
10/9/07-
Canadian Dollar (CAD) 1/16/08 1,507 CAD 1,516,272 -- 75,825
Colombian Peso (COP) 10/16/07 339,000 COP 167,215 -- 12,815
Czech Koruna (CZK) 10/15/07 10,250 CZK 531,018 -- 13,341
10/1/07-
Euro (EUR) 12/21/07 3,001 EUR 4,280,617 -- 133,859
10/2/07-
Japanese Yen (JPY) 12/21/07 128,000 JPY 1,119,710 7,779 2,749
New Taiwan Dollar (TWD) 10/15/07 16,000 TWD 491,252 -- 6,887
11/2/07-
New Turkish Lira (TRY) 11/7/07 450 TRY 368,298 -- 44,564
10/9/07-
New Zealand Dollar (NZD) 10/10/07 385 NZD 291,488 -- 1,748
Singapore Dollar (SGD) 10/15/07 750 SGD 505,451 -- 10,088
10/9/07-
Swiss Franc (CHF) 12/21/07 1,049 CHF 903,511 -- 13,657
-------------------------
7,779 356,369
-------------------------
Total unrealized appreciation and depreciation $463,150 $389,859
=========================
29 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures) or debt securities (interest rate futures) in order to gain
exposure to or protection from changes in market value of stocks and bonds or
interest rates. The Fund may also buy or write put or call options on these
futures contracts.
The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures contracts to gain exposure to market changes as it may
be more efficient or cost effective than actually buying securities.
Upon entering into a futures contract, the Fund is required to deposit
either cash or securities (initial margin) in an amount equal to a certain
percentage of the contract value. Subsequent payments (variation margin) are
made or received by the Fund each day. The variation margin payments are equal
to the daily changes in the contract value and are recorded as unrealized gains
and losses. The Fund recognizes a realized gain or loss when the contract is
closed or has expired.
Cash held by the broker to cover initial margin requirements on open
futures contracts is noted in the Statement of Assets and Liabilities.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin. Realized gains and losses are
reported in the Statement of Operations at the closing and expiration of futures
contracts. The net change in unrealized appreciation and depreciation is
reported in the Statement of Operations.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of September 30, 2007, the Fund had outstanding futures contracts as follows:
VALUATION AS UNREALIZED
EXPIRATION NUMBER OF OF SEPTEMBER APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 30, 2007 (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Canada (Government of) Bonds, 10 yr. 12/18/07 4 $ 452,139 $ (2,686)
DAX Index 12/21/07 1 283,567 5,087
Euro-Schatz 12/6/07 47 6,927,120 (3,779)
Japan (Government of) Bonds, 10 yr. 12/10/07 22 2,585,452 (10,605)
OMXS30 Index 10/26/07 9 170,353 4,613
U.S. Treasury Nts., 10 yr. 12/19/07 106 11,583,813 3,356
United Kingdom Long Gilt 12/27/07 2 437,597 (4,555)
---------------
(8,569)
30 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATES CONTRACTS 2007 (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
Euro-Bundesobligation, 10 yr. 12/6/07 15 $ 2,410,130 $ 11
Nikkei 225 Index 12/13/07 1 146,520 (9,364)
Standard & Poor's 500 E-Mini Index 12/21/07 2 153,810 (4,893)
U.S. Long Bonds 12/19/07 83 9,241,531 43,707
U.S. Treasury Nts., 5 yr. 12/31/07 151 16,161,719 (4,653)
---------------
24,808
---------------
$ 16,239
===============
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, expiration date, exercise price, premium received and market value are
detailed in a note to the Statement of Investments. Options written are reported
as a liability in the Statement of Assets and Liabilities. Realized gains and
losses are reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
31 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. OPTION ACTIVITY Continued
Written option activity for the period ended September 30, 2007 was as follows:
CALL OPTIONS PUT OPTIONS
-------------------------- --------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
- ------------------------------------------------------------------------------------------
Options outstanding as of
July 23, 2007 -- $ -- -- $ --
Options written 106,491,000 13,382 106,491,000 13,415
Options closed or expired (61,549,000) (4,855) (44,821,000) (7,823)
Options exercised (44,814,000) (7,722) (61,542,000) (4,787)
-------------------------------------------------------
Options outstanding as of
September 30, 2007 128,000 $ 805 128,000 $ 805
=======================================================
- --------------------------------------------------------------------------------
8. INTEREST RATE SWAP CONTRACTS
An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. Payments under the swap are based on an agreed
upon principal amount but since this principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Interest rate swaps are marked to market daily using
primarily quotations from counterparties, and brokers. The value of the
contracts is separately disclosed on the Statement of Assets and Liabilities.
The unrealized appreciation (depreciation) related to the change in the
valuation of the notional amount of the swap is combined with the amount due to
(owed by) the Fund at termination or settlement. The net change in this amount
during the period is included on the Statement of Operations. The Fund also
records any periodic payments received from (paid to) the counterparty,
including at termination, under such contracts as realized gain (loss) on the
Statement of Operations.
Swap agreements entail both interest rate risk and credit risk. There is a
risk, based on movements of interest rates in the future, the payments made by
the Fund under a swap agreement will be greater than the payments it received.
Credit risk arises from the possibility that the counterparty will default. If
the counterparty defaults, the Fund's loss will consist of the net amount of
contractual interest payments that the Fund has not yet received. The Manager
will monitor the creditworthiness of counterparties to the Fund's interest rate
swap transactions on an ongoing basis.
32 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
As of September 30, 2007, the Fund had entered into the following interest rate
swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATES VALUE
- --------------------------------------------------------------------------------------------------
Six-Month
Tasa Nominal
Banco Santander Annual
Central Hispano SA 33,000,000 CLP (TNA-Chile) 6.600% 8/21/17 $ 1,147
- --------------------------------------------------------------------------------------------------
Six-Month
Tasa Nominal
Citibank NA, Annual
New York 26,000,000 CLP (TNA-Chile) 6.530 8/25/17 1
- --------------------------------------------------------------------------------------------------
Six-Month
Tasa Nominal
Credit Suisse Annual
International 26,000,000 CLP (TNA-Chile) 6.580 8/21/17 839
- --------------------------------------------------------------------------------------------------
J Aron & Co. 8,000,000 BRR BZDI 11.460 1/2/12 16,602
- --------------------------------------------------------------------------------------------------
Morgan Stanley Six-Month
Capital Services, Inc. 790,000 EUR 4.713% EURIBOR 8/22/17 (2,896)
- --------------------------------------------------------------------------------------------------
Three-Month
Westpac 1,410,000 NZD 7.775 NZD-BBR-FRA 9/17/09 2,505
---------
$ 18,198
=========
Notional amount is reported in U.S. Dollars (USD), except for those denoted in
the following currencies:
BRR Brazilian Real
CLP Chilean Peso
EUR Euro
NZD New Zealand Dollar
Index abbreviations are as follows:
BZDI Brazil Interbank Deposit Rate
EURIBOR Euro Interbank Offered Rate
NZD-BBR-FRA New Zealand Dollar-Bank Bill Rate-Foward Rate Agreement
- --------------------------------------------------------------------------------
9. CREDIT DEFAULT SWAP CONTRACTS
A credit default swap is a bilateral contract that enables an investor to buy or
sell protection against a defined-issuer credit event. The Fund may enter into
credit default swaps to hedge an existing position or to obtain exposure to a
security or market by purchasing or selling credit protection. The Fund may
enter into credit default swaps on a single security, or a basket of securities.
In a credit default swap contract, the purchaser of the contract will pay
a periodic interest fee, similar to an insurance premium, on the notional amount
of the swap contract to the counterparty (the seller of the contract). If there
is a credit event (for example, bankruptcy or a failure to timely pay interest
or principal), the purchaser will exercise the contract
33 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. CREDIT DEFAULT SWAP CONTRACTS Continued
and will receive a payment from the seller of the contract equal to the notional
value of the credit default swap contract less the value of the underlying
security.
The periodic interest fees are accrued daily as a component of unrealized
appreciation (depreciation) and are recorded as realized gain (loss) upon
payment. In the event that the credit default swap is exercised due to a credit
event, the difference between the value of the underlying security and the
notional amount is recorded as realized gain (loss) and is included on the
Statement of Operations.
Credit default swaps are marked to market daily using primarily quotations
from counterparties and brokers. The value of the contracts is separately
disclosed on the Statement of Assets and Liabilities. The unrealized
appreciation (depreciation) related to the change in the valuation of the
notional amount of the swap is combined with the accrued interest due to (owed
by) the Fund at termination or settlement. The net change in this amount during
the period is included on the Statement of Operations.
Risks of credit default swaps include, but are not limited to, the cost of
paying for credit protection if there are no credit events, pricing transparency
when assessing the cost of a credit default swap, counterparty risk, adverse
pricing when purchasing bonds to satisfy its delivery obligation, and the need
to fund the delivery obligation (either cash or defaulted securities depending
on whether the Fund is the purchaser or seller of the credit default swap
contract, respectively).
Information regarding such credit default swaps as of September 30, 2007 is as
follows:
BUY/SELL NOTIONAL PAY/
SWAP REFERENCE CREDIT AMOUNT RECEIVE TERMINATION PREMIUM
COUNTERPARTY ENTITY PROTECTION (000S) FIXED RATE DATES RECEIVED VALUE
- ---------------------------------------------------------------------------------------------------------------------
Barclays Bank plc:
CDX.EM.8
5-Year Index Buy $ 160 1.75% 12/20/12 $ 1,472 $ (1,656)
Republic of Turkey Sell 85 1.81 4/20/12 -- 970
- ---------------------------------------------------------------------------------------------------------------------
Citibank NA,
New York Republic of Indonesia Sell 20 2.10 9/20/12 -- 672
- ---------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG Republic of Peru Sell 60 1.50 4/20/17 -- 1,361
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services,
Inc:
CDX.EM.8 Index Buy 160 1.75 12/20/12 1,440 (1,808)
Republic of Indonesia Sell 40 2.23 9/20/12 -- 1,561
Republic of Turkey Sell 85 2.85 11/20/16 -- 3,145
- ---------------------------------------------------------------------------------------------------------------------
UBS AG Republic of the
Philippines Sell 230 2.50 6/20/17 -- 8,468
--------------------
$ 2,912 $ 12,713
====================
34 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
- --------------------------------------------------------------------------------
10. TOTAL RETURN SWAP CONTRACTS
A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counter-party, and is
referred to as notional. Total return swaps are marked to market daily using
primarily quotations from counterparties and brokers. The value of the contracts
is separately disclosed on the Statement of Assets and Liabilities. The
unrealized appreciation (depreciation) related to the change in the valuation of
the notional amount of the swap is combined with the amount due to (owed by) the
Fund at termination or settlement. The net change in this amount during the
period is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).
As of September 30, 2007, the Fund had entered into the following total return
swap agreements:
SWAP NOTIONAL PAID BY RECEIVED BY TERMINATION
COUNTERPARTY AMOUNT THE FUND THE FUND DATE VALUE
- ------------------------------------------------------------------------------------------
The Constant
Maturity Option
Merrill Lynch Price divided
Capital Services, Inc. $ 880,000 5.33% by 10,000 8/13/17 $ (20,048)
- --------------------------------------------------------------------------------
11. ILLIQUID SECURITIES
As of September 30, 2007, 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.
- --------------------------------------------------------------------------------
12. 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
35 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12. RECENT ACCOUNTING PRONOUNCEMENT Continued
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 September 30, 2007, the Manager has
evaluated the implications of FIN 48 and does not currently anticipate a
material impact to the Fund's financial statements. The Manager will continue to
monitor the Fund's tax positions prospectively for potential future impacts.
In September 2006, ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 157, FAIR VALUE MEASUREMENTS. This standard establishes a
single authoritative definition of fair value, sets out a framework for
measuring fair value and expands disclosures about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. As of September 30, 2007, the Manager does not believe the
adoption of SFAS No. 157 will materially impact the financial statement amounts;
however, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements on changes in net
assets for the period.
36 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER SMA INTERNATIONAL BOND
FUND:
We have audited the accompanying statement of assets and liabilities of
Oppenheimer SMA International Bond Fund, including the statement of investments,
as of September 30, 2007, and the related statement of operations, the statement
of changes in net assets and the financial highlights for the period from July
23, 2007 (commencement of operations) to September 30, 2007. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of September 30, 2007, by correspondence
with the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer SMA International Bond Fund as of September 30, 2007, the results of
its operations, the changes in its net assets and the financial highlights for
the period from July 23, 2007 (commencement of operations) to September 30,
2007, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Denver, Colorado
November 16, 2007
37 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
FEDERAL INCOME TAX INFORMATION Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2008, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2007. Regulations of the U.S. Treasury Department require the Fund
to report this information to the Internal Revenue Service.
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.
38 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES;
UPDATES TO STATEMENTS OF INVESTMENTS Unaudited
- --------------------------------------------------------------------------------
The Fund has adopted Portfolio Proxy Voting Policies and Procedures under which
the Fund votes proxies relating to securities ("portfolio proxies") held by the
Fund. A description of the Fund's Portfolio Proxy Voting Policies and Procedures
is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is required to
file Form N-PX, with its complete proxy voting record for the 12 months ended
June 30th, no later than August 31st of each year. The Fund's voting record is
available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048, and (ii) in the Form N-PX filing on the SEC's website at
www.sec.gov.
The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q. The
Fund's Form N-Q filings are available on the SEC's website at
http://www.sec.gov. Those forms may be reviewed and copied at the SEC's Public
Reference Room in Washington D.C. Information on the operation of the Public
Reference Room may be obtained by calling 1-800-SEC-0330.
39 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Investment Company Act of 1940, as amended, requires that a fund's Board of
Directors or Trustees, including a majority of the independent Board members,
request and evaluate, and that its Manager provide, such information as may be
reasonably necessary to evaluate the terms of the fund's investment advisory
agreement.
In approving the Fund's initial investment advisory agreement (the
"Agreement"), the Board of Trustees (the "Board") considered information
provided by the Manager on the following factors: (i) the nature, quality and
extent of the Manager's services to be provided, (ii) the fees and expenses of
the Fund, including estimated and comparative expense information, (iii) the
profitability of the Manager and its affiliates, including an analysis of the
anticipated cost of providing services by the Manager and its affiliates, (iv)
the extent to which economies of scale may be realized as the Fund grows and
whether fee levels reflect these economies of scale for Fund investors and (v)
other benefits that the Manager may receive from its relationship with the Fund.
NATURE AND EXTENT OF SERVICES. The Board considered information about the
nature and extent of the services to be provided to the Fund and information
regarding the Manager's key personnel who will provide such services. The
Manager's duties include providing the Fund with the services of the portfolio
manager and the Manager's investment team, who provide research, analysis and
other advisory services in regard to the Fund's investments; securities trading
services; oversight of third party service providers; monitoring compliance with
applicable Fund policies and procedures and adherence to the Fund's investment
restrictions. The Manager is responsible for providing certain administrative
services to the Fund as well. Those services include providing and supervising
all administrative and clerical personnel who are necessary in order to provide
effective corporate administration for the Fund; compiling and maintaining
records with respect to the Fund's operations; preparing and filing reports
required by the Securities and Exchange Commission; preparing periodic reports
regarding the operations of the Fund for its shareholders; preparing proxy
materials for shareholder meetings; and preparing the registration statements
required by Federal and state securities laws for the sale of the Fund's shares.
The Manager also provides the Fund with office space, facilities and equipment.
QUALITY OF SERVICES. The Board also considered the quality of the services
expected to be provided by the Manager and the quality of the Manager's
resources that will be available to the Fund. The Board took account of the fact
that the Manager has had over forty years of experience as an investment adviser
and that its assets under management rank it among the top mutual fund managers
in the United States. The Board evaluated the Manager's administrative,
accounting, legal and compliance services, and information the Board has
received regarding the experience and professional qualifications of the
40 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
Manager's personnel and the size and functions of its staff. In its evaluation
of the quality of the portfolio management services to be provided, the Board
considered the experience of Arthur Steinmetz, the portfolio manager for the
Fund, and the Manager's international and quantitative fixed income investment
team and analysts. The Board members also considered their experiences with the
Manager and its officers and other personnel through their service on the boards
of other funds advised by the Manager. The Board considered information
regarding the quality of services provided by affiliates of the Manager, which
its members have become knowledgeable about in connection with other funds
managed by the Manager. In light of the foregoing, the Board concluded that the
Fund will benefit from the services to be provided under the Agreement and from
the Manager's experience, reputation, personnel, operations, and resources.
MANAGEMENT FEES AND EXPENSES. The Board reviewed the fees to be paid to
the Manager and its affiliates and the other expenses that will be borne by the
Fund. The Board also evaluated the comparability of the fees to be charged and
the services to be provided to the Fund to the fees and services for other
clients or accounts advised by the Manager. The Manager has contractually agreed
to waive all Management Fees and pay or reimburse all expenses of the Fund,
except extraordinary expenses, transfer agent fees and fees paid to the
Independent Trustees. This agreement has no fixed term. Investors should be
aware that even though the Fund does not pay any fees or expenses to the
Manager, investors will pay a "wrap fee" to their program's sponsor.
ECONOMIES OF SCALE. The Board considered the extent to which the Manager
may realize economies of scale in managing and supporting the Fund and the
extent to which those economies of scale would benefit the Fund's shareholders.
BENEFITS TO THE MANAGER. The Board considered information regarding the
Manager's estimated costs in serving as the Fund's investment adviser, including
the costs associated with the personnel and systems necessary to manage the
Fund, and information regarding the Manager's potential profitability from its
relationship with the Fund. The Board considered that the Manager must be able
to pay and retain experienced professional personnel at competitive rates to
provide services to the Fund and that maintaining the financial viability of the
Manager is important in order for the Manager to provide significant services to
the Fund and its shareholders. In addition to considering the profits that may
be realized by the Manager, the Board considered information regarding the
direct and indirect benefits the Manager may receive as a result of its
relationship with the Fund, including compensation paid to the Manager's
affiliates for services provided.
41 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
BOARD APPROVAL OF THE FUND'S INVESTMENT
ADVISORY AGREEMENT Unaudited / Continued
- --------------------------------------------------------------------------------
CONCLUSIONS. These factors were also considered by the independent
Trustees meeting separately from the full Board, assisted by experienced counsel
to the Fund and the independent Trustees. Fund counsel is independent of the
Manager within the meaning and intent of the Securities and Exchange Commission
Rules.
Based on its review of the information it received and its evaluations
described above, the Board, including a majority of the independent Trustees,
concluded that the nature, extent and quality of the services to be provided to
the Fund by the Manager would be a benefit to the Fund and in the best interest
of the Fund's shareholders and that the amount and structure of the compensation
to be received by the Manager and its affiliates are reasonable in relation to
the services to be provided. Accordingly, the Board approved the Agreement for
an initial period of two years. In arriving at this decision, the Board did not
single out any factor or factors as being more important than others, but
considered all of the factors together. The Board judged the terms and
conditions of the Agreement, including the management fee, in light of all of
the surrounding circumstances.
42 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
TRUSTEES AND OFFICERS Unaudited
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NAME, POSITION(S) HELD WITH THE PRINCIPAL OCCUPATION(S) DURING THE PAST 5 YEARS; OTHER TRUSTEESHIPS/DIRECTORSHIPS HELD; NUMBER OF
FUND, LENGTH OF SERVICE, AGE PORTFOLIOS IN THE FUND COMPLEX CURRENTLY OVERSEEN
INDEPENDENT THE ADDRESS OF EACH TRUSTEE IN THE CHART BELOW IS 6803 S. TUCSON WAY, CENTENNIAL,
TRUSTEES COLORADO 80112-3924. EACH TRUSTEE SERVES FOR AN INDEFINITE TERM, OR UNTIL HIS OR HER RESIGNATION,
RETIREMENT, DEATH OR REMOVAL.
BRIAN F. WRUBLE, General Partner of Odyssey Partners, L.P. (hedge fund) (since September 1995); Director of Special
Chairman of the Board of Value Opportunities Fund, LLC (registered investment company) (since September 2004); Member of
Trustees (since 2007), Zurich Financial Services Investment Advisory Board (insurance) (since October 2004); Chairman
Trustee (since 2006) (since August 2007) and Trustee (since August 1991) of the Board of Governing Trustees of The
Age: 64 Jackson Laboratory (non-profit); 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 64 portfolios in the OppenheimerFunds
complex.
DAVID K. DOWNES, President, Chief Executive Officer and Board Member of CRAFund Advisors, Inc. (investment
Trustee (since 2007) management company) (since January 2004); President of The Community Reinvestment Act Qualified
Age: 67 Investment Fund (investment management company) (since January 2004); Independent Chairman of
the Board of Trustees of Quaker Investment Trust (registered investment company) (since January
2004); Director of Internet Capital Group (information technology company) (since October 2003);
Chief Operating Officer and Chief Financial Officer of Lincoln National Investment Companies, Inc.
(subsidiary of Lincoln National Corporation, a publicly traded company) and Delaware Investments
U.S., Inc. (investment management subsidiary of Lincoln National Corporation) (1993-2003);
President, Chief Executive Officer and Trustee of Delaware Investment Family of Funds (1993-2003);
President and Board Member of Lincoln National Convertible Securities Funds, Inc. and the Lincoln
National Income Funds, TDC (1993-2003); Chairman and Chief Executive Officer of Retirement
Financial Services, Inc. (registered transfer agent and investment adviser and subsidiary of
Delaware Investments U.S., Inc.) (1993-2003); President and Chief Executive Officer of Delaware
Service Company, Inc. (1995-2003); Chief Administrative Officer, Chief Financial Officer, Vice
Chairman and Director of Equitable Capital Management Corporation (investment subsidiary of
Equitable Life Assurance Society) (1985-1992); Corporate Controller of Merrill Lynch & Company
(financial services holding company) (1977-1985); held the following positions at the Colonial
Penn Group, Inc. (insurance company): Corporate Budget Director (1974-1977), Assistant Treasurer
(1972-1974) and Director of Corporate Taxes (1969-1972); held the following positions at Price
Waterhouse & Company (financial services firm): Tax Manager (1967-1969), Tax Senior (1965-1967)
and Staff Accountant (1963-1965); United States Marine Corps (1957-1959). Oversees 64 portfolios
in the OppenheimerFunds complex.
MATTHEW P. FINK, Trustee of the Committee for Economic Development (policy research foundation) (since 2005);
Trustee (since 2006) Director of ICI Education Foundation (education foundation) (October 1991-August 2006); President
Age: 66 of the Investment Company Institute (trade association) (October 1991-June 2004); Director of ICI
Mutual Insurance Company (insurance company) (October 1991-June 2004). Oversees 54 portfolios in
the OppenheimerFunds complex.
43 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
ROBERT G. GALLI, A director or trustee of other Oppenheimer funds. Oversees 64 portfolios in the OppenheimerFunds
Trustee (since 2006) complex.
Age: 74
PHILLIP A. GRIFFITHS, Distinguished Presidential Fellow for International Affairs (since 2002) and Member (since 1979)
Trustee (since 2006) of the National Academy of Sciences; Council on Foreign Relations (since 2002); Director of GSI
Age: 69 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 54 portfolios in the OppenheimerFunds complex.
MARY F. MILLER, Trustee of the American Symphony Orchestra (not-for-profit) (since October 1998); and Senior Vice
Trustee (since 2006) President and General Auditor of American Express Company (financial services company) (July
Age: 65 1998-February 2003). Oversees 54 portfolios in the OppenheimerFunds complex.
JOEL W. MOTLEY, Managing Director of Public Capital Advisors, LLC (privately-held financial advisor) (since
Trustee (since 2006) January 2006); Director of Columbia Equity Financial Corp. (privately-held financial advisor)
Age: 55 (since 2002); Managing Director of Carmona Motley, Inc. (privately-held financial advisor)
(since January 2002); Managing Director of Carmona Motley Hoffman Inc. (privately-held financial
advisor) (January 1998-December 2001); Member of the Finance and Budget Committee of the Council
on Foreign Relations, Member of the Investment Committee of the Episcopal Church of America,
Member of the Investment Committee and Board of Human Rights Watch and the Investment Committee of
Historic Hudson Valley. Oversees 54 portfolios in the OppenheimerFunds complex.
RUSSELL S. REYNOLDS, JR., Chairman of RSR Partners (formerly "The Directorship Search Group, Inc.") (corporate governance
Trustee (since 2006) consulting and executive recruiting) (since 1993); Life Trustee of International House (non-profit
Age: 75 educational organization); Former Trustee of The Historical Society of the Town of Greenwich;
Former Director of Greenwich Hospital Association. Oversees 54 portfolios in the OppenheimerFunds
complex.
JOSEPH M. WIKLER, Director of the following medical device companies: Medintec (since 1992) and Cathco (since 1996);
Trustee (since 2006) Director of Lakes Environmental Association (environmental protection organization) (since 1996);
Age: 66 Member of the Investment Committee of the Associated Jewish Charities of Baltimore (since 1994);
Director of Fortis/Hartford mutual funds (1994-December 2001); Director of C-TASC (a privately
held bio-statistics company) (since May 2007). Oversees 54 portfolios in the OppenheimerFunds
complex.
PETER I. WOLD, President of Wold Oil Properties, Inc. (oil and gas exploration and production company) (since
Trustee (since 2006) 1994); Vice President of American Talc Company, Inc. (talc mining and milling) (since 1999);
Age: 59 Managing Member of Hole-in-the-Wall Ranch (cattle ranching) (since 1979); Vice President,
Secretary and Treasurer of Wold Trona Company, Inc. (soda ash processing and production)
(1996-2006); Director and Chairman of the Denver Branch of the Federal Reserve Bank of Kansas City
(1993-1999); and Director of PacifiCorp. (electric utility) (1995-1999). Oversees 54 portfolios in
the OppenheimerFunds complex.
44 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE THE ADDRESS OF MR. MURPHY IS TWO WORLD FINANCIAL CENTER, 225 LIBERTY STREET, 11TH FLOOR, NEW YORK,
AND OFFICER NEW YORK 10281-1008. MR. MURPHY SERVES AS A TRUSTEE FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL AND AS AN OFFICER FOR AN INDEFINITE TERM, OR UNTIL HIS
RESIGNATION, RETIREMENT, DEATH OR REMOVAL. MR. MURPHY IS AN INTERESTED TRUSTEE DUE TO HIS
POSITIONS WITH OPPENHEIMERFUNDS, INC. AND ITS AFFILIATES.
JOHN V. MURPHY, Chairman, Chief Executive Officer and Director of the Manager (since June 2001); President of the
Trustee, President and Manager (September 2000-March 2007); President and director or trustee of other Oppenheimer funds;
Principal Executive Officer President and Director of Oppenheimer Acquisition Corp. ("OAC") (the Manager's parent holding
(since 2006) company) and of Oppenheimer Partnership Holdings, Inc. (holding company subsidiary of the Manager)
Age: 58 (since July 2001); Director of OppenheimerFunds Distributor, Inc. (subsidiary of the Manager)
(November 2001-December 2006); Chairman and Director of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent subsidiaries of the Manager) (since July
2001); President and Director of OppenheimerFunds Legacy Program (charitable trust program
established by the Manager) (since July 2001); Director of the following investment advisory
subsidiaries of the Manager: OFI Institutional Asset Management, Inc., Centennial Asset Management
Corporation, Trinity Investment Management Corporation and Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since
July 2001); President (since November 2001) and Director (since July 2001) of Oppenheimer Real
Asset Management, Inc.; Executive Vice President of Massachusetts Mutual Life Insurance Company
(OAC's parent company) (since February 1997); Director of DLB Acquisition Corporation (holding
company parent of Babson Capital Management LLC) (since June 1995); Chairman (since October
2007) and Member of the Investment Company Institute's Board of Governors (since October 2003);
Chief Operating Officer of the Manager (September 2000-June 2001). Oversees 102 portfolios in
the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER OFFICERS THE ADDRESSES OF THE OFFICERS IN THE CHART BELOW ARE AS FOLLOWS: FOR MESSRS. STEINMETZ, 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.
ARTHUR P. STEINMETZ, Senior Vice President of the Manager (since March 1993) and of HarbourView Asset Management
Vice President and Portfolio Corporation (since March 2000). An officer of 4 portfolios in the OppenheimerFunds complex.
Manager (since 2006)
Age: 48
MARK S. VANDEHEY, Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Chief
Vice President and Chief Compliance Officer of the Manager, OppenheimerFunds Distributor, Inc., Centennial Asset Management
Compliance Officer and Shareholder Services, Inc. (since March 2004); Vice President of OppenheimerFunds Distributor,
(since 2006) Inc., Centennial Asset Management Corporation and Shareholder Services, Inc. (since June 1983).
Age: 57 Former Vice President and Director of Internal Audit of the Manager (1997-February 2004). An
officer of 102 portfolios in the OppenheimerFunds complex.
BRIAN W. WIXTED, Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the following:
Treasurer and Principal HarbourView Asset Management Corporation, Shareholder Financial Services, Inc., Shareholder
Financial & Accounting Services, Inc., Oppenheimer Real Asset Management, Inc. and Oppenheimer Partnership Holdings, Inc.
Officer (since 2006) (since March 1999), OFI Private Investments, Inc. (since March 2000), OppenheimerFunds
Age: 48 International Ltd. (since May 2000), OppenheimerFunds plc (since May 2000), OFI Institutional Asset
45 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
TRUSTEES AND OFFICERS Unaudited / Continued
- --------------------------------------------------------------------------------
BRIAN W. WIXTED, Management, Inc. (since November 2000), and OppenheimerFunds Legacy Program (charitable trust
Continued 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 102 portfolios in the OppenheimerFunds complex.
BRIAN S. PETERSEN, Vice President of the Manager (since February 2007); Assistant Vice President of the Manager
Assistant Treasurer (August 2002-February 2007); Manager/Financial Product Accounting of the Manager (November
(since 2006) 1998-July 2002). An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 37
BRIAN C. SZILAGYI, Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting and
Assistant Treasurer Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of Berger
(since 2006) Financial Group LLC (May 2001-March 2003); Director of Mutual Fund Operations at American Data
Age: 37 Services, Inc. (September 2000-May 2001). An officer of 102 portfolios in the OppenheimerFunds
complex.
ROBERT G. ZACK, Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Secretary (since 2006) Manager; General Counsel and Director of the Distributor (since December 2001); General Counsel of
Age: 59 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 102 portfolios in the OppenheimerFunds complex.
LISA I. BLOOMBERG, Vice President and Associate Counsel of the Manager (since May 2004); First Vice President (April
Assistant Secretary 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate Vice President
(since 2006) (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000) of UBS Financial
Age: 39 Services Inc. (formerly, PaineWebber Incorporated). An officer of 102 portfolios in the
OppenheimerFunds complex.
PHILLIP S. GILLESPIE, Senior Vice President and Deputy General Counsel of the Manager (since September 2004); First Vice
Assistant Secretary President (2000-September 2004), Director (2000-September 2004) and Vice President (1998-2000) of
(since 2006) Merrill Lynch Investment Management. An officer of 102 portfolios in the OppenheimerFunds complex.
Age: 43
46 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
KATHLEEN T. IVES, Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October 2003)
Assistant Secretary of the Manager; Vice President (since 1999) and Assistant Secretary (since October 2003) of the
(since 2006) Distributor; Assistant Secretary of Centennial Asset Management Corporation (since October 2003);
Age: 42 Vice President and Assistant Secretary of Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and Shareholder Financial Services, Inc. (since
December 2001); Assistant Counsel of the Manager (August 1994-October 2003). An officer of 102
portfolios in the OppenheimerFunds complex.
THE FUND'S STATEMENT OF ADDITIONAL INFORMATION CONTAINS ADDITIONAL INFORMATION
ABOUT THE FUND'S TRUSTEES AND OFFICERS AND IS AVAILABLE WITHOUT CHARGE UPON
REQUEST, BY CALLING 1.800.525.7048.
47 | OPPENHEIMER SMA INTERNATIONAL BOND FUND
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees of the registrant has determined that David Downes, a
member of the Board's Audit Committee, is an audit committee financial expert
and that Mr. Downes is "independent" for purposes of this Item 3.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees
The principal accountant for the audit of the registrant's annual financial
statements billed $45,000 in fiscal 2007 and no such fees in fiscal 2006.
(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 $55,000 in fiscal 2007 and no such fees in fiscal 2006 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 and professional services
relating to FAS 123R.
(c) Tax Fees
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees to the registrant during the last two fiscal
years.
The principal accountant for the audit of the registrant's annual financial
statements billed no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
(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 no such fees during the last two fiscal years to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing services to the
registrant.
(e) (1) During its regularly scheduled periodic meetings, the registrant's
audit committee will pre-approve all audit, audit-related, tax and other
services to be provided by the principal accountants of the registrant.
The audit committee has delegated pre-approval authority to its Chairman
for any subsequent new engagements that arise between regularly scheduled
meeting dates provided that any fees such pre-approved are presented to
the audit committee at its next regularly scheduled meeting.
Under applicable laws, pre-approval of non-audit services maybe waived
provided that: 1) the aggregate amount of all such services provided
constitutes no more than five percent of the total amount of fees paid by
the registrant to it principal accountant during the fiscal year in which
services are provided 2) such services were not recognized by the
registrant at the time of engagement as non-audit services and 3) such
services are promptly brought to the attention of the audit committee of
the registrant and approved prior to the completion of the audit.
(2) 100%
(f) Not applicable as less than 50%.
(g) The principal accountant for the audit of the registrant's annual
financial statements billed $55,000 in fiscal 2007 and no such fees in
fiscal 2006 to the registrant and the registrant's investment adviser or
any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant related to
non-audit fees. Those billings did not include any prohibited non-audit
services as defined by the Securities Exchange Act of 1934.
(h) No such services were rendered.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE FUND'S GOVERNANCE COMMITTEE PROVISIONS WITH RESPECT TO NOMINATIONS OF
DIRECTORS/TRUSTEES TO THE RESPECTIVE BOARDS
1. The Fund's Governance Committee (the "Committee") will evaluate potential
Board candidates to assess their qualifications. The Committee shall have
the authority, upon approval of the Board, to retain an executive search
firm to assist in this effort. The Committee may consider recommendations
by business and personal contacts of current Board members and by
executive search firms which the Committee may engage from time to time
and may also consider shareholder recommendations. The Committee may
consider the advice and recommendation of the Funds' investment manager
and its affiliates in making the selection.
2. The Committee shall screen candidates for Board membership. The Committee
has not established specific qualifications that it believes must be met
by a trustee nominee. In evaluating trustee nominees, the Committee
considers, among other things, an individual's background, skills, and
experience; whether the individual is an "interested person" as defined in
the Investment Company Act of 1940; and whether the individual would be
deemed an "audit committee financial expert" within the meaning of
applicable SEC rules. The Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute
to the Board. There are no differences in the manner in which the
Committee evaluates nominees for trustees based on whether the nominee is
recommended by a shareholder.
3. The Committee may consider nominations from shareholders for the Board at
such times as the Committee meets to consider new nominees for the Board.
The Committee shall have the sole discretion to determine the candidates
to present to the Board and, in such cases where required, to
shareholders. Recommendations for trustee nominees should, at a minimum,
be accompanied by the following:
o the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
o a statement concerning whether the person is an "interested person"
as defined in the Investment Company Act of 1940;
o any other information that the Funds would be required to include in
a proxy statement concerning the person if he or she was nominated;
and
o the name and address of the person submitting the recommendation
and, if that person is a shareholder, the period for which that
person held Fund shares.
The recommendation also can include any additional information which the
person submitting it believes would assist the Committee in evaluating the
recommendation.
4. Shareholders should note that a person who owns securities issued by
Massachusetts Mutual Life Insurance Company (the parent company of the
Funds' investment adviser) would be deemed an "interested person" under
the Investment Company Act of 1940. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside
legal counsel may cause a person to be deemed an "interested person."
5. Before the Committee decides to nominate an individual as a trustee,
Committee members and other directors customarily interview the individual
in person. In addition, the individual customarily is asked to complete a
detailed questionnaire which is designed to elicit information which must
be disclosed under SEC and stock exchange rules and to determine whether
the individual is subject to any statutory disqualification from serving
as a trustee of a registered investment company.
ITEM 11. CONTROLS AND PROCEDURES.
Based on their evaluation of the registrant's disclosure controls and procedures
(as defined in rule 30a-3(c) under the Investment Company Act of 1940 (17 CFR
270.30a-3(c)) as of 09/30/2007, the registrant's principal executive officer and
principal financial officer found the registrant's disclosure controls and
procedures to provide reasonable assurances that information required to be
disclosed by the registrant in the reports that it files under the Securities
Exchange Act of 1934 (a) is accumulated and communicated to registrant's
management, including its principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure, and (b) is
recorded, processed, summarized and reported, within the time periods specified
in the rules and forms adopted by the U.S. Securities and Exchange Commission.
There have been no changes in the registrant's internal controls over financial
reporting that occurred during the registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a) (1) Exhibit attached hereto.
(2) Exhibits attached hereto.
(3) Not applicable.
(b) Exhibit attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Oppenheimer SMA International Bond Fund
By: /s/ John V. Murphy
---------------------------
John V. Murphy
Principal Executive Officer
Date: 11/14/2007
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: 11/14/2007
By: /s/ Brian W. Wixted
---------------------------
Brian W. Wixted
Principal Financial Officer
Date: 11/14/2007